CASES IN ALTERNATIVE DISPUTE RESOLUTION

GROUP 1
G.R. No. 174938 October 1, 2014
GERARDO LANUZA, JR. AND ANTONIO O. OLBES, Petitioners,
vs.
BF CORPORATION, SHANGRI-LA PROPERTIES, INC., ALFREDO C. RAMOS, RUFO
B. COLAYCO, MAXIMO G. LICAUCO III, AND BENJAMIN C. RAMOS, Respondents.
BF Corporation and Shari-La Properties entered into a contract for the construction of a
Shanri-La mall and a multilevel parking structure along EDSA. During the construction,
Shangri-La defaulted in the payments but BF Corporation nonetheless continued.
According to BF Corporation, ShangriLa misrepresented that it had funds to pay for its
obligations with BF Corporation, and the delay in payment was simply a matter of
delayed processing of BF Corporation’s progress billing statements. BF Corporation
alleged that the officers of Shangri-La were in bad faith because of this
misrepresentation.
After the construction, Shangri-La took possession of the buildings. BF
Corporation demanded for the payment but Shangri-La ignored the repeated demands.
BF Corporation filed an action in court for the collection of the outstanding balance. The
officers of Shangri-La filed a motion to suspend the proceedings. They said that the
contract contains an arbitration clause and BF Corporation’s failure to submit the
dispute to arbitration is sufficient ground to dismiss their complaint. The pertinent
arbitration clause is as follows:
(1) 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 there under or
inconnection therewith (including any matter or thing left by this Contract to the
discretion of the Project Manager or the withholding by the Project Manager of any
certificate to which the Contractor may claim to be entitled or the measurement and
valuation mentioned in clause 30(5)(a) of these Conditions or the rights and liabilities of
the parties under clauses 25, 26, 32 or 33 of these Conditions), 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.
(6) The award of such Arbitrators shall be final and binding on the parties. The decision
of the Arbitrators shall be a condition precedent to any right of legal action that either
party may have against the other.
In the proceedings filed by BF Corporation, they included the officers as parties
because of their bad faith coming from their misrepresentations.
Contention of the Petitioners: Because of the separate personality given to juridical
persons vis-à-vis their directors, officers, stockholders, and agents, they cannot be held
as parties to the arbitration proceedings. Also, they did not sign the arbitration
agreement in any capacity, they cannot be forced to submit to the jurisdiction of the
Arbitration Tribunal in accordance with the arbitration agreement. Moreover, they had
already resigned as directors of Shangri-La at the time of the alleged default.

ISSUE: Whether the officers should still be included as “parties” considering that they
already resigned from Shangri-La Corporation

Trial Court: Shangri-La’s directors were interested parties who "must also be served
with a demand for arbitration to give them the opportunity to ventilate their side of the
controversy, safeguard their interest and fend off their respective positions."

CA: [The officers are] deemed not third-parties to the contract as they [were] sued for
their acts in representation of the party to the contract pursuant to Art. 31 of the
Corporation Code, and that as directors of the defendant corporation, [they], in
accordance with Art. 1217 of the Civil Code, stand to be benefited or injured by the
result of the arbitration proceedings, hence, being necessary parties, they must be
joined in order to have complete adjudication of the controversy. Consequently, if [they
were] excluded as parties in the arbitration proceedings and an arbitral award is
rendered, holding [Shangri-La] and its board of directors jointly and solidarily liable to
private respondent BF Corporation, a problem will arise, i.e., whether petitioners will be
bound by such arbitral award, and this will prevent complete determination of the issues
and resolution of the controversy.

HELD: The officers should be included as parties. True, a corporation has a separate
and distinct personality from its owners, but this assumption admits of several
exceptions, we call this the “Piercing the veil of Corporate Ficition”. Because of the
alleged bad faith on the part of the officers, they should be included as parties to the
complaint. This is to determine whether there are sufficient grounds to hold that there is
indeed bad faith. And in case there really is, to hold them solidarily liable.
DETAILED EXPLANATION @ CASE: As a general rule, a corporation’s representative
who did not personally bind himself or herself to an arbitration agreement cannot be
forced to participate in arbitration proceedings made pursuant to an agreement entered
into by the corporation. He or she is generally not considered a party to that agreement.
However, there are instances when the distinction between personalities of directors,
officers,and representatives, and of the corporation, are disregarded. We call this
piercing the veil of corporate fiction.
Piercing the corporate veil is warranted when "[the separate personality of a
corporation] is used as a means to perpetrate fraud or an illegal act, or as a vehicle for
the evasion of an existing obligation, the circumvention of statutes, or to confuse
legitimate issues."85 It is also warranted in alter ego cases "where a corporation is
merely a farce since it is a mere alter ego or business conduit of a person, or where the
corporation is so organized and controlled and its affairs are so conducted as to make it
merely an instrumentality, agency, conduit or adjunct of another corporation."86
When corporate veil is pierced, the corporation and persons who are normally treated
as distinct from the corporation are treated as one person, such that when the
corporation is adjudged liable, these persons, too, become liable as if they were the
corporation.
When there are allegations of bad faith or malice against corporate directors or
representatives, it becomes the duty of courts or tribunals to determine if these persons
and the corporation should be treated as one. Without a trial, courts and tribunals have
no basis for determining whether the veil of corporate fiction should be pierced. Courts
or tribunals do not have such prior knowledge. Thus, the courts or tribunals must first
determine whether circumstances exist to warrant the courts or tribunals to disregard
the distinction between the corporation and the persons representing it. The
determination of these circumstances must be made by one tribunal or court in a
proceeding participated in by all parties involved, including current representatives of
the corporation, and those persons whose personalities are impliedly the sameas the
corporation. This is because when the court or tribunal finds that circumstances exist
warranting the piercing of the corporate veil, the corporate representatives are treated
as the corporation itself and should be held liable for corporate acts. The corporation’s
distinct personality is disregarded, and the corporation is seen as a mere aggregation of
persons undertaking a business under the collective name of the corporation.

G.R. No. 198075 September 4, 2013

KOPPEL, INC. (formerly known as KPL AIRCON, INC.), Petitioner,
vs.
MAKATI ROTARY CLUB FOUNDATION, INC., Respondent.
FACTS: Fedders Koppel, Incorporated (FKI) has a registered parcel of land located in
Paranaque. In 1975, FKI bequeathed the said land to Makati Rotary Club, by way of a
conditional donation. Makati Rotary Club accepted the donation with all of its conditions.
Among the conditions was to rent back the land to FKI for a period of 25 years at a rate
of P40,126 per annum. It is subject to renewal at conditions based on the mutual
agreement of the parties.
On May 2000, the parties executed another lease contract covering the same
land. In this 2000 Lease Contract, FKI and respondent agreed on a new five-year lease
to take effect on the 26th of May 2000, with annual rents ranging from ₱4,000,000 for
the first year up to ₱4,900,000 for the fifth year. The 2000 Lease Contract also
contained an arbitration clause enforceable in the event the parties come to
disagreement about the" interpretation, application and execution" of the lease.
After the 2000 Lease Contract expired, FKI and respondent agreed to renew their lease
for another five (5) years. This new lease (2005 Lease Contract ) required FKI to pay a
fixed annual rent of ₱4,200,000. In addition to paying the fixed rent, FKI was obligated to
make a yearly " donation " of money. Such donations ranged from ₱3,000,000 for the
first year up to ₱3,900,000for the fifth year. The 2005 Lease Contract contained an
arbitration clause similar to that in the 2000 Lease Contract.
FKI faithfully paid the rentals and " donations "due it per the 2005 Lease Contract.23
But in June of 2008, FKI sold all its rights and properties relative to its business in favor
of herein petitioner Koppel, Incorporated. FKI executed a deed of assignment and
assumption of lease in favor of Koppel, Incorporated. The following year, petitioner
discontinued the payment of the rent and " donation " under the 2005 Lease Contract.
Their refusal to pay such rent and "donation " emanated from its belief that the rental
stipulations of the 2005 Lease Contract, and even of the 2000 Lease Contract, violated
one of the" material conditions " of the donation of the subject land.
In June 1, 2009, Makati Rotary Club sent a demand letter to Koppel because of its
default in payment. On September 22 of the same year, Koppel gave a reply stating that
the rentals are "severely disproportionate," "unconscionable" and "in clear violation to
the nominal rentals mandated by the Amended Deed of Donation." In lieu of the amount
demanded by the respondent, which purportedly totaled to ₱8,394,000.00, exclusive of
interests, they offered to pay only ₱80,502.79, in accordance with the rental provisions
of the Deed of Donation and Amended Deed of Donation. Makati Rotary Club refused
this offer.
Makati Rotary Club sent a 2nd demand letter in September 2009, demanding the
payment of the obligation and an order to vacate the premises should it fail to pay the
obligations within 7 days from receipt of the letter. Koppel failed to comply with both
demands, prompting Makati Rotary Club to file a recission or cancelation of the Deed of
Donation and an Unlawful Detainer suit against Koppel.
Koppel questions the legality of the proceedings commenced considering that there is
an arbitration clause in the lease contracts. Makati Rotary Club questions the validity of
the contract and consequently the arbitration clause.

