Adr Case Digests Genprinciples

ALTERNATIVE
DISPUTE RESOLUTION (2019-‐2020)

ATTY. DARNIEL BUSTAMANTE

I.GENERAL PRINCIPLES
A.CASES

1. DEPARTMENT OF FOREIGN AFFAIRS AND BANGKO SENTRAL NG PILIPINAS
VS. FALCON AND BCA INTERNATIONAL CORPORATION;
G.R. NO. 225051 & 210858, JULY 19,2017
PERALTA, J.

FACTS:
In an Amended Build-‐Operate-‐Transfer (BOT) Agreement1 dated April 5,
2002 (Agreement), petitioner DF A awarded the Machine Readable Passport and Visa
Project (MRP/V Project) to respondent BCA International Corporation. In the course of
implementing the MRPN Project, conflict arose and petitioner sought to terminate the
Agreement.

Respondent opposed the termination and filed a Request for Arbitration on April 20, 2006. The
Arbitral Tribunal was constituted on June 29, 2009.2
In its Statement of Claims3 dated August 24, 2009, respondent sought the following reliefs
against petitioner: (a) a judgment nullifying and setting aside the Notice of Termination dated
December 9, 2005 of the DFA, including its demand to BCA to pay liquidated damages equivalent
to the corresponding performance security bond posted by BCA; (b) a judgment confirming the
Notice of Default dated December 22, 2005 issued by BCA to the DF A and ordering the DF A to
perform its obligation under the Amended BOT Agreement dated April 5, 2002 by approving the
site of the Central Facility at the Star Mall Complex in Shaw Boulevard, Mandaluyong City, within
five days from receipt of the Arbitral A ward; (c) a judgment ordering the DF A to pay damages
to BCA, reasonably estimated at ₱l00,000,000.00 as of this date, representing lost business
opportunities; financing fees, costs and commissions; travel expenses; legal fees and expenses;
and cost of arbitration, including the fees of the members of the Arbitral Tribunal; and (d) other
just or equitable relief.

On October 5, 2013, respondent manifested that it shall file an Amended Statement of Claims so
that its claim may conform to the evidence they have presented.4
Petitioner opposed respondent's manifestation, arguing that such amendment at the very late
stage of the proceedings will cause undue prejudice to its interests. However, the Arbitral
Tribunal gave respondent a period of time within which to file its Amended Statement of Claims
and gave petitioner time to formally interpose its objections.5

In the Amended Statement of Claims6 dated October 25, 2013, respondent interposed the
alternative relief that, 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 ₱l ,648,611,531.00, representing the net income respondent is expected to earn
under the Agreement, and ₱l00,000,000.00 as exemplary, temperate or nominal damages.7
In an Opposition dated December 19, 2013, petitioner objected to respondent's Amended
Statement of Claims, averring that its belated filing violates its right to due process and will
prejudice its interest and that the Tribunal has no jurisdiction over the alternative reliefs sought
by respondent.8

ALTERNATIVE DISPUTE RESOLUTION CASE DIGEST A.Y. 2019-‐2020 1
ATTY. BUSTAMANTE
ABSR

On August 6, 2014, respondent filed a Motion to Withdraw Amended Statement of Claims9 in the
light of petitioner's opposition to the admission of the Amended Statement of Claims and to
avoid further delay in the arbitration of its claims, without prejudice to the filing of such claims
for liquidated and other damages at the appropriate time and proceeding. Thereafter,
respondent filed a motion to resume proceedings.

However, on May 4, 2015, respondent filed anew a Motion to Admit Attached Amended
Statement of Claims dated April 30, 2015, increasing the actual damages sought to
₱390,000,000.00, plus an additional ₱l0,000,000.00 for exemplary, temperate or nominal
damages.10
On November 6, 2015, petitioner filed an Opposition to the Motion to Admit Attached Amended
Statement of Claims.

PROCEDURAL ORDER NO. 11
Grants the Motion to Admit on the premise that BCA will no longer present any additional
evidence-‐in-‐chief to prove the bigger claim in the Amended Statement.

For the additional claim of 300 million pesos, BCA should pay the additional fee of 5% or
15 million pesos. Having paid 12 million pesos, the balance of 3 million pesos shall be
payable upon submission of this case for resolution. No award shall be issued and
promulgated by the Tribunal unless the balance of 40% in the Arbitrators' fees for the
original Claim and Counterclaim, respectively, and the balance of 3 million for the
Amended Claim, are all fully paid by the parties.

BOTH PARTIES FILED AN MR

PROCEDURAL ORDER NO. 12

Denied petitioner's motion for reconsideration of Procedural Order No. 11, petitioner
filed this petition for certiorari under Rule 65 of the Rules of Court with application for
issuance of a temporary restraining order and/or writ of preliminary injunction, seeking
to annul and set aside Procedural Order No. 11 dated February 15, 2016 and Procedural
Order No. 12 dated June 8, 2016.
Petitioner stated that it opted to file the petition directly with this court in view of the
immensity of the claim concerned, significance of the public interest involved in this case,
and the circumvention of the temporary restraining order issued by this Court
in Department of Foreign Affairs v. BCA International Corporation, docketed as G.R. No.
210858. It cited Department of Foreign Affairs, et al. v. Hon. Judge Falcon,15 wherein the
Court overlooked the rule on hierarchy of courts and took cognizance of the petition
for certiorari.

ISSUE: WHETHER OR NOT THE ALTERNATIVE RELIEF IN THE AMENDED STATEMENT OF
CLAIMS FALLS OUTSIDE THE SCOPE OF THE ARBITRATION CLAUSE; HENCE, OUTSIDE THE
JURISDICTION OF THE AD HOC ARBITRAL TRIBUNAL

HELD: NO.

The Agreement provides for the resolution of dispute between the parties in Section
19.02 thereof, thus:
2 ALTERNATIVE DISPUTE RESOLUTION CASE DIGEST A.Y. 2019-‐2020
A ATTY. BUSTAMANTE
ABSR

If the Dispute cannot be settled amicably within ninety (90) days by mutual
discussion as contemplated under Section 19.01 herein, the Dispute shall be settled
with finality by an arbitrage tribunal operating under International Law, hereinafter
referred to as the "Tribunal," under the UNCITRAL Arbitration Rules contained in
Resolution 31/98 adopted by the United Nations General Assembly on December
15, 1976, and entitled "Arbitration Rules on the United Nations Commission on the
International Trade Law." The DFA and BCA undertake to abide by and implement
the arbitration award. The place of arbitration shall be Pasay City, Philippines, or
such other place as may mutually be agreed upon by both parties. The Arbitration
proceeding shall be conducted in the English language.
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.17 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. 928519 and its
IRR, and the Special ADR Rules apply.20 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.”

x x x x
The IRR of RA 9285 reiterate that RA 9285 is procedural in character and applicable
to all pending arbitration proceedings. Consistent with Article 2046 of the Civil
Code, the Special ADR Rules were formulated and were also applied to all pending
arbitration proceedings covered by RA 9285, provided no vested rights are
impaired. Thus, contrary to DFA's contention, RA 9285, its IRR, and the Special ADR
Rules are applicable to the present arbitration proceedings. The arbitration between
the DF A and BCA is still pending, since no arbitral award has yet been rendered.
Moreover, DF A did not allege any vested rights impaired by the application of those
procedural rules.

2. G.R. No. 210858
June 29, 2016
DEPARTMENT OF FOREIGN AFFAIRS, Petitioner,
vs.
BCA INTERNATIONAL CORPORATION, Respondent.
CARPIO, J.:

ISSUE AT POINT: : WHETHER OR NOT THE 1976 UNCITRAL ARBITRATION
RULES AND THE RULES OF COURT APPLY TO THE PRESENT ARBITRATION
PROCEEDINGS, NOT RA 9285 AND THE SPECIAL ADR RULES

ATTY. BUSTAMANTE
ABSR

HELD:

Arbitration is deemed a special proceeding13 and governed by the special provisions
of RA 9285, its IRR, and the Special ADR Rules. 14 RA 9285 is the general law
applicable to all matters and controversies to be resolved through alternative
dispute resolution methods. 15 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:

While RA 9285 was passed only in 2004, it nonetheless applies in the instant case
since it is a procedural law which has a retroactive effect. Likewise, KOGIES filed its
application for arbitration before the KCAB on July 1, 1998 and it is still pending
because no arbitral award has yet been rendered. Thus, RA 9285 is applicable to the
instant case. Well-‐settled is the rule that procedural laws are construed to be
applicable to actions pending and undetermined at the time of their passage, and are
deemed retroactive in that sense and to that extent. As a general rule, the
retroactive application of procedural laws does not violate any personal rights
because no vested right has yet attached nor arisen from them. 16 (Emphasis
supplied)

The IRR of RA 9285 reiterate that RA 9285 is procedural in character and applicable
to all pending arbitration proceedings.17 Consistent with Article 2046 of the Civil
Code, 18 the Special ADR Rules were formulated and were also applied to all pending
arbitration proceedings covered by RA 9285, provided no vested rights are
impaired. 19Thus, contrary to DFA's contention, RA 9285, its IRR, and the Special
ADR Rules are applicable to the present arbitration proceeding. The arbitration
between the DFA and BCA is still pending, since no arbitral award has yet been
rendered. Moreover, DFA did not allege any vested rights impaired by the
application of those procedural rules.

RA 9285, its IRR, and the Special ADR Rules provide that any party to an arbitration,
whether domestic or foreign, may request the court to provide assistance in taking
evidence such as the issuance of subpoena ad testificandum and subpoena duces
tecum.20 The Special ADR Rules specifically provide that they shall apply to
assistance in taking evidence,21 and the RTC order granting assistance in taking
evidence shall be immediately executory and not subject to reconsideration or
appeal.22 An appeal with the Court of Appeals (CA) is only possible where the RTC
denied a petition for assistance in taking evidence. 23 An appeal to the Supreme
Court from the CA is allowed only under any of the grounds specified in the Special
ADR Rules.24 We rule that the DFA failed to follow the procedure and the hierarchy
of courts provided in RA 9285, its IRR, and the Special ADR Rules, when DFA directly
appealed before this Court the RTC Resolution and Orders granting assistance in
taking evidence.

A ATTY. BUSTAMANTE
ABSR

DFA contends that the RTC issued the subpoenas on the premise that RA 9285 and
the Special ADR Rules apply to this case. However, we find that even without
applying RA 9285 and the Special ADR Rules, the RTC still has the authority to issue
the subpoenas to assist the parties in taking evidence.

The 1976 UNCITRAL Arbitration Rules, agreed upon by the parties to govern them,
state that 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. "25 Established in this jurisdiction is the rule that the
law of the place where the contract is made governs, or lex loci contractus.26 Since
there is no law designated by the parties as applicable and the Agreement was
perfected in the Philippines, "The Arbitration Law," or Republic Act No. 876 (RA
876), applies

Considering that this petition was not filed in accordance with RA 9285, the Special
ADR Rules and 1976 UNCITRAL Arbitration Rules, this petition should normally be
denied. However, we have held time and again that the ends of justice are better
served when cases are determined on the merits after all parties are given full
opportunity to ventilate their causes and defenses rather than on technicality or
some procedural imperfections. 29More importantly, this case is one of first
impression involving the production of evidence in an arbitration case where
the deliberative process privilege is invoked.

3. G.R. No. 135362 December 13, 1999
HEIRS OF AUGUSTO L. SALAS, JR
vs.
LAPERAL REALTY CORPORATION, ROCKWAY REAL ESTATE CORPORATION,
SOUTH RIDGE VILLAGE, INC., MAHARAMI DEVELOPMENT CORPORATION
DE LEON, JR., J.:

FACTS:
Augusto Salas, Jr. was the registered owner of a vast tract of land in Lipa
City, Batangas. He entered into an Owner-‐Contractor Agreement with
Respondent Laperal Realty Corporation to render and provide complete
(horizontal) construction services on his land. Said agreement contains
an arbitration clause, to wit:

“ARTICLE VI. ARBITRATION.
All cases of dispute between CONTRACTOR and OWNER’S
representative shall be referred to the committee represented by:

1.One representative of the OWNER;
2.One representative of the CONTRACTOR;

ATTY. BUSTAMANTE
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3. One representative acceptable to both OWNER and CONTRACTOR.”

Salas, Jr. then executed a Special Power of Attorney in favor of Respondent Laperal
Realty to exercise general control, supervision and management of the sale of his
land, for cash or on installment basis. By virtue thereof, Respondent Laperal Realty
subdivided said land and sold portions thereof to Respondents Rockway Real Estate
Corporation and South Ridge Village, Inc. in 1990; to Respondent spouses Abrajano
and Lava and Oscar Dacillo in 1991; and to Respondents Eduardo Vacuna,
Florante de la Cruz and Jesus Vicente Capalan in 1996 (Respondent Lot
Buyers hereinafter). Back in 1989, Salas, Jr. left his home in the morning for a
business trip to Nueva Ecija. He, however, never returned on that unfaithful
morning. Seven years later or in 1996, his wife, Teresita Diaz-‐Salas filed with the
RTC of Makati City a verified Petition for the Declaration of Presumptive Death,
which Petition was granted.

In 1998, Petitioners, as heirs of Salas, Jr. filed in the RTC of Lipa City
a Complaint for Declaration of Nullity of Sale, Reconveyance, Cancellation of
Contract, Accounting and Damages against Respondents. Respondent Laperal Realty
filed a Motion to Dismiss on the ground that Petitioners failed to submit their
grievance to arbitration as required under Article VI of the Owner-‐Contractor
Agreement. Respondent spouses Abrajano and Lava and Respondent Dacillo filed a
Joint Answer with Counterclaim and Crossclaim praying for dismissal of Petitioners’
Complaint for the same reason.

The RTC then issued the herein assailed Order dismissing Petitioners’
Complaint for non-‐compliance with the foregoing arbitration clause.
Hence the present Petition for Review on Certiorari under Rule 45.

ISSUE:

WHETHER OR NOT THE ARBITRATION CLAUSE UNDER ARTICLE VI OF THE
OWNERCONTRACTOR AGREEMENT IS BINDING UPON THE RESPONDENT LOT
BUYERS

ARGUMENTS:
Petitioners argue that (1) their causes of action did not emanate from
the Owner-‐Contractor Agreement, (2) that their causes of action for
cancellation of contract and accounting are covered by the exception
under the Arbitration Law, and (3) that failure to arbitrate is not a
ground for dismissal.

Petitioners claim that they suffered lesion of more than one-‐fourth (1/4)
of the value of Salas, Jr.’s land when Respondent Laperal Realty subdivided it and
sold portions thereof to Respondent Lot Buyers. Thus, they instituted action against
A ATTY. BUSTAMANTE
ABSR

both Respondent Laperal Realty and Respondent Lot Buyers for rescission of the
sale transactions and reconveyance to them of the subdivided lots. They argue that
rescission, being their cause of action, falls under the exception clause in Sec. 2
ofRepublic 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”.

