DFA Vs BCA
No. 11, granted BCA’s motion to admit, in the
Tickler: BOT, Amended increase in damages,
SC review discretionary, not matter of right,
appeal to SC must be based on CA’s decision
thus if SC cant hear cases directly appealing
arbitration tribunal’s decision
Form: Petition for certiorari under Rule 65
between Department of Foreign Affairs and BCA
International Corporation appealing decision of
Arbitration Tribunal. DISMISSED.
Facts: Through a Build-Operate- Translate
(BOT) Agreement, DFA awarded the Machine
Readable Passport and Visa Project (MRP/V
Project) to respondent BCA International
Corporation.In the course of its implementation,
conflict arose and DFA sought to terminate the
operation, which BCA opposed. The latter filed a
Request for Arbitration seeking the following
reliefs: a.) nullification of the notice of
termination of the DFA including DFA’s claim
for damages, 2.) judgment confirming the notice
of default BCA issued to DFA and ordering the
latter for specific performance of its obligation
under the agreement by approving the site of the
Central Facility at the Star Mall Complex in Shaw
Boulevard, c.) ordering DFA to pay damages
estimated at 100 million pesos and d.) other just
relief.
BCA then filed an Amended Statement of
Claims in the event specific performance by
petitioner was no longer possible, petitioner
prayed that the Arbitral Tribunal shall render
judgment ordering petitioner to pay respondent
P1,648,611,531.00, representing the net income
respondent is expected to earn under the
Agreement, and P100,000,000.00 as exemplary,
temperate or nominal damages. DFA objected,
and BCA withdrew its statement, but later filed a
new amended statement of claims increasing the
actual damages sought to P390,000,000.00, plus
an additional P10,000,000.00 for exemplary,
temperate or nominal damages.
The Arbitral Tribunal through Procedural Order
premise that it would no longer present any
additional evidence to prove the bigger claim.
BCA opposed and passed a motion for partial
reconsideration, asking the Tribunal to allow it to
present further evidence, this request was granted
by the Tribunal through Proc. Oder No. 12 ,
accordingly modifying Proc Order 11 and
allowing BCA to present its evidence.
Through Proc. Order 12, DFA’s motion for
reconsideration for Poc Order 11, thus filing this
petition under Rule 65, with prayer for issuance
of a temporary restraining order and/or writ of
preliminary injunction to annul Proc. Order Nos.
11 and 12.
Citing Article 20 of the of the 1976 UNCITRAL
Arbitration Rules, DFA contends that BCA’s
motion to admit amended statement of claims
should have been denied as there a.) has been
delay and prejudice to it, b.) fair and efficient
administration of the proceedings should have
warranted its denial, and c.) the Arbitral Tribunal
did not have jurisdiction over the amended
claims.
Article 20: AMENDMENTS TO THE CLAIM
OR DEFENCE : During the course of the
arbitral proceedings either party may amend or
supplement his claim or defence unless the
arbitral tribunal considers it inappropriate to
allow such amendment having regard to the delay
in making it or prejudice to the other party or any
other circumstances. However, a claim may not
be amended in such a manner that the amended
claim falls outside the scope of the arbitration
clause or separate arbitration agreement.
Respondent avers that the Arbitration Tribunal
had juriscition from the contractual consent of
the parties and that the Supreme Court has no
jurisdiction to intervene in a provate arbitration.
Issues: The issues to be resolved at the outset are
a.)n which laws apply to the arbitration
proceedings RA No. 876, 18 RA No. 9285 and
its IRR, and the Special ADR Rules and
b.)whether the petition filed before the Court is
proper.NO.
Ruling: Tribunal had jurisdiction. The
Agreement provides for the resolution of dispute
between the parties in Section 19.02 thereof,
Under Article 33 of the UNCITRAL Arbitration
Rules governing the parties, "the arbitral tribunal
shall apply the law designated by the parties as
applicable to the substance of the dispute."
"Failing such designation by the parties, the
arbitral tribunal shall apply the law determined by
the conflict of laws rules which it considers
applicable." Established in this jurisdiction is the
rule that the law of the place where the contract is
made governs, or lex loci contractus. As the
parties did not designate the applicable law and
the Agreement was perfected in the Philippines,
our Arbitration laws, particularly, RA No. 876, 18
RA No. 9285 and its IRR, and the Special ADR
Rules apply. The IRR of RA No. 9285 provides
that "[t]he arbitral tribunal shall decide the
dispute in accordance with such law as is chosen
by the parties. In the absence of such agreement,
Philippine law shall apply."
Under the Special ADR Rules, review by the
Supreme Court of an appeal by certiorari is not a
matter of right.
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 prescribed grounds for review or be
closely analogous thereto.
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 extent of court intervention in domestic
arbitration is specifed in the IRR of RA No.
9285, thus:
Art. 5.4. Extent of Court Intervention. In matters
governed by this Chapter, no court shall
intervene except in accordance with the Special
ADR Rules.
Court intervention in the Special ADR Rules is
allowed through these remedies: (1) Specific
Court Relief, which includes Judicial Relief
Involving the Issue of Existence, Validity and
Enforceability of the Arbitral Agreement, Interim
Measures of Protection, Challenge to the
Appointment of Arbitrator, Termination of
Mandate of Arbitrator, Assistance in Taking
Evidence, Confidentiality/Protective Orders,
Confirmation, Correction or Vacation of Award
in Domestic Arbitration, all to be filed with the
RTC; (2) a motion for reconsideration may be
filed by a party with the RTC on the grounds
specified in Rule 19.1; (3) an appeal to the Court
of Appeals through a petition for review under
Rule 19.2 or through a special civil action for
certiorari under Rule 19.26; and (4) a petition for
certiorari with the Supreme Court from a
judgment or final order or resolution of the
Court of Appeals, raising only questions of law.
RULE 19.37. Filing of Petition with Supreme
Court. — A party desiring to appeal by certiorari
from a judgment or final order or resolution of
the Court of Appeals issued pursuant to these
Special ADR Rules may file with the Supreme
Court a verified petition for review on certiorari.
The petition shall raise only questions of law,
which must be distinctly set forth. It is clear that
an appeal by certiorari to the Supreme Court is
from a judgment or final order or resolution of
the Court of Appeals and only questions of law
may be raised.
Conclusion: , in this case, the appeal by certiorari
is not from a final Order of the Court of Appeals
or the Regional Trial Court, but from an
interlocutory order of the Arbitral Tribunal;
hence, the petition must be dismissed.
Case within the case
In another earlier case led by petitioner entitled
Department of Foreign Affairs v. BCA
International Corporation, 22 docketed as G.R.
No. 210858, petitioner also raised as one of its
issues that the 1976 UNCITRAL Arbitration
Rules and the Rules of Court apply to the present
arbitration proceedings, not RA No. 9285 and
the Special ADR Rules. We ruled therein thus:
Arbitration is deemed a special proceeding and
governed by the special provisions of RA 9285,
its IRR, and the Special ADR Rules. RA 9285 is
the general law applicable to all matters and
controversies to be resolved through alternative
dispute resolution methods. While enacted only
in 2004, we held that RA 9285 applies to pending
arbitration proceedings since it is a procedural
law, which has retroactive effect. Thus, contrary
to DFA's contention, RA 9285, its IRR, and the
Special ADR Rules are applicable to the present
arbitration proceedings
Heirs of Salas v Laperal Realty
De Leon, Jr.