ISSUE 1. Whether the validity of the contract could be subject to arbitration.

HELD 1: Arbitration is not proper when one of the parties repudiates the existence or
validity of such contract or agreement on the ground of fraud or oppression as in this
case. The validity of the contract cannot be subject of arbitration proceedings.
Allegations of fraud and duress in the execution of a contract are matters within the
jurisdiction of the ordinary courts of law. These questions are legal in nature and require
the application and interpretation of laws and jurisprudence which is necessarily a
judicial function.
ISSUE 2: Whether the arbitration clause in the contract could still be invoked
notwithstanding that contract’s possible nullity.
HELD 2: Yes, the arbitration clause remains to be valid because of the doctrine of
separability. Under the doctrine of separability, an arbitration agreement is considered
as independent of the main contract. Being a separate contract in itself, the arbitration
agreement may thus be invoked regardless of the possible nullity or invalidity of the
main contract.
ISSUE 3: Whether the arbitration clause could still operate considering that there is no
request filed in the MeTC to arbitrate.
HELD 3: The arbitration clause could still be invoked. The filing of a "request" pursuant
to Section 24 of R.A. No. 9285 is not the sole means by which an arbitration clause may
be validly invoked in a pending suit. In this case, it is conceded that petitioner was not
able to file a separate " request " of arbitration before the MeTC. However, it is equally
conceded that the petitioner, as early as in its Answer with Counterclaim ,had already
apprised the MeTC of the existence of the arbitration clause in the 2005 Lease Contract
and, more significantly, of its desire to have the same enforced in this case. This act of
petitioner is enough valid invocation of his right to arbitrate.
ISSUE 4: Whether the fact that the case was already submitted for JDR resolution
makes arbitration unnecessary and circuitous.
HELD 4: No, the has not become unnecessary and circuitous by virtue of the JDR
Resolution. The JDR framework is based on the processes of mediation, conciliation or
early neutral evaluation which entails the submission of a dispute before a " JDR judge "
who shall merely " facilitate settlement " between the parties in conflict or make a "
non-binding evaluation or assessment of the chances of each party’s case." Thus in
JDR, the JDR judge lacks the authority to render a resolution of the dispute that is
binding upon the parties in conflict. In arbitration, on the other hand, the dispute is
submitted to an arbitrator/s —a neutral third person or a group of thereof— who shall
have the authority to render a resolution binding upon the parties.

OVERALL DECISION: Since there really are no legal impediments to the application of
the arbitration clause of the 2005 Contract of Lease in this case, We find that the instant
unlawful detainer action was instituted in violation of such clause. The decision and the
proceedings must be stayed, and the matter should be referred for arbitration. In our
jurisdiction, bona fide arbitration agreements are recognized as valid;102 and that
laws,103 rules and regulations104 do exist protecting and ensuring their enforcement
as a matter of state policy.

GROUP 2
CONCEPT OF ARBITRATION
UNIWIDE SALES REALTY AND RESOURCES CORPORATION, vs. TITAN-IKEDA
CONSTRUCTION
AND DEVELOPMENT CORPORATION
FACTS​:
This case involved Titan-Ikeda who entered into 3 construction agreement/ contract /project with
Uniwide. Later Titan-Ikeda filed an action for sum of money against Uniwide with the RTC
because Uniwide allegedly failed to pay certain claims billed by Titan after the completion of the
3 projects.
Uniwide moved for the dismissal/suspension of the proceeding for them to first undergo
arbitration.
The Arbitrators issued terms of reference which was signed by the parties, (Uniwide did not
attempt to modify the TOR to accommodate its belated counterclaim on deadlines for liquidated
damages.)
Titan then refiled the case with CIAC. (Construction Industry Arbitration Commission)
CIAC Decision:
Project 1: Uniwide is absolved of any liability.
Project 2: Uniwide is absolved of any liability for VAT payment and for the account of Titan,
and Titan is absolved from liability for defective construction
Project 3: Uniwide is held liable for unpaid balance (5,158,364.63) plus 12% interest/annum and
to pay the full VAT for the additional work where no written authorization was presented.
CIAC likewise rejected the claim on liquidated damages​.
After Uniwide’s motion for reconsideration was denied by CIAC, it filed a ​petition for review
with CA​ but same was denied, thus​, Uniwide filed a petition for review under rule 45 to seek
partial reversal of the decision of CA which modified the decision of CIAC.
Uniwide claims that CIAC ​should have applied procedural rules​ such as section 5, Rule 10
with more liberality because it was an administrative tribunal free from all rigid technicalities of
regular courts because CA held that the issue on liquidated damages should be left for
determination in future proceedings.
Section 5.​ ​Amendment to conform to or authorize presentation of evidence​. — When
issues not raised by the pleadings are tried with the express or implied consent of the
parties they shall be treated in all respects as if they had been raised in the pleadings.
Such amendment of the pleadings as may be necessary to cause them to conform to
the evidence and to raise these issues may be made upon motion of any party at any
time, even after judgment; but failure to amend does not affect the result of the trial of
these issues. If evidence is objected to at the trial on the ground that it is not within the
issues made by the pleadings, the court may allow the pleadings to be amended and
shall do so with liberality if the presentation of the merits of the action and the ends of
substantial justice will be subserved thereby. The court may grant a continuance to
enable the amendment to be made
ISSUE​: Whether or not CIAC should have applied the Rules of Court in the arbitration
proceeding.
RULING​:
No. Rule of Procedure Governing Construction Arbitration promulgated by the CIAC contains
no provision on the application of the Rules of Court to arbitration proceedings, even in a
suppletory capacity.
Such importation of the Rules of Court provision on amendment to conform to evidence would
contravene the spirit, if not the letter of the CIAC rules. This is for the reason that the
formulation of the Terms of Reference is done with the active participation of the parties and
their counsel themselves. The TOR is further required to be signed by all the parties, their
respective counsel and all the members of the Arbitral Tribunal. Unless the issues thus carefully
formulated in the Terms of Reference were expressly showed to be amended, issues outside
thereof may not be resolved. As already noted in the Decision, "no attempt was ever made by the
[Uniwide] to modify the TOR in order to accommodate the issues related to its belated
counterclaim" on this issue.
Arbitration has been defined as "an arrangement for taking and abiding by the judgment of
selected persons in some disputed matter, instead of carrying it to established tribunals of justice,
and is intended to avoid the formalities, the delay, the expense and vexation of ordinary
litigation​.

