Republic of the Philippines which reversed and set aside the June 24, 2009 Order2 of the

SUPREME COURT Regional Trial Court (RTC) of Makati City, Branch 148 in SP
Manila Proc. Case No. M-6046.

FIRST DIVISION In G.R. No. 199238,a petition for certiorari under Rule 65,
Banco De Oro Unibank, Inc. (BDO)assails the Resolution3
G.R. No. 196171 December 10, 2012 dated September 13, 2011 in CA-G.R. SP No. 120888 which
denied BDO’s application for the issuance of a stay order
RCBC CAPITAL CORPORATION, Petitioners, and/or temporary restraining order (TRO)/preliminary
vs. injunction against the implementation of the Writ of
BANCO DE ORO UNIBANK, INC., Respondent. Execution4 dated August 22, 2011 issued by the Makati City
RTC, Branch 148 in SP Proc. Case No. M-6046.
X- - - - - - - - - - - - - - - - - - - - - - - - - -X
Factual Antecedents
G.R. No. 199238
On May 24, 2000, RCBC entered into a Share Purchase
Agreement5 (SPA) with Equitable-PCI Bank, Inc. (EPCIB),
BANCO DE ORO UNIBANK, INC., Petitioner, George L. Go and the individual shareholders6 of Bankard, Inc.
vs. (Bankard) for the sale to RCBC of 226,460,000 shares (Subject
COURT OF APPEALS and RCBC CAPITAL CORPORATION, Shares) of Bankard, constituting 67% of the latter’s capital
Respondents. stock. After completing payment of the contract price
(₱1,786,769,400), the corresponding deeds of sale over the
DECISION subject shares were executed in January 2001.

