G.R. No.

199650               June 26, 2013

J PLUS ASIA DEVELOPMENT CORPORATION

vs.
UTILITY ASSURANCE CORPORATION

FACTS: J Plus Asia Development Corporation and Martin E. Mabunay, doing business under the name
and style of Seven Shades of Blue Trading and Services, entered into a Construction Agreement whereby
the latter undertook to build the former's 72-room Condotel in Boracay. The project, costing
₱42,000,000.00, was to be completed within one year or 365 days reckoned from the first calendar day
after signing of the Notice of Award and Notice to Proceed and receipt of down payment (20% of
contract price). The ₱8,400,000.00 down payment was fully paid on January 14, 2008. Per the agreed
work schedule, the completion date of the project was December 2008. 5 Mabuhay also submitted the
required Performance Bond6 issued by respondent Utility Assurance Corporation (UTASSCO) in the
amount equivalent to 20% down payment or ₱8.4 million.

Mabunay commenced work at the project site on January 7, 2008. As of September 16, 2008, petitioner
had paid the total amount of ₱15,979,472.03 inclusive of the 20% down payment.

After conducting a joint inspection and evaluation of the project it was concluded that as of 14
November 2008, the project is only Thirty One point Thirty Nine Percent (31.39%) complete. Petitioner
terminated the contract and sent demand letters to Mabunay and respondent surety. As its demands
went unheeded, petitioner filed a Request for Arbitration 10 before the Construction Industry Arbitration
Commission (CIAC).

Respondent filed a motion to dismiss on the ground that petitioner has no cause of action and the
complaint states no cause of action against it but was denied.

CIAC ruled in favor of petitioner ordering Mabunay and UTASSCO to pay petitioner liquidated damages
and unrecoupled down payment plus interest. It being understood that respondent Utassco’s liability
shall in no case exceed ₱8.4 million.

CA: The CA agreed with the CIAC that the specific condition in the Performance Bond did not clearly
state the limitation of the surety’s liability. Pursuant to Article 1377 18 of the Civil Code, the CA said that
the provision should be construed in favor of petitioner considering that the obscurely phrased
provision was drawn up by respondent and Mabunay. However, the CA reversed the CIAC’s ruling that
Mabunay had incurred delay which entitled petitioner to the stipulated liquidated damages and
unrecouped down payment. Citing Aerospace Chemical Industries, Inc. v. Court of Appeals, the appellate
court said that not all requisites in order to consider the obligor or debtor in default were present in this
case. It held that it is only from December 24, 2008 (completion date) that we should reckon default
because the Construction Agreement provided only for delay in the completion of the project and not
delay on a monthly basis using the work schedule approved by petitioner as the reference point. Hence,
petitioner’s termination of the contract was premature since the delay in this case was merely
speculative; the obligation was not yet demandable.

THE ISSUES:
 A. THE COURT OF APPEALS SERIOUSLY ERRED IN NOT HOLDING THAT THE ALTERNATIVE
DISPUTE RESOLUTION ACT AND THE SPECIAL RULES ON ALTERNATIVE DISPUTE RESOLUTION
HAVE STRIPPED THE COURT OF APPEALS OF JURISDICTION TO REVIEW ARBITRAL AWARDS.

B. THE COURT OF APPEALS SERIOUSLY ERRED IN REVERSING THE ARBITRAL AWARD ON AN

ISSUE THAT WAS NOT RAISED IN THE ANSWER. NOT IDENTIFIED IN THE TERMS OF REFERENCE,
NOT ASSIGNED AS ANERROR, AND NOT ARGUED IN ANY OF THE PLEADINGS FILED BEFORE THE
COURT.

OUR RULING:

We finds no merit in petitioner’s contention that with the institutionalization of alternative dispute
resolution under Republic Act (R.A.) No. 9285, 22 otherwise known as the Alternative Dispute Resolution
Act of 2004, the CA was divested of jurisdiction to review the decisions or awards of the CIAC. Petitioner
erroneously relied on the provision in said law allowing any party to a domestic arbitration to file in the
Regional Trial Court (RTC) a petition either to confirm, correct or vacate a domestic arbitral award.

We hold that R.A. No. 9285 did not confer on regional trial courts jurisdiction to review awards or
decisions of the CIAC in construction disputes. On the contrary, Section 40 thereof expressly declares
that confirmation by the RTC is not required, thus:

SEC. 40. Confirmation of Award. – The confirmation of a domestic arbitral award shall be governed by
Section 23 of R.A. 876.

A domestic arbitral award when confirmed shall be enforced in the same manner as final and executory
decisions of the Regional Trial Court.

The confirmation of a domestic award shall be made by the regional trial court in accordance with the
Rules of Procedure to be promulgated by the Supreme Court.

A CIAC arbitral award need not be confirmed by the regional trial court to be executory as provided
under E.O. No. 1008. (Emphasis supplied.)

Executive Order (EO) No. 1008 vests upon the CIAC original and exclusive jurisdiction over disputes
arising from, or connected with, contracts entered into by parties involved in construction in the
Philippines, whether the dispute arises before or after the completion of the contract, or after the
abandonment or breach thereof. By express provision of Section 19 thereof, the arbitral award of the
CIAC is final and unappealable, except on questions of law, which are appealable to the Supreme Court.
With the amendments introduced by R.A. No. 7902 and promulgation of the 1997 Rules of Civil
Procedure, as amended, the CIAC was included in the enumeration of quasijudicial agencies whose
decisions or awards may be appealed to the CA in a petition for review under Rule 43. Such review of
the CIAC award may involve either questions of fact, of law, or of fact and law.

Petitioner misread the provisions of A.M. No. 07-11-08-SC (Special ADR Rules) promulgated by this Court
and which took effect on October 30, 2009. Since R.A. No. 9285 explicitly excluded CIAC awards from
domestic arbitration awards that need to be confirmed to be executory, said awards are therefore not
covered by Rule 11 of the Special ADR Rules, 24 as they continue to be governed by EO No. 1008, as
amended and the rules of procedure of the CIAC. The CIAC Revised Rules of Procedure Governing
Construction Arbitration provide for the manner and mode of appeal from CIAC decisions or awards in
Section 18 thereof, which reads:

SECTION 18.2 Petition for review. – A petition for review from a final award may be taken by any of the
parties within fifteen (15) days from receipt thereof in accordance with the provisions of Rule 43 of the
Rules of Court.

As to the alleged error committed by the CA in deciding the case upon an issue not raised or litigated
before the CIAC, this assertion has no basis. Whether or not Mabunay had incurred delay in the
performance of his obligations under the Construction Agreement was the very first issue stipulated in
the Terms of Reference (TOR), which is distinct from the issue of the extent of respondent’s liability
under the Performance Bond.

SO ORDERED.

PUROMINES, INC., petitioner, vs. COURT OF APPEAL and PHILIPP BROTHERS OCEANIC, INC.,
respondents.

Principle: As a general rule, in a Sales contract, the seller has the obligation to transmit the goods to the
buyer, and concomitant, contracting a carriage to deliver the same. Thus, any dispute arising from the
delivery of goods is subject to the Arbitration Clause provided in said contract.

Facts: Puromines entered into a contract with private respondents Philipp Brothers Oceanic, Inc. for the
sale of prilled Urea in bulk. The Sales Contract provided an arbitration clause which states, thus:
"Any disputes arising under this contract shall be settled by arbitration... xxx.”

The vessel M/V "Liliana Dimitrova" loaded on board at Yuzhny, USSR a shipment of prilled Urea in bulk
complete and in good order and condition for transport to Iloilo and Manila, to be delivered to
petitioner. The ship-agent in the Philippines, Maritime Factors Inc., issued three bills of lading covering
the shipment. Bills of lading No. 1,2, and 3.

The shipment covering Bill of Lading No. 2 was discharged in Iloilo City complete and in good order and
condition. However, the shipments covered by Bill of Lading Nos. 1 and 3 were discharged in Manila in
bad order and condition, caked, hardened and lumpy, discolored and contaminated with rust and dirt
which was due to improper ventilation and inadequate storage facilities. Damages were valued at P683,
056. 29 including additional discharging expenses.

This prompted the petitioner to file a complaint with the trial court for breach of contract of carriage
against Maritime Factors Inc. as ship-agent in the Philippines for the owners of the vessel MV "Liliana
Dimitrova," while private respondent, Philipp Brothers Oceanic Inc., was impleaded as charterer of the
said vessel and proper party to accord petitioner complete relief. Private respondent filed a motion to
dismiss contending that the complaint states no cause of action; that it was prematurely filed; and that
petitioner should comply with the arbitration clause in the sales contract. Petitioner countered by saying
that the arbitration clause in inapplicable since the cause of action did not arise from the violation of
terms of the sales contract but rather claims of cargo damages where there is no arbitration agreement.
Simply put, the petitioner is inferring that the sales contract is different from the contract of carriage.

The trial court ruled in favor of the petitioner dismissing the respondent's motion to dismiss. Elevating
the matter to the Court of Appeals, petitioner's complaint was dismissed. The court found that the
arbitration clause in the sales contract and/or the bills of lading is applicable in the present case. That
the sales contract shows that it is broad enough to include the claim for damages arising from the
carriage and delivery of the goods.

Hence, this petition.

Issue: Whether or not the arbitration clause in the sales of contract cover claims for violations of
contract of carriage?

Held: The Supreme Court ruled in affirmative. The sales contract is comprehensive enough to include
claims for damages arising from carriage and delivery of the goods. As a general rule, the seller has the
obligation to transmit the goods to the buyer, and concomitant thereto, the contracting of a carrier to
deliver the same.

Moreover, whether the liability of respondent should be based on the same contract or that of the bill
of lading, the parties are nevertheless obligated to respect the arbitration provisions on the sales
contract and/or the bill of lading. Petitioner being a signatory and party to the sales contract cannot
escape from his obligation under the arbitration clause as stated therein. Arbitration has been held valid
and constitutional. Even before the enactment of Republic Act No. 876, this Court has countenanced the
settlement of disputes through arbitration. The rule now is that unless the agreement is such as
absolutely to close the doors of the courts against the parties, which agreement would be void, the
courts will look with favor upon such amicable arrangements and will only interfere with great
reluctance to anticipate or nullify the action of the arbitrator.
Case #4 ChungFu Industries vs CA

Facts: Chung Fu and Roblecor Philippines, Inc. forged a construction agreement whereby Roblecor
committed to construct and finish ChungFu’s industrial/factory complex. In the event of disputes arising
from the performance of subject contract, it was stipulated therein that the issue(s) shall be submitted
for resolution before a single arbitrator chosen by both parties.

