HIRD DIVISION MMC appealed the above orders of April 11, 1988 and April 15,
1988 to the Office of the President, docketed as O.P. Case No.
[G.R. No. 137174. July 10, 2000]
REPUBLIC OF THE PHILIPPINES, Represented by the POLLUTION
ADJUDICATION BOARD (DENR), petitioner,
vs. MARCOPPER MINING CORPORATION, respondent.
DECISION
GONZAGA-REYES, J.:
In this petition for review on certiorari, petitioner REPUBLIC OF
THE PHILIPPINES through the Pollution Adjudication Board of the
Department of Environment and Natural Resources seeks to annul the
Decision[1] of the Court of Appeals [2] in CA-G.R. SP No. 44656 setting
aside the Order[3] of the Pollution Adjudication Board [4] in DENR-PAB
Case No. 04-00597-96; as well as the Resolution[5] denying
reconsideration of said Decision.
The following antecedent facts are undisputed:
Respondent Marcopper Mining Corporation (MMC) was issued a
temporary permit to operate a tailings [6] sea disposal system under
TPO No. POW-85-454-EJ for the period October 31, 1985 to October
21, 1986. Before it expired, MMC filed an application for the renewal
thereof with the National Pollution Control Commission (NPCC). On
September 20, 1986, MMC received a telegraphic order from the
NPCC directing the former to (i)mmediately cease and desist from
discharging mine tailings into Calancan Bay. The directive was brought
about through the efforts of certain religious groups which had been
protesting MMCs tailings sea disposal system. MMC requested the
NPCC to refrain from implementing the aforesaid directive until its
adoption of an alternative tailings disposal system. The NPCC granted
MMCs request and called a conference to discuss possible alternative
disposal systems. Consequently, an Environmental Technical
Committee, composed of representatives from the NPCC, the Bureau
of Mines and Geo-Sciences, and MMC was created to study the
feasibility of various tailings disposal systems that may be appropriate
for utilization by MMC and to submit its findings and recommendations
thereon.
Meanwhile, after the expiration of MMCs TPO No. POW-85-454-
EJ on October 21, 1986, the NPCC issued to MMC a new temporary
permit, TPO No. POW-86-454-EJ dated November 11, 1986, to expire
on February 10, 1987, with the condition that [t]he tailings disposal
system shall be transferred to San Antonio Pond within two (2) months
from the date of this permit. MMC moved for the deletion of the
condition stating that it needed to develop and mine
the ore deposits underneath the San Antonio pond for it to continue its
mining operations. In a letter-manifestation dated February 5, 1987,
MMC requested the NPCC for an extension of TPO No. POW-86-454-
EJ and the indefinite suspension of the condition in said permit until
such time that the NPCC shall have finally resolved the NPCC case
entitled Msgr. Rolly Oliverio, et al. vs. Marcopper Mining Corporation.
In the meantime, the NPCC was abolished by Executive Order
No. 192[7] dated June 10, 1987, and its powers and functions were
integrated into the Environmental Management Bureau and into the
Pollution Adjudication Board (PAB).[8]
On April 11, 1988, the Secretary of Environment and Natural
Resources, in his capacity as Chairman of the PAB, issued an Order
directing MMC to cease and desist from discharging mine tailings into
Calancan Bay. The order reads:
The Temporary Permit to Operate issued to Marcopper Mining
Corporation expired on February 10, 1987.
Section 96 of the National Pollution Control Commission (NPCC) Rules
and Regulations, which were adopted by the Board, provides that in no
case can a permit be valid for more than one (1) year.
Records show that Marcopper Mining Corporation has not filed any
application for renewal of the permit.
Marcopper Mining Corporation is hereby ordered to cease and desist
from discharging mine tailings into Calancan Bay immediately upon
receipt of this Order.
SO ORDERED.[9]
Immediately thereafter, the DENR Undersecretary for
Environment and Research issued a telegraphic order dated April 15,
1988, enjoining immediate compliance by MMC of the cease and
desist order of April 11, 1988.
3802. In an Order dated May 2, 1988, the Office of the President
denied MMCs requests for issuance of restraining orders against the
orders of the PAB. Consequently, MMC filed an Urgent Ex-Parte
Partial Motion for Reconsideration dated May 6, 1988, seeking the
reconsideration of the above Order. In an Order dated May 13, 1988,
the Office of the President granted the above partial motion for
reconsideration, thus:
WHEREFORE, the instant Urgent Ex-Parte Motion for Reconsideration
is hereby GRANTED, and the Order of this Office, dated May 2, 1988,
is hereby set aside insofar as it denies respondent-appellants requests
for issuance of restraining orders.
Accordingly, the Pollution Adjudication Board, its agents, deputies or
representatives are hereby enjoined from enforcing its cease and
desist order of April 15, 1988 pending resolution by this Office of
respondent-appellants appeal from said orders.
It is further directed that the status quo obtaining prior to the issuance
of said cease and desist order be maintained until further orders from
this Office.
It is understood, however, that during the efficacy of this restraining
order, respondent-appellant shall immediately undertake, at a cost of
not less than P30,000.00 a day, the building of artificial reefs and
planting of sea grass, mangroves and vegetation on the causeway of
Calancan Bay under the supervision of the Pollution Adjudication
Board and subject to such guidelines as the Board may impose.
SO ORDERED.[10]
In line with the directive from the Office of the President, the
Calancan Bay Rehabilitation Project (CBRP) was created, and MMC
remitted the amount of P30,000.00 a day, starting from May 13, 1988
