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RESOLUTION COMPILED
CASES
THIRD DIVISION
G.R. No. 132848-49
DECISION
TINGA, J.:
This Petition for Review on Certiorari under Rule 45 seeks the
partial reversal of the 21 February 1996 Decision1 of the Court
of Appeals Fifteenth Division in CA-G.R. SP No. 37957
which modified the 17 April 1995 Decision2 of the
Construction Industry Arbitration Commission (CIAC).
The case originated from an action for a sum of money filed
by Titan-Ikeda Construction and Development Corporation
January 7, 2008
February 7, 2001
and, that the shrewd and subtle manner with which petitioners
concocted imaginary violations by private respondent MMI of
the Distributorship Agreement in order to justify the untimely
termination thereof was a subterfuge. For the foregoing,
private respondents claimed, among other reliefs, the payment
of actual damages, exemplary damages, attorney's fees and
litigation expenses.
On 21 October 1996 petitioners filed a Motion to Suspend
Proceedings13 invoking the arbitration clause in their
Agreement with private respondents.1wphi1.nt
In a Resolution14 dated 23 December 1996 the trial court
deferred consideration of petitioners' Motion to Suspend
Proceedings as the grounds alleged therein did not constitute
the suspension of the proceedings considering that the action
was for damages with prayer for the issuance of Writ of
Preliminary Attachment and not on the Distributorship
Agreement.
On 15 January 1997 petitioners filed a Motion for
Reconsideration to which respondents filed their
Comment/Opposition. On 31 January 1997 petitioners filed
their Reply. Subsequently, private respondents filed an Urgent
Motion for Leave to Admit Supplemental Pleading dated 2
April 1997. This Motion was admitted, over petitioners'
opposition, in an Order of the trial court dated 27 June 1997.
As a result of the admission of the Supplemental Complaint,
petitioners filed on 22 July 1997 a Manifestation adopting
their Motion to Suspend Proceedings of 17 October 1996 and
Motion for Reconsideration of 14 January 1997.
On 11 November 1997 the Motion to Suspend Proceedings
was denied by the trial court on the ground that it "will not
serve the ends of justice and to allow said suspension will only
delay the determination of the issues, frustrate the quest of the
parties for a judicious determination of their respective
claims, and/or deprive and delay their rights to seek
redress."15
On appeal, the Court of appeals affirmed the decision of the
trial court. It held that the alleged damaging acts recited in the
Complaint, constituting petitioners' causes of action, required
the interpretation of Art. 21 of the Civil Code16 and that in
determining whether petitioners had violated it "would require
a full blown trial" making arbitration "out of the question." 17
Petitioners' Motion for Reconsideration of the affirmation was
denied. Hence, this Petition for Review.
The crux of the controversy boils down to whether the dispute
between the parties warrants an order compelling them to
submit to arbitration.
Petitioners contend that the subject matter of private
respondents' causes of action arises out of or relates to the
Agreement between petitioners and private respondents. Thus,
considering that the arbitration clause of the Agreement
provides that all disputes arising out of or relating to the
Agreement or the parties' relationship, including the
termination thereof, shall be resolved by arbitration, they insist
on the suspension of the proceedings in Civil Case No. 2637MN as mandated by Sec. 7 of RA 876 18
Sec. 7. Stay of Civil Action. If any suit or proceeding
be brought upon an issue arising out of an agreement
providing for arbitration thereof, the court in which
such suit or proceeding is pending, upon being
satisfied that the issue involved in such suit or
proceeding is referable to arbitration, shall stay the
action or proceeding until an arbitration has been
had in accordance with the terms of the agreement.
SO ORDERED.
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FIRST DIVISION
G.R. No. 156660
dated October 30, 2002 of the Court of Appeals (CA) in CAG.R. SP No. 56166 which set aside the Joint Orders2 dated
August 26, 1999 and October 29, 1999 issued by the Regional
Trial Court (RTC) of Ormoc City, Branch 12 upholding
petitioners legal personality to demand arbitration from
respondents and directing respondents to nominate two
arbitrators to represent them in the Board of Arbitrators.
Petitioners are associations organized by and whose members
are individual sugar planters (Planters). The membership of
each association follows: 264 Planters were members of
OSPA; 533 Planters belong to OLFAMCA; 617 Planters
joined UNIFARM; 760 Planters enlisted with ONDIMCO;
and the rest belong to BAP-MPC which did not join the
lawsuit.
