PRELIMINARIES ON ALTERNATIVE DISPUTE RESOLUTION

VALID ARBITRATION AGREEMENTS MAKE A CONDITION PRECEDENT; GROUND TO SUSPEND PROCEEDINGS.

Arbitration is the wave of the future in dispute resolution. The Supreme Court has recognized arbitration agreements as valid,
binding, enforceable and not contrary to public policy so much so that when there obtains a written provision for arbitration which is
not complied with, the trial court should suspend the proceedings and order the parties to proceed to arbitration in accordance
with the terms of their agreement. To brush aside a contractual agreement calling for arbitration in case of disagreement between
parties would be a step backward (Heirs of Augusto Salas, Jr. v. Laperal Realty Corporation, 320 SCRA 610 (1999).

WHILE MULTIPLICITY OF SUITS IS DISCOURAGED, INTEREST OF JUSTICE CALLS FOR A SINGLE AND COMPLETE PROCEEDING FOR
PURPOSES OF SETTLING COMPLAINT AGAINST ALL RESPONDENTS AND PETITIONERS’ RIGHTS.
To split the proceedings into arbitration for respondent Laperal Realty and trial for the respondent lot buyers, or to hold
trial in abeyance pending arbitration between petitioners and respondent Laperal Realty, would in effect result in multiplicity of
suits, duplicitous procedure and unnecessary delay. On the other hand, it would be in the interest of justice if the trial court hears
the complaint against all herein respondents and adjudicates petitioners rights as against theirs in a single and complete proceeding
(Ibid).

Heirs of Augusto Salas, Jr. v. Laperal Realty Corporation, 320 SCRA 610 (1999)
FACTS: Salas, Jr. was the registered owner of a vast tract of land in Lipa City, Batangas. He entered into an [Owner-Contractor]
Agreement with respondent Laperal Realty Corporation to render and provide complete (horizontal) construction services on his
land. Salas, Jr. executed a Special Power of Attorney in favor of respondent to exercise general control, supervision and management
of the sale of his land, for cash or on installment basis. On June of the following year, Salas, Jr. left his home in the morning for a
business trip to Nueva Ecija. He never returned.
Teresita Diaz Salas filed with the RTC of Makati City a verified petition for the declaration of presumptive death of her husband,
Salas, Jr., who had then been missing for more than seven (7) years, which was eventually granted. Meantime, respondent Realty
subdivided the land of Salas, Jr. and sold subdivided portions thereof to respondent lot buyers. Petitioners as heirs of Salas, Jr. filed
in the Regional Trial Court of Lipa City a Complaint for declaration of nullity of sale, reconveyance, and cancellation of contract
against herein respondents which was docketed as Civil Case No. 98-0047. Respondent Laperal Realty filed a Motion to Dismiss on
the ground that petitioners failed to submit their grievance to arbitration as required under Article VI of the Agreement which
provides:

ARTICLE VI. ARBITRATION.

All cases of dispute between CONTRACTOR and OWNERS representative shall be referred to the committee represented by:
a. One representative of the OWNER;
b. One representative of the CONTRACTOR;
c. One representative acceptable to both OWNER and CONTRACTOR.

On August 9, 1998, the trial court issued the herein assailed Order dismissing petitioners Complaint for non-compliance
with the foregoing arbitration clause. (In favor of the Respondent)

ISSUE: Are the RESPONDENT LOT BUYERS considered as parties/assigns/heirs to the agreement?
DISPOSITIVE PORTION: WHEREFORE, the instant petition is hereby GRANTED. The Order dated August 19, 1998 of Branch 85 of the
Regional Trial Court of Lipa City is hereby NULLIFIED and SET ASIDE. Said court is hereby ordered to proceed with the hearing of Civil
Case No. 98-0047.
SUBMISSION TO ARBITRATION IS A CONTRACT; CONTRACTS TAKE EFFECT AS BETWEEN THE PARTIES, THEIR ASSIGNS AND HEIRS.
A submission to arbitration is a contract. As such, the Agreement, containing the stipulation on arbitration, binds the parties
thereto, as well as their assigns and heirs; but only they.

Petitioners, as heirs of Salas, Jr., and respondent Laperal Realty are certainly bound by the Agreement. If respondent
Laperal Realty, had assigned its rights under the Agreement to a third party, making the former, the assignor, and the latter, the
assignee, such assignee would also be bound by the arbitration provision since assignment involves such transfer of rights as to vest
in the assignee the power to enforce them to the same extent as the assignor could have enforced them against the debtor or in
this case, against the heirs of the original party to the Agreement.

MERE BUYERS DO NOT FALL WITHIN THE CONTEMPLATION OF THE LAW UNDER ART. 1311 OF THE CIVIL CODE; AUTHORITY GIVEN
IS THE RECKONING POINT.
 However, respondents Rockway Real Estate Corporation, South Ridge Village, Inc., Maharami Development Corporation,
spouses Abrajano, spouses Lava, Oscar Dacillo, Eduardo Vacuna, Florante de la Cruz and Jesus Vicente Capellan are not assignees of
the rights of respondent Laperal Realty under the Agreement to develop Salas, Jr’s land and sell the same. They are, rather, buyers
of the land that respondent Laperal Realty was given the authority to develop and sell under the Agreement. As such, they
are not assigns contemplated in Art. 1311 of the New Civil Code which provides that contracts take effect only between the parties,
their assigns and heirs.
They argue that rescission, being their cause of action, falls under the exception clause in Sec. 2 of Republic Act No. 876
which provides that such submission [to] or contract [of arbitration] shall be valid, enforceable and irrevocable, save upon such
grounds as exist at law for the revocation of any contract.