to the Ecology Trust Fund (ETF) thereof. However, on June 30, 1991,
MMC stopped discharging its tailings in the Bay, hence, it likewise
ceased from making further deposits to the ETF.
From the issuance of the Order on May 13, 1988 until the
cessation of the tailings disposal on June 30, 1991, MMC made its
contribution to the ETF in the total amount of Thirty-Two Million Nine
Hundred and Seventy-Five Thousand Pesos
(P32,975,000.00). Thereafter, MMC filed a Motion dated July 9, 1991
manifesting that it would discontinue its contributions/deposits to the
ETF since it had stopped dumping tailings in the Bay. MMC prayed
that the Order issued by the Office of the President on May 13, 1988
be lifted.
On February 5, 1993, the Office of the President rendered a
decision in O.P. Case No. 3802 dismissing the appeal; affirming the
cease and desist Order issued by the PAB; and lifting the TRO dated
May 13, 1988. The Office of the President resolved the appeal in this
wise:
This brings to the fore the primordial issue of whether or not the
Secretary of Environment and Natural Resources gravely erred in
declaring the TPO No. POW-86-454-EJ issued to respondent-appellant
MMC expired on February 10, 1987, and in ordering the latter to cease
and desist from discharging mine tailings into Calancan Bay.
Respondent-appellant argues that the cease and desist orders were
issued by the PAB ex-parte, in violation of its procedural and
substantive rights provided for under Section 7 (a) of P.D. No. 984
requiring a public hearing before any order or decision for the
discontinuance of discharge of a sewage or industrial wastes into the
water, air or land could be issued by the PAB.
We are not persuaded.
Section 7(a) of P.D. No. 984, reads in part:
Sec. 7(a) Public Hearing. Public hearing shall be conducted by the
Commissioner, Deputy Commissioner or any senior official duly
designated by the Commissioner prior to issuance or promulgation of
any order or decision by the Commissioner requiring the
discontinuance of discharge of sewage, industrial wastes and other
wastes into the water, air or land resources of the Philippines as
provided in the Decree: provided, that whenever the Commission finds
a prima facie evidence that the discharged sewage or wastes are of
immediate threat to life, public health, safety or welfare, or to animal or
plant life, or exceeds the allowable standards set by the Commission,
the Commissioner may issue an ex-parte order directing the
discontinuance of the same or the temporary suspension or cessation
1
of operation of the establishment or person generating such sewage or
wastes without the necessity of a prior public hearing. x x x .
(underscoring supplied).
Clearly then, it is self-indulgent nonsense to assume that the DENR
Secretary, acting as PAB Chairman, is absolutely without authority to
issue an ex-parte order requiring the discontinuance of discharge of
sewage or other industrial wastes without public hearing. As can be
gleaned from the afroequoted proviso, this authority to issue an ex-
parte order suspending the discharge of industrial wastes is postulated
upon his finding of prima-facie evidence of an imminent threat to life,
public health, safety or welfare, to animal or plant life or exceeds the
allowable standards set by the Commission.[11]
In a letter dated January 22, 1997 [12], Municipal Mayor Wilfredo
A. Red of Sta. Cruz, Marinduque informed the PAB that MMC stopped
remitting the amount of 30,000.00 per day as of July 1, 1991 to the
ETF of the CBRP. This letter-complaint of Mayor Red was docketed as
DENR-PAB Case No. 04-00597-96, for violation of P.D. 984 [13] and its
implementing Rules and Regulations.
In an order dated April 23, 1997, the PAB ruled that the
obligation of MMC to deposit P30,000.00 per day to the ETF of the
CBRP subsists, as provided for in the Order of the Office of the
President dated May 13, 1988, during the efficacy of said order
restraining the PAB from enforcing its cease and desist order against
MMC. Since the Order was lifted only on February 5, 1993, the
obligation of MMC to remit was likewise extinguished only on said date
and not earlier as contended by MMC from the time it ceased dumping
tailings into the Bay on July 1, 1991. We quote in part:
The issue before this Board is whether Marcopper Mining Corporation
is still obliged to remit the amount of P30,000.00 to the CBRP. The
answer by the Order from the Office of the President dated 13 May
1988, which states that the obligation on the part of Marcopper Mining
to pay the amount of P30,000.00 per day for the rehabilitation of
Calancan Bay is binding only during the efficacy of the said Order.
The record further shows that on 05 February 1993, the Office of the
President lifted its Order dated 13 May 1988. This means that as of the
date of the lifting, Marcopper Mining Corporation no longer had any
obligation to remit the amount of P30,000.00 to the CBRP. Thus,
Marcoppers obligation only runs from 13 May 1988 to 05 February
1993. Beyond the cut-off date of 05 February 1993, Marcopper is no
longer obligated to remit the amount of P30,000.00 per day to the
CBRP.
It does not matter whether Marcopper was no longer dumping its tail
minings into the sea even before the cut-off date of 05 February
1993. The obligation of Marcopper to pay the amount of P30,000.00 to
the CBRP arises from the Office of the President Order dated 13 May
1988, not from it dumping of mine tailings.
WHEREFORE, Marcopper Mining Corporation is hereby ordered to
pay the CBRP the amount of P30,000.00 per day, computed from the
date Marcopper Mining Corporation stopped paying on 01 July
1991, up to the formal lifting of the subject Order from the Office of the
President on 05 February 1993.
SO ORDERED.[14]
MMC assailed the aforequoted Order dated April 23, 1997 of the