HELD:NO.
Respondent Lot Buyers are neither parties to the Agreement nor the
latter’s assigns or heirs. Consequently, the right to arbitrate as provided
in Article VI of the Agreement was never vested in Respondent Lot
Buyers.

Respondent Laperal Realty, on the other hand, 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 betweenPetitioners 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. Petition is GRANTED. The
assailed Order of RTC of Lipa City is
NULLIFIED and SET ASIDE.

4.HOME BANKERS SAVINGS AND TRUST COMPANY, petitioner,
vs.
COURT OF APPEALS and FAR EAST BANK & TRUST CO., INC. respondents.
G.R. No. 115412, November 19, 1999
BUENA, J.:

FACTS:
Victor Tancuan issued Petitioner Home Bankers Savings and Trust Company a check
while Eugene Arriesgado issued Private Respondent Far East Bank and Trust
Company three checks; both checks totaling the amount of P25,250,000.00. Tancuan
and Arriesgado exchanged each other’s checks and deposited them with their
respective banks for collection. When FEBTC presented Tancuan’s HBSTC check for
clearing, it was dishonored for being DAIF. Meanwhile, HBSTC sent Arriesgado’s 3
FEBTC checks through the Philippine Clearing House Corporation (PCHC) to FEBTC
but was returned for being DAIF. HBSTC receive 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 3 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. HBSTC, however

ATTY. BUSTAMANTE
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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, under its Supplementary Rules on Regional Clearing to
which FEBTC and HBSTC are bound as participants in the regional clearing
operations administered by the PCHC. While the arbitration proceeding was still
pending, FEBTC filed an action for sum of money and damages with preliminary
attachment against HBSTC. HBSTC moved to dismiss on the ground that there is no
cause of action and because it seeks to enforce an arbitral award which as yet does
not exist. The trial court denied the motion to dismiss and the motion for
reconsideration. Petitioner then filed a petition for certiorari with respondent CA to
which it had dismissed.

ISSUE:
Whether or not private respondent which commenced an arbitration proceeding
under the auspices of the PCHC may subsequently file a separate case in court over
the same subject matter despite the pendency of that arbitration, simply to obtain
the provisional remedy of attachment against the adverse party in the arbitration
proceeding.

HELD:
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.

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 file a petition in court to
safeguard any matter which is the subject of the dispute in arbitration. In the case at
bar, private respondent filed 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.

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,
A ATTY. BUSTAMANTE
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as sanctioned by section 14 of the Arbitration Law, and otherwise not shown to be
contrary to the PCHC rules and regulations.

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. Wherefore, premises considered,
the petition is hereby dismissed and the decision of the court a quo is affirmed.
5. G.R. No. 141833 March 26, 2003
LM POWER ENGINEERING CORPORATION, petitioner,
vs.
CAPITOL INDUSTRIAL CONSTRUCTION GROUPS, INC., respondent.
PANGANIBAN, J.:

FACTS:
LM Power Engineering Corporation and Capitol Industrial Construction Groups Inc.
entered into a Subcontract Agreement involving electrical work at the Third Port of
Zamboanga. Due to the inability of the petitioner to procure materials, Capitol
Industrial took over some of the work contracted to the former. After the
completion of the contract, petitioner billed respondent in the amount of P6,
711,813.90 but the respondent refused to pay.

Petitioner filed with the RTC of Makati a Complaint for the collection of the amount
representing the alleged balance due it under the subcontract. Respondent filed a
Motion to Dismiss, alleging that the Complaint was premature, due to the absence of
prior recourse to arbitration.

RTC denied the Motion on the ground that the dispute did not involve the
interpretation or the implementation of the Agreement and was not covered by the
arbitral clause and ruled in favor of the petitioner. Respondent appealed to the CA,
the latter reversed the decision of the RTC and ordered the referral of the case to
arbitration.

ISSUE:
WHETHER OR NOT THERE IS A NEED FOR THE PRIOR ARBITRATION BEFORE
FILING OF THE COMPLAINT WITH THE COURT.

HELD: YES.
The case at hand involves technical discrepancies that are better left to an arbitral
body that has expertise in the subject matter. Moreover, the agreement between the
parties contains arbitral clause 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

ATTY. BUSTAMANTE
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arbitration”. 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. There is no need for prior
request for arbitration by the parties with the CIAC in order for it to acquire
jurisdiction because 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
arbitral clause in the agreement is a commitment on the part of the parties to submit
to arbitration the disputes covered therein.

6. LUZON IRON DEVELOPMENT GROUP CORPORATION AND CONSOLIDATED
IRON SANDS, LTD.,Petitioners, v. BRIDESTONE MINING AND DEVELOPMENT
CORPORATION AND ANACONDA MINING AND DEVELOPMENT
CORPORATION, Respondents.
G.R. No. 220546, December 07, 2016
MENDOZA, J.:

FACTS:
On October 25, 2012, respondents Bridestone Mining and Development Corporation
(Bridestone) and Anaconda Mining and Development Corporation (Anaconda) filed
separate complaints before the RTC for rescission of contract and damages against
petitioners Luzon Iron Development Group Corporation (Luzon Iron) and
Consolidated Iron Sands, Ltd. (Consolidated Iron), docketed as Civil Case No. 12-‐
1053 and Civil Case No. 12-‐1054, respectively. Both complaints sought the
rescission of the Tenement Partnership and Acquisition Agreement (TPAA)4 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.5

Thereafter, Luzon Iron and Consolidated Iron filed their Special Appearance with
Motion to Dismiss6separately 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.

On December 19, 2012, the RTC ordered the consolidation of the two
cases.7 Subsequently, Luzon Iron and Consolidated Iron filed their Special
Appearance and Supplement to Motions to Dismiss,8 dated January 31, 2013,
ATTY. BUSTAMANTE
ABSR

seeking the dismissal of the consolidated cases. The petitioners alleged that
Bridestone and Anaconda were guilty of forum shopping because they filed similar
complaints before the Department of Environment and Natural Resources (DENR),
Mines and Geosciences Bureau, Regional Panel of Arbitrators against Luzon Iron.

RTC: Denied the motions to dismiss, as well as the supplemental motion to dismiss,
finding that Consolidated Iron was doing business in the Philippines, with Luzon
Iron as its resident agent.

CA: It agreed that the court acquired jurisdiction over the person of Consolidated
Iron because the summons may be validly served through its agent Luzon Iron,
considering that the latter was merely the business conduit of the former. 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

HELD: YES.
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 15.1.30

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
sufficiency, 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.31

Thus, 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

ATTY. BUSTAMANTE 1
ABSR

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 sufficiency, 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 sub-‐
paragraphs 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.34

7. GR. No. 196072, September 20, 2017
STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION (BERMUDA)
LIMITED, Petitioner, v. SULPICIO LINES, INC., Respondent.
LEONEN, J.:

FACTS:
An insured member may be compelled to arbitration pursuant to the Rules of the
Protection and Indemnity Club, which were incorporated in the insurance policy by
reference. Where there are multiple parties, the court must refer to arbitration the
parties covered by the agreement while proceeding with the civil action against
those who were not bound by the arbitration agreement.

Steamship was a Bermuda-‐based Protection and Indemnity Club, managed outside
London, England.6 It insures its members-‐shipowners against "third party risks and
liabilities" for claims arising from (a) death or injury to passengers; (b) loss or
damage to cargoes; and (c) loss or damage from collisions.7

Sulpicio insured its fleet of inter-‐island vessels with Steamship for Protection &
Indemnity risks through local insurance agents, Pioneer Insurance and Surety
ATTY. BUSTAMANTE
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Corporation (Pioneer Insurance) or Seaboard-‐Eastern Insurance Co., Inc. (Seaboard-‐
Eastern).8 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 Interior and Local Government to be "accidental" in
nature.10

Sulpicio claimed indemnity from Steamship under the Protection & Indemnity
insurance policy. Steamship denied the claim and subsequently rescinded the
insurance coverage of Sulpicio's other vessels on the ground that "Sulpicio was
grossly negligent in conducting its business regarding safety, maintaining the
seaworthiness of its vessels as well as proper training of its crew."11

On June 28, 2007, Sulpicio filed a Complaint12 with the Regional Trial Court of
Makati City against Steamship; one (1) of its directors, Gary Rynsard; and its local
insurance agents Pioneer Insurance and Seaboard-‐Eastern for specific performance
and damages. This Complaint was docketed as Civil Case No. 07-‐577, was amended
on August 10, 2007,13 and further amended on September 11, 2007.14

Steamship filed its Motion to Dismiss and/or to Refer Case to Arbitration15 pursuant
to Republic Act No. 9285, or the Alternative Dispute Resolution Act of 2004 (ADR
Law), and to Rule 4716 of the 2005/2006 Club Rules, which supposedly provided for
arbitration in London of disputes between Steamship and its members.17 The other
defendants filed separate motions to dismiss.18

Branch 149, Regional Trial Court, Makati City denied the motions to dismiss. In its
July 11, 2008 Order,19 denying Steamship's motion and supplemental motion to
dismiss and citing20European Resources and Technologies, Inc. v. Ingenieuburo
Birkhann + Nolte, Ingeniurgesellschaft Gmbh21 the Regional Trial Court held that
"arbitration [did] not appear to be the most prudent action, . . . considering that the
other defendants . . . ha[d] already filed their [respective] [a]nswers."22 Steamship
filed its Motion for Reconsideration,23 but it was likewise denied in the
Order24 dated September 24, 2008.

Steamship assailed trial court orders before the Court of Appeals through a Rule 65
Petition, docketed as CA-‐G.R. SP No. 106103.25 The Court of Appeals dismissed the
petition in its November 26, 2010 Decision.26 It 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 Arbitration27 or any convincing evidence to show that a valid
arbitration agreement existed between the parties.28 Steamship's Motion for
Reconsideration of this Decision was likewise denied in the Resolution29 dated
March 10, 2011.

ATTY. BUSTAMANTE 3
ABSR

ISSUE: WHETHER OR NOT THERE IS A VALID AND BINDING ARBITRATION
AGREEMENT BETWEEN STEAMSHIP MUTUAL UNDERWRITING (BERMUDA)
LIMITED AND SULPICIO LINES, INC

HELD:YES.

It is the State's policy to promote party autonomy in the mode of resolving
disputes.126 Under the freedom of contract principle, parties to a contract may
stipulate on a particular method of settling any conflict between
them.127 Arbitration and other alternative dispute resolution methods like
mediation, negotiation, and conciliation are favored over court action. Republic Act
No. 9285128 expresses this policy:
Section 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
efficient 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 efficient 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. (Emphasis
supplied)

Arbitration, as a mode of settling disputes, was already recognized in the Civil
Code.129 In 1953, Republic Act No. 876 was passed, which reinforced domestic
arbitration as a process of dispute resolution. Foreign arbitration was likewise
recognized through the Philippines' adherence to the United Nations Convention on
the Recognition and Enforcement of Foreign Arbitral Awards of 1958, otherwise
known as the New York Convention.130 Republic Act No. 9285 sets the basic
principles in the enforcement of foreign arbitral awards in the Philippines.131

Consistent with State policy, "arbitration agreements are liberally construed in favor
of proceeding to arbitration."132 Every reasonable interpretation is indulged to give
effect to arbitration agreements. Thus, courts must give effect to the arbitration
clause as much as the terms of the agreement would allow.133 "Any doubt should be
resolved in favor of arbitration."134

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Sulpicio's acceptance of the Certificate of Entry and Acceptance manifests its
acquiescence to all its provisions. There is no showing in the records or in Sulpicio's
contentions that it objected to any of the terms in this Certificate. Its acceptance,
likewise, operated as an acceptance of the entire provisions of the Club Rules.

When a contract is embodied in two (2) or more writings, the writings of the parties
should be read and interpreted together in such a way as to render their intention
effective.144 The arbitration clause is found in Rule 47 of the 2005/2006 Club Rules

Under Rule 47, any dispute concerning the insurance afforded by Steamship must first be brought by a claiming member to the
Directors for adjudication. If this member disagrees with the decision of the Director, the dispute must be referred to
arbitration in London. Despite the member's disagreement, the Managers of Steamship may refer the dispute to arbitration
without adjudication of the Directors. This procedure must be complied with before the member can pursue legal proceedings
against Steamship.

There is no ambiguity in the terms and clauses of the Certificate of Entry Acceptance. Contrary to the ruling of the Court of
Appeals, the Certificate clearly incorporates the entire Club Rules—not only those provisions relating to cancellation and
alteration of the policy.148

"[W]hen the text of a contract is explicit and leaves no doubt as to its intention, the court may not read into it any other
intention that would contradict its plain import."149

The incorporation of the Club Rules in the insurance policy is without any qualification. This includes the arbitration clause
even if not particularly stipulated. A basic rule in construction is that the entire contract, and each and all of its parts, must be
read together and given effect, with all its clauses and provisions harmomonized with one another.150

In domestic arbitration, the formal requirements of an arbitration agreement are

that it must "be in writing and subscribed by the party sought to be charged, or by
his lawful agent."151 In international commercial arbitration,152 it is likewise
required that the arbitration agreement must be in writing.

An arbitration agreement is in writing if it is contained (1) in a document signed by
the parties, (2) in an exchange of letters, telex, telegrams or other means of
telecommunication which provide a record of the agreement, or (3) in an exchange
of statements of claim and defense in which the existence of an agreement is alleged
by a party and not denied by another. The reference in a contract to a document
containing an arbitration clause constitutes an arbitration agreement provided that
the contract is in writing and the reference is such as to make that clause part of the
contract.153

Thus, an arbitration agreement that was not embodied in the main agreement but
set forth in another document is binding upon the parties, where the document was
incorporated by reference to the main agreement. The arbitration agreement
contained in the Club Rules, which in turn was referred to in the Certificate of Entry
and Acceptance, is binding upon Sulpicio even though there was no specific

ATTY. BUSTAMANTE 5
ABSR

stipulation on dispute resolution in this Certificate.

Furthermore, as stated earlier, Sulpicio became a member of Steamship by the very
act of making a contract of insurance with it. The Certificate of Entry and Acceptance
issued by Steamship states that "[its] name has been entered in the Register of
Members of the Club as a Member."157 Sulpicio admits its membership and the entry
of its vessels to Steamship.

8.DEPARTMENT OF PUBLIC WORKS AND
HIGHWAYS, Petitioner, v. CMC/MONARK/PACIFIC/HI-‐TRI JOINT
VENTURE, Respondent.
G.R. No. 179732, September 13, 2017
LEONEN,J.