POLICY ON ARBITRATION
KOREA TECHNOLOGIES CO., LTD v HON. ALBERTO A. LERMA and PACIFIC
GENERAL STEEL MANUFACTURING CORPORATION
FACTS​:
Korea Technologies Co., LTD (KOGIES) is a Korean corporation which is engaged in the
supply and installation of LPG cylinder manufacturing plants, while Pacific General Steel
Manufacturing Corp (PGSMC) is a domestic corporation. The two executed a contract where
KOGIES would set up a manufacturing plant in Carmona, Cavite. The said contract was
executed in the Philippines but was then amended in Korea. It is stipulated in the contract and in
the amendment that KOGIES will ship the machinery and facilities necessary and will install and
initiate the operation of the plant. In return, PGMSC then bound itself to pay a total amount of
USD 1,530,000. Months later, PGMC entered into a contract of lease with Worth Properties for
use of their property to house the LPG manufacturing plant. The monthly rental was PhP
322,560 commencing on January 1, 1998 with a 10% annual increment clause. Subsequently, the
machineries, equipment, and facilities for the manufacture of LPG cylinders were shipped,
delivered, and installed in the Carmona plant. PGSMC paid KOGIES USD 1,224,000.
However, after the installation of the plant, the initial operation could not be conducted as
PGSMC encountered financial difficulties. As such, they issued two post-dated checks each with
the amount of P 4,500,000. When KOGIES deposited the checks, these were dishonored for the
reason “PAYMENT STOPPED”. The company sent a demand letter threatening a violation of
BP 22 in case of non-payment. On the same day, the wife faxed a letter to the company’s
president complaining that KOGIES delivered a different brand of hydraulic press from that
agreed upon. On reply, PGSMC stated that the two checks they issued were fully funded but the
payment was stopped because of the delivery of a lower quality of equipment. PGSMC then
informed that they were cancelling their contract basing on the previous ground and that they
will dismantle the parts which were already installed. Five days later, PGSMC filed a complaint
for estafa against the President of KOGIES.
KOGIES then wrote that PGSMC could not unilaterally rescind their contract nor dismantle and
transfer the machineries on mere imagined violations. They also raised the contention that their
disputes should be settled by arbitration as agreed upon in Article 15, the arbitration clause of
their contract. KOGIES then instituted an Application for Arbitration before the Korean
Commercial Arbitration in Seoul, Korea pursuant to Art. 15 of the contract as amended.
RTC​:
KOGIES filed a complaint for specific performance before the RTC of Muntinlupa City.
The court granted ta TRO which was then subsequently extended. PGSMC filed an opposition to
the TRO arguing that the KOGIES was not entitled to the TRO since the arbitration clause was
null and void for being against public policy as it ousts local courts of jurisdiction. KOGIES’
prayer for an injunctive writ was denied. The court also held that Art. 15 of the Contract as
amended was invalid as it tended to oust the trial court or any other court jurisdiction over any
dispute that may arise between the parties. In its reply and answer, KOGIES relied on Chung Fu
Industries Inc. V CA on insisting that the arbitration clause was without question valid. KOGIES
filed an MR about the supplies and about the validity of the arbitration clause. In the meantime,
PGMSC filed a Motion for Inspection for things but was then opposed by KOGIES. The trial
court granted the Motion for Inspection and denied all other motions. KOGIES then filed an
urgent MR. Ten days after, without waiting for the resolution of the prior, KOGIES filed before
the CA a petition for certiorari seeking the annulment of the RTC orders, praying for the
issuance of injunction and for the enforcement of the arbitration clause for the enforcement of
the dispute. The RTC denied the urgent motion for reconsideration and confirmed the inspection
CA:
 The CA affirmed the trial court’s decision and declared the arbitration clause as against
public policy. Hence, this Petition for Review on Certiorari
ISSUE​:
Whether the CA erred in ruling that the Arbitration clause was void for being against public
policy
HELD​:
Yes, the CA erred in ruling because the arbitration clause was valid. Established in this
jurisdiction is the rule that the law of the place where the contract is made governs. Lex loci
contractus. The contract in this case was perfected here in the Philippines. Therefore, our laws
ought to govern. Nonetheless, Art. 2044 of the Civil Code sanctions the validity of mutually
agreed arbitral clause or the finality and binding effect of an arbitral award. Art. 2044 provides,
"Any stipulation that the arbitrators’ award or decision shall be final, is valid, without prejudice
to Articles 2038, 2039 and 2040."The arbitration clause was mutually and voluntarily agreed
upon by the parties. It has not been shown to be contrary to any law, or against morals, good
customs, public order, or public policy. There has been no showing that the parties have not dealt
with each other on equal footing. We find no reason why the arbitration clause should not be
respected and complied with by both parties. In Gonzales v. Climax Mining Ltd., 35 we held that
submission to arbitration is a contract and that a clause in a contract providing that all matters in
dispute between the parties shall be referred to arbitration is contract. Again in Del Monte
Corporation-USA v. Court of Appeals, we likewise ruled that "[t]he provision to submit to
arbitration any dispute arising therefrom and the relationship of the parties is part of that contract
and is itself contract."
The arbitration clause which stipulates that the arbitration must be done in Seoul, Korea in
accordance with the Commercial Arbitration Rules of the KCAB, and that the arbitral award is
final and binding, is not contrary to public policy. This Court has sanctioned the validity of
arbitration clauses in a catena of cases. In the 1957 case of Eastboard Navigation Ltd. v. Juan
Ysmael and Co., Inc., this Court had occasion to rule that an arbitration clause to resolve
differences and breaches of mutually agreed contractual terms is valid. In BF Corporation v.
Court of Appeals, we held that "[i]n this jurisdiction, arbitration has been held valid and
constitutional. Even before the approval on June 19, 1953 of Republic Act No. 876, this Court
has countenanced the settlement of disputes through arbitration. Republic Act No. 876 was
adopted to supplement the New Civil Code’s provisions on arbitration." And in LM Power
Engineering Corporation v. Capitol Industrial Construction Groups, Inc., we declared that:
Being an inexpensive, speedy and amicable method of settling disputes, arbitration––along
with mediation, conciliation and negotiation––is encouraged by the Supreme Court. Aside
from unclogging judicial dockets, arbitration also hastens the resolution of disputes,
especially of the commercial kind. It is thus regarded as the "wave of the future" in
international civil and commercial disputes. Brushing aside a contractual agreement
calling for arbitration between the parties would be a step backward.
Consistent with the above-mentioned policy of encouraging alternative dispute resolution
methods, courts should liberally construe arbitration clauses. Provided such clause is susceptible
of an interpretation that covers the asserted dispute, an order to arbitrate should be granted. Any
doubt should be resolved in favor of arbitration.40 Having said that the instant arbitration clause
is not against public policy, we come to the question on what governs an arbitration clause
specifying that in case of any dispute arising from the contract, an arbitral panel will be
constituted in a foreign country and the arbitration rules of the foreign country would govern and
its award shall be final and binding

GROUP 3

Report #2

CASES

1. CHAN KENT v. DIONESIO C. MICAREZ, et al.; G.R. No. 185758; March 9, 2011

FACTS: ​Linda Chant Kent filed a complaint for recovery of real property and annulment of title
against her parents and brother, Dionesio. Chan Kent alleged that the subject residential lot in
Panabo City, Davao del Norte was purchased by her through her younger sister,​ ​and authorized
representative, Rosita Micarez-Manalang in 1982.
However, it was named under her parents under an implied trust due to the difficulty in
registering a real property in her name being married to an American citizen. However, she
learned from her sister that their parents fraudulently conveyed and transferred the subject lot
to her brother, Dionesio.
After the issues had been joined, the RTC ordered the referral of the case to the
Philippine Mediation Center (PMC). Conferences were then scheduled. Based on the Report of
Mediator Esmeraldo O. Padao, Sr. that respondents’ counsel and representative did not appear
on the conferences, the RTC issued an order allowing petitioner to present her evidence ex
parte. It was later been clarified by Padao that it was petitioner’s counsel and representative
who did not attend the mediation proceedings.
Upon knowing this, the RTC issued an order dismissing the case. Petitioner filed a
motion for reconsideration to set aside the order, appealing the relaxation of the rule on
non-appearance in the mediation proceedings but was denied. Petitioner invoked that the
dismissal of the case was not in accordance with applicable law and jurisprudence and claims
that it was unjust because her representative and counsel did not deliberately snub the
mediation proceedings for they have attended twice the mediation conferences and only left
when respondent’s counsel had not yet arrived. Moreover, she explained that there were some
urgent matters caused by the sudden increase in prices of commodities which did not allow her
representative to appear in the last hearing.