PAB as null and void for having been issued without jurisdiction or with
grave abuse of discretion in a petition for Certiorari and Prohibition
(with prayer for temporary restraining order and preliminary injunction)
before the Court of Appeals which was docketed as CA-G.R. No. SP-
44656. In a Resolution dated July 15, 1997, the Court of Appeals
required the PAB and its members to comment on said petition.
On November 19, 1997, the Office of the Solicitor General, on
behalf of the PAB and its members, filed with the Court of Appeals the
required comment.
On September 15, 1997, for purposes of determining whether or
not to grant MMCs prayer for a temporary restraining order and
preliminary injunction, the Court of Appeals conducted a hearing where
counsel for the parties were heard on oral arguments.
In a Resolution dated September 19, 1997, the Court of Appeals
issued a writ of preliminary injunction, conditioned upon the filing of a
bond by MMC in the amount of P500,000.00 enjoining the PAB and its
members to cease and desist from enforcing the assailed Order dated
April 23, 1997, until it had made a full determination on the merits of
the case.
On January 7, 1998, the Court of Appeals promulgated a
Decision in CA-G.R. SP No. 44656, the dispositive portion of which
reads:
In view of the foregoing, the instant petition is hereby GRANTED and,
accordingly, the questioned Order of respondent Pollution Adjudication
Board dated 23 April 1997 is hereby SET ASIDE. Respondents are
ordered to REFRAIN and DESIST from enforcing aforesaid Order. The
injunctive bond filed by the petitioner in the amount of Five Hundred
Thousand (P500,000.00) is hereby RELEASED.
The motion for reconsideration of the above decision was denied
in a Resolution dated January 13, 1999 of the Court of Appeals.
Hence, the instant petition on the following grounds:
I
The Court of Appeals erred in ruling that Republic Act No. 7942
(otherwise known as the Philippine Mining Act of 1995) repealed the
provisions of Republic Act No. 3931, as amended by Presidential
Decree No. 984, (otherwise known as the National Pollution Control
Decree of 1976), with respect to the power and function of petitioner
Pollution Adjudication Board to issue, renew or deny permits for the
discharge of the mine tailings.
II
Respondent Marcopper Mining Corporation bound itself to pay the
amount of P30,000.00 a day for the duration of the period starting May
13, 1988 up to February 5, 1993.
III
Respondent Marcopper Mining Corporation was not deprived of due
process of law when petitioner Pollution Adjudication Board directed it
to comply with its long-existing P30,000.00 per day obligation under
the Order of the Office of the President dated May 13, 1988. [15]
In setting aside the Order of the PAB dated April 23, 1997,
requiring MMC to pay its arrears in deposits, the Court of Appeals
ruled that the PAB exceeded its power and authority in issuing the
subject Order for the following reasons:
The applicable and governing law in this petition is Republic Act No.
7942 otherwise known as the Philippine Mining Act of 1995 (Mining
Act, approved on March 3, 1995).
Chapter XI of the Mining Act contains a series of provisions relating to
safety and environmental protection on mining and quarrying
operations. More specifically, Section 67 of the Mining Act in essence,
grants the mines regional director the power to issue orders or to take
appropriate measures to remedy any practice connected with mining or
quarrying operations which is not in accordance with safety and anti-
pollution laws and regulations.
From a reading of that provision, it would appear therefore that prior to
the passage of the Mining Act, the Pollution Adjudication Board had
jurisdiction to act on pollution-related matters in the mining
business. With the effectivity of the Mining Act and in congruence with
its Sec. 115 (i.e., Repealing and Amending Clause), the power to
impose measures against violations of environmental policies by
mining operators is now vested on the mines regional director. Be that
as it may, we are constrained to enunciate that the PAB had no
authority to issue the challenged Order dated 23 April 1997. More so,
respondent PAB as petitioner argued and We note, had remained
perplexingly silent on the matter for almost six (6) years from July 1991
when MMC ceased to make its deposits up to April 1997 when
respondent PAB precipitately issued the Order requiring MMC to pay
its arrears in deposits to the ETF. And PAB, apparently oblivious to
MMCs economic quandary had issued said Order ex-parte without
hearing or notice.
x x x
As a general rule, the adjudication of pollution cases pertains to the
Pollution Adjudication Board (PAB), except in cases where the special
law, expressly or impliedly, provides for another forum, as in the instant
petition.
Thus under Republic Act No. 7942 and its implementing rules and
regulations, the mines regional director, in consultation with
the Environmental Management Bureau (italics ours), is specifically
mandated to carry out and make effective the declared national policy
that the State shall promote the rational exploration, development,
utilization and conservation of all mineral resources in public and
private lands within the territory and exclusive economic zone of the
Republic of the Philippines, through the combined efforts of
government and the private sector in order to enhance national growth
and protect the rights of affected communities. (Sec. 2, R.A. 7942).
2
Under this expansive authority, the Mines Regional Director, by virtue
of this special law, has the primary responsibility to protect the
communities surrounding a mining site from the deleterious effects of
pollutants emanating from the dumping of tailing wastes from the
