TEODORO VEGA vs. THE SAN CARLOS MILLING CO.

, LTD
G.R. No. L-21549, October 22, 1924

FACTS:
Plaintiff filed an action for the recovery of 32,959 kilos of centrifugal sugar, or its value, P6,252, plus the payment of
P500 damages and the costs. The defendants filed an answer, and set up special defenses, the first of which is at
the same time a counterclaim.

PROCDEDURAL HISTORY:
The Court of First Instance of Occidental Negros that tried the case, rendered judgment in favor of the plaintiff.

The defendant company appealed from this judgment, and alleges that the lower court erred in having held itself with
jurisdiction to take cognizance of and render judgment in the cause. The assignment of error is based on clause 23 of
the Mill's covenants and clause 14 of the Planter's Covenant. Said clauses are as follows:

23. That it (the Mill — Party of the first part) will submit and all differences that may arise between the Mill
and the Planters to the decision of arbitrators, two of whom shall be chosen by the Mill and two by the
Planters, who in case of inability to agree shall select a fifth arbitrator, and to respect and abide by the
decision of said arbitrators, or any three of them, as the case may be.

xxx xxx xxx

14. That they (the Planters--Parties of the second part) will submit any and all differences that may arise
between the parties of the first part and the parties of the second part of the decision of arbitrators, two of
whom shall be chosen by the said parties of the first part and two by the said party of the second part, who
in case of inability to agree, shall select a fifth arbitrator, and will respect and abide by the decision of said
arbitrators, or any three of them, as the case may be.

It is an admitted fact that the differences which arose between the parties, and which are the subject of the present
litigation have not been submitted to the arbitration provided for in the above quoted clauses.

Defendant contends that as such stipulations on arbitration are valid, they constitute a condition precedent, to which
the plaintiff should have resorted before applying to the courts, as he prematurely did.

HELD:
The defendant is right in contending that such covenants on arbitration are valid, but they are not for the reason a bar
to judicial action, in view of the way they are expressed: An agreement to submit to arbitration, not consummated by
an award, is no bar to suit at law or in equity concerning the subject matter submitted. And the rule applies both in
respect of agreements to submit existing differences and agreements to submit differences which may arise in the
future. And in view of the terms in which the said covenants on arbitration are expressed, it cannot be held that in
agreeing on this point, the parties proposed to establish the arbitration as a condition precedent to judicial action,
because these clauses quoted do not create such a condition either expressly or by necessary inference.