FACTS:
As the administrative agency tasked with resolving issues pertaining to the
construction industry, the Construction Industry Arbitration Commission
enjoys a wide latitude in recognition of its technical expertise and experience.
Its factual findings are, thus, accorded respect and even finality, particularly
when they are affirmed by an appellate court.

This is a Petition for Review on Certiorari1 assailing the Court of Appeals
Decision2 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).

On April 29, 1999, Republic of the Philippines, through the Department of Public
Works and Highways (DPWH), and CMC/Monark/Pacific/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. 1473-‐PHI"3 (Contract) for a total contract
amount of P713,330,885.28.4

Parts I (General Conditions with forms of tender + agreement) and II (Conditions of
Particular Application + Guidelines for Preparation of Part II Clauses) of the
"Conditions of Contract for Works of Civil Engineering Construction of the
Federation International Des Ingenieurs -‐ Conseils" (Conditions of Contract) formed.
part of the Contract.5 DPWH hired BCEOM French Engineering Consultants to
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oversee the project.6

On October 23, 2002, or while the project was ongoing, the Joint Venture's truck and
equipment were set on fire. On March 11, 2003, a bomb exploded at Joint Venture's
hatching 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.7

The Joint Venture made several written demands for extension and payment of the
foreign component of the Contract. There were efforts between the parties to settle
the unpaid Payment Certificates amounting to P26,737,029.49. Thus, only the
foreign component of US$358,227.95 was up for negotiations subject to further
reduction of the amount on account of payments subsequently received by the Joint
Venture from DPWH.8

In a letter dated September 18, 2003, BCEOM French Engineering Consultants
recommended that DPWH promptly pay the outstanding monies due the Joint
Venture.9 The letter also stated that the actual volume of the Joint Venture's
accomplishment was "2,732m2 of hardrock and 4,444m3 of rippable rock," making
the project 80% complete when it was halted.10

On March 3, 2004, the Joint Venture filed a Complaint11 against DPWH before CIAC.

Meanwhile, on July 8, 2004, 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. This is due to its diminished financial capability due to
DPWH's late payments, changes in the project involving payment terms, peace and
order problems, and previous agreement by the parties.

On July 16, 2004, then DPWH Acting Secretary Florante Soriquez accepted the Joint
Venture's request for mutual termination of the contract.14

After hearing and submission of the parties' respective memoranda,15 CIAC
promulgated an Award16 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 under
Presidential Decree

CA: Sustained CIAC's Award with certain modifications and remanded the case
to CIAC for the determination of the number of days' extension that the Joint
Venture is entitled to and "the conversion rate in peso.

ISSUE: WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN
RENDERING THE ASSAILED DECISION BECAUSE IT COMPLETELY IGNORED,
OVERLOOKED, OR MISAPPRECIATED FACTS OF SUBSTANCE, WHICH, IF DULY

ATTY. BUSTAMANTE 7
ABSR

CONSIDERED, WOULD MATERIALLY AFFECT THE OUTCOME OF THE CASE

HELD:NO.
CIAC was created under Executive Order No. 1008, or the "Construction Industry
Arbitration Law." It was originally under the administrative supervision of the
Philippine Domestic Construction Board59 which, in turn, was an implementing
agency of the Construction Industry Authority of the Philippines.60 The Construction
Industry Authority of the Philippines is presently a part of the Department of Trade
and Industry as an attached agency.61

CIAC's specific purpose is the "early and expeditious settlement of disputes"62 in the
construction industry as a recognition of the industry's role in "the furtherance of
national development goals."63

Section 4 of the Construction Industry Arbitration Law lays out CIAC's jurisdiction:
Section 4. Jurisdiction. -‐ The CIAC shall have original and exclusive jurisdiction over
disputes arising from, or connected with, contracts entered into by parties involved
in construction in the Philippines, whether the dispute arises before or after the
completion of the contract, or after the abandonment or breach thereof. These
disputes may involve government or private contracts. For the Board to acquire
jurisdiction, the parties to a dispute must agree to submit the same to voluntary
arbitration.

The jurisdiction of the CIAC may include but is not limited to violation of
specifications for materials and workmanship; violation of the terms of agreement;
interpretation and/or application of contractual time and delays; maintenance and
defects; payment, default of employer or contractor and changes in contract cost.

CIAC's authority to arbitrate construction disputes was then incorporated into the
general statutory framework on alternative dispute resolution through Republic Act
No. 9285, the "Alternative Dispute Resolution Act of 2004". Section 34 of Republic
Act No. 9285 specifically referred to the Construction Industry Arbitration Law,
while Section 35 confirmed CIAC's jurisdiction:
CHAPTER 6 -‐ ARBITRATION OF CONSTRUCTION DISPUTES

Section 34. Arbitration of Construction Disputes: Governing Law. -‐ The arbitration of
construction disputes shall be governed by Executive Order No. 1008, otherwise
known as the Constitution Industry Arbitration Law.

Section 35. Coverage of the Law. -‐ Construction disputes which fall within the
original and exclusive jurisdiction of the Construction Industry Arbitration
Commission (the "Commission") shall include those between or among parties to, or
who are otherwise bound by, an arbitration agreement, directly or by reference
whether such parties are project owner, contractor, subcontractor, quantity
ATTY. BUSTAMANTE
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surveyor, bondsman or issuer of an insurance policy in a construction project.

The Commission shall continue to exercise original and exclusive jurisdiction over
construction disputes although the arbitration is "commercial" pursuant to Section
21 of this Act.

As a general rule, findings of fact of CIAC, a quasi-‐judicial tribunal which has
expertise on matters regarding the construction industry, should be respected and
upheld. In National Housing Authority v. First United Constructors Corp.,64 this Court
held that CIAC's factual findings, as affirmed by the Court of Appeals, will not be
overturned except as to the most compelling of reasons:

As this finding of fact by the CIAC was affirmed by the Court of Appeals, and it being
apparent that the CIAC arrived at said finding after a thorough consideration of the
evidence presented by both parties, the same may no longer be reviewed by this
Court. The all too-‐familiar rule is that the Court will not, in a petition for review on
certiorari, entertain matters factual in nature, save for the most compelling and
cogent reasons, like when such factual findings were drawn from a vacuum or
arbitrarily reached, or are grounded entirely on speculation or conjectures, are
conflicting or are premised on the supposed evidence and contradicted by the
evidence on record or when the inference made is manifestly mistaken or absurd.
This conclusion is made more compelling by the fact that the CIAC is a quasi-‐judicial
body whose jurisdiction is confined to construction disputes. Indeed, settled is the
rule that 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 finality when affirmed by the Court of
Appeals.65 (Emphasis supplied)

Excluded from the coverage of this law are disputes arising from employer-‐
employee relationships which shall continue to be covered by the Labor Code of the
Philippines.

Republic Act No. 9184 or the "Government Procurement Reform Act," recognized
CIAC's competence in arbitrating over contractual disputes within the construction
industry:

Section 59. Arbitration, Any and all disputes arising from the implementation of a
contract covered by this Act shall be submitted to arbitration in the Philippines
according to the provisions of Republic Act No. 876, otherwise known as the
"Arbitration Law": Provided, however, That, disputes that are within the competence
of the Construction Industry Arbitration Commission to resolve shall be referred
thereto. The process of arbitration shall be incorporated as a provision in the
contract that will be executed pursuant to the provisions of this Act: Provided, That

ATTY. BUSTAMANTE 9
ABSR

by mutual agreement, the parties may agree in writing to resort to alternative
modes of dispute resolution. (Emphasis supplied)

CIAC's authority to arbitrate construction disputes was then incorporated into the
general statutory framework on alternative dispute resolution through Republic Act
No. 9285, the "Alternative Dispute Resolution Act of 2004". Section 34 of Republic Act
No. 9285 specifically referred to the Construction Industry Arbitration Law, while
Section 35 confirmed CIAC's jurisdiction.

In distinguishing between commercial arbitration, voluntary arbitration under
Article 219(14) of the Labor Code,66 and construction arbitration, Freuhauf
Electronics Philippines Corporation v. Technology Electronics Assembly and
Management Pacific67 ruled that commercial arbitral tribunals are purely ad hoc
bodies operating through contractual consent, hence, they are not quasi-‐judicial
agencies. In contrast, voluntary arbitration under the Labor Code and construction
arbitration derive their authority from statute in recognition of the public interest
inherent in their respective spheres. Furthermore, voluntary arbitration under the
Labor Code and construction arbitration exist independently of the will of the
contracting parties:

Voluntary Arbitrators resolve labor disputes and grievances arising from the
interpretation of Collective Bargaining Agreements. These disputes were specifically
excluded from the coverage of both the Arbitration Law and the ADR Law.

Unlike purely commercial relationships, the relationship between capital and labor
are heavily impressed with public interest. Because of this, Voluntary Arbitrators
authorized to resolve labor disputes have been clothed with quasi-‐judicial authority.

On the other hand, commercial relationships covered by our commercial arbitration
laws are purely private and contractual in nature. Unlike labor relationships, they do
not possess the same compelling state interest that would justify state interference
into the autonomy of contracts. Hence, commercial arbitration is a purely private
system of adjudication facilitated by private citizens instead of government
instrumentalities wielding quasi-‐judicial powers.

Moreover, judicial or quasi-‐judicial jurisdiction cannot be conferred upon a tribunal
by the parties alone. The Labor Code itself confers subject-‐matter jurisdiction to
Voluntary Arbitrators.

Notably, the other arbitration body listed in Rule 43 -‐ the Construction Industry
Arbitration Commission (CIAC) -‐ is also a government agency attached to the
Department of Trade and Industry. Its jurisdiction is likewise conferred by statute. By
contrast, the subject matter jurisdiction of commercial arbitrators is stipulated by
the.parties.68 (Emphasis supplied)
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8.BASES CONVERSION DEVELOPMENT AUTHORITY v. DMCI PROJECT
DEVELOPERS
GR No. 173137, Jan 11, 2016
LEONEN, J.:

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 beneficiaries of a contract containing an arbitration clause may become
parties to a proceeding initiated based on that arbitration clause.

FACTS:
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.

BCDA organized and incorporated Northrail.[6] Northrail was registered with the
Securities and Exchange Commission on August 22, 1995.[7]

BCDA invited investors to participate in the railroad project's financing and
implementation. Among those invited were D.M. Consunji, Inc. and Metro Pacific
Corporation.[8]

On February 8, 1996, the Joint Venture Agreement was amended to include D.M.
Consunji, Inc. and/or its nominee as party.[9] Under the amended Joint Venture
Agreement, D.M. Consunji, Inc. shall be an additional investor of Northrail.[10] It shall
subscribe to 20% of the increase in Northrail's authorized capital stock.[11]

On February 8, 1996, BCDA and the other parties to the Joint Venture Agreement,
including D.M. Consunji, Inc. and/or its nominee, entered into a Memorandum of
Agreement.[12] Under this agreement, the parties agreed that the initial seed capital
of P600 million shall be infused to Northrail.[13] Of that amount, P200 million shall
be D.M. Consunji, Inc.'s share, which shall be converted to equity upon NorthraiPs
privatization.[14] Later, D.M. Consunji, Inc.'s share was increased to P300 million.[15]

Upon BCDA and Northrail's request,[16] DMCI Project Developers, Inc. (DMCI-‐PDI)
deposited P300 million into NorthraiPs account with Land Bank of the
Philippines.[17] The deposit was made on August 7, 1996[18] for its "future
subscription of the Northrail shares of stocks."[19] In NorthraiPs 1998 financial

ATTY. BUSTAMANTE 1
ABSR

statements submitted to the Securities and Exchange Commission, this amount was
reflected as "Deposits For Future Subscription."[20] At that time, NorthraiPs
application to increase its authorized capital stock was still pending with the
Securities and Exchange Commission.[21]

In letters[22] dated April 4, 1997, D.M. Consunji, Inc. informed PNR and the other
parties that DMCI-‐PDI shall be its designated nominee for all the agreements it
entered and would enter with them in connection with the railroad project.

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 Official 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.

Upon BCDA's request, the Office 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[.]"[32]

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 August 17, 2005,[36] DMCI-‐PDI served a demand for arbitration to BCDA and
Northrail, citing the arbitration clause in the June 10, 1995 Joint Venture
Agreement.[37] BCDA and Northrail failed to respond.[38]

DMCI-‐PDI filed before the Regional Trial Court of Makati[39] a Petition to Compel
Arbitration[40] against BCDA and Northrail, pursuant to the alleged arbitration
clause in the Joint Venture Agreement.[41] DMCI-‐PDI prayed for "an order directing
the parties to proceed to arbitration in accordance with the terms and conditions of
the agreement."[42]

BCDA filed 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 filed 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.

ATTY. BUSTAMANTE
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RTC: The trial court ruled that the arbitration clause in the Joint Venture Agreement
should cover all subsequent documents including the amended Joint Venture
Agreement and the Memorandum of Agreement. The three (3) documents
constituted one contract for the formation and funding of Northrail.[49]

The trial court also ruled that even though DMCI-‐PDI was not a signatory to the Joint
Venture Agreement and the Memorandum of Agreement, it was an assignee of D.M.
Consunji, Inc.'s rights. Therefore, it could invoke the arbitration clause in the Joint
Venture Agreement.

ISSUE: WHETHER DMCI-‐PDI MAY COMPEL BCDA AND NORTHRAIL TO SUBMIT
TO ARBITRATION.

HELD: YES.
Arbitration is a mode of settling disputes between parties.[75] Like many alternative
dispute resolution processes, it is a product of the meeting of minds of parties
submitting a pre-‐defined set of disputes. They agree among themselves to a process
of dispute resolution that avoids extended litigation.

The state adopts a policy in favor of arbitration. Republic Act No.
9285[76] 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 efficient 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 efficient 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.
(Emphasis supplied)

Our policy in favor of party autonomy in resolving disputes has been reflected in our
laws as early as 1949 when our Civil Code was approved.[77] Republic Act No.
876[78] later explicitly recognized the validity and enforceability of parties' decision
to submit disputes and related issues to arbitration.[79]

Arbitration agreements are liberally construed in favor of proceeding to

ATTY. BUSTAMANTE 3
ABSR

arbitration.[80] We adopt the interpretation that would render effective an
arbitration clause if the terms of the agreement allow for such interpretation.
Hence, we resolve the issue of whether DMCI-‐PDI may compel BCDA and Northrail
to submit to arbitration proceedings in light of the policy in favor of arbitration.

9. FRUEHAUF ELECTRONICS PHILIPPINES CORPORATION, Petitioner,
vs.
TECHNOLOGY ELECTRONICS ASSEMBLY AND MANAGEMENT PACIFIC
CORPORATION, Respondent.
G.R. No. 204197
BRION, J.:

The fundamental importance of this case lies in its delineation of the extent of
permissible judicial review over arbitral awards. We make this determination
from the prism of our existing laws on the subject and the prevailing state policy
to uphold the autonomy of arbitration proceedings.