Respondents Hideco Sugar Milling Co., Inc. (Hideco) and
Ormoc Sugar Milling Co, Inc. (OSCO) are sugar centrals
engaged in grinding and milling sugarcane delivered to them
by numerous individual sugar planters, who may or may not
be members of an association such as petitioners.
Petitioners assert that the relationship between respondents
and the individual sugar planters is governed by milling
contracts. To buttress this claim, petitioners presented
representative samples of the milling contracts.3
Notably, Article VII of the milling contracts provides that
34% of the sugar and molasses produced from milling the
Planters sugarcane shall belong to the centrals (respondents)
as compensation, 65% thereof shall go to the Planter and the
remaining 1% shall go the association to which the Planter
concerned belongs, as aid to the said association. The 1% aid
shall be used by the association for any purpose that it may
deem fit for its members, laborers and their dependents. If the
Planter was not a member of any association, then the said 1%
shall revert to the centrals. Article XIV, paragraph B 4 states
that the centrals may not, during the life of the milling
contract, sign or execute any contract or agreement that will
provide better or more benefits to a Planter, without the
written consent of the existing and recognized associations
except to Planters whose plantations are situated in areas
beyond thirty (30) kilometers from the mill. Article XX
provides that all differences and controversies which may
arise between the parties concerning the agreement shall be
submitted for discussion to a Board of Arbitration, consisting
of five (5) memberstwo (2) of which shall be appointed by
the centrals, two (2) by the Planter and the fifth to be
appointed by the four appointed by the parties.
On June 4, 1999, petitioners, without impleading any of their
individual members, filed twin petitions with the RTC for
Arbitration under R.A. 876, Recovery of Equal Additional
Benefits, Attorneys Fees and Damages, against HIDECO and
OSCO, docketed as Civil Case Nos. 3696-O and 3697-O,
respectively.
Petitioners claimed that respondents violated the Milling
Contract when they gave to independent planters who do not
belong to any association the 1% share, instead of reverting
said share to the centrals. Petitioners contended that
respondents unduly accorded the independent Planters more
benefits and thus prayed that an order be issued directing the
parties to commence with arbitration in accordance with the
terms of the milling contracts. They also demanded that
respondents be penalized by increasing their member Planters
65% share provided in the milling contract by 1%, to 66%.
DECISION
LEONARDO-DE CASTRO, J.:
Before the Court is a special civil action for certiorari assailing
the Decision1 dated December 7, 2001 and the Resolution
This claim has no leg to stand on since petitioners did not sign
the milling contracts at all, whether as a party or as a
representative of their member Planters. The individual
Planter and the appropriate central were the only signatories to
the contracts and there is no provision in the milling contracts
that the individual Planter is authorizing the association to
represent him/her in a legal action in case of a dispute over the
milling contracts.
Moreover, even assuming that petitioners are indeed
representatives of the member Planters who have milling
contracts with the respondents and assuming further that
petitioners signed the milling contracts as representatives of
their members, petitioners could not initiate arbitration
proceedings in their own name as they had done in the
present case. As mere agents, they should have brought the
suit in the name of the principals that they purportedly
represent. Even if Section 4 of R.A. No. 876 allows the
agreement to arbitrate to be signed by a representative, the
principal is still the one who has the right to demand
arbitration.
Indeed, Rule 3, Section 2 of the Rules of Court requires suits
to be brought in the name of the real party in interest, to wit:
Sec. 2. Parties in interest. A real party in interest is the party
who stands to be benefited or injured by the judgment in the
suit, or the party entitled to the avails of the suit. Unless
otherwise authorized by law or these Rules, every action must
be prosecuted or defended in the name of the real party in
interest.
We held in Oco v. Limbaring14 that:
As applied to the present case, this provision has two
requirements: 1) to institute an action, the plaintiff must be the
real party in interest; and 2) the action must be prosecuted in
the name of the real party in interest. Necessarily, the purposes
of this provision are 1) to prevent the prosecution of actions by
persons without any right, title or interest in the case; 2) to
require that the actual party entitled to legal relief be the one
to prosecute the action; 3) to avoid a multiplicity of suits; and
4) to discourage litigation and keep it within certain bounds,
pursuant to sound public policy.