surrounding areas. Thus, in the exercise of its express powers under
this special law, the authority of the Mines Regional Director to impose
appropriate protective and/or preventive measures with respect to
pollution cases within mining operations is perforce,
implied. Otherwise, the special law granting this authority may well be
relegated to a mere paper tiger talking protection but allowing pollution.
It bears mention that the Pollution Adjudication Board has the power to
issue an ex-parte order when there is prima facie evidence of an
establishment exceeding the allowable standards set by the anti-
pollution laws of the country. (Pollution Adjudication Board v. Court of
Appeals, et al., 195 SCRA 112). However, with the passage of R.A.
7942, insofar as the regulation, monitoring and enforcement of anti-
pollution laws are concerned with respect to mining establishments,
the Mines Regional Director has a broad grant of power and
authority. Clearly, pollution-related issues in mining operations are
addressed to the Mines Regional Director, not the Pollution
Adjudication Board.
This being the case, the questioned Order dated 23 April 1997
requiring MMC to pay its arrears in deposits was beyond the power
and authority of the Pollution Adjudication Board to issue and as such,
petitioner may seek appropriate injunctive relief from the court. Thus,
certiorari lies against public respondent PAB.[16]
The Court of Appeals likewise ruled that the obligation of MMC to
contribute to the ETF of the CBRP ceased inasmuch as the latter
discontinued dumping tailings into the Bay and the actual funds in the
ETF are sufficient to rehabilitate the Bay. It ratiocinated thus:
In the instant case, it is of record that petitioner MMC undertakes its
obligation to provide for the rehabilitation of the Bay waters. This
obligation, through its monetary contribution to the ETF, is however
anchored on its continuing disposal of the mines tailings waste into the
Bay. Hence, since it ceased its mining operations in the affected area
as of July 1991 and had not been discharging any tailings wastes since
then, its consequent duty to rehabilitate the polluted waters, if any, no
longer exists.
x x x
Be that as it may, this Court observes that out of the approximate sum
of thirty-two (32) million pesos contributed by the petitioner to the ETF
there is admittedly an existing estimated balance of fourteen (14)
million pesos in the Fund. For its part, petitioner does not renege on its
obligation to rehabilitate and in fact undertakes to continue the
rehabilitation process until its completion within two (2) years time and
which would only cost six (6) million pesos. Thus, as petitioner
convincingly argued and which respondent unsatisfactorily rebuked,
the existing fourteen (14) million pesos in the ETF is more than enough
to complete the rehabilitation project. (TSN, Hearing dated 15
September 1997, at pp. 56 to 62, Rollo).
xxx. Without much ado, the Court concurs with the finding that to
demand a daily deposit of thirty thousand (P30, 000.00) pesos even if
the root of the obligation, that is, the dumping of tailings waste, had
ceased to exist, is indubitably of a herculean and onerous burden on
the part of petitioner amounting to a deprivation of its property and a
denial of its right to due process.[17]
Unsatisfied, the OSG argues that the Philippine Mining Act of
1995 did not amend or repeal the provisions of Republic Act No. 3931,
as amended by Presidential Decree No. 984 (otherwise known as the
National Pollution Control Decree of 1976); that the Mines Regional
Director has no power over areas outside mining installations and over
areas which are not part of the mining or quarrying operations such as
Calancan Bay; that the powers of the Mines Regional Director cannot
be exercised to the exclusion of other government agencies; that the
jurisdiction of a Mines Regional Director with respect to anti-pollution
laws is limited to practices committed within the confines of a mining or
quarrying installation; that the dumping of mine tailings into Calancan
Bay occurred long before the effectivity of the Philippine Mining Act
and that MMC cannot hide under cover of this new law. The OSG
further argues that theportion of the Order of May 13, 1988, setting the
period of time within which MMC shall pay P30,000.00 per day, which
is during the efficacy of the restraining order was never questioned or
appealed by MMC. Finally, the OSG argues that PAB did not violate
MMCs right to due process by the issuance of the Order dated April
23, 1988 without notice and hearing as it was simply requiring MMC to
comply with an obligation in an Order which has long become final and
executory.
In the context of the established facts, the issue that actually
emerges is: Has the PAB under RA 3931 as amended by PD 984
(National Pollution Control Decree of 1976) been divested of its
authority to try and hear pollution cases connected with mining
operations by virtue of the subsequent enactment of RA 7942
(Philippine Mining Act of 1995)? As mentioned earlier, the PAB took
cognizance and ruled on the letter-complaint (for violation of PD 984
and its implementing rules and regulations) filed against MMC by
Marinduque Mayor Wilfredo Red. In the subject Order dated April 23,
1997, the PAB ruled that MMC should pay its arrears in deposits to the
ETF of the CBRP computed from the day it stopped dumping and
paying on July 1, 1991 up to the lifting of the Order of the Office of the
President dated May 13, 1988 on February 5, 1993.
The answer is in the negative. We agree with the Solicitor
General that the Court of Appeals committed reversible error in ruling
that the PAB had no authority to issue the Order dated April 23, 1997.
Republic Act No. 3931 (An Act Creating The National Water And