However, Roblecor failed to complete the work despite the extension of time allowed it by
Chung Fu. Subsequently, the latter had to take over the construction when it had become evident that
Roblecor was not in a position to fulfill its obligation.

Claiming an unsatisfied account of P10, 500,000.00 and unpaid progress billings of

P2,370,179.23, Roblecor, filed a petition for Compulsory Arbitration with prayer for Temporary
Restraining Order before respondent Regional Trial Court, pursuant to the arbitration clause in the
construction agreement. It led to the formulation of an arbitration agreement which, among others,
provides that the decision of arbitrator shall be final and unappealable and there shall be no judicial
recourse if a party disagrees in part or in whole. RTC approved the arbitration agreement and appointed
Engr. Ascunsion as sole arbitrator. Asuncion ordered ChungFu to immediately pay Roblecor, the sum of
P16,108,801.00. He further declared the award as final and unappealable, pursuant to the Arbitration
Agreement precluding judicial review of the award.

Roblecor moved for the confirmation of said award. On the other hand, Chung Fu moved to
remand the case for further hearing and asked for a reconsideration of the judgment award claiming
that Arbitrator Asuncion committed twelve (12) instances of grave error by disregarding the provisions
of the parties' contract.

RTC denied Chung Fu's Motion to Remand thus compelling it to seek reconsideration therefrom
but to no avail. The trial court granted Roblecor's Motion for Confirmation of Award and accordingly,
entered judgment in conformity therewith. Moreover, it granted the motion for the issuance of a writ of
execution filed by respondent.

Chung Fu elevated the case via a petition for certiorari to Court of Appeals. The appellate court
concurred with the findings and conclusions of respondent trial court resolving that Chung Fu and its
officers, as signatories to the Arbitration Agreement are bound to observe the stipulations thereof
providing for the finality of the award and precluding any appeal therefrom.

Issue: Whether Chungfu is precluded to seek judicial review of the award

Held: No, Chungfu is not precluded from seeking judicial review.

A clause in a contract providing that all matters in dispute between the parties shall be referred
to arbitrators and to them alone is contrary to public policy and cannot oust the courts of
Jurisdiction." But certainly, the stipulation to refer all future disputes to an arbitrator or to submit an
ongoing dispute to one is valid. Being part of a contract between the parties, it is binding and
enforceable in court in case one of them neglects, fails or refuses to arbitrate. Going a step further, in
the event that they declare their intention to refer their differences to arbitration first before taking
court action, this constitutes a condition precedent, such that where a suit has been instituted
prematurely, the court shall suspend the same and the parties shall be directed forthwith to proceed to
arbitration.

It is stated explicitly under Art. 2044 of the Civil Code that the finality of the arbitrators' award is
not absolute and without exceptions. Where the conditions described in Articles 2038, 2039 and 2040
applicable to both compromises and arbitrations are obtaining, the arbitrators' award may be annulled
or rescinded.  Additionally, under Sections 24 and 25 of the Arbitration Law, there are grounds for
vacating, modifying or rescinding an arbitrator's award.  Thus, if and when the factual circumstances
referred to in the above-cited provisions are present, judicial review of the award is properly warranted.

The trial court's refusal to look into the merits of the case, despite  prima facie showing of the
existence of grounds warranting judicial review, effectively deprived Chungfu of their opportunity to
prove or substantiate their allegations. In so doing, the trial court itself committed grave abuse of
discretion. Likewise, the appellate court, in not giving due course to the petition, committed grave abuse
of discretion. Respondent courts should not shirk from exercising their power to review, where under
the applicable laws and jurisprudence, such power may be rightfully exercised; more so where the
objections raised against an arbitration award may properly constitute grounds for annulling, vacating or
modifying said award under the laws on arbitration.
AGAN, Jr. ET AL. V. PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., ET AL. GR NO. 155001, May 5,
2003

FACTS: In 1993, Executives from Asia’s Emerging Dragon Corp. (AEDC) submitted an unsolicited proposal
to the Government through the DOTC for the development of the NAIA IPT III under a build-operate-
and-transfer arrangement. The proposed project sought the construction of a new international airport.
The DOTC then constituted a prequalification bids and awards for the implementation of the said
project. Aside from AEDC, the Philippine International Airport Terminals Co., Inc. (PIATCO) joined the
Bidding process. Despite opposition, the project was awarded to PIATCO. This resulted to the signing of
a concession agreement and subsequently the Amended and Restated Concession Agreement (ARCA).
Section 10.2 of the ARCA provides for an arbitration proceeding in case a dispute arises between the
parties. Different petitions assailing the agreement were filed by several persons not party to the
agreement. The controversy eventually reached the supreme court. In 2003, the PIATCO informed the
court that they have commenced an arbitration proceeding before the International Court of Arbitration
(ICC).

ISSUE: Whether or not the court proceeding shall be suspended to give way to arbitration.

RULING: The proceedings shall not be suspended just to give to arbitration.

Though arbitration proceedings have been filed at the instance of the PIATCO pursuant to Sec.10.02 of
the ARCA, such step will not oust the court of its jurisdiction over the case. It is established that the
petitioners in the pending cases who have presented legitimate interest in the resolution ow the
controversy are not parties to the PIATCO contract, accordingly they cannot be bound by the arbitration
clause provided for in the ARCA and hence cannot be compelled to submit to arbitration proceedings.

Hawaiian and California Sugar Company et al. v. Pioneer Insurance and Surety Corporation

G.R No. 139273 November 28,2000

Facts:
 A vessel arrived at the port of manila carrying a cargo of soybean meal in bulk. This was consigned
to several consigness including Metro Manila Feeders Association (Metro). It was also insured with
Pioneer Insurance and Surety Corporation (PISC).

When the cargo was offloaded to the delivery trucks, there was a shortage in its weight of 255.051
metric tons which was valued at P 1,621,171.16. PISC, as insurer paid Metro Association after alleged
refusal of petitioners to settle their respective liabilities.

PISC filed a complaint for damages as alleged subrogee of Metro. The petitioners filed a Motion to
Dismiss on the ground that the claim it premature because it is arbitrable. The Trial Court still scheduled
a pre-trial. This issue reached the Court of Appeals who affirmed RTC. It held that PISC, as subrogee, is
entitled to filing a complaint. This is based in the case of Pan Malayan Insurance Corp. v. CA. The Court
declared in this case that the payment by the insurer to the insured operates as an equitable assignment
to the former of all remedies which the latter may have against the third party whose negligence or
wrongful act caused the loss. This is not dependent on the existence of any contract.

Issue: Whether the abitration clause applies to PISC, the subrogee in this case

Ruling: Yes. The arbitration clause applies to PISC, the subrogee. In Pan Malayan case, the applicability of
arbitration clause to the subrogee is not prohibited. Therefore, the right of the respondent insurance
company as subrogee accrues upon its payment of the insurance claim to the insured consignee.

Asset Privatization Trust vs CA

FACTS

Pursuant to a Mortgage Trust Agreement, the Development Bank of the Philippines and the Philippine
National Bank foreclosed the assets of the Marinduque Mining and Industrial Corporation. The assets
were sold to Philippine National Bank and later transferred to the Asset Privatization Trust (APT).

In February 1985, Jesus Cabarrus, Sr., together with other stockholders of Marinduque Mining and
Industrial Corporation, filed a derivative suit against Development Bank of the Philippines and Philippine
National Bank before the Regional Trial Court of Makati for Annulment of Foreclosures, Specific
Performance and Damages. In the course of the trial, Marinduque Mining and Industrial Corporation and
Asset Privatization Trust as successor in interest of Development Bank of the Philippines and Philippine
National Bank, agreed to submit the case to arbitration by entering into a Compromise and Arbitration
Agreement. This agreement was approved by the trial court and the complaint was corollarily dismissed.
Thereafter, the Arbitration Committee rendered a decision ordering Asset Privatization Trust to pay
Marinduque Mining and Industrial Corporation damages and arbitration costs in the amount of P2.5
Billion, P13,000,000.00 of which is for moral and exemplary damages.

On motion of Cabarrus and the other stockholders of Marinduque Mining and Industrial Corporation,
the trial court confirmed the Arbitration Committee’s award. Its motion for reconsideration having been
denied, Asset Privatization Trust filed a special civil action for certiorari with the Court of Appeals. It was
likewise denied.

Hence, this petition for review on certiorari.

ISSUE

WHETHER THE RESPONDENT JUDGE COMMITTED GRAVE ABUSE OF DISCRETION AND ACTED WITHOUT
OR IN EXCESS OF JURISDICTION, IN ISSUING THE QUESTIONED ORDERS CONFIRMING THE ARBITRAL
AWARD AND DENYING THE MOTION FOR RECONSIDERATION OF ORDER OF AWARD.

HELD
As a rule, the award of an arbitrator cannot be set aside for mere errors of judgment either as to
the law or as to the facts.  Errors of law and fact, or an erroneous decision of matters submitted to the
judgment of the arbitrators, are insufficient to invalidate an award fairly and honestly made. Judicial
review of an arbitration is, thus, more limited than judicial review of a trial.
Nonetheless, the arbitrators awards is not absolute and without exceptions. The arbitrators cannot
resolve issues beyond the scope of the submission agreement.  
While a court is precluded from overturning an award for errors in determination of factual issues,
nevertheless, if an examination of the record reveals no support whatever for the arbitrators
determinations, their award must be vacated. In the same manner, an award must be vacated if it was
made in manifest disregard of the law.

G.R. No. 155651. July 28, 2005

COCA-COLA BOTTLERS PHILIPPINES, INC., SALES FORCE UNION-PTGWO-BALAIS,  vs.

COCA-COLA BOTTLERS, PHILIPPINES, INC., 

Facts:

After staging a strike, NCMB succeeded in making the parties agree to a voluntary settlement through a
MOA which provides that the company shall grant 50% of their commission in the Christmas Bonus to all
those covered by the bargaining unit of the union but in 1999, it was fixed to P4,000. Claiming that it
was a breach of the MOA, the union submitted its grievance to CCBPI but to no avail. It was referred to a
Panel of Voluntary Arbitrators.