Interest within the meaning of the Rules means material
interest or an interest in issue to be affected by the decree
or judgment of the case, as distinguished from mere curiosity
about the question involved. One having no material interest
to protect cannot invoke the jurisdiction of the court as the
plaintiff in an action. When the plaintiff is not the real party
in interest, the case is dismissible on the ground of lack of
cause of action.
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ARBITRATION
Any dispute which the Buyer and Seller may not be able to
settle by mutual agreement shall be settled by arbitration in the
City of New York before the American Arbitration
Association. The Arbitration Award shall be final and binding
on both parties.5
that respondent must first comply with the arbitration clause
before resorting to court, thus, the RTC must either dismiss
the case or suspend the proceedings and direct the parties to
proceed with arbitration, pursuant to Sections 6 6 and 77 of
Republic Act (R.A.) No. 876, or the Arbitration Law.
Respondent filed an Opposition, wherein it argued that the
RTC has jurisdiction over the action for rescission of contract
and could not be changed by the subject arbitration clause. It
cited cases wherein arbitration clauses, such as the subject
clause in the contract, had been struck down as void for being
contrary to public policy since it provided that the arbitration
being of the view that Gonzales had raised in his answer the
issue of the making of the arbitration agreement.16
Climax-Arimco then filed a motion to resolve its pending
motion to compel arbitration. The RTC denied the same in its
24 July 2000 order.
On 28 July 2000, Climax-Arimco filed a Motion to Inhibit
Judge Herminio I. Benito for "not possessing the cold
neutrality of an impartial judge." 17 On 5 August 2000, Judge
Benito issued an Order granting the Motion to Inhibit and
ordered the re-raffling of the petition for arbitration.18 The
case was raffled to the sala of public respondent Judge Oscar
B. Pimentel of Branch 148.
On 23 August 2000, Climax-Arimco filed a motion for
reconsideration of the 24 July 2000 Order. 19 Climax-Arimco
argued that R.A. No. 876 does not authorize a pre-trial or trial
for a motion to compel arbitration but directs the court to hear
the motion summarily and resolve it within ten days from
hearing. Judge Pimentel granted the motion and directed the
parties to arbitration. On 13 February 2001, Judge Pimentel
issued the first assailed order requiring Gonzales to proceed
with arbitration proceedings and appointing retired CA Justice
Jorge Coquia as sole arbitrator.20
Gonzales moved for reconsideration on 20 March 2001 but
this was denied in the Order dated 7 March 2005.21
Gonzales thus filed the Rule 65 petition assailing the Orders
dated 13 February 2001 and 7 March 2005 of Judge Pimentel.
Gonzales contends that public respondent Judge Pimentel
acted with grave abuse of discretion in immediately ordering
the parties to proceed with arbitration despite the proper, valid,
and timely raised argument in his Answer with Counterclaim
that the Addendum Contract, containing the arbitration clause,
is null and void. Gonzales has also sought a temporary
restraining order to prevent the enforcement of the assailed
orders directing the parties to arbitrate, and to direct Judge
Pimentel to hold a pre-trial conference and the necessary
hearings on the determination of the nullity of the Addendum
Contract.
In support of his argument, Gonzales invokes Sec. 6 of R.A.
No. 876:
Sec. 6. Hearing by court.A party aggrieved by the failure,
neglect or refusal of another to perform under an agreement in
writing providing for arbitration may petition the court for an
order directing that such arbitration proceed in the manner
provided for in such agreement. Five days notice in writing of
the hearing of such application shall be served either
personally or by registered mail upon the party in default. The
court shall hear the parties, and upon being satisfied that the
making of the agreement or such failure to comply therewith
is not in issue, shall make an order directing the parties to
proceed to arbitration in accordance with the terms of the
agreement. If the making of the agreement or default be in
issue the court shall proceed to summarily hear such issue. If
the finding be that no agreement in writing providing for
arbitration was made, or that there is no default in the
proceeding thereunder, the proceeding shall be dismissed. If
the finding be that a written provision for arbitration was made
and there is a default in proceeding thereunder, an order shall
be made summarily directing the parties to proceed with the
arbitration in accordance with the terms thereof.
The court shall decide all motions, petitions or applications
filed under the provisions of this Act, within ten (10) days
after such motions, petitions, or applications have been heard
by it.