FACTS:
In 1978, Fruehauf Electronics Philippines Corp. (Fruehauf) leased several parcels of
land in Pasig City to Signetics Filipinas Corporation (Signetics) 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 (BOI) 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. (TEAM).

In March 1987, Fruehauf filed an unlawful detainer case against TEAM. In an effort
to amicably settle the dispute, both parties executed a Memorandum of
Agreement (MOA) on June 9, 1988.3 Under the MOA, TEAM undertook to pay
Fruehauf 14.7 million pesos as unpaid rent (for the period of December 1986 to June
1988).

They also entered a 15-‐year lease contract4 (expiring on June 9, 2003) that was
renewable for another 25 years upon mutual agreement. The contract included an
arbitration agreement.

The contract also authorized TEAM to sublease the property. TEAM subleased the
property to Capitol Publishing House (Capitol) on December 2, 1996 after notifying
Fruehauf.
On May 2003, TEAM informed Fruehauf that it would not be renewing the lease. 6

ATTY. BUSTAMANTE
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On May 31, 2003, the sublease between TEAM and Capitol expired. However, Capitol
only vacated the premises on March 5, 2005. In the meantime, the master lease
between TEAM and Fruehauf expired on June 9, 2003.

On March 9, 2004, Fruehauf instituted SPProc. No.11449 before the Regional Trial
Court (RTC) for "Submission of an Existing Controversy for Arbitration." 7 It alleged:
(1) that when the lease expired, the property suffered from damage that required
extensive renovation; (2) that when the lease expired, TEAM failed to turn over the
premises and pay rent; and (3) that TEAM did not restore the property to its original
condition as required in the contract. Accordingly, the parties are obliged to submit
the dispute to arbitration pursuant to the stipulation in the lease contract.

RTC: Granted the petition and directed the parties to comply with the
arbitration clause of the contract.

Pursuant to the arbitration agreement, the dispute was referred to a three-‐
member arbitration tribunal. TEAM and Fruehauf appointed one member
each while the Chairman was appointed by the first two members. The
tribunal was formally constituted ion September 27, 2004 with retired CA
Justice Hector L. Hofileña, as chairman, retired CA Justice Mariano M. Umali
and Atty. Maria Clara B. Tankeh-‐Asuncion as members

The Arbitral Award
On December 3, 2008, the arbitral tribunal awarded Fruehauf: (1) 8.2 million pesos
as (the balance of) unpaid rent from June 9, 2003 until March 5, 2005; and (2) 46.8
million pesos as damages.

The tribunal found that Fruehauf made several demands for the return of the leased
premises before and after: the expiration of the lease14 and that there was no
express or implied renewal of the lease after June 9, 2003. It recognized that the
sub-‐lessor, Capitol, remained in possession of the lease. However, relying on the
commentaries of Arturo Tolentino on the subject, the tribunal held that it was not
enough for lessor to simply vacate the leased property; it is necessary that he place
the thing at the disposal of the lessor, so that the latter can receive it without any
obstacle. 15

For failing to return the property' to Fruehauf, TEAM remained liable for the
payment of rents. However, if it can prove that Fruehauf received rentals from
Capitol, TEAM can deduct these from its liability. 16 Nevertheless, the award of rent
and damages was without prejudice to TEAM's right to seek redress from its sub-‐
lessee, Capitol. 17

TEAM moved for reconsideration28 which the tribunal denied. 29 Thus, TEAM
petitioned the RTC to partially vacate or modify the arbitral award.30 It argued that

ATTY. BUSTAMANTE 5
ABSR

the tribunal failed to properly appreciate the facts and the terms of the lease
contract.

RTC: found insufficient legal grounds under Sections 24 and 25 of the Arbitration
Law to modify or vacate the award.32
CA:DISMISSED, BUT AMENDED AFTER MR

The CA held that Section 29 of the Arbitration Law does not preclude the aggrieved
party from resorting to other judicial remedies.50 Citing Asset Privatization Trust v.
Court of Appeals,51the CA held that the aggrieved party may resort to a petition for
certiorari when the R TC to which the award was submitted for confirmation Has
acted without jurisdiction, or with grave abuse of discretion and there is no appeal,
nor any plain, speedy remedy in the course of law.

ISSUE: WHAT ARE THE REMEDIES OR THE MODES OF APPEAL AGAINST AN
UNFAVORABLE ARBITRAL AWARD?
HELD:
The right to an appeal is neither' a natural right nor an indispensable component of

due process; it is a mere statutory privilege that cannot be invoked in the absence of
an enabling statute. Neither the Arbitration Law nor the ADR Law allows a losing
party to appeal from the arbitral award. The statutory absence of an appeal
mechanism reflects the State's policy of upholding the autonomy of arbitration
proceedings and their corresponding arbitral awards.
If the Regional Trial Court is asked to set aside an arbitral award in a domestic or
international arbitration on any ground other than those provided in the Special
ADR Rules, the court shall entertain such ground for the setting aside or non-‐
recognition of the arbitral award only if the same amounts to a violation of
public policy.
The court shall not set aside or vacate the award of the arbitral tribunal merely
on 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.116
The grounds for vacating a domestic arbitral award under Section 24 of the
Arbitration Law contemplate the following scenarios:
(a) when the award is procured by corruption, fraud, or other undue means; or
ATTY. BUSTAMANTE
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(b) there was evident partiality or corruption in the arbitrators or any of them; or
(c) the arbitrators were guilty of misconduct that materially prejudiced the rights of
any party; or
(d) the arbitrators exceeded their powers, or so imperfectly executed them, that a
mutual, final and definite award upon the subject matter submitted to them was not
made. 117
The award may also be vacated if an arbitrator who was disqualified to act willfully
refrained from disclosing his disqualification to the parties. 118 Notably, none of
these grounds pertain to the correctness of the award but relate to the misconduct of
arbitrators.
A losing party is likewise precluded from resorting to certiorari under Rule 65 of the
Rules of Court. 124 Certiorari is a prerogative writ designed to correct errors of
jurisdiction committed by a judicial or quasi-‐judicial body. 125 Because an arbitral
tribunal is not a government organ exercising judicial or quasi-‐judicial powers, it is
removed from the ambit of Rule 65.
Not even the Court's expanded certiorari jurisdiction under the Constitution 126 can
justify judicial intrusion into the merits of arbitral awards. While the Constitution
expanded the scope of certiorari proceedings, this power remains limited to a
review' of the acts of "any branch or instrumentality of the Government." As a purely
private creature of contract, an arbitral tribunal remains outside the scope
of certiorari.
Lastly, the Special ADR Rules are a self-‐contained body of rules. The parties cannot
invoke remedies and other provisions from the Rules of Court unless they were
incorporated in the Special ADR Rules:
Rule 22.1. Applicability of Rules of Court. -‐ The 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.
The remedies against an order

Confirming, vacating, correcting, or
modifying an arbitral award
Once the RTC orders the confirmation, vacation, or correction/modification of a

domestic arbitral award, the aggrieved party may move for reconsideration within a
non-‐extendible period of fifteen (15) days from receipt of the order. 129 The losing
party may also opt to appeal from the RTC's ruling instead.

ATTY. BUSTAMANTE 7
ABSR

Under the Arbitration Law, the mode of appeal was via petition for review
on certiorari:
Section 29. Appeals. -‐ An appeal may be taken from an order made in a proceeding
under this Act, or from a judgment entered upon an award
through certiorari proceedings, but such appeals shall be limited to questions of
law. The proceedings upon such appeal, including the judgment thereon shall be
governed by, the Rules of Court in so far as they are applicable.130
The Arbitration Law did not specify which Court had jurisdiction to entertain the
appeal but left the matter to be governed by the Rules of Court. As the appeal was
limited to questions of law and was described as "certiorari proceedings," the mode
of appeal can be interpreted as an Appeal By Certiorari to this Court under Rule 45.
When the ADR Law was enacted in 2004, it specified that the appeal shall be made
to the CA in accordance with the rules of procedure to be promulgated by this
Court. 131 The Special ADR Rules provided that the mode of appeal from the RTC's
order confirming, vacating, or correcting/modifying a domestic arbitral award was
through a petition for review with the CA. 132 However, the Special ADR Rules only
took effect on October 30, 2009.
In the present case, the R TC disallowed TEAM' s notice of appeal from the former's
decision confirming the arbitral award on July 3, 2009. TEAM moved for
reconsideration which was likewise denied on November 15, 2009. In the interim,
the Special ADR Rules became effective. Notably, the Special ADR Rules apply
retroactively in light of its procedural character. 133 TEAM filed its petition
for certiorari soon after.
Nevertheless, whether we apply, Section 29 of the Arbitration Law, Section 46 of the
ADR Law, or Rule 19.12 of the Special ADR Rules, there is no legal basis that an
ordinary appeal (via notice of appeal) is the correct remedy from an order
confirming, vacating, or correcting an arbitral award. Thus, there is no merit in the
CA's ruling that the RTC gravely abused its discretion when it refused to give due
course to the notice of appeal.
12.GERARDO LANUZA, JR. AND ANTONIO O. OLBES, Petitioners,

vs.
BF CORPORATION, SHANGRI-‐LA PROPERTIES, INC., ALFREDO C. RAMOS, RUFO
B. COLAYCO, MAXIMO G. LICAUCO III, AND BENJAMIN C. RAMOS, Respondents.
G.R. No. 174938 October 1, 2014
LEONEN, J.:

ATTY. BUSTAMANTE
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Corporate representatives may be compelled to submit to arbitration
proceedings pursuant to a contract entered into by the corporation they
represent if there are allegations of bad faith or malice in their acts
representing the corporation.
FACTS:
In 1993, BF Corporation filed a collection complaint with the Regional Trial Court
against Shangri-‐La and the members of its board of directors: Alfredo C. Ramos,
Rufo B. Colayco, Antonio O. Olbes, Gerardo Lanuza, Jr., Maximo G. Licauco III, and
Benjamin C. Ramos.
BF Corporation alleged in its complaint that... it entered into agreements with

Shangri-‐La wherein it undertook to construct for Shangri-‐La a mall and a multilevel
parking structure along EDSA.
Shangri-‐La had been consistent in paying BF Corporation in accordance with its

progress billing statements.
However, by October 1991, Shangri-‐La started defaulting in payment.
BF Corporation eventually completed the construction of the buildings.
Shangri-‐La allegedly took possession of the buildings while still owing BF

Corporation an outstanding balance.[
BF Corporation alleged that despite repeated demands, Shangri-‐La refused to pay

the balance owed to it.
Alfredo C. Ramos, Rufo B. Colayco, Maximo G. Licauco III, and Benjamin C. Ramos
filed a motion to suspend the proceedings in view of BF Corporation's failure to
submit its dispute to arbitration, in accordance with the arbitration clause
provided... in its contract
BF Corporation opposed the motion to suspend proceedings
In the November 18, 1993 order, the Regional Trial Court denied the motion to
suspend proceedings.
On December 8, 1993, petitioners filed an answer to BF Corporation's complaint,

with compulsory counterclaim against BF Corporation and cross-‐claim against
Shangri-‐La.
They alleged that they had resigned as members of Shangri-‐La's board of directors
as of July 15, 1991.

ATTY. BUSTAMANTE 9
ABSR

After the Regional Trial Court denied... the motion for reconsideration
Alfredo C. Ramos, Rufo B. Colayco, Maximo G. Licauco III, and Benjamin Ramos filed
a petition for certiorari with the Court of
Appeals.
On April 28, 1995, the Court of Appeals granted the petition for certiorari and
ordered the submission of the dispute to arbitration.
Another issue arose after BF Corporation had initiated arbitration proceedings. BF
Corporation and Shangri-‐La failed to agree as to the law that should govern the
arbitration proceedings.
Shangri-‐La filed an omnibus motion and BF Corporation an urgent motion for

clarification, both seeking to clarify the term, "parties," and whether Shangri-‐La's
directors should be included in the arbitration proceedings and served with
separate demands for... arbitration.
Petitioners filed their comment on Shangri-‐La's and BF Corporation's motions,

praying that they be excluded from the arbitration proceedings for being non-‐
parties to Shangri-‐La's and BF Corporation's agreement.[
The Court of Appeals ruled that Shangri-‐La's directors were necessary parties
in the arbitration proceedings.
They were] deemed not third-‐parties to the contract as they [were] sued for their
acts in representation of the party to the contract pursuant to Art. 31 of the
Corporation Code, and that as directors of the defendant corporation, [they], in
accordance with Art.
1217 of the Civil Code, stand to be benefited or injured by the result of the
arbitration proceedings, hence, being necessary parties, they must be joined in
order to have complete adjudication of the controversy.
The Court of Appeals further ruled that "excluding petitioners in the arbitration
proceedings . . . would be contrary to the policy against multiplicity of suits."
ISSUE: WHETHER PETITIONERS SHOULD BE MADE PARTIES TO THE

ARBITRATION PROCEEDINGS, PURSUANT TO THE ARBITRATION CLAUSE
PROVIDED IN THE CONTRACT BETWEEN BF CORPORATION AND SHANGRI-‐LA.
HELD:

ATTY. BUSTAMANTE
ABSR

Because a corporation's existence is only by fiction of law, it can only exercise its
rights and powers through its directors, officers, or agents, who are all natural
persons. A corporation cannot sue or enter into contracts without them.
As a general rule, therefore, a corporation's representative who did not personally

bind himself or herself to an arbitration agreement cannot be forced to participate
in arbitration proceedings made pursuant to an agreement entered into by the
corporation. He or she is... generally not considered a party to that agreement.
However, there are instances when the distinction between personalities of

directors, officers, and representatives, and of the corporation, are disregarded. We
call this piercing the veil of corporate fiction.
Piercing the corporate veil is warranted when "[the separate personality of a

corporation] is used as a means to perpetrate fraud or an illegal act, or as a vehicle
for the evasion of an existing obligation, the circumvention of statutes, or to confuse
legitimate... issues."
It is also warranted in alter ego cases "where a corporation is merely a farce since it
is a mere alter ego or business conduit of a person, or where the corporation is so
organized and controlled and its affairs are so conducted as to make it... merely an
instrumentality, agency, conduit or adjunct of another corporation."
When corporate veil is pierced, the corporation and persons who are normally
treated as distinct from the corporation are treated as one person, such that when
the corporation is adjudged liable, these persons, too, become liable as if they were
the corporation.
Among the persons who may be treated as the corporation itself under certain
circumstances are its directors and officers.
13. KOPPEL, INC. (formerly known as KPL AIRCON, INC.), Petitioner,
vs.
MAKATI ROTARY CLUB FOUNDATION, INC., Respondent.
G.R. No. 198075 September 4, 2013
PEREZ, J.:
FACTS:
In 1975, Fedders Koppel, Incorporated (FKI) bequeathed a parcel of land exclusive
of improvements thereon in favor of Respondent Makati Rotary Club Foundation,
Inc. by way of aconditional donation. Respondent accepted the donation with all of
its conditions. On 26 May 1975, FKI and the Respondent executed a Deed of
Donation evidencing their consensus.