ISSUE: ​Whether dismissal is the proper sanction due to her representative’s failure to attend
the mediation process although the party have appeared for two (2) times.

HELD: ​No. Dismissal was not the proper action. Although the RTC has legal basis to order the
dismissal of Civil Case No. 13-2007, the Court finds this sanction too severe to be imposed on
the petitioner where the records of the case is devoid of evidence of willful or flagrant
disregard of the rules on mediation proceedings.
A.M. No. 01-10-5-SC-PHILJA regards mediation as part of pre-trial where parties are
encouraged to personally attend the proceeding. To ensure attendance, it provides sanction
including but not limited to censure, reprimand, contempt and such other sanctions as are
provided under the Rules of Court for failure to appear for pre-trial, in case any or both of the
parties absent himself/themselves, or for abusive conduct during mediation proceedings.
There is no clear demonstration that the absence of petitioner’s representative during
mediation proceedings on March 1, 2008 was intended to perpetuate delay in the litigation of
the case. Neither is it indicative of lack of interest on the part of petitioner to enter into a
possible amicable settlement of the case.
The Court held that a mere censure or reprimand would have been sufficient for
petitioner’s representative and her counsel so as to be informed of the court’s intolerance of
tardiness and laxity in the observation of its order. By failing to do so and refusing to resuscitate
the case, the RTC impetuously deprived petitioner of the opportunity to recover the land which
she allegedly paid for. Unless the conduct of the party is so negligent, irresponsible,
contumacious, or dilatory as for non-appearance to provide substantial grounds for dismissal,
the courts should consider lesser sanctions which would still achieve the desired end.

2. BBB v AAA
Facts:
While A, was a medical student and a single mother to one child, B borne with her two more
children. A and B legalized their relationship and got married and legitimated their 2 common
children. The marriage soon went sour because of constant fights over A’s allegations of B’s
womanizing and B’s verbal abuses against A. B left the conjugal home alleging that A had fits of
irrational jealousy. A also decided to leave the conjugal home because B displayed acts of
marital infidelity which exposed A to public ridicule causing her emotional and psychological
distress. A also found out that B failed to pay the rental fee to their condominium unit, forcing
her to be evicted. A decided to live in a friend’s house. A found out that B had been stalking her
and the kids through B’s friend who lived in the same subdivision. B’s friend had been checking
the guard’s logbook and have been monitoring the activities of A and her children in and out of
the subdivision. For fear of her and her children’s safety, A filed for a Temporary Protection
Order (TPO; and prayed for it to become permanent upon the findings of the RTC).

The RTC ruled a permanent protection order in favor of A and granted A ​permanent sole
custody over their common children and B to provide support in the amount of Php 62,918.97
per month, requiring B to stay away from A at a distance of 100 meters, plus damages and the
cost of suit.

The CA affirmed the RTC’s decision but remanded the case for the proper proceedings who
shall be awarded custody of the children.

B contends that the PPO issued againt him is moot because he now has actual care and
custody of their common children while A is working as a nurse abroad. B alleges that he and A
had entered into a compromise agreement regarding the exercise of parental authority over,
and support of their common children.

A countered that B continuously violates the PPO. A alleged that she signed the MOA while
emotionally distressed and without the advice and guidance of counsel. A claims that B still
verbally abuses her. B has not paid the fees and costs of litigation awarded to A. He does not
provide support for A’s child who, in the eyes of the law, is also among B’s legitimated children.
A also alleged that she left their common children under the care of B only because the
circumstances forced her to do so ,she could not depend for financial support from B, she was
left with no choice but to yield custody over their common children even if the set-up exposed
the children to B’s illicit affairs.

Issue:
WHETHER the Memorandum of Agreement between the parties over the PPO, and the support
and custody of their children should be honored by the court.

Held:

The permanent protection order, the custody and support of their children are not proper
subjects of a compromise agreement because it involved violence against women and children.

Alleging psychological violence and economic abuse, A anchored her application for the
issuance of a TPO and a PPO on the basis of the provisions of the ​Anti-Violence Against
Women and their Children (RA 9262)​. The rules intend that cases filed under the provisions of
R.A. No. 9262 be not subjects of compromise agreements. Section 23(d) of A.M. No.
04-10-11-SC20 explicitly prohibits compromise on any act constituting the crime of violence
against women. Violence is not a subject for compromise. A process which involves parties
mediating the issue of violence implies that the victim is somehow at fault.
AM No. 10-4-16-SC directs the referral to mediation of all issues under the Family Code and
other laws in relation to support, custody, visitation, property relations and guardianship of minor
children, excepting therefrom those covered by R.A. No. 9262.

While A filed her application for a TPO and a PPO as an independent action and not as an
incidental relief prayed for in a criminal suit, the instant petition cannot be taken outside cases
falling under the provisions of R.A. No. 9262. Hence, the prohibition against subjecting it to
compromise applies.

The PPO issued is valid and that a remanding of the case to the trial court is necessary to
determine who shall exercise custody over the children. However, the choices of the children as
with whom they would prefer to stay would alter the effects of the PPO. But as to who shall be
granted custody over the three children, how the spouses shall exercise visitation rights, and the
amount and manner of providing financial support shall be remanded to the RTC.

While B and A arrived at an amicable settlement as regards the issues of custody, exercise of
parental authority over, and support of their common children, and while these matters can be
lawful subjects of compromise, A’s contentions compels the Court to exercise prudence by
directing the RTC to resolve with finality the said issues. While the parties are not prohibited
from entering into a compromise as regards the aforesaid issues, the Court now requires the
RTC’s direct supervision to put an end to their bickering.

Events, which took place after the issuance of the PPO, do not erase the fact that psychological,
emotional and economic abuses were committed by BBB against AAA. Hence, BBB’s claim that
he now has actual sole care of DDD and EEE does not necessarily call for this Court’s
revocation of the PPO and the award to him of custody over the children.
The case is remanded for the RTC to resolve the question of custody. Since the children are
now all older than seven years of age, they can choose for themselves whom they want to stay
with. If all the three children would manifest their choice to stay with A, then the PPO issued by
RTC shall continue to be executed in its entirety. However, if any of the three children would
choose to be under B’s care, the PPO issued against B relative to them is to be modified. The
PPO, in its entirety, would remain effective only as to A and any of the children who opt to stay
with her. The RTC may accordingly alter the manner and amount of financial support B should
give depending on who shall finally be awarded custody over the children.

Section 16 of R.A. No. 9262 provides that a PPO shall be effective until revoked by a court upon
application of the person in whose favor the order was issued. Pending the resolution of the
issue on the PPO, B claims that he and A had executed a MOA, upon which basis a judgment
by compromise is sought to be rendered. A however alleged that A’s consent to the MOA was
without counsel. The SC ruled that the PPO stands unless A files an application for its
revocation.