X=
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Section 7. Remedies for Breach of Warranties
a. If any of the representations and warranties of any
or all of the SELLERS or the BUYER (the
"Defaulting Party") contained in Sections 5 and 6
shall be found to be untrue when made and/or as of
the Closing Date, the other party, i.e., the BUYER if
the Defaulting Party is any or all of the SELLERS
and the SELLERS if the Defaulting Party is the
BUYER (hereinafter referred to as the "NonDefaulting Party") shall have the right to require the
Defaulting Party, at the latters expense, to cure such
breach, and/or seek damages, by providing notice or
presenting a claim to the Defaulting Party, reasonably
specifying therein the particulars of the breach. The
foregoing remedies shall be available to the NonDefaulting Party only if the demand therefor is
presented in writing to the Defaulting Party within
three (3) years from the Closing Date except that the
remedy for a breach of the SELLERS representation
and warrant in Section 5 (h) shall be available only if
the demand therefor is presented to the Defaulting
Party in writing together with schedules and to
substantiate such demand, within six (6) months from
the Closing Date.6
On June 2, 2000, RCBC deposited the stipulated
downpayment amount in an escrow account after which it was
given full management and operational control of Bankard.
June 2, 2000 is also considered by the parties as the Closing
Date referred to in the SPA.
Thereafter, the parties executed an Amendment to Share
Purchase Agreement (ASPA) dated September 19, 2000.7 Its
paragraph 2(e) provided that:
2. Notwithstanding any provisions to the contrary in
the Share Purchase Agreement and/or any agreement,
instrument or document entered into or executed by
words, RCBC, prior to such second audit, did not have full
and thorough knowledge of the correctness of Bankards
accounts, in relation to Sec. 5(g). RCBC, therefore, could not
have misrepresented itself considering that it was still in the
process of verifying the warranties covered under Sec. 5(g).
Considering that there must be a concurrence of the elements
of estoppel for it to arise, on this ground alone such claim is
already negated. As will be shown, however, all the other
elements of estoppel are likewise absent in the case at bar.
As to the second element, in order to establish estoppel,
RCBC must have intended that petitioners would act upon its
actions. This element is also missing. RCBC by its actions did
not mislead petitioners into believing that it waived any claim
for violation of a warranty. The periods under Sec. 5(g) and
5(h) were still available to RCBC.
The element that petitioners relied on the acts and conduct of
RCBC is absent. The Court finds that there was no reliance on
the part of petitioners on the acts of RCBC that would lead
them to believe that the RCBC will forego the filing of a claim
under Sec. 5(g). The allegation that RCBC knew that the
Bankard accounts did not comply with generally accepted
accounting principles before payment and, hence, it cannot
question the financial statements of Bankard is meritless.
Precisely, the SPA explicitly provides that claims for violation
of the warranties under Sec. 5(g) can still be filed within three
(3) years from the closing date. Petitioners contention that
RCBC had full control of Bankard operations after payment of
the price and that an audit undertaken by the Rubio team did
not find anything wrong with the accounts could not have
plausibly misled petitioners into believing that RCBC will
waive its right to file a claim under Sec. 5(g). After all, the
period to file a claim under Sec. 5(g) is three (3) years under
Sec. 7, much longer than the six (6)-month period under Sec.
5(h). Petitioners are fully aware that the warranties under Sec.
5(g) (1997 up to March 2000) are of a wider scope than that of
Sec. 5(h) (AFS of 1999 and UFS up to May 31, 2000),
necessitating a longer audit period than the six (6)-month
period under Sec. 5(h).
The third element of estoppel in relation to the party sought to
be estopped is also absent considering that, as stated, RCBC
was still in the process of verifying the correctness of
Bankards accounts prior to presenting its claim of
overvaluation to petitioners. RCBC, therefore, had no
sufficient knowledge of the correctness of Bankards accounts.
On another issue, RCBC could not have immediately changed
the Bankard accounting practices until it had conducted a
more extensive and thorough audit of Bankards voluminous
records and transactions to uncover any irregularities. That
would be the only logical explanation why Bankards alleged
irregular practices were maintained for more than two (2)
years from closing date. The fact that RCBC continued with
the audit of Bankards AFS and records after the termination
of the Rubio audit can only send the clear message to
petitioners that RCBC is still entertaining the possibility of
filing a claim under Sec. 5(g). It cannot then be said that
petitioners reliance on RCBCs acts after full payment of the
price could have misled them into believing that no more
claim will be presented by RCBC.