VILLARAMA, JR., J.:
Before the Court are two consolidated petitions separately filed
by the parties in an arbitration case administered by the
International Chamber of Commerce-International Court of
Arbitration (ICC-ICA) pursuant to the arbitration clause in their
contract.
The Case
In G.R. No. 196171, a petition for review under Rule 45 of the
1997 Rules of Civil Procedure, as amended, RCBC Capital
Corporation (RCBC) seeks to reverse the Court of Appeals (CA)
Decision1 dated December 23, 2010 in CA-G.R. SP No. 113525
The dispute between the parties arose sometime in May 2003
when RCBC informed EPCIB and the other selling
shareholdersof an overpayment of the subject shares, claiming
there was an overstatement of valuation of accounts amounting
to ₱478 million and that the sellers violated their
warrantyunder Section 5(g)of the SPA.7
As no settlement was reached, RCBC commenced arbitration
proceedings with the ICC-ICA in accordance with Section 10 of
the SPA which states:
Section 10. Arbitration
Should there be any dispute arising between the parties
relating to this Agreement including the interpretation or
performance hereof which cannot be resolved by agreement of
the parties within fifteen (15) days after written notice by a
party to another, such matter shall then be finally settled by
arbitration under the Rules of Conciliation and Arbitration of
the International Chamber of Commerce in force as of the time
of arbitration, by three arbitrators appointed in accordance
with such rules. The venue of arbitration shall be in Makati
City, Philippines and the arbitration proceedings shall be
conducted in the English language. Substantive aspects of the
dispute shall be settled by applying the laws of the Philippines.
The decision of the arbitrators shall be final and binding upon
the parties hereto and the expenses of arbitration (including
without limitation the award of attorney’s fees to the prevailing
party) shall be paid as the arbitrators shall determine.8
In its Request for Arbitration9 dated May 12, 2004, Claimant
RCBC charged Bankard with deviating from and contravening
generally accepted accounting principles and practices, due to
which the financial statements of Bankard prior to the stock
purchase were far from fair and accurate, and resulted in the
overpayment of ₱556 million. For this violation of
sellers’representations and warranties under the SPA, RCBC
sought its rescission, as well as payment of actual damages in
the amount of ₱573,132,110, legal interest on the purchase
price until actual restitution, moral damages and litigation and
attorney’s fees, with alternative prayer for award of damages in
the amount of at least ₱809,796,082 plus legal interest.
In their Answer,10 EPCIB, Go and the other selling individual
shareholders (Respondents) denied RCBC’s allegations
contending that RCBC’s claim is one for overpayment or price
reduction under Section 5(h) of the SPA which is already time-
barred, the remedy of rescission is unavailable, and even
assuming that rescission is permitted by the SPA, RCBC failed
to file its claim within a reasonable time. They further asserted
that RCBC is not entitled to its alternative prayer for damages,
being guilty of laches and failing to set out the details of the
breach as required under Section 7 of the SPA. A counterclaim
for litigation expenses and costs of arbitration in the amount of
US$300,000, as well as moral and exemplary damages, was
likewise raised by the Respondents.
RCBC submitted a Reply11 to the aforesaid Answer.
Subsequently, the Arbitration Tribunal was constituted. Mr.
Neil Kaplan was nominated by RCBC; Justice Santiago M.
Kapunan (a retired Member of this Court) was nominated by
the Respondents; and Sir Ian Barker was appointed by the ICC-
ICA as Chairman.
On August 13, 2004, the ICC-ICA informed the parties that they
are required to pay US$350,000 as advance on costs pursuant
to Article 30 (3) of the ICC Rules of Arbitration (ICC Rules).
RCBC paid its share of US$107,000, the balance remaining
after deducting payments of US$2,500 and US$65,000 it made
earlier. Respondents’ share of the advance on costs was thus
fixed at US$175,000.
Respondents filed an Application for Separate Advances on
Costs12 dated September 17, 2004 under Article 30(2) of the
ICC Rules, praying that the ICC fix separate advances on the
cost of the parties’ respective claims and counterclaims, instead
of directing them to share equally on the advance cost of
Claimant’s (RCBC) claim. Respondents deemed this advance
cost allocation to be proper, pointing out that the total amount
of RCBC’s claim is substantially higher – more than 40 times –
the total amount of their counterclaims, and that it would be
unfair to require them to share in the costs of arbitrating what
is essentially a price issue that is now time-barred under the
SPA.
On September 20, 2004, the ICC-ICA informed Respondents
that their application for separate advances on costs was
premature pending the execution of the Terms of Reference
(TOR).13 The TOR was settled by the parties and signed by the
Chairman and Members of the Arbitral Tribunal by October 11,
2004. On December 3, 2004,14 the ICC-ICA denied the
application for separate advances on costs and invited anew the
Respondents to pay its share in the advance on costs. However,
despite reminders from the ICC-ICA, Respondents refused to
pay their share in the advance cost fixed by the ICC-ICA. On
December 16, 2004, the ICC-ICA informed the parties that if
Respondents still failed to pay its share in the advance cost, it
would apply Article 30(4) of the ICC Rules and request the
Arbitration Tribunal to suspend its work and set a new time
limit, and if such requested deposit remains unpaid at the
expiry thereof, the counterclaims would be considered
withdrawn.15
In a fax-letter dated January 4, 2005, the ICC-ICA invited
RCBC to pay the said amount in substitution of Respondents.It
also granted an extension until January 17, 2005 within which
to pay the balance of the advance cost (US$175,000). RCBC
replied that it was not willing to shoulder the share of
Respondents in the advance on costs but nevertheless
requested for a clarification as to the effect of such refusal to
substitute for Respondents’share.16
On March 10, 2005, the ICC-ICA instructed the Arbitration
Tribunal to suspend its work and granted the parties a final
time-limit of 15 days to pay the balance of the advanceon costs,
failing which the claims shall be considered withdrawn, without
prejudice to their reintroduction at a later date in another
proceeding. The parties were advised that if any of them objects
to the measure, it should make a request in writing within such
period.17 For the same reason of non-receipt of the balance of
the advance cost, the ICC-ICA issued Procedural Order No. 3
for the adjournment of the substantive hearings and granting
the Respondents a two-month extension within which to
submit their brief of evidence and witnesses.
RCBC objected to the cancellation of hearings, pointing out that
Respondents have been given ample time and opportunity to
submit their brief of evidence and prepare for the hearings and
that their request for postponement serves no other purpose
but to delay the proceedings. It alleged that Respondents’
unjustified refusal to pay their share in the advance on costs
warrants a ruling that they have lost standing to participate in
the proceedings. It thus prayed that Respondents be declared
as in default, the substantive hearings be conducted as
originally scheduled, and RCBC be allowed to submit rebuttal
evidence and additional witness statements.18
On December 15, 2005, the ICC-ICA notified the parties of its
decision to increase the advances on costs from US$350,000 to
US$450,000 subject to later readjustments, and again invited
the Respondents to pay the US$100,000 increment within 30
days from notice. Respondents, however, refused to pay the
increment, insisting that RCBC should bear the cost of
prosecuting its own claim and that compelling the Respondents
to fund such prosecution is inequitable. Respondents reiterated
that it was willing to pay the advance on costs for their
counterclaim.19
On December 27, 2005, the ICC-ICA advised that it was not
possible to fix separate advances on costs as explained in its
December 3, 2004 letter, and again invited Respondents to pay
their share in the advance on costs. Respondents’ response
contained in the letter dated January 6, 2006 was still the
same: it was willing to pay only the separate advance on costs
of their counterclaim.20 In view of Respondents’ continuing
refusal to pay its equal share in the advance on costs and
increment, RCBC wrote the ICC-ICA stating that the latter
should compel the Respondents to pay as otherwise RCBC will
be prejudiced and the inaction of the ICC-ICA and the
Arbitration Tribunal will detract from the effectiveness of
arbitration as a means of settling disputes. In accordance with
Article 30(4) of the ICC Rules, RCBC reiterated its request to
declare the Respondents as in default without any personality
to participate in the proceedings not only with respect to their
counterclaims but also to the claim of RCBC.21
Chairman Ian Barker, in a letter dated January 25, 2006,
stated in part:
xxxx
2. The Tribunal has no power under the ICC Rules to
order the Respondents to pay the advance on costs
sought by the ICC or to give the Claimant any relief
against the Respondents’ refusal to pay. The ICC
Rules differ from, for example, the Rules of the LCIA
(Article 24.3) which enables a party paying the share of
costs which the other party has refused to pay, to
recover "that amount as a debt immediately due from the
defaulting party."
3. The only sanction under the ICC Rules is contained
within Article 30 (4). Where a request for an advance on
costs has not been complied with, after consultation
with the Tribunal, the Secretary-General may direct the
Tribunal to suspend its work. After expiry of a time
limit, all claims and counterclaims are then considered
as withdrawn. This provision cannot assist a Claimant
who is anxious to litigate its claim. Such a Claimant has
to pay the sums requested (including the Respondents’
share) if it wishes the arbitration to proceed.
4. It may be possible for a Claimant in the course of
the arbitral hearing (or whenever costs are being
considered by the Tribunal) to make submissions
based on the failure of the Respondents to pay their
share of the costs advance.What relief, if any, would
have to be then determined by the Tribunal after
having heard submissions from the Respondents.
5. I should be pleased if the Claimant will advise the
Tribunal of its intention in relation to the costs advance.
If the costs are not paid, the arbitration cannot
proceed.22 (Italics in the original; emphasis supplied)
RCBC paid the additional US$100,000 under the second
assessment to avert suspension of the Arbitration Tribunal’s
proceedings.
Upon the commencement of the hearings, the Arbitration
Tribunal decided that hearings will be initially confined to
issues of liability (liability phase) while the substantial issues
will be heard on a later date (quantum phase).
Meanwhile, EPCIB’s corporate name was officially changed to
Banco De Oro (BDO)-EPCIB after its merger with BDO was duly
approved by the Securities and Exchange Commission. As
such, BDO assumed all the obligations and liabilities of EPCIB
under the SPA.
On September 27, 2007, the Arbitration Tribunal rendered a
Partial Award23 (First Partial Award) in ICC-ICA Case No.
13290/MS/JB/JEM,as follows:
15 AWARD AND DIRECTIONS
15.1 The Tribunal makes the following declarations by
way of Partial Award:
(a) The Claimant’s claim is not time-barred
under the provisions of this SPA.
(b) The Claimant is not estopped by its conduct
or the equitable doctrine of laches from pursuing
its claim.
(c) As detailed in the Partial Award, the Claimant
has established the following breaches by the
Respondents of clause 5(g) of the SPA:
i) the assets, revenue and net worth of
Bankard were overstated by reason of its
 policy on and recognition of Late
Payment Fees;
ii) reported receivables were higher than
their realisable values by reason of the
‘bucketing’ method, thus overstating
Bankard’s assets; and
iii) the relevant Bankard statements were
inadequate and misleading in that their
disclosures caused readers to be
misinformed about Bankard’s
accounting policies on revenue and
receivables.
(d) Subject to proof of loss the Claimant is
entitled to damages for the foregoing breaches.
(e) The Claimant is not entitled to rescission of
the SPA.
(f) All other issues, including any issue
relating to costs, will be dealt with in a
further or final award.
15.2 A further Procedural Order will be necessary
subsequent to the delivery of this Partial Award to deal
with the determination of quantum and in particular,
whether there should be an Expert appointed by the
Tribunal under Article 20(4) of the ICC Rules to assist
the Tribunal in this regard.
15.3 This Award is delivered by a majority of the
Tribunal (Sir Ian Barker and Mr. Kaplan). Justice
Kapunan is unable to agree with the majority’s
conclusion on the claim of estoppel brought by the
Respondents.24 (Emphasis supplied)
On October 26, 2007, RCBC filed with the Makati City RTC,
Branch 148 (SP Proc. Case No. M-6046)amotion to confirm the
First Partial Award, while Respondents filed a motion to vacate
the same.
ICC-ICA by letter25 dated October 12, 2007 increased the
advance on costs from US$450,000 to US$580,000. Under this
third assessment, RCBC paid US$130,000 as its share on the
increment. Respondents declined to pay its adjudged total
share of US$290,000 on account of its filing in the RTC of a
motion to vacate the First Partial Award.26 The ICC-ICA then
invited RCBC to substitute for Respondents in paying the
balance of US$130,000 by December 21, 2007.27 RCBC
complied with the request, making its total payments in the
amount of US$580,000.28
While RCBC paid Respondents’ share in the increment
(US$130,000), it reiterated its plea that Respondents be
declared as in default and the counterclaimsdeemed as
withdrawn.29
Chairman Barker’s letter dated December 18, 2007 states in
part:
xxxx
8. Contrary to the Complainant’s view, the Tribunal has
no jurisdiction to declare that the Respondents have no
right to participate in the proceedings concerning the
claim. Article 30(4) of the ICC Rules applies only to any
counterclaim of the Respondents.
9. The Tribunal interprets the Claimant’s latest
letter as an application by the Claimant to the
Tribunal for the issue of a partial award against the
Respondents in respect of their failure to pay their
share of the ICC’s requests for advance on costs.
 10. I should be grateful if the Claimant would confirm
that this is the situation. If so, the Claimant should
propose a timetable for which written submissions
should be made by both parties. This is an application
which can be considered by the Tribunal on written
submissions.30 (Emphasis supplied)
RCBC, in a letter dated December 26, 2007, confirmed the
Arbitration Tribunal’s interpretation that it was applying for a
partial award against Respondents’ failure to pay their share in
the advance on costs.31
Meanwhile, on January 8, 2008, the Makati City RTC, Branch
148 issued an order in SP Proc. Case No. M-6046 confirming
the First Partial Award and denying Respondents’ separate
motions to vacate and to suspend and inhibit Barker and
Kaplan. Respondents’ motion for reconsideration was likewise
denied. Respondents directly filed with this Court a petition for
review on certiorari under Rule 45, docketed as G.R. No.
182248 and entitled Equitable PCI Banking Corporation v.
RCBC Capital Corporation.32 In our Decision dated December
18, 2008, we denied the petition and affirmed the RTC’s ruling
confirming the First Partial Award.
On January 18, 2008, the Arbitration Tribunal set a timetable
for the filing of submission by the parties on whether it should
issue a Second Partial Award in respect of the Respondents’
refusal to pay an advance on costs to the ICC-ICA.
In compliance, RCBC filed on February 7, 2008an Application
for Reimbursement of Advance on Costs Paid, praying for the
issuance of a partial award directing the Respondents to
reimburse its payment in the amount of US$290,000
representing Respondents’ share in the Advance on Costs and
to consider Respondents’ counterclaim for actual damages in
the amount of US$300,000, and moral and exemplary damages
as withdrawn for their failure to pay their equal share in the
advance on costs. RCBC invoked the plain terms of Article 30
(2) and (3) to stress the liability of Respondents to share equally
in paying the advance on costs where the Arbitration Tribunal
has fixed the same.33
Respondents, on the other hand, filed their Opposition34 to the
said application alleging that the Arbitration Tribunal has lost
its objectivity in an unnecessary litigation over the payment of
Respondents’ share in the advance costs. They pointed out that
RCBC’s letter merely asked that Respondents be declared as in
default for their failure to pay advance costs but the Arbitration
Tribunal, while denying the request offered an alternative to
RCBC: a Partial Award for Respondents’ share in the advance
costs even if it was clear from the language of RCBC’s December
11, 2007 letter that it had no intention of litigating for the
advance costs. Chairman Barker, after ruling earlier that it
cannot grant RCBC’s request to declare the Respondents as
having no right to participate in the proceedings concerning the
claim, interpreted RCBC’s letter as an application for the
Arbitration Tribunal to issue a partial award in respect of such
refusal of Respondents to pay their share in the advance on
costs, and subsequently directed the parties to make
submissions on the matter.Aside from violating their right to
due process and to be heard by an impartial tribunal,
Respondents also argued that in issuing the award for advance
cost, the ArbitrationTribunal decided an issue beyond the
terms of the TOR.
Respondents also emphasized that the parties agreed on a two-
part arbitration: the first part of the Tribunal’s proceedings
would determine Respondents’ liability, if any, for alleged
violation of Section 5(g) and (h) of the SPA; and the second part
of the proceedings would determine the amounts owed by one
party to another as a consequence of a finding of liability or
lack thereof. An award for "reimbursement of advances for
costs" clearly falls outside the scope of either proceedings.
Neither can the Tribunal justify such proceedings under Article
23 of the ICC Rules (Conservatory and Interim Measures)
because that provision does not contemplate an award for the
reimbursement of advance on costs in arbitration cases.
Respondents further asserted that since the advances on costs
have been paid by the Claimant (RCBC), the main claim and
counterclaim may both be heard by the Arbitration Tribunal.
In his letter dated March 13, 2008, Chairman Barker advised
the parties, as follows:
1. The Tribunal acknowledges the Respondents’
response to the Claimant’s application for a Partial
Award, based on the Respondents’ failure to pay their
share of the costs, as requested by the ICC.
2. The Tribunal notes that neither party has referred
to an article by Mat[t]hew Secomb on this very
subject which appears in the ICC Bulletin Vol. 14
No.1 (Spring 2003). To assist both sides and to ensure
that the Tribunal does not consider material on which
the parties have not been given an opportunity to
address, I attach a copy of this article, which also
contains reference to other scholarly works on the
subject.
3. The Tribunal will give each party seven days within
which to submit further written comments as a
consequence of being alerted to the above authorities.35
(Additional emphasis supplied)
The parties complied by submitting their respective comments.
RCBC refuted Respondents’ allegation of partiality on the part
of Chairman Barker and reiterated the prayer in its application
for reimbursement of advance on costs paid to the ICC-ICA.
RCBC contended that based on Mr. Secomb’s article, whether
the "contractual" or "provisional measures" approach is
applied, the Arbitration Tribunal is vested with jurisdiction and
authority to render an award with respect to said
reimbursement of advance cost paid by the non-defaulting
party.36
Respondents, on the other hand, maintained that RCBC’s
application for reimbursement of advance cost has no basis
under the ICC Rules. They contended that no manifest injustice
can be inferred from an act of a party paying for the share of
the defaulting party as this scenario is allowed by the ICC
Rules. Neither can a partial award for advance cost be justified
under the "contractual approach" since the matter of costs for
arbitration is between the ICC and the parties, not the
Arbitration Tribunal and the parties. An arbitration tribunal
can issue decisions on costs only for those costs not fixed by
the ICC.37
Respondents reiterated their position that Article 30(3)
envisions a situation whereby a party would refuse to pay its
share on the advance on costs and provides a remedy therefor
– the other party "shall be free to pay the whole of the advance
on costs." Such party’s reimbursement for payments of the
defaulting party’s share depends on the final arbitral award
where the party liable for costs would be determined. This is
the only remedy provided by the ICC Rules.38
On May 28, 2008, the Arbitration Tribunal rendered the Second
Partial Award,39 as follows:
7 AWARD
7.1 Having read and considered the submissions of both
parties, the Tribunal AWARDS, DECLARES AND ORDERS as
follows:
(a) The Respondents are forthwith to pay to the
Claimant the sum of US$290,000.
(b) The Respondents’ counterclaim is to be considered
as withdrawn.
(c) All other questions, including interest and costs, will
be dealt with in a subsequent award.40
The above partial award was received by RCBC and
Respondents on June 12, 2008.
On July 11, 2008, EPCIB filed a Motion to Vacate Second
Partial Award41 in the Makati City RTC, Branch 148 (SP Proc.
Case No. M-6046). On July 10, 2008, RCBC filed in the same
court a Motion to Confirm Second Partial Award.42
EPCIB raised the following grounds for vacating the Second
Partial Award: (a) the award is void ab initio having been
rendered by the arbitrators who exceeded their power or acted
without it; and (b) the award was procured by undue means or
issued with evident partiality or attended by misbehavior on the
part of the Tribunal which resulted in a material prejudice to
the rights of the Respondents. EPCIB argued that there is no
express agreement either in the SPA or the ICC Rules for such
right of reimbursement. There is likewise no implied agreement
because from the ICC Rules, the only inference is that the
parties agreed to await the dispositions on costs liability in the
Final Award, not before.
On the ruling of the Arbitration Tribunal that Respondents’
application for costs are not counterclaims, EPCIB asserted
that this is contrary to Philippine law as it is basic in our
jurisdiction that counterclaims for litigation expenses, moral
and exemplary damages are proper counterclaims, which rule
should be recognized in view of Section 10 of the SPA which
provides that "substantive aspects of the dispute shall be
settled by applying the laws of the Philippines." Finally, EPCIB
takes issue with Chairman Barker’s interpretation of RCBC’s
December 11, 2007 letter as an application for a partial award
for reimbursement of the substituted payments. Such conduct
of Chairman Barker is prejudicial and proves his evident
partiality in favor of RCBC.
RCBC filed its Opposition,43 asserting that the Arbitration
Tribunal had jurisdiction to consider Respondents’
counterclaim as withdrawn, the same having been abandoned
by not presenting any computation or substantiation by
evidence, their only computation relates only to attorney’s fees
which are simply cost of litigation properly brought at the
conclusion of the arbitration. It also pointed out that the
Arbitration Tribunal was empowered by the parties’ arbitral
clause to determine the manner of payment of expenses of
arbitration, and that the Second Partial Award was based on
authorities and treatiseson the mandatory and contractual
nature of the obligation to pay advances on costs.
In its Reply,44 EPCIB contended that RCBC had the option to
agree to its proposal for separate advances on costs but decided
against it; RCBC’s act of paying the balance of the advance cost
in substitution of EPCIB was for the purpose of having EPCIB
defaulted and the latter’s counterclaim withdrawn. Having
agreed to finance the arbitration until its completion, RCBC is
not entitled to immediate reimbursement of the amount it paid
in substitution of EPCIB under an interim award, as its right to
a partial or total reimbursement will have to be determined
under the final award. EPCIB asserted that the matter of
reimbursement of advance cost paid cannot be said to have
properly arisen during arbitration. EPCIB reiterated that
Chairman Barker’s interpretation of RCBC’s December 11,
2007 letter as an application for interim award for
reimbursement is tantamount to a promise that the award will
be issued in due course.
After a further exchange of pleadings, and other motions
seeking relief from the court in connection with the arbitration
proceedings (quantum phase), the Makati City RTC, Branch
148 issued the Order45 dated June 24, 2009 confirming the
Second Partial Award and denying EPCIB’s motion to vacate
the same. Said court held that since the parties agreed to
submit any dispute under the SPA to arbitration and to be
bound by the ICC Rules, they are also bound to pay in equal
shares the advance on costs as provided in Article 30 (2) and
(3). It noted that RCBC was forced to pay the share of EPCIB in
substitution of the latter to prevent a suspension of the
arbitration proceedings, while EPCIB’s non-payment seems
more like a scheme to delay such proceedings. On the
Arbitration Tribunal’s ruling on EPCIB’s counterclaim, no error 15 AWARD
was committed in considering it withdrawn for failure of EPCIB
to quantify and substantiate it with supporting evidence. As to 15.1 The Tribunal by a majority (Sir Ian Barker & Mr. Kaplan)
EPCIB’s claim for attorney’s fees, the RTC agreed that these awards, declares and adjudges as follows:
should be brought only at the close of arbitration.
(a) the Respondents are to pay damages to the Claimant
EPCIB moved to reconsider the June 24, 2009 Order and for for breach of the sale and purchase agreement for
the voluntary inhibition of the Presiding Judge (Judge Oscar B. Bankard shares in the sum of ₱348,736,920.29.
Pimentel) on the ground that EPCIB’s new counsel represented
another client in another case before him in which said counsel (b) The Respondents are to pay to the Claimant the sum
assailed his conduct and had likewise sought his inhibition. of US$880,000 in respect of the costs of the arbitration
Both motions were denied in the Joint Order46 dated March as fixed by the ICC Court.
23, 2010.
(c) The Respondents are to pay to the Claimant the sum
On April 14, 2010, EPCIB filed in the CA a petition for review47 of US$582,936.56 for the fees and expenses of Mr. Best.
with application for TRO and/or writ of preliminary injunction
(CA-G.R. SP No. 113525) in accordance with Rule 19, Section
4 of the Special Rules of Court on Alternative Dispute (d) The Respondents are to pay to the Claimant their
expenses of the arbitration as follows:
Resolution48 (Special ADR Rules). EPCIB assailed the Makati
City RTC, Branch 148 in denying its motion to vacate the
Second Partial Award despite (a) said award having been (i) Experts’ fees ₱7,082,788.55
rendered in excess of jurisdiction or power, and contrary to
public policy; (b) the fact that it was issued with evident (ii) Costs of without prejudice meeting
partiality and serious misconduct; (c) the award deals with a ₱22,571.45
dispute not contemplated within the terms of submission to
arbitration or beyond the scope of such submission, which (iii) Costs of arbitration hearings ₱553,420.66
therefore ought to be vacated pursuant to Article 34 of the
UNCITRAL Model Law; and (d) the Presiding Judge having (iv) Costs of transcription service ₱483,597.26
exhibited bias and prejudice against BDO and its counsel as Total ₱8,144,377.62
confirmed by his pronouncements in the Joint Order dated
March 23, 2010 in which, instead of recusing himself, he
(e) The Respondents are to pay to the Claimant the sum
imputed malice and unethical conduct in the entry of
of ₱7,000,000 for party-and-party legal costs.
appearance of Belo Gozon Elma Asuncion and Lucila Law
Offices in SP Proc. Case No. M-6046, which warrants his
voluntary inhibition. (f) The Counterclaims of the Respondents are all
dismissed.
Meanwhile, on June 16, 2010, the Arbitration Tribunal issued
the Final Award,49 as follows: (g) All claims of the Claimant are dismissed, other than
those referred to above.
15.2 Justice Kapunan does not agree with the majority of the
members of the Tribunal and has issued a dissenting opinion.
He has refused to sign this Award.50
On July 1, 2010 BDO filed in the Makati City RTC a Petition to
Vacate Final Award Ad Cautelam,51 docketed as SP Proc. Case
No. M-6995, which was raffled to Branch 65.
On July 28, 2010, RCBC filed with the Makati City RTC, Branch
148 (SP Proc. Case No. M-6046) a Motion to Confirm Final
Award.52 BDO filed its Opposition With Motion to Dismiss53
on grounds that a Petition to Vacate Final Award Ad
Cautelamhad already been filed in SP Proc. Case No. M-6995.
BDO also pointed out that RCBC did not file the required
petition but instead filed a mere motion which did not go
through the process of raffling to a proper branch of the RTC of
Makati City and the payment of the required docket/filing fees.
Even assuming that Branch 148 has jurisdiction over RCBC’s
motion to confirm final award, BDO asserted that RCBC had
filed before the Arbitration Tribunal an Application for
Correction and Interpretation of Award under Article 29 of the
ICC Rules, which is irreconcilable with its Motion to Confirm
Final Award before said court. Hence, the Motion to Confirm
Award was filed precipitately.
On August 18, 2010, RCBC filed an Omnibus Motion in SP
Proc. Case No. M-6995 (Branch 65) praying for the dismissal of
BDO’s Petition to Vacate Final Award or the transfer of the
same to Branch 148 for consolidation with SP Proc. Case No.
M-6046. RCBC contended that BDO’s filing of its petition with
another court is a blatant violation of the Special ADR Rules
and is merely a subterfuge to commit forum-shopping. BDO
filed its Opposition to the Omnibus Motion.54
On October 28, 2010, Branch 65 issued a Resolution55
denying RCBC’s omnibus motion and directing the service of
the petition to RCBC for the latter’s filing of a comment thereon.
RCBC’s motion for reconsideration was likewise denied in the
said court’s Order dated December 15, 2010. RCBC then filed
its Opposition to the Petition to Vacate Final Award Ad
Cautelam.
Meanwhile, on November 10, 2010, Branch 148 (SP Proc. Case
No. M-6046) issued an Order56 confirming the Final Award
"subject to the correction/interpretation thereof by the Arbitral
Tribunal pursuant to the ICC Rules and the UNCITRAL Model
Law," and denying BDO’s Opposition with Motion to Dismiss.
On December 30, 2010, George L. Go, in his personal capacity
and as attorney-in-fact of the other listed shareholders of
Bankard, Inc. in the SPA (Individual Shareholders), filed a
petition in the CA, CA-G.R. SP No. 117451, seeking to set aside
the above-cited November 10, 2010 Order and to enjoin Branch
148 from further proceeding in SP Proc. Case No. M-6046. By
Decision57 dated June 15, 2011, the CA dismissed the said
petition. Their motion for reconsideration of the said decision
was likewise denied by the CA in its Resolution58 dated
December 14, 2011.
On December 23, 2010, the CA rendered its Decision in CA-
G.R. SP No. 113525, the dispositive portion of which states:
WHEREFORE, premises considered, the following are hereby
REVERSED and SET ASIDE:
1. the Order dated June 24, 2009 issued in SP Proc.
Case No. M-6046 by the Regional Trial Court of Makati
City, Branch 148, insofar as it denied the Motion to
Vacate Second Partial Award dated July 8, 2008 and
granted the Motion to Confirm Second Partial Award
dated July 10, 2008;
2. the Joint Order dated March 23, 2010 issued in SP
Proc. Case No. M-6046 by the Regional Trial Court of
Makati City, Branch 148, insofar as it denied the Motion
For Reconsideration dated July 28, 2009 relative to the
 motions concerning the Second Partial Award
immediately mentioned above; and
3. the Second Partial Award dated May 28, 2008 issued
in International Chamber of Commerce Court of
Arbitration Reference No. 13290/MS/JB/JEM.
SO ORDERED.59
RCBC filed a motion for reconsideration but the CA denied the
same in its Resolution60 dated March 16, 2011. On April 6,
2011, it filed a petition for review on certiorari in this Court
(G.R. No. 196171).
On February 25, 2011, Branch 65 rendered a Decision61 in SP
Proc. Case No. M-6995, as follows:
WHEREFORE, premises considered, the Final Award dated
June 16, 2010 in ICC Ref. No. 13290/MS/JB/JEM is hereby
VACATED with cost against the respondent.
SO ORDERED.62
In SP Proc. Case No. M-6046, Branch 148 issued an Order63
dated August 8, 2011 resolving the following motions: (1)
Motion for Reconsideration filed by BDO, Go and Individual
Shareholders of the November 10, 2010 Order confirming the
Final Award; (2) RCBC’s Omnibus Motion to expunge the
motion for reconsideration filed by Go and Individual
Shareholders, and for execution of the Final Award; (3) Motion
for Execution filed by RCBC against BDO; (4) BDO’s Motion for
Leave to File Supplement to the Motion for Reconsideration;
and (5) Motion for Inhibition filed by Go and Individual
Shareholders. Said Order decreed:
WHEREFORE, premises considered, it is hereby ORDERED, to
wit:
1. Banco De Oro’s Motion for Reconsideration, Motion
for Leave to File Supplement to Motion for
Reconsideration, and Motion to Inhibit are DENIED for
lack of merit.
2. RCBC Capital’s Motion to Expunge, Motion to
Execute against Mr. George L. Go and the Bankard
Shareholders, and the Motion to Execute against Banco
De Oro are hereby GRANTED.
3. The damages awarded to RCBC Capital Corporation
in the amount of Ph₱348,736,920.29 is subject to an
interest of 6% per annum reckoned from the date of
RCBC Capital’s extra-judicial demand or from May 5,
2003 until the confirmation of the Final Award.
Likewise, this compounded amount is subject to 12%
interest per annum from the date of the confirmation of
the Final Award until its satisfaction. The costs of the
arbitration amounting to US$880,000.00, the fees and
expenses of Mr. Best amounting to US$582,936.56, the
Claimant’s expenses of the arbitration amounting to
Ph₱8,144,377.62, and the party-and-party legal costs
amounting to Ph₱7,000,000.00 all ruled in favor of
RCBC Capital Corporation in the Final Award of the
Arbitral Tribunal dated June 16, 2010 are subject to
12% legal interest per annum, also reckoned from the
date of the confirmation of the Final Award until its
satisfaction.
4. Pursuant to Section 40 of R.A. No. 9285, otherwise
known as the Alternative Dispute Resolution Act of
2004 in relation to Rule 39 of the Rules of Court, since
the Final Award have been confirmed, the same shall be
enforced in the same manner as final and executory
decisions of the Regional Trial Court, let a writ of
execution be issued commanding the Sheriff to enforce
this instant Order confirming this Court’s Order dated