3. Garcia v Drilon
JESUS C. GARCIA,​ vs. ​THE HONORABLE RAY ALAN T. DRILON, Presiding Judge, Regional
Trial Court-Branch 41, Bacolod City, and ROSALIE JAYPE-GARCIA, for herself and in behalf
of minor children, namely: JO-ANN, JOSEPH EDUARD, JESSE ANTHONE, all surnamed
GARCIA,

Facts: Rosalie Jaype-Garcia filed, for herself and in behalf of her minor children, a verified petition
before the RTC of Bacolod City for the issuance of a Temporary Protection Order against her
husband, Jesus C. Garcia, pursuant to R.A. 9262. She claimed to be a victim of physical abuse;
emotional, psychological, and economic violence as a result of marital infidelity on the part of
petitioner, with threats of deprivation of custody of her children and of financial support.

Rosalie married Jesus in 2002 when she was 34 years old and the former was eleven years her
senior and had 3 children. Rosalie is a dutiful and faithful wife, whose life revolved around her
husband. On the other hand, Jesus is dominant, controlling, and demands absolute obedience from
his wife and children. He forbade private respondent to pray, and deliberately isolated her from her
friends. When she took up law, and even when she was already working part time at a law office,
petitioner trivialized her ambitions and prevailed upon her to just stay at home. He was often jealous
of the fact that his attractive wife still catches the eye of some men, at one point threatening that he
would have any man eyeing her killed. Things turned for the worse when Jesus had an affair with a
bank manager of Robinson's Bank. Jesus admitted to the affair when Rosalie confronted him about
it. The infidelity spawned a series of fights that left Rosalie physically and emotionally wounded. ​In
one of their quarrels, petitioner grabbed Rosalie on both arms and shook her with such force that
caused bruises and hematoma. At another time, Jesus hit Rosalie forcefully on the lips that caused
some bleeding. Jesus sometimes turned his ire on their daughter, Jo-Ann, who had seen the text
messages he sent to his paramour and whom he blamed for squealing on him. He beat Jo-Ann on
the chest and slapped her many times. All the emotional and psychological turmoil drove Rosalie to
the brink of despair. At one point, she attempted suicide by cutting her wrist. She was found by her
son bleeding on the floor. Jesus simply fled the house instead of taking her to the hospital. Rosalie
was hospitalized for about 7 days in which time petitioner never bothered to visit, nor apologized or
showed pity on her.

When Rosalie informed the management of Robinson's Bank that she intends to file charges against
the bank manager, Jesus got angry with her for jeopardizing the manager's job. Jesus warned her
that if she goes on a legal battle with him, she would not get a single centavo.

RTC of Bacolod City: Finding reasonable ground to believe that an imminent danger of violence
against the private respondent and her children exists or is about to recur, the RTC issued a TPO.

Jesus’ Contention: "by criminalizing run-of-the-mill arguments, instead of encouraging mediation and
counseling, the law has done violence to the avowed policy of the State to "protect and strengthen
the family as a basic autonomous social institution."

Ruling of the Court: No, the non-referral of a VAWC case to a mediator is justified.
Under Section 23(c) of A.M. No. 04-10-11-SC, the court shall not refer the case or any issue thereof
to a mediator. The reason behind this provision is well-explained by the Commentary on Section 311
of the Model Code on Domestic and Family Violence as follows:

This section prohibits a court from ordering or referring parties to mediation in a proceeding for an
order for protection. Mediation is a process by which parties in equivalent bargaining positions
voluntarily reach consensual agreement about the issue at hand. Violence, however, is not a subject
for compromise. A process which involves parties mediating the issue of violence implies that the
victim is somehow at fault. In addition, mediation of issues in a proceeding for an order of protection
is problematic because the petitioner is frequently unable to participate equally with the person
against whom the protection order has been sought.

4. Arroyo v Alcantara

Facts​:
Antonio Arroyo filed an administrative complaint against Sancho Alcantara for violations of 5(a)
and (d) of RA 6713 (Code of Conduct and Ethical Standards for Public Officials and Employees)
and3(E) of RA 3019. The complaint arose when Alcantara, a clerk of court, issued a subpoena
to Joaquin Opiana, Sr. Joaquin is Arroyo’s father-in-law and the subpoena required him to
appear before the court. Ruben Olayres, the barangay captain, was the one who served the
subpoena. Nine days after the service of the subpoena, Antonio wrote the office of Alcantara,
requesting for a copy of the alleged subpoena and a certification as to the facts surrounding the
issuance of the same. A month after, he wrote again a letter to follow up his first request even to
the point of requesting to examine the records of the court, but his efforts proved futile. Hence,
this complaint seeking the preventive suspension of Alcantara pending investigation of the
charges against him.
On the other hand, Alcantara claims that Antonio mistook the document as a subpoena when in
facts it was just a letter, typed on an ordinary bondpaper and addressed to Joaquin Opiana, Sr.,
requesting him to attend a meeting at the office of the MTC of Guinobatan, Albay. Alcantara
further explains that he made the request in his personal capacity upon the insistence of
Olayres, who thought that Alcantara’s position as a clerk of court could be used to amicably
settle the dispute among the heirs of IsaacOpiana, one whom was Joaquin Opiana, Sr.,
concerning a real property.
Issue:
Is a clerk of court authorized to mediate in a dispute?
Ruling​:
No, Alcantara as a clerk of court had no authority to mediate among the constituents of Isaac
Olayres. Although he claims that it was done in a personal capacity, his claim is belied by the
fact that Antonio was given the impression that the intended meeting involving his father-in-law
was court-related. His acts exceeded his authority as a clerk of court. In effect, he had, wittingly
allowed his position to be used to exercise his oral ascendancy over the Opiana family, whom
he summoned to his office for mediation.

GROUP 4

GROUP 5

GROUP 6

GROUP 7

WAHL vs DONALDSON, 1903

FACTS: ​Rudolph Wahl & Co., brought an action against Donaldson, Sims and Co., based upon a contract
by which they (Wahl) leased to them (Donaldson) a certain ship called ​Petrarch for the term of 6
months, under which contract Wahl (plaintiffs) claimed that Donaldson (defendants) were indebted to
them a balance of $25,484.38, with interest from the July 30, 1901.
The suit was instituted on the March 4, 1902, and service of citation was had upon the defendants on
the same day but the defendants failed to answer the complaint, and judgment was rendered by default
against the defendants in favor of the plaintiffs for the sum of $17,892.81. Afterwards, the defendants
made an application to the Court of First Instance for a new trial. The motion for a new trial was granted
and the judgment by default against the defendants was set aside.
A demurrer was made by the defendants to the complaint which presented the question of the
competency of the CFI to try the case. The objection was based upon the grounds that there was a
provision contained in the contract to the following effect:
If there should arise any difference of opinion between the parties to the contract, whether it may be
with reference to the principal matter or in any detail, ​this difference shall be referred for arbitration to
two competent persons in Hongkong, one of which shall be selected by each of the contracting
parties, with the power to call in a third party in the event of a disagreement​; the majority of the
opinions will be final and obligatory to the end of compelling any payment. This award may be made a
rule of the court.

ISSUE: ​Whether the provision of the contract is invalid as being against public policy

HELD: ​Yes. ​Agreements to refer matters in dispute to arbitration have been regarded generally as
attempts to oust the jurisdiction of the court, and are not enforced. The Court of First Instance should
have entertained jurisdiction in this case, notwithstanding the clause providing for arbitration above
referred to. The rule is thus stated in Clark on Contracts, page 432:
A condition in a contract that disputes arising out of it shall be referred to arbitration is good where the
amount of damages sustained by a breach of the contract is to be ascertained by specified arbitration
before any right of action arises, but that it is ​illegal where all the matters in dispute of whatever sort
may be referred to arbitrators and to them alone​. In the first case a condition precedent to the accrual
of a right of action is imposed, while in the second it is attempted to prevent any right of action accruing
at all, and this can not be permitted.
This seems to be the general rule in the United States, and we understand that in the civil law it is also
the rule that, where there is a stipulation that all matters in dispute are to be referred to arbitrators and
to them alone, such stipulation is contrary to public policy.