Tickler: Only parties to original contract and
assignees are bound by arbitration clause, buyers
of land not assignees and are not bound
Form: Petition for review on certiorari of the
order of Regional Trial Court of Lipa City
dismissing petitioners' complaint for rescission of
several sale transactions involving land owned by
Augusto L. Salas, Jr., their predecessor-in-
interest, on the ground that they failed to first
resort to arbitration. GRANTED
Facts:
Salas, Jr. was the registered owner of a vast tract
of land in Lipa City, Batangas spanning 1,484,354
square meters. He entered into an Owner-
Contractor Agreement with Laperal Realty
Corporation to provide complete (horizontal)
construction services on his land on May 15,
1987. Salas allowed respondent to exercise e
general control, supervision and management of
the sale of his land, for cash or on installment
basis through a Special Power of Attorney.
On June 10, 1989, Salas, Jr. left his home in the
morning for a business trip to Nueva Ecija. He
never returned. After seven years, his wife
Teresita filed a petition for declaration of
presumptive death.
Meantime, Laperal subdivided the land of Salas,
Jr. and sold subdivided portions thereof to
respondents Rockway Real Estate Corporation
and South Ridge Village, Inc, spouses Dacillo,
and to r Eduardo Vacuna, Florante de la Cruz
and Jesus Vicente Capalan.
On February 3, 1998, petitioners heirs of Salas
filed in the Regional Trial Court of Lipa City a
Complaint for declaration of nullity of sale,
reconveyance, cancellation of contract,
accounting and damages against herein
respondents.
Laperal Realty filed a Motion to Dismiss on the
ground that petitioners failed to submit their
grievance to arbitration as required under Article
VI of the Agreement:
“ARTICLE VI. ARBITRATION. All cases of
dispute between CONTRACTOR and
OWNER'S representative shall be referred to the
committee represented by:
a. One representative of the OWNER;
b. One representative of the CONTRACTOR;
c. One representative acceptable to both
OWNER and CONTRACTOR."
The trial court dismissed the heirs’ complaint for
failure to comply with the Arbitration Clause.
Issues:
Whether or not the dismissal of petitioners’ case
on the ground that it did not seek relief through
arbitration is proper. NO
Petitioners argue, thus:
The petitioners' causes of action did not emanate
from the Owner Contractor Agreement
The petitioners' causes of action for cancellation
of contract and accounting are covered by the
exception under the Arbitration Law.
Failure to arbitrate is not a ground for dismissal
Ruling: We grant the petition.
A submission to arbitration is a contract. As
such, the Agreement, containing the stipulation
on arbitration, binds the parties thereto, as well as
their assigns and heirs. But only they. Petitioners,
as heirs of Salas, Jr., and respondent Laperal
Realty are certainly bound by the Agreement.
If respondent Laperal Realty had assigned its
rights under the Agreement to a third party,
making the former, the assignor, and the latter,
the assignee, such assignee would also be bound
by the arbitration provision since assignment
involves such transfer of rights as to vest in the
assignee the power to enforce them to the same
extent as the assignor could have enforced them
against the debtor 18 or in this case, against the
heirs of the original party to the Agreement.
However, respondents Rockway Real Estate
Corporation, South Ridge Village, Inc.,
Maharami Development Corporation, spouses
Abrajano, spouses Lava, Oscar Dacillo, Eduardo
Vacuna, Florante de la Cruz and Jesus Vicente
Capellan are not assignees of the rights of
respondent Laperal Realty under the Agreement
to develop Salas, Jr.'s land and sell the same.
They are, rather, buyers of the land that
respondent Laperal Realty was given the authority
to develop and sell under the Agreement. As
such, they are not "assigns" contemplated in Art.
1311 of the New Civil Code which provides that
"contracts take effect only between the parties,
their assigns and heirs".
Petitioners are not exempted from complying
with the arbitration clause.
They argue that rescission, being their cause of
action, falls under the exception clause in Sec. 2
of Republic Act No. 876 which provides that
"such submission [to] or contract [of arbitration]
shall be valid, enforceable and irrevocable save,
upon such grounds as exist at law for the
revocation of any contract".
The petitioners' contention is without merit. For
while rescission, as a general rule, is an arbitrable
issue, they impleaded in the suit for rescission the
respondent lot buyers who are neither parties to
the Agreement nor the latter's assigns or heirs.
Consequently, the right to arbitrate as provided in
Article VI of the Agreement was never vested in
respondent lot buyers.
Conclusion: Respondent Laperal Realty, as a
contracting party to the Agreement, has the right
to compel petitioners to first arbitrate before
seeking judicial relief. However, to split the
proceedings into arbitration for respondent
Laperal Realty and trial for the respondent lot
buyers, or to hold trial in abeyance pending
arbitration between petitioners and respondent
Laperal Realty, would in effect result in
multiplicity of suits, duplicitous procedure and
unnecessary delay. On the other hand, it would
be in the interest of justice if the trial court hears
the complaint against all herein respondents and
adjudicates petitioners' rights as against theirs in a
single and complete proceeding.
WHEREFORE, the instant petition is hereby
GRANTED. The Order dated August 19, 1998
of Branch 85 of the Regional Trial Court of Lipa
City is hereby NULLIFIED and SET ASIDE.
Said court is hereby ordered to proceed with the
hearing of Civil Case No. 98-0047.
Case within the case:
In a catena of cases inspired by Justice Malcolm's
provocative dissent in Vega v. San Carlos Milling
Co. , this Court has recognized arbitration
agreements as valid, binding, enforceable and not
contrary to public policy so much so that when
there obtains a written provision for arbitration
which is not complied with, the trial court should
suspend the proceedings and order the parties to
proceed to arbitration in accordance with the
terms of their agreement. Arbitration is the "wave
of the future" in dispute resolution. To brush
aside a contractual agreement calling for
arbitration in case of disagreement between
parties would be a step backward
Home Bankers Savings v CA
Buena, J.
Tickler:
Form: Appeal by certiorari under Rule 45 to
annul and set aside the decision of the Court of
Appeals dismissing the petition for certiorari filed
by petitioner to annul the two (2) orders issued by
the Regional Trial Court of Makati in denying
petitioner's motion to dismiss and the second
denying petitioner's motion for reconsideration
thereof. DISMISSED.
Facts: Victor Tancuan issued an HBSTC check
for P25,250,000.00 while Eugene Arriesgado
issued FEBTC checks for P8,600,000.00,
P8,500,000.00 and P8,100,000.00, respectively,
the three checks amounting to P25,200,000.00.
Tancuan and Arriesgado exchanged each other's
checks and deposited them with their respective
banks for collection. Tancuan’s checks when
presented by FEBTC were dishonoured by
HBSTC for insufficient funds.