The petitioner’s contention is without merit. For while rescission, as a general rule, is an arbitrable issue, they impleaded in the
suit for rescission the respondent lot buyers who are neither parties to the Agreement nor the latter’s assigns or
heirs. Consequently, the right to arbitrate as provided in Article VI of the Agreement was never vested in respondent lot buyers.
Respondent Laperal Realty, as a contracting party to the Agreement, has the right to compel petitioners to first arbitrate
before seeking judicial relief.

Petitioner and respondent Shangri-La Properties, Inc. (SPI) entered into an agreement whereby the latter engaged the former
to construct the main structure of the EDSA Plaza Project, a shopping mall complex in the City of Mandaluyong. The construction
work was in progress when SPI decided to expand the project by engaging the services of petitioner again. Thus, the parties entered
into an agreement for the main contract works after which construction work began.
However, petitioner incurred delay in the construction work that SPI considered as serious and substantial. On the other hand,
according to petitioner, the construction works progressed in faithful compliance with the First Agreement until a fire broke out on
November 30, 1990 damaging Phase I of the Project. Hence, SPI proposed the re-negotiation of the agreement between them.
Consequently, on May 30, 1991, petitioner and SPI entered into a written agreement denominated as Agreement for the Execution
of Builders Work for the EDSA Plaza Project. Said agreement would cover the construction work on said project as of May 1, 1991
until its eventual completion. According to SPI, petitioner failed to complete the construction works and abandoned the project. This
resulted in disagreements between the parties as regards their respective liabilities under the contract. On July 12, 1993, upon SPIs
initiative, the parties’ respective representatives met in conference but they failed to come to an agreement.
Barely two days later or on July 14, 1993, petitioner filed with the Regional Trial Court of Pasig a complaint for collection of the
balance due under the construction agreement. Named defendants therein were SPI and members of its board of directors.
On August 3, 1993, SPI and its co-defendants filed a motion to suspend proceedings instead of filing an answer. The motion
was anchored on defendants’ allegation that the formal trade contract for the construction of the project provided for a clause
requiring prior resort to arbitration before judicial intervention could be invoked in any dispute arising from the contract. The
following day, SPI submitted a copy of the conditions of the contract containing the arbitration clause that it failed to append to its
motion to suspend proceedings.
Petitioner opposed said motion claiming that there was no formal contract between the parties although they entered into an
agreement defining their rights and obligations in undertaking the project. It emphasized that the agreement did not provide for
arbitration and therefore the court could not be deprived of jurisdiction conferred by law by the mere allegation of the existence of
an arbitration clause in the agreement between the parties.
In reply to said opposition, SPI insisted that there was such an arbitration clause in the existing contract between petitioner and
SPI. In a rejoinder to SPIs reply, petitioner reiterated that there was no arbitration clause in the contract between the parties. It
averred that granting that such a clause indeed formed part of the contract, suspension of the proceedings was no longer proper. In
its sur-rejoinder, SPI pointed out the significance of petitioner’s admission of the due execution of the Articles of Agreement. Thus,
on page D/6 thereof, the signatures of SPI president and president of petitioner appear, while page D/7 shows that the agreement is
a public document duly notarized on November 15, 1991.
Thereafter, upon a finding that an arbitration clause indeed exists, the lower court denied the motion to suspend proceedings on the
ground that the Contract Documents as incorporated in the Articles of Agreement were not signed by the parties to the contract and
that the invocation for arbitration was too late even on the assumption that the arbitration clause was indeed valid and enforceable.
 Notice of the demand for arbitration of a dispute shall be filed in writing with the other party to the contract and a copy
filed with the Project Manager. The demand for arbitration shall be made within a reasonable time after the dispute has
arisen and attempts to settle amicably have failed; in no case, however, shall the demand he made be later than the time
of final payment except as otherwise expressly stipulated in the contract.
The Court of Appeals however ruled otherwise.

Clause No. 35 on arbitration specifically provides:

Provided always that in case any dispute or difference shall arise between the Owner or the Project Manager on his behalf and the
Contractor, either during the progress or after the completion or abandonment of the Works as to the construction of this Contract
or as to any matter or thing of whatsoever nature arising thereunder or in connection therewith, the Owner and the Contractor
hereby agree to exert all efforts to settle their differences or dispute amicably. Failing these efforts then such dispute or difference
shall be referred to Arbitration in accordance with the rules and procedures of the Philippine Arbitration Law.

The fact that said conditions of contract containing the arbitration clause bear only the initials of respondent Corporations
representatives, Bayani Fernando and Reynaldo de la Cruz, without that of the representative of petitioner Shangri-La Properties,
Inc. does not militate against its effectivity. The parties, therefore, should be allowed to submit their dispute to arbitration in
accordance with their agreement.

Respondent Court has overlooked the fact that under the arbitration clause provides that the demand for arbitration shall be made
within reasonable time and that under the circumstances, the demand was made by the petitioners not beyond reasonable time.

It is that mode of appeal taken by private respondents before the Court of Appeals that is being questioned by the petitioners
before this Court. But at the heart of said issue is the question of whether there exists an Arbitration Clause because if an Arbitration
Clause does not exist, then private respondents took the wrong mode of appeal before the Court of Appeals.