ATTY. BUSTAMANTE 1
ABSR

One of the conditions of the donation required the Respondent to lease the subject
land back to FKI under terms specified in their Deed of Donation. With the
Respondent’s acceptance of the donation, a lease agreement between them was,
therefore, effectively incorporated in the Deed of Donation.

Pertinent terms of such lease agreement, as provided in the Deed of Donation, were
as follows:
1. The period of the lease is for twenty-‐five (25) years, or until the 25 th of May
2. The amount of rent to be paid by FKI for the first twenty-‐five (25) years is
P40,126.00 perannum.

2000;

The Deed of Donation also stipulated that the lease over the subject property is
renewable for another period of twenty-‐five (25) years “upon mutual agreement” of
FKI and the Respondent. In which case, the amount of rent shall be determined in
accordance with item 2(g) of the Deed of Donation.

In October 1976, FKI and the Respondent executed an Amended Deed of Donation
that reiterated the provisions of the Deed of Donation, including those relating to
the lease of the subject land.

Verily, by virtue of the lease agreement contained in the Deed of Donation and
Amended Deed of Donation, FKI was able to continue in its possession and use of the
subject land.

Two (2) days before the lease incorporated in the Deed of Donation and Amended
Deed of Donation was set to expire, or on 23 May 2000, FKI and Respondent
executed another contract of lease (2000 Lease Contract)
covering the subject land. In this 2000 Lease Contract, FKI and Respondent agreed
on a new five-‐year lease to take effect on the 26th of May 2000, with annual rents
ranging from P4M for the first year up to P4.9M for the
fifth year. The 2000 Lease Contract also contained an arbitration clause enforceable
in the event the parties come to disagreement about the “interpretation, application
and execution” of the lease.

After the 2000 Lease Contract expired, FKI and Respondent agreed to renew their
lease for another five (5) years. This new lease (2005 Lease Contract) required FKI
ATTY. BUSTAMANTE
ABSR

to pay a fixed annual rent of P4.2M.In addition to paying the fixed rent, however, the
2005 Lease Contract also obligated FKI to make a yearly “donation” of money to the
Respondent. Such donations ranged from P3M for the first year up to P3.9M for the
fifth year.

Notably, the 2005 Lease Contract contained an arbitration clause similar to that in
the 2000 Lease Contract, to
wit:
19. Governing Law – The provisions of this [2005 Lease Contract] shall be governed,
interpreted and
construed in all aspects in accordance with the laws of the Republic of the
Philippines. Any disagreement as to the interpretation, application or execution of
this [2005 Lease Contract] shall be submitted to a board of three (3) arbitrators
constituted in accordance with the arbitration law of the Philippines. The decision of
the majority of the arbitrators shall be binding upon [FKI and Respondent].
(Emphasis supplied)

From 2005 to 2008, FKI faithfully paid the rentals and “donations” due it per the
2005 Lease Contract. But in June of 2008, FKI sold all its rights and properties
relative to its business in favor of herein Petitioner Koppel,
Incorporated.

On 29 August 2008, FKI and Petitioner executed an Assignment and Assumption of
Lease and Donation—
wherein FKI, with the conformity of the Respondent, formally assigned all of its
interests and obligations under the Amended Deed of Donation and the 2005 Lease
Contract in favor of Petitioner.

The following year, Petitioner discontinued the payment of the rent and “donation”
under the 2005Lease
Contract.

Petitioner’s refusal to pay such rent and “donation” emanated from its belief that the
rental stipulations of the 2005 Lease Contract, and even of the 2000 Lease Contract,
cannot be given effect because they violated one of the “material conditions” of the
donation of the subject land, as stated in the Deed of Donation and Amended Deed of
Donation.

According to Petitioner, the Deed of Donation and Amended Deed of Donation
actually established not only one but two (2) lease agreements between FKI and

ATTY. BUSTAMANTE 3
ABSR

Respondent, i.e., one lease for the first twenty-‐five (25) years or from 1975 to 2000,
and another lease for the next twenty-‐five (25) years thereafter or from 2000 to
2025. Both leases are material conditions of the donation of the subject land.
Petitioner points out that while a definite amount of rent for the second twenty-‐five
(25) year lease was not fixed in the Deed of Donation and Amended Deed of
Donation, both deeds nevertheless prescribed rules and
limitations by which the same may be determined. Such rules and limitations ought
to be observed in any succeeding lease agreements between Petitioner and
Respondent for they are, in themselves, material conditions of the donation of the
subject land. In this connection, Petitioner cites item 2(g) of the Deed of Donation
and Amended Deed of Donation that supposedly limits the amount of rent for the
lease over the second twenty-‐five (25) years to only “three percent (3%) of the fair
market value of the [subject] land excluding the improvements.
For Petitioner then, the rental stipulations of both the 2000 Lease Contract and
2005 Lease Contract cannot be enforced as they are clearly, in view of their
exorbitant exactions, in violation of the aforementioned threshold in
item 2(g) of the Deed of Donation and Amended Deed of Donation. Consequently,
Petitioner insists that the amount of rent it has to pay thereon is and must still be
governed by the limitations prescribed in the Deed of
Donation and Amended Deed of Donation.
Respondent then sent Demand Letters to Petitioners notifying the latter of its
default, demanding for the settlement of the rent and “donations” due for the year
2009. Respondent intimated of cancelling the 2005 Lease Contract should Petitioner
fail to settle the said obligations. In its last sent Demand Letter, Respondent demand
Petitioner to “immediately vacate the leased premises” should it fail to pay such
obligations within seven (7) days from its receipt of the letter. Petitioner refused to
comply with the demands of the Respondent. Instead, on 30 September 2009,
Petitioner filed with the RTC of Parañaque City a Complaint for the Rescission or
Cancellation of the Deed of Donation and Amended Deed of Donation against the
Respondent.

On 5 October 2009, Respondent filed an Unlawful Detainer case against the

Petitioner before the MeTC of
Parañaque City.

On 4 November 2009, Petitioner filed an Answer with Compulsory Counterclaim.In

it, Petitioner reiterated its objection over the rental stipulations of the 2005 Lease
Contract for being violative of the material conditions of the Deed of Donation and
Amended Deed of Donation.


ATTY. BUSTAMANTE
ABSR

On 27 April 2010, the MeTC rendered judgment in favor of the Petitioner. While the
MeTC refused to dismiss the action on the ground that the dispute is subject to
arbitration, it nonetheless sided with the Petitioner with respect to the issues
regarding the insufficiency of the Respondent’s demand and the nullity of the 2005
Lease Contract.
The Respondent appealed to the RTC which reversed the MeTC’s decision.
Aggrieved, the Petitioner appealed to the CA which affirmed the decision of the RTC.

Hence, the present Petition for Review on Certiorari under Rule 45.
ISSUE:
WHETHER OR NOT THE PRESENT DISPUTE IS ARBITRABLE UNDER THE
ARBITRATION CLAUSE OF THE 2005 LEASE AGREEMENT
CONTRACT?

ARGUMENTS:
At different points in the proceedings of this case, the following arguments were
offered against the application
of the arbitration clause of the 2005 Lease Contract:
1. The disagreement between the Petitioner and Respondent is non-‐arbitrable as it
will inevitably touch upon the issue of the validity of the 2005 Lease Contract. It was
submitted that one of the reasons offered by the Petitioner in justifying its failure to
pay under the 2005 Lease Contract was the nullity of
such contract for being contrary to law and public policy. The Supreme Court, in
Gonzales v. Climax

Mining, Ltd. [2005], held that “the validity of contract cannot be subject of
arbitration proceedings” as such questions are “legal in nature and require the
application and interpretation of laws and jurisprudence which is necessarily a
judicial function.”
2. The Petitioner cannot validly invoke the arbitration clause of the 2005 Lease
Contract while, at the same time, impugn such contract’s validity.
3. Even assuming that it can invoke the arbitration clause whilst denying the validity
of the2005 Lease Contract, Petitioner still did not file a formal application before the
MeTC so as to render such arbitration clause operational. Section 24 of Republic Act
No. 9285 requires the party seeking
arbitration to first file a “request” or an application therefor with the courtnot later
than the preliminary conference.
4. Petitioner and Respondent already underwent JDR proceedings before the RTC.
Hence, a further referral of the dispute to arbitration would only be circuitous.
Moreover, an ejectment case, in view of its summary nature, already fulfills the
prime purpose of arbitration, i.e., to provide parties in conflict with an expedient
method for the resolution of their dispute. Arbitration then would no longer be

ATTY. BUSTAMANTE 5
ABSR

necessary in this case.

HELD:YES
None of the above-‐mentioned arguments have any merit. The MeTC, RTC and CA all
erred in overlooking the significance of the arbitration clause incorporated in the
2005 Lease Contract. As the SC sees it, that is a fatal mistake.

Hence, the Petition is GRANTED and thus referring the Petitioner and the
Respondent to arbitration pursuant
to the arbitration clause of the 2005 Lease Contract, repeatedly included in the 2000
Lease Contract and in the
1976 Amended Deed of Donation.

RATIO DECIDENDI:
The arbitration clause of the 2005 Lease Contract stipulates that “any disagreement”
as to the “interpretation, application or execution” of the 2005 Lease Contract ought
to be submitted to arbitration. To the mind of the
Court, such stipulation is clear and is comprehensive enough so as to include
virtually any kind of conflict or dispute that may arise from the 2005 Lease
Contractincluding the one that presently besets Petitioner and Respondent.
First. The disagreement between the Petitioner and Respondent falls within the all-‐
encompassing terms of the arbitration clause of the 2005 Lease Contract. While it
may be conceded that in the arbitration of such disagreement, the validity of the
2005 Lease Contract, or at least, of such contract’s rental stipulations would have to
be determined, the same would not render such disagreement non-‐arbitrable. The
quotation from Gonzales case that was used to justify the contrary position was
taken out of context.

The pivotal issue that confronted the Court in the Gonzales case was whether the
complaint for arbitration raises arbitrable issues that the Panel of Arbitrators of the
Mines and Geosciences Bureau (PA-‐MGB) can take cognizance of. Gonzales decided
the issue in the negative. In holding that the PA-‐MGB was devoid of any jurisdiction
to take cognizance of the complaint for arbitration, this Court pointed out to the
provisions of R.A. No. 7942, or the
Mining Act of 1995, which granted the PA-‐MGB with exclusive original jurisdiction
only over mining disputes, i.e., disputes involving “rights to mining areas,” “mineral
agreements or permits,” and “surface owners,
occupants, claimholders or concessionaires” requiring the technical knowledge and
experience of mining authorities in order to be resolved.

ATTY. BUSTAMANTE
ABSR

Accordingly, since the complaint for arbitration in Gonzales did not
raise mining disputes as contemplated under R.A. No. 7942 but only issues relating
to the validity of certain mining related agreements, SC held that such complaint
could not be arbitrated before the PA-‐MGB. It is in this
context that SC made the pronouncement now in discussion:

Arbitration before the Panel of Arbitrators is proper only when there is a

disagreement between the parties as to some provisions of the contract between
them, which needs the interpretation and the application of that
particular knowledge and expertise possessed by members of that Panel. It is not
proper when one of the parties repudiates the existence or validity of such contract
or agreement on the ground of fraud or oppression as in this case.The validity of the
contract cannot be subject of arbitration proceedings. Allegations of fraud and
duress in the execution of a contract are matters within the jurisdiction of the
ordinary courts of law. These questions are legal in nature and require the
application and interpretation of laws and jurisprudence which is necessarily a
judicial function. (Emphasis supplied)

SC in Gonzales did not simply base its rejection of the complaint for arbitration on
the ground that the issue raised therein, i.e., the validity of contracts, is per se non-‐
arbitrable. The real consideration behind the ruling
was the limitation that was placed by R.A. No. 7942 upon the jurisdiction of the PA-‐
MGB as an arbitral body. Gonzales rejected the complaint for arbitration because the
issue raised therein is not a mining dispute per R.A. No. 7942 and it is for this
reason, and only for this reason, that such issue is rendered nonarbitrable before
the PA-‐MGB. As stated beforehand, R.A. No. 7942 clearly limited the jurisdiction of
the PAMGB only to mining disputes.
Much more instructive for our purposes, on the other hand, is the recent case of
Cargill Philippines, Inc. v. San Fernando Regal Trading, Inc [2011]. In Cargill, SC
answered the question of whether issues involving the rescission of a contract are
arbitrable. The respondent in Cargill argued against arbitrability, also citing therein
Gonzales. After dissecting Gonzales, SC ruled in favor of arbitrability.
Thus, SC held:
Respondent contends that assuming that the existence of the contract and the
arbitration clause is conceded, the CA’s decision declining referral of the parties’
dispute to arbitration is still correct. It claims that its complaint
in the RTC presents the issue of whether under the facts alleged, it is entitled to
rescind the contract with damages; and that issue constitutes a judicial question or
one that requires the exercise of judicial function and cannot be the subject of an
arbitration proceeding. Respondent cites our ruling in Gonzales, wherein we held
that a panel of arbitrator is bereft of jurisdiction over the complaint for declaration
of nullity/or termination of the

ATTY. BUSTAMANTE 7
ABSR

subject contracts on the grounds of fraud and oppression attendant to the execution
of the addendum contract and the other contracts emanating from it, and that the
complaint should have been filed with the regular courts
as it involved issues which are judicial in nature. Such argument is misplaced and
respondent cannot rely on the Gonzales case to support its
argument. (Emphasis ours)

Second. Petitioner may still invoke the arbitration clause of the 2005 Lease Contract
notwithstanding the fact that it assails the validity of such contract. This is due to
the doctrine of separability. Under the doctrine of separability, an arbitration
agreement is considered as independent of the main contract.
Being a separate contract in itself, the arbitration agreement may thus be invoked
regardless of the possible nullity or invalidity of the main contract.

Once again instructive is Cargill, wherein SC held that, as a further consequence of
the doctrine of separability, even the very party who repudiates the main contract
may invoke its arbitration clause.

Third. The operation of the arbitration clause in this case is not at all defeated by the
failure of the Petitioner to file a formal “request” or application therefor with the
MeTC. SC finds that the filing of a “request” pursuant to
Section 24 of R.A. No. 9285 is not the sole means by which an arbitration clause may
be validly invoked in a pending suit.