HBSTC sent Arriesgado's three (3) FEBTC
checks through the Philippine Clearing House
Corporation (PCHC) to FEBTC but was
returned as "Drawn Against Insufficient Funds.
HBSTC received the notice of dishonor but
refused to accept the checks and returned them
to FEBTC through the PCHC for the reason
"Beyond Reglementary Period," implying that
HBSTC already treated the three (3) FEBTC
checks as cleared and allowed the proceeds
thereof to be withdrawn.
FEBTC demanded reimbursement for the
returned checks and inquired from HBSTC
whether it had permitted any withdrawal of funds
against the unfunded checks and if so, on what
date. HBSTC, however, refused to make any
reimbursement and to provide FEBTC with the
needed information.
Thus FEBTC submitted the dispute for
arbitration before the PCHC Arbitration
Committee.
Pending the arbitration proceeding, FEBTC filed
an action for sum of money and damages with
preliminary attachment against HBSTC, Robert
Young, Victor Tancuan and Eugene Arriesgado
with the Regional Trial Court of Makati.
A motion to dismiss was filed by HBSTC
claiming that the complaint sought to enforce an
arbitral award which did not exist yet. The trial
court denied this motion and the subsequent
motion for reconsideration. HBSTC filed a
petition for certiorari with the Court of Appeals
contending that the trial court acted with grave
abuse of discretion amounting to lack of
jurisdiction in denying its motion to dismiss. The
CA dismissed the petition for lack of merit. The
respondent court observed that "[i]n the
Complaint, FEBTC applied for the issuance of a
writ of preliminary attachment over HBT's
[HBSTC] property" and citing Section 14 of
Republic Act No. 876, otherwise known as the
Arbitration Law, maintained that "[n]ecessarily, it
has to reiterate its main cause of action for sum of
money against HBT [HBSTC]," 13 and that "this
prayer for conservatory relief [writ of preliminary
attachment] satisfies the requirement of a cause
of action which FEBTC may pursue in the courts
Hence, this present action
According to the respondent court, based in Sec
7 of the Arbritation Law, as seen in
jurisprudence, when there is a condition
requiring prior submiddion to arbitration before
institution of a court action, the action should not
be dismissed but suspended for arbitration.
HBSTC contended that this applies ontly in
circumstances where a complaint is filed in court
withour arbitration, and not like the case at bar
where arbitration proceedings were initiated first
before filing filing a court action pending the
arbitration proceedings.
Respondent court reasons that if the absence of a
prior arbitration may stay court action, so too and
with more reason, should an arbitration already
pending as obtains in this case stay the court
action. A party to a pending arbitral proceeding
may go to court to obtain conservatory reliefs in
connection with his cause of action although the
disposal of that action on the merits cannot as yet
be obtained.
Petitioner contends that
one cannot file a complaint in court over a
subject that is undergoing arbitration
Second, since arbitration is a special proceeding
by a clear provision of law, the civil suit filed
below is, without a shadow of doubt, barred by
litis pendentia and should be dismissed de plano
insofar as HBSTC is concerned.
Third, when arbitration is agreed upon and suit
is filed without arbitration having been held and
terminated, the case that is filed should be
dismissed.
Private respondent FEBTC, on the other hand,
contends that "the cause of action for collection
[of a sum of money] can coexist in the civil suit
and the arbitration [proceeding]" citing Section 7
of the Arbitration Law which provides for the stay
of the civil action until an arbitration has been
had.
Issue: Whether or not private respondent which
commenced an arbitration proceeding under the
auspices of the Philippine Clearing House
Corporation (pchc) may subsequently file a
separate case in court over the same subject
matter of arbitration despite the pendency of that
arbitration, simply to obtain the provisional
remedy of attachment against the bank, the
adverse party in the arbitration proceeding." NO.
Ruling: We find no merit in the petition. Section
14 of Republic Act 876, otherwise known as the
Arbitration Law, allows any party to the
arbitration proceeding to petition the court to
take measures to safeguard and/or conserve any
matter which is the subject of the dispute in
arbitration, thus.
Petitioner's exposition of the foregoing provision
deserves scant consideration. Section 14 simply
grants an arbitrator the power to issue subpoena
and subpoena duces tecum at any time before
rendering the award. The exercise of such power
is without prejudice to the right of a party to ;le a
petition in court to safeguard any matter which is
the subject of the dispute in arbitration. In the
case at bar, private respondent ;led an action for a
sum of money with prayer for a writ of
preliminary attachment. Undoubtedly, such
action involved the same subject matter as that in
arbitration, i.e., the sum of P25,200,000.00 which
was allegedly deprived from private respondent in
what is known in banking as a "kiting scheme."
However, the civil action was not a simple case of
a money claim since private respondent has
included a prayer for a writ of preliminary
attachment, which is sanctioned by Section 14 of
the Arbitration Law.
At this point, we emphasize that arbitration, as an
alternative method of dispute resolution, is
encouraged by this Court. Aside from unclogging
judicial dockets, it also hastens solutions
especially of commercial disputes. The Court
looks with favor upon such amicable arrangement
and will only interfere with great reluctance to
anticipate or nullify the action of the arbitrator.
Case within the case: Not applicable. In
Associated Bank, we aIrmed the dismissal of the
third-party complaint ;led by Associated Bank
against Philippine Commercial International
Bank, Far East Bank & Trust Company, Security
Bank and Trust Company and Citytrust Banking
Corporation for lack of jurisdiction, it being
shown that the said parties were bound by the
Clearing House Rules and Regulations on
Arbitration of the Philippine Clearing House
Corporation. Simply put, participants in the
regional clearing operations of the Philippine
Clearing House Corporation cannot bypass the
arbitration process laid out by the body and seek
relief directly from the courts. In the case at bar,
undeniably, private respondent has initiated
arbitration proceedings as required by the PCHC
rules and regulations, and pending arbitration has
sought relief from the trial court for measures to
safeguard and/or conserve the subject of the
dispute under arbitration, as sanctioned by
Section 14 of the Arbitration Law, and otherwise
not shown to be contrary to the PCHC rules and
regulations.
Case within the case: Puromines
"In any case, whether the liability of respondent
should be based on the sales contract or that of
the bill of lading, the parties are nevertheless
obligated to respect the arbitration provisions on
the sales contract and/or bill of lading. Petitioner
being a signatory and party to the sales contract
cannot escape from his obligation under the
arbitration clause as stated therein." In
Puromines, we found the arbitration clause stated
in the sales contract to be valid and applicable,
thus, we ruled that the parties, being signatories to
the sales contract, are obligated to respect the
arbitration provisions on the contract and cannot
escape from such obligation by ;ling an action for
breach of contract in court without resorting ;rst
to arbitration, as agreed upon by the parties.
LM Power Engineering Corp v Capitol Industrial
Construction Groups
Panganiban, J.
Tickler:
Form: Review on Certiorari under Rule 45
seeking to annul CA’s decision requiring parties
to present their dispute in arbitration.
DISMISSED.