The Arbitral Tribunal explained in detail why estoppel is not
present in the case at bar, thus:
10.18 The audit exercise conducted by Mr. Legaspi
and Mr. Rubio was clearly not one comprehensive
enough to have discovered the problems later
unearthed by Dr. Laya and Dean Ledesma. x x x
10.19 Although the powers of the TC [Transition
Committee] may have been widely expressed in the
10.25 The fact that the purchase price was paid over
in full without any deduction in terms of clause 5(h)
is not a bar to the Claimant bringing a claim under
5(g) within the three-year period. The fact that
payment was made can be, as the Tribunal has held, a
barrier to a claim for rescission and restitution ad
inegrum. A claim for estoppel needs a finding of
representation by words of conduct or a shared
presumption that a right would not be relied upon.
The party relying on estoppel has to show reliance to
its detriment or that, otherwise, it would be
unconscionable to resile from the provision.
10.26 Article 1431 of the Civil Code states:
"Through estoppel an admission or representation is
rendered conclusive upon the person making it, and
cannot be denied or disproved as against the person
relying thereon."
10.27 Clearly, there has to both an admission or
representation by (in this case) the Claimant, plus
reliance upon it by (in this case) the Respondents.
The Tribunal cannot find as proved any
admission/representation that the Claimant was
abandoning a 5(g) claim, any reliance by
Respondents on an admission, and any detriment to
the Respondents such as would entitle them to have
the Claimant deprived of the benefit of clause 5(g).
These aspects of the claim of estoppel are rejected.
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10.42 The Tribunal is not the appropriate forum for
deciding whether there have been any regulatory or
ethical infractions by Bankard and/or the Claimant in
setting the buy-back price. It has no bearing on
whether the Claimant must be considered as having
waived its right to claim against the Respondents.
10.43 In the Tribunals view, neither any infraction
by Bankard in failing to advise the Central Bank of
the experts findings, nor a failure to put a tag on the
accounts nor to have said something to the
shareholders in the buy-back exercise operates as a
"technical knock-out" of Claimants claim.
10.44 The Tribunal notes that the conciliation process
mandated by the SPA took most of 2003 and this
may explain a part of the delay in commencing
arbitral proceedings.
10.45 Whatever the status of Mr. Rubios and Mr.
Legaspis enquiries in late 2000, the Claimant was
quite entitled to commission subsequent reports from
Dr. Laya and Dr. Echanis and, on the basis of those
reports, make a timeous claim under clause 5(g) of
the SPA.
10.46 In the Tribunals view, therefore, there is no
merit in Respondents various submissions that the
Claimant is debarred from prosecuting its claims on
the grounds of estoppel. There is just no proof of the
necessary representation to the Respondent, nor any
detriment to the Respondent proved. The grounds of
delay and laches are not substantiated.
In summary, the tribunal properly ruled that petitioners failed
to prove that the formation of the Transition Committee and
the conduct of the audit by Rubio and Legaspi were
admissions or representations by RCBC that it would not
pursue a claim under Sec. 5(g) and that petitioners relied on
DECISION
CORONA, J.:
This petition for review on certiorari under Rule 45 of the
Rules of Court seeks to set aside the February 16, 2005
decision1 and August 16, 2005 resolution2 of the Court of
Appeals (CA) in CA-G.R. SP No. 81940.
On September 27, 1999, petitioner ABS-CBN Broadcasting
Corporation entered into a licensing agreement with
respondent World Interactive Network Systems (WINS) Japan
Co., Ltd., a foreign corporation licensed under the laws of
Japan. Under the agreement, respondent was granted the
exclusive license to distribute and sublicense the distribution
of the television service known as "The Filipino Channel"
(TFC) in Japan. By virtue thereof, petitioner undertook to
transmit the TFC programming signals to respondent which
the latter received through its decoders and distributed to its
subscribers.
A dispute arose between the parties when petitioner accused
respondent of inserting nine episodes of WINS WEEKLY, a
weekly 35-minute community news program for Filipinos in
Japan, into the TFC programming from March to May 2002.3
Petitioner claimed that these were "unauthorized insertions"
constituting a material breach of their agreement.
Consequently, on May 9, 2002,4 petitioner notified respondent
of its intention to terminate the agreement effective June 10,
2002.