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 requestsnot later that the pre-‐trial conference, or upon the request of both
parties thereafter, refer the parties to arbitration unless it finds that the arbitration
agreement is null and void, inoperative or incapable of being performed. [Emphasis
ours; italics original]

The “request” referred to in the above provision is, in turn, implemented by Rules
4.1 to 4.3 of A.M. No. 07-‐1108-‐SC or the Special Rules of Court on Alternative
Dispute Resolution (Special ADR Rules):

RULE 4: REFERRAL TO ADR
Rule 4.1. Who makes the request. – A party to a pending action filed in violation of
ATTY. BUSTAMANTE
ABSR

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.
Rule 4.2. When to make request. – (A) Where the arbitration agreement exists
before the action is filed. – The request for referral shall be made not later than the
pre-‐trial conference. After the pre-‐trial conference, the court
will only act upon the request for referral if it is made with the agreement of all
parties to the case.
(B) Submission agreement. – If there is no existing arbitration agreement at the time
the case is filed but the parties subsequently enter into an arbitration agreement,
they may request the court to refer their dispute to arbitration at any time during
the proceedings.
Rule 4.3. Contents of request. – The request for referral shall be in the form of a
motion, which shall state that the dispute is covered by an arbitration agreement.
Apart from other submissions, the movant shall attach to his motion an authentic
copy of the arbitration agreement.

The request shall contain a notice of hearing addressed to all parties specifying the
date and time when it would be heard. The party making the request shall serve it
upon the respondent to give him the opportunity to
file a comment or opposition as provided in the immediately succeeding Rule before
the hearing. [Emphasis ours; italics original]

Attention must be paid, however, to the salient wordings of Rule 4.1. It reads: “[a]
party to a pending action filed in violation of the arbitration agreement x x x 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.
In this case, it is conceded that Petitioner was not able to file a separate “request” of
arbitration before the MeTC. However, it is equally conceded that the Petitioner, as
early as in its Answer with Counterclaim, had already apprised the MeTC of the
existence of the arbitration clause in the 2005 Lease Contract and, more
significantly, of its desire to have the same enforced in this case. This act of
Petitioner is enough valid invocation of his right to arbitrate.

ATTY. BUSTAMANTE 9
ABSR

Fourth. The fact that the Petitioner and Respondent already underwent through JDR
proceedings before the RTC, will not make the subsequent conduct of arbitration
between the parties unnecessary or circuitous. The
JDR system is substantially different from arbitration proceedings. The JDR
framework is based on the processes of mediation, conciliation or early neutral
evaluation which entails the submission of a dispute before a “JDR judge” who shall
merely “facilitate settlement” between the parties in conflict or make a “non-‐binding
evaluation or assessment of the chances of each party’s case.” Thus in JDR, the JDR
judge lacks the authority to render a resolution of the dispute that is binding upon
the parties in conflict. In arbitration, on the other hand, the dispute is submitted to
an arbitrator/s—a neutral third person or a group of thereof—who shall have the
authority to render a resolution binding upon the parties.

Clearly, the mere submission of a dispute to JDR proceedings would not necessarily
render the subsequent conduct of arbitration a mere surplusage. The failure of the
parties in conflict to reach an amicable settlement
before the JDR may, in fact, be supplemented by their resort to arbitration where a
binding resolution to the dispute could finally be achieved. This situation precisely
finds application to the case at bench.
Neither would the summary nature of ejectment cases be a valid reason to disregard
the enforcement of the arbitration clause of the 2005 Lease Contract.
Notwithstanding the summary nature of ejectment cases,
arbitration still remains relevant as it aims not only to afford the parties an
expeditious method of resolving their dispute.

A pivotal feature of arbitration as an alternative mode of dispute resolution is that it
is, first and foremost, a product of party autonomy or the freedom of the parties to
“make their own arrangements to resolve their own
disputes.” Arbitration agreements manifest not only the desire of the parties in
conflict for an expeditious resolution of their dispute. They also represent, if not
more so, the parties’ mutual aspiration to achieve such resolution outside of judicial
auspices, in a more informal and less antagonistic environment under the terms of
their choosing. Needless to state, this critical feature can never be satisfied in an
ejectment case no matter
how summary it may be.

Legal Effect of the Application of the Arbitration Clause

Since there really are no legal impediments to the application of the arbitration
clause of the 2005 Contract of
Lease in this case, We find that the instant unlawful detainer action was instituted in

ATTY. BUSTAMANTE
ABSR

violation of such clause.

The Law, therefore, should have governed the fate of the parties and this suit:
R.A. No. 876
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]

R.A. No. 9285
Section 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 finds that the arbitration
agreement is null and void, inoperative or incapable of being performed. [Emphasis
supplied]
It is clear that under the law, the instant unlawful detainer action should have been
stayed; the Petitioner and the Respondent should have been referred to arbitration
pursuant to the arbitration clause of the 2005 Lease Contract. The MeTC, however,
did not do so in violation of the law—which violation was, in turn, affirmed by the
RTC and Court of Appeals on appeal.
The violation by the MeTC of the clear directives under R.A. Nos. 876 and 9285
renders invalid all proceedings it undertook in the ejectment case after the filing by
Petitioner of its Answer with Counterclaim—the point when
the Petitioner and the Respondent should have been referred to arbitration. This
case must, therefore, be remanded to the MeTC and be suspended at said point.
Inevitably, the decisions of the MeTC, RTC and the Court of Appeals must all be
vacated and set aside. The Petitioner and the Respondent must then be referred to
arbitration pursuant to the arbitration clause of
the 2005 Lease Contract.

14. KOREA TECHNOLOGIES CO., LTD., petitioner,

vs.
HON. ALBERTO A. LERMA, in his capacity as Presiding Judge of Branch 256 of
Regional Trial Court of Muntinlupa City, and PACIFIC GENERAL STEEL
MANUFACTURING CORPORATION, respondents.

ATTY. BUSTAMANTE 1
ABSR

G.R. No. 143581 January 7, 2008
VELASCO, JR., J.:
FACTS:
Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean corporation which is

engaged in the supply and installation of Liquefied Petroleum Gas (LPG) Cylinder
manufacturing plants, while private respondent Pacific General Steel Manufacturing
Corp. (PGSMC) is a domestic corporation. On March 5, 1997, PGSMC and KOGIES
executed a Contract whereby KOGIES would set up an LPG Cylinder Manufacturing
Plant in Carmona, Cavite. The contract was executed in the Philippines. On April 7,
1997, the parties executed, in Korea, an Amendment for Contract No. KLP-‐970301
dated March 5, 1997 amending the terms of payment. The contract and its
amendment stipulated that KOGIES will ship the machinery and facilities necessary
for manufacturing LPG cylinders for which PGSMC would pay USD 1,224,000.
KOGIES would install and initiate the operation of the plant for which PGSMC bound
itself to pay USD 306,000 upon the plants production of the 11-‐kg. LPG cylinder
samples. Thus, the total contract price amounted to USD 1,530,000. On October 14,
1997, PGSMC entered into a Contract of Lease with Worth Properties, Inc. (Worth)
for use of Worths 5,079-‐square meter property with a 4,032-‐square meter
warehouse building to house the LPG manufacturing plant. The monthly rental was
PhP 322,560 commencing on January 1, 1998 with a 10% annual increment clause.
Subsequently, the machineries, equipment, and facilities for the manufacture of LPG
cylinders were shipped, delivered, and installed in the Carmona plant. PGSMC paid
KOGIES USD 1,224,000. However, gleaned from the Certificate executed by the
parties on January 22, 1998, after the installation of the plant, the initial operation
could not be conducted as PGSMC encountered financial difficulties affecting the
supply of materials, thus forcing the parties to agree that KOGIES would be deemed
to have completely complied with the terms and conditions of the March 5, 1997
contract. For the remaining balance of USD306,000 for the installation and initial
operation of the plant, PGSMC issued two postdated checks: (1) BPI Check No.
0316412 dated January 30, 1998 for PhP 4,500,000; and (2) BPI Check No. 0316413
dated March 30, 1998 for PhP 4,500,000. When KOGIES deposited the checks, these
were dishonored for the reason PAYMENT STOPPED. Thus, on May 8, 1998, KOGIES
sent a demand letter to PGSMC threatening criminal action for violation of Batas
Pambansa Blg. 22 in case of nonpayment. On the same date, the wife of PGSMCs
President faxed a letter dated May 7, 1998 to KOGIES President who was then
staying at a Makati City hotel. She complained that not only did KOGIES deliver a
different brand of hydraulic press from that agreed upon but it had not delivered
several equipment parts already paid for.
ISSUE: WHETHER OR NOT THE ARBITRATION CLAUSE IN THE CONTRACT OF
THE PARTIES SHOULD GOVERN.
ATTY. BUSTAMANTE
ABSR

Held: YES.
Established in this jurisdiction is the rule that the law of the place where the
contract is made governs. Lex loci contractus. The contract in this case was perfected
here in the Philippines. Therefore, our laws ought to govern. Nonetheless, Art. 2044
of the Civil Code sanctions the validity of mutually agreed arbitral clause or the
finality and binding effect of an arbitral award. Art. 2044 provides, Any stipulation
that the arbitrators award or decision shall be final, is valid, without prejudice to
Articles 2038, 2039 and 2040.
The arbitration clause was mutually and voluntarily agreed upon by the parties. It
has not been shown to be contrary to any law, or against morals, good customs,
public order, or public policy. There has been no showing that the parties have not
dealt with each other on equal footing. We find no reason why the arbitration clause
should not be respected and complied with by both parties. In Gonzales v. Climax
Mining Ltd., we held that submission to arbitration is a contract and that a clause in
a contract providing that all matters in dispute between the parties shall be referred
to arbitration is a contract. Again in Del Monte Corporation-‐USA v. Court of Appeals,
we likewise ruled that [t]he provision to submit to arbitration any dispute arising
therefrom and the relationship of the parties is part of that contract and is itself a
contract.
Having said that the instant arbitration clause is not against public policy, we come
to the question on what governs an arbitration clause specifying that in case of any
dispute arising from the contract, an arbitral panel will be constituted in a foreign
country and the arbitration rules of the foreign country would govern and its award
shall be final and binding.
Thus, it can be gleaned that the concept of a final and binding arbitral award is
similar to judgments or awards given by some of our quasi-‐judicial bodies, like the
National Labor Relations Commission and Mines Adjudication Board, whose final
judgments are stipulated to be final and binding, but not immediately executory in
the sense that they may still be judicially reviewed, upon the instance of any party.
Therefore, the final foreign arbitral awards are similarly situated in that they need
first to be confirmed by the RTC.
15. JORGE GONZALES and PANEL OF ARBITRATORS, Petitioners,

vs.
CLIMAX MINING LTD., CLIMAX-‐ARIMCO MINING CORP., and AUSTRALASIAN
PHILIPPINES MINING INC.,Respondents.
G.R. No. 161957 January 22, 2007
TINGA, J.:

ATTY. BUSTAMANTE 3
ABSR

FACTS:
This is a consolidation of two petitions rooted in the same disputed Addendum

Contract entered into by the parties. In G.R. No. 161957, the Court in its Decision of
28 February 2005 denied the Rule 45 petition of petitioner Jorge Gonzales
(Gonzales). It held that the DENR Panel of Arbitrators had no jurisdiction over the
complaint for the annulment of the Addendum Contract on grounds of fraud and
violation of the Constitution and that the action should have been brought before
the regular courts as it involved judicial issues. Both parties filed separate motions
for reconsideration. Gonzales avers in his Motion for Reconsideration that the Court
erred in holding that the DENR Panel of Arbitrators was bereft of jurisdiction,
reiterating its argument that the case involves a mining dispute that properly falls
within the ambit of the Panels authority. Gonzales adds that the Court failed to rule
on other issues he raised relating to the sufficiency of his complaint before the
DENR Panel of Arbitrators and the timeliness of its filing. Respondents Climax
Mining Ltd., et al., (respondents) filed their Motion for Partial Reconsideration
and/or Clarification seeking reconsideration of that part of the Decision holding that
the case should not be brought for arbitration under Republic Act (R.A.) No. 876,
also known as the Arbitration Law. Respondents, citing American jurisprudence and
the UNCITRAL Model Law, argue that the arbitration clause in the Addendum
Contract should be treated as an agreement independent of the other terms of the
contract, and that a claimed rescission of the main contract does not avoid the duty
to arbitrate. Respondents add that Gonzales argument relating to the alleged
invalidity of the Addendum Contract still has to be proven and adjudicated on in a
proper proceeding; that is, an action separate from the motion to compel
arbitration. Pending judgment in such separate action, the Addendum Contract
remains valid and binding and so does the arbitration clause therein. Respondents
add that the holding in the Decision that the case should not be brought under the
ambit of the Arbitration Law appears to be premised on Gonzales having
impugn[ed] the existence or validity of the addendum contract. If so, it supposedly
conveys the idea that Gonzales unilateral repudiation of the contract or mere
allegation of its invalidity is all it takes to avoid arbitration. Hence, respondents
submit that the courts holding that the case should not be brought under the ambit
of the Arbitration Law be understood or clarified as operative only where the
challenge to the arbitration agreement has been sustained by final judgment.
ISSUE: WHETHER OR NOT IT WAS PROPER FOR THE RTC, IN THE PROCEEDING
TO COMPEL ARBITRATION UNDER R.A. NO. 876, TO ORDER THE PARTIES TO
ARBITRATE EVEN THOUGH THE DEFENDANT THEREIN HAS RAISED THE TWIN
ISSUES OF VALIDITY AND NULLITY OF THE ADDENDUM CONTRACT AND,
CONSEQUENTLY, OF THE ARBITRATION CLAUSE THEREIN AS WELL
HELD: YES.

ATTY. BUSTAMANTE
ABSR

Disputes do not go to arbitration unless and until the parties have agreed to abide
by the arbitrators decision. Necessarily, a contract is required for arbitration to take
place and to be binding. R.A. No. 876 recognizes the contractual nature of the
arbitration agreement.
The doctrine of separability, or severability as other writers call it, enunciates that
an arbitration agreement is independent of the main contract. The arbitration
agreement is to be treated as a separate agreement and the arbitration agreement
does not automatically terminate when the contract of which it is part comes to an
end.
The separability of the arbitration agreement is especially significant to the

determination of whether the invalidity of the main contract also nullifies the
arbitration clause. Indeed, the doctrine denotes that the invalidity of the main
contract, also referred to as the container contract, does not affect the validity of the
arbitration agreement. Irrespective of the fact that the main contract is invalid, the
arbitration clause/agreement still remains valid and enforceable.
The separability of the arbitration clause is confirmed in Art. 16(1) of the UNCITRAL
Model Law and Art. 21(2) of the UNCITRAL Arbitration Rules.
The proceeding in a petition for arbitration under R.A. No. 876 is limited only to the
resolution of the question of whether the arbitration agreement exists. Second, the
separability of the arbitration clause from the Addendum Contract means that
validity or invalidity of the Addendum Contract will not affect the enforceability of
the agreement to arbitrate. Thus, Gonzales petition for certiorari should be
dismissed.
This brings us back to G.R. No. 161957. The adjudication of the petition in G.R. No.
167994 effectively modifies part of the Decision dated 28 February 2005 in G.R. No.
161957. Hence, we now hold that the validity of the contract containing the
agreement to submit to arbitration does not affect the applicability of the arbitration
clause itself. A contrary ruling would suggest that a parties mere repudiation of the
main contract is sufficient to avoid arbitration. That is exactly the situation that the
separability doctrine, as well as jurisprudence applying it, seeks to avoid. We add
that when it was declared in G.R. No. 161957 that the case should not be brought for
arbitration, it should be clarified that the case referred to is the case actually filed by
Gonzales before the DENR Panel of Arbitrators, which was for the nullification of the
main contract on the ground of fraud, as it had already been determined that the
case should have been brought before the regular courts involving as it did judicial
issues.
16.DEL MONTE CORPORATION-‐USA, PAUL E. DERBY, JR., DANIEL

COLLINS and LUIS HIDALGO, petitioners,
vs.