Air Pollution Control Commission) was passed in June 18, 1964 to
maintain reasonable standards of purity for the waters and air of the
country with their utilization for domestic, agricultural, industrial and
other legitimate purposes. Said law was revised in 1976 by
Presidential Decree No. 984 (Providing For The Revision Of Republic
Act No. 3931, Commonly Known As The Pollution Control Law, And
For Other Purposes) to strengthen the National Pollution Control
Commission to best protect the people from the growing menace of
environmental pollution. Subsequently, Executive Order No. 192, s.
1987 (The Reorganization Act of the DENR) was passed. The internal
structure, organization and description of the functions of the new
DENR, particularly the Mines and Geosciences Bureau, reveals no
provision pertaining to the resolution of cases involving violations of the
pollution laws.[18] The Mines and Geo-Sciences Bureau was created
under the said EO 192 to absorb the functions of the abolished Bureau
of Mines and Geo-Sciences, Mineral Reservations Development Board
and the Gold Mining Industry Development Board to, among others,
recommend policies, regulations and programs pertaining to mineral
resources development; assist in the monitoring and evaluation of the
Bureaus programs and projects; and to develop and promulgate
standards and operating procedures on mineral resources
development.[19]
On the other hand, the PAB was created and granted under the
same EO 192 broad powers to adjudicate pollution cases in
general. Thus,
SEC. 19. Pollution Adjudication Board. There is hereby created a
Pollution Adjudication Board under the Office of the Secretary. The
Board shall be composed of the Secretary as Chairman, two (2)
Undersecretaries as may be designated by the Secretary, the Director
of Environmental management, and three (3) others to be designated
by the Secretary as members. The Board shall assume the powers
and functions of the Commission/Commissioners of the National
Pollution Control Commission with respect to the adjudication of
pollution cases under Republic Act 3931 and Presidential Decree 984,
particularly with respect to Section 6 letters e, f, g, j, k, and p of P.D.
984. The Environmental Management Bureau shall serve as the
Secretariat of the Board. These powers and functions may be
delegated to the regional offices of the Department in accordance with
rules and regulations to be promulgated by the Board. [20]
Section 6 letters e, f, g, j, k, and p of PD 984 referred to above
are quoted as follows:
SEC. 6. Powers and Functions. The Commission shall have the
following powers and functions:
(e) Issue orders or decision to compel compliance with the
provisions of this Decree and its implementing rules
and regulations only after proper notice and hearing.
(f) Make, alter or modify orders requiring the
discontinuance of pollution specifying the conditions
and the time within which such discontinuance must
be accomplished.
(g) Issue, renew, or deny permits, under such conditions
as it may determine to be reasonable, for the
prevention and abatement of pollution, for the
discharge of sewage, industrial waste, or for the
installation or operation of sewage works and industrial
disposal system or parts thereof: Provided, however,
That the Commission, by rules and regulations, may
require subdivisions, condominium, hospitals, public
buildings and other similar human settlements to put
up appropriate central sewerage system and sewage
treatment works, except that no permits shall be
required to any sewage works or changes to or
extensions of existing works that discharge only
domestic or sanitary wastes from a singles residential
building provided with septic tanks or their
equivalent. The Commission may impose reasonable
fees and charges for the issuance or renewal of all
permits required herein.
3
 (h)
(i)
(j) Serve as arbitrator for the determination of reparations,
or restitution of the damages and losses resulting from
pollution.
(k) Deputize in writing or request assistance of appropriate
government agencies or instrumentalities for the
purpose of enforcing this Decree and its implementing
rules and regulations and the orders and decisions of
the Commission.
(l)
(m)
(n)
(o)
(p) Exercise such powers and perform such other
functions as may be necessary to carry out its duties
and responsibilities under this Decree.
Section 7(a) of P.D. No. 984 further provides in part:
Sec. 7(a) Public Hearing. Public hearing shall be conducted by the
Commissioner, Deputy Commissioner or any senior official duly
designated by the Commissioner prior to issuance or promulgation of
any order or decision by the Commissioner requiring the
discontinuance of discharge of sewage, industrial wastes and other
wastes into the water, air or land resources of the Philippines as
provided in the Decree: provided, that whenever the Commission finds
a prima facie evidence that the discharged sewage or wastes are of
immediate threat to life, public health, safety or Welfare, or to animal or
plant life, or exceeds the allowable standards set by the Commission,
the Commissioner may issue and ex-parte order directing the
discontinuance of the same or the temporary suspension or cessation
of operation of the establishment or person generating such sewage or
wastes without the necessity of a prior public hearing. x x x .
(underscoring supplied).
The ruling of the Court of Appeals that the PAB has been
divested of authority to act on pollution-related matters in mining
operations is anchored on the following provisions of RA 7942
(Philippine Mining Act of 1995):
SEC. 67. Power to Issue Orders. The mines regional director shall, in
consultation with the Environmental Management Bureau, forthwith or
within such time as specified in his order, require the contractor to