January 21, 2001- It was ruled that P4,000 is not a bonus, thus, the 50% claim is denied. One of the
arbitrators dissented.
February 22, 2001- the union received a copy of the decision without the dissenting opinion
March 2, 2001- the parties furnished a copy of the dissenting opinion
March 23, 2001- the parties filed an MR on the Jan 21, 2001 decision

ISSUE: WON the Decision of Panel of Arbitrators attained its finality even without the dissenting opinion
of one of its members?

The Decision of the Panel of Arbitrators attained its finality even without the dissenting opinion.

"Section 6. Finality of Award or Decisions. – Awards or decisions of voluntary arbitrator become final and
executory after ten (10) calendar days from receipt of copies of the award or decision by the parties."
(Sec 6, Rule VII, Procedural Guidelines in the Conduct of Voluntary Arbitration Proceedings)

The above-mentioned rule makes the voluntary arbitrator’s award final and executory after ten calendar
days from receipt of a copy of the decision or award by the parties. Presumably, the decision may still be
reconsidered by the Voluntary Arbitrator on the basis of a motion for reconsideration seasonably filed
during that period. Thus, the seasonable filing of a motion for reconsideration following the receipt by
the petitioner of a copy of the decision or award of the panel of Voluntary Arbitrators, is a mandatory
requirement to forestall the finality of such decision or award. In the case at bar however, the petitioner
filed on March 12, 2001 a motion for reconsideration of the arbitrators decision, which it received on
February 20, 2001. Without doubt at the time the said motion was filed, which was beyond the
reglementary period of ten (10) days, the decision had already become final and executory.

As correctly pointed out by the Court of Appeals, a dissenting opinion is not binding on the parties as it is
a mere expression of the individual view of the dissenting member from the conclusion held by the
majority of the Court.

NATIONAL STEEL CORPORATION VS. RTC LANAO DEL NORTE BRANCH 2, ILIGAN CITY

G.R. NO. 127004, MARCH 11, 1999

FACTS:

Edward Willkom Enterprises, Inc. (EWEI) together with Ramiro Construction executed a Contract
for Site Development with National Steel Corporation (NSC) whereby the former jointly undertook to
construct the latter its Integrated Iron and Steel Mills Complex to be established at Iligan City.
Thereafter, the services of Ramiro Construction were terminated and EWEI took over its contractual
obligation. NSC granted EWEI extensions of time for the termination of the project. Differences later
arose which prompted EWEI to file civil case before RTC Lanao Br. 6 praying essentially for the payment
of 458, 381.001 with interests from the time of delay; the price adjustment as provided by P.D No. 1594;
and exemplary damages in the amount of 50,000 and attorney’s fees. NSC filed its answer with
counterclaim to the complaints. Upon joint motion of the parties, the lower court dismissed the
complaint and counter claim in view of the desire of both parties to implement sec. 9 of the contract,
providing for resolution of any conflict by arbitration. Subsequently, the Arbitration Board was
composed and after hearings, rendered decision directing NSC to pay EWEI:

a. 458,381.00 representing EWEI’s last billing No. 16 with interest thereon at the rate of 1-1/4%
per month from January 1, 1985 to actual date of payment.
b. 1,335,514.20 representing price escalation adjustment under P.D No. 1594, with interest
thereon at the rate of 1-1/4% per month from January 1, 1985 to actual date of payment;
c. 50,000as and for exemplary damages;
d. 350,000 for attorney’s fees;
e. 35,000 for the cost of arbitration.

RTC Br. 2, Iligan City affirmed and confirmed in toto the award of the Board of Arbitrators. Upon
denial of the MR, NSC brought the case to SC via petition for certiorari with prayer for preliminary
injunction and TRO.

ISSUE:

Whether or not the lower court committed grave abuse of discretion in not vacating the award
of the Board of Arbitrators.

SUPREME COURT’S RULING:

The lower court did not commit any grave abuse of discretion in not vacating the award of the
Board of Arbitrators. It should be stressed that voluntary arbitrators, by the nature of their functions, act
in a quasi-judicial capacity. As a rule, findings of facts by quasi-judicial bodies, which have acquired
expertise because their jurisdiction is confined to specific matters, are accorded not only respect but
even finality if they are supported by substantial evidence, even if not overwhelming or preponderant.
As the petitioner has availed of Rule 65, the Court will or review the facts found nor even of the law as
interpreted or applied by the arbitrator unless the supposed errors of facts or of law are so patent and
gross and prejudicial as to amount to a grave abuse of discretion on the part of the arbitrators.

In the case at bar, NSC posited evident partiality in the assailed decision of the arbitrators in
favor of EWEI and mistaken appreciation of facts and application of the law by the arbitrators as grounds
for vacating the award. NSC merely averred evident partiality without any proof to back it up. NSC was
never deprived of the right to present evidence nor was there any showing that the board showed signs
of any bias in favor of EWEI. The decision must be sustained for it is well-settled rule that the actual
findings of an administrative body should be affirmed if there is substantial evidence to support them
and the conclusions stated in the decision are not clearly against the law and jurisprudence, similar to
the instant case. Henceforth, every reasonable intendment will be indulged to give effect such
proceedings and in favor of the regulatory and integrity of the arbitrators’ act.

The price escalation is likewise justified in accordance with the cardinal rule in the interpretation
of contracts that “if the terms of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations shall control”. However, the 1-1/4% interest
rate per month from January 1, 1985 to actual date of payment shall be changed to 6% per annum being
the legal rate of interest. The award of exemplary damages is likewise not warranted considering that
the requirements for the award of said damages are not present in the case at bar. Attorney’s fees are
also not justified, it is a conclusion without a premise, its basis being improperly left to speculation and
conjecture.

Gonzales vs Climax Mining Ltd 512 SCRA 148 [GR No. 161957 January 22, 2007]

DOCTRINE: The doctrine of separability, or severability as other writers call it, enunciates that an
arbitration agreement is independent of the main contract. The arbitration agreement is to be treated
as a separate agreement and the arbitration agreement does not automatically terminate when the
contract of which it is part comes to an end.

Facts: This is a consolidation of two petitions rooted in the same disputed Addendum Contract entered
into by the parties.

In G.R. No. 161957, the Court in its Decision of 28 February 2005 denied the Rule 45 petition of
Jorge Gonzales (Gonzales). It held that the DENR Panel of Arbitrators had no jurisdiction over the
complaint for the annulment of the Addendum Contract on grounds of fraud and violation of the
Constitution and that the action should have been brought before the regular courts as it involved
judicial issues.

Both parties filed separate motions for reconsideration. Gonzales avers in his Motion for
Reconsideration that the Court erred in holding that the DENR Panel of Arbitrators was bereft of
jurisdiction, reiterating its argument that the case involves a mining dispute that properly falls within the
ambit of the Panel’s authority. Gonzales adds that the Court failed to rule on other issues he raised
relating to the sufficiency of his complaint before the DENR Panel of Arbitrators and the timeliness of its
filing.

Respondents Climax Mining Ltd., et al., (respondents) filed their Motion for Partial
Reconsideration and/or Clarification seeking reconsideration of that part of the Decision holding that
the case should not be brought for arbitration under Republic Act (R.A.) No. 876, also known as the
Arbitration Law. Respondents, citing American jurisprudence and the UNCITRAL Model Law, argue that
the arbitration clause in the Addendum Contract should be treated as an agreement independent of the
other terms of the contract, and that a claimed rescission of the main contract does not avoid the duty
to arbitrate. Respondents add that Gonzales argument relating to the alleged invalidity of the
Addendum Contract still has to be proven and adjudicated on in a proper proceeding; that is, an action
separate from the motion to compel arbitration. Pending judgment in such separate action, the
Addendum Contract remains valid and binding and so does the arbitration clause therein. Respondents
add that the holding in the Decision that the case should not be brought under the ambit of the
Arbitration Law appears to be premised on Gonzales having impugn[ed] the existence or validity of the
addendum contract. If so, it supposedly conveys the idea that Gonzales unilateral repudiation of the
contract or mere allegation of its invalidity is all it takes to avoid arbitration. Hence, respondents submit
that the courts holding that the case should not be brought under the ambit of the Arbitration Law be
understood or clarified as operative only where the challenge to the arbitration agreement has been
sustained by final judgment.

Issue: Whether or not it was proper for the RTC, in the proceeding to compel arbitration under R.A. No.
876, to order the parties to arbitrate even though the defendant therein has raised the twin issues of
validity and nullity of the Addendum Contract and, consequently, of the arbitration clause therein as
well

Held: Yes. Disputes do not go to arbitration unless and until the parties have agreed to abide by the
arbitrators decision. Necessarily, a contract is required for arbitration to take place and to be binding.
R.A. No. 876 recognizes the contractual nature of the arbitration agreement.

The doctrine of separability, or severability as other writers call it, enunciates that an arbitration
agreement is independent of the main contract. The arbitration agreement is to be treated as a separate
agreement and the arbitration agreement does not automatically terminate when the contract of which
it is part comes to an end.

The separability of the arbitration agreement is especially significant to the determination of whether
the invalidity of the main contract also nullifies the arbitration clause. Indeed, the doctrine denotes that
the invalidity of the main contract, also referred to as the container contract, does not affect the validity
of the arbitration agreement. Irrespective of the fact that the main contract is invalid, the arbitration
clause/agreement still remains valid and enforceable.

The separability of the arbitration clause is confirmed in Art. 16(1) of the UNCITRAL Model Law and Art.
21(2) of the UNCITRAL Arbitration Rules.

The proceeding in a petition for arbitration under R.A. No. 876 is limited only to the resolution of the
question of whether the arbitration agreement exists. Second, the separability of the arbitration clause
from the Addendum Contract means that validity or invalidity of the Addendum Contract will not affect
the enforceability of the agreement to arbitrate. Thus, Gonzales petition for certiorari should be
dismissed.

MARIANO, Carty

REGALA, Alexis

Case 15

DFA VS. FALCON

FACTS:
 The Philippine Department of Foreign Affairs (“DFA”) implemented its Machine Readable
Passport and Visa Project (the “MRPV Project”) under the Build-Operate-andTransfer (“BOT”)
scheme. Pursuant to the BOT Law, having found that BCA International Corporation (“BCA”) submitted
the sole complying bid, direct negotiations were commenced between DFA and BCA for the MRPV
Project. In compliance with the Notice of Award and the BOT Law, BCA incorporated a project company,
the Philippine Passport Corporation (“PPC”) to undertake and implement the MRPV Project.
Consequently, on February 8, 2001 a Build-Operate-Transfer Agreement (“BOT Agreement”) was
entered into by the DFA and the PPC. Later, an Amended BOT Agreement was entered into by the DFA
and BCA with the conformity of PPC. Then, an Assignment Agreement was executed by BCA and PPC,
whereby BCA assigned and ceded its rights, title, interest and benefits arising from the Amended BOT
Agreement to PPC.