ALLEN vs PROVINCE OF TAYABAS

FACTS: ​The Province of Tayabas, represented by the Director of Public Works, and Arthur F, Allen,
contractor, entered into a contract whereby the contractor agreed to construct five reenforced concrete
bridges for P39,200. One provision was that the bridges were to be constructed "in accordance with the
said advertisements, instructions to bidders, general conditions, plans, specifications, proposal, and this
agreement." Other paragraphs of the contract concerned the method and rate of payment for extras.
Four of the bridges were accepted by the Government and paid for. The dispute between the
parties arose as to the fifth bridge, No. 53.3 and as to certain extras. As to this bridge, the Province of
Tayabas paid to the contractor P4,360 on account of the contract price thereof, but refused to pay the
balance of P2,840 because plaintiff had deviated from the specifications and because the work was
defective. To recover the balance upon the contract was the purpose of the contractor in bringing action
for P9,685 (amended complaint), alleged to be due him by the Province of Tayabas. Defendant, on its
defense, alleged defective work on the part of Allen, and that the contract was not approved by the
Governor-General under Act No. 1600.
The trial court ruled in favour of Allen holding that the law which makes the approval of the
Governor-General a prerequisite only to the purchase or conveyance of real property by a province.
Since the Province of Tayabas’ Motion for New trial was denied, it elevated the case to the Supreme
Court contending that the certificate by the district engineer and the Director of Public Works must be
obtained before suit can be brought on a contract; that the findings of these officials are conclusive; and
that the complaint must contain an averment to this effect. On the other hand, Allen contends that
neither the law nor the contract requires the submission to arbitration of disputes between the
Government and the contractor.

ISSUE: ​Whether the certification of the district engineer and the Director of Public Works which must be
obtained first before a suit can be brought on a contract constitutes an arbitration agreement

HELD: ​No. The Certification of the district engineer and the Director of Public Works is not an arbitration
agreement but a condition precedent before a contractor can recover from a contract, nevertheless,
Allen is entitled to recover even without such Certificate on the ground of substantial performance.
The law makes the approval of the Governor-General a prerequisite only to the purchase or conveyance
of real property by a province; that the provisions of the law and the form of the contract, usually
followed in this jurisdiction, providing for the certificate of approval by the Director of Public Works or
his representative, are in the nature of a condition precedent, which must be alleged and proved, and
that this certificate is conclusive in the absence of a showing of fraud or bad faith.
 A. CHAN LINTE, ​Plaintiff-Appellant,​ v. LAW UNION AND ROCK INSURANCE
CO., LTD.,​Defendant-Appellee.​

A. CHAN LINTE, ​Plaintiff-Appellant,​ v. TOKYO MARINE INSURANCE

A. CHAN LINTE, ​Plaintiff-Appellant,​ v. THE CHINE FIRE INSURANCE CO., LTD.,

Defendant-Appellee​.

Facts:

The plaintiff is a resident adult of the Philippine and the defendants are fire insurance companies
duly licensed to do business here. Plaintiff alleges that he was the owner of 30,992.50 kilos of
hemp stored in the warehouse in Calbayog, Province of Samar, Philippine Islands, he requested
the defendant Law Union and Rock Insurance Co., Ltd. (LAW UNION), to insure against loss by
fire in the sum of P5,000; that during the life of the policy the hemp was destroyed by fire in the
bodega where it was insured; that its value was P21,296.27; that he at once notified the defendant
of the loss, and in all other respects complied with the terms and conditions of the policy, and
made a demand for the payment of the full amount of the insurance.
That defendant refused and still refuses to pay the same or any part thereof. After the
commencement of the action, the defendant requested that its liability should be submitted to
arbitration, in accord with the provisions of the policy, and that "plaintiff acceded to the
requirement made by said defendant, but not that the award of arbitration should be conclusive or
final, or deprive the courts of jurisdiction, and by agreement of both plaintiff and defendant
Frank B. Ingersoll was named sole arbitrator, and both parties informally presented evidence
before him and he made return of arbitration to the effect that said plaintiff had only seven bales
of hemp destroyed in the fire, with which return the said plaintiff is dissatisfied, and comes to
this court for proper action."
For its answer the defendant alleges that an arbitrator was agreed upon for the purpose of
deciding the alleged difference; that the arbitrator found that only seven bales of hemp of the
grade "ovillo" were destroyed. Further, defendant asseverates that the arbitrator filed a
supplemental award wherein he finds from the evidence submitted that the local value of the
seven bales of plaintiff's hemp destroyed by the said fire was P608.34; that in addition to the
defendant's policy, the same property was covered by two other fire insurance polices, that of
Tokyo Marine Insurance, Inc., (TOKYO MARINE) and Chine Fire Insurance Co., Ltd. (CHINE)
by each of which the property in question was insured to the value of P5,000 against the loss;
that defendant, and the aforementioned insurance companies, have offered and are now willing
to pay plaintiff its one-third of the loss in full satisfaction of its liability.
The arbitration clauses in the policies issued by LAW UNION and TOKYO MARINE stipulated
that any questions as to differences that shall arise as to the amount of loss or damage shall be
referred to an arbitrator, and that the arbitration process shall be a condition precedent to any
right of action or suit upon the policies. On the other hand, the arbitration clause in the policy
issued by TOKYO MARINE contained the same stipulation and that the award of the arbitrator
shall be conclusive. The trial court rendered judgment against each of the defendants for
P202.78, claiming that the court erred in holding that the decision of the arbitrator is conclusive
or in any way binding on the plaintiff. Hence, this petition.
ISSUES:
1)​ ​Whether the arbitration clauses are null and void for being contrary to public policy
HELD:
Petition DENIED.
The said arbitration clauses are valid, and that, unless there was an effort to comply, no action
could be maintained. In Allen vs. Province of Tayabas (38 Phil., 356), it is said: . . . It would be
highly improper for courts out of untoward jealousy to annul laws or agreements which seek to
oust the courts of their jurisdiction. . . . Unless the agreement is such as absolutely to close the
doors of the courts against the parties, which agreement would be void. (Wahl and Wahl vs.
Donaldson, Sims and Co.), courts will look with favor upon such amicable arrangements and
will only with great reluctance interfere to anticipate or nullify the action of the arbitrator. . . .
In the instant case, it will be noted that sometime after the action was commenced and upon the
request of the defendants, the plaintiff agreed to arbitrate under the terms and provisions of the
policies; that the parties mutually agreed upon an arbitrator; and that each appeared before him
and offered his or its evidence upon the questions in dispute.
There is no claim or pretense that the proceedings were not honestly and fairly conducted.
Having formally agreed and submitted to arbitration after the action was commenced, it may
well be doubted whether the plaintiff can at this time question the validity of the proceedings,
except upon the ground of fraud or mistake.
The findings of the arbitrator are conclusive upon the parties. The plaintiff, having agreed to
arbitration after the action was commenced and submitted his proof to the arbitrator, in the
absence of fraud or mistake, is estopped and bound by the award.
NB: ( In case it is needed since history ung topic natin. J​ ​ )
On page 352 of Ruling Case Law, vol. 2, it is said:
Arbitration as a method of settling disputes and controversies is recognized at common law. The
award of the arbitrators is binding on the parties, but, in the absence of statute, the successful
party can only enforce his rights thereunder by a suit at law. Thus the only gain by a common
law arbitration is the substitution of the definite findings of the award as the basis of a suit, in
the place of the former unsettled rights of the parties. In an action on the award the award itself
is conclusive evidence of all matters therein contained, provided the arbitrators have not
exceeded the powers delegated to them by the agreement of submission. The courts regard
matters submitted as concluded by the award, and in an action thereon they will not review the
merits of the arbitrators' findings.
Corpus Juris, vol. 5, p. 16, says:
The statement of controversies by arbitration is an ancient practice at common law. In its broad
sense it is a substitution, by consent of parties, of another tribunal for the tribunals provided by
the ordinary processes of law; a domestic tribunal, as contradistinguished from a regularly
organized court proceeding according to the course of the common law, depending upon the
voluntary act of the parties disputant in the selection of judges of their own choice. Its object is
the final disposition, in a speedy and inexpensive way, of the matters involved, so that they may
not become the subject of future litigation between the parties.
On page 20, it is said:
APPROVED METHOD OF SETTLEMENT; FAVORED BY CONSTRUCTION.
— Although arbitration was recognized at the common law as a mode of adjusting matters in
dispute, especially such as concerned personal chattels and personal wrongs, yet, from efforts
perceptible in the earlier cases to construe arbitration proceedings and awards so as to defeat
them, it would seem that they were not originally favored by the courts. This hostility, however,
has long since disappeared, and, by reason of the fact that the proceeding represents a method of
the parties' own choice and furnishes a more expeditious and less expensive means of settling
controversies than the ordinary course of regular judicial proceedings, it is the policy of the law
to favor arbitration. Therefore every reasonable intendment will be indulged to give effect to
such proceedings, and in favor of the regularity and integrity of the arbitrators' acts.
On page 43, it is said:
Where a contract contains a stipulation, not that all questions arising thereunder, whether as to
the validity or effect of such contract, or otherwise, shall be submitted to arbitration, but that the
decision of arbitrators on a certain question or questions, such as the quantity, quality, or price
of materials or workmanship, the value of work, the amount of loss or damage, or the like, shall
be a condition precedent to the right of action on the contract itself, no fixed sum being stated in
the contract, such stipulation will be enforced, because the parties to a contract have a right to
adopt whatever method they see fit for determining such questions, and until the method adopted
has been pursued, or some sufficient reason given for not pursuing it, no action can be brought
on the contract. "Freedom to contract for arbitration to this extent," it has been said, "imports
no invasion of the province of the courts, and there is no ground upon which a right so essential
to the convenient transaction of modern business affairs can be denied," nor is such agreement
objectionable as being against public policy. In order to give effect to such an agreement it must
of course appear that the matter proposed to be referred is a difference, within the meaning of
the agreement.
In the instant case, there was no dispute about the policy of insurance or the fire. The only real
difference was the amount of the loss which plaintiff sustained, and that was the only question
submitted to arbitration. In December, the arbitrator found the amount of plaintiff's hemp which
was destroyed, but did not find its value.
Hence the award on the question submitted was not complete or final. In the finding of the actual
value of the hemp, there was no change or revision of any previous finding. It was simply the
completion by the arbitrator of an unfinished work. No formal notice was served on the
arbitrator, and he was not removed or discharged, and until such time as his duties were fully
performed, or he was discharged, he would have the legal right to complete his award. The
plaintiff, having agreed to arbitration after the action was commenced and submitted his proof to
the arbitrator, in the absence of fraud or mistake, is estopped and bound by the award. Where a
plaintiff has commenced an action to recover upon an insurance policy, and then voluntarily
submits the amount of his loss to arbitration, he cannot ignore or nullify the award and treat it
as void upon the ground that he is dissatisfied with the decision.