November 10, 2010 that judicially confirmed the June
16, 2010 Final Award.
SO ORDERED.64
Immediately thereafter, RCBC filed an Urgent Motion for
Issuance of a Writ of Execution.65 On August 22, 2011, after
approving the execution bond, Branch 148 issued a Writ of
Execution for the implementation of the said court’s "Order
dated August 8, 2011 confirming the November 10, 2010 Order
that judicially confirmed the June 16, 2010 Final Award x x
x."66
BDO then filed in the CA, a "Petition for Review (With
Application for a Stay Order or Temporary Restraining Order
and/or Writ of Preliminary Injunction," docketed as CA-G.R. SP
No. 120888. BDO sought to reverse and set aside the Orders
dated November 10, 2010 and August 8, 2011, and any writ of
execution issued pursuant thereto, as well as the Final Award
dated June 16, 2010 issued by the Arbitration Tribunal.
In its Urgent Omnibus Motion67 to resolve the application for
a stay order and/or TRO/writ of preliminary injunction, and to
quash the Writ of Execution dated August 22, 2011 and lift the
Notices of Garnishment dated August 22, 2011, BDO argued
that the assailed orders of execution (Writ of Execution and
Notice of Garnishment) were issued with indecent haste and
despite the non-compliance with the procedures in Special ADR
Rules of the November 10, 2010 Order confirming the Final
Award. BDO was not given sufficient time to respond to the
demand for payment or to elect the method of satisfaction of
the judgment debt or the property to be levied upon. In any
case, with the posting of a bond by BDO, Branch 148 has no
jurisdiction to implement the appealed orders as it would pre-
empt the CA from exercising its review under Rule 19 of the
Special ADR Rules after BDO had perfected its appeal. BDO
stressed that the bond posted by RCBC was for a measly sum
of ₱3,000,000.00 to cause execution pending appeal of a
monetary award that may reach ₱631,429,345.29. RCBC also
failed to adduce evidence of "good cause" or "good reason" to
justify discretionary execution under Section 2(a), Rule 39 of
the Rules of Court.
BDO further contended that the writ of execution should be
quashed for having been issued with grave abuse of discretion
amounting to lack or excess of jurisdiction as Branch 148
modified the Final Award at the time of execution by imposing
the payment of interests though none was provided therein nor
in the Order confirming the same.
During the pendency of CA-G.R. SP No. 120888, Branch 148
continued with execution proceedings and on motion by RCBC
designated/deputized additional sheriffs to replace Sheriff
Flora who was supposedly physically indisposed.68 These
court personnel went to the offices/branches of BDO
attempting to serve notices of garnishment and to levy the
furniture, fixtures and equipment.
On September 12, 2011, BDO filed a Very Urgent Motion to Lift
Levy and For Leave to Post Counter-Bond69 before Branch 148
praying for the lifting of the levy of BDO Private Bank, Inc.
(BPBI) shares and the cancellation of the execution sale thereof
scheduled on September 15, 2011, which was set for hearing
on September 14, 2011. BDO claimed that the levy was invalid
because it was served by the RTC Sheriffs not to the authorized
representatives of BPBI, as provided under Section 9(b), Rule
39 in relation to Section 7, Rule 57 of the Rules of Court stating
that a notice of levy on shares of stock must be served to the
president or managing agent of the company which issued the
shares. However, BDO was advised by court staff that Judge
Sarabia was on leave and the case could not be set for hearing.
In its Opposition to BDO’s application for injunctive relief,
RCBC prayed for its outright denial as BDO’s petition raises
questions of fact and/or law which call for the CA to substitute
its judgment with that of the Arbitration Tribunal, in patent
violation of applicable rules of procedure governing domestic
arbitration and beyond the appellate court’s jurisdiction. RCBC
asserted that BDO’s application has become moot and
academic as the writ of execution was already implemented
and/or enforced. It also contended that BDO has no clear and
unmistakable right to warrant injunctive relief because the
issue of jurisdiction was already ruled upon in CA-G.R. SP No.
117451 which dismissed the petition filed by Go and the
Individual Shareholders of Bankard questioning the authority
of Branch 148 over RCBC’s motion to confirm the Final Award
despite the earlier filing by BDO in another branch of the RTC
(Branch 65) of a petition to vacate the said award.
On September 13, 2011, BDO, to avert the sale of the BPBI
shares scheduled on September 15, 2011 and prevent further
disruption in the operations of BDO and BPBI, paid under
protest by tendering a Manager’s Check in the amount of
₱637,941,185.55, which was accepted by RCBC as full and
complete satisfaction of the writ of execution. BDO manifested
before Branch 148 that such payment was made without
prejudice to its appeal before the CA.70
On even date, the CA denied BDO’s application for a stay order
and/or TRO/preliminary injunction for non-compliance with
Rule 19.25 of the Special ADR Rules. The CA ruled that BDO
failed to show the existence of a clear right to be protected and
that the acts sought to be enjoined violated any right. Neither
was BDO able to demonstrate that the injury to be suffered by
it is irreparable or not susceptible to mathematical
computation.
BDO did not file a motion for reconsideration and directly filed
with this Court a petition for certiorari with urgent application
for writ of preliminary mandatory injunction (G.R. No.
199238).
The Petitions
In G.R. No. 196171, RCBC set forth the following grounds for
the reversal of the CA Decision dated December 23, 2010:
I.
THE COURT OF APPEALS ACTED CONTRARY TO LAW
AND PRIOR RULINGS OF THIS HONORABLE COURT
AND COMMITTED REVERSIBLE ERROR IN VACATING
THE SECOND PARTIAL AWARD ON THE BASIS OF
CHAIRMAN BARKER’S ALLEGED PARTIALITY, WHICH
IT CLAIMS IS INDICATIVE OF BIAS CONSIDERING
THAT THE ALLEGATIONS CONTAINED IN
BDO/EPCIB’S PETITION FALL SHORT OF THE
JURISPRUDENTIAL REQUIREMENT THAT THE SAME
BE SUPPORTED BY CLEAR AND CONVINCING
EVIDENCE.
II.
THE COURT OF APPEALS ACTED CONTRARY TO LAW
AND PRIOR RULINGS OF THIS HONORABLE COURT
AND COMMITTED REVERSIBLE ERROR WHEN IT
REVERSED THE ARBITRAL TRIBUNAL’S FINDINGS OF
FACT AND LAW IN THE SECOND PARTIAL AWARD IN
PATENT CONTRAVENTION OF THE SPECIAL ADR
RULES WHICH EXPRESSLY PROHIBITS THE COURTS,
IN AN APPLICATION TO VACATE AN ARBITRAL
AWARD, FROM DISTURBING THE FINDINGS OF FACT
AND/OR INTERPRE[TA]TION OF LAW OF THE
ARBITRAL TRIBUNAL.71
BDO raises the following arguments in G.R. No. 199238:
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN PERFUNCTORILY DENYING PETITIONER
BDO’S APPLICATION FOR STAY ORDER, AND/OR
TEMPORARY RESTRAINING ORDER AND PRELIMINARY
INJUNCTION DESPITE THE EXISTENCE AND CONCURRENCE
OF ALL THE ELEMENTS FOR THE ISSUANCE OF SAID
PROVISIONAL RELIEFS
 A. PETITIONER BDO HAS CLEAR AND
UNMISTAKABLE RIGHTS TO BE PROTECTED BY THE
ISSUANCE OF THE INJUNCTIVE RELIEF PRAYED
FOR, WHICH, HOWEVER, WERE DISREGARDED BY
PUBLIC RESPONDENT WHEN IT DENIED PETITIONER
BDO’S PRAYER FOR ISSUANCE OF A STAY ORDER
AND/OR TRO
B. PETITIONER BDO’S RIGHT TO DUE PROCESS AND
EQUAL PROTECTION OF THE LAW WAS GROSSLY
VIOLATED BY THE RTC-MAKATI CITY BRANCH 148,
THE DEPUTIZED SHERIFFS AND RESPONDENT RCBC
CAPITAL, WHICH VIOLATION WAS AIDED BY PUBLIC
RESPONDENT’S INACTION ON AND EVENTUAL
DENIAL OF THE PRAYER FOR STAY ORDER AND/OR
TRO
C. DUE TO THE ACTS AND ORDERS OF RTC BRANCH
148, PETITIONER BDO SUFFERED IRREPARABLE
DAMAGE AND INJURY, AND THERE WAS DIRE AND
URGENT NECESSITY FOR THE ISSUANCE OF THE
INJUNCTIVE RELIEF PRAYED FOR WHICH PUBLIC
RESPONDENT DENIED IN GRAVE ABUSE OF
DISCRETION72
Essentially, the issues to be resolved are: (1) whether there is
legal ground to vacate the Second Partial Award; and (2)
whether BDO is entitled to injunctive relief in connection with
the execution proceedings in SP Proc. Case No. M-6046.
In their TOR, the parties agreed on the governing law and rules
as follows:
Laws to be Applied
13 The Tribunal shall determine the issues to be resolved in
accordance with the laws of the Republic of the Philippines.
Procedure to be Applied
14 The proceedings before the Tribunal shall be governed by
the ICC Rules of Arbitration (1 January 1998) and the law
currently applicable to arbitration in the Republic of the
Philippines.73
As stated in the Partial Award dated September 27, 2007,
although the parties provided in Section 10 of the SPA that the
arbitration shall be conducted under the ICC Rules, it was
nevertheless arbitration under Philippine law since the parties
are both residents of this country. The provisions of Republic
Act No. 87674 (RA 876),as amended by Republic Act No.
928575 (RA 9285)principally applied in the arbitration between
the herein parties.76
The pertinent provisions of R.A. 9285 provide:
SEC. 40. Confirmation of Award. – The confirmation of a
domestic arbitral award shall be governed by Section 23 of R.A.
876.
A domestic arbitral award when confirmed shall be enforced in
the same manner as final and executory decisions of the
Regional Trial Court.
The confirmation of a domestic award shall be made by the
regional trial court in accordance with the Rules of Procedure
to be promulgated by the Supreme Court.
xxxx
SEC. 41. Vacation Award. – A party to a domestic arbitration
may question the arbitral award with the appropriate regional
trial court in accordance with the rules of procedure to be
promulgated by the Supreme Court only on those grounds
enumerated in Section 25 of Republic Act No. 876. Any other
ground raised against a domestic arbitral award shall be
disregarded by the regional trial court.
Rule 11.4 of the Special ADR Rules sets forth the grounds for
vacating an arbitral award:
Rule 11.4. Grounds.—(A) To vacate an arbitral award. – The
arbitral award may be vacated on the following grounds:
a. The arbitral award was procured through corruption,
fraud or other undue means;
b. There was evident partiality or corruption in the
arbitral tribunal or any of its members;
c. The arbitral tribunal was guilty of misconduct or any
form of misbehavior that has materially prejudiced the
rights of any party such as refusing to postpone a
hearing upon sufficient cause shown or to hear evidence
pertinent and material to the controversy;
d. One or more of the arbitrators was disqualified to act
as such under the law and willfully refrained from
disclosing such disqualification; or
e. The arbitral tribunal exceeded its powers, or so
imperfectly executed them, such that a complete, final
and definite award upon the subject matter submitted
to them was not made.
The award may also be vacated on any or all of the following
grounds:
a. The arbitration agreement did not exist, or is invalid
for any ground for the revocation of a contract or is
otherwise unenforceable; or
b. A party to arbitration is a minor or a person judicially
declared to be incompetent.
xxxx
In deciding the petition to vacate the arbitral award, the court
shall disregard any other ground than those enumerated above.
(Emphasis supplied)
Judicial Review
At the outset, it must be stated that a review brought to this
Court under the Special ADR Rules is not a matter of right.
Rule 19.36 of said Rules specified the conditions for the
exercise of this Court’s discretionary review of the CA’s
decision.
Rule 19.36.Review discretionary.—A review by the Supreme
Court is not a matter of right, but of sound judicial discretion,
which will be granted only for serious and compelling reasons
resulting in grave prejudice to the aggrieved party. The
following, while neither controlling nor fully measuring the
court’s discretion, indicate the serious and compelling, and
necessarily, restrictive nature of the grounds that will warrant
the exercise of the Supreme Court’s discretionary powers, when
the Court of Appeals:
a. Failed to apply the applicable standard or test for
judicial review prescribed in these Special ADR
Rules in arriving at its decision resulting in substantial
prejudice to the aggrieved party;
b. Erred in upholding a final order or decision despite
the lack of jurisdiction of the court that rendered such
final order or decision;
 c. Failed to apply any provision, principle, policy or rule
contained in these Special ADR Rules resulting in
substantial prejudice to the aggrieved party; and
d. Committed an error so egregious and harmful to a
party as to amount to an undeniable excess of
jurisdiction.
The mere fact that the petitioner disagrees with the Court of
Appeals’ determination of questions of fact, of law or both
questions of fact and law, shall not warrant the exercise of the
Supreme Court’s discretionary power. The error imputed to
the Court of Appeals must be grounded upon any of the
above prescribed grounds for review or be closely analogous
thereto.
A mere general allegation that the Court of Appeals has
committed serious and substantial error or that it has acted
with grave abuse of discretion resulting in substantial prejudice
to the petitioner without indicating with specificity the nature
of such error or abuse of discretion and the serious prejudice
suffered by the petitioner on account thereof, shall constitute
sufficient ground for the Supreme Court to dismiss outright the
petition. (Emphasis supplied)
The applicable standard for judicial review of arbitral awards in
this jurisdiction is set forth in Rule 19.10 which states:
Rule 19.10. Rule on judicial review on arbitration in the
Philippines.--As a general rule, the court can only vacate or set
aside the decision of an arbitral tribunal upon a clear showing
that the award suffers from any of the infirmities or grounds
for vacating an arbitral award under Section 24 of Republic
Act No. 876 or under Rule 34 of the Model Law in a domestic
arbitration, or for setting aside an award in an international
arbitration under Article 34 of the Model Law, or for such other
grounds provided under these Special Rules.
xxxx
The court shall not set aside or vacate the award of the arbitral
tribunal merelyon the ground that the arbitral tribunal
committed errors of fact, or of law, or of fact and law, as the
court cannot substitute its judgment for that of the arbitral
tribunal. (Emphasis supplied)
The above rule embodied the stricter standard in deciding
appeals from arbitral awards established by jurisprudence. In
the case of Asset Privatization Trust v. Court of Appeals,77 this
Court held:
As a rule, the award of an arbitrator cannot be set aside for
mere errors of judgment either as to the law or as to the
facts.Courts are without power to amend or overrule merely
because of disagreement with matters of law or facts
determined by the arbitrators.They will not review the findings
of law and fact contained in an award, and will not undertake
to substitute their judgment for that of the arbitrators, since
any other rule would make an award the commencement, not
the end, of litigation.Errors of law and fact, or an erroneous
decision of matters submitted to the judgment of the
arbitrators, are insufficient to invalidate an award fairly and
honestly made. Judicial review of an arbitration is, thus, more
limited than judicial review of a trial.78
Accordingly, we examine the merits of the petition before us
solely on the statutory ground raised for vacating the Second
Partial Award: evident partiality, pursuant to Section 24 (b) of
the Arbitration Law (RA 876) and Rule 11.4 (b) of the Special
ADR Rules.
Evident Partiality
Evident partiality is not defined in our arbitration laws. As one
of the grounds for vacating an arbitral award under the Federal
Arbitration Act (FAA) in the United States (US), the term
"encompasses both an arbitrator’s explicit bias toward one
party and an arbitrator’s inferred bias when an arbitrator fails
to disclose relevant information to the parties."79
From a recent decision80 of the Court of Appeals of Oregon, we
quote a brief discussion of the common meaning of evident
partiality:
To determine the meaning of "evident partiality," we begin with
the terms themselves. The common meaning of "partiality" is
"the inclination to favor one side."Webster’s Third New Int'l
Dictionary 1646 (unabridged ed 2002); see also id. (defining
"partial" as "inclined to favor one party in a cause or one side
of a question more than the other: biased, predisposed"
(formatting in original)). "Inclination," in turn, means "a
particular disposition of mind or character : propensity, bent"
or "a tendency to a particular aspect, state, character, or
action."Id. at 1143 (formatting in original); see also id. (defining
"inclined" as "having inclination, disposition, or tendency").
The common meaning of "evident" is "capable of being perceived
esp[ecially] by sight : distinctly visible : being in evidence :
discernable[;] * * * clear to the understanding : obvious,
manifest, apparent."Id. at 789 (formatting in original); see also
id. (stating that synonyms of "evident" include "apparent,
patent, manifest, plain, clear, distinct, obvious, [and] palpable"
and that, "[s]ince evident rather naturally suggests
evidence, it may imply the existence of signs and
indications that must lead to an identification or inference"
(formatting in original)). (Emphasis supplied)
Evident partiality in its common definition thus implies "the
existence of signs and indications that must lead to an
identification or inference" of partiality.81 Despite the
increasing adoption of arbitration in many jurisdictions, there
seems to be no established standard for determining the
existence of evident partiality. In the US, evident partiality
"continues to be the subject of somewhat conflicting and
inconsistent judicial interpretation when an arbitrator’s failure
to disclose prior dealings is at issue."82
The first case to delineate the standard of evident partiality in
arbitration proceedings was Commonwealth Coatings Corp. v.
Continental Casualty Co., et al.83 decided by the US Supreme
Court in 1968. The Court therein addressed the issue of
whether the requirement of impartiality applies to an
arbitration proceeding. The plurality opinion written by Justice
Black laid down the rule that the arbitrators must disclose to
the parties "any dealings that might create an impression of
possible bias,"84 and that underlying such standard is "the
premise that any tribunal permitted by law to try cases and
controversies not only must be unbiased but also must avoid
even the appearance of bias."85 In a separate concurring
opinion, Justice White joined by Justice Marshall, remarked
that "[t]he Court does not decide today that arbitrators are to
be held to the standards of judicial decorum of Article III judges,
or indeed of any judges."86 He opined that arbitrators should
not automatically be disqualified from an arbitration
proceeding because of a business relationship where both
parties are aware of the relationship in advance, or where the
parties are unaware of the circumstances but the relationship
is trivial. However, in the event that the arbitrator has a
"substantial interest" in the transaction at hand, such
information must be disclosed.
Subsequent cases decided by the US Court of Appeals Circuit
Courts adopted different approaches, given the imprecise
standard of evident partiality in Commonwealth Coatings.
In Morelite Construction Corp. v. New York District Council
Carpenters Benefit Funds,87 the Second Circuit reversed the
judgment of the district court and remanded with instructions
to vacate the arbitrator’s award, holding that the existence of a
father-son relationship between the arbitrator and the
president of appellee union provided strong evidence of
partiality and was unfair to appellant construction contractor.
After examining prior decisions in the Circuit, the court
concluded that –
x x x we cannot countenance the promulgation of a standard
for partiality as insurmountable as "proof of actual bias" -- as
the literal words of Section 10 might suggest. Bias is always
difficult, and indeed often impossible, to "prove." Unless an
arbitrator publicly announces his partiality, or is overheard in
a moment of private admission, it is difficult to imagine how
"proof" would be obtained. Such a standard, we fear,
occasionally would require that we enforce awards in situations
that are clearly repugnant to our sense of fairness, yet do not
yield "proof" of anything.
If the standard of "appearance of bias" is too low for the
invocation of Section 10, and "proof of actual bias" too
high, with what are we left? Profoundly aware of the competing
forces that have already been discussed, we hold that "evident
partiality" within the meaning of 9 U.S.C. § 10 will be found
where a reasonable person would have to conclude that an
arbitrator was partial to one party to the arbitration.x x x88
(Emphasis supplied)
In Apperson v. Fleet Carrier Corporation,89 the Sixth Circuit
agreed with the Morelite court’s analysis, and accordingly held
that to invalidate an arbitration award on the grounds of bias,
the challenging party must show that "a reasonable person
would have to conclude that an arbitrator was partial" to the
other party to the arbitration.
This "myriad of judicial interpretations and approaches to
evident partiality" resulted in a lack of a uniform standard,
leaving the courts "to examine evident partiality on a case-by-
case basis."90 The case at bar does not present a non-
disclosure issue but conduct allegedly showing an arbitrator’s
partiality to one of the parties.
EPCIB/BDO, in moving to vacate the Second Partial Award
claimed that the Arbitration Tribunal exceeded its powers in
deciding the issue of advance cost not contemplated in the TOR,
and that Chairman Barker acted with evident partiality in
making such award. The RTC held that BDO failed to
substantiate these allegations. On appeal, the CA likewise
found that the Arbitration Tribunal did not go beyond the
submission of the parties because the phrasing of the scope of
the agreed issues in the TOR ("[t]he issues to be determined by
the Tribunal are those issues arising from the said Request for
Arbitration, Answer and Reply and such other issues as may
properly arise during the arbitration")is broad enough to
accommodate a finding on the liability and the repercussions
of BDO’s failure to share in the advances on costs. Section 10
of the SPA also gave the Arbitration Tribunal authority to decide
how the costs should be apportioned between them.
However, the CA found factual support in BDO’s charge of
partiality, thus:
On the issue on evident partiality, the rationale in the American
case of Commonwealth Coatings Corp. v. Continental Cas. Co.
appears to be very prudent. In Commonwealth, the United
States Supreme Court reasoned that courts "should…be even
more scrupulous to safeguard the impartiality of arbitrators
than judges, since the former have completely free rein to
decide the law as well as the facts, and are not subject to
appellate review" in general. This taken into account, the Court
applies the standard demanded of the conduct of
magistrates by analogy. After all, the ICC Rules require that
an arbitral tribunal should act fairly and impartially. Hence, an
arbitrator’s conduct should be beyond reproach and
suspicion. His acts should be free from the appearances of
impropriety.
An examination of the circumstances claimed to be illustrative
of Chairman Barker’s partiality is indicative of bias. Although
RCBC had repeatedly asked for reimbursement and the
withdrawal of BDO’s counterclaims prior to Chairman Barker’s
December 18, 2007 letter, it is baffling why it is only in the
said letter that RCBC’s prayer was given a complexion of
being an application for a partial award. To the Court, the
said letter signaled a preconceived course of action that
the relief prayed for by RCBC will be granted.
That there was an action to be taken beforehand is confirmed
by Chairman Barker’s furnishing the parties with a copy of the
Secomb article. This article ultimately favored RCBC by
advancing its cause. Chairman Barker makes it appear that
he intended good to be done in doing so but due process
dictates the cold neutrality of impartiality. This means that
"it is not enough…[that] cases [be decided] without bias and
favoritism. Nor is it sufficient that…prepossessions [be rid of].
[A]ctuations should moreover inspire that belief." These put
into the equation, the furnishing of the Secomb article further
marred the trust reposed in Chairman Barker. The suspicion of
his partiality on the subject matter deepened. Specifically, his
act established that he had pre-formed opinions.
Chairman Barker’s providing of copies of the said text is easily
interpretable that he had prejudged the matter before him. In
any case, the Secomb article tackled bases upon which the
Second Partial Award was founded. The subject article
reflected in advance the disposition of the ICC arbitral
tribunal. The award can definitely be viewed as an affirmation
that the bases in the Secomb article were adopted earlier on.
To the Court, actuations of arbitrators, like the language of
judges, "must be guarded and measured lest the best of
intentions be misconstrued."
x x x x91 (Emphasis supplied)
We affirm the foregoing findings and conclusion of the appellate
court save for its reference to the obiter in Commonwealth
Coatings that arbitrators are held to the same standard of
conduct imposed on judges. Instead, the Court adopts the
reasonable impression of partiality standard, which requires a
showing that a reasonable person would have to conclude that
an arbitrator was partial to the other party to the arbitration.
Such interest or bias, moreover, "must be direct, definite and
capable of demonstration rather than remote, uncertain, or
speculative."92 When a claim of arbitrator’s evident partiality
is made, "the court must ascertain from such record as is
available whether the arbitrators’ conduct was so biased and
prejudiced as to destroy fundamental fairness."93
Applying the foregoing standard, we agree with the CA in
finding that Chairman Barker’s act of furnishing the parties
with copies of Matthew Secomb’s article, considering the
attendant circumstances,is indicative of partiality such that a
reasonable man would have to conclude that he was favoring
the Claimant, RCBC. Even before the issuance of the Second
Partial Award for the reimbursement of advance costs paid by
RCBC, Chairman Barker exhibited strong inclination to grant
such relief to RCBC, notwithstanding his categorical ruling that
the Arbitration Tribunal "has no power under the ICC Rules to
order the Respondents to pay the advance on costs sought by
the ICC or to give the Claimantany relief against the
Respondents’ refusal to pay."94 That Chairman Barker was
predisposed to grant relief to RCBC was shown by his act of
interpreting RCBC’s letter, which merely reiterated its plea to
declare the Respondents in default and consider all
counterclaims withdrawn – as what the ICC Rules provide – as
an application to the Arbitration Tribunal to issue a partial
award in respect of BDO’s failure to share in the advance costs.
It must be noted that RCBC in said letter did not contemplate
the issuance of a partial order, despite Chairman Barker’s
previous letter which mentioned the possibility of granting relief
upon the parties making submissions to the Arbitration
Tribunal. Expectedly, in compliance with Chairman Barker’s
December 18, 2007 letter, RCBC formally applied for the
issuance of a partial award ordering BDO to pay its share in
the advance costs.
Mr. Secomb’s article, "Awards and Orders Dealing With the
Advance on Costs in ICC Arbitration: Theoretical Questions and
Practical Problems"95 specifically dealt with the situation when
one of the parties to international commercial arbitration
refuses to pay its share on the advance on costs. After a brief
discussion of the provisions of ICC Rules dealing with advance
on costs, which did not provide for issuance of a partial award
to compel payment by the defaulting party, the author stated:
4. As we can see, the Rules have certain mechanisms to deal
with defaulting parties. Occasionally, however, parties have
sought to use other methods to tackle the problem of a party
refusing to pay its part of the advance on costs. These have
included seeking an order or award from the arbitral tribunal
condemning the defaulting party to pay its share of the advance
on costs.1âwphi1 Such applications are the subject of this
article.96
By furnishing the parties with a copy of this article, Chairman
Barker practically armed RCBC with supporting legal
arguments under the "contractual approach" discussed by
Secomb. True enough, RCBC in its Application for
Reimbursement of Advance Costs Paid utilized said approach
as it singularly focused on Article 30(3)97 of the ICC Rules and
fiercely argued that BDO was contractually bound to share in
the advance costs fixed by the ICC.98 But whether under the
"contractual approach" or "provisional approach" (an
application must be treated as an interim measure of protection
under Article 23 [1] rather than enforcement of a contractual
obligation), both treated in the Secomb article, RCBC
succeeded in availing of a remedy which was not expressly
allowed by the Rules but in practice has been resorted to by
parties in international commercial arbitration proceedings. It
may also be mentioned that the author, Matthew Secomb, is a
member of the ICC Secretariat and the "Counsel in charge of
the file", as in fact he signed some early communications on
behalf of the ICC Secretariat pertaining to the advance costs
fixed by the ICC.99 This bolstered the impression that
Chairman Barker was predisposed to grant relief to RCBC by
issuing a partial award.
Indeed, fairness dictates that Chairman Barker refrainfrom
suggesting to or directing RCBC towards a course of action to
advance the latter’s cause, by providing it with legal arguments
contained in an article written by a lawyer who serves at the
ICC Secretariat and was involved or had participation -- insofar
as the actions or recommendations of the ICC – in the case.
Though done purportedly to assist both parties, Chairman
Barker’s act clearly violated Article 15 of the ICC Rules
declaring that "[i]n all cases, the Arbitral Tribunal shall act
fairly and impartially and ensure that each party has a
reasonable opportunity to present its case." Having pre-judged
the matter in dispute, Chairman Barker had lost his objectivity
in the issuance of the Second Partial Award.
In fine, we hold that the CA did not err in concluding that the
article ultimately favored RCBC as it reflected in advance the
disposition of the Arbitral Tribunal, as well as "signalled a
preconceived course of action that the relief prayed for by RCBC
will be granted." This conclusion is further confirmed by the
Arbitral Tribunal’s pronouncements in its Second Partial Award
which not only adopted the "contractual approach" but even
cited Secomb’s article along with other references, thus:
6.1 It appears to the Tribunal that the issue posed by this
application is essentially a contractual one. x x x
xxxx
6.5 Matthew Secomb, considered these points in the article in
14 ICC Bulletin No. 1 (2003) which was sent to the parties. At
Para. 19, the learned author quoted from an ICC Tribunal (Case
No. 11330) as follows:
"The Arbitral Tribunal concludes that the partiesin arbitrations
conducted under the ICC Rules have a mutually binding
obligation to pay the advance on costs as determined by the ICC
Court, based on Article 30-3 ICC Rules which – by reference –
forms part of the parties’ agreement to arbitration under such
Rules."100
The Court, however, must clarify that the merits of the parties’
arguments as to the propriety of the issuance of the Second
Partial Award are not in issue here. Courts are generally
without power to amend or overrule merely because of
disagreement with matters of law or facts determined by the
arbitrators. They will not review the findings of law and fact
contained in an award, and will not undertake to substitute
their judgment for that of the arbitrators. A contrary rule would
make an arbitration award the commencement, not the end, of
litigation.101 It is the finding of evident partiality which
constitutes legal ground for vacating the Second Partial Award
and not the Arbitration Tribunal’s application of the ICC Rules
adopting the "contractual approach" tackled in Secomb’s
article.
Alternative dispute resolution methods or ADRs – like
arbitration, mediation, negotiation and conciliation – are
encouraged by this Court. By enabling parties to resolve their
disputes amicably, they provide solutions that are less time-
consuming, less tedious, less confrontational, and more
productive of goodwill and lasting relationship.102
Institutionalization of ADR was envisioned as "an important
means to achieve speedy and impartial justice and declog court
dockets."103 The most important feature of arbitration, and
indeed, the key to its success, is the public’s confidence and
trust in the integrity of the process.104 For this reason, the law
authorizes vacating an arbitral award when there is evident
partiality in the arbitrators.
Injunction Against Execution Of Arbitral Award
Before an injunctive writ can be issued, it is essential that the
following requisites are present: (1) there must be a right inesse
or the existence of a right to be protected; and (2) the act against
which injunction to be directed is a violation of such right. The
onus probandi is on movant to show that there exists a right to
be protected, which is directly threatened by the act sought to
be enjoined. Further, there must be a showing that the invasion
of the right is material and substantial and that there is an
urgent and paramount necessity for the writ to prevent a
serious damage.105
Rule 19.22 of the Special ADR Rules states:
Rule 19.22. Effect of appeal.—The appeal shall not stay the
award, judgment, final order or resolution sought to be
reviewed unless the Court of Appeals directs otherwise upon
such terms as it may deem just.
We find no reversible error or grave abuse of discretion in the
CA’s denial of the application for stay order or TRO upon its
finding that BDO failed to establish the existence of a clear legal
right to enjoin execution of the Final Award confirmed by the
Makati City RTC, Branch 148, pending resolution of its
appeal.It would be premature to address on the merits the
issues raised by BDO in the present petition considering that
the CA still has to decide on the validity of said court's orders
confirming the Final Award. But more important, since BOO
had already paid ₱637,941,185.55 m manager's check, albeit
under protest, and which payment was accepted by RCBC as
full and complete satisfaction of the writ of execution, there is
no more act to be enjoined.
Settled is the rule that injunctive reliefs are preservative
remedies for the protection of substantive rights and interests.
Injunction is not a cause of action in itself, but merely a
provisional remedy, an adjunct to a main suit. When the act
sought to be enjoined has become fait accompli, the prayer for
provisional remedy should be denied. 106
Thus, the Court ruled in Gov. Looyuko107 that when the events
sought to be prevented by injunction or prohibition have
already happened, nothing more could be enjoined or
prohibited. Indeed, it is a universal principle of law that an
injunction will not issue to restrain the performance of an act
already done. This is so for the simple reason that nothing more
can be done in reference thereto. A writ of injunction becomes
moot and academic after the act sought to be enjoined has
already been consummated.