On December 9, 2005, the DFA sent a Notice of Termination to BCA and PPC due to their alleged
failure to submit proof of financial capability to complete the entire MRPV Project in accordance with
the financial warranty under Section 5.02 (A) of the Amended BOT Agreement. On December 14, 2005,
BCA sent a letter to the DFA demanding that it immediately reconsider and revoke its previous notice of
termination, otherwise, BCA would be compelled to declare the DFA in default pursuant to the
Amended BOT Agreement.

As the impasse remained unresolved, BCA filed a Request for Arbitration dated April 7, 2006
with the Philippine Dispute Resolution Center, Inc. (PDRCI), pursuant to Section 19.02 of the Amended
BOT Agreement which provides: Section 19.02. Failure to Settle Amicably — If the Dispute cannot be
settled amicably within ninety (90) days by mutual discussion as contemplated under Section 19.01
herein, the Dispute shall be settled with finality by an arbitrage tribunal operating under International
Law, hereinafter referred to as the "Tribunal", under the UNCITRAL Arbitration Rules contained in
Resolution 31/98 adopted by the United Nations General Assembly on December 15, 1976, and entitled
"Arbitration Rules on the United Nations Commission on the International Trade Law". The DFA and the
BCA undertake to abide by and implement the arbitration award. The place of arbitration shall be Pasay
City, Philippines, or such other place as may mutually be agreed upon by both parties. The arbitration
proceeding shall be conducted in the English language.

Thereafter, the DFA and the Bangko Sentral ng Pilipinas (“BSP”) entered into a Memorandum of
Agreement for the latter to provide the former passports compliant with international standards. The
BSP then solicited bids for the supply, delivery, installation and commissioning of a system for the
production of Electronic Passport Booklets or e-Passports.

Thus, BCA filed a Petition for Interim Relief under Section 28 of the Alternative Dispute
Resolution Act of 2004 (the “ADR Act of 2004”), with the Regional Trial Court of Pasig City. In that
petition, BCA prayed for, among others, that the trial court grant interim relief to BCA prior to the
constitution of the arbitral tribunal in the form an order temporarily restraining the DFA and BSP and
their agents (i) from awarding a new contract to implement the MRPV Project, or any similar electronic
passport or visa project; or (ii) if such contract has been awarded, from implementing such MRPV
Project or similar projects until further orders from the court.
 On January 23, 2007, the trial court ordered the issuance of a temporary restraining order
restraining the DFA and the BSP and their agents from awarding a new contract to implement the MVPV
Project or any similar electronic passport or visa project, or if such contract has been awarded, from
implementing such or similar projects. After hearing, the trial court issued an Order granting BCA's
application for preliminary injunction. Hence, the DFA and the BSP filed a Petition before the Supreme
Court assailing the order of the trial court and the issuance of the writ of preliminary injunction.

ISSUE:

Whether or not a grant of interim measure may be allowed even before the constitution of an arbitral
tribunal.

RULING:

We note that under Section 28, Republic Act No. 9285 or the Alternative Dispute Resolution Act
of 2004, the grant of an interim measure of protection by the proper court before the constitution of an
arbitral tribunal is allowed:

Sec. 28. Grant of Interim Measure of Protection. — (a) It is not incompatible with an arbitration
agreement for a party to request, before constitution of the tribunal, from a Court an interim measure
of protection and for the Court to grant such measure. After constitution of the arbitral tribunal and
during arbitral proceedings, a request for an interim measure of protection, or modification thereof,
may be made with the arbitral tribunal or to the extent that the arbitral tribunal has no power to act or
is unable to act effectively, the request may be made with the Court. The arbitral tribunal is deemed
constituted when the sole arbitrator or the third arbitrator, who has been nominated, has accepted the
nomination and written communication of said nomination and acceptance has been received by the
party making the request.

Section 3 (h) of the same statute provides that the "Court" as referred to in Article 6 of the
Model Law shall mean a Regional Trial Court. Republic Act No. 9285 is a general law applicable to all
matters and controversies to be resolved through alternative dispute resolution methods. This law
allows a Regional Trial Court to grant interim or provisional relief, including preliminary injunction, to
parties in an arbitration case prior to the constitution of the arbitral tribunal. This general statute,
however, must give way to a special law governing national government projects, Republic Act No.
8975 which prohibits courts, except the Supreme Court, from issuing TROs and writs of preliminary
injunction in cases involving national government projects.

BCA's petition for interim relief before the trial court is essentially a petition for a provisional
remedy (i.e., preliminary injunction) ancillary to its Request for Arbitration in PDRCI Case No. 30-
2006/BGF. BCA specifically prayed that the trial court grant it interim relief pending the constitution of
the arbitral tribunal in the said PDRCI case. Unfortunately, during the pendency of this case, PDRCI Case
No. 30-2006/BGF was dismissed by the PDRCI for lack of jurisdiction, in view of the lack of agreement
between the parties to arbitrate before the PDRCI.

In Philippine National Bank v. Ritratto Group, Inc., we held: A writ of preliminary injunction is an
ancillary or preventive remedy that may only be resorted to by a litigant to protect or preserve his rights
or interests and for no other purpose during the pendency of the principal action. The dismissal of the
principal action thus results in the denial of the prayer for the issuance of the writ.

In view of intervening circumstances, BCA cannot longer be granted injunctive relief and the civil
case before the trial court should be accordingly dismissed. However, this is without prejudice to the
parties litigating the main controversy in arbitration proceedings, in accordance with the provisions of
the Amended BOT Agreement, which should proceed with dispatch.

LAWAGUEY, SUNSHINE
REVITA, RIA EVITA

MCC INDUSTRIAL SALES CORPORATION VS. SSANGYONG CORPORATION

FACTS:

MCC is engaged in the business of importing and wholesaling stainless steel products. One of its
suppliers is the Ssangyong which is an international trading company with head office in Seoul, South
Korea and regional headquarters in Makati City.

The two corporations conducted business through telephone calls and facsimile or telecopy
transmissions. Ssangyong would send the pro forma invoices containing the details of the steel product
order to MCC; if MCC conforms thereto, its representative affixes his signature on the faxed copy and
sends it back to Ssangyong, again by fax. Ssangyong Manila Office sent, by fax, a letter addressed to
Gregory Chan who is the MCC Manager and President of Sanyo Seiki Stainless Steel Corporation to
confirm MCC’s and Sanyo Seiki’s order of 220 MT (metric tons) of hot rolled stainless steel under a
preferential rate of $1,860 per MT. Chan on behalf of the corporations assented and affixed his
signature on the conforme portion of the letter. Time comes where MCC met financial difficulty. Its
previous order of 220 MT of steel was split into two, one for 110MT covered by pro forma invoice No.
ST2-POSTSO401-1 and another for 110 MT covered by ST2-POSTSO401-2. The splitting was because MCC
could open only a partial letter of credit. Despite several letters of demand and granting of extensions,
MCC was unable to open its second and last letter of credit. Ssangyong through counsel wrote a letter to
MCC cancelling the sales contracts and demanding payment of $97,317. 37 representing losses,
warehousing expenses, interests and damages.

Ssangyong filed a civil action for damages due to breach of contract against petitioner before the RTC of
Makati City.
In its complaint, respondent alleged that defendants breached their contract when they refused to open
the letter of credit in the amount of US$170,000.00 for the remaining 100MT of steel under Pro Forma
Invoices. After Ssangyong rested its case, defendants filed a Demurrer to Evidence alleging that
respondent failed to present the original copies of the pro forma invoices on which the civil action was
based. The lower court denied the same stating the documentary evidence was already admitted and its
admissibility finds support in R.A No 8792 (ELECTRONIC COMMERCE ACT OF 2000).
After trial, the lower court rendered decision in favor of Ssangyong. Upon appeal, the CA affirmed the
trial court’s ruling but absolved Chan from liability. Hence, the case reached SC via petition for review on
certiorari.

ISSUE:

Whether the photocopies of facsimile printouts of Pro Forma Invoice Nos. ST2-POSTSO401-1 and ST2-
POSTSO401-2 are within the coverage of R.A No. 8792.

HELD:

Electronic document shall be regarded as the equivalent of an original document under the Best
Evidence Rule, as long as it is a printout or output readable by sight or other means, showing to reflect
the data accurately. Thus, to be admissible in evidence as an electronic data message or to be
considered as the functional equivalent of an original document under the Best Evidence Rule, the
writing must foremost be an “electronic data message” or an “electronic document.

The Implementing Rules and Regulations (IRR) of R.A. No. 8792 defines the “Electronic Data Message”
refers to information generated, sent, received or stored by electronic, optical or similar means, but not
limited to, electronic data interchange (EDI), electronic mail, telegram, telex or telecopy.

The phrase “but not limited to, electronic data interchange (EDI), electronic mail, telegram, telex or
telecopy” in the IRR’s definition of “electronic data message” is copied from the Model Law on
Electronic Commerce adopted by the United Nations Commission on International Trade Law
(UNCITRAL), from which majority of the provisions of R.A. No. 8792 were taken. While Congress deleted
this phrase in the Electronic Commerce Act of 2000, the drafters of the IRR reinstated it. The deletion by
Congress of the said phrase is significant and pivotal.

Moreover, when Congress formulated the term “electronic data message,” it intended the same
meaning as the term “electronic record” in the Canada law. This construction of the term “electronic
data message,” which excludes telexes or faxes, except computer-generated faxes, is in harmony with
the Electronic Commerce Law’s focus on “paperless” communications and the “functional equivalent
approach” that it espouses. Facsimile transmissions are not, in this sense, “paperless,” but verily are
paper-based.
In an ordinary facsimile transmission, there exists an original paper-based information or data that is
scanned, sent through a phone line, and re-printed at the receiving end. … [I]n a virtual or paperless
environment, technically, there is no original copy to speak of, as all direct printouts of the virtual reality
are the same, in all respects, and are considered as originals. Ineluctably, the law’s definition of
“electronic data message,” which, as aforesaid, is interchangeable with “electronic document,” could
not have included facsimile transmissions, which have an original paper-based copy as sent and a paper-
based facsimile copy as received. These two copies are distinct from each other, and have different legal
effects.  While Congress anticipated future developments in communications and computer technology
when it drafted the law, it excluded the early forms of technology, like telegraph, telex and telecopy
(except computer-generated faxes, which is a newer development as compared to the ordinary fax
machine to fax machine transmission), when it defined the term “electronic data message.”