ATTY. BUSTAMANTE 5
ABSR

COURT OF APPEALS, JUDGE BIENVENIDO L. REYES in his capacity as Presiding
Judge, RTC-‐Br. 74, Malabon, Metro Manila, MONTEBUENO MARKETING, INC.,
LIONG LIONG C. SY and SABROSA FOODS, INC., respondents.
G.R. No. 136154 February 7, 2001
BELLOSILLO, J.:
There is no doubt that arbitration is valid and constitutional in our

jurisdiction.[21] Even before the enactment of RA 876, this Court has
countenanced the settlement of disputes through arbitration. Unless the
agreement is such as absolutely to close the... doors of the courts against the
parties, which agreement would be void, the courts will look with favor upon
such amicable arrangement and will only interfere with great reluctance to
anticipate or nullify the action of the arbitrator.[22] Moreover, as RA
876 expressly authorizes arbitration of domestic disputes, foreign arbitration

as a system of settling commercial disputes was likewise recognized when the
Philippines adhered to the United Nations "Convention on the Recognition and
the Enforcement of Foreign Arbitral Awards... of 1958" under the 10 May 1965
Resolution No. 71 of the Philippine Senate, giving reciprocal recognition and
allowing enforcement of international arbitration agreements between parties
of different nationalities within a contracting state
FACTS:
In a Distributorship Agreement, petitioner Del Monte Corporation-‐USA... appointed

Montebueno Marketing, Inc. (MMI) as the sole and exclusive distributor of its Del
Monte products in the Philippines for a period of five (5) years,... renewable for two
(2) consecutive five (5) year periods with the consent of the parties. The Agreement
provided... for an arbitration clause which states -‐
12. GOVERNING LAW AND ARBITRATION[4]
This Agreement shall be governed by the laws of the State of California and/or,
if applicable, the United States of America. All disputes arising out of or
relating to this Agreement or the parties' relationship, including the
termination thereof, shall be resolved by... arbitration in the City of San
Francisco, State of California, under the Rules of the American Arbitration
Association. The arbitration panel shall consist of three members, one of
whom shall be selected by DMC-‐USA, one of whom shall be selected by MMI,
and third of whom shall... be selected by the other two members and shall
ATTY. BUSTAMANTE
ABSR

have relevant experience in the industry x x x x... after its appointment,
private respondent MMI appointed Sabrosa Foods, Inc. (SFI), with the
approval of petitioner DMC-‐USA, as MMI's marketing arm to concentrate on its
marketing and selling function as well as to manage its critical relationship
with the trade... private respondents MMI, SFI and MMI's Managing Director
Liong Liong C. Sy (LILY SY) filed a Complaint[5] against petitioners DMC-‐USA,
Paul E. Derby, Jr.,[6] Daniel Collins[7] and Luis Hidalgo,[8] and Dewey Ltd.[9]
before the Regional Trial Court of Malabon, Metro Manila.
On the alleged violations by petitioners of Arts. 20,[10] 21[11] and 23[12] of
the Civil Code.
According to private respondents, DMC-‐USA products continued to be brought into
the country by parallel importers despite the appointment of private respondent
MMI as the sole and exclusive distributor of Del Monte products
They alleged that the products brought into the country by these importers were
aged, damaged, fake or counterfeit
Private respondents claimed that they... had exhausted all possible avenues for an
amicable resolution and settlement of their grievances... petitioners filed a Motion to
Suspend Proceedings[13] invoking the arbitration clause in their Agreement with
private respondents.
Trial court deferred consideration of petitioners' Motion to Suspend Proceedings as

the grounds alleged therein did not constitute the suspension of the proceedings
considering that the action was for damages with prayer for the issuance of Writ of
Preliminary Attachment and not on the Distributorship Agreement.
The Motion to Suspend Proceedings was denied by the trial court
On appeal, the Court of Appeals affirmed the decision of the trial court.
Motion for Reconsideration of the affirmation was denied. Hence, this Petition for
Review.
Petitioners contend that the subject matter of private respondents' causes of action
arises out of or relates to the Agreement between petitioners and private
respondents. Thus, considering that the arbitration clause of the Agreement
provides that all disputes arising out of or... relating to the Agreement or the parties'
relationship, including the termination thereof, shall be resolved by arbitration, they
insist on the suspension of the proceedings in Civil Case No. 2637-‐MN as mandated
by Sec. 7 of RA 876

ATTY. BUSTAMANTE 7
ABSR

Private respondents claim, on the other hand, that their causes of action are rooted
in Arts. 20, 21 and 23 of the Civil Code,[19] the determination of which demands a
full blown trial
Private respondents further contend that the arbitration clause centers more on
venue rather than on arbitration.
They insist that the filing of the petition to compel arbitration in the United States
made the petition filed before... this Court an alternative remedy and, in a way, an
abandonment of the cause they are fighting for here in the Philippines, thus
warranting the dismissal of the present petition before this Court.
ISSUE: WHETHER THE DISPUTE BETWEEN THE PARTIES WARRANTS AN

ORDER COMPELLING THEM TO SUBMIT TO ARBITRATION
HELD: YES.
A careful examination of the instant case shows that the arbitration clause in the
Distributorship Agreement between petitioner DMC-‐USA and private respondent
MMI is valid and the dispute between the parties is arbitrable. However, this Court
must deny the petition.
The Agreement between petitioner DMC-‐USA and private respondent MMI is a

contract. The provision to submit to arbitration any dispute arising therefrom and
the relationship of the parties is part of that contract and is itself a contract. As a
rule, contracts are respected as... the law between the contracting parties and
produce effect as between them, their assigns and heirs.
Clearly, only parties to the Agreement, i.e., petitioners DMC-‐USA and its Managing
Director for Export Sales Paul E. Derby, Jr., and private... respondents MMI and its
Managing Director LILY SY are bound by the Agreement and its arbitration clause as
they are the only signatories thereto.
Petitioners Daniel Collins and Luis Hidalgo, and private respondent SFI, not parties
to the Agreement and cannot even be considered... assigns or heirs of the parties,
are not bound by the Agreement and the arbitration clause therein. Consequently,
referral to arbitration in the State of California pursuant to the arbitration clause
and the suspension of the proceedings in Civil Case No. 2637-‐MN pending the...
return of the arbitral award could be called for[25] but only as to petitioners DMC-‐
USA and Paul E. Derby, Jr., and private respondents MMI and LILY SY, and not as to
the other parties in this case... only parties to the Agreement, their assigns or heirs
have the right to arbitrate or could be compelled to... arbitrate. The Court went
further by declaring that in recognizing the right of the contracting parties to
arbitrate or to compel arbitration, the splitting of the proceedings to arbitration as
ATTY. BUSTAMANTE
ABSR

to some of the parties on one hand and trial for the others on the other hand, or the...
suspension of trial pending arbitration between some of the parties, should not be
allowed as it would, in effect, result in multiplicity of suits, duplicitous procedure
and unnecessary delay
The object of arbitration is to allow the expeditious determination of a dispute.[31]
Clearly, the issue before us could not be speedily and efficiently resolved in its
entirety if we allow simultaneous arbitration proceedings and trial, or suspension
of... trial pending arbitration. Accordingly, the interest of justice would only be
served if the trial court hears and adjudicates the case in a single and complete
proceeding
Principles:
There is no doubt that arbitration is valid and constitutional in our jurisdiction.[21]

Even before the enactment of RA 876, this Court has countenanced the settlement of
disputes through arbitration. Unless the agreement is such as absolutely to close
the... doors of the courts against the parties, which agreement would be void, the
courts will look with favor upon such amicable arrangement and will only interfere
with great reluctance to anticipate or nullify the action of the arbitrator.[22]
Moreover, as RA
876 expressly authorizes arbitration of domestic disputes, foreign arbitration as a

system of settling commercial disputes was likewise recognized when the
Philippines adhered to the United Nations "Convention on the Recognition and the
Enforcement of Foreign Arbitral Awards... of 1958" under the 10 May 1965
Resolution No. 71 of the Philippine Senate, giving reciprocal recognition and
allowing enforcement of international arbitration agreements between parties of
different nationalities within a contracting state
17. SEA-‐LAND SERVICE, INC., petitioner,

vs.
COURT OF APPEALS, A.P. MOLLER/MAERSK LINE and MAERSK-‐TABACALERA
SHIPPING AGENCY (FILIPINAS), INC., respondents.
G.R. No. 126212 March 2, 2000
YNARES-‐SANTIAGO, J.:
FACTS:
On April 29, 1991, petitioner Sea-‐Land Services, Inc. and private respondent A.P.
Moller/Maersk Line (hereinafter referred to as "AMML"), both carriers of cargo in
containerships as well as common carriers, entered into a contract entitled, "Co-‐
operation in the Pacific"2 (hereinafter referred to as the "Agreement"), a vessel

ATTY. BUSTAMANTE 9
ABSR

sharing agreement whereby they mutually agreed to purchase, share and exchange
needed space for cargo in their respective containerships. Under the Agreement,
they could be, depending on the occasion, either a principal carrier (with a
negotiable bill of lading or other contract of carriage with respect to cargo) or a
containership operator (owner, operator or charterer of containership on which the
cargo is carried).
During the lifetime of the said Agreement, or on 18 May 1991, Florex International,
Inc. (hereinafter referred to as "Florex") delivered to private respondent AMML
cargo of various foodstuffs, with Oakland, California as port of discharge and San
Francisco as place of delivery. The corresponding Bill of Lading No. MAEU
MNL110263 was issued to Florex by respondent AMML. Pursuant to the Agreement,
respondent AMML loaded the subject cargo on MS Sealand Pacer, a vessel owned by
petitioner. Under this arrangement, therefore, respondent AMML was the principal
carrier while petitioner was the containership operator.
The consignee refused to pay for the cargo, alleging that delivery thereof was
delayed. Thus, on June 26, 1992, Florex filed a complaint against respondent
Maersk-‐Tabacalera Shipping Agency (Filipinas), Inc. for reimbursement of the value
of the cargo and other charges.3 According to Florex, the cargo was received by the
consignee only on June 28, 1991, since it was discharged in Long Beach, California,
instead of in Oakland, California on June 5, 1991 as stipulated.
ISSUE: WHETHER OR NOT THE COURT OF APPEALS DISREGARDED AN
AGREEMENT TO ARBITRATE IN VIOLATION OF STATUTE AND SUPREME
COURT DECISIONS HOLDING THAT ARBITRATION IS A CONDITION
PRECEDENT TO SUIT WHERE SUCH AN AGREEMENT TO ARBITRATE EXISTS.
HELD: YES
To begin with, allowing respondent AMML's Third Party Claim against petitioner to
proceed would be in violation of Clause 16.2 of the Agreement. As summarized, the
clause provides that whatever dispute there may be between the Principal Carrier
and the Containership Operator arising from contracts of carriage shall be governed
by the provisions of the bills of lading deemed issued to the Principal Carrier by the
Containership Operator. On the other hand, to sustain the Third Party Complaint
would be to allow private respondent to hold petitioner liable under the provisions
of the bill of lading issued by the Principal Carrier to Florex, under which the latter
is suing in its Complaint, not under the bill of lading petitioner, as containership
operator, issued to respondent AMML, as Principal Carrier, contrary to what is
contemplated in Clause 16.2.
The Court of Appeals ruled that the terms of the Agreement "explicitly required that
the principal carrier's claim against the containership operator first be finally
ATTY. BUSTAMANTE
ABSR

determined by, among others, a court judgment, before the right to arbitration
accrues." However, the Court of Appeals failed to consider that, precisely, arbitration
is the mode by which the liability of the Containership Operator may be finally
determined. This is clear from the mandate of Clause 16.3 that "(T)he Principal
Carrier shall have the right to seek damages and/or an indemnity from the
Containership Operator by arbitration" and that it "shall be entitled to commence
such arbitration at any time until one year after its liability has been finally
determined by agreement, arbitration award or judgment".
For respondent Court of Appeals to say that the terms of the contract do not require
arbitration as a condition precedent to judicial action is erroneous. In the light of the
Agreement clauses aforequoted, it is clear that arbitration is the mode provided by
which respondent AMML as Principal Carrier can seek damages and/or indemnity
from petitioner, as Containership Operator. Stated differently, respondent AMML is
barred from taking judicial action against petitioner by the clear terms of their
Agreement.
As the Principal Carrier with which Florex directly dealt with, respondent AMML
can and should be held accountable by Florex in the event that it has a valid claim
against the former. Pursuant to Clause 16.3 of the Agreement, respondent AMML,
when faced with such a suit "shall use all reasonable endeavours to defend" itself or
"settle such suits for as low a figure as reasonably possible". In turn, respondent
AMML can seek damages and/or indemnity from petitioner as Containership
Operator for whatever final judgment may be adjudged against it under the
Complaint of Florex. The crucial point is that collection of said damages and/or
indemnity from petitioner should be by arbitration.
All told, when the text of a contract is explicit and leaves no doubt as to its intention,
the court may not read into it any other intention that would contradict its plain
import. 11 Arbitration being the mode of settlement between the parties expressly
provided for by their Agreement, the Third Party Complaint should have been
dismissed.
This Court has previously held that arbitration is one of the alternative methods of
dispute resolution that is now rightfully vaunted as "the wave of the future" in
international relations, and is recognized worldwide. To brush aside a contractual
agreement calling for arbitration in case of disagreement between the parties would
therefore be a step backward. 12
18. MAGELLAN CAPITAL MANAGEMENT CORPORATION and MAGELLAN

CAPITAL HOLDINGS CORPORATION, petitioners,
vs.
ROLANDO M. ZOSA and HON. JOSE P. SOBERANO, JR., in his capacity as
Presiding Judge of Branch 58 of the Regional Trial Court of Cebu, 7th Judicial
Region, respondents.