WHEREFORE, premises considered, the petition m G.R. No.

199238 is DENIED. The Resolution dated September 13,2011
ofthe Court of Appeals in CA-G.R. SP No. 120888 is
AFFIRMED.

The petition in G.R. No. 196171 is DENIED. The Decision dated

December 23, 2010 of the Court of Appeals in CA-G.R. SP No.
113525 is hereby AFFIRMED.

SO ORDERED.

MARTIN S. VILLARAMA, JR.

Associate Justice
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 212081 February 23, 2015
DEPARTMENT OF ENVIRONMENT AND NATURAL
RESOURCES (DENR), Petitioner,
vs.
UNITED PLANNERS CONSULTANTS , INC. (UPCI),
Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 is the
Decision2 dated March 26, 2014 of the Court of Appeals (CA)
in CA-G.R. SP No. 126458 which dismissed the petition for
certiorari filed by petitioner the Department of Environment
and Natural Resources (petitioner).
The Facts
On July 26, 1993, petitioner, through the Land Management
Bureau (LMB), entered into an Agreement for Consultancy
Services3 (Consultancy Agreement) with respondent United
Planners Consultants, Inc. (respondent) in connection with the
LMB' s Land Resource Management Master Plan Project
(LRMMP).4 Under the Consultancy Agreement, petitioner
committed to pay a total contract price of ₱4,337,141.00, based
on a predetermined percentage corresponding to the particular
stage of work accomplished.5
In December 1994, respondent completed the work required,
which petitioner formally accepted on December 27, 1994.6
However, petitioner was able to pay only 47% of the total
contract price in the amount of ₱2,038,456.30.7
On October 25, 1994, the Commission on Audit (COA) released
the Technical Services Office Report8 (TSO) finding the contract
price of the Agreement to be 84.14% excessive.9 This
notwithstanding, petitioner, in a letter dated December 10,
1998, acknowledged its liability to respondent in the amount of
₱2,239,479.60 and assured payment at the soonest possible
time.10
For failure to pay its obligation under the Consultancy
Agreement despite repeated demands, respondent instituted a
Complaint11 against petitioner before the Regional Trial Court
of Quezon City, Branch 222 (RTC), docketed as Case No. Q-07-
60321.12
Upon motion of respondent, the case was subsequently referred
to arbitration pursuant to the arbitration clause of the
Consultancy Agreement,13 which petitioner did not oppose.14
As a result, Atty. Alfredo F. Tadiar, Architect Armando N. Alli,
and Construction Industry Arbitration Commission (CIAC)
Accredited Arbitrator Engr. Ricardo B. San Juan were
appointed as members of the Arbitral Tribunal. The court-
referred arbitration was then docketed as Arbitration Case No.
A-001.15
During the preliminary conference, the parties agreed to adopt
the CIAC Revised Rules Governing Construction Arbitration16
(CIAC Rules) to govern the arbitration proceedings.17 They
further agreed to submit their respective draft decisions in lieu
of memoranda of arguments on or before April 21, 2010, among
others.18
On the due date for submission of the draft decisions, however,
only respondent complied with the given deadline,19 while
petitioner moved for the deferment of the deadline which it
followed with another motion for extension of time, asking that
it be given until May 11, 2010 to submit its draft decision.20
In an Order21 dated April 30, 2010, the Arbitral Tribunal
denied petitioner’s motions and deemed its non-submission as
a waiver, but declared that it would still consider petitioner’s
draft decision if submitted before May 7, 2010, or the expected
date of the final award’s promulgation.22 Petitioner filed its
draft decision23 only on May 7, 2010.
The Arbitral Tribunal rendered its Award24 dated May 7, 2010
(Arbitral Award) in favor of respondent, directing petitioner to
pay the latter the amount of (a) ₱2,285,089.89 representing the
unpaid progress billings, with interest at the rate of 12% per
annum from the date of finality of the Arbitral Award upon
confirmation by the RTC until fully paid; (b) ₱2,033,034.59 as
accrued interest thereon; (c) ₱500,000.00 as exemplary
damages; and (d) ₱150,000.00 as attorney’s fees.25 It also
ordered petitioner to reimburse respondent its proportionate
share in the arbitration costs as agreed upon in the amount of
₱182,119.44.26
Unconvinced, petitioner filed a motion for reconsideration,27
which the Arbitral Tribunal merely noted without any action,
claiming that it had already lost jurisdiction over the case after
it had submitted to the RTC its Report together with a copy of
the Arbitral Award.28
Consequently, petitioner filed before the RTC a Motion for
Reconsideration29 dated May 19, 2010 (May 19, 2010 Motion
for Reconsideration)and a Manifestation and Motion30 dated
June 1, 2010 (June 1, 2010 Manifestation and Motion),
asserting that it was denied the opportunity to be heard when
the Arbitral Tribunal failed to consider its draft decision and
merely noted its motion for reconsideration.31 It also denied
receiving a copy of the Arbitral Award by either electronic or
registered mail.32 For its part, respondent filed an opposition
thereto and moved for the confirmation33 of the Arbitral Award
in accordance with the Special Rules of Court on Alternative
Dispute Resolution (Special ADR Rules).34
In an Order35 dated March 30, 2011, the RTC merely noted
petitioner’s aforesaid motions, finding that copies of the
Arbitral Award appear to have been sent to the parties by the
Arbitral Tribunal, including the OSG, contrary to petitioner’s
claim. Onthe other hand, the RTC confirmed the Arbitral Award
pursuant to Rule 11.2 (A)36 of the Special ADR Rules and
ordered petitioner to pay respondent the costs of confirming the
award, as prayed for, in the total amount of ₱50,000.00. From
this order, petitioner did not file a motion for reconsideration.
Thus, on June 15, 2011, respondent moved for the issuance of
a writ of execution, to which no comment/opposition was filed
by petitioner despite the RTC’s directive therefor. In an Order37
dated September 12, 2011, the RTC granted respondent’s
motion.38
Petitioner moved to quash39 the writ of execution, positing that
respondent was not entitled to its monetary claims. It also
claimed that the issuance of said writ was premature since the
RTC should have first resolved its May 19, 2010 Motion for
Reconsideration and June 1, 2010 Manifestation and Motion,
and not merely noted them, thereby violating its right to due
process.40
The RTC Ruling
In an Order41 dated July 9, 2012, the RTC denied petitioner’s
motion to quash.
It found no merit in petitioner’s contention that it was denied
due process, ruling that its May 19, 2010 Motion for
Reconsideration was a prohibited pleading under Section
17.2,42 Rule 17 of the CIAC Rules. It explained that the
available remedy to assail an arbitral award was to file a motion
for correction of final award pursuant to Section 17.143 of the
CIAC Rules, and not a motion for reconsideration of the said
award itself.44 On the other hand, the RTC found petitioner’s
June 1, 2010 Manifestation and Motion seeking the resolution
of its May 19, 2010 Motion for Reconsideration to be defective
for petitioner’s failure to observe the three day notice rule.45
Having then failed to avail of the remedies attendant to an order
of confirmation, the Arbitral Award had become final and
executory.46
On July 12, 2012, petitioner received the RTC’s Order dated
July 9, 2012 denying its motion to quash.47
Dissatisfied, it filed on September 10, 2012a petition for
certiorari48 before the CA, docketed as CA-G.R. SP No. 126458,
averring in the main that the RTC acted with grave abuse of
discretion in confirming and ordering the execution of the
Arbitral Award.
The CA Ruling
In a Decision49 dated March 26, 2014, the CA dismissed the
certiorari petition on two (2) grounds, namely: (a) the petition
essentially assailed the merits of the Arbitral Award which is
prohibited under Rule 19.750 of the Special ADR Rules;51 and
(b) the petition was filed out of time, having been filed way
beyond 15 days from notice of the RTC’s July 9, 2012 Order, in
violation of Rule 19.2852 in relation to Rule 19.853 of said
Rules which provide that a special civil action for certiorari
must be filed before the CA within 15 days from notice of the
judgment, order, or resolution sought to be annulled or set
aside (or until July 27, 2012). Aggrieved, petitioner filed the
instant petition.
The Issue Before the Court
The core issue for the Court’s resolution is whether or not the
CA erred in applying the provisions of the Special ADR Rules,
resulting in the dismissal of petitioner’s special civil action for
certiorari.
The Court’s Ruling
The petition lacks merit.
I.
Republic Act No. (RA) 9285,54 otherwise known as the
Alternative Dispute Resolution Act of 2004," institutionalized
the use of an Alternative Dispute Resolution System (ADR
System)55 in the Philippines. The Act, however, was without
prejudice to the adoption by the Supreme Court of any ADR
system as a means of achieving speedy and efficient means of
resolving cases pending before all courts in the Philippines.56
Accordingly, A.M. No. 07-11-08-SC was created setting forth
the Special Rules of Court on Alternative Dispute Resolution
(referred herein as Special ADR Rules) that shall govern the
procedure to be followed by the courts whenever judicial
intervention is sought in ADR proceedings in the specific cases
where it is allowed.57
Rule 1.1 of the Special ADR Rules lists down the instances
when the said rules shall apply, namely: "(a) Relief on the issue
of Existence, Validity, or Enforceability of the Arbitration
Agreement; (b) Referral to Alternative Dispute Resolution
("ADR"); (c) Interim Measures of Protection; (d) Appointment of
Arbitrator; (e) Challenge to Appointment of Arbitrator; (f)
Termination of Mandate of Arbitrator; (g) Assistance in Taking
Evidence; (h) Confirmation, Correction or Vacation of Award in
Domestic Arbitration; (i) Recognition and Enforcement or
Setting Aside of an Award in International Commercial
Arbitration; (j) Recognition and Enforcement of a Foreign
Arbitral Award; (k) Confidentiality/Protective Orders; and (l)
Deposit and Enforcement of Mediated Settlement
Agreements."58
Notably, the Special ADR Rules do not automatically govern the
arbitration proceedings itself. A pivotal feature of arbitration as
an alternative mode of dispute resolution is that it is a product
of party autonomy or the freedom of the parties to make their
own arrangements to resolve their own disputes.59 Thus, Rule
2.3 of the Special ADR Rules explicitly provides that "parties
are free to agree on the procedure to be followed in the conduct
of arbitral proceedings. Failing such agreement, the arbitral
tribunal may conduct arbitration in the manner it considers
appropriate."60
In the case at bar, the Consultancy Agreement contained an
arbitration clause.61 Hence, respondent, after it filed its
complaint, moved for its referral to arbitration62 which was not
objected to by petitioner.63 By its referral to arbitration, the
case fell within the coverage of the Special ADR Rules. However,
with respect to the arbitration proceedings itself, the parties
had agreed to adopt the CIAC Rules before the Arbitral Tribunal
in accordance with Rule 2.3 of the Special ADR Rules.
On May 7, 2010, the Arbitral Tribunal rendered the Arbitral
Award in favor of respondent. Under Section 17.2, Rule 17 of
the CIAC Rules, no motion for reconsideration or new trial may
be sought, but any of the parties may file a motion for
correction64 of the final award, which shall interrupt the
running of the period for appeal,65 based on any of the
following grounds, to wit: a. an evident miscalculation of
figures, a typographical or arithmetical error;
b. an evident mistake in the description of any party,
person, date, amount, thing or property referred to in
the award;
c. where the arbitrators have awarded upon a matter
not submitted to them, not affecting the merits of the
decision upon the matter submitted;
d. where the arbitrators have failed or omitted to resolve
certain issue/s formulated by the parties in the Terms
of Reference (TOR) and submitted to them for
resolution, and
e. where the award is imperfect in a matter of form not
affecting the merits of the controversy.
The motion shall be acted upon by the Arbitral Tribunal or the
surviving/remaining members.66
Moreover, the parties may appeal the final award to the CA
through a petition for review under Rule43 of the Rules of
Court.67
Records do not show that any of the foregoing remedies were
availed of by petitioner. Instead, it filed the May 19, 2010
Motion for Reconsideration of the Arbitral Award, which was a
prohibited pleading under the Section 17.2,68 Rule 17 of the
CIAC Rules, thus rendering the same final and executory.
Accordingly, the case was remanded to the RTC for
confirmation proceedings pursuant to Rule 11 of the Special
ADR Rules which requires confirmation by the court of the final
arbitral award. This is consistent with Section 40, Chapter 7
(A) of RA 9285 which similarly requires a judicial confirmation
of a domestic award to make the same enforceable:
SEC. 40. Confirmation of Award.– The confirmation of a
domestic arbitral award shall be governed by Section 2369 of
R.A. 876.70
A domestic arbitral award when confirmed shall be enforced in
the same manner as final and executory decisions of the
regional trial court.
The confirmation of a domestic award shall be made by the
regional trial court in accordance with the Rules of Procedure
to be promulgated by the Supreme Court.
A CIAC arbitral award need not be confirmed by the regional
trial court to be executory as provided under E.O. No. 1008.
(Emphases supplied)
During the confirmation proceedings, petitioners did not
oppose the RTC’s confirmation by filing a petition to vacate the
Arbitral Award under Rule 11.2 (D)71 of the Special ADR Rules.
Neither did it seek reconsideration of the confirmation order in
accordance with Rule 19.1 (h) thereof. Instead, petitioner filed
only on September 10, 2012 a special civil action for certiorari
before the CA questioning the propriety of (a) the RTC Order
dated September 12, 2011 granting respondent’s motion for
issuance of a writ of execution, and (b) Order dated July 9,2012
denying its motion to quash. Under Rule 19.26 of the Special
ADR Rules, "[w]hen the Regional Trial Court, in making a ruling
under the Special ADR Rules, has acted without or in excess of
its jurisdiction, or with grave abuse of discretion amounting to
lack or excess of jurisdiction, and there is no appeal or any
plain, speedy, and adequate remedy in the ordinary course of
law, a party may file a special civil action for certiorari to annul
or set aside a ruling of the Regional Trial Court." Thus, for
failing to avail of the foregoing remedies before resorting to
certiorari, the CA correctly dismissed its petition.
II.
Note that the special civil action for certiorari described in Rule
19.26 above may be filed to annul or set aside the following
orders of the Regional Trial Court.
a. Holding that the arbitration agreement is in existent,
invalid or unenforceable;
b. Reversing the arbitral tribunal’s preliminary
determination upholding its jurisdiction;
c. Denying the request to refer the dispute to
arbitration;
d. Granting or refusing an interim relief;
e. Denying a petition for the appointment of an
arbitrator;
f. Confirming, vacating or correcting a domestic arbitral
award;
g. Suspending the proceedings to set aside an
international commercial arbitral award and referring
the case back to the arbitral tribunal;
h. Allowing a party to enforce an international
commercial arbitral award pending appeal;
i. Adjourning or deferring a ruling on whether to set
aside, recognize and or enforce an international
commercial arbitral award;
j. Allowing a party to enforce a foreign arbitral award
pending appeal; and
k. Denying a petition for assistance in taking evidence.
(Emphasis supplied)
Further, Rule 19.772 of the Special ADR Rules precludes a
party to an arbitration from filing a petition for certiorari
questioning the merits of an arbitral award.
If so falling under the above-stated enumeration, Rule 19.28 of
the Special ADR Rules provide that said certiorari petition
should be filed "with the [CA] within fifteen (15) days from
notice of the judgment, order or resolution sought to be
annulled or set aside. No extension of time to file the petition
shall be allowed."
In this case, petitioner asserts that its petition is not covered
by the Special ADR Rules (particularly, Rule 19.28 on the 15-
day reglementary period to file a petition for certiorari) but by
Rule 65 of the Rules of Court (particularly, Section 4 thereof on
the 60-day reglementary period to file a petition for certiorari),
which it claimed to have suppletory application in arbitration
proceedings since the Special ADR Rules do not explicitly
provide for a procedure on execution. The position is untenable.
Execution is fittingly called the fruit and end of suit and the life
of the law. A judgment, if left unexecuted, would be nothing but
an empty victory for the prevailing party.73
While it appears that the Special ADR Rules remain silent on
the procedure for the execution of a confirmed arbitral award,
it is the Court’s considered view that the Rules’ procedural
mechanisms cover not only aspects of confirmation but
necessarily extend to a confirmed award’s execution in light of
the doctrine of necessary implication which states that every
statutory grant of power, right or privilege is deemed to include
all incidental power, right or privilege. In Atienza v. Villarosa,74
the doctrine was explained, thus:
No statute can be enacted that can provide all the details
involved in its application.1âwphi1 There is always an omission
that may not meet a particular situation. What is thought, at
the time of enactment, to be an all embracing legislation may
be inadequate to provide for the unfolding of events of the
future. So-called gaps in the law develop as the law is enforced.
One of the rules of statutory construction used to fill in the gap
is the doctrine of necessary implication. The doctrine states
that what is implied in a statute is as much a part thereof as
that which is expressed. Every statute is understood, by
implication, to contain all such provisions as may be necessary
to effectuate its object and purpose, or to make effective rights,
powers, privileges or jurisdiction which it grants, including all
such collateral and subsidiary consequences as may be fairly
and logically inferred from its terms. Ex necessitate legis. And
every statutory grant of power, right or privilege is deemed to
include all incidental power, right or privilege. This is so
because the greater includes the lesser, expressed in the
maxim, in eo plus sit, simper inest et minus.75 (Emphases
supplied)
As the Court sees it, execution is but a necessary incident to
the Court’s confirmation of an arbitral award. To construe it
otherwise would result in an absurd situation whereby the
confirming court previously applying the Special ADR Rules in
its confirmation of the arbitral award would later shift to the
regular Rules of Procedure come execution. Irrefragably, a
court’s power to confirm a judgment award under the Special
ADR Rules should be deemed to include the power to order its
execution for such is but a collateral and subsidiary
consequence that may be fairly and logically inferred from the
statutory grant to regional trial courts of the power to confirm
domestic arbitral awards.
All the more is such interpretation warranted under the
principle of ratio legis est anima which provides that a statute
must be read according to its spirit or intent,76 for what is
within the spirit is within the statute although it is not within
its letter, and that which is within the letter but not within the
spirit is not within the statute.77 Accordingly, since the Special
ADR Rules are intended to achieve speedy and efficient
resolution of disputes and curb a litigious culture,78 every
interpretation thereof should be made consistent with these
objectives.
Thus, with these principles in mind, the Court so concludes
that the Special ADR Rules, as far as practicable, should be
made to apply not only to the proceedings on confirmation but
also to the confirmed award’s execution.
Further, let it be clarified that – contrary to petitioner’s stance
– resort to the Rules of Court even in a suppletory capacity is
not allowed. Rule 22.1 of the Special ADR Rules explicitly
provides that "[t]he provisions of the Rules of Court that are
applicable to the proceedings enumerated in Rule 1.1 of these
Special ADR Rules have either been included and incorporated
in these Special ADR Rules or specifically referred to herein."79
Besides, Rule 1.13 thereof provides that "[i]n situations where
no specific rule is provided under the Special ADR Rules, the
court shall resolve such matter summarily and be guided by
the spirit and intent of the Special ADR Rules and the ADR
Laws."
As above-mentioned, the petition for certiorari permitted under
the Special ADR Rules must be filed within a period of fifteen
(15) days from notice of the judgment, order or resolution
sought to be annulled or set aside.80 Hence, since petitioner’s
filing of its certiorari petition in CA-G.R. SP No. 126458 was
made nearly two months after its receipt of the RTC’s Order
dated July 9, 2012,or on September 10, 2012,81 said petition
was clearly dismissible.82
III.
Discounting the above-discussed procedural considerations,
the Court still finds that the certiorari petition had no merit.
Indeed, petitioner cannot be said to have been denied due
process as the records undeniably show that it was accorded
ample opportunity to ventilate its position. There was clearly
nothing out of line when the Arbitral Tribunal denied
petitioner’s motions for extension to file its submissions having
failed to show a valid reason to justify the same or in rendering
the Arbitral Award sans petitioner’s draft decision which was
filed only on the day of the scheduled promulgation of final
award on May 7, 2010.83 The touchstone of due process is
basically the opportunity to be heard. Having been given such
opportunity, petitioner should only blame itself for its own
procedural blunder.
On this score, the petition for certiorari in CA-G.R. SP No.
126458 was likewise properly dismissed.
IV.
Nevertheless, while the Court sanctions the dismissal by the
CA of the petition for certiorari due to procedural infirmities,
there is a need to explicate the matter of execution of the
confirmed Arbitral Award against the petitioner, a government
agency, in the light of Presidential Decree No. (PD) 144584
otherwise known as the "Government Auditing Code of the
Philippines." Section 26 of PD 1445 expressly provides that
execution of money judgment against the Government or any
of its subdivisions, agencies and instrumentalities is within the
primary jurisdiction of the COA, to wit:
SEC. 26. General jurisdiction. The authority and powers of the
Commission shall extend to and comprehend all matters
relating to auditing procedures, systems and controls, the
keeping of the general accounts of the Government, the
preservation of vouchers pertaining thereto for a period of ten
years, the examination and inspection of the books, records,
and papers relating to those accounts; and the audit and
settlement of the accounts of all persons respecting funds or
property received or held by them in an accountable capacity,
as well as the examination, audit, and settlement of all debts
and claims of any sort due from or owing to the Government or
any of its subdivisions, agencies and instrumentalities. The
said jurisdiction extends to all government-owned or controlled
corporations, including their subsidiaries, and other self-
governing boards, commissions, or agencies of the
Government, and as herein prescribed, including non-
governmental entities subsidized by the government, those
funded by donation through the government, those required to
pay levies or government share, and those for which the
government has put up a counterpart fund or those partly
funded by the government. (Emphases supplied)
From the foregoing, the settlement of respondent’s money claim
is still subject to the primary jurisdiction of the COA despite
finality of the confirmed arbitral award by the RTC pursuant to
the Special ADR Rules.85 Hence, the respondent has to first
seek the approval of the COA of their monetary claim. This
appears to have been complied with by the latter when it filed
a "Petition for Enforcement and Payment of Final and
Executory Arbitral Award"86 before the COA. Accordingly, it is
now the COA which has the authority to rule on this latter
petition. WHEREFORE, the petition is DENIED. The Decision
dated March 26, 2014 of the Court of Appeals in CA-G.R. SP
No. 126458 which dismissed the petition for certiorari filed by
petitioner the Department of Environment and Natural
Resources is hereby AFFIRMED.

SO ORDERED.

ESTELA M. PERLAS-BERNABE
Associate Justice
 DIVISION
[ GR No. 198226, Jul 18, 2014]
ABOITIZ TRANSPORT SYSTEM CORPORATION v. CARLOS
A. GOTHONG LINES +
DECISION
PERLAS-BERNABE, J.:
Assailed in these petitions for review on certiorari[1] are the
Orders dated August 13, 2010,[2] April 15, 2011,[3] and July 6,
2011[4] of the Regional Trial Court of Cebu City, Branch 20
(RTC) in Civil Case No. CEB-34951, which confirmed the notice
of dismissal filed by respondent Carlos A. Gothong Lines, Inc.
(CAGLI) and, consequently, dismissed the case without
prejudice, denied petitioners Aboitiz Transport System
Corporation (ATSC) and Aboitiz Shipping Corporation's (ASC)
motion for reconsideration, and deemed ATSC's motion to
exclude respondent Victor S. Chiongbian (respondent
Chiongbian) from arbitration moot and academic, respectively.
The Facts
ASC, CAGLI, and William Lines, Inc. (WLI), principally owned
by the Aboitiz, Gothong, and Chiongbian families, respectively,
entered into an Agreement[5] dated January 8, 1996, which was
signed by Jon Ramon Aboitiz for ASC, Benjamin D. Gothong
(Gothong) for CAGLI, and respondent Chiongbian for WLI. In
the said Agreement, ASC and CAGLI agreed to transfer their
shipping assets to WLI in exchange for the latter's shares of
capital stock. The parties likewise agreed that WLI would run
the merged shipping business and be renamed "WG&A, Inc."
Pertinently, Section 11.06 of the Agreement provides that all
disputes arising out of or in connection with the Agreement
shall be finally settled by arbitration in accordance with
Republic Act No. (RA) 876, otherwise known as "The Arbitration
Law,"[6] and that each of the parties shall appoint one
arbitrator, and the three arbitrators would then appoint the
fourth arbitrator who shall act as Chairman.
Among the attachments to the Agreement was a letter[7] dated
January 8, 1996 written by respondent Chiongbian and
addressed to Gothong, stating that WLI committed to acquire
from CAGLI's inventory certain spare parts and materials not
exceeding P400 Million. In this relation, a valuation of CAGLI's
inventory was conducted wherein it was shown that the same
amounted to P514 Million.[8] Thereafter, WLI received inventory
valued at P558.89 Million, but only paid CAGLI the amount of
P400 Million as agreed upon in the Agreement.[9] Dissatisfied,
CAGLI sent to WLI various letters in 2001, demanding that the
latter pay or return the inventory that it received in excess of
P400 Million.[10]
Sometime in 2002, the Chiongbian and Gothong families
decided to sell their respective interests in WLI/WG&A to the
Aboitiz family. This resulted in the execution of a Share
Purchase Agreement[11] whereby Aboitiz Equity Ventures (AEV)
agreed to purchase and acquire the WLI/WG&A shares of the
Chiongbian and Gothong families. Thereafter, the corporate
name of WLI/WG&A was changed to ATSC.[12]
Six (6) years later, or in 2008, CAGLI sent a letter[13] dated
February 14, 2008 to ATSC demanding that the latter pay the
excess inventory it delivered to WLI amounting to
P158,399,700.00. CAGLI likewise demanded AEV and
respondent Chiongbian that they refer their dispute to
arbitration.[14] In response, AEV countered that the excess
inventory had already been returned to CAGLI and that it
should not be included in the dispute, considering that it is an
entity separate and distinct from ATSC.[15] Thus, CAGLI was
constrained to file a complaint[16] before the RTC against
Chiongbian, ATSC, ASC, and AEV to compel them to submit to
arbitration.
For their part, ATSC and AEV moved for the dismissal of the
case, contending that CAGLI did not have a cause of action for
arbitration since its claim had already been paid or otherwise,
extinguished, and, in any event, said action had already
prescribed.[17]
The RTC Proceedings
In an Order[18] dated December 4, 2009, the RTC dismissed the
complaint only with respect to AEV for lack of cause of
action,[19] but not as to the other defendants. Thereafter, the
RTC issued an Order[20] dated February 26, 2010, directing
CAGLI, respondent Chiongbian, ATSC, and ASC to proceed to
arbitration, and accordingly, the parties appointed their
respective arbitrators, with ATSC and ASC doing so only on an
ad cautelam basis.[21]
Meanwhile, ATSC filed a Motion for Reconsideration/To
Exclude[22] dated March 25, 2010 praying that respondent
Chiongbian be excluded from the arbitration proceedings since
the latter was not a party to the Agreement. Pending resolution
of the said motion, CAGLI filed a Notice of Dismissal[23] dated
July 8, 2010, averring that it has decided to withdraw its
complaint in view of the fact that the opposing parties had not
filed their respective responsive pleadings.
In an Order[24] dated August 13, 2010, the RTC found CAGLI's
Notice of Dismissal meritorious, and, thus, confirmed the same
and ordered the case dismissed without prejudice.
Dissatisfied, ATSC and ASC moved for reconsideration[25] which
was, however, denied in an Order[26] dated April 15, 2011. In
said Order, the RTC cited Section 1 of Rule 17 of the Rules of
Court which allows the plaintiff to file a notice of dismissal of
the complaint as a matter of right "before service of the answer
or a motion for summary judgment." It further ruled that, save
for the condition that no answer or motion for summary
judgment had been priorly filed, nothing in the rules or law
expressly prohibits or restricts the right of the plaintiff to
withdraw the complaint by mere notice of dismissal at any
stage of the proceedings.[27]
Separately, the RTC issued an Order[28] dated July 6, 2011,
denying ATSC's Motion for Reconsideration/To Exclude,
holding that the issue raised in the said motion has been
rendered moot and academic in view of the confirmation of
CAGLI's notice of dismissal.
Hence, the instant petitions.
The Issues Before the Court
The issues for the Court's resolution are as follows: (a) whether
or not the RTC was correct in confirming CAGLI's notice of
dismissal and, consequently, dismissing the case without
prejudice; and (b) whether or not respondent Chiongbian
should be excluded from the arbitration proceedings.
The Court's Ruling
The petition is meritorious.
A. Propriety of CAGLI's Notice of Dismissal.
At the outset, the Court notes that the nature of the complaint
filed by CAGLI before the RTC is for the enforcement of an
arbitration agreement, governed by Section 6 of RA 876, viz.:
Section 6. Hearing by court. A party aggrieved by the failure,
neglect or refusal of another to perform under an agreement in
writing providing for arbitration may petition the court for an
order directing that such arbitration proceed in the manner
provided for in such agreement. Five days notice in writing of
the hearing of such application shall be served either personally
or by registered mail upon the party in default. The court shall
hear the parties, and upon being satisfied that the making of
the agreement or such failure to comply therewith is not in
issue, shall make an order directing the parties to proceed to
arbitration in accordance with the terms of the agreement. If
the making of the agreement or default be in issue the court
shall proceed to summarily hear such issue. If the finding be
that no agreement in writing providing for arbitration was
made, or that there is no default in the proceeding
thereunder, the proceeding shall be dismissed. If the
finding be that a written provision for arbitration was made
and there is a default in proceeding thereunder, an order
shall be made summarily directing the parties to proceed
with the arbitration in accordance with the terms thereof.
x x x x (Emphasis supplied)
In the case of Gonzales v. Climax Mining, Ltd. (Gonzales),[29] the
Court had instructed that the special proceeding under the
above-quoted provision is the procedural mechanism for the
enforcement of the contract to arbitrate.[30] RA 876 explicitly
confines the court's authority only to pass upon the issue of
whether there is or there is no agreement in writing providing
for arbitration. If there is such agreement, the court shall issue
an order summarily directing the parties to proceed with the
arbitration in accordance with the terms thereof; otherwise, the
proceeding shall be dismissed.[31] To stress, such proceeding is
merely a summary remedy to enforce the agreement to arbitrate
and the duty of the court is not to resolve the merits of the
parties' claims but only to determine if they should proceed to
arbitration or not.[32]
In the present case, the records show that the primary relief
sought for in CAGLI's complaint, i.e., to compel the parties to
submit to arbitration,[33] had already been granted by the RTC
through its Order[34] dated February 26, 2010. Undeniably,
such Order partakes of a judgment on the merits of the
complaint for the enforcement of the arbitration agreement.
At this point, although no responsive pleading had been filed
by ATSC,[35] it is the rules on appeal, or other proceedings after
rendition of a judgment or final order no longer those on notice
of dismissal that come into play. Verily, upon the rendition of a
judgment or final order,[36] the period "before service of the
answer or of a motion for summary judgment," mentioned in
Section 1[37] of Rule 17 of the Rules of Court when a notice of
dismissal may be filed by the plaintiff, no longer applies. As a
consequence, a notice of dismissal filed by the plaintiff at such
judgment stage should no longer be entertained or confirmed.
In view of the foregoing, it was an error on the part of the RTC
to have confirmed the notice of dismissal and to have dismissed
the complaint without prejudice.
B. Parties covered by Arbitration Proceedings.
Section 2 of RA 876 specifies who may be subjected to
arbitration, to wit:
Sec. 2. Persons and matters subject to arbitration. Two or more
persons or parties may submit to the arbitration of one or more
arbitrators any controversy existing between them at the time
of the submission and which may be the subject of an action,
or the parties to any contract may in such contract agree to
settle by arbitration a controversy thereafter arising between
them. Such submission or contract shall be valid, enforceable
and irrevocable, save upon such grounds as exist at law for the
revocation of any contract.
xxxx
In Gonzales, the Court explained that "[d]isputes do not go to
arbitration unless and until the parties have agreed to abide by
the arbitrator's decision. Necessarily, a contract is required for
arbitration to take place and to be binding."[38] Furthermore, in
Del Monte Corporation USA v. Court of Appeals,[39] the Court
stated that "[t]he provision to submit to arbitration any dispute
arising therefrom and the relationship of the parties is part of
that contract. As a rule, contracts are respected as the law
between the contracting parties and produce effect as between
them, their assigns and heirs."[40] Succinctly put, only those
parties who have agreed to submit a controversy to arbitration
who, as against each other, may be compelled to submit to
arbitration. SO ORDERED.