The terms “electronic data message” and “electronic document,” as defined under the Electronic
Commerce Act of 2000, do not include a facsimile transmission.  Accordingly, a facsimile transmission
cannot be considered as electronic evidence.  It is not the functional equivalent of an original under the
Best Evidence Rule and is not admissible as electronic evidence.

CASE 18: MAGELLAN CAPITAL MANAGEMENT CORPORATION and MAGELLAN CAPITAL HOLDINGS
CORPORATION vs. ROLANDO M. ZOSA and HON. JOSE P. SOBERANO (G.R. No. 129916)

FACTS:

Under a management agreement entered into, MCHC appointed MCMC as manager for the operation of
its business and affairs. Pursuant thereto, petitioners and private respondent Rolando Zosa entered into
“Employment Agreement” designating the latter as President and CEO of MCHC. The employment
agreement contains an arbitration clause which states inter alia that the panel of arbitrators shall be
designated by the by the Manager, Employee and the Corporation. Thereafter, the majority of the board
of directors decided not to re-elect Zosa as President and CEO of MCMC on account of loss of trust and
confidence arising from alleged violation of the resolution issued by the MCMC’s board of directors and
non-completion clause of the employment clause of the employment agreement. He was ,however,
elected to a new position as MCHC’s Vice-Chairman/Chairman New Ventures Development to which he
communicated his resignation on the ground that it had less responsibility and scope and demanded
that he be given termination benefits as provided in the Employment Agreement. MCHC communicated
its non-acceptance to the resignation and advised respondent that the agreement is terminated on
account of the latter’s breach thereof. Respondent invoked the Arbitration Clause of the agreement and
both parties designated their arbitrators in the panel. However, instead of submitting the dispute to
arbitration, respondent filed an action for damages against petitioners before the RTC. Petitioners’
motion to dismiss was denied. Petitioners filed a petition for certiorari and prohibition in the CA to
which it was given due course. The RTC in compliance with the decision, declared the arbitration clause
in the agreement partially void and of no effect insofar as it concerns the composition of arbitrators.
Petitioners then filed this petition for review on certiorari under Rule 45.

ISSUE:
 1. Whether or not the Arbitration Clause contained in Sec. 23 of the Employment Agreement is
void insofar as the composition of the panel of arbitrators are concerned?
2. Whether or not the Regional Trial Court of Cebu has no jurisdiction over of the case?
SC HELD:

1. The Arbitration Clause contained in the Employment Agreement is void insofar as the
composition of the panel of arbitrators. The MCMC and MCHC represent the same interest. The
MCMC is the manager of the defendant MCHC. MCMC will naturally and certainly be in favour of
its employer to protect and preserve its own interest. As a result, Rolando Zosa will be given less
opportunity to obtain justice from the award of the panel of arbitrators will render.

Article 2045 of the Civil Code provides, “Any clause giving one of the parties power to choose
more arbitrators than the other is void and of no effect.” Arbitration proceedings are designed
to level the playing field among the parties in pursuit of a mutually acceptable solution to their
conflicting claims. Any arrangement or scheme that would give undue advantage to a party in
the negotiating table is anathema to the very purpose of arbitration and should, therefore, be
resisted.

2. Regional Trial Court of Cebu has jurisdiction over of the case.

It is error for the petitioners to claim that the case should fall under the jurisdiction of the
Securities and Exchange Commission [SEC, for brevity]. The controversy does not in any way
involve the election/appointment of officers of petitioner MCHC, as claimed by petitioners in
their assignment of errors. Respondent Zosa's amended complaint focuses heavily on the
illegality of the Employment Agreement's "Arbitration Clause" initially invoked by him in seeking
his termination benefits under Section 8 of the employment contract. And under Republic Act
No. 876, otherwise known as the "Arbitration Law," it is the regional trial court which exercises
jurisdiction over questions relating to arbitration.

Furthermore, the decision of the Court of Appeals affirming the trial court's assumption of
jurisdiction over the case has become the "law of the case" which now binds the petitioners. The
"law of the case" doctrine has been defined as "a term applied to an established rule that when
an appellate court passes on a question and remands the cause to the lower court for further
proceedings, the question there settled becomes the law of the case upon subsequent appeal."

ABELLA, Judy Ann

DE LEON, Maja Felene

Case #19

TRANSFIELD PHILIPPINES, INC. (TPI) v LUZON HYDRO CORPORATION (LHC), AUSTRALIA AND NEW
ZEALAND BANKING GROUP LIMITED and SECURITY BANK CORPORATION
[G.R. No. 146717, May 19, 2006]

FACTS:
 LHC claims that Transfield Philippines, Inc. (TPI) is guilty of forum-shopping when it filed the
following suits:

1. Civil Case No. 04-332 filed on 19 March 2004, pending before the Regional Trial Court (RTC)
of Makati, Branch 56 for confirmation, recognition and enforcement of the Third Partial
Award
in case 11264 TE/MW, ICC International Court of Arbitration, entitled Transfield Philippines,
Inc. v. Luzon Hydro Corporation.

2. ICC Case No. 11264/TE/MW, Transfield Philippines, Inc. v. Luzon Hydro Corporation filed
before the International Court of Arbitration, International Chamber of Commerce (ICC) a
request for arbitration dated 3 November 2000 pursuant to the Turnkey Contract between
LHC
and TPI;

3. G.R. No. 146717, Transfield Philippines, Inc. v. Luzon Hydro Corporation, Australia and New
Zealand Banking Group Limited and Security Bank Corp. filed on 5 February 2001, which was
an appeal by certiorari with prayer for TRO/preliminary prohibitory and mandatory injunction,
of the Court of Appeals Decision dated 31 January 2001 in CA-G.R. SP No. 61901.

a. CA-G.R. SP No. 61901 was a petition for review of the Decision in Civil Case No. 00-
1312, wherein TPI claimed that LHC’s call on the securities was premature considering
that the issue of default has not yet been resolved with finality; the petition was
however
denied by the Court of Appeals;

b. Civil Case No. 00-1312 was a complaint for injunction with prayer for temporary
restraining order and/or writ of preliminary injunction dated 5 November 2000, which
sought to restrain LHC from calling on the securities and respondent banks from
transferring or paying of the securities; the complaint was denied by the RTC.

On the other hand, TPI claims that it is LHC which is guilty of forum-shopping when it raised the
issue of forum-shopping not only in this case, but also in Civil Case No. 04-332, and even asked for the
dismissal of the other case based on this ground. Moreover, TPI argues that LHC is relitigating in Civil
Case No. 04-332 the very same causes of action in ICC Case No. 11264/TE/MW, and even manifesting
therein that it will present evidence earlier presented before the arbitral tribunal.

On 1 August 2005, TPI moved to set the case for oral argument, positing that the resolution of
the Court on the issue of forum-shopping may have significant implications on the interpretation of the
Alternative Dispute Resolution Act of 2004, as well as the viability of international commercial
arbitration as an alternative mode of dispute resolution in the country. Said motion was opposed by LHC
in its opposition filed on 2 September 2005, with LHC arguing that the respective memoranda of the
parties are sufficient for the Court to resolve the issue of forum-shopping. On 28 October 2005, TPI filed
its Manifestation and Reiterative Motion to set the case for oral argument, where it manifested that the
International Chamber of Commerce (ICC) arbitral tribunal had issued its Final Award ordering LHC to
pay TPI US$24,533,730.00 (including the US$17,977,815.00 proceeds of the two standby letters of
credit). TPI also submitted a copy thereof with a Supplemental Petition to the Regional Trial Court (RTC),
seeking recognition and enforcement of the said award.
ISSUES:

1. Whether or not there is forum-shopping in the case at bar.

2. Whether or not the International Commercial Arbitration is viable as an alternative mode of dispute
resolution in the Philippines.

HELD:

1. No. There is no forum-shopping in the case at bar. The disposal of the forum-shopping charge is
crucial to the parties to this case on account of its profound effect on the final outcome of the
international arbitral proceedings which the parties have chosen as their principal dispute resolution
mechanism.

The essence of forum-shopping is the filing of multiple suits involving the same parties for the
same cause of action, either simultaneously or successively, for the purpose of obtaining a favorable
judgment. Forum-shopping has likewise been defined as the act of a party against whom an adverse
judgment has been rendered in one forum, seeking and possible getting a favorable opinion in another
forum, other than by appeal or the special civil action of certiorari, or the institution of two or more
actions or proceedings grounded on the same cause on the supposition that one or the other court
would make a favorable disposition. Thus, for forum shopping to exist, there must be (a) identity of the
parties, or at least such parties as represent the same interests in both actions; (b) identity of rights
asserted and relief prayed for, the relief being founded on the same facts; and (c) the identity of the two
preceding particulars in such that any judgment rendered in the other action will, regardless of which
party is successful, amount to res judicata in the action under consideration. None of these elements are
present in the case at bar.

2. Yes. The International Commercial Arbitration is viable as an alternative mode of dispute

resolution in the Philippines. As a fundamental point, the pendency of arbitral proceedings does not
foreclose resort to the courts for provisional reliefs. The Rules of the ICC, as well as Sec.14 of RA 876,
and RA 9285, all allow the filing of provisional or interim measures with the regular courts whenever the
arbitral tribunal has no power to act or to act effectively in safeguarding or conserving any matter which
is the subject of the dispute in arbitration. Also, the NY Convention, to which the Philippines is a
signatory, governs the recognition and enforcement of foreign arbitral awards. The applicability of the
NY Convention in the Philippines was confirmed in Sec.42 of RA 9285 which provides that the
application for the recognition and enforcement of such awards shall be file in the proper RTC.

Thus, international commercial arbitration is viable, practical, and applicable as an alternative

mode of dispute resolution in the country.