Thereafter, respondent filed an arbitration suit pursuant to the
arbitration clause of its agreement with petitioner. It contended
that the airing of WINS WEEKLY was made with petitioner's
prior approval. It also alleged that petitioner only threatened to
terminate their agreement because it wanted to renegotiate the
terms thereof to allow it to demand higher fees. Respondent
also prayed for damages for petitioner's alleged grant of an
exclusive distribution license to another entity, NHK (Japan
Broadcasting Corporation).5
The parties appointed Professor Alfredo F. Tadiar to act as
sole arbitrator. They stipulated on the following issues in their
terms of reference (TOR)6:
1. Was the broadcast of WINS WEEKLY by the
claimant duly authorized by the respondent [herein
petitioner]?
2. Did such broadcast constitute a material breach of
the agreement that is a ground for termination of the
agreement in accordance with Section 13 (a) thereof?
3. If so, was the breach seasonably cured under the
same contractual provision of Section 13 (a)?
4. Which party is entitled to the payment of damages
they claim and to the other reliefs prayed for?
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DECISION
TINGA, J.:
Subject of this case is the letter of credit which has evolved as
the ubiquitous and most important device in international
trade. A creation of commerce and businessmen, the letter of
credit is also unique in the number of parties involved and its
supranational character.
Petitioner has appealed from the Decision1 of the Court of
Appeals in CA-G.R. SP No. 61901 entitled "Transfield
Philippines, Inc. v. Hon. Oscar Pimentel, et al.," promulgated
on 31 January 2001.2
On 26 March 1997, petitioner and respondent Luzon Hydro
Corporation (hereinafter, LHC) entered into a Turnkey
Contract3 whereby petitioner, as Turnkey Contractor,
undertook to construct, on a turnkey basis, a seventy (70)Megawatt hydro-electric power station at the Bakun River in
the provinces of Benguet and Ilocos Sur (hereinafter, the
Project). Petitioner was given the sole responsibility for the
design, construction, commissioning, testing and completion
of the Project.4
The Turnkey Contract provides that: (1) the target completion
date of the Project shall be on 1 June 2000, or such later date
as may be agreed upon between petitioner and respondent
LHC or otherwise determined in accordance with the Turnkey
Contract; and (2) petitioner is entitled to claim extensions of
time (EOT) for reasons enumerated in the Turnkey Contract,
among which are variations, force majeure, and delays caused
by LHC itself.5 Further, in case of dispute, the parties are
bound to settle their differences through mediation,
The Facts
On June 1, 1987, Benguet and J.G. Realty entered into a
RAWOP, wherein J.G. Realty was acknowledged as the owner
of four mining claims respectively named as Bonito-I, BonitoII, Bonito-III, and Bonito-IV, with a total area of 288.8656
hectares, situated in Barangay Luklukam, Sitio Bagong Bayan,
Municipality of Jose Panganiban, Camarines Norte. The
parties also executed a Supplemental Agreement5 dated June
1, 1987. The mining claims were covered by MPSA
Application No. APSA-V-0009 jointly filed by J.G. Realty as
claimowner and Benguet as operator.
In the RAWOP, Benguet obligated itself to perfect the rights
to the mining claims and/or otherwise acquire the mining
rights to the mineral claims. Within 24 months from the
execution of the RAWOP, Benguet should also cause the
examination of the mining claims for the purpose of
determining whether or not they are worth developing with
reasonable probability of profitable production. Benguet
undertook also to furnish J.G. Realty with a report on the
examination, within a reasonable time after the completion of
the examination. Moreover, also within the examination
period, Benguet shall conduct all necessary exploration in
accordance with a prepared exploration program. If it chooses
to do so and before the expiration of the examination period,
Benguet may undertake to develop the mining claims upon
written notice to J.G. Realty. Benguet must then place the
mining claims into commercial productive stage within 24
months from the written notice.6 It is also provided in the
RAWOP that if the mining claims were placed in commercial
production by Benguet, J.G. Realty should be entitled to a
royalty of five percent (5%) of net realizable value, and to
royalty for any production done by Benguet whether during
the examination or development periods.
Thus, on August 9, 1989, the Executive Vice-President of
Benguet, Antonio N. Tachuling, issued a letter informing J.G.
Realty of its intention to develop the mining claims. However,
on February 9, 1999, J.G. Realty, through its President,
Johnny L. Tan, then sent a letter to the President of Benguet
informing the latter that it was terminating the RAWOP on the
following grounds:
a. The fact that your company has failed to perform
the obligations set forth in the RAWOP, i.e., to
undertake development works within 2 years from
the execution of the Agreement;
b. Violation of the Contract by allowing high graders
to operate on our claim.
c. No stipulation was provided with respect to the
term limit of the RAWOP.