In the present case, Section 11.06 of the Agreement, which Carpio, (Chairperson), Brion, Del Castillo, and Perlas-Bernabe,
embodies the Arbitration Agreement among the parties, JJ., concur.
provides:

All disputes arising out of or in connection with this Agreement

including any issue as to this Agreement's validity or
enforceability, which cannot be settled amicably among the
parties, shall be finally settled by arbitration in accordance with
the Arbitration Law (Republic Act No. 876) by an arbitration
tribunal composed of four (4) arbitrators. Each of the parties
shall appoint one (1) arbitrator, the three (3) to appoint the
fourth arbitrator who shall act as Chairman. Any award by the
arbitration tribunal shall be final and binding upon the parties
and shall be enforced by judgment of the Courts of Cebu or
Metro Manila. [41]

The three parties to the Agreement and necessarily to the

arbitration agreement embodied therein are: (a) ASC, (b) CAGLI,
and (c) WLI/WG&A/ATSC. Contracts, like the subject
arbitration agreement, take effect only between the parties,
their assigns and heirs.[42] Respondent Chiongbian, having
merely physically signed the Agreement as a representative of
WLI, is not a party thereto and to the arbitration agreement
contained therein. Neither is he an assignee or an heir of any
of the parties to the arbitration agreement. Hence, respondent
Chiongbian cannot be included in the arbitration proceedings.

WHEREFORE, the petitions are GRANTED. The Orders dated

August 13, 2010, April 15, 2011, and July 6, 2011 of the
Regional Trial Court of Cebu City, Branch 20 (RTC) in Civil Case
No. CEB-34951 are hereby REVERSED and SET ASIDE. The
Order dated February 26, 2010 of the RTC is REINSTATED
with MODIFICATION excluding Victor S. Chiongbian from the
arbitration proceedings.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 163101 February 13, 2008
BENGUET CORPORATION, petitioner,
vs.
DEPARTMENT OF ENVIRONMENT AND NATURAL
RESOURCES -MINES ADJUDICATION BOARD and J.G.
REALTY AND MINING CORPORATION, respondents.
DECISION
VELASCO, JR., J.:
The instant petition under Rule 65 of the Rules of Court seeks
the annulment of the December 2, 2002 Decision1 and March
17, 2004 Resolution2 of the Department of Environment and
Natural Resources-Mining Adjudication Board (DENR-MAB) in
MAB Case No. 0124-01 (Mines Administrative Case No. R-M-
2000-01) entitled Benguet Corporation (Benguet) v. J.G. Realty
and Mining Corporation (J.G. Realty). The December 2, 2002
Decision upheld the March 19, 2001 Decision3 of the MAB
Panel of Arbitrators (POA) which canceled the Royalty
Agreement with Option to Purchase (RAWOP) dated June 1,
19874 between Benguet and J.G. Realty, and excluded Benguet
from the joint Mineral Production Sharing Agreement (MPSA)
application over four mining claims. The March 17, 2004
Resolution denied Benguet’s Motion for Reconsideration.
The Facts
On June 1, 1987, Benguet and J.G. Realty entered into a
RAWOP, wherein J.G. Realty was acknowledged as the owner
of four mining claims respectively named as Bonito-I, Bonito-
II, Bonito-III, and Bonito-IV, with a total area of 288.8656
hectares, situated in Barangay Luklukam, Sitio Bagong Bayan,
Municipality of Jose Panganiban, Camarines Norte. The parties
also executed a Supplemental Agreement5 dated June 1, 1987.
The mining claims were covered by MPSA Application No.
APSA-V-0009 jointly filed by J.G. Realty as claimowner and
Benguet as operator.
In the RAWOP, Benguet obligated itself to perfect the rights to
the mining claims and/or otherwise acquire the mining rights
to the mineral claims. Within 24 months from the execution of
the RAWOP, Benguet should also cause the examination of the
mining claims for the purpose of determining whether or not
they are worth developing with reasonable probability of
profitable production. Benguet undertook also to furnish J.G.
Realty with a report on the examination, within a reasonable
time after the completion of the examination. Moreover, also
within the examination period, Benguet shall conduct all
necessary exploration in accordance with a prepared
exploration program. If it chooses to do so and before the
expiration of the examination period, Benguet may undertake
to develop the mining claims upon written notice to J.G. Realty.
Benguet must then place the mining claims into commercial
productive stage within 24 months from the written notice.6 It
is also provided in the RAWOP that if the mining claims were
placed in commercial production by Benguet, J.G. Realty
should be entitled to a royalty of five percent (5%) of net
realizable value, and to royalty for any production done by
Benguet whether during the examination or development
periods.
Thus, on August 9, 1989, the Executive Vice-President of
Benguet, Antonio N. Tachuling, issued a letter informing J.G.
Realty of its intention to develop the mining claims. However,
on February 9, 1999, J.G. Realty, through its President,
Johnny L. Tan, then sent a letter to the President of Benguet
informing the latter that it was terminating the RAWOP on the
following grounds:
 a. The fact that your company has failed to perform the
obligations set forth in the RAWOP, i.e., to undertake
development works within 2 years from the execution of
the Agreement;
b. Violation of the Contract by allowing high graders to
operate on our claim.
c. No stipulation was provided with respect to the term
limit of the RAWOP.
d. Non-payment of the royalties thereon as provided in
the RAWOP.7
In response, Benguet’s Manager for Legal Services, Reynaldo P.
Mendoza, wrote J.G. Realty a letter dated March 8, 1999, 8
therein alleging that Benguet complied with its obligations
under the RAWOP by investing PhP 42.4 million to rehabilitate
the mines, and that the commercial operation was hampered
by the non-issuance of a Mines Temporary Permit by the Mines
and Geosciences Bureau (MGB) which must be considered as
force majeure, entitling Benguet to an extension of time to
prosecute such permit. Benguet further claimed that the high
graders mentioned by J.G. Realty were already operating prior
to Benguet’s taking over of the premises, and that J.G. Realty
had the obligation of ejecting such small scale miners. Benguet
also alleged that the nature of the mining business made it
difficult to specify a time limit for the RAWOP. Benguet then
argued that the royalties due to J.G. Realty were in fact in its
office and ready to be picked up at any time. It appeared that,
previously, the practice by J.G. Realty was to pick-up checks
from Benguet representing such royalties. However, starting
August 1994, J.G. Realty allegedly refused to collect such
checks from Benguet. Thus, Benguet posited that there was no
valid ground for the termination of the RAWOP. It also
reminded J.G. Realty that it should submit the disagreement to
arbitration rather than unilaterally terminating the RAWOP.
On June 7, 2000, J.G. Realty filed a Petition for Declaration of
Nullity/Cancellation of the RAWOP9 with the Legaspi City POA,
Region V, docketed as DENR Case No. 2000-01 and entitled
J.G. Realty v. Benguet.
On March 19, 2001, the POA issued a Decision,10 dwelling upon
the issues of (1) whether the arbitrators had jurisdiction over
the case; and (2) whether Benguet violated the RAWOP
justifying the unilateral cancellation of the RAWOP by J.G.
Realty. The dispositive portion stated:
WHEREFORE, premises considered, the June 01, 1987
[RAWOP] and its Supplemental Agreement is hereby
declared cancelled and without effect. BENGUET is
hereby excluded from the joint MPSA Application over
the mineral claims denominated as "BONITO-I",
"BONITO-II", "BONITO-III" and "BONITO-IV".
SO ORDERED.
Therefrom, Benguet filed a Notice of Appeal11 with the MAB on
April 23, 2001, docketed as Mines Administrative Case No. R-
M-2000-01. Thereafter, the MAB issued the assailed December
2, 2002 Decision. Benguet then filed a Motion for
Reconsideration of the assailed Decision which was denied in
the March 17, 2004 Resolution of the MAB. Hence, Benguet
filed the instant petition.
The Issues
1. There was serious and palpable error when the
Honorable Board failed to rule that the contractual
obligation of the parties to arbitrate under the Royalty
Agreement is mandatory.
2. The Honorable Board exceeded its jurisdiction when
it sustained the cancellation of the Royalty Agreement
 for alleged breach of contract despite the absence of
evidence.
3. The Questioned Decision of the Honorable Board in
cancelling the RAWOP prejudice[d] the substantial
rights of Benguet under the contract to the unjust
enrichment of JG Realty.12
Restated, the issues are: (1) Should the controversy have first
been submitted to arbitration before the POA took cognizance
of the case?; (2) Was the cancellation of the RAWOP supported
by evidence?; and (3) Did the cancellation of the RAWOP
amount to unjust enrichment of J.G. Realty at the expense of
Benguet?
The Court’s Ruling
Before we dwell on the substantive issues, we find that the
instant petition can be denied outright as Benguet resorted to
an improper remedy.
The last paragraph of Section 79 of Republic Act No. (RA) 7942
or the "Philippine Mining Act of 1995" states, "A petition for
review by certiorari and question of law may be filed by the
aggrieved party with the Supreme Court within thirty (30) days
from receipt of the order or decision of the [MAB]."
However, this Court has already invalidated such provision in
Carpio v. Sulu Resources Development Corp.,13 ruling that a
decision of the MAB must first be appealed to the Court of
Appeals (CA) under Rule 43 of the Rules of Court, before
recourse to this Court may be had. We held, thus:
To summarize, there are sufficient legal footings
authorizing a review of the MAB Decision under Rule 43
of the Rules of Court. First, Section 30 of Article VI of
the 1987 Constitution, mandates that "[n]o law shall be
passed increasing the appellate jurisdiction of the
Supreme Court as provided in this Constitution without
its advice and consent." On the other hand, Section 79
of RA No. 7942 provides that decisions of the MAB may
be reviewed by this Court on a "petition for review by
certiorari." This provision is obviously an expansion of
the Court’s appellate jurisdiction, an expansion to
which this Court has not consented. Indiscriminate
enactment of legislation enlarging the appellate
jurisdiction of this Court would unnecessarily burden
it.
Second, when the Supreme Court, in the exercise of its
rule-making power, transfers to the CA pending cases
involving a review of a quasi-judicial body’s decisions,
such transfer relates only to procedure; hence, it does
not impair the substantive and vested rights of the
parties. The aggrieved party’s right to appeal is
preserved; what is changed is only the procedure by
which the appeal is to be made or decided. The parties
still have a remedy and a competent tribunal to grant
this remedy.
Third, the Revised Rules of Civil Procedure included
Rule 43 to provide a uniform rule on appeals from
quasi-judicial agencies. Under the rule, appeals from
their judgments and final orders are now required to be
brought to the CA on a verified petition for review. A
quasi-judicial agency or body has been defined as an
organ of government, other than a court or legislature,
which affects the rights of private parties through either
adjudication or rule-making. MAB falls under this
definition; hence, it is no different from the other quasi-
judicial bodies enumerated under Rule 43. Besides, the
introductory words in Section 1 of Circular No. 1-91––
"among these agencies are"––indicate that the
enumeration is not exclusive or conclusive and
acknowledge the existence of other quasi-judicial
agencies which, though not expressly listed, should be
deemed included therein.
 Fourth, the Court realizes that under Batas Pambansa
(BP) Blg. 129 as amended by RA No. 7902, factual
controversies are usually involved in decisions of quasi-
judicial bodies; and the CA, which is likewise tasked to
resolve questions of fact, has more elbow room to
resolve them. By including questions of fact among the
issues that may be raised in an appeal from quasi-
judicial agencies to the CA, Section 3 of Revised
Administrative Circular No. 1-95 and Section 3 of Rule
43 explicitly expanded the list of such issues.
According to Section 3 of Rule 43, "[a]n appeal under
this Rule may be taken to the Court of Appeals within
the period and in the manner herein provided whether
the appeal involves questions of fact, of law, or mixed
questions of fact and law." Hence, appeals from quasi-
judicial agencies even only on questions of law may be
brought to the CA.
Fifth, the judicial policy of observing the hierarchy of
courts dictates that direct resort from administrative
agencies to this Court will not be entertained, unless
the redress desired cannot be obtained from the
appropriate lower tribunals, or unless exceptional and
compelling circumstances justify availment of a remedy
falling within and calling for the exercise of our primary
jurisdiction.14
The above principle was reiterated in Asaphil Construction and
Development Corporation v. Tuason, Jr. (Asaphil).15 However,
the Carpio ruling was not applied to Asaphil as the petition in
the latter case was filed in 1999 or three years before the
promulgation of Carpio in 2002. Here, the petition was filed on
April 28, 2004 when the Carpio decision was already applicable,
thus Benguet should have filed the appeal with the CA.
Petitioner having failed to properly appeal to the CA under Rule
43, the decision of the MAB has become final and executory.
On this ground alone, the instant petition must be denied.
Even if we entertain the petition although Benguet skirted the
appeal to the CA via Rule 43, still, the December 2, 2002
Decision and March 17, 2004 Resolution of the DENR-MAB in
MAB Case No. 0124-01 should be maintained.
First Issue: The case should have first been brought
to
voluntary arbitration before the POA
Secs. 11.01 and 11.02 of the RAWOP pertinently
provide:
11.01 Arbitration
Any disputes, differences or disagreements between
BENGUET and the OWNER with reference to anything
whatsoever pertaining to this Agreement that cannot be
amicably settled by them shall not be cause of any
action of any kind whatsoever in any court or
administrative agency but shall, upon notice of one
party to the other, be referred to a Board of Arbitrators
consisting of three (3) members, one to be selected by
BENGUET, another to be selected by the OWNER and
the third to be selected by the aforementioned two
arbitrators so appointed.
xxxx
11.02 Court Action
No action shall be instituted in court as to any matter
in dispute as hereinabove stated, except to enforce the
decision of the majority of the Arbitrators.16
Thus, Benguet argues that the POA should have first referred
the case to voluntary arbitration before taking cognizance of the
case, citing Sec. 2 of RA 876 on persons and matters subject to
arbitration.
On the other hand, in denying such argument, the POA ruled
that:
While the parties may establish such stipulations clauses,
terms and conditions as they may deem convenient, the same
must not be contrary to law and public policy. At a glance, there
is nothing wrong with the terms and conditions of the
agreement. But to state that an aggrieved party cannot initiate
an action without going to arbitration would be tying one’s
hand even if there is a law which allows him to do so.17
The MAB, meanwhile, denied Benguet’s contention on the
ground of estoppel, stating:
Besides, by its own act, Benguet is already estopped in
questioning the jurisdiction of the Panel of Arbitrators
to hear and decide the case. As pointed out in the
appealed Decision, Benguet initiated and filed an
Adverse Claim docketed as MAC-R-M-2000-02 over the
same mining claims without undergoing contractual
arbitration. In this particular case (MAC-R-M-2000-02)
now subject of the appeal, Benguet is likewise in
estoppel from questioning the competence of the Panel
of Arbitrators to hear and decide in the summary
proceedings J.G. Realty’s petition, when Benguet itself
did not merely move for the dismissal of the case but
also filed an Answer with counterclaim seeking
affirmative reliefs from the Panel of Arbitrators.18
Moreover, the MAB ruled that the contractual provision on
arbitration merely provides for an additional forum or venue
and does not divest the POA of the jurisdiction to hear the
case.19
In its July 20, 2004 Comment,20 J.G. Realty reiterated the
above rulings of the POA and MAB. It argued that RA 7942 or
the "Philippine Mining Act of 1995" is a special law which
should prevail over the stipulations of the parties and over a
general law, such as RA 876. It also argued that the POA cannot
be considered as a "court" under the contemplation of RA 876
and that jurisprudence saying that there must be prior resort
to arbitration before filing a case with the courts is inapplicable
to the instant case as the POA is itself already engaged in
arbitration.
On this issue, we rule for Benguet.
Sec. 2 of RA 876 elucidates the scope of arbitration:
Section 2. Persons and matters subject to arbitration.––
Two or more persons or parties may submit to the
arbitration of one or more arbitrators any
controversy existing between them at the time of
the submission and which may be the subject of an
action, or the parties to any contract may in such
contract agree to settle by arbitration a controversy
thereafter arising between them. Such submission
or contract shall be valid, enforceable and
irrevocable, save upon such grounds as exist at law
for the revocation of any contract.
Such submission or contract may include question[s]
arising out of valuations, appraisals or other
controversies which may be collateral, incidental,
precedent or subsequent to any issue between the
parties. (Emphasis supplied.)
In RA 9285 or the "Alternative Dispute Resolution Act of 2004,"
the Congress reiterated the efficacy of arbitration as an
alternative mode of dispute resolution by stating in Sec. 32
thereof that domestic arbitration shall still be governed by RA
876. Clearly, a contractual stipulation that requires prior resort
to voluntary arbitration before the parties can go directly to
court is not illegal and is in fact promoted by the State. Thus,
petitioner correctly cites several cases whereby arbitration
clauses have been upheld by this Court.21
Moreover, the contention that RA 7942 prevails over RA 876
presupposes a conflict between the two laws. Such is not the
case here. To reiterate, availment of voluntary arbitration
before resort is made to the courts or quasi-judicial agencies of
the government is a valid contractual stipulation that must be
adhered to by the parties. As stated in Secs. 6 and 7 of RA 876:
Section 6. Hearing by court.––A party aggrieved by the
failure, neglect or refusal of another to perform
under an agreement in writing providing for
arbitration may petition the court for an order
directing that such arbitration proceed in the
manner provided for in such agreement. Five days
notice in writing of the hearing of such application shall
be served either personally or by registered mail upon
the party in default. The court shall hear the parties,
and upon being satisfied that the making of the
agreement or such failure to comply therewith is not
in issue, shall make an order directing the parties to
proceed to arbitration in accordance with the terms
of the agreement. If the making of the agreement or
default be in issue the court shall proceed to
summarily hear such issue. If the finding be that no
agreement in writing providing for arbitration was
made, or that there is no default in the proceeding
thereunder, the proceeding shall be dismissed. If the
finding be that a written provision for arbitration
was made and there is a default in proceeding
thereunder, an order shall be made summarily
directing the parties to proceed with the arbitration
in accordance with the terms thereof.
xxxx
Section 7. Stay of civil action.––If any suit or proceeding
be brought upon an issue arising out of an agreement
providing for the arbitration thereof, the court in which
such suit or proceeding is pending, upon being satisfied
that the issue involved in such suit or proceeding is
referable to arbitration, shall stay the action or
proceeding until an arbitration has been had in
accordance with the terms of the agreement: Provided,
That the applicant, for the stay is not in default in
proceeding with such arbitration. (Emphasis supplied.)
In other words, in the event a case that should properly be the
subject of voluntary arbitration is erroneously filed with the
courts or quasi-judicial agencies, on motion of the defendant,
the court or quasi-judicial agency shall determine whether
such contractual provision for arbitration is sufficient and
effective. If in affirmative, the court or quasi-judicial agency
shall then order the enforcement of said provision. Besides, in
BF Corporation v. Court of Appeals, we already ruled:
In this connection, it bears stressing that the lower
court has not lost its jurisdiction over the case. Section
7 of Republic Act No. 876 provides that proceedings
therein have only been stayed. After the special
proceeding of arbitration has been pursued and
completed, then the lower court may confirm the award
made by the arbitrator.22
J.G. Realty’s contention, that prior resort to arbitration is
unavailing in the instant case because the POA’s mandate is to
arbitrate disputes involving mineral agreements, is misplaced.
A distinction must be made between voluntary and compulsory
arbitration. In Ludo and Luym Corporation v. Saordino, the
Court had the occasion to distinguish between the two types of
arbitrations:
Comparatively, in Reformist Union of R.B. Liner, Inc. vs.
NLRC, compulsory arbitration has been defined both as
"the process of settlement of labor disputes by a
government agency which has the authority to
investigate and to make an award which is binding on
all the parties, and as a mode of arbitration where the
parties are compelled to accept the resolution of their
dispute through arbitration by a third party." While a
 voluntary arbitrator is not part of the governmental
unit or labor department’s personnel, said arbitrator
renders arbitration services provided for under labor
laws.23 (Emphasis supplied.)
There is a clear distinction between compulsory and voluntary
arbitration. The arbitration provided by the POA is compulsory,
while the nature of the arbitration provision in the RAWOP is
voluntary, not involving any government agency. Thus, J.G.
Realty’s argument on this matter must fail.
As to J.G. Realty’s contention that the provisions of RA 876
cannot apply to the instant case which involves an
administrative agency, it must be pointed out that Section
11.01 of the RAWOP states that:
[Any controversy with regard to the contract] shall not
be cause of any action of any kind whatsoever in any
court or administrative agency but shall, upon notice
of one party to the other, be referred to a Board of
Arbitrators consisting of three (3) members, one to be
selected by BENGUET, another to be selected by the
OWNER and the third to be selected by the
aforementioned two arbiters so appointed.24 (Emphasis
supplied.)
There can be no quibbling that POA is a quasi-judicial body
which forms part of the DENR, an administrative agency.
Hence, the provision on mandatory resort to arbitration, freely
entered into by the parties, must be held binding against
them.25
In sum, on the issue of whether POA should have referred the
case to voluntary arbitration, we find that, indeed, POA has no
jurisdiction over the dispute which is governed by RA 876, the
arbitration law.
However, we find that Benguet is already estopped from
questioning the POA’s jurisdiction. As it were, when J.G. Realty
filed DENR Case No. 2000-01, Benguet filed its answer and
participated in the proceedings before the POA, Region V.
Secondly, when the adverse March 19, 2001 POA Decision was
rendered, it filed an appeal with the MAB in Mines
Administrative Case No. R-M-2000-01 and again participated
in the MAB proceedings. When the adverse December 2, 2002
MAB Decision was promulgated, it filed a motion for
reconsideration with the MAB. When the adverse March 17,
2004 MAB Resolution was issued, Benguet filed a petition with
this Court pursuant to Sec. 79 of RA 7942 impliedly recognizing
MAB’s jurisdiction. In this factual milieu, the Court rules that
the jurisdiction of POA and that of MAB can no longer be
questioned by Benguet at this late hour. What Benguet should
have done was to immediately challenge the POA’s jurisdiction
by a special civil action for certiorari when POA ruled that it
has jurisdiction over the dispute. To redo the proceedings fully
participated in by the parties after the lapse of seven years from
date of institution of the original action with the POA would be
anathema to the speedy and efficient administration of justice.
Second Issue: The cancellation of the RAWOP
was supported by evidence
The cancellation of the RAWOP by the POA was based on two
grounds: (1) Benguet’s failure to pay J.G. Realty’s royalties for
the mining claims; and (2) Benguet’s failure to seriously pursue
MPSA Application No. APSA-V-0009 over the mining claims.
As to the royalties, Benguet claims that the checks representing
payments for the royalties of J.G. Realty were available for pick-
up in its office and it is the latter which refused to claim them.
Benguet then thus concludes that it did not violate the RAWOP
for nonpayment of royalties. Further, Benguet reasons that
J.G. Realty has the burden of proving that the former did not
pay such royalties following the principle that the complainants
must prove their affirmative allegations.
With regard to the failure to pursue the MPSA application,
Benguet claims that the lengthy time of approval of the
application is due to the failure of the MGB to approve it. In
other words, Benguet argues that the approval of the
application is solely in the hands of the MGB.
Benguet’s arguments are bereft of merit.
Sec. 14.05 of the RAWOP provides:
14.05 Bank Account
OWNER shall maintain a bank account at ___________
or any other bank from time to time selected by OWNER
with notice in writing to BENGUET where BENGUET
shall deposit to the OWNER’s credit any and all
advances and payments which may become due the
OWNER under this Agreement as well as the purchase
price herein agreed upon in the event that BENGUET
shall exercise the option to purchase provided for in the
Agreement. Any and all deposits so made by
BENGUET shall be a full and complete acquittance
and release to [sic] BENGUET from any further
liability to the OWNER of the amounts represented
by such deposits. (Emphasis supplied.)
Evidently, the RAWOP itself provides for the mode of royalty
payment by Benguet. The fact that there was the previous
practice whereby J.G. Realty picked-up the checks from
Benguet is unavailing. The mode of payment is embodied in a
contract between the parties. As such, the contract must be
considered as the law between the parties and binding on
both.26 Thus, after J.G. Realty informed Benguet of the bank
account where deposits of its royalties may be made, Benguet
had the obligation to deposit the checks. J.G. Realty had no
obligation to furnish Benguet with a Board Resolution
considering that the RAWOP itself provided for such payment
scheme.
Notably, Benguet’s claim that J.G. Realty must prove
nonpayment of its royalties is both illogical and unsupported
by law and jurisprudence.
The allegation of nonpayment is not a positive allegation as
claimed by Benguet. Rather, such is a negative allegation that
does not require proof and in fact transfers the burden of proof
to Benguet. Thus, this Court ruled in Jimenez v. National Labor
Relations Commission:
As a general rule, one who pleads payment has the
burden of proving it. Even where the plaintiff must
allege non-payment, the general rule is that the burden
rests on the defendant to prove payment, rather than
on the plaintiff to prove non-payment. The debtor has
the burden of showing with legal certainty that the
obligation has been discharged by payment.27
(Emphasis supplied.)
In the instant case, the obligation of Benguet to pay royalties to
J.G. Realty has been admitted and supported by the provisions
of the RAWOP. Thus, the burden to prove such obligation rests
on Benguet.
It should also be borne in mind that MPSA Application No.
APSA-V-0009 has been pending with the MGB for a
considerable length of time. Benguet, in the RAWOP, obligated
itself to perfect the rights to the mining claims and/or otherwise
acquire the mining rights to the mineral claims but failed to
present any evidence showing that it exerted efforts to speed up
and have the application approved. In fact, Benguet never even
alleged that it continuously followed-up the application with
the MGB and that it was in constant communication with the
government agency for the expeditious resolution of the
application. Such allegations would show that, indeed, Benguet
was remiss in prosecuting the MPSA application and clearly
failed to comply with its obligation in the RAWOP.
Third Issue: There is no unjust enrichment in the instant
case
Based on the foregoing discussion, the cancellation of the
RAWOP was based on valid grounds and is, therefore, justified.
The necessary implication of the cancellation is the cessation
of Benguet’s right to prosecute MPSA Application No. APSA-V-
0009 and to further develop such mining claims.
In Car Cool Philippines, Inc. v. Ushio Realty and Development
Corporation, we defined unjust enrichment, as follows:
WHEREFORE, we DISMISS the petition, and AFFIRM the
December 2, 2002 Decision and March 17, 2004 Resolution of
the DENR-MAB in MAB Case No. 0124-01 upholding the
cancellation of the June 1, 1987 RAWOP. No costs.
SO ORDERED.
PRESBITERO J. VELASCO, JR.
Associate Justice