Hutama-RSEA v Citra

GR 180640
Facts:

Parties entered into an EPCC where Hutama would undertake the construction of Stage 1 of the
South Metro Manila Skyway Project which stretched from the junction of Buendia Ave., Makati to
Bicutan Interchange, Taguig. As consideration, Citra obliged itself under the EPCC to pay Hutama a total
of $369, 510, 304. During the construction, Hutama wrote to Citra on several occassions requesting
payment. Citra partially paid, thus prompting Hutama to demand payment of the outstanding balance
but Citra failed to do so. Thereafter, the Skyway project was opened for public use. Hutama again
demanded payment as well as the “early completion bonus” agreed up but Citra refused, prompting
Hutama’s counsel to send another demand letter. Hutama and Citra held several meetings to discuss the
possibility of amicably settle, the negotiation of which lasted for almost a year but failed to reach a
settlement. As a result, Hutama filed with CIAC a request for arbitration seeking to enforce its money
claims. Citra filed a motion to dismiss, arguing that it was agreed that they first refer to DAB before
going to CIAC.

Issue:

Whether the parties had to go to DAB first as a condition precedent before going to CIAC

Ruling:

Prior referral to DAB is not a condition precedent before CIAC can assume jurisdiction over the
dispute. Section 1 Article III of the CIAC Rules provides that CIAC can assume jurisdiction over
construction cases notwithstanding the reference to a different arbitration institution. Hence, the bare
fact that the parties incorporated an arbitration clause in the EPCC is sufficient to vest CIAC with
jurisdiction over their dispute.

HI-PRECISION STEEL CENTER INC. v LIM KIM STEEL BUILDERS INC.

G.R No. 110434 December 13, 1993

FACTS:

Hi-Precision entered into a contract with Steel Builders under which the latter as Contractor was
to complete a 21 Million Pesos construction project owned by Hi-Precision with a period of 153 days.
The said completion of the project was then moved, however, when the date came, only 75.8674% of
the project was actually completed. Petitioner attributed this non-completion to Steel Builders which
allegedly incurred delays both during the original contract and period of extension. On the other hand,
the Steel Builders claimed that the said non-completion of the project was either excusable or was due
to Hi-Precision’s own fault and issuance of change orders. The said project was taken over and
completed by Hi-Precision.

Steel Builders requested for an adjudication with CIAC (Public Respondent) and sought payment
of its unpaid billings, alleged unearned profits and other receivables. Hi-Precision on the other hand
claimed for damages and reimbursement of alleged additional costs. The CIAC formed an Arbitral
Tribunal with 3 members and such tribunal rendered a decision in favor of Steel Builders Inc ordering Hi-
Precision to pay Steel Builders their claim. Hence, Hi-Precision seeks review of both under Rule 45 and
Rule 65 of the Rules of Court based on misapprehension of facts.

ISSUE:

Whether or not the arbitral award in the case at bar can be reviewed by the Supreme Court.

RULING:

NO. The arbitral award in the case at bar cannot be reviewed by the Supreme Court. Section 19
of EO No. 1008 as amended says, “The arbitral award shall be binding upon the parties. It shall be final
and inappealable except on questions of law which shall be appealable to the Supreme Court."

Section 19 makes it crystal clear that questions of fact cannot be raised in proceedings before
the Supreme Court — which is not a trier of facts - in respect of an arbitral award rendered under the
aegis of the CIAC. Consideration of the animating purpose of voluntary arbitration in general, and
arbitration under the aegis of the CIAC in particular, requires us to apply rigorously the above principle
embodied in Section 19 that the Arbitral Tribunal’s findings of fact shall be final and unappealable.

Voluntary arbitration involves the reference of a dispute to an impartial body, the members of
which are chosen by the parties themselves, which parties freely consent in advance to abide by the
arbitral award issued after proceedings where both parties had the opportunity to be heard. The basic
objective is to provide a speedy and inexpensive method of settling disputes by allowing the parties to
avoid the formalities, delay, expense and aggravation which commonly accompany ordinary litigation,
especially litigation which goes through the entire hierarchy of courts. Executive Order No. 1008 created
an arbitration facility to which the construction industry in the Philippines can have recourse. The
Executive Order was enacted to encourage the early and expeditious settlement of disputes in the
construction industry, a public policy the implementation of which is necessary and important for the
realization of national development goals.

Aware of the objective of voluntary arbitration in the labor field, in the construction industry,
and in any other area for that matter, the Court will not assist one or the other or even both parties in
any effort to subvert or defeat that objective for their private purposes. The Court will not review the
factual findings of an arbitral tribunal upon the artful allegation that such body had "misapprehended
the facts" and will not pass upon issues which are, at bottom, issues of fact, no matter how cleverly
disguised they might be as "legal questions." Examination of the Petition at bar reveals that it is
essentially an attempt to re-assert and re-litigate before this Court the detailed or itemized factual
claims made before the Arbitral Tribunal under a general averment that the Arbitral Tribunal under a
general averment that the Arbitral Tribunal had "misapprehended the facts" submitted to it. The parties
here had recourse to arbitration and chose the arbitrators themselves; they must have had confidence
in such arbitrators. The Court will not, therefore, permit the parties to relitigate before it the issues of
facts previously presented and argued before the Arbitral Tribunal, save only where a very clear showing
is made that, in reaching its factual conclusions, the Arbitral Tribunal committed an error so egregious
and hurtful to one party as to constitute a grave abuse of discretion resulting in lack or loss of
jurisdiction.

VALDEZ, KRIZZAN MARIZ A.

2- SPECIAL

CASE NO. 24

A. D. GOTHONG MANUFACTURING CORPORATION EMPLOYEES UNION-ALU, petitioner, vs. HON.

NIEVES CONFESOR, SECRETARY, DEPARTMENT OF LABOR AND EMPLOYMENT and A.D. GOTHONG
MANUFACTURING CORPORATION, Subangdaku, Mandaue City, respondents.

G.R. No. 113638 November 16, 1999

Facts:

The Union filed a petition for certification election in its bid to represent the unorganized regular
rank-and-file employees of respondent excluding its office staff and personnel. In the inclusion-exclusion
proceedings, the parties agreed to the inclusion of Romulo Plaza and Paul Michael Yap in the list of
eligible voters on condition that their votes are considered challenged on the ground that they were
supervisory employees. The certification election was conducted as scheduled and yielded the following
results: Yes, 20; No, 19; Spolied, 0; and Challenged 2; Both Plaza and Yap argued that they are rank-and-
file employees while the Union maintains that both Plaza and Yap are supervisors who are disqualified
to join the proposed bargaining unit for rank-and-file employees. The Med-Arbiter declared that the
challenged voters Yap and Plaza are rank-and-file employees. The Secretary of Labor and Employment
(SOLE) affirmed the finding of the Med-Arbiter upon appeal. Hence, this petition.

Issue:

Whether or not the decision of the Med-Arbiter affirmed by the SOLE is reversible.
Held:

No. The decision of the Med-Arbiter affirmed by the SOLE is not reversible.

It has been established that in the determination of whether or not certain employees are
managerial employees, this Court accords due respect and therefore sustains the findings of fact made
by quasi-judicial agencies which are supported by substantial evidence considering their expertise in
their respective fields. 

The Med-Arbiter ruled that the petitioner Union failed to present concrete and substantial
evidence to establish the fact that challenged voters are either managerial or supervising employees;
There is nothing in them which specifically and precisely tells that the challenged voters can exercise the
powers and prerogatives to effectively recommended such managerial actions which require the use of
independent judgment. 

This Court is not a trier of facts. As earlier stated, it is not the function of this Court to examine
and evaluate the probative value of all evidence presented to the concerned tribunal which formed the
basis of its impugned decision or resolution. Following established precedents, it is inappropriate to
review that factual findings of the Med-Arbiter regarding the issue whether Romulo Plaza and Paul
Michael Yap are or are not rank-and-file employees considering that these are matters within their
technical expertise. They are binding on this Court as we are satisfied that they are supported by
substantial evidence, and we find no capricious exercise of judgment warranting reversal by certiorari.

G.R. No. 107918 June 14, 1994

ASSOCIATED BANK, petitioner,

vs.

HON. COURT OF APPEALS, HON. MARINA L. BUZON, as Presiding Judge of RTC, Quezon City, MM, Br.
91, VISITACION

SERRA FLORES RTC, Quezon City, MM, Br. 91, MA. ASUNCION FLORES, PHILIPPINE COMMERCIAL
INTERNATIONAL BANK,

FAR EAST BANK & TRUST CO., SECURITY BANK & TRUST CO. and CITYTRUST BANKING CORPORATION,
respondents.-
_______________________________________________________________________________

DOCTRINES: EXHAUSTION AF ADMIN REMEDIES, PRIMARY JURISDICTION, PCHC

MEMBERS/PARTICIPANTS ARE GOVERNED BY ITS ARBITRATION COMMITTEE

FACTS:
In a complaint for Violation of the Negotiable Instrument Law and Damages, plaintiffs 1 seek the
recovery of the amount of P900,913.60 which defendant bank 2 charged against their current account
by virtue of the sixteen (16) checks drawn by them despite the apparent alterations therein with respect
to the name of the payee, that is, the name Filipinas Shell was erased and substituted with Ever Trading
and DBL Trading by their supervisor Jeremias Cabrera, without their knowledge and consent. With
leave of court, defendant bank filed a Third-Party Complaint against Philippine Commercial International
Bank, Far East Bank & Trust Company, Security Bank and Trust Company and Citytrust
Banking Corporation for reimbursement, contribution, indemnity from said third-party defendants for
being the collecting banks of the subject checks and by virtue of their bank guarantee for all
checks sent for clearing to the Philippine Clearing House Corporation (PCHC), as provided for in
Section 17, (PCHC), as provided for in Section 17, PCHC Clearing House Rules and Regulations.

Philippine Commercial International Bank alleged that the subject check was complete and regular on its
face and was paid by it only upon presentment to the drawee bank for clearing who, upon examination
thereof, found the same to

be complete and regular on its face; that it was only after said check was cleared by third-party plaintiff
for payment that it allowed the payee to withdraw the proceeds of the check from its account; that the
cause of action of the third- party plaintiff is barred by estoppel and/or laches for its failure to return the
check to it within the period provided for under Clearing House Rules and Regulations; that this Court
has no jurisdiction over the suit as it and third-party plaintiff are members of the Philippine Clearing
House and bound by the Rules and Regulations thereof providing for arbitration

A Motion To Dismiss was filed by Security Bank and Trust Company on the grounds that third-party
plaintiff failed to resort to arbitration as provided for in Section 36 of the Clearing House Rules and
Regulations of the Philippine Clearing House Corporation, and that it was released from any liability
with the acceptance by third-party plaintiff of the subject check.