remedy any practice connected with mining or quarrying operations,
which is not in accordance with safety and anti-pollution laws and
regulations. In case of imminent danger to life or property, the mines
regional director may summarily suspend the mining or quarrying
operations until the danger is removed, or appropriate measures are
taken by the contractor or permittee.
And
SEC. 115. Repealing and Amending Clause. All laws, executive
orders, presidential decrees, rules and regulations, or parts thereof
which are inconsistent with any of the provisions of this Act are hereby
repealed or amended accordingly.
The other provisions in Chapter XI on Safety and Environmental
Protection found in RA 7942 promote the safe and sanitary upkeep of
mining areas to achieve waste-free and efficient mine development
with particular concern for the physical and social rehabilitation of
areas and communities affected by mining activities [21], without
however, arrogating unto the mines regional director any adjudicative
responsibility.
From a careful reading of the foregoing provisions of law, we
hold that the provisions of RA 7942 do not necessarily repeal RA 3931,
as amended by PD 984 and EO 192. RA 7942 does not contain any
provision which categorically and expressly repeals the provisions of
the Pollution Control Law. Neither could there be an implied repeal. It
is well-settled that repeals of laws by implication are not favored and
that courts must generally assume their congruent application. Thus, it
has been held:
The two laws must be absolutely incompatible, and a clear finding
thereof must surface, before the inference of implied repeal may be
drawn. The rule is expressed in the maxim, interpretare et concordare
leqibus est optimus interpretendi, i.e., every statute must be so
interpreted and brought into accord with other laws aas to form a
uniform system of jurisprudence.The fundament is that the legislature
should be presumed to have known the existing laws on the subject
and not have enacted conflicting statutes. Hence, all doubts must be
resolved against any implied repeal, and all efforts should be exerted
in order to harmonize and give effect to all laws on the subject.[22]
There is no irreconcilable conflict between the two laws. Section
19 of EO 192 vested the PAB with the specific power to adjudicate
pollution cases in general. Sec. 2, par. (a) of PD 984 defines the term
pollution as referring to any alteration of the physical, chemical and
biological properties of any water, air and/or land resources of the
Philippines , or any discharge thereto of any liquid, gaseous or solid
wastes as will or is likely to create or to render such water, air and land
resources harmful, detrimental or injurious to public health, safety or
welfare or which will adversely affect their utilization for domestic,
commercial, industrial, agricultural, recreational or other legitimate
purposes.
On the other hand, the authority of the mines regional director is
complementary to that of the PAB. Section 66 of RA 7942 gives the
mines regional director exclusive jurisdiction over the safety inspection
of all installations, surface or underground in mining
operations. Section 67 thereof vests upon the regional director power
to issue orders requiring a contractor to remedy any practice
connected with mining or quarrying operations which is not in
accordance with safety and anti-pollution laws and regulations; and to
summarily suspend mining or quarrying operations in case of imminent
danger to life or property. The law likewise requires every contractor to
undertake an environmental protection and enhancement program
which shall be incorporated in the work program which the contractor
shall submit as an accompanying document to the application for a
mineral agreement or permit. In addition, an environmental clearance
certificate is required based on an environment impact
assessment. The law also requires contractors and permittees to
rehabilitate the mined-out areas, and set up a mine rehabilitation
fund. Significantly, the law allows and encourages peoples
organizations and non-governmental organizations to participate in
ensuring that contractors/permittees shall observe all the requirements
of environmental protection.
From the foregoing, it readily appears that the power of the
mines regional director does not foreclose PABs authority to determine
and act on complaints filed before it. The power granted to the mines
regional director to issue orders requiring the contractor to remedy any
practice connected with mining or quarrying operations or to summarily
suspend the same in cases of violation of pollution laws is for purposes
of effectively regulating and monitoring activities within mining
operations and installations pursuant to the environmental protection
and enhancement program undertaken by contractors and permittees
in procuring their mining permit. While the mines regional director has
express administrative and regulatory powers over mining operations
and installations, it has no adjudicative powers over complaints for
violation of pollution control statutes and regulations.
True, in Laguna Lake Development Authority vs. Court of
Appeals,[23] this Court held that adjudication of pollution cases generally
pertains to the Pollution Adjudication Board (PAB) except where the
special law provides for another forum. However, contrary to the ruling
of the Court of Appeals, RA 7942 does not provide for another forum
inasmuch as RA 7942 does not vest quasi-judicial powers in the Mines
Regional Director. The authority is vested and remains with the PAB.
Neither was such authority conferred upon the Panel of
Arbitrators and the Mines Adjudication Board which were created by
the said law. The provisions creating the Panel of Arbitrators for the