We have held that "[t]here is unjust enrichment when a

person unjustly retains a benefit to the loss of another,
or when a person retains money or property of another
against the fundamental principles of justice, equity
and good conscience." Article 22 of the Civil Code
provides that "[e]very person who through an act of
performance by another, or any other means, acquires
or comes into possession of something at the expense of
the latter without just or legal ground, shall return the
same to him." The principle of unjust enrichment under
Article 22 requires two conditions: (1) that a person is
benefited without a valid basis or justification, and (2)
that such benefit is derived at another’s expense or
damage.

There is no unjust enrichment when the person who

will benefit has a valid claim to such benefit.28
(Emphasis supplied.)

Clearly, there is no unjust enrichment in the instant case as

the cancellation of the RAWOP, which left Benguet without any
legal right to participate in further developing the mining
claims, was brought about by its violation of the RAWOP.
Hence, Benguet has no one to blame but itself for its
predicament.

THIRD DIVISION
G.R. No. 126619 December 20, 2006
UNIWIDE SALES REALTY AND RESOURCES
CORPORATION, petitioner,
vs.
TITAN-IKEDA CONSTRUCTION AND DEVELOPMENT
CORPORATION, respondent.
DECISION
TINGA, J.:
This Petition for Review on Certiorari under Rule 45 seeks the
partial reversal of the 21 February 1996 Decision1 of the Court
of Appeals Fifteenth Division in CA-G.R. SP No. 37957 which
modified the 17 April 1995 Decision2 of the Construction
Industry Arbitration Commission (CIAC).
The case originated from an action for a sum of money filed by
Titan-Ikeda Construction and Development Corporation (Titan)
against Uniwide Sales Realty and Resources Corporation
(Uniwide) with the Regional Trial Court (RTC), Branch 119, 3
Pasay City arising from Uniwide's non-payment of certain
claims billed by Titan after completion of three projects covered
by agreements they entered into with each other. Upon
Uniwide's motion to dismiss/suspend proceedings and Titan's
open court manifestation agreeing to the suspension, Civil Case
No. 98-0814 was suspended for it to undergo arbitration.4
Titan's complaint was thus re-filed with the CIAC.5 Before the
CIAC, Uniwide filed an answer which was later amended and
re-amended, denying the material allegations of the complaint,
with counterclaims for refund of overpayments, actual and
exemplary damages, and attorney's fees. The agreements
between Titan and Uniwide are briefly described below.
PROJECT 1.6
The first agreement (Project 1) was a written "Construction
Contract" entered into by Titan and Uniwide sometime in May
1991 whereby Titan undertook to construct Uniwide's
Warehouse Club and Administration Building in Libis, Quezon
City for a fee of P120,936,591.50, payable in monthly progress
billings to be certified to by Uniwide's representative.7 The
parties stipulated that the building shall be completed not later
than 30 November 1991. As found by the CIAC, the building
was eventually finished on 15 February 19928 and turned over
to Uniwide.
PROJECT 2.
Sometime in July 1992, Titan and Uniwide entered into the
second agreement (Project 2) whereby the former agreed to
construct an additional floor and to renovate the latter's
warehouse located at the EDSA Central Market Area in
Mandaluyong City. There was no written contract executed
between the parties for this project. Construction was allegedly
to be on the basis of drawings and specifications provided by
Uniwide's structural engineers. The parties proceeded on the
basis of a cost estimate of P21,301,075.77 inclusive of Titan's
20% mark-up. Titan conceded in its complaint to having
received P15,000,000.00 of this amount. This project was
completed in the latter part of October 1992 and turned over to
Uniwide.
PROJECT 3.9
The parties executed the third agreement (Project 3) in May
1992. In a written "Construction Contract," Titan undertook to
construct the Uniwide Sales Department Store Building in
Kalookan City for the price of P118,000,000.00 payable in
progress billings to be certified to by Uniwide's representative.10
It was stipulated that the project shall be completed not later
than 28 February 1993. The project was completed and turned
over to Uniwide in June 1993.
Uniwide asserted in its petition that: (a) it overpaid Titan for
unauthorized additional works in Project 1 and Project 3; (b) it
is not liable to pay the Value-Added Tax (VAT) for Project 1; (c)
it is entitled to liquidated damages for the delay incurred in
constructing Project 1 and Project 3; and (d) it should not have
been found liable for deficiencies in the defectively constructed
Project 2.
An Arbitral Tribunal consisting of a chairman and two members
was created in accordance with the CIAC Rules of Procedure
Governing Construction Arbitration. It conducted a preliminary
conference with the parties and thereafter issued a Terms of
Reference (TOR) which was signed by the parties. The tribunal
also conducted an ocular inspection, hearings, and received the
evidence of the parties consisting of affidavits which were
subject to cross-examination. On 17 April 1995, after the
parties submitted their respective memoranda, the Arbitral
Tribunal promulgated a Decision,11 the decretal portion of
which is as follows:
"WHEREFORE, judgment is hereby rendered as follows:
On Project 1 – Libis:
[Uniwide] is absolved of any liability for the claims made
by [Titan] on this Project.
Project 2 – Edsa Central:
[Uniwide] is absolved of any liability for VAT payment on
this project, the same being for the account of the
[Titan]. On the other hand, [Titan] is absolved of any
liability on the counterclaim for defective construction
of this project.
[Uniwide] is held liable for the unpaid balance in the
amount of P6,301,075.77 which is ordered to be paid to
the [Titan] with 12% interest per annum commencing
from 19 December 1992 until the date of payment.
On Project 3 – Kalookan:
[Uniwide] is held liable for the unpaid balance in the
amount of P5,158,364.63 which is ordered to be paid to
the [Titan] with 12% interest per annum commencing
from 08 September 1993 until the date of payment.
[Uniwide] is held liable to pay in full the VAT on this
project, in such amount as may be computed by the
Bureau of Internal Revenue to be paid directly thereto.
The BIR is hereby notified that [Uniwide] Sales Realty
and Resources Corporation has assumed responsibility
and is held liable for VAT payment on this project. This
accordingly exempts Claimant Titan-Ikeda
Construction and Development Corporation from this
obligation.
Let a copy of this Decision be furnished the Honorable
Aurora P. Navarette Recina, Presiding Judge, Branch
119, Pasay City, in Civil Case No. 94-0814 entitled
Titan-Ikeda Construction Development Corporation,
Plaintiff – versus – Uniwide Sales Realty and Resources
 Corporation, Defendant, pending before said court for
information and proper action.
SO ORDERED."12
Uniwide filed a motion for reconsideration of the 17 April 1995
decision which was denied by the CIAC in its Resolution dated
6 July 1995. Uniwide accordingly filed a petition for review with
the Court of Appeals,13 which rendered the assailed decision on
21 February 1996. Uniwide's motion for reconsideration was
likewise denied by the Court of Appeals in its assailed
Resolution14 dated 30 September 1996.
Hence, Uniwide comes to this Court via a petition for review
under Rule 45. The issues submitted for resolution of this
Court are as follows:15 (1) Whether Uniwide is entitled to a
return of the amount it allegedly paid by mistake to Titan for
additional works done on Project 1; (2) Whether Uniwide is
liable for the payment of the Value-Added Tax (VAT) on Project
1; (3) Whether Uniwide is entitled to liquidated damages for
Projects 1 and 3; and (4) Whether Uniwide is liable for
deficiencies in Project 2.
As a rule, findings of fact of administrative agencies and quasi-
judicial bodies, which have acquired expertise because their
jurisdiction is confined to specific matters, are generally
accorded not only respect, but also finality, especially when
affirmed by the Court of Appeals.16 In particular, factual
findings of construction arbitrators are final and conclusive
and not reviewable by this Court on appeal.17 This rule,
however admits of certain exceptions.
In David v. Construction Industry and Arbitration Commission,18
we ruled that, as exceptions, factual findings of construction
arbitrators may be reviewed by this Court when the petitioner
proves affirmatively that: (1) the award was procured by
corruption, fraud or other undue means; (2) there was evident
partiality or corruption of the arbitrators or of any of them; (3)
the arbitrators were guilty of misconduct in refusing to hear
evidence pertinent and material to the controversy; (4) one or
more of the arbitrators were disqualified to act as such under
Section nine of Republic Act No. 876 and willfully refrained
from disclosing such disqualifications or of any other
misbehavior by which the rights of any party have been
materially prejudiced; or (5) 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.19
Other recognized exceptions are as follows: (1) when there is a
very clear showing of grave abuse of discretion20 resulting in
lack or loss of jurisdiction as when a party was deprived of a
fair opportunity to present its position before the Arbitral
Tribunal or when an award is obtained through fraud or the
corruption of arbitrators,21 (2) when the findings of the Court of
Appeals are contrary to those of the CIAC,22 and (3) when a
party is deprived of administrative due process.23
Thus, in Hi-Precision Steel Center, Inc. v. Lim Kim Builders,
Inc.,24 we refused to review the findings of fact of the CIAC for
the reason that petitioner was requiring the Court to go over
each individual claim and counterclaim submitted by the
parties in the CIAC. A review of the CIAC's findings of fact would
have had the effect of "setting at naught the basic objective of a
voluntary arbitration and would reduce arbitration to a largely
inutile institution." Further, petitioner therein failed to show
any serious error of law amounting to grave abuse of discretion
resulting in lack of jurisdiction on the part of the Arbitral
Tribunal, in either the methods employed or the results reached
by the Arbitral Tribunal, in disposing of the detailed claims of
the respective parties. In Metro Construction, Inc. v. Chatham
Properties, Inc.,25 we reviewed the findings of fact of the Court
of Appeals because its findings on the issue of whether
petitioner therein was in delay were contrary to the findings of
the CIAC. Finally, in Megaworld Globus Asia, Inc. v. DSM
Construction and Development Corporation,26 we declined to
depart from the findings of the Arbitral Tribunal considering
that the computations, as well as the propriety of the awards,
are unquestionably factual issues that have been discussed by
the Arbitral Tribunal and affirmed by the Court of Appeals.
In the present case, only the first issue presented for resolution
of this Court is a question of law while the rest are factual in
nature. However, we do not hesitate to inquire into these
factual issues for the reason that the CIAC and the Court of
Appeals, in some matters, differed in their findings.
We now proceed to discuss the issues in seriatim.
Payment by Mistake for Project 1
The first issue refers to the P5,823,481.75 paid by Uniwide for
additional works done on Project 1. Uniwide asserts that Titan
was not entitled to be paid this amount because the additional
works were without any written authorization.
It should be noted that the contracts do not contain
stipulations on "additional works," Uniwide's liability for
"additional works," and prior approval as a requirement before
Titan could perform "additional works."
Nonetheless, Uniwide cites Article (Art. ) 1724 of the New Civil
Code as basis for its claim that it is not liable to pay for
"additional works" it did not authorize or agree upon in writing.
The provision states:
Art. 1724. The contractor who undertakes to build a
structure or any other work for a stipulated price, in
conformity with plans and specifications agreed upon
with the landowner, can neither withdraw from the
contract nor demand an increase in the price on
account of the higher cost of labor or materials, save
when there has been a change in the plans and
specifications, provided:
(1) Such change has been authorized by the proprietor
in writing; and
(2) The additional price to be paid to the contractor has
been determined in writing by both parties.
The Court of Appeals did take note of this provision, but
deemed it inapplicable to the case at bar because Uniwide had
already paid, albeit with unwritten reservations, for the
"additional works." The provision would have been operative
had Uniwide refused to pay for the costs of the "additional
works." Instead, the Court of Appeals applied Art. 142327 of the
New Civil Code and characterized Uniwide's payment of the said
amount as a voluntary fulfillment of a natural obligation. The
situation was characterized as being akin to Uniwide being a
debtor who paid a debt even while it knew that it was not legally
compelled to do so. As such debtor, Uniwide could no longer
demand the refund of the amount already paid.
Uniwide counters that Art. 1724 makes no distinction as to
whether payment for the "additional works" had already been
made. It claims that it had made the payments, subject to
reservations, upon the false representation of Titan-Ikeda that
the "additional works" were authorized in writing. Uniwide
characterizes the payment as a "mistake," and not a "voluntary"
fulfillment under Art. 1423 of the Civil Code. Hence, it urges
the application, instead, of the principle of solutio indebiti under
Arts. 215428 and 215629 of the Civil Code.
To be certain, this Court has not been wont to give an expansive
construction of Art. 1724, denying, for example, claims that it
applies to constructions made of ship vessels,30 or that it can
validly deny the claim for payment of professional fees to the
architect.31 The present situation though presents a thornier
problem. Clearly, Art. 1724 denies, as a matter of right,
payment to the contractor for additional works which were not
authorized in writing by the proprietor, and the additional price
of which was not determined in writing by the parties.
Yet the distinction pointed out by the Court of Appeals is
material. The issue is no longer centered on the right of the
contractor to demand payment for additional works
undertaken because payment, whether mistaken or not, was
already made by Uniwide. Thus, it would not anymore be
incumbent on Titan to establish that it had the right to demand
or receive such payment.
But, even if the Court accepts Art. 1724 as applicable in this
case, such recognition does not ipso facto accord Uniwide the
right to be reimbursed for payments already made, since Art.
1724 does not effect such right of reimbursement. It has to be
understood that Art. 1724 does not preclude the payment to
the contractor who performs additional works without any prior
written authorization or agreement as to the price for such
works if the owner decides anyway to make such payment.
What the provision does preclude is the right of the contractor
to insist upon payment for unauthorized additional works.
Accordingly, Uniwide, as the owner who did pay the contractor
for such additional works even if they had not been authorized
in writing, has to establish its own right to reimbursement not
under Art. 1724, but under a different provision of law.
Uniwide's burden of establishing its legal right to
reimbursement becomes even more crucial in the light of the
general presumption contained in Section 3(f), Rule 131 of the
Rules of Court that "money paid by one to another was due to
the latter."
Uniwide undertakes such a task before this Court, citing the
provisions on solutio indebiti under Arts. 2154 and 2156 of the
Civil Code. However, it is not enough to prove that the
payments made by Uniwide to Titan were "not due" because
there was no prior authorization or agreement with respect to
additional works. There is a further requirement that the
payment by the debtor was made either through mistake or
under a cloud of doubt. In short, for the provisions on solutio
indebiti to apply, there has to be evidence establishing the
frame of mind of the payor at the time the payment was made.32
The CIAC refused to acknowledge that the additional works on
Project 1 were indeed unauthorized by Uniwide. Neither did the
Court of Appeals arrive at a contrary determination. There
would thus be some difficulty for this Court to agree with this
most basic premise submitted by Uniwide that it did not
authorize the additional works on Project 1 undertaken by
Titan. Still, Uniwide does cite testimonial evidence from the
record alluding to a concession by employees of Titan that these
additional works on Project 1 were either authorized or
documented.33
Yet even conceding that the additional works on Project 1 were
not authorized or committed into writing, the undisputed fact
remains that Uniwide paid for these additional works. Thus, to
claim a refund of payments made under the principle of solutio
indebiti, Uniwide must be able to establish that these payments
were made through mistake. Again, this is a factual matter that
would have acquired a mantle of invulnerability had it been
determined by both the CIAC and the Court of Appeals.
However, both bodies failed to arrive at such a conclusion.
Moreover, Uniwide is unable to direct our attention to any
pertinent part of the record that would indeed establish that
the payments were made by reason of mistake.
We note that Uniwide alleged in its petition that the CIAC award
in favor of Titan in the amount P5,158,364.63 as the unpaid
balance in Project 3 included claims for additional works of
P1,087,214.18 for which no written authorization was
presented. Unfortunately, this issue was not included in its
memorandum as one of the issues submitted for the resolution
of the Court.
Liability for the Value-Added Tax (VAT)
The second issue takes us into an inquiry on who, under the
law, is liable for the payment of the VAT, in the absence of a
written stipulation on the matter. Uniwide claims that the VAT
was already included in the contract price for Project 1. Citing
Secs. 99 and 102 of the National Internal Revenue Code,
Uniwide asserts that VAT, being an indirect tax, may be shifted
to the buyer by including it in the cash or selling price and it is
entirely up to the buyer to agree or not to agree to absorb the
VAT.34 Thus, Uniwide concludes, if there is no provision in the
contract as to who should pay the VAT, it is presumed that it
would be the seller.35
The contract for Project 1 is silent on which party should
shoulder the VAT while the contract for Project 3 contained a
provision to the effect that Uniwide is the party responsible for
the payment of the VAT.36 Thus, when Uniwide paid the amount
of P2,400,000.00 as billed by Titan for VAT, it assumed that it
was the VAT for Project 3. However, the CIAC and the Court of
Appeals found that the same was for Project 1.
We agree with the conclusions of both the CIAC and the Court
of Appeals that the amount of P2,400,000.00 was paid by
Uniwide as VAT for Project 1. This conclusion was drawn from
an Order of Payment37 dated 7 October 1992 wherein Titan
billed Uniwide the amount of P2,400,000.00 as "Value Added
Tax based on P60,000,000.00 Contract," computed on the
basis of 4% of P60,000,000.00. Said document which was
approved by the President of Uniwide expressly indicated that
the project involved was the "UNIWIDE SALES WAREHOUSE
CLUB & ADMIN BLDG." located at "90 E. RODRIGUEZ JR.
AVE., LIBIS, Q.C." The reduced base for the computation of the
tax, according to the Court of Appeals, was an indication that
the parties agreed to pass the VAT for Project 1 to Uniwide but
based on a lower contract price. Indeed, the CIAC found as
follows:
Without any documentary evidence than Exhibit "H" to
show the extent of tax liability assumed by [Uniwide],
the Tribunal holds that the parties is [sic] obliged to pay
only a share of the VAT payment up to P60,000,000.00
out of the total contract price of P120,936,591.50. As
explained by Jimmy Gow, VAT is paid on labor only
for construction contracts since VAT had already
been paid on the materials purchased. Since labor
costs is [sic] proportionately placed at 60%-40% of
the contract price, simplified accounting computes
VAT at 4% of the contract price. Whatever is the
balance for VAT that remains to be paid on Project 1 –
Libis shall remain the obligation of [Titan]. (Emphasis
supplied.)38
Liquidated Damages
On the third issue of liquidated damages, the CIAC rejected
such claim while the Court of Appeals held that the matter
should be left for determination in future proceedings where
the issue has been made clear.
In rejecting Uniwide's claim for liquidated damages, the CIAC
held that there is no legal basis for passing upon and resolving
Uniwide's claim for the following reasons: (1) no claim for
liquidated damages arising from the alleged delay was ever
made by Uniwide at any time before the commencement of
Titan's complaint; (2) the claim for liquidated damages was not
included in the counterclaims stated in Uniwide's answer to
Titan's complaint; (3) the claim was not formulated as an issue
to be resolved by the CIAC in the TOR;39 and (4) no attempt was
made to modify the TOR to accommodate the same as an issue
to be resolved.
Uniwide insists that the CIAC should have applied Section 5,
Rule 10 of the Rules of Court.40 On this matter, the Court of
Appeals held that the CIAC is an arbitration body, which is not
necessarily bound by the Rules of Court. Also, the Court of
Appeals found that the issue has never been made concrete
enough to make Titan and the CIAC aware that it will be an
issue. In fact, Uniwide only introduced and quantified its claim
for liquidated damages in its Memorandum submitted to the
CIAC at the end of the arbitration proceeding. The Court of
Appeals also noted that the only evidence on record to prove
delay in the construction of Project 1 is the testimony of Titan's
engineer regarding the date of completion of the project while
the only evidence of delay in the construction of Project 3 is the
affidavit of Uniwide's President.
According to Uniwide, the ruling of the Court of Appeals on the
issue of liquidated damages goes against the established
judicial policy that a court should always strive to settle in one
proceeding the entire controversy leaving no root or branch to
bear the seeds of future litigations.41 Uniwide claims that the
required evidence for an affirmative ruling on its claim is
already on the record. It cites the pertinent provisions of the
written contracts which contained deadlines for liquidated
damages. Uniwide also noted that the evidence show that
Project 1 was completed either on 15 February 1992, as found
by the CIAC, or 12 March 1992, as shown by Titan's own
evidence, while Project 3, according to Uniwide's President, was
completed in June 1993. Furthermore, Uniwide asserts, the
CIAC should have applied procedural rules such as Section 5,
Rule 10 with more liberality because it was an administrative
tribunal free from the rigid technicalities of regular courts.42
On this point, the CIAC held:
The 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.
Hypothetically admitting that there is such a provision,
suppletory application is made only if it would not
contravene a specific provision in the arbitration rules
and the spirit thereof. The Tribunal holds that 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 [sic] 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. (Emphasis supplied.)
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."43 Voluntary arbitration, on
the other hand, involves the reference of a dispute to an
impartial body, the members of which are chosen by the parties
themselves, which parties freely consent in advance to abide by
the arbitral award issued after proceedings where both parties
had the opportunity to be heard. The basic objective is to
provide a speedy and inexpensive method of settling disputes
by allowing the parties to avoid the formalities, delay, expense
and aggravation which commonly accompany ordinary
litigation, especially litigation which goes through the entire
hierarchy of courts.44 As an arbitration body, the CIAC can only
resolve issues brought before it by the parties through the TOR
which functions similarly as a pre-trial brief. Thus, if Uniwide's
claim for liquidated damages was not raised as an issue in the
TOR or in any modified or amended version of it, the CIAC
cannot make a ruling on it. The Rules of Court cannot be used
to contravene the spirit of the CIAC rules, whose policy and
objective is to "provide a fair and expeditious settlement of
construction disputes through a non-judicial process which
ensures harmonious and friendly relations between or among
the parties."45
Further, a party may not be deprived of due process of law by
an amendment of the complaint as provided in Section 5, Rule
10 of the Rules of Court. In this case, as noted by the Court of
Appeals, Uniwide only introduced and quantified its claim for
liquidated damages in its memorandum submitted to the CIAC
at the end of the arbitration proceeding. Verily, Titan was not
given a chance to present evidence to counter Uniwide's claim
for liquidated damages.
Uniwide alludes to an alleged judicial admission made by Engr.
Luzon Tablante wherein he stated that Project 1 was completed
on 10 March 1992. It now claims that by virtue of Engr.
Tablante's statement, Titan had admitted that it was in delay.
We disagree. The testimony of Engr. Tablante was offered only
to prove that Project 1 was indeed completed. It was not offered
to prove the fact of delay. It must be remembered that the
purpose for which evidence is offered must be specified because
such evidence may be admissible for several purposes under
the doctrine of multiple admissibility, or may be admissible for
one purpose and not for another, otherwise the adverse party
cannot interpose the proper objection. Evidence submitted for
one purpose may not be considered for any other purpose.46
Furthermore, even assuming, for the sake of argument, that
said testimony on the date of completion of Project 1 is
admitted, the establishment of the mere fact of delay is not
sufficient for the imposition of liquidated damages. It must
further be shown that delay was attributable to the contractor
if not otherwise justifiable. Contrarily, Uniwide's belated claim
constitutes an admission that the delay was justified and
implies a waiver of its right to such damages.
Project 2: "as-built" plans, overpricing, defective construction
To determine whether or not Uniwide is liable for the unpaid
balance of P6,301,075.77 for Project 2, we need to resolve four
sub-issues, namely: (1) whether or not it was necessary for
Titan to submit "as-built" plans before it can be paid by
Uniwide; (2) whether or not there was overpricing of the project;
(3) whether or not the P15,000,000.00 paid by Uniwide to Titan
for Project 2 constitutes full payment; and (4) whether or not
Titan can be held liable for defective construction of Project 2.
The CIAC, as affirmed by the Court of Appeals, held Uniwide
liable for deficiency relating to Project 2 in the amount of
P6,301,075.77. It is nonetheless alleged by Uniwide that Titan
failed to submit any "as-built" plans for Project 2, such plans
allegedly serving as a condition precedent for payment. Uniwide
further claims that Titan had substantially overcharged
Uniwide for Project 2, there being uncontradicted expert
testimony that the total cost of Project 2 did not exceed
P7,812,123.60. Furthermore, Uniwide alleged that the works
performed were structurally defective, as evidenced by the
structural damage on four columns as observed on ocular
inspection by the CIAC and confirmed by Titan's project
manager.
On the necessity of submitting "as-built" plans, this Court rules
that the submission of such plans is not a pre-requisite for
Titan to be paid by Uniwide. The argument that said plans are
required by Section 308 of Presidential Decree No. 1098
(National Building Code) and by Section 2.11 of its
Implementing Rules before payment can be made is untenable.
The purpose of the law is "to safeguard life, health, property,
and public welfare, consistent with the principles of sound
environmental management and control." The submission of
these plans is necessary only in furtherance of the law's
purpose by setting minimum standards and requirements to
control the "location, site, design, quality of materials,
construction, use, occupancy, and maintenance" of buildings
constructed and not as a requirement for payment to the
contractor.47 The testimony of Engr. Tablante to the effect that
the "as-built" plans are required before payment can be claimed
by Titan is a mere legal conclusion which is not binding on this
Court.
Uniwide claims that, according to one of its consultants, the
true price for Project 2 is only P7,812,123.60. The CIAC and
the Court of Appeals, however, found the testimony of this
consultant suspect and ruled that the total contract price for
Project 2 is P21,301,075.77. The CIAC held:
The Cost Estimate for Architectural and Site
Development Works for the EDSA Central, Dau Branch
Project (Exhibit "2-A" for [Uniwide] and made as a
 common exhibit by [Titan] who had it marked at [sic] its
own Exhibit "U"), which was admittedly prepared by
Fermindoza and Associates, [Uniwide]'s own architects,
shows that the amount of P17,750,896.48 was arrived
at. Together with the agreed upon mark-up of 20% on
said amount, the total project cost was P21,301,075.77.
The Tribunal holds that the foregoing document is
binding upon the [Uniwide], it being the mode agreed
upon by which its liability for the project cost was to be
determined.48 (Emphasis supplied.)
Indeed, Uniwide is bound by the amount indicated in the above
document. Claims of connivance or fraudulent conspiracy
between Titan and Uniwide's representatives which, it is
alleged, grossly exaggerated the price may properly be
dismissed. As held by the CIAC:
The Tribunal holds that [Uniwide] has not introduced
any evidence to sustain its charge of fraudulent
conspiracy. As a matter of fact, [Uniwide]'s own
principal witness, Jimmy Gow, admitted on cross-
examination that he does not have any direct evidence
to prove his charge of connivance or complicity between
the [Titan] and his own representatives. He only made
that conclusion by the process of his own "logical
reasoning" arising from his consultation with other
contractors who gave him a much lower estimate for the
construction of the Dau Project. There is thus no reason
to invalidate the binding character of Exhibit "2-A"
which, it is significant to point out, is [Uniwide]'s own
evidence.49 (Emphasis supplied.)
Accordingly, deducting the P15,000,000.00 already paid by
Uniwide from the total contract price of P21,301,075.77, the
unpaid balance due for Project 2 is P6,301,075.77. This is the
same amount reflected in the Order of Payment prepared by
Uniwide's representative, Le Consultech, Inc. and signed by no
less than four top officers and architects of Le Consultech, Inc.
endorsing for payment by Uniwide to Titan the amount of
P6,301,075.77.50
Uniwide asserts that Titan should not have been allowed to
recover on Project 2 because the said project was defective and
would require repairs in the amount of P800,000.00. It claims
that the CIAC and the Court of Appeals should have applied
Nakpil and Sons v. Court of Appeals51 and Art. 1723 of the New
Civil Code holding a contractor responsible for damages if the
edifice constructed falls within fifteen years from completion on
account of defects in the construction or the use of materials of
inferior quality furnished by him or due to any violation of the
terms of the contract.
On this matter, the CIAC conducted an ocular inspection of the
premises on 30 January 1995. What transpired in the said
ocular inspection is described thus:
On 30 January 1995, an ocular inspection was
conducted by the Arbitral Tribunal as requested by
[Uniwide]. Photographs were taken of the alleged
construction defects, an actual ripping off of the plaster
of a certain column to expose the alleged structural
defect that is claimed to have resulted in its being
"heavily damaged" was done, clarificatory questions
were asked and manifestations on observations were
made by the parties and their respective counsels. The
entire proceedings were recorded on tape and
subsequently transcribed. The photographs and
transcript of the ocular inspection form part of the
records and considered as evidence.52
And, according to these evidence, the CIAC concluded as
follows:
It is likewise the holding of this Tribunal that [Uniwide]'s
counterclaim of defective construction has not been
sufficiently proven. The credibility of Engr. Cruz,
 [Uniwide]'s principal witness on this issue, has been
severely impaired. During the ocular inspection of the
premises, he gave such assurance of the soundness of
his opinion as an expert that a certain column was
heavily damaged judging from the external cracks that
was readily apparent x x x
xxxx
On insistence of the Tribunal, the plaster was chipped
off and revealed a structurally sound column x x x
Further, it turns out that what was being passed off as
a defective construction by [Titan], was in fact an old
column, as admitted by Mr. Gow himself x x x x53
(Emphasis supplied.)
Uniwide had the burden of proving that there was defective
construction in Project 2 but it failed to discharge this burden.
Even the credibility of its own witness was severely impaired.
Further, it was found that the concrete slab placed by Titan
was not attached to the old columns where cracks were
discovered. The CIAC held that the post-tensioning of the new
concrete slab could not have caused any of the defects
manifested by the old columns. We are bound by this finding of
fact by the CIAC.
It is worthy to stress our ruling in Hi-Precision Steel Center, Inc.
v. Lim Kim Steel Builders, Inc.54 which was reiterated in David
v. Construction Industry and Arbitration Commission,55 that:
x x x Executive Order No. 1008 created an arbitration
facility to which the construction industry in the
Philippines can have recourse. The Executive Order
was enacted to encourage the early and expeditious
settlement of disputes in the construction industry,
a public policy the implementation of which is
necessary and important for the realization of
national development goals.
Aware of the objective of voluntary arbitration in the
labor field, in the construction industry, and in any
other area for that matter, the Court will not assist one
or the other or even both parties in any effort to subvert
or defeat that objective for their private purposes. The
Court will not review the factual findings of an arbitral
tribunal upon the artful allegation that such body had
"misapprehended facts" and will not pass upon issues
which are, at bottom, issues of fact, no matter how
cleverly disguised they might be as "legal questions."
The parties here had recourse to arbitration and chose
the arbitrators themselves; they must have had
confidence in such arbitrators. The Court will not,
therefore, permit the parties to relitigate before it the
issues of facts previously presented and argued before
the Arbitral Tribunal, save only where a clear showing
is made that, in reaching its factual conclusions, the
Arbitral Tribunal committed an error so egregious and
hurtful to one party as to constitute a grave abuse of
discretion resulting in lack or loss of jurisdiction.
Prototypical examples would be factual conclusions of
the Tribunal which resulted in deprivation of one or the
other party of a fair opportunity to present its position
before the Arbitral Tribunal, and an award obtained
through fraud or the corruption of arbitrators. Any
other, more relaxed rule would result in setting at
naught the basic objective of a voluntary arbitration and
would reduce arbitration to a largely inutile institution.
(Emphasis supplied.)
WHEREFORE, premises considered, the petition is DENIED
and the Decision of the Court of Appeals dated 21 February
1996 in CA-G.R. SP No. 37957 is hereby AFFIRMED.
SO ORDERED.
Quisumbing, J., Chairperson, Carpio, Carpio Morales, And
Velasco, Jr., JJ., concur.
 Republic of the Philippines G.R. SP No. 112127 which dismissed its appeal from the
SUPREME COURT Arbitral Tribunal’s Partial Award4 dated December 15, 2009
Manila (Partial Award) on the ground of forum shopping; while the
petition in G.R. No. 1967285 filed by Sumitomo Corporation
SECOND DIVISION (Sumitomo) seeks to annul and set aside the CA’s Decision6
dated January 26, 2011 and Resolution7 dated April 29, 2011
G.R. No. 196723 August 28, 2013 in CA-G.R. SP No. 113828 which modified the Arbitral
Tribunal’s Final Award8 dated March 17, 2010 (Final Award) by
way of deleting the award of attorney’s fees in Sumitomo’s favor.
ASIAN CONSTRUCTION AND DEVELOPMENT
CORPORATION, Petitioner,
vs. The Facts
SUMITOMO CORPORATION, Respondent.
On March 15, 1996, Asian Construction entered into a Civil
x-----------------------x Work Agreement9 (Agreement) with Sumitomo for the
construction of a portion of the Light Rail Transit System along
the Epifanio Delos Santos Avenue, specifically, from Shaw
G.R. No. 196728 Boulevard, Mandaluyong City to Taft Avenue, Pasay City for a
total cost of US$19,982,000.00 (Project).10 The said Agreement
SUMITOMO CORPORATION, Petitioner, provides that the "validity, interpretation, enforceability, and
vs. performance of the same shall be governed by and construed in
ASIAN CONSTRUCTION AND DEVELOPMENT accordance with the law of the State of New York, U.S.A. (New
CORPORATION, Respondent. York State Law), without regard to, or legal effect of, the
conflicts of law provisions thereof"11 and that any dispute,
DECISION controversy or claim arising therefrom "shall be solely and
finally settled by arbitration."12
PERLAS-BERNABE, J.:
In May 1996, Sumitomo paid Asian Construction the amount
Before the Court are consolidated petitions for review on of US$2,997,300.00 as advance payment to be recovered in
certiorari which assail separate issuances of the Court of accordance with the terms of the Agreement. Later, an
Appeals (C A) in relation to the partial and final awards additional advance payment of US$1,998,200.00 was made in
rendered by the Construction Industry Arbitration October 1997.13 In all, Asian Construction received from
Commission's (CIAC) Arbitral Tribunal (Arbitral Tribunal) in Sumitomo the amount of US$9,731,606.62, inclusive of the
CIAC Case No. 28-2008. advance payments (before withholding tax of US$97,308.44).14