DECISION
VELASCO, JR., J.:
The instant petition under Rule 65 of the Rules of Court seeks
the annulment of the December 2, 2002 Decision1 and March
17, 2004 Resolution2 of the Department of Environment and
Natural Resources-Mining Adjudication Board (DENR-MAB)
in MAB Case No. 0124-01 (Mines Administrative Case No.
R-M-2000-01) entitled Benguet Corporation (Benguet) v. J.G.
Realty and Mining Corporation (J.G. Realty). The December
2, 2002 Decision upheld the March 19, 2001 Decision3 of the
MAB Panel of Arbitrators (POA) which canceled the Royalty
Agreement with Option to Purchase (RAWOP) dated June 1,
19874 between Benguet and J.G. Realty, and excluded
Benguet from the joint Mineral Production Sharing Agreement
(MPSA) application over four mining claims. The March 17,
2004 Resolution denied Benguets Motion for
Reconsideration.
September 4, 2013
DECISION
2000 Lease Contract
PEREZ, J.:
This case is an appeal1 from the Decision2 dated 19 August
2011 of the Court of Appeals in C.A.-G.R. SP No. 116865.
The facts:
The Donation
Fedders Koppel, Incorporated (FKI), a manufacturer of airconditioning products, was the registered owner of a parcel of
land located at Km. 16, South Superhighway, Paraaque City
(subject land).3 Within the subject land are buildings and other
improvements dedicated to the business of FKI.4
In 1975, FKI5 bequeathed the subject land (exclusive of the
improvements thereon) in favor of herein respondent Makati
Rotary Club Foundation, Incorporated by way of a conditional
donation.6 The respondent accepted the donation with all of its
conditions.7 On 26 May1975, FKI and the respondent
executed a Deed of Donation8 evidencing their consensus.
The Lease and the Amended Deed of Donation
One of the conditions of the donation required the respondent
to lease the subject land back to FKI under terms specified in
their Deed of Donation.9 With the respondents acceptance of
the donation, a lease agreement between FKI and the
respondent was, therefore, effectively incorporated in the
Deed of Donation.
Pertinent terms of such lease agreement, as provided in the
Deed of Donation , were as follows:
1. The period of the lease is for twenty-five (25)
years,10 or until the 25th of May 2000;
2. The amount of rent to be paid by FKI for the first
twenty-five (25) years is P40,126.00 per annum .11
The Deed of Donation also stipulated that the lease over the
subject property is renewable for another period of twenty-five
(25) years " upon mutual agreement" of FKI and the
respondent.12 In which case, the amount of rent shall be
determined in accordance with item 2(g) of the Deed of
Donation, viz:
g. The rental for the second 25 years shall be the subject of
mutual agreement and in case of disagreement the matter shall
be referred to a Board of three Arbitrators appointed and with
powers in accordance with the Arbitration Law of the
Philippines, Republic Act 878, whose function shall be to
decide the current fair market value of the land excluding the
improvements, provided, that, any increase in the fair market
value of the land shall not exceed twenty five percent (25%) of
the original value of the land donated as stated in paragraph
2(c) of this Deed. The rental for the second 25 years shall not
exceed three percent (3%) of the fair market value of the land
excluding the improvements as determined by the Board of
Arbitrators.13
In October 1976, FKI and the respondent executed an
Amended Deed of Donation14 that reiterated the provisions of
taking " legal steps " in the event that petitioner failed to
comply with any of the said demands.40 Petitioner received the
Second Demand Letter on 26September 2009.41
Petitioner refused to comply with the demands of the
respondent. Instead, on 30 September 2009, petitioner filed
with the Regional Trial Court (RTC) of Paraaque City a
complaint42 for the rescission or cancellation of the Deed of
Donation and Amended Deed of Donation against the
respondent. This case is currently pending before Branch 257
of the RTC, docketed as Civil Case No. CV 09-0346.
The Ejectment Suit
On 5 October 2009, respondent filed an unlawful detainer
case43 against the petitioner before the Metropolitan Trial
Court (MeTC) of Paraaque City. The ejectment case was
raffled to Branch 77 and was docketed as Civil Case No.
2009-307.