settlement of conflicts refers to disputes involving rights to mining
areas, mineral agreements or permits and those involving surface
owners, occupants and claim-holders/concessionaires.[24] The scope of
authority of the Panel of Arbitrators and the Mines Adjudication Board
conferred by RA 7942 clearly exclude adjudicative responsibility over
pollution cases. Nowhere is there vested any authority to adjudicate
cases involving violations of pollution laws and regulations in general.
Thus, there is no genuine conflict between RA 7942 and RA
3931 as amended by PD 984 that precludes their co-existence.
Moreover, it has to be conceded that there was no intent on the part of
the legislature to repeal the said law. There is nothing in the
sponsorship speech[25] of the laws proponent, Representative Renato
Yap, and the deliberations that followed thereafter, to indicate a
legislative intent to repeal the pollution law. Instead, it appears that the
legislature intended to maximize the exploration, development and
utilization of the countrys mineral resources to contribute to the
achievement of national economic and social development with due
regard to the social and environmental cost implications relative
thereto. The law intends to increase the productivity of the countrys
mineral resources while at the same time assuring its sustainability
through judicious use and systematic rehabilitation. Henceforth, the
Department of Environment and Natural Resources as the primary
government agency responsible for the conservation, management,
development, and proper use of the States mineral resources, through
its Secretary, has the authority to enter into mineral agreements on
behalf of the Government upon the recommendation of the Director,
and to promulgate such rules and regulations as may be necessary to
carry out the provisions of RA 7942. [26] The PAB and the Mines
4
Regional Director, with their complementary functions and through
their combined efforts, serve to accomplish the mandate of RA 3931
(National Pollution Control Decree of 1976) as amended by PD 984
and EO 192 and that of RA 7942 (Philippine Mining Act of 1995).
That matter settled, we now go to the issue of whether the
appellate court erred in ruling that there is no basis for further
payments by MMC to the Ecology Trust Fund of the Calancan Bay
Rehabilitation Project considering that MMC convincingly argued and
which respondent unsatisfactorily rebuked, the existing fourteen (14)
million pesos in the ETF is more than enough to complete the
rehabilitation project. Indeed, the records reveal that witness for PAB,
Mr. Edel Genato, who is the Technical Resource person of the PAB for
the project admitted that the funds in the ETF amounting to about
Fourteen Million Pesos are more than sufficient to cover the costs of
rehabilitation. Hereunder are excerpts from the transcript of
stenographic notes taken during the hearing held on September 15,
1997:
ATTY. HERNANDEZ:[27]
I would like your Honor, if the court will allow, our witness from the
EBRB Your Honor would attest to that . . .
JUSTICE JACINTO:
Is it not being taken from the 14 million?
ATTY. HERNANDEZ:
Yes, Your Honor.
JUSTICE RASUL:
What is his role?
ATTY. HERNANDEZ:
He is our Technical Resource person Your Honor, of the project.
JUSTICE RASUL:
In other words, he has participated in the . . (inaudible)?
ATTY. HERNANDEZ:
Yes, Your Honor.
JUSTICE RASUL:
Do you agree with him?
MR. EDEL GENATO:
Yes, Your Honor, that the Calancan rehabilitation program is being
funded by Marcopper through the Ecology Trust Fund.
JUSTICE RASUL:
Will the construction be finished in two years time?
MR. EDEL GENATO:
Presently, under the Steering Committee of the Calancan Bay
Rehabilitation, there is another phase that is being
proposed. Actually the two years time will definitely cover the
other phase of the . .(inaudible)
Well Your Honor, I cannot comment on the amount Your Honor.
JUSTICE RASUL:
You have already made your comment, but you received some
signal from your lawyer.
ATTY. HERNANDEZ:
Your Honor . . .
MR. EDEL GENATO:
No, no Your Honor. . .
JUSTICE RASUL:
My question is, do you agree with him that the 14 million fund will
be enough to sustain the construction up to the end?
MR. EDEL GENATO:
Two years?
JUSTICE RASUL:
Yes.
MR. EDEL GENATO:
Your Honor. . .
JUSTICE AMIN:
Categorical answer.
JUSTICE RASUL:
You just answer, is it enough, in your own honest way, on your
honor?
MR. EDEL GENATO:
I think so Your Honor.[28]
We must sustain the appellate court on this point on account of
the testimony of Mr. Edel Genato. Further, we note that the Office of
the President never objected nor ruled on themanifestation dated July
9, 1991 filed by MMC that it would stop paying since it already ceased
dumping mine tailings into the bay. Still further, the order of the OP
directing MMC to rehabilitate at a cost of P30,000.00 a day during the
efficacy of the restraining order had become functus officio since MMC
voluntarily stopped dumping mine tailings into the bay.
To sum up, PAB has jurisdiction to act and rule on the letter-
complaint of Mayor Wilfredo Red of Marinduque for violation of PD 984
and its implementing rules and regulations which jurisdiction was not
lost upon the passage of RA 7942 (the Philippine Mining Act of
1995). Nevertheless, MMC must be declared not to have arrears in
deposits as admittedly, the ETF already has more than sufficient funds
to undertake the rehabilitation of Calancan Bay.
WHEREFORE, the petition is hereby partially GRANTED. The
assailed Decision is REVERSED insofar as the jurisdiction of the PAB
to act on the complaint is concerned; but AFFIRMED insofar as
Marcopper Mining Corporation has no arrears in deposits with the
Ecology Trust Fund of the Calancan Bay Rehabilitation Project.