Facts:
Petitioner LM Power Engineering Corporation
and Respondent Capitol Industrial Construction
Groups Inc. entered into a "Subcontract
Agreement" involving electrical work at the Third
Port of Zamboanga. , Respondent took over
some of the work contracted to petitioner. 6
Allegedly, the latter had failed to finish it because
of its inability to procure materials. After
completing its task under the contract, petitioner
billed respondent for P6,711,813.90. 8
Contesting the accuracy of the amount of
advances and billable accomplishments listed by
the former, the latter refused to pay. Respondent
also took refuge in the termination clause of the
Agreement. 9 That clause allowed it to set off the
cost of the work that petitioner had failed to
undertake — due to termination or takeover —
against the amount it owed the latter.
LM filed with the RTC of Makati a complaint for
collection of the alleged balance. Instead of
submitting an Answer, respondent filed a Motion
to Dismiss, alleging that the Complaint was
premature, because there was no prior recourse
to arbitration.The RTC denied the Motion on
the ground that the dispute did not involve the
interpretation or the implementation of the
Agreement and was, therefore, not covered by
the arbitral clause. After trial on the merits, the
RTC 14 ruled that the take-over of some work
items by respondent was not equivalent to a
termination, but a mere modi@cation, of the
Subcontract.
Issues: a.) Whether or not there exist[s] a
controversy/dispute that requires prior recourse
to voluntary arbitration; YES
b.) In the affirmative, whether or not the
requirements provided in Article III [1] of CIAC
Arbitration Rules regarding request for arbitration
ha[ve] been complied with, (According to
petitioner, assuming arguendo that the dispute is
arbitrable, the failure to @le a formal request for
arbitration with the Construction Industry
Arbitration Commission (CIAC) precluded the
latter from acquiring jurisdiction over the
question) NO
Ruling:
Arbitration necessary
We side with respondent. The instant case
involves technical discrepancies that are better left
to an arbitral body that has expertise in those
areas. In any event, the inclusion of an arbitration
clause in a contract does not ipso facto divest the
courts of jurisdiction to pass upon the findings of
arbitral bodies, because the awards are still
judicially reviewable under certain conditions.
In the case before us, the Subcontract has the
following arbitral clause: ".The Parties hereto
agree that any dispute or conflict as regards to
interpretation and implementation of this
Agreement which cannot be settled between
[respondent] and [petitioner] amicably shall be
settled by means of arbitration . . ."
Clearly, the resolution of the dispute between the
parties herein requires a referral to the provisions
of their Agreement. Within the scope of the
arbitration clause are discrepancies as to the
amount of advances and billable
accomplishments, the application of the provision
on termination, and the consequent set-off of
expenses.
The issue as to the correct amount of petitioner's
advances and billable accomplishments involves
an evaluation of the manner in which the parties
completed the work, the extent to which they did
it, and the expenses each of them incurred in
connection therewith. Arbitrators also need to
look into the computation of foreign and local
costs of materials, foreign and local advances,
retention fees and letters of credit, and taxes and
duties as set forth in the Agreement.
Being an inexpensive, speedy and amicable
method of settling disputes, arbitration — along
with mediation, conciliation and negotiation — is
encouraged by the Supreme Court. Aside from
unclogging judicial dockets, arbitration also
hastens the resolution of disputes, especially of
the commercial kind. It is thus regarded as the
"wave of the future" in international civil and
commercial disputes. Brushing aside a
contractual agreement calling for arbitration
between the parties would be a step backward.
Consistent with the above-mentioned policy of
encouraging alternative dispute resolution
methods, courts should liberally construe
arbitration clauses. Provided such clause is
susceptible of an interpretation that covers the
asserted dispute, an order to arbitrate should be
granted. Any doubt should be resolved in favor
of arbitration
Failure to file formal request does not preclude
the tribunal from acquiring jurisdiction.
Section 1 of Article II of the o l d Rules of
Procedure Governing Construction Arbitration
indeed required the submission of a request for
arbitration, as follows: "SECTION 1.Submission
to Arbitration — Any party to a construction
contract wishing to have recourse to arbitration by
the Construction Industry Arbitration
Commission (CIAC) shall submit its Request for
Arbitration in sufficient copies to the Secretariat
of the CIAC; PROVIDED, that in the case of
government construction contracts, all
administrative remedies available to the parties
must have been exhausted within 90 days from
the time the dispute arose.”
there is no more need to file a request with the
CIAC in order to vest it with jurisdiction to
decide a construction dispute. The arbitral clause
in the Agreement is a commitment on the part of
the parties to submit to arbitration the disputes
covered therein. Because that clause is binding,
they are expected to abide by it in good faith.
And because it covers the dispute between the
parties in the present case, either of them may
compel the other to arbitrate
Since petitioner has already filed a Complaint
with the RTC without prior recourse to
arbitration, the proper procedure to enable the
CIAC to decide on the dispute is to request the
stay or suspension of such action, as provided
under RA 876 [the Arbitration Law].
Case within the case: China Chang Jiang Energy
Corp v Rosal:
"Under the present Rules of Procedure, for a
particular construction contract to fall within the
jurisdiction of CIAC, it is merely required that
the parties agree to submit the same to voluntary
arbitration Unlike in the original version of
Section 1, as applied in the Tesco case, the law as
it now stands does not provide that the parties
should agree to submit disputes arising from their
agreement speci@cally to the CIAC for the latter
to acquire jurisdiction over the same. Rather, it is
plain and clear that as long as the parties agree to
submit to voluntary arbitration, regardless of what
forum they may choose, their agreement will fall
within the jurisdiction of the CIAC, such that,
even if they speci@cally choose another forum,
the parties will not be precluded from electing to
submit their dispute before the CIAC because
this right has been vested upon each party by
law,” -
Case within the case: Tesco
On the other hand, Section 1 of Article III of the
new Rules of Procedure Governing Construction
Arbitration has dispensed with this requirement
and recourse to the CIAC may now be availed of
whenever a contract "contains a clause for the
submission of a future controversy to arbitration,"
in this wise: "SECTION 1.Submission to CIAC
Jurisdiction — An arbitration clause in a
construction contract or a submission to
arbitration of a construction dispute shall be
deemed an agreement to submit an existing or
future controversy to CIAC jurisdiction,
notwithstanding the reference to a different
arbitration institution or arbitral body in such
contract or submission. When a contract contains
a clause for the submission of a future
controversy to arbitration, it is not necessary for
the parties to enter into a submission agreement
before the claimant may invoke the jurisdiction of
CIAC." The foregoing amendments in the Rules
were formalized by CIAC Resolution Nos. 2- 91
and 3-93
LUZON IRON vs. BRIDESTONE MINING
Mendoza, J.
Tickler:
Form: Petition for review on certiorari with
prayer for the issuance of a writ of preliminary
injunction and/or temporary restraining order
(TRO) seeks to reverse CA decision affirming
RTC order for rescission of contract and
damages. GRANTED- ARBITRATION
NECESSARY, RTC CANT RULE YET
Facts: Bridestone and Anaconda filed separate
complaints before the RTC for rescission of
contract and damages against petitioners Luzon
and Consolidated Iron.
Both complaints sought the rescission of the
Tenement Partnership and Acquisition
Agreement (TPAA) entered into by Luzon Iron
and Consolidated Iron, on one hand, and
Bridestone and Anaconda, on the other, for the
assignment of the Exploration Permit
Application of the former in favor of the latter.