KAY B. CHANG, ET AL., Plaintiffs-Appellees, v. ROYAL EXCHANGE ASSURANCE

CORPORATION OF LONDON

DECISION
WILLARD, J. :
The arbitration clause in the fire policy in question in this case is in part as follows:
"If a disagreement should at any time arise between the corporation and the assured . . . respect
of any loss or damage alleged to have been caused by fire, every such disagreement, when it may
occur (unless the corporation shall deny liability by reason of fraud or breach of any of the
conditions, or because the claimant has by some other means waived his rights under the policy),
shall be referred to the arbitration of some person to be selected by agreement of both parties . . .
And by virtue of these presents it is hereby expressly declared to be a condition of this policy,
and an essential element of the contract between the corporation and the insured that unless the
corporation shall demand exemption from liability by reason of fraud, breach of conditions, or
waiver, as stated, the assured, or claimant, shall have no right to commence suit or other
proceedings before any court whatever upon this policy until the amount of the loss or damage
shall have been referred, investigated, and determined as above provided, and then only for the
amount awarded, and the obtaining of such an award shall be a condition precedent to the
institution of any suit upon this policy and to the liability and obligation of the corporation to pay
or satisfy any claim or demand based upon this policy."
The conditions contained in this clause of the policy are valid, and no action can be maintained
by the assured unless as award has been made or sought, or unless the company has denied
liability on some of the grounds stated therein. (Hamilton v. Liverpool, London and Globe
Insurance Company, 136 U.S., 242.) The duty of asking a submission to arbitration does not rest
exclusively upon the company. If it takes no action in that respect it is the duty of the assured to
do so, and to ask that arbitrators be appointed for the purpose of determining the amount of the
loss, in accordance with the provisions of this policy. The company may, however, by its
conduct, waive the provisions of this clause relating to arbitration. In fact, this is expressly stated
in the policy itself, as will be seen from the quotation above made, and the principal question in
this case is whether there has been such waiver or not.
Simple silence of the company is not sufficient. If it remains passive, it is the duty of the assured
to take affirmative action to secure arbitration. Neither will the failure of the company to return
proofs of loss, or its failure to point out defects therein, amount to a waiver of the arbitration
clause. These acts may amount to a waiver of the clause requiring the furnishing of proofs of
loss, but such an action can not constitute proof that the company has refused to pay the policy
because the defendant has failed to comply with the terms and conditions thereof.
It is claimed, however, by the plaintiffs and appellees, that affirmative action was taken by the
company indicating its purpose not to pay anything to the insured.
The property insured, consisting of a stock of goods, was entirely destroyed by a fire on the 11th
day of March, 1905. On the same day the plaintiffs notified the agent of the defendant of the loss
and within fifteen days thereafter presented to the company a detailed statement of the articles
which had been destroyed and of their value. Plaintiffs were notified by the company that this
proof was insufficient and that they must obtain the sworn certificates of two merchants to the
truth of their statement. This was done within a few days. Plaintiffs were again notified that their
proof was insufficient. Various interviews were had between the agent of the defendant and the
plaintiff Chang and the plaintiffs’ lawyer between the latter part of March and the 21st of June,
1905. During this time the plaintiffs furnished additional evidence relating to the justice of their
claim and were told that their proofs were still insufficient. No indication was made by the
company’s agent as to what other proofs should be furnished, he offering, however, at one of the
interview to settle the claim for 3,000 pesos. This offer was refused by the plaintiffs. In the final
interview on June 21, between the company’s agent and the counsel for the plaintiffs, the former
said:
"I can not go on with your case, Mr. Sleeper; I have not enough proof.
"Q. What did Mr. Sleeper state?
"A. I think, so far as I can remember, that he said he wanted to bring the matter to a basis, but I
would not say so to the court."
This action was commenced on the 24th of June, 1905. The plaintiffs at no time requested the
appointment of arbitrators. After the suit had been commenced, and on the same day, the
defendant requested in writing that arbitrators be appointed in accordance with the terms of the
policy. This was the first communication in writing which the defendant made to the plaintiffs
after the loss.
Under all the circumstances in the case, we think that the statement made by the company’s
agent on the 21st day of June amounted to a denial of liability on the ground that proper proofs
of loss had not been presented and that, therefore, there had been a failure of the assured to
comply with one of the terms of the policy. The delay of the company in taking any affirmative
action between the 11th day of March and the 21st day of June; its repeated statements that the
proofs were insufficient without indicating in any way what other proofs should be furnished,
and its final statement that it could go no further with the case, was sufficient evidence to show
that it did not intend to pay. This view is somewhat confirmed by what took place afterwards
before the arbitrators, both of whom were appointed by the defendant in accordance with the
terms of the policy. At the first meeting of these arbitrators the defendant objected to any award
being made upon the ground that the proof of loss which had been furnished was sworn to before
a notary public and not before the municipal judge, as required by the provisions of the Code of
Commerce.
In the case of The Phenix Insurance Company v. Stocks (149 Ill., 319) the company wrote two
letters to the insured, in the first of which they said:
"The circumstances under which this fire occurred are such that we do not feel justified in
extending to you any measure of grace, in considering your claim, which you may not fairly
demand under the terms of the policy. There is at least one fact that looks very peculiar, and until
our minds are relieved of the doubts which we have come to receive in regard to the integrity of
this loss, we shall offer you no benefits that you may not demand under a strict construction of
the policy."
In the other letter the company said:
"Replying to your letter of August 23d, received this morning, we beg to say that our views of
this matter have been fully expressed in our previous correspondence, and have nothing at this
time to add."
"The mere silence of the company would not amount to a waiver of its right to insist upon the
condition [as to arbitration], but when it placed its determination upon the grounds stated in the
correspondence, which were such as could not be submitted to arbitration under the provisions of
the policy, it must be held to have waived the condition requiring arbitration (German Ins. Co. v.
Gueck, 130 Ill., 345), and especially is this so where the assured would be misled to their
prejudice into bringing suit upon the policy without first having obtained an award. The
company was not bound to speak at all., but when asked in effect, what its determination was, if
it answered, good faith required that it should disclose the true ground of its defense.”
It is apparent in the case at bar that the counsel for the plaintiffs sought the interview of June 21
for the express purpose of finding out what the decision of the company was, and after receiving
the answer which has been heretofore quoted, the plaintiffs were fully justified in bringing the
action at once, without seeking any arbitration.
Judgment was entered in the court below in favor of the plaintiffs for the sum of 5,265 pesos and
25 centavos, with interest from the 24th of June, 1905, and costs. It is claimed by the appellant
that the finding of the court below as to the amount of the loss is not justified by the evidence. A
great many witnesses were presented by each side, but the only persons who had any real
knowledge as to the amount of stock in the store at the time of the fire, and as to its value, were
the plaintiff Chang and his clerk. They testified that it was worth more than 10,000 pesos, the
amount named in the policy. No one of the witnesses for the defendant fixed the value of the
stock then on hand at more than 500 pesos. The arbitrators appointed by the defendant found that
the value was 2,106 pesos. The defendant’s agent testified that during negotiations he offered to
settle for 3,000 pesos. That the plaintiff (Chang) was carrying on a business of some importance
was proved at the trial by the introduction of the records of the customs in Cebu, by which it
appeared that between the month of July, 1904, and February, 1905, he had imported through the
custom-house goods which with the duty added were of the value of 4,758 dollars and 48 cents,
money of the United States, and the plaintiff, Chang, testified that he had no hand at the time of
the fire a large amount of property, products of the country, which were not imported through the
customs.
In view of all the evidence in the case, we can not say that it preponderates against the finding of
the judge below as to the amount of the loss.