The trial court dismissed the third-party complaint for lack of jurisdiction citing Section 36 of the
Clearing House Rules and Regulations of the PCHC providing for settlement of disputes and
controversies involving any check or item cleared through the body with the PCHC. It ruled — citing the
Arbitration Rules of Procedure — that the decision or award of the PCHC through its arbitration
committee/arbitrator is appealable only on questions of law to any of the Regional Trial Courts in the
National Capital Region where the head office of any of the parties is located.

ISSUE:

W THE ARBITRATION COMMITTEE OF THE PCHC HAS JUEISDICTION OVER THE CASE.
RULING:

The Clearing House Rules and Regulations on Arbitration of the Philippine Clearing House Corporation
are clearly applicable to petitioner and private respondents, third party plaintiff and defendants,
respectively, in the court below. Petitioner Associated Bank’s third party complaint in the trial court
was one for reimbursement, contribution and indemnity against the Philippine Commercial and
Industrial Bank (PCIB), the Far East Bank and Trust, Co. (FEBTC), Security Bank and Trust Co. (SBTC), and
the City Trust Banking Corporation (CTBC), in connection with petitioner’s having honored sixteen
checks which said respondent banks supposedly endorsed to the former for collection in 1989. Under
the rules and regulations of the Philippine Clearing House Corporation (PCHC), the mere act of
participation of the parties concerned in its operations in effect amounts to a manifestation of
agreement by the parties to abide by its rules and regulations. As a consequence of such participation,
a party cannot invoke the jurisdiction of the courts over disputes and controversies which fall under the
PCHC Rules and Regulations without first going through the arbitration processes laid out by the
body. Since claims relating to the regularity of checks cleared by banking institutions are
among those claims which should first be submitted for resolution by the PCHC’s
Arbitration Committee, petitioner Associated Bank, having voluntarily bound itself to abide by such rules
and regulations, is estopped from seeking relief from the Regional Trial Court on the coattails of a
private claim and in the guise of a third party complaint without first having obtained a decision adverse
to its claim from the said body. It cannot bypass the arbitration process on the basis of its averment that
its third party complaint is inextricably linked to the original complaint in the Regional Trial Court. Under
its Articles of Incorporation, the PCHC provides "an effective, convenient, efficient, economical and
relevant exchange and facilitate service limited to check processing and sorting by way of assisting
member banks, entities in clearing checks and other clearing items as defined and existing in future
Central Bank of the Philippines Circulars, memoranda, circular letters rules and regulations and policies
in pursuance of Section 107 of RA 265." Pursuant to its function involving the clearing of checks and
other clearing items, the PCHC has adopted rules and regulations designed to provide member
banks with a procedure whereby disputes involving the clearance of checks and other negotiable
instruments undergo a process of arbitration prior to submission to the courts below. This procedure
not only ensures a uniformity of rulings relating to factual disputes involving checks and other
negotiable instruments but also provides a mechanism for settling minor disputes among participating
and member banks which would otherwise go directly to the trial courts. While the PCHC Rules and
Regulations allow appeal to the Regional Trial Courts only on questions of law, this does not preclude
our lower courts from dealing with questions of fact already decided by the PCHC arbitration when
warranted and appropriate. In Banco de Oro Savings and Mortgage Banks vs. Equitable Banking
Corporation 8 this Court had the occasion to rule on the validity of these rules as well as the jurisdiction
of the PCHC as a forum for resolving disputes and controversies involving checks and other clearing
items when it held that "the participation of two banks. . . in the Clearing Operations of the
PCHC (was) a manifestation of its submission to its jurisdiction."
The applicable PCHC provisions on the question of jurisdiction provide:

Sec. 3 — AGREEMENT TO THESE RULES

It is the general agreement and understanding, that any participant in the PCHC MICR clearing
operations, by the mere act of participation, thereby manifests its agreement to these Rules and
Regulations, and its subsequent amendments.

xxx xxx xxx

Sec. 36 — ARBITRATION

36.1 Any dispute or controversy between two or more clearing participants involving any check/item
cleared thru PCHC shall be submitted to the Arbitration Committee, upon written complaint of any
involved participant by filing the same with the PCHC serving the same upon the other party or parties,
who shall within fifteen (15) days after receipt

thereof, file with the Arbitration Committee its written answer to such written complaint and also within
the same period serve the same upon the complaining participant. This period of fifteen (15) days may
be extended by the Committee not more than once for another period of fifteen (15) days,
but upon agreement in writing of the complaining party, said extension may be for such period as
the latter may agree to.

Section 36.6 is even more emphatic:

36.6 The fact that a bank participates in the clearing operations of PCHC shall be deemed its written
and subscribed consent to the binding effect of this arbitration agreement as if it had done so in
accordance with Section 4 of the Republic Act No. 876 otherwise known as the Arbitration Law.

Thus, not only do the parties manifest by mere participation their consent to these rules, but such
participation is deemed (their) written and subscribed consent to the binding effect of arbitration
agreements under the PCHC rules. Moreover, a participant subject to the Clearing House Rules and
Regulations of the PCHC may go on appeal to any of the Regional Trial Courts in the National Capital
Region where the head office of any of the parties is located only after
a decision or award has been rendered by the arbitration committee or arbitrator on questions of law.

Clearly therefore, petitioner Associated Bank, by its voluntary participation and its consent to the
arbitration rules cannot go directly to the Regional Trial Court when it finds it convenient to do so. The
jurisdiction of the PCHC under the rules and regulations is clear, undeniable and is particularly
applicable to all the parties in the third party complaint under their obligation to first seek
redress of their disputes and grievances with the PCHC before going to

the trial court.

G.R. No. 147080. April 26, 2005

CAPITOL MEDICAL CENTER, INC., Petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION, et al.

FACTS:

Whether the respondent Capitol Medical Center Employees Association-Alliance of Filipino Workers (the
Union, for brevity) was the exclusive bargaining agent of the rank-and-file employees of the petitioner
Capitol Medical Center, Inc. The petitioner’s refusal to negotiate for a collective bargaining agreement
(CBA) resulted in a union-led strike on April 15, 1993.

The Union had to contend with another union – the Capitol Medical Center Alliance of Concerned
Employees (CMC-ACE) – which demanded for a certification election among the rank-and-file employees
of the petitioner. Med-Arbiter Brigida Fadrigon granted the petition, and the matter was appealed to the
Secretary of Labor and Employment (SOLE). Undersecretary Bienvenido E. Laguesma rendered a
Resolution on November 18, 1994 granting the appeal. He, likewise, denied the motion filed by the
petitioner and the CMC-ACE.

Instead of filing a motion with the SOLE for the enforcement of the resolutions of Undersecretary
Laguesma as affirmed by this Court, the Union filed a Notice of Strike on October 29, 1997 with the
National Conciliation and Mediation Board (NCMB), serving a copy thereof to the petitioner. The Union
alleged as grounds for the projected strike the following acts of the petitioner: (a) refusal to bargain; (b)
coercion on employees; and (c) interference/ restraint to self-organization.

A series of conferences was conducted before the NCMB (National Capital Region), but no agreement
was reached. On November 20, 1997, the Union submitted to the NCMB the minutes of the alleged
strike vote purportedly held at the parking lot in front of the petitioner’s premises. On November 28,
1997, the officers and members of the Union staged a strike. On December 4, 1997, the SOLE issued an
Order, assuming jurisdiction over the ongoing labor dispute.
HELD: The strike in the case at bar is illegal. The union failed to comply with the procedures mandated
by law.

Second paragraph of Section 10, Rule XXII of the Omnibus Rules of the NLRC which reads:

Section 10. Strike or lockout vote. – A decision to declare a strike must be approved by a majority of the
total union membership in the bargaining unit concerned obtained by secret ballot in meetings or
referenda called for the purpose. A decision to declare a lockout must be approved by a majority of the
Board of Directors of the employer, corporation or association or the partners obtained by a secret
ballot in a meeting called for the purpose.

In National Federation of Labor v. NLRC, the Court enumerated the notices required by Article 263 of
the Labor Code and the Implementing Rules, which include the 24-hour prior notice to the NCMB:

1) A notice of strike, with the required contents, should be filed with the DOLE, specifically the
Regional Branch of the NCMB, copy furnished the employer of the union;

2) A cooling-off period must be observed between the filing of notice and the actual execution of the
strike thirty (30) days in case of bargaining deadlock and fifteen (15) days in case of unfair labor
practice. However, in the case of union busting where the union’s existence is threatened, the cooling-
off period need not be observed.

4) Before a strike is actually commenced, a strike vote should be taken by secret balloting, with a 24-
hour prior notice to NCMB. The decision to declare a strike requires the secret-ballot approval of
majority of the total union membership in the bargaining unit concerned.

5) The result of the strike vote should be reported to the NCMB at least seven (7) days before the
intended strike or lockout, subject to the cooling-off period.

A union is mandated to notify the NCMB of an impending dispute in a particular bargaining unit via a
notice of strike. Thereafter, the NCMB, through its conciliator-mediators, shall call the parties to a
conference at the soonest possible time in order to actively assist them in exploring all possibilities for
amicable settlement. In the event of the failure in the conciliation/mediation proceedings, the parties
shall be encouraged to submit their dispute for voluntary arbitration. However, if the parties refuse, the
union may hold a strike vote, and if the requisite number of votes is obtained, a strike may ensue. The
purpose of the strike vote is to ensure that the decision to strike broadly rests with the majority of the
union members in general and not with a mere minority, and at the same time, discourage wildcat
strikes, union bossism and even corruption. A strike vote report submitted to the NCMB at least seven
days prior to the intended date of strike ensures that a strike vote was, indeed, taken. The 15 to 30 day
cooling-off period is designed to afford the parties the opportunity to amicably resolve the dispute
with the assistance of the NCMB conciliator/mediator, while the seven-day strike ban is intended to
give the DOLE an opportunity to verify whether the projected strike really carries the imprimatur of
the majority of the union members.