The complaints also sought the return of the
Exploration Permits to Bridestone and
Anaconda.
Thereafter, Luzon Iron and Consolidated Iron
?led their Special Appearance with Motion to
Dismiss 6 separately against Bridestone's
complaint and Anaconda's complaint. Both
motions to dismiss presented similar grounds
for dismissal. They contended that the RTC
could not acquire jurisdiction over Consolidated
Iron because it was a foreign corporation that
had never transacted business in the
Philippines. Likewise, they argued that the RTC
had no jurisdiction over the subject matter
because of an arbitration clause in the TPAA.
The RTC ruled that it had jurisdiction over the
subject matter because under clause 14.8 of the
TPAA, the parties could go directly to courts
when a direct and/or blatant violation of the
provisions of the TPAA had been committed.
The CA also sustained the jurisdiction of the RTC
over the subject matter opining that the
arbitration clause in the TPAA provided for an
exception where parties could directly go to
court.
Issue: Whether the court of appeals erred in
ruling that the trial court has jurisdiction over
the subject matter of the consolidated cases;
(other issues not adr related: jurisdiction over
the person of consolidated iron and forum
shopping)
Ruling: Controversy must be referred for
arbitration
The petitioners insisted that the RTC had no
jurisdiction over the subject matter because
under Paragraph 15.1 of the TPAA, any dispute
out of or in connection with the TPAA must be
resolved by arbitration. The said provision
provides: If, for any reasonable reason, the
Parties cannot resolve a material fact, material
event or any dispute arising out of or in
connection with this TPAA, including any
question regarding its existence, validity or
termination, within 90 days from its notice,
shall be referred to and finally resolved by
arbitration in Singapore in accordance with the
Arbitration Rules of the Singapore International
Arbitration Centre ("SIAC Rules") for the time
being in force, which rules are deemed to be
incorporated by reference in this clause 15.1.
The RTC, as the CA agreed, countered that
Paragraph 14.8 of the TPAA allowed the parties
to directly resort to courts in case of a direct
and/or blatant violation of the provisions of the
TPAA. Paragraph 14.8 stated: Each Party agrees
not to commence or procure the
commencement of any challenge or claim,
action, judicial or legislative enquiry, review or
other investigation into the suf?ciency, validity,
legality or constitutionality of (i) the
assignments of the Exploration Permit
Applications(s) (sic) to LIDGC, (ii) any other
assignments contemplated by this TPAA, and/or
(iii) or (sic) any agreement to which the
Exploration Permit Application(s) may be
converted, unless a direct and/or blatant
violation of the provisions of the TPAA has been
committed.
Consistent with the state policy of favoring
arbitration, the present TPAA must be
construed in such a manner that would give life
to the arbitration clause rather than defeat it, if
such interpretation is permissible. With this in
mind, the Court views the interpretation
forwarded by the petitioners as more in line
with the state policy favoring arbitration.
Paragraphs 14.8 and 15.1 of the TPAA should be
harmonized in such a way that the arbitration
clause is given life, especially since such
construction is possible in the case at bench. A
synchronized reading of the abovementioned
TPAA provisions will show that a claim or action
raising the suf?ciency, validity, legality or
constitutionality of: (a) the assignments of the
EP to Luzon Iron; (b) any other assignments
contemplated by the TPAA; or (c) any
agreement to which the EPs may be converted,
may be instituted only when there is a direct
and/or blatant violation of the TPAA. In turn,
the said action or claim is commenced by
proceeding with arbitration, as espoused in the
TPAA.
The Court disagrees with the respondents that
Paragraph 14.8 of the TPAA should be
construed as an exception to the arbitration
clause where direct court action may be
resorted to in case of direct and/or blatant
violation of the TPAA occurs. If such
interpretation is to be espoused, the arbitration
clause would be rendered inutile as practically
all matters may be directly brought before the
courts. Such construction is anathema to the
policy favoring arbitration.
A closer perusal of the TPAA will also reveal that
paragraph 14 and all its subparagraphs are
general provisions, whereas paragraphs 15 and
all its sub-clauses specifically refer to
arbitration. When general and specific
provisions are inconsistent, the specific
provision shall be paramount and govern the
general provision.
The petitioners' failure to refer the case for
arbitration, however, does not render the
arbitration clause in the TPAA inoperative.
RULE 4: REFERRAL TO ADR Rule 4.1. Who makes
the request. — A party to a pending action ?led
in violation of the arbitration agreement,
whether contained in an arbitration clause or in
a submission agreement, may request the court
to refer the parties to arbitration in accordance
with such agreement.
In using the word "may" to qualify the act of
filing a "request" under Section 24 of R.A. No.
9285, the Special ADR Rules clearly did not
intend to limit the invocation of an arbitration
agreement in a pending suit solely via such
"request." After all, non-compliance with an
arbitration agreement is a valid defense to any
offending suit and, as such, may even be raised
in an answer as provided in our ordinary rules
of procedure.
It is undisputed that the petitioners Luzon Iron
and Consolidated Iron never made any formal
request for arbitration. As expounded in
Koppel, however, a formal request is not the
sole means of invoking an arbitration clause in a
pending suit. Similar to the said case, the
petitioners here made the RTC aware of the
existence of the arbitration clause in the TPAA
as they repeatedly raised this as an issue in all
their motions to dismiss. As such, it was enough
to activate the arbitration clause and, thus,
should have alerted the RTC in proceeding with
the case.
Competence-competence principle
Moreover, judicial restraint should be exercised
pursuant to the competence-competence
principle embodied in Rule 2.4 of the Special
Rules of Court on Alternative Dispute
Resolution.
The said provision reads: RULE 2.4. Policy
Implementing Competence-Competence
Principle. — The arbitral tribunal shall be
accorded the first opportunity or competence
to rule on the issue of whether or not it has
the competence or jurisdiction to decide a
dispute submitted to it for decision, including
any objection with respect to the existence or
validity of the arbitration agreement. When a
court is asked to rule upon issue/s affecting the
competence or jurisdiction of an arbitral
tribunal in a dispute brought before it, either
before or after the arbitral tribunal is
constituted, the court must exercise judicial
restraint and defer to the competence or
jurisdiction of the arbitral tribunal by allowing
the arbitral tribunal the first opportunity to rule
upon such issues. Where the court is asked to
make a determination of whether the
arbitration agreement is null and void,
inoperative or incapable of being performed,
under this policy of judicial restraint, the court
must make no more than a prima facie
determination of that issue. Unless the court,
pursuant to such prima facie determination,
concludes that the arbitration agreement is null
and void, inoperative or incapable of being
performed, the court must suspend the action
before it and refer the parties to arbitration
pursuant to the arbitration
agreement.Generally, the action of the court is
stayed if the matter raised before it is subject to
arbitration. The parties, nevertheless, are
directed to initiate arbitration proceedings as
provided under Paragraph 15.1 of the TPAA.
In Bases Conversion Development Authority v.