On 4 November 2009, petitioner filed an Answer with
Compulsory Counterclaim.44 In it, petitioner reiterated its
objection over the rental stipulations of the 2005 Lease
Contract for being violative of the material conditions of the
Deed of Donation and Amended Deed of Donation.45 In
addition to the foregoing, however, petitioner also interposed
the following defenses:
1. The MeTC was not able to validly acquire
jurisdiction over the instant unlawful detainer case in
view of the insufficiency of respondents demand. 46
The First Demand Letter did not contain an actual
demand to vacate the premises and, therefore, the
refusal to comply there with does not give rise to an
action for unlawful detainer.47
2. Assuming that the MeTC was able to acquire
jurisdiction, it may not exercise the same until the
disagreement between the parties is first referred to
arbitration pursuant to the arbitration clause of the
2005 Lease Contract.48
3. Assuming further that the MeTC has jurisdiction
that it can exercise, ejectment still would not lie as
the 2005 Lease Contract is void abinitio.49 The
stipulation in the 2005 Lease Contract requiring
petitioner to give yearly " donations " to respondent
is a simulation, for they are, in fact, parts of the rent.
50 Such grants were only denominated as " donations
" in the contract so that the respondentanon-stock
and non-profit corporationcould evade payment of
the taxes otherwise due thereon.51
In due course, petitioner and respondent both submitted their
position papers, together with their other documentary
evidence.52 Remarkably, however, respondent failed to submit
the Second Demand Letter as part of its documentary
evidence.
Rulings of the MeTC, RTC and Court of Appeals
On 27 April 2010, the MeTC rendered judgment53 in favor of
the petitioner. While the MeTC refused to dismiss the action
on the ground that the dispute is subject to arbitration, it
nonetheless sided with the petitioner with respect to the issues
regarding the insufficiency of the respondents demand and
the nullity of the 2005 Lease Contract.54 The MeTC thus
disposed:
WHEREFORE, judgment is hereby rendered dismissing the
case x x x, without pronouncement as to costs.
SO ORDERED.55
The respondent appealed to the Regional Trial Court (RTC).
This appeal was assigned to Branch 274 of the RTC of
Paraaque City and was docketed as Civil Case No. 10-0255.
xxxx
SO ORDERED.67
Hence, this appeal.
On 5 September 2011, this Court granted petitioners prayer
for the issuance of a Temporary Restraining Order 68 staying
the immediate implementation of the decisions adverse to it.
OUR RULING
Independently of the merits of the case, the MeTC, RTC and
Court of Appeals all erred in overlooking the significance of
the arbitration clause incorporated in the 2005 Lease Contract
. As the Court sees it, that is a fatal mistake.
For this reason, We grant the petition.
Present Dispute is Arbitrable Under the
Arbitration Clause of the 2005 Lease
Agreement Contract
Going back to the records of this case, it is discernable that the
dispute between the petitioner and respondent emanates from
the rental stipulations of the 2005 Lease Contract. The
respondent insists upon the enforce ability and validity of such
stipulations, whereas, petitioner, in substance, repudiates
them. It is from petitioners apparent breach of the 2005 Lease
Contract that respondent filed the instant unlawful detainer
action.
One cannot escape the conclusion that, under the foregoing
premises, the dispute between the petitioner and respondent
arose from the application or execution of the 2005 Lease
Contract . Undoubtedly, such kinds of dispute are covered by
the arbitration clause of the 2005 Lease Contract to wit:
19. Governing Law The provisions of this 2005 Lease
Contract shall be governed, interpreted and construed in all
aspects in accordance with the laws of the Republic of the
Philippines.
Any disagreement as to the interpretation, application or
execution of this 2005 Lease Contract shall be submitted to a
board of three (3) arbitrators constituted in accordance with
the arbitration law of the Philippines. The decision of the
majority of the arbitrators shall be binding upon FKI and
respondent.69 (Emphasis supplied)
The arbitration clause of the 2005 Lease Contract stipulates
that "any disagreement" as to the " interpretation, application
or execution " of the 2005 Lease Contract ought to be
submitted to arbitration.70 To the mind of this Court, such
stipulation is clear and is comprehensive enough so as to
include virtually any kind of conflict or dispute that may arise
from the 2005 Lease Contract including the one that presently
besets petitioner and respondent.
The application of the arbitration clause of the 2005 Lease
Contract in this case carries with it certain legal effects.
However, before discussing what these legal effects are, We
shall first deal with the challenges posed against the
application of such arbitration clause.