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BF Corporation v. Court of Appeals et.al.

G.R. No. 120105

March 27, 1998
- BF Corporation (BF) and respondent Shangri-La Properties, Inc. (Shang)
entered into the 1st agreement whereby Shang engaged BF to construct the main
structure of the EDSA Plaza Project the EDSA Shangri-La Mall in Mandaluyong
- While the construction work was in progress Shang once again hired BF for the
expansion of the project, the 2nd agreement.
- BF incurred delay in the construction work that SPI considered as serious and
substantial. BF contended that they had faithfully complied with the first agreement
until a fire broke out on [Nov 30, 1990] damaging phase 1 of the project, Hence SPI
proposed the renegotiation of the agreement between them.
- [May 30, 1991] Parties entered into another agreement named Agreement for
the Execution of Builders Work for the EDSA Plaza Project (3 rd agreement)
that would cover the construction work on said project as of [May 1, 1991] until its
eventual completion.
- [July 14, 1993] BF filed with the RTC of Pasig a complaint for the collection of the
balance due under the construction agreement. Named Defendants therein were
Shang and members of its board of directors A. Ramos, Colayco, Obles, Lanuza
Jr., Licauco & B.Ramos.
- [Aug 3, 1993] Shang and its co-defendants filed a motion to suspend proceedings
instead of filing an answer.
o Motion was anchored on the defendants allegation that the formal trade
contract of the the construction project provided for a clause requiring prior
resort to arbitration before judicial intervention.
- [Aug 4, 1993] Shang submitted a copy of the condition of the contract containing
arbitration clause that it failed to attach its motion to suspend proceedings.
- BF opposed said motion stating that there was no formal contract between the
parties although they entered into an agreement. They emphasized that the
agreement did not provide for an arbitration thus cannot deprive the court of its
- Shang insisted that there was an arbitration clause in the existing contract between
them. It alleged that the suspension would not deprive the court of its jurisdiction
and would expedite the settlement proceedings rather than delay it.
- In a rejoinder, BF reiterated that there was no arbitration clause in the contract
bewtween the parties. It averred that if there was an arbitration clause, suspension
of the proceedings was no longer proper and that defendants should be declared in
default for failure to answer within the reglementary period.
- In its sur-rejoinder, Shang pointed out the significance of the petitioners admission
of the due execution of the Articles of Agreement. It was shown that the
Signature of Colayco (Shang President) and Bayani Fernando (BF President)
was in such agreement and was even duly notarized.

The RTC found that the arbitration clause did exist, however the lower court denied
motion to suspend proceedings and ruled in favor of BF (see reasons below)
o This was because despite the fact there was an arbitration agreement, the
Conditions of Contract only the initials of Bayani Fernando was present,
while no signature on the part of Shang.
o There were no singed documents to prove Shangs claims thus there is
serious doubt to the validity of the arbitration clause found in the Conditions
of Contract
o Assuming that the arbitration clause was valid and binding, it was too late
for Shang to invoke arbitration because:
the demand should have been made before the time of final
payment except as otherwise expressly stipulated in the contract
the court found that the project was to be completed on [Oct 31,
1991] and any delays would incur 80K for each day of delay from
[Nov 1,1991] with liquefied damages up to a maximum of 5% of the
total contract price
the court found out that the project was completed in accordance
with the agreement and Shang had took possession and started
operations thereof by opening the same to the public in [Nov, 1911].
BF billed Shang the total amount of P110,883,101.52 contained in a
demand letter sent on Feb 17, 1993. Instead of paying the amound
demanded, SPI set up its own claim of P220,000,000.00 and
scheduled a conference on that claim for July 12, 1993. The
conference took place but was futile.
Shang filed a motion for reconsideration but was denied because of lack of merit
and directed the other defendants to file their responsive pleading within the
reglementary period.
Instead of filing an answer to the complaint, SPI filed a petition for Certiorari under
Rule 65 before the Court of appeals.
The Court of Appeals granted the petition and annulled and set aside the orders
and stayed the proceedings in the lower court.
o According to the contract the project manager and the contractor should
coordinate with the owner, should there be failure to resolve differences,
dispute shall be submitted for arbitration.
Although it was only the initials of Bayani Fernando and De La Cruz
present and none from Shang, it does not affect its effectivity. BF
categorically admitted that the document is the agreement bewtween the
parties, the initial signature of BF representative to signify conformity to
arbitration is no longer necessary. The parties should be allowed to submit
their dispute to arbitration in accordance with their agreement.
o Demand for arbitration was made within a reasonable time after the dispute
has arisen and attempts to settle amicably has failed. This was evidenced
by the fact that such demands were acted upon only months. Jul 12
conference > Jul 14 Shang complaint against BF > Aug 13 Request for
Hence the petition before the Supreme Court.

WON the parties entered into an arbitrary agreement
Yes, according to Sec 4 of R.A. 876 a contract to arbitrate a controversy thereafter
arising between the parties, as well as a submission to arbitrate an existing
controversy, shall be in writing and subscribed by the party sought to be charged, or by his
lawful agent.
The making of a contract or submission for arbitration described in section two hereof,
providing for arbitration of any controversy, shall be deemed a consent of the parties of the
province or city where any of the parties resides, to enforce such contract of submission.
(Underscoring supplied.)
The formal requirements of an agreement to arbitrate are therefore the following: (a) it
must be in writing and (b) it must be subscribed by the parties or their representatives.
There is no denying that the parties entered into a written contract that was submitted in
evidence before the lower court. To subscribe means to write underneath, as ones name;
to sign at the end of a document. That word may sometimes be construed to mean to give
consent to or to attest.
The Court finds that, upon a scrutiny of the records of this case, these requisites were
complied with in the contract in question. The Articles of Agreement, which incorporates all
the other contracts and agreements between the parties, was signed by representatives of
both parties and duly notarized. The failure of the private respondents representative to
initial the `Conditions of Contract would therefore not affect compliance with the formal
requirements for arbitration agreements because that particular portion of the covenants
between the parties was included by reference in the Articles of Agreement.
Petitioners contention that there was no arbitration clause because the contract
incorporating said provision is part of a hodge-podge document, is therefore untenable. A
contract need not be contained in a single writing. It may be collected from several
different writings which do not conflict with each other and which, when connected, show
the parties, subject matter, terms and consideration, as in contracts entered into by
correspondence.[13] A contract may be encompassed in several instruments even though
every instrument is not signed by the parties, since it is sufficient if the unsigned
instruments are clearly identified or referred to and made part of the signed instrument or
instruments. Similarly, a written agreement of which there are two copies, one signed by
each of the parties, is binding on both to the same extent as though there had been only
one copy of the agreement and both had signed it.[14]