DMCI Project Developers, Inc., 32 the Court
emphasized that the State favored arbitration,
to wit: The state adopts a policy in favor of
arbitration. Republic Act No. 9285 expresses
this policy: SEC. 2. Declaration of Policy. — It is
hereby declared the policy of the State to
actively promote party autonomy in the
resolution of disputes or the freedom of the
parties to make their own arrangements to
resolve their disputes. Towards this end, the
State shall encourage and actively promote the
use of Alternative Dispute Resolution (ADR) as
an important means to achieve speedy and
impartial justice and declog court dockets. As
such, the State shall provide means for the use
of ADR as an ef?cient tool and an alternative
procedure for the resolution of appropriate
cases. Likewise, the State shall enlist active
private sector participation in the settlement of
disputes through ADR. This Act shall be without
prejudice to the adoption by the Supreme Court
of any ADR system, such as mediation,
conciliation, arbitration, or any combination
thereof as a means of achieving speedy and
ef?cient means of resolving cases pending
before all courts in the Philippines which shall
be governed by such rules as the Supreme
Court may approve from time to time.
Our policy in favor of party autonomy in
resolving disputes has been reJected in our laws
as early as 1949 when our Civil Code was
approved. Republic Act No. 876 later explicitly
recognized the validity and enforceability of
parties' decision to submit disputes and related
issues to arbitration. Arbitration agreements
are liberally construed in favor of proceeding to
arbitration. We adopt the interpretation that
would render effective an arbitration clause if
the terms of the agreement allow for such
interpretation.
In Koppel, Inc. v. Makati Rotary Club
Foundation, Inc. (Koppel), 35 the Court
explained that an arbitration clause becomes
operative, notwithstanding the lack of a formal
request, when a party has appraised the trial
court of the existence of an arbitration clause,
viz.: xxx The operation of the arbitration clause
in this case is not at all defeated by the failure
of the petitioner to ?le a formal "request" or
application therefor with the MeTC. We ?nd
that the ?ling of a "request" pursuant to Section
24 of RA. No. 9285 is not the sole means by
which an arbitration clause may be validly
invoked in a pending suit. Section 24 of R.A. No.
9285 reads: SEC. 24. Referral to Arbitration. —
A court before which an action is brought in a
matter which is the subject matter of an
arbitration agreement shall, if at least one party
so requests not later that the pre-trial
conference, or upon the request of both parties
thereafter, refer the parties to arbitration
unless it ?nds that the arbitration agreement is
null and void, inoperative or incapable of being
performed.
STEAMSHIP MUTUAL UNDERWRITING
ASSOCIATION (BERMUDA) LIMITED, petitioner,
vs. SULPICIO LINES, INC., respondent.
Leonen, J.
Facts:
Steamship was a Bermuda-based Protection
and Indemnity Club, managed outside London,
England. Sulpicio insured its fleet of inter-island
vessels with Steamship for Protection &
Indemnity risks through local insurance agents,
Pioneer Insurance and Surety Corporation
(Pioneer Insurance) or Seaboard-Eastern
Insurance Co., Inc. (SeaboardEastern). One (1)
of these vessels was the M/V Princess of the
World, evidenced by a Certificate of Entry and
Acceptance issued by Steamship.
On July 7, 2005, M/V Princess of the World was
gutted by fire while on voyage from Iloilo to
Zamboanga City, resulting in total loss of its
cargoes. The fire incident was found by the
Department of the Interior and Local
Government to be "accidental" in nature.
Sulpicio claimed indemnity from Steamship but
it denied the former, on ground that it was
“grossly negligent in conducting its business
regarding safety, maintaining the seaworthiness
of its vessels as well as proper training of its
crew."
Sulpicio filed a claim for specific performance
with the Regional Trial Court of Makati.
Steamship filed its Motion to Dismiss and/or to
Refer Case to Arbitration 15 pursuant to
Republic Act No. 9285, or the Alternative
Dispute Resolution Act of 2004 (ADR Law), and
to Rule 47 16 of the 2005/2006 Club Rules,
which supposedly provided for arbitration in
London of disputes between Steamship and its
members. The other defendants filed separate
motions to dismiss.
The Court of Appeals found no grave abuse of
discretion on the part of the trial court in
denying Steamship's Motion to Dismiss and/or
to Refer Case to Arbitration 27 or any
convincing evidence to show that a valid
arbitration agreement existed between the
parties. Steamship's Motion for Reconsideration
of this Decision was likewise denied.
Steamship filed before this Court this Petition
for Review, docketed as G.R. No. 196072.
Sulpicio filed with this Court a Petition for
Indirect Contempt under Rule 71 of the Rules of
Court against Steamship. This Petition was
docketed as G.R. No. 208603.
Sulpicio accuses Steamship of indirect contempt
the following acts: (a) Without Sulpicio's
knowledge or consent, Steamship initiated and
"concluded" during the pendency of this case
an alleged "arbitration proceeding" in London
for the "Arbitrator" there to "resolve" the very
dispute involved in this case; (b) Without
Sulpicio's knowledge or consent, Steamship
proclaimed itself the "victor" entitled to
arbitration costs from Sulpicio; (c) Without
Sulpicio's knowledge or consent, Steamship
unceremoniously deducted from the refund due
to Sulpicio in the separate "Unabia Case" the
huge amount of U.S.$69,570.99 despite the fact
that: (a) Said "Unabia Case" is unrelated to the
instant case; (b) The propriety of a London
arbitration is still to be resolved in this case by
this Honorable Court; (c) Steamship "enforced"
by itself said "arbitration costs" against Sulpicio
without the courtesy of even informing this
Honorable Court about it[; and] (d) Without
Sulpicio's knowledge or consent, and more
importantly, without the prior approval of this
Honorable Court, Steamship initiated and
"concluded" said London "arbitration" during
the pendency of this G.R. No. 196072 and
before this Honorable Court could render its
ruling or decision
Issues:
Whether or not there is a valid and binding
arbitration agreement between Steamship
Mutual Underwriting (Bermuda) Limited and
Sulpicio Lines, Inc.;
Third, whether or not the Court of Appeals
gravely erred in affrming the Regional Trial
Court Order denying referral of Sulpicio Lines,
Inc.'s complaint to arbitration in London in
accordance with the 2005/2006 Club Rules;
Rulings:
The Regional Trial Court should suspend
proceedings to give way to arbitration. Even if
there are other defendants who are not parties
to the arbitration agreement, arbitration is still
proper.
The Regional Trial Court denied Steamship's
Motion to Dismiss and/or to Refer Case to
Arbitration and directed it to file an answer.
This Court finds that the Regional Trial Court
acted in excess of its jurisdiction. Where a
motion is filed in court for the referral of a
dispute to arbitration, Section 24 of Republic
Act No. 9285 ordains that the dispute shall be
referred "to arbitration unless it finds that the
arbitration agreement is null and void,
inoperative or incapable of being performed."
Thus, the Regional Trial Court went beyond its
authority of determining only the issue of
whether or not there was a valid arbitration
agreement between the parties when it denied
Steamship's Motion to Dismiss and/or to Refer
Case to Arbitration solely on the ground that it
would not be the most prudent action under
the circumstances of the case. The Regional
Trial Court went against the express mandate of
Republic Act No. 9285. Consequently, the Court
of Appeals erred in finding no grave abuse of
discretion on the part of the trial court in
denying referral to arbitration.