Chung Fu Industries v CA (1992)

FACTS: In 1989, Chung Fu and Roblecor Incorporated entered into a construction
agreement. Roblecor would undertake to construct Chung Fu’s industrial complex in
Cavite for a consideration of P42 million. The agreement contained a clause saying that
in the event of disputes arising from the performance of subject contract, the issue(s)
shall be submitted for resolution before a single arbitrator chosen by both parties.
In the next months, they entered into 2 more ancillary contracts: one for the
construction of dorm and support facilities, and another for the installation of electrical,
water and hydrant systems.
Roblecor failed to complete the project. They were granted an extension, but
nevertheless failed to fulfil their obligation. So Chung Fu took over the construction.
In 1990, Roblecor filed a petition for compulsory arbitration with prayer for TRO in the
RTC. The company claimed that it be paid P10.5 million and that it had progress billings
of P2.37 million.
After negotiations, the two parties entered into an arbitration agreement (AA),
which provided that:
(a) They will abide by the decision of the arbitrator including any amount that may be
awarded to either party as compensation, consequential damage and/or interest;
(b) The decision of the arbitrator shall be final and unappealable. Therefore, there shall
be no further judicial recourse if either party disagrees with the whole or any part of the
arbitrator's award; and
(c) Either party is entitled to seek judicial assistance for purposes of enforcing the
arbitrator's award.
The RTC approved the AA. Engr. Willardo Asuncion was appointed as sole
arbitrator. A month later, Asuncion ordered Chung Fu to immediately pay Roblecor
P16.11 million and declared his award final and unappealable.
Chung Fu filed a motion to remand the case for further hearing and
reconsideration of the award, claiming that Asuncion exceeded his powers by going
beyond the terms in the construction agreement, and even granting extra compensation
to Roblecor. Roblecor, on the other hand, filed a motion for confirmation of award. The
RTC granted Roblecor’s motion.
Chung Fu then elevated the case via a petition for certiorari in the CA. The CA
affirmed the RTC and held that as signatories to the AA, Chung Fu and its officers are
bound to observe the stipulation saying that the award is final and unappealable. After
their Motion for Reconsideration was denied, Chung Fu elevated the case to the SC.

ISSUE: Whether the arbitration award is beyond the ambit of the court’s power of
judicial review.

HELD: NO.
The SC first emphasized the following rules:
(a) Absent an agreement of the parties to resolve their disputes via a particular
mode, it is the regular courts that remain the fora to resolve such matters.
(b) The parties may opt for recourse to third parties, like through arbitration, by either
spelling it out in the contract itself in anticipation of a future dispute, OR stipulating in a
submission agreement later on when they are actually facing a dispute.
(c) An extrajudicial means of settlement is not intended to completely deprive the
courts of their jurisdiction.
(d) But a 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.
(e) 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.

The answer to the main issue is no. An arbitration award is not completely
outside of the court’s jurisdiction.The rule on finality of awards is not absolute. The Civil
Code itself provides for the exceptions under Arts 2038-2040.
The Arbitration Law also enumerates other exceptions to the finality rule:
(a) corruption, fraud, or other undue means;
(b) evident partiality or corruption in the arbitrators or any of them; or
(c) the arbitrators were guilty of misconduct in refusing to postpone the hearing upon
sufficient cause shown, or in refusing to hear evidence pertinent and material to the
controversy; that one or more of the arbitrators was disqualified to act and wilfully
refrained from disclosing such disqualifications or of any other misbehavior by which the
rights of any party have been materially prejudiced; or
(d) the arbitrators exceeded their powers, or so imperfectly executed them, that a
mutual, final and definite award upon the subject matter submitted to them was not
made.”
In the case of Chung Fu and Roblecor, the SC found that the arbitrator
committed a grave abuse of discretion by failing to apply the terms of the original
contract between the parties, and in granting unjustified extra compensation.
Section 24(d) is therefore present here, and as stated in the law, the court has the
power to order that such award be vacated.
Hence, the SC remanded the case back to the RTC for further hearing. It should
be noted, however, that the Special Rules now provide protection over arbitral awards
from court intervention.
The court’s power of judicial review is now limited by this rule:
“No appeal or certiorari on the merits of an arbitral award. - An agreement to
refer a dispute to arbitration shall mean that the arbitral award shall be final and binding.
Consequently, a party to an arbitration is precluded from filing an appeal or a petition for
certiorari questioning the merits of an arbitral award.”