ATTY. BUSTAMANTE 1
ABSR

G.R. No. 129916 March 26, 2001
BUENA, J.
FACTS:
Under a management agreement entered into, MCHC appointed MCMC as manager
for the operation of its business and affairs. Pursuant thereto, petitioners and
private respondent Rolando Zosa entered into “Employment Agreement”
designating the latter as President and CEO of MCHC. Respondent Zosa then was
elected to a new position as MCHC’s Vice-‐Chairman/Chairman New Ventures
Development to which he communicated his resignation on the ground that it had
less responsibility and scope and demanded that he be given termination benefits as
provided in the Employment Agreement. MCHC communicated its non-‐acceptance
to the resignation and advised respondent that the agreement is terminated on
account of the latter’s breach thereof. Respondent invoked the Arbitration Clause of
the agreement and both parties designated their arbitrators in the panel. However,
instead of submitting the dispute to arbitration, respondent filed an action for
damages against petitioners before the RTC. Petitioners’s motion to dismiss was
denied. Petitioners filed a petition for certiorari and prohibition in the CA to which it
was given due course. The RTC in compliance with the decision, declared the
arbitration clause in the agreement partially void and of no effect insofar as it
concerns the composition of arbitrators. Petitioners then filed this petition for
review on certiorari.
ISSUE: WHETHER OR NOT THE ARBITRATION CLAUSE IN THE EMPLOYMENT
AGREEMENT IS PARTIALLY VOID AND OF NO EFFECT.
HELD:
We rule against the petitioners.
Even if procedural rules are disregarded, and a scrutiny of the merits of the case is
undertaken, this Court finds the trial court’s observations on why the composition of
the panel of arbitrators should be voided, incisively correct so as to merit our
approval. Thus,
“From the memoranda of both sides, the Court is of the view that the defendants
[petitioner] MCMC and MCHC represent the same interest. There is no quarrel that
both defendants are entirely two different corporations with personalities distinct
ATTY. BUSTAMANTE
ABSR

and separate from each other and that a corporation has a personality distinct and
separate from those persons composing the corporation as well as from that of any
other legal entity to which it may be related. But as the defendants [herein
petitioner] represent the same interest, it could never be expected, in the arbitration
proceedings, that they would not protect and preserve their own interest, much less,
would both or either favor the interest of the plaintiff. The arbitration law, as all
other laws, is intended for the good and welfare of everybody. In fact, what is being
challenged by the plaintiff herein is not the law itself but the provision of the
Employment Agreement based on the said law, which is the arbitration clause but
only as regards the composition of the panel of arbitrators.
“From the foregoing arbitration clause, it appears that the two (2) defendants
[petitioners] (MCMC and MCHC) have one (1) arbitrator each to compose the panel
of three (3) arbitrators. As the defendant MCMC is the Manager of defendant MCHC,
its decision or vote in the arbitration proceeding would naturally and certainly be in
favor of its employer and the defendant MCHC would have to protect and preserve
its own interest; hence, the two (2) votes of both defendants (MCMC and MCHC)
would certainly be against the lone arbitrator for the plaintiff [herein defendant].
Hence, apparently, plaintiff [defendant] would never get or receive justice and
fairness in the arbitration proceedings from the panel of arbitrators as provided in
the aforequoted arbitration clause. In fairness and justice to the plaintiff
[defendant], the two defendants (MCMC and MCHC) [herein petitioners] which
represent the same interest should be considered as one and should be entitled to
only one arbitrator to represent them in the arbitration proceedings. Accordingly,
the arbitration clause, insofar as the composition of the panel of arbitrators is
concerned should be declared void and of no effect, because the law says, “Any
clause giving one of the parties power to choose more arbitrators than the other is
void and of no effect” (Article 2045, Civil Code).
“The dispute or controversy between the defendants (MCMC and MCHC) [herein
petitioners] and the plaintiff [herein defendant] should be settled in the arbitration
proceeding in accordance with the Employment Agreement, but under the panel of
three (3) arbitrators, one (1) arbitrator to represent the plaintiff, one (1) arbitrator
to represent both defendants (MCMC and MCHC) [herein petitioners] and the third
arbitrator to be chosen by the plaintiff [defendant Zosa] and defendants
[petitioners].
We need only to emphasize in closing that arbitration proceedings are designed to
level the playing field among the parties in pursuit of a mutually acceptable solution
to their conflicting claims. Any arrangement or scheme that would give undue
advantage to a party in the negotiating table is anathema to the very purpose of
arbitration and should, therefore, be resisted. Wherefore, premises considered, the
petition is hereby dismissed and the decision of the trial court is affirmed.

ATTY. BUSTAMANTE 3
ABSR

19. CARGILL PHILIPPINES, INC., petitioner, vs. SAN FERNANDO REGALA
TRADING, INC., respondent.
G.R. No. 175404, January 31, 2011
PERALTA, J.:

FACTS:
Respondent San Fernando Regala Trading filed with the RTC of Makati City a
Complaint for Rescission of Contract with Damages against petitioner Cargill. It
alleged that it agreed that it would purchase from Cargill 12,000 metric tons of
Thailand origin cane blackstrap molasses and that the payment would be by an
Irrevocable Letter of Credit payable at sight. The parties agreed that the delivery
would be made in April/May. Cargill failed to comply with its obligations despite
demands from respondent. The respondent then filed for rescission. The petitioner
filed a Motion to Dismiss/Suspend proceeding, arguing that they must first resort to
arbitration as stated in their agreement before going to court. However, the RTC
ruled in favor of the respondent. The CA affirmed the RTC decision, adding that the
case cannot be brought under the Arbitration Law for the purpose of suspending the
proceedings before the RTC, since in its Motion to Dismiss/Suspend proceedings,
petitioner alleged, as one of the grounds thereof, that the subject contract between
the parties did not exist or it was invalid; that the said contract bearing the
arbitration clause was never consummated by the parties, thus, it was proper that
such issue be first resolved by the court through an appropriate trial; that the issue
involved a question of fact that the RTC should first resolve.

ISSUE: WHETHER THE CA ERRED IN FINDING THAT THIS CASE CANNOT BE
BROUGHT UNDER THE ARBITRATION LAW FOR THE PURPOSE OF
SUSPENDING THE PROCEEDINGS IN THE RTC.

HELD:
The petition is meritorious. CIVIL LAW -‐ Arbitration; alternative dispute resolution;
contracts Arbitration, as an alternative mode of settling disputes, has long been
recognized and accepted in our jurisdiction. R.A. No. 876 authorizes arbitration of
domestic disputes. Foreign arbitration, as a system of settling commercial disputes
of an international character, is likewise recognized. The enactment of R.A. No. 9285
on April 2, 2004 further institutionalized the use of alternative dispute resolution
systems, including arbitration, in the settlement of disputes. A contract is required
for arbitration to take place and to be binding. Submission to arbitration is a
contract and a clause in a contract providing that all matters in dispute between the
parties shall be referred to arbitration is a contract. The provision to submit to
arbitration any dispute arising therefrom and the relationship of the parties is part
of the contract and is itself a contract. The validity of the contract containing the
agreement to submit to arbitration does not affect the applicability of the arbitration
clause itself. A contrary ruling would suggest that a party's mere repudiation of the
main contract is sufficient to avoid arbitration. That is exactly the situation that the
ATTY. BUSTAMANTE
ABSR

separability doctrine, as well as jurisprudence applying it, seeks to avoid. Petition is
GRANTED.
20.RCBC CAPITAL CORPORATION, Petitioners,

vs.
BANCO DE ORO UNIBANK, INC., Respondent.
G.R. No. 196171 December 10, 2012
VILLARAMA, JR., J.:
FACTS:
On May 24, 2000, RCBC entered into a Share Purchase Agreement5 (SPA) with
Equitable-‐PCI Bank, Inc. (EPCIB), George L. Go and the individual shareholders6 of
Bankard, Inc. (Bankard) for the sale to RCBC of 226,460,000 shares (Subject Shares)
of Bankard, constituting 67% of the latter’s capital stock. After completing payment
of the contract price (₱1,786,769,400), the corresponding deeds of sale over the
subject shares were executed in January 2001.
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.
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.
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

ATTY. BUSTAMANTE 5
ABSR

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
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.
on June 16, 2010, the Arbitration Tribunal issued the Final Award.
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.
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

ATTY. BUSTAMANTE
ABSR

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.
ISSUE: WHETHER THERE IS LEGAL GROUND TO VACATE THE SECOND PARTIAL
AWARD
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."
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

ATTY. BUSTAMANTE 7
ABSR

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").
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
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.
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.102Institutionalization of ADR was envisioned as "an important
ATTY. BUSTAMANTE
ABSR

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
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
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

ATTY. BUSTAMANTE 9
ABSR

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ALTERNATIVE

DISPUTE RESOLUTION (2019-­‐2020)

14 ALTERNATIVE DISPUTE RESOLUTION CASE DIGEST A.Y. 2019-­‐2020

In domestic arbitration, the formal requirements of an arbitration agreement are

24 ALTERNATIVE DISPUTE RESOLUTION CASE DIGEST A.Y. 2019-­‐2020

The right to an appeal is neither' a natural right nor an indispensable component of

The remedies against an order

Once the RTC orders the confirmation, vacation, or correction/modification of a

12.GERARDO LANUZA, JR. AND ANTONIO O. OLBES, Petitioners,

G.R. No. 174938 October 1, 2014

28 ALTERNATIVE DISPUTE RESOLUTION CASE DIGEST A.Y. 2019-­‐2020

BF Corporation alleged in its complaint that... it entered into agreements with

Shangri-­‐La had been consistent in paying BF Corporation in accordance with its

However, by October 1991, Shangri-­‐La started defaulting in payment.

BF Corporation eventually completed the construction of the buildings.

Shangri-­‐La allegedly took possession of the buildings while still owing BF

BF Corporation alleged that despite repeated demands, Shangri-­‐La refused to pay

BF Corporation opposed the motion to suspend proceedings

On December 8, 1993, petitioners filed an answer to BF Corporation's complaint,

Shangri-­‐La filed an omnibus motion and BF Corporation an urgent motion for

Petitioners filed their comment on Shangri-­‐La's and BF Corporation's motions,

ISSUE: WHETHER PETITIONERS SHOULD BE MADE PARTIES TO THE

30 ALTERNATIVE DISPUTE RESOLUTION CASE DIGEST A.Y. 2019-­‐2020

As a general rule, therefore, a corporation's representative who did not personally

However, there are instances when the distinction between personalities of

Piercing the corporate veil is warranted when "[the separate personality of a

G.R. No. 198075 September 4, 2013

On 5 October 2009, Respondent filed an Unlawful Detainer case against the

On 4 November 2009, Petitioner filed an Answer with Compulsory Counterclaim.In

34 ALTERNATIVE DISPUTE RESOLUTION CASE DIGEST A.Y. 2019-­‐2020

36 ALTERNATIVE DISPUTE RESOLUTION CASE DIGEST A.Y. 2019-­‐2020

Arbitration before the Panel of Arbitrators is proper only when there is a

Section 24 of R.A. No. 9285 reads:

Legal Effect of the Application of the Arbitration Clause

40 ALTERNATIVE DISPUTE RESOLUTION CASE DIGEST A.Y. 2019-­‐2020

14. KOREA TECHNOLOGIES CO., LTD., petitioner,

VELASCO, JR., J.:

Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean corporation which is

15. JORGE GONZALES and PANEL OF ARBITRATORS, Petitioners,

G.R. No. 161957 January 22, 2007

This is a consolidation of two petitions rooted in the same disputed Addendum

44 ALTERNATIVE DISPUTE RESOLUTION CASE DIGEST A.Y. 2019-­‐2020

The separability of the arbitration agreement is especially significant to the

16.DEL MONTE CORPORATION-­‐USA, PAUL E. DERBY, JR., DANIEL

G.R. No. 136154 February 7, 2001

There is no doubt that arbitration is valid and constitutional in our

876 expressly authorizes arbitration of domestic disputes, foreign arbitration

In a Distributorship Agreement, petitioner Del Monte Corporation-­‐USA... appointed

12. GOVERNING LAW AND ARBITRATION[4]

Trial court deferred consideration of petitioners' Motion to Suspend Proceedings as

ISSUE: WHETHER THE DISPUTE BETWEEN THE PARTIES WARRANTS AN

The Agreement between petitioner DMC-­‐USA and private respondent MMI is a

There is no doubt that arbitration is valid and constitutional in our jurisdiction.[21]

876 expressly authorizes arbitration of domestic disputes, foreign arbitration as a

17. SEA-­‐LAND SERVICE, INC., petitioner,

G.R. No. 126212 March 2, 2000

18. MAGELLAN CAPITAL MANAGEMENT CORPORATION and MAGELLAN

We rule against the petitioners.

20.RCBC CAPITAL CORPORATION, Petitioners,

G.R. No. 196171 December 10, 2012

VILLARAMA, JR., J.:

As no settlement was reached, RCBC commenced arbitration proceedings with the

While RCBC paid Respondents’ share in the increment (US$130,000), it reiterated

DISPUTE RESOLUTION (2019-‐2020)

14 ALTERNATIVE DISPUTE RESOLUTION CASE DIGEST A.Y. 2019-‐2020

24 ALTERNATIVE DISPUTE RESOLUTION CASE DIGEST A.Y. 2019-‐2020

28 ALTERNATIVE DISPUTE RESOLUTION CASE DIGEST A.Y. 2019-‐2020

Shangri-‐La had been consistent in paying BF Corporation in accordance with its

However, by October 1991, Shangri-‐La started defaulting in payment.

Shangri-‐La allegedly took possession of the buildings while still owing BF

BF Corporation alleged that despite repeated demands, Shangri-‐La refused to pay

Shangri-‐La filed an omnibus motion and BF Corporation an urgent motion for

Petitioners filed their comment on Shangri-‐La's and BF Corporation's motions,

30 ALTERNATIVE DISPUTE RESOLUTION CASE DIGEST A.Y. 2019-‐2020

34 ALTERNATIVE DISPUTE RESOLUTION CASE DIGEST A.Y. 2019-‐2020

36 ALTERNATIVE DISPUTE RESOLUTION CASE DIGEST A.Y. 2019-‐2020

40 ALTERNATIVE DISPUTE RESOLUTION CASE DIGEST A.Y. 2019-‐2020

44 ALTERNATIVE DISPUTE RESOLUTION CASE DIGEST A.Y. 2019-‐2020

16.DEL MONTE CORPORATION-‐USA, PAUL E. DERBY, JR., DANIEL

In a Distributorship Agreement, petitioner Del Monte Corporation-‐USA... appointed

The Agreement between petitioner DMC-‐USA and private respondent MMI is a

17. SEA-‐LAND SERVICE, INC., petitioner,

56 ALTERNATIVE DISPUTE RESOLUTION CASE DIGEST A.Y. 2019-‐2020