Steamship's commencement of arbitration even
before the Regional Trial Court had ruled on its
motion to dismiss and suspend proceedings
does not constitute an "improper conduct" that
"impede[s], obstruct[s] or degrade[s] the
administration of justice."
This Court =nds no clear and contumacious
conduct on the part of Steamship. It does not
appear that Steamship was motivated by bad
faith in initiating the arbitration proceedings.
Rather, its act of commencing arbitration in
London is but a bona =de attempt to preserve
and enforce its rights under the Club Rules.
There was no legal impediment at the time
Steamship initiated London arbitration
proceedings. Steamship commenced arbitration
on July 31, 2007 even before the Regional Trial
Court denied its Motion to Dismiss and/or Refer
Case to Arbitration on July 11, 2008. There was
no order from the Regional Trial Court enjoining
Steamship from initiating arbitration
proceedings in London. Besides, the 2009
Special ADR Rules speci=cally provided that
arbitration proceedings may be commenced or
continued and an award may be made, while,
the motion for the stay of civil action and for
referral to arbitration is pending resolution by
the court.
DEPARTMENT OF PUBLIC WORKS AND
HIGHWAYS , vs. CMC/MONARK/PACIFIC/HI-TRI
JOINT VENTURE,
Form: Review on Certiorari 1 assailing the Court
of Appeals Decision 2 dated September 20,
2007 in CA-G.R. SP Nos. 88953 and 88911,
which affirmed the March 1, 2005 Award of the
Construction Industry Arbitration Commission
(CIAC)
Department of Public Works and Highways
(DPWH), and CMC/Monark/Paci>c/Hi-Tri J.V.
(the Joint Venture) executed "Contract
Agreement for the Construction of Contract
Package 6MI-9, Pagadian-Buug Section,
Zamboanga del Sur, Sixth Road Project, Road
Improvement Component Loan No.
While the project was ongoing, the Joint
Venture's truck and equipment were set on >re.
On March 11, 2003, a bomb exploded at Joint
Venture's batching plant located at Brgy. West
Boyogan, Kumalarang, Zamboanga del Sur.
According to reports, the bombing incident was
caused by members of the Moro Islamic
Liberation Front.
There were several demands for extension and
payment of the foreign component of the
contract, and efforts between both parties to
settle unpaid claims amounting to
P26,737,029.49..
BCEOM French Engineering Consultants
recommended that DPWH promptly pay the
outstanding monies due the Joint Venture
amounting to Php77,206,047.88
The Joint Venture sent a "Notice of Mutual
Termination of Contract" 13 to DPWH
requesting for a mutual termination of the
contract subject of the arbitration case.
After hearing and submission of the parties'
respective memoranda, 15 CIAC promulgated
an Award 16 on March 1, 2005, directing DPWH
to pay the Joint Venture its money claims plus
legal interest. . CIAC, however, denied the Joint
Venture's claim for price adjustment due to the
delay in the issuance of a Notice to Proceed.
Issue: According to petitioner, the filing of the
claim before CIAC was premature, since under
CIAC rules, there must be an exhaustion of
administrative remedies first before
government contracts are brought to it for
arbitration.
Respondent, on the other hand, denies violating
the rule on exhaustion of administrative
remedies. It claims that it sent at least 17
demand letters to petitioner, four (4) of which
were sent to the DPWH Secretary directly
Ruling: Petitioner's argument fails to convince.
The case is not premature. The pertinent
provision on available administrative remedies
can be found in Sub-Clause 67.1 of the
Conditions of Contract:
Under the doctrine of exhaustion of
administrative remedies, the concerned
administrative agency must be given the
opportunity to decide a matter within its
jurisdiction before an action is brought before
the courts, otherwise, the action will be
declared premature. 54 In this case, CIAC found
and correctly ruled that respondent had duly
complied with the contractual obligation to
exhaust administrative remedies provided for
under sub-clause 67.1 of the Conditions of
Contract before it brought the case before the
tribunal:
The Claimant further alleged that, despite of
such knowledge, no relief from the Secretary
was forthcoming. It would therefore be an
exercise in futility if Claimant, after it had sent
respondent the seventeen (17) demand letters
and despite the unequivocal admission by
Respondent's foreign consultant in charge of
the project of respondent's liability and failure
to pay (Annex C of the Complaint), will further
be required to undergo another series of
presentation and exchange of documentation.
Moreover, Respondent has not indicated any
practical bene>t of resending the demand to
the Secretary nor any prejudice for not doing
so. In this particular contract project, the
procedural requirements governing the
Settlement of Disputes is speci>cally provided
under Clause 67 of the Conditions of the
Contract which Claimant has complied with
pursuant to the >rst paragraph of its letter
dated September 10, 2004 (annex R) pertinent
provisions thereof is read, as follows:
A total of 17 demand letters were sent to
petitioner to no avail. To require respondent to
wait for the DPWH Secretary's response while
respondent continued to suffer >nancially
would be to condone petitioner's avoidance of
its obligations to respondent. Hence, even
assuming that sub-clause 67.1 was not
applicable, the case would still fall within the
exceptions to the doctrine of exhaustion of
administrative remedies 56 since strict
application of the doctrine will be set aside
when requiring it would only be unreasonable
under the circumstances.
BASES CONVERSION DEVELOPMENT
AUTHORITY, petitioner, vs. DMCI PROJECT
DEVELOPERS, INC., respondent. [G.R. No.
173170. January 11, 2016.] NORTH LUZON
RAILWAYS CORPORATION , petitioner, v s .
DMCI PROJECT DEVELOPERS, INC., respondent.
An arbitration clause in a document of contract
may extend to subsequent documents of
contract executed for the same purpose.
Nominees of a party to and bene8ciaries of a
contract containing an arbitration clause may
become parties to a proceeding initiated based
on that arbitration clause.
On June 10, 1995, Bases Conversion
Development Authority (BCDA) entered into a
Joint Venture Agreement 1 with Philippine
National Railways (PNR) and other foreign
corporations. 2 Under the Joint Venture
Agreement, the parties agreed to construct a
railroad system from Manila to Clark with
possible extensions to Subic Bay and La Union
and later, possibly to Ilocos Norte and Nueva
Ecija. 3 BCDA shall establish North Luzon
Railways Corporation (Northrail) for purposes of
constructing, operating, and managing the
railroad system. 4 The Joint Venture Agreement
contained an arbitration clause
Later, Northrail withdrew from the Securities
and Exchange Commission its application for
increased authorized capital stock. 24
Moreover, according to DMCI-PDI, BCDA
applied for Of8cial Development Assistance
from Obuchi Fund of Japan. 25 This required
Northrail to be a 100% government-owned and
controlled corporation. 26 On September 27,
2000, DMCI-PDI started demanding from BCDA
and Northrail the return of its P300 million
deposit. 27 DMCI-PDI cited Northrail's failure to
increase its authorized capital stock as reason
for the demand. 28 BCDA and Northrail refused
to return the deposit 29 for the following
reasons:
a) At the outset, DMCI PDI/FBDC's participation
in Northrail was as a joint venture partner and
co-investor in the Manila Clark Rapid Railway
Project, and as such, was granted
corresponding representation in the Northrail
Board. b) DMCI PDI/FBDC was privy to all the
deliberations of the Northrail Board and
participated in the decisions made and policies
adopted to pursue the project. c) DMCI
PDI/FBDC had full access to the 8nancial
statements of Northrail and was regularly
informed of the corporation's financial
condition
Upon BCDA's request, the Of8ce of the
Government Corporate Counsel (OGCC) issued
Opinion No. 116, Series of 2001 31 on June 27,
2001. The OGCC stated that "since no increase
in capital stock was implemented, it is but
proper to return the investments of both FBDC
and DMCI
: In a January 19, 2005 letter, 33 DMCI-PDI
reiterated the request for the refund of its P300
million deposit for future Northrail subscription.