In particular, the petition in G.R. No. 1967231 filed by Asian On September 1, 1998, Sumitomo informed Asian Construction
Construction and Development Corporation (Asian that it was terminating the Agreement effective September 5,
Construction) seeks to annul and set aside the CA’s 1998 due to the following reasons: (a) Asian Construction’s
Resolutions dated July 23, 20102 and April 18, 20113 in CA- failure "to perform and complete the civil work for Notice to
Proceed issued construction areas within the duration of the
Time Schedule in the ‘Contract Specification of Civil and
Architectural Works (Station No. 8 to Station No. 13) x x x’"; (b)
Asian Construction’s failure to "provide adequate traffic
management as required in the Scope of Works pursuant to
subparagraph 5.2.4 of the Contract Specification of Civil and
Architectural Work"; and (c) Asian Construction’s failure to
"pay the suppliers of certain materials and equipment used in
the construction of the Project in violation of paragraph 3.1.3,
Article 3 of the Agreement."15 In view of the foregoing,
Sumitomo requested Asian Construction to "make the
necessary arrangements for the proper turnover of the Project
x x x."16 Asian Construction, however, claimed that the
accomplishments under Progress Billing No. (PB) 01817 dated
June 10, 1998 and PB 01918 dated July 6, 1998, as well as
other various claims, were still left unpaid.19 Hence, on
December 22, 1998, it sent Sumitomo a letter,20 demanding
payment of the total amount of US$6,371,530.89. This was
followed by several correspondences between the parties
through 1999 to 2007 but no settlement was achieved.21
The Proceedings Before the Arbitral Tribunal
On September 2, 2008, Asian Construction filed a complaint22
with the CIAC, docketed as CIAC Case No. 28-2008, seeking
payment for its alleged losses and reimbursements amounting
to US$9,501,413.13, plus attorney’s fees in the amount of
₱2,000,000.00.23 As a matter of course, an Arbitral Tribunal
was constituted, with Alfredo F. Tadiar being designated as
Chairman, and Salvador P. Castro and Jesse B. Grove as
Members.24
For its part, Sumitomo filed a Motion to Dismiss,25 questioning
the CIAC’s jurisdiction over the dispute on the ground that the
arbitration should proceed in accordance with the Commercial
Arbitration Rules of Japan.26 However, the aforesaid motion
was denied.27 As such, Sumitomo filed an Answer,28 reiterating
the CIAC’s alleged lack of jurisdiction and further asserting that
the claim was already time-barred. It added that had Asian
Construction discharged its obligations under the Agreement
to itemize and justify its claims, the same could have been
amicably settled years ago. In this respect, it made a
counterclaim for the unutilized portion of the advance
payments, attorney’s fees and costs of litigation in the amount
of at least ₱10,000,000.00.29
Subsequently, the parties signed a TOR,30 stipulating the
admitted facts and defining the issues to be determined in the
arbitration proceedings.
On December 15, 2009, the Arbitral Tribunal rendered the
Partial Award31 which affirmed its jurisdiction over the dispute
but held that the parties were bound by their Agreement that
the substantive New York State Law shall apply in the
resolution of the issues.32 It proceeded to dismiss both the
claims and counterclaims of the parties on the ground that
these had already prescribed under New York State Law’s six-
year statute of limitations33 and ruled that, in any case, were it
to resolve the same on the merits, "it would not produce an
affirmative recovery for the claimant."34
Aggrieved, Asian Construction filed before the CA, on January
5, 2010, a Rule 43 Petition for Review,35 docketed as CA-G.R.
SP No. 112127 (First CA Petition), seeking the reversal of the
Partial Award.
Meanwhile, notwithstanding its dismissal of the claims and
counterclaims, the Arbitral Tribunal further directed the
parties to itemize their respective claims for costs and
attorney’s fees and to submit factual proof and legal bases for
their entitlement thereto.36 Pursuant to this directive,
Sumitomo submitted evidence to prove the costs it had
incurred and paid as a result of the arbitration proceedings.37
Asian Construction, on the other hand, did not present any
statement or document to substantiate its claims but, instead,
submitted an Opposition38 dated March 8, 2010 (opposition) to
Sumitomo’s claim for costs. The Arbitral Tribunal did not act
upon the opposition because it was treated, in effect, as a
motion for reconsideration which was prohibited under the
CIAC Revised Rules of Procedure Governing Construction
Arbitration (CIAC Revised Rules).39
On March 17, 2010, the Arbitral Tribunal rendered the Final
Award40 which granted Sumitomo’s claim for attorney’s fees in
the amount of US$200,000.00. It held that while the filing of
the arbitration suit cannot be regarded as "clearly unfounded"
because of the two progress billings that were left unpaid, Asian
Construction’s disregard of the Agreement to have the dispute
resolved in accordance with New York State Law had forced
Sumitomo to incur attorney’s fees in order to defend its
interest.41 It further noted that if Asian Construction had
accepted the settlement offered by Sumitomo, then, the
arbitration proceedings would have even been aborted.42 On the
other hand, a similar claim for attorney’s fees made by Asian
Construction was denied by reason of the latter’s failure to
submit, as directed, proof of its entitlement thereto.43 As to the
matter of costs, the Arbitral Tribunal declared Sumitomo
relieved from sharing pro-rata in the arbitration costs and,
consequently, directed Asian Construction to shoulder the
same costs in full and reimburse Sumitomo the amount of
₱849,532.45. However, it ordered Sumitomo to bear all the
expenses related to the appointment of the foreign arbitrator
considering that such service was secured upon its own
initiative and without the participation and consent of Asian
Construction.44
Dissatisfied with the Arbitral Tribunal’s ruling, Asian
Construction filed another Rule 43 Petition for Review45 before
the CA, on May 3, 2010, docketed as CA-G.R. SP No. 113828
(Second CA Petition), this time, to set aside the Final Award. In
this light, it claimed gross negligence and partiality on the part
of the Arbitral Tribunal and asserted, inter alia, that, apart from
being a non-arbitrable issue, an award of attorney’s fees would
be premature since the prevailing party can only be determined
when the case is decided with finality. Moreover, it maintained
that both claims of Asian Construction and the counterclaims
of Sumitomo had already been dismissed for being time-
barred.46
The CA Ruling
On July 23, 2010, the CA rendered a Resolution47 (July 23,
2010 Resolution), dismissing Asian Construction’s First CA
Petition against the Partial Award on the ground of forum-
shopping, after it was shown that: (a) the aforesaid petition was
filed while the arbitration case was still pending final resolution
before the Arbitral Tribunal; and (b) Asian Construction’s
opposition to Sumitomo’s claim for costs filed before the
Arbitral Tribunal had, in fact, effectively sought for the same
relief and stated the same allegations as those in its First CA
Petition. The CA also noted Asian Construction’s premature
resort to a petition for review because what was sought to be
nullified was not a final award, but only a partial one. The CA
eventually denied Asian Construction’s motion for
reconsideration in a Resolution48 dated April 18, 2011. Hence,
Asian Construction’s petition before the Court, docketed as
G.R. No. 196723.
Meanwhile, the CA gave due course to Asian Construction’s
Second CA Petition assailing the Final Award and rendered a
Decision49 on January 26, 2011, upholding the Arbitral
Tribunal’s ruling except the award of attorney’s fees in favor of
Sumitomo. The CA held that the fact that Asian Construction
initiated an action or refused to compromise its claims cannot
be considered unjustified or made in bad faith as to entitle
Sumitomo to the aforesaid award. Consequently, Sumitomo
moved for reconsideration,50 asserting that Asian
Construction’s Second CA Petition should have instead been
dismissed in its entirety considering their Agreement that the
Arbitral Tribunal’s decisions and awards would be final and
non-appealable. However, in a Resolution51 dated April 29,
2011, the CA denied the motion for reconsideration. Thus,
Sumitomo’s petition before the Court, docketed as G.R. No.
196728.
The Issues Before the Court
The essential issues for the Court’s resolution are as follows:
(a) in G.R. No. 196723, whether or not the CA erred in
dismissing Asian Construction’s First CA Petition on the
ground of forum shopping; and (b) in G.R. No. 196728, whether
or not the CA erred in reviewing and modifying the Final Award
which Sumitomo insists to be final and unappealable.
The Court’s Ruling
The petitions should be denied.
A. Dismissal of Asian
Construction’s First CA
Petition; forum shopping.
Forum shopping is the act of a litigant who repetitively availed
of several judicial remedies in different courts, simultaneously
or successively, all substantially founded on the same
transactions and the same essential facts and circumstances,
and all raising substantially the same issues, either pending in
or already resolved adversely by some other court, to increase
his chances of obtaining a favorable decision if not in one court,
then in another. More particularly, forum shopping can be
committed in three ways, namely: (a) by filing multiple cases
based on the same cause of action and with the same prayer,
the previous case not having been resolved yet (where the
ground for dismissal is litis pendentia); (b) by filing multiple
cases based on the same cause of action and with the same
prayer, the previous case having been finally resolved (where
the ground for dismissal is res judicata); and (c) by filing
multiple cases based on the same cause of action but with
different prayers (splitting of causes of action, where the ground
for dismissal is also either litis pendentia or res judicata). 52
Forum shopping is treated as an act of malpractice and, in this
accord, constitutes a ground for the summary dismissal of the
actions involved.53 To be sure, the rule against forum shopping
seeks to prevent the vexation brought upon the courts and the
litigants by a party who asks different courts to rule on the
same or related causes and grant the same or substantially the
same reliefs and in the process creates the possibility of
conflicting decisions being rendered by the different fora upon
the same issues.54
In this case, the Court finds that the CA committed no
reversible error in dismissing Asian Construction’s First CA
Petition on the ground of forum shopping since the relief sought
(i.e., the reconsideration of the Partial Award) and the
allegations stated therein are identical to its opposition to
Sumitomo’s claim for costs filed before the Arbitral Tribunal
while CIAC Case No. 28-2008 was still pending. These
circumstances clearly square with the first kind of forum
shopping which thereby impels the dismissal of the First CA
Petition on the ground of litis pendentia.
On this score, it is apt to point out that Asian Construction’s
argument that it merely complied with the directive of the
Arbitral Tribunal cannot be given any credence since it (as well
as Sumitomo) was only directed to submit evidence to prove the
costs it had incurred and paid as a result of the arbitration
proceedings. However, at variance with the tribunal’s directive,
Asian Construction, in its opposition to Sumitomo’s claim for
costs, proceeded to seek the reversal of the Partial Award in the
same manner as its First CA Petition. It cannot, therefore, be
doubted that it treaded the course of forum shopping,
warranting the dismissal of the aforesaid petition.
In any case, the Court observes that the First CA Petition
remains dismissible since the CIAC Revised Rules provides for
the resort to the remedy of a petition for review only against a
final arbitral award,55 and not a partial award, as in this case.
In fine, the Court upholds the CA’s dismissal of Asian
Construction’s petition in CA-G.R. SP No. 112127 (First CA
Petition) and based on this, denies its petition in G.R. No.
196723.
B. Review and modification of the Final Award.
Sumitomo Corporation faults the CA for reviewing and
modifying a final and non-appealable arbitral award and insists
that the Asian Construction’s Second CA Petition should have
been, instead, dismissed outright. It mainly argues that by
entering into stipulations in the arbitration clause – which
provides that "the order or award of the arbitrators will be the
sole and exclusive remedy between the parties regarding any
and all claims and counterclaims with respect to the matter of
the arbitrated dispute"56 and that "the order or award rendered
in connection with an arbitration shall be final and binding
upon the parties,"57 Asian Construction effectively waived any
and all appeals from the Arbitral Tribunal’s decision or award.
Sumitomo’s argument is untenable.
A brief exegesis on the development of the procedural rules
governing CIAC cases clearly shows that a final award rendered
by the Arbitral Tribunal is not absolutely insulated from
judicial review.
To begin, Executive Order No. (EO) 1008,58 which vests upon
the CIAC original and exclusive jurisdiction over disputes
arising from, or connected with, contracts entered into by
parties involved in construction in the Philippines, plainly
states that the arbitral award "shall be final and inappealable
except on questions of law which shall be appealable to the
Court."59 Later, however, the Court, in Revised Administrative
Circular (RAC) No. 1-95,60 modified this rule, directing that the
appeals from the arbitral award of the CIAC be first brought to
the CA on "questions of fact, law or mixed questions of fact and
law." This amendment was eventually transposed into the
present CIAC Revised Rules which direct that "a petition for
review from a final award may be taken by any of the parties
within fifteen (15) days from receipt thereof in accordance with
the provisions of Rule 43 of the Rules of Court."61 Notably, the
current provision is in harmony with the Court’s
pronouncement that "despite statutory provisions making the
decisions of certain administrative agencies ‘final,’ the Court
still takes cognizance of petitions showing want of jurisdiction,
grave abuse of discretion, violation of due process, denial of
substantial justice or erroneous interpretation of the law" and
that, in particular, "voluntary arbitrators, by the nature of their
functions, act in a quasi-judicial capacity, such that their
decisions are within the scope of judicial review."62
In this case, the Court finds that the CA correctly reviewed and
modified the Arbitral Tribunal’s Final Award insofar as the
award of attorney’s fees in favor of Sumitomo is concerned since
the same arose from an erroneous interpretation of the
law.1âwphi1
To elucidate, jurisprudence dictates that in the absence of a
governing stipulation, attorney’s fees may be awarded only in
case the plaintiff's action or defendant's stand is so untenable
as to amount to gross and evident bad faith.63 This is embodied
in Article 2208 of the Civil Code which states:
Article 2208. In the absence of stipulation, attorney's fees and
expenses of litigation, other than judicial costs, cannot be
recovered, except:
xxxx
(5) Where the defendant acted in gross and evident bad faith in
refusing to satisfy the plaintiff's64 plainly valid, just and
demandable claim;
xxxx
In this case, the parties agreed that reasonable attorney’s fees
shall be paid by the defaulting party if it fails to perform any of
its obligations under the Agreement or by the party not
prevailing, if any dispute concerning the meaning and
interpretation thereto arises.65 However, since the parties’
respective claims under the Agreement had already prescribed
pursuant to New York State Law, considering as well that the
dispute was not regarding the meaning or construction of any
provision under the Agreement,66 their stipulation on attorney’s
fees should remain inoperative. Therefore, discounting the
application of the foregoing stipulation, the Court proceeds to
examine the matter under the lens of bad faith pursuant to the
above-discussed rules on attorney’s fees.