The requirement of giving notice of the conduct of a strike vote to the NCMB at least 24 hours before
the meeting for the said purpose is designed to (a) inform the NCMB of the intent of the union to
conduct a strike vote; (b) give the NCMB ample time to decide on whether or not there is a need to
supervise the conduct of the strike vote to prevent any acts of violence and/or irregularities attendant
thereto; and (c) should the NCMB decide on its own initiative or upon the request of an interested party
including the employer, to supervise the strike vote, to give it ample time to prepare for the deployment
of the requisite personnel, including peace officers if need be. The failure of a union to comply with the
requirement of the giving of notice to the NCMB at least 24 hours prior to the holding of a strike vote
meeting will render the subsequent strike staged by the union illegal.

In this case, the respondent Union failed to comply with the 24-hour prior notice requirement to the
NCMB before it conducted the alleged strike vote meeting on November 10, 1997.

DEL MONTE CORPORATION-USA vs. COURT OF APPEALS

DOCTRINE:

FACTS: Del Monte Corporation-USA (DMC-USA) entered in a Distribution Agreement with Montebueno
Marketing, Inc. (MMI), making it the sole and exclusive distributor of Del Monte Products in the
Philippines. The agreement contained an arbitration clause which states that –

This Agreement shall be governed by the laws of the State of California and/or, if applicable, the
United States of America. All disputes arising out of or relating to this Agreement or the parties
relationship, including the termination thereof, shall be resolved by arbitration in the City of San
Francisco, State of California, under the Rules of the American Arbitration Association. xxx

MMI appointed Sabrosa Foods, Inc. (SFI) as its marketing arm which was approved by DMC-USA. MMI,
SFI, and MMI’s Managing Director Liong Liong Sy filed a Complaint against DMC-USA, Paul Derby, Jr.,
Daniel Collins, and Luis Hidalgo before the RTC of Malabon, alleging that the petitioners violated Articles
20, 21, and 23 of the Civil Code. The respondents contend that DMC-USA products continued to be
brought into the country by parallel importers which caused them great embarrassment and substantial
damage. DMC-USA filed a motion to suspend proceedings by invoking the arbitration clause contained in
the Distributorship Agreement. DMC-USA contended that the subject matter relates to the
Distributorship Agreement containing an arbitration clause which mentions that all disputes arising
thereof shall be resolved by arbitration.But, RTC deferred the motion because the ground alleged by
DMC-USA did not constitute the suspension of the proceeding. The complainants filed Urgent Motion
for Leave to admit Supplemental Pleading which was affirmed by the lower court. Upon admission of the
Supplemental Complaint, DMC-USA filed a manifestation adopting their motion to suspend proceedings.
On appeal, the Court of Appeals affirmed the decision of the trial court, ruling that the damaging acts
alleged in the complaint required the interpretation of Article 21 of the Civil Code and that in
determining whether the petitioners violated it would require a full blown trial, making arbitration
improper.

ISSUE: Whether the dispute between the parties warrants an order to compel them to submit to
arbitration.
HELD: No. The dispute between the parties does not warrant an order to compel them to submit to
arbitration.

The arbitration clause in the Distributorship Agreement between petitioner DMC-USA and private
respondent MMI is valid and the dispute between the parties is arbitrable. However, the Court denied
the petition and affirmed the decision of the Court of Appeals.

The Agreement between DMC-USA and MMI is a contract. The provision to submit to arbitration any
dispute arising therefrom and the relationship of the parties is part of that contract and is itself a
contract. As a rule, contracts are respected as the law between the contracting parties and produce
effect as between them, their assigns and heirs. Only parties to the Agreement, i.e., DMC-USA and its
Managing Director for Export Sales Paul E. Derby, Jr., and MMI and its Managing Director LILY SY are
bound by the Agreement and its arbitration clause as they are the only signatories thereto. Daniel
Collins and Luis Hidalgo, and SFI, not parties to the Agreement and cannot even be considered assigns or
heirs of the parties, are not bound by the Agreement and the arbitration clause therein.

Consequently, referral to arbitration in the State of California and the suspension of the proceedings in
Civil Case pending the return of the arbitral award could be called for but only as to DMC-USA and Paul
E. Derby, Jr., and MMI and LILY SY, and not as to the other parties in this case.

In Heirs of Augusto L. Salas, Jr. v. Laperal Realty Corporation only parties to the Agreement, their assigns
or heirs have the right to arbitrate or could be compelled to arbitrate. The Court also declared that in
recognizing the right of the contracting parties to arbitrate or to compel arbitration, the splitting of the
proceedings to arbitration as to some of the parties on one hand and trial for the others on the other
hand, or the suspension of trial pending arbitration between some of the parties, should not be allowed
as it would, in effect, result in multiplicity of suits, duplicitous procedure and unnecessary delay.

The object of arbitration is to allow the expeditious determination of a dispute. Clearly, the issue in this
case could not be speedily and efficiently resolved in its entirety if the Court will allow simultaneous
arbitration proceedings and trial, or suspension of trial pending arbitration. Accordingly, the interest of
justice would only be served if the trial court hears and adjudicates the case in a single and complete
proceeding. Hence, the Regional Trial Court concerned is directed to proceed with the hearing of Civil
Case.

KOPPEL, INC. VS. MAKATI ROTARY CLUB FOUNDATION, INC.

GR NO. 198075, SEPTEMBER 4, 2013

FACTS:

Fedders Koppel owned a parcel of land with buildings and improvements therein, dedicated to
its business, in 1975, by way of conditional donation, Fedders bequeathed the parcel of land to Makati
Rotary, subject to the following conditions set forth in the Lease Contract and Deed of Donation:
 1. The period of lease is for 25 years, with annual rent of P40, 126.
2. That the lease shall be renewable for another 25 years upon their mutual agreement and in the
case of disagreement on the rental, the matter state be referred to a Board of Arbitrators
appointed and with the powers in accordance with the Arbitration Law(RA 878), whose function
shall be to be decide the FMV of the land provided, that any increase in the FMV of the land
shall not exceed 25% of the original value of the land donated; and that the rental shall not
exceed 3% of the FMV of the land, as determined by the Board of Arbitrators.

Fedders Koppel continued to possess and use the land.

In 2000, Lease corporation, before 1975 lease contract expired, the parties executed another
5year contract, with annual rents ranging from P4,000,000.00 for the 5 th year. The lease contract
contained an arbitration clause that any disagreement as to the interpretation, application, or execution
of the contract shall be submitted to a board of 3 arbitrators constituted in accordance with the
arbitration law of the Philippines; that the decision of the majority of the arbitrators shall be binding
among the parties.

In 2005, the parties renewed the lease contract for another 5 years. The 2005 Lease Corporation
required Fedders to pay a fixed annual rent of P4, 200,000.00, with the addition of a yearly donation of
money ranging from P3, 000,000.00 to P3, 900,000.00. the lease contract contained an arbitration
clause similar to that of the 2000 lease contract.

In the assignment, Fedders faithfully complied with its obligations under the Lease Corporation
until it sold all its rights and properties to Koppel. In 2009, Koppel discontinued payment of the rent and
donations, contending that they are mot in accordance with the 1975 Deed of Donations, which
specified that only 3% of the FMV shall be the amount of the rent.

Makati Rotary sent Koppel a letter notifying the latter of its default and demanding the payment
of the rent and donation due for 2009, and that should Koppel fail to do so. Makati would intimate the
cancelling of the 2005 lease contract. Koppel refused to pay. Later, Makati Rotary sent another demand
letter reiterating the same contents of the first demand letter. Again, Koppel refused to comply with
Makati Rotary’s demand. Koppel instead filed with the RTC a complaint for rescission on cancellation of
the Deed of Donation and Amended Deed of Donation against Makati Rotary. Later, Makati Rotary filed
an unlawful detainer case with the MeTC, in its answer, Koppel, argued among others that the dispute
must first be referred to arbitration pursuant to the arbitration clause in the 2005 Lease Contract. MeTC
sided, with Koppel on the ground of nullity of the 2005 Lease Contract. The RTC reversed MeTC decision
the reason among others:

1. Koppel cannot invoke the arbitration clause, and at the same time question the 2005 Lease
Contract validity.
2. Koppel did not file a formal application before the MeTC to as to render such arbitration clause
operational.

The CA, affirmed RTC decision.

ISSUES:

1. Whether the disagreement is non-arbitriable because it will inevitably touch upon the issue of
the validity of the 2005 Lease Contract, or whether it is contrary to law and public order?
2. Whether Koppel cannot invoke the arbitration clause while at the same time impugn such
contracts validity?
3. Whether even in assuming that Koppel can invoke the arbitration clause, it did not file a formal
application before the MeTC do as to under such arbitration clauses operational in accordance
with Sec. 24 of RA 9285?
4. Whether the parties already underwent JDR before the RTC and ADR would only be circuitous?
5. Whether ejectments are summary in nature?

RULINGS:

1. While the issue of validity of a contract is non-arbitriable the issue here is the disagreement
between the parties as to the rental stipulation of the 2005 Lease Contract. Thus, it would be
safe to conclude that the present dispute arose from the application or execution of the said
Lease Contract. Such stipulation is clear and comprehensive enough they include any kind of
dispute that may arise from the 2005 Lease Contract. The present dispute then is arbitriable.
2. Koppel may still invoke the arbitration clause while at the same time; assail the validity of the
2005 Lease Contract, due to the Doctrine of Separability.

DOCTRINE OF SEPARABILITY- an arbitration agreement is independent of the main contract.

Being a separate contract, the arbitration agreement may thus be invoked regardless of the
possible nullity of the main contract.

3. The operation of the arbitration clause is not all defected by the non-filing of a formal request
therefore with the MeTC. The filing of the request is not the sole means by which an arbitration
clause may be validly invoked in a pending suit. In resolving the issue, the court resorted to the
Rule 4.1 of the Special ADR Rules, in relation to Sec. 24 of the ADR Law. In using the word “may”
to qualify the filing of the request for arbitration, the Special ADR Rules clearly did not intend to
limit the invocation of an arbitration agreement in a pending suit.
4. JDR- referral to a JDR judge who merely facilitates settlement, and make a non-binding
evaluation or assessment of the chances of each party’s case while ADR- is a dispute submitted
to arbitrators who are neutral 3 rd persons, who shall have the authority to render a resolution
binding upon the parties.
5. Notwithstanding the summary nature of ejectment cases, an arbitration still remains relevant as
it aims not only to afford the parties an expedition methods of resolving disputes. ADR features
party autonomy on the freedom of the parties to make their own arrangements to settle their
disputes. Such feature cannot be found in summary proceedings.