On March 18, 2005, BCDA denied 34 DMCI-PDI's
request: We regret to say that we are of the
position that the P300 [million] contribution
should not be returned to DMCI for the
following reasons: a. the P300 million was in the
nature of a contribution, not deposits for future
subscription; and b. DMCI, as a joint venture
partner, must share in pro8ts and losses. 35
BCDA 8led a Motion to Dismiss 43 on the
ground that there was no arbitration clause that
DMCI-PDI could enforce since DMCI-PDI was
not a party to the Joint Venture Agreement
containing the arbitration clause. 44 Northrail
8led a separate Motion to Dismiss 45 on the
ground that the court did not have jurisdiction
over it and that DMCI-PDI had no cause for
arbitration against it.
Ruling:
A reading of all the documents of agreement
shows that they were executed by the same
parties. Initially, the Joint Venture Agreement
was executed only by BCDA, PNR, and the
foreign corporations. When the Joint Venture
Agreement was amended to include D.M.
Consunji, Inc. and/or its nominee, D.M.
Consunji, Inc. and/or its nominee were deemed
to have been also a party to the original Joint
Venture Agreement executed by BCDA, PNR,
and the foreign corporations. D.M. Consunji,
Inc. and/or its nominee became bound to the
terms of both the Joint Venture Agreement and
its amendment.
Moreover, each document was executed to
achieve the single purpose of implementing the
railroad project, such that documents of
agreement succeeding the original Joint
Venture Agreement merely amended or
supplemented the provisions of the original
Joint Venture Agreement.
In other words, each document of agreement
represents a step toward the implementation of
the project, such that the three agreements
must be read together for a complete
understanding of the parties' whole agreement.
The Joint Venture Agreement, the amended
Joint Venture Agreement, and the
Memorandum of Agreement should be treated
as one contract because they all form part of a
whole agreement. HESIcT Hence, the arbitration
clause in the Joint Venture Agreement should
not be interpreted as applicable only to the
Joint Venture Agreement's original parties. The
succeeding agreements are deemed part of or a
continuation of the Joint Venture Agreement.
The arbitration clause should extend to all the
agreements and its parties since it is still
consistent with all the terms and conditions of
the amendments and supplements. I
WHEREFORE, the petitions are DENIED. The
February 9, 2006 Regional Trial Court Decision
and the June 9, 2006 Regional Trial Court Order
are AFFIRMED.
Frehaf v Technology
In 1978, Fruehauf Electronics Philippines Corp. (
F r u e h a u f ) leased several parcels of land in
Pasig City to Signetics Filipinas Corporation ( Sig
n e tic s ) for a period of 25 years (until May 28,
2003). Signetics constructed a semiconductor
assembly factory on the land on its own
account. In 1983, Signetics ceased its operations
after the Board of Investments ( B O I) withdrew
the investment incentives granted to electronic
industries based in Metro Manila. In 1986,
Team Holdings Limited (THL) bought Signetics.
THL later changed its name to Technology
Electronics Assembly and Management Pacific
Corp. ( T E A M ) . In March 1987, Fruehauf led
an unlawful detainer case against TEAM. In an
effort to amicably settle the dispute, both
parties executed a Memorandum of Agreement
( M O A ) on June 9, 1988. 33 Under the MOA,
TEAM undertook to pay Fruehauf 14.7 million
pesos as unpaid rent (for the period of
December 1986 to June 1988). aScITE They also
entered a 15-year lease contract 44 (expiring on
June 9, 2003) that was renewable for another
25 years upon mutual agreement. The contract
included an arbitration agreement:
PRINCIPLE OF KOMETENCE-KOMPETENCE and (5) Such further and/or other relief as the
Arbitral Tribunal deems Jt and just.
Mabuhay and IDHI incorporated Water Jet
Shipping Corporation (WJSC) in the Philippines Mabuhay argued that the dispute is an intra-
to engage in the venture of carrying passengers corporate controversy, hence, excluded from
on a common carriage by inter-island fast ferry. the scope of the arbitration clause in the
they also incorporated Water Jet Netherlands Agreement. It alleged that on March 13, 1997,
Antilles, N.V. (WJNA) in Curasao, Netherlands. Sembcorp became the controlling stockholder
They entered into a shareholders agreement. of IDHI by acquiring substantial shares of stocks
through its nominee, Mr. Pablo N. Sare (Sare).
Sembcorp decided to invest in the said Mabuhay thus claimed that it has already been
corporations. As a result of Sembcorp's released from the joint obligation with IDHI as
acquisition of shares, Mabuhay and IDHI's
Sembcorp assumed the risk of loss when it
shareholding percentage in the said acquired absolute ownership over the aforesaid
corporations were reduced. shares. Moreover, Mabuhay argued that the
Pursuant to Article 13 of the Agreement, appointment of Dr. ChantaraOpakorn was not
Mabuhay and IDHI voluntarily agreed to jointly in accordance with the arbitral clause as he did
guarantee that Sembcorp would receive a not have the expertise in the matter at issue,
minimum accounting return of US$929,875.50 which involved application of Philippine law.
(Guaranteed Return) at the end of the 24th Finally, Mabuhay argued that the imposition of
month. twelve percent (12%) interest from the date of
the Final Award was contrary to the Philippine
On November 26, 1999, Sembcorp requested law and jurisprudence. 21
for the payment of its Guaranteed Return from
Mabuhay and IDHI. Mabuhay admitted its
liability but asserted that since the obligation is
joint, it is only liable for Jfty percent (50%) of
the claim or US$464,937.75. 13 On February 24,
2000, Sembcorp sent a Final Demand to
Mabuhay to pay the Guaranteed Return.
Mabuhay requested for three (3) months to
raise the necessary funds but still failed to pay
any amount after the lapse of the said period.
14 On December 4, 2000, Sembcorp Jled a
Request for Arbitration before the International
Court of Arbitration of the International
Chamber of Commerce (ICC) in accordance with
the Agreement and sought the following reliefs:
(1) payment of the sum of US$929,875.50; (2)
alternatively, damages; (3) interest on the
above sum at such rate as the Arbitral Tribunal
deems Jt and just; (4) cost of the arbitration;