After a careful scrutiny of the records, the Court observes that

there was no gross and evident bad faith on the part of Asian
Construction in filing its complaint against Sumitomo since it
was merely seeking payment of its unpaid works done pursuant
to the Agreement. Neither can its subsequent refusal to accept
Sumitomo’s offered compromise be classified as a badge of bad
faith since it was within its right to either accept or reject the
same owing to its contractual nature.67 Verily, absent any other
just or equitable reason to rule otherwise,68 these incidents are
clearly off-tangent with a finding of gross and evident bad faith
which altogether negates Sumitomo’s entitlement to attorney’s
fees.

Hence, finding the CA’s review of the Final Award and its
consequent deletion of the award of attorney’s fees to be proper,
the Court similarly denies Sumitomo’s petition in G.R. No.
196728.

WHEREFORE, the petitions are DENIED. The Resolutions

dated July 23, 2010 and April 18, 2011 of the Court of Appeals
in CA-G.R. SP No. 112127, as well as its Decision dated
January 26, 2011 and Resolution dated April 29, 2011 in CA-
G.R. SP No. 113828 are hereby AFFIRMED.

SO ORDERED.

ESTELA M. PERLAS-BERNABE
Associate Justice
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 169332 February 11, 2008
ABS-CBN BROADCASTING CORPORATION, petitioner,
vs.
WORLD INTERACTIVE NETWORK SYSTEMS (WINS) JAPAN
CO., LTD., respondent.
DECISION
CORONA, J.:
This petition for review on certiorari under Rule 45 of the Rules
of Court seeks to set aside the February 16, 2005 decision1 and
August 16, 2005 resolution2 of the Court of Appeals (CA) in CA-
G.R. SP No. 81940.
On September 27, 1999, petitioner ABS-CBN Broadcasting
Corporation entered into a licensing agreement with
respondent World Interactive Network Systems (WINS) Japan
Co., Ltd., a foreign corporation licensed under the laws of
Japan. Under the agreement, respondent was granted the
exclusive license to distribute and sublicense the distribution
of the television service known as "The Filipino Channel" (TFC)
in Japan. By virtue thereof, petitioner undertook to transmit
the TFC programming signals to respondent which the latter
received through its decoders and distributed to its
subscribers.
A dispute arose between the parties when petitioner accused
respondent of inserting nine episodes of WINS WEEKLY, a
weekly 35-minute community news program for Filipinos in
Japan, into the TFC programming from March to May 2002. 3
Petitioner claimed that these were "unauthorized insertions"
constituting a material breach of their agreement.
Consequently, on May 9, 2002,4 petitioner notified respondent
of its intention to terminate the agreement effective June 10,
2002.
Thereafter, respondent filed an arbitration suit pursuant to the
arbitration clause of its agreement with petitioner. It contended
that the airing of WINS WEEKLY was made with petitioner's
prior approval. It also alleged that petitioner only threatened to
terminate their agreement because it wanted to renegotiate the
terms thereof to allow it to demand higher fees. Respondent
also prayed for damages for petitioner's alleged grant of an
exclusive distribution license to another entity, NHK (Japan
Broadcasting Corporation).5
The parties appointed Professor Alfredo F. Tadiar to act as sole
arbitrator. They stipulated on the following issues in their
terms of reference (TOR)6:
1. Was the broadcast of WINS WEEKLY by the claimant
duly authorized by the respondent [herein petitioner]?
2. Did such broadcast constitute a material breach of
the agreement that is a ground for termination of the
agreement in accordance with Section 13 (a) thereof?
3. If so, was the breach seasonably cured under the
same contractual provision of Section 13 (a)?
4. Which party is entitled to the payment of damages
they claim and to the other reliefs prayed for?
xxx xxx xxx
The arbitrator found in favor of respondent.7 He held that
petitioner gave its approval to respondent for the airing of WINS
WEEKLY as shown by a series of written exchanges between
the parties. He also ruled that, had there really been a material
breach of the agreement, petitioner should have terminated the
same instead of sending a mere notice to terminate said
agreement. The arbitrator found that petitioner threatened to
terminate the agreement due to its desire to compel respondent
to re-negotiate the terms thereof for higher fees. He further
stated that even if respondent committed a breach of the
agreement, the same was seasonably cured. He then allowed
respondent to recover temperate damages, attorney's fees and
one-half of the amount it paid as arbitrator's fee.
Petitioner filed in the CA a petition for review under Rule 43 of
the Rules of Court or, in the alternative, a petition for certiorari
under Rule 65 of the same Rules, with application for
temporary restraining order and writ of preliminary injunction.
It was docketed as CA-G.R. SP No. 81940. It alleged serious
errors of fact and law and/or grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of the
arbitrator.
Respondent, on the other hand, filed a petition for confirmation
of arbitral award before the Regional Trial Court (RTC) of
Quezon City, Branch 93, docketed as Civil Case No. Q-04-
51822.
Consequently, petitioner filed a supplemental petition in the CA
seeking to enjoin the RTC of Quezon City from further
proceeding with the hearing of respondent's petition for
confirmation of arbitral award. After the petition was admitted
by the appellate court, the RTC of Quezon City issued an order
holding in abeyance any further action on respondent's petition
as the assailed decision of the arbitrator had already become
the subject of an appeal in the CA. Respondent filed a motion
for reconsideration but no resolution has been issued by the
lower court to date.8
On February 16, 2005, the CA rendered the assailed decision
dismissing ABS-CBN’s petition for lack of jurisdiction. It stated
that as the TOR itself provided that the arbitrator's decision
shall be final and unappealable and that no motion for
reconsideration shall be filed, then the petition for review must
fail. It ruled that it is the RTC which has jurisdiction over
questions relating to arbitration. It held that the only instance
it can exercise jurisdiction over an arbitral award is an appeal
from the trial court's decision confirming, vacating or modifying
the arbitral award. It further stated that a petition for certiorari
under Rule 65 of the Rules of Court is proper in arbitration
cases only if the courts refuse or neglect to inquire into the facts
of an arbitrator's award. The dispositive portion of the CA
decision read:
WHEREFORE, the instant petition is hereby
DISMISSED for lack of jurisdiction. The application for
a writ of injunction and temporary restraining order is
likewise DENIED. The Regional Trial Court of Quezon
City Branch 93 is directed to proceed with the trial for
the Petition for Confirmation of Arbitral Award.
SO ORDERED.
Petitioner moved for reconsideration. The same was denied.
Hence, this petition.
Petitioner contends that the CA, in effect, ruled that: (a) it
should have first filed a petition to vacate the award in the RTC
and only in case of denial could it elevate the matter to the CA
via a petition for review under Rule 43 and (b) the assailed
decision implied that an aggrieved party to an arbitral award
does not have the option of directly filing a petition for review
under Rule 43 or a petition for certiorari under Rule 65 with
the CA even if the issues raised pertain to errors of fact and law
or grave abuse of discretion, as the case may be, and not
dependent upon such grounds as enumerated under Section
24 (petition to vacate an arbitral award) of RA 876 (the
Arbitration Law). Petitioner alleged serious error on the part of
the CA.
The issue before us is whether or not an aggrieved party in a
voluntary arbitration dispute may avail of, directly in the CA, a
petition for review under Rule 43 or a petition for certiorari
under Rule 65 of the Rules of Court, instead of filing a petition
to vacate the award in the RTC when the grounds invoked to
overturn the arbitrator’s decision are other than those for a
petition to vacate an arbitral award enumerated under RA 876.
RA 876 itself mandates that it is the Court of First Instance,
now the RTC, which has jurisdiction over questions relating to
arbitration,9 such as a petition to vacate an arbitral award.
Section 24 of RA 876 provides for the specific grounds for a
petition to vacate an award made by an arbitrator:
Sec. 24. Grounds for vacating award. - In any one of
the following cases, the court must make an order
vacating the award upon the petition of any party to
the controversy when such party proves affirmatively
that in the arbitration proceedings:
(a) The award was procured by corruption, fraud, or
other undue means; or
(b) That there was evident partiality or corruption in the
arbitrators or any of them; or
(c) That 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 as such under section
nine hereof, and willfully refrained from disclosing such
disqualifications or of any other misbehavior by which
the rights of any party have been materially prejudiced;
or
(d) That 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.
Based on the foregoing provisions, the law itself clearly provides
that the RTC must issue an order vacating an arbitral award
only "in any one of the . . . cases" enumerated therein. Under
the legal maxim in statutory construction expressio unius est
exclusio alterius, the explicit mention of one thing in a statute
means the elimination of others not specifically mentioned. As
RA 876 did not expressly provide for errors of fact and/or law
and grave abuse of discretion (proper grounds for a petition for
review under Rule 43 and a petition for certiorari under Rule
65, respectively) as grounds for maintaining a petition to vacate
an arbitral award in the RTC, it necessarily follows that a party
may not avail of the latter remedy on the grounds of errors of
fact and/or law or grave abuse of discretion to overturn an
arbitral award.
Adamson v. Court of Appeals10 gave ample warning that a
petition to vacate filed in the RTC which is not based on the
grounds enumerated in Section 24 of RA 876 should be
dismissed. In that case, the trial court vacated the arbitral
award seemingly based on grounds included in Section 24 of
RA 876 but a closer reading thereof revealed otherwise. On
appeal, the CA reversed the decision of the trial court and
affirmed the arbitral award. In affirming the CA, we held:
The Court of Appeals, in reversing the trial court's
decision held that the nullification of the decision of the
Arbitration Committee was not based on the grounds
provided by the Arbitration Law and that xxx private
respondents (petitioners herein) have failed to
substantiate with any evidence their claim of partiality.
Significantly, even as respondent judge ruled against
the arbitrator's award, he could not find fault with their
impartiality and integrity. Evidently, the nullification
of the award rendered at the case at bar was not
 made on the basis of any of the grounds provided by
law.
xxx xxx xxx
It is clear, therefore, that the award was vacated not
because of evident partiality of the arbitrators but
because the latter interpreted the contract in a way
which was not favorable to herein petitioners and
because it considered that herein private respondents,
by submitting the controversy to arbitration, was
seeking to renege on its obligations under the contract.
xxx xxx xxx
It is clear then that the Court of Appeals reversed the
trial court not because the latter reviewed the
arbitration award involved herein, but because the
respondent appellate court found that the trial court
had no legal basis for vacating the award. (Emphasis
supplied).
In cases not falling under any of the aforementioned grounds
to vacate an award, the Court has already made several
pronouncements that a petition for review under Rule 43 or a
petition for certiorari under Rule 65 may be availed of in the
CA. Which one would depend on the grounds relied upon by
petitioner.
In Luzon Development Bank v. Association of Luzon
Development Bank Employees,11 the Court held that a
voluntary arbitrator is properly classified as a "quasi-judicial
instrumentality" and is, thus, within the ambit of Section 9 (3)
of the Judiciary Reorganization Act, as amended. Under this
section, the Court of Appeals shall exercise:
xxx xxx xxx
(3) Exclusive appellate jurisdiction over all final
judgments, decisions, resolutions, orders or awards of
Regional Trial Courts and quasi-judicial agencies,
instrumentalities, boards or commissions, including
the Securities and Exchange Commission, the
Employees’ Compensation Commission and the Civil
Service Commission, except those falling within the
appellate jurisdiction of the Supreme Court in
accordance with the Constitution, the Labor Code of the
Philippines under Presidential Decree No. 442, as
amended, the provisions of this Act and of
subparagraph (1) of the third paragraph and
subparagraph (4) of the fourth paragraph of Section 17
of the Judiciary Act of 1948. (Emphasis supplied)
As such, decisions handed down by voluntary arbitrators fall
within the exclusive appellate jurisdiction of the CA. This
decision was taken into consideration in approving Section 1 of
Rule 43 of the Rules of Court.12 Thus:
SECTION 1. Scope. - This Rule shall apply to appeals
from judgments or final orders of the Court of Tax
Appeals and from awards, judgments, final orders or
resolutions of or authorized by any quasi-judicial
agency in the exercise of its quasi-judicial functions.
Among these agencies are the Civil Service Commission,
Central Board of Assessment Appeals, Securities and
Exchange Commission, Office of the President, Land
Registration Authority, Social Security Commission,
Civil Aeronautics Board, Bureau of Patents,
Trademarks and Technology Transfer, National
Electrification Administration, Energy Regulatory
Board, National Telecommunications Commission,
Department of Agrarian Reform under Republic Act
Number 6657, Government Service Insurance System,
Employees Compensation Commission, Agricultural
Inventions Board, Insurance Commission, Philippine
Atomic Energy Commission, Board of Investments,
Construction Industry Arbitration Commission, and
 voluntary arbitrators authorized by law. (Emphasis
supplied)
This rule was cited in Sevilla Trading Company v. Semana,13
Manila Midtown Hotel v. Borromeo,14 and Nippon Paint
Employees Union-Olalia v. Court of Appeals.15 These cases held
that the proper remedy from the adverse decision of a voluntary
arbitrator, if errors of fact and/or law are raised, is a petition
for review under Rule 43 of the Rules of Court. Thus,
petitioner's contention that it may avail of a petition for review
under Rule 43 under the circumstances of this case is correct.
As to petitioner's arguments that a petition for certiorari under
Rule 65 may also be resorted to, we hold the same to be in
accordance with the Constitution and jurisprudence.
Section 1 of Article VIII of the 1987 Constitution provides that:
SECTION 1. The judicial power shall be vested in one
Supreme Court and in such lower courts as may be
established by law.
Judicial power includes the duty of the courts of
justice to settle actual controversies involving rights
which are legally demandable and enforceable, and to
determine whether or not there has been a grave
abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or
instrumentality of the Government. (Emphasis
supplied)
As may be gleaned from the above stated provision, it is well
within the power and jurisdiction of the Court to inquire
whether any instrumentality of the Government, such as a
voluntary arbitrator, has gravely abused its discretion in the
exercise of its functions and prerogatives. Any agreement
stipulating that "the decision of the arbitrator shall be final and
unappealable" and "that no further judicial recourse if either
party disagrees with the whole or any part of the arbitrator's
award may be availed of" cannot be held to preclude in proper
cases the power of judicial review which is inherent in courts.16
We will not hesitate to review a voluntary arbitrator's award
where there is a showing of grave abuse of authority or
discretion and such is properly raised in a petition for
certiorari17 and there is no appeal, nor any plain, speedy
remedy in the course of law.18
Significantly, Insular Savings Bank v. Far East Bank and Trust
Company19 definitively outlined several judicial remedies an
aggrieved party to an arbitral award may undertake:
(1) a petition in the proper RTC to issue an order to
vacate the award on the grounds provided for in Section
24 of RA 876;
(2) a petition for review in the CA under Rule 43 of the
Rules of Court on questions of fact, of law, or mixed
questions of fact and law; and
(3) a petition for certiorari under Rule 65 of the Rules of
Court should the arbitrator have acted without or in
excess of his jurisdiction or with grave abuse of
discretion amounting to lack or excess of jurisdiction.
Nevertheless, although petitioner’s position on the judicial
remedies available to it was correct, we sustain the dismissal of
its petition by the CA. The remedy petitioner availed of, entitled
"alternative petition for review under Rule 43 or petition for
certiorari under Rule 65," was wrong.
Time and again, we have ruled that the remedies of appeal and
certiorari are mutually exclusive and not alternative or
successive.20
Proper issues that may be raised in a petition for review under
Rule 43 pertain to errors of fact, law or mixed questions of fact
and law.21 While a petition for certiorari under Rule 65 should
only limit itself to errors of jurisdiction, that is, grave abuse of
discretion amounting to a lack or excess of jurisdiction.22
Moreover, it cannot be availed of where appeal is the proper
remedy or as a substitute for a lapsed appeal.23
In the case at bar, the questions raised by petitioner in its
alternative petition before the CA were the following:
A. THE SOLE ARBITRATOR COMMITTED SERIOUS
ERROR AND/OR GRAVELY ABUSED HIS DISCRETION
IN RULING THAT THE BROADCAST OF "WINS
WEEKLY" WAS DULY AUTHORIZED BY ABS-CBN.
B. THE SOLE ARBITRATOR COMMITTED SERIOUS
ERROR AND/OR GRAVELY ABUSED HIS DISCRETION
IN RULING THAT THE UNAUTHORIZED BROADCAST
DID NOT CONSTITUTE MATERIAL BREACH OF THE
AGREEMENT.
C. THE SOLE ARBITRATOR COMMITTED SERIOUS
ERROR AND/OR GRAVELY ABUSED HIS DISCRETION
IN RULING THAT WINS SEASONABLY CURED THE
BREACH.
D. THE SOLE ARBITRATOR COMMITTED SERIOUS
ERROR AND/OR GRAVELY ABUSED HIS DISCRETION
IN RULING THAT TEMPERATE DAMAGES IN THE
AMOUNT OF P1,166,955.00 MAY BE AWARDED TO
WINS.
E. THE SOLE ARBITRATOR COMMITTED SERIOUS
ERROR AND/OR GRAVELY ABUSED HIS DISCRETION
IN AWARDING ATTORNEY'S FEES IN THE
UNREASONABLE AMOUNT AND UNCONSCIONABLE
AMOUNT OF P850,000.00.
F. THE ERROR COMMITTED BY THE SOLE
ARBITRATOR IS NOT A SIMPLE ERROR OF
JUDGMENT OR ABUSE OF DISCRETION. IT IS GRAVE
ABUSE OF DISCRETION TANTAMOUNT TO LACK OR
EXCESS OF JURISDICTION.
A careful reading of the assigned errors reveals that the real
issues calling for the CA's resolution were less the alleged grave
abuse of discretion exercised by the arbitrator and more about
the arbitrator’s appreciation of the issues and evidence
presented by the parties. Therefore, the issues clearly fall under
the classification of errors of fact and law — questions which
may be passed upon by the CA via a petition for review under
Rule 43. Petitioner cleverly crafted its assignment of errors in
such a way as to straddle both judicial remedies, that is, by
alleging serious errors of fact and law (in which case a petition
for review under Rule 43 would be proper) and grave abuse of
discretion (because of which a petition for certiorari under Rule
65 would be permissible).
It must be emphasized that every lawyer should be familiar with
the distinctions between the two remedies for it is not the duty
of the courts to determine under which rule the petition should
fall.24 Petitioner's ploy was fatal to its cause. An appeal taken
either to this Court or the CA by the wrong or inappropriate
mode shall be dismissed.25 Thus, the alternative petition filed
in the CA, being an inappropriate mode of appeal, should have
been dismissed outright by the CA.
WHEREFORE, the petition is hereby DENIED. The February
16, 2005 decision and August 16, 2005 resolution of the Court
of Appeals in CA-G.R. SP No. 81940 directing the Regional Trial
Court of Quezon City, Branch 93 to proceed with the trial of the
petition for confirmation of arbitral award is AFFIRMED.
Costs against petitioner.
SO ORDERED.
RENATO C. CORONA
Associate Justice