JUSTICE RASUL: SO ORDERED.

Never mind that. Will the amount be sufficient to the end of the ORGE GONZALES and G.R. No. 161957
construction? PANEL OF ARBITRATORS,
Petitioners, Present:
MR. EDEL GENATO:
 
Yes, Sir. PUNO, C. J.,
Chairperson,
JUSTICE RASUL: -        versus AUSTRIA-MARTINEZ,
C
Enough? ALLEJO,
SR.,
MR. EDEL GENATO: TINGA,
Yes, Sir. and
NAZARIO, JJ.
JUSTICE RASUL: CLIMAX MINING LTD.,
CLIMAX-ARIMCO MINING CORP.,
There is no more need for collecting the 30 thousand a and AUSTRALASIAN PHILIPPINES Promulgated:
day? . . . Do not . . . I will hold you for contempt . . . MINING INC.,
Respondents. January 22, 2007
ATTY. HERNANDEZ:  
x--------------------------------------------------------------------------------- x
Im sorry Your Honor.
 
JUSTICE RASUL:  
JORGE GONZALES, G.R. No. 167994
Again. Petitioner,
 
MR. EDEL GENATO:  
5
 -        versus
 
 
HON. OSCAR B. PIMENTEL, in his
capacity as PRESIDING JUDGE of BR. 148
of the REGIONAL TRIAL COURT of
MAKATI CITY, and CLIMAX-ARIMCO
MINING CORPORATION,
Respondents.
x-------------------------- --------------------------------------------------- x
 
 
 
R E S O L U T I ON
 
TINGA, J.:
 
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[1] 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[2] 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[3] 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.
[4]
 Respondents, citing American jurisprudence [5] and the UNCITRAL Model
Law,[6] 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 Gonzaless 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 Gonzaless having impugn[ed] the existence or validity of the addendum
contract. If so, it supposedly conveys the idea that Gonzaless 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.
 
Both parties were required to file their respective comments to the other partys
motion for reconsideration/clarification.[7] Respondents filed their Comment
on 17 August 2005,[8] while Gonzales filed his only on 25 July 2006.[9]
 
On the other hand, G.R. No. 167994 is a Rule 65 petition filed on 6 May
2005, or while the motions for reconsideration in G.R. No. 161957[10] were
pending, wherein Gonzales challenged the orders of the Regional Trial Court
(RTC) requiring him to proceed with the arbitration proceedings as sought by
Climax-Arimco Mining Corporation (Climax-Arimco).
 
On 5 June 2006, the two cases, G.R. Nos. 161957 and 167994, were
consolidated upon the recommendation of the Assistant Division Clerk of
Court since the cases are rooted in the same Addendum Contract.
 
We first tackle the more recent case which is G.R. No. 167994. It stemmed
from the petition to compel arbitration filed by respondent Climax-Arimco
before the RTC of Makati City on 31 March 2000 while the complaint for the
nullification of the Addendum Contract was pending before the DENR Panel
of Arbitrators. On 23 March 2000, Climax-Arimco had sent Gonzales a
Demand for Arbitration pursuant to Clause 19.1[11] of the Addendum Contract
and also in accordance with Sec. 5 of R.A. No. 876. The petition for
arbitration was subsequently filed and Climax-Arimco sought an order to
compel the parties to arbitrate pursuant to the said arbitration clause. The case,
docketed as Civil Case No. 00-444, was initially raffled to Br. 132 of the RTC
of Makati City, with Judge Herminio I. Benito as Presiding
Judge. Respondent Climax-Arimco filed on 5 April 2000 a motion to set the
application to compel arbitration for hearing.
 
 
On 14 April 2000, Gonzales filed a motion to dismiss which he however
failed to set for hearing. On 15 May 2000, he filed an Answer with
Counterclaim,[12] questioning the validity of the Addendum Contract
containing the arbitration clause. Gonzales alleged that the Addendum
Contract containing the arbitration clause is void in view of Climax-Arimcos
acts of fraud, oppression and violation of the Constitution. Thus, the
arbitration clause, Clause 19.1, contained in the Addendum Contract is also
null and void ab initioand legally inexistent.
 
On 18 May 2000, the RTC issued an order declaring Gonzaless motion to
dismiss moot and academic in view of the filing of his Answer with
Counterclaim.[13]
 
On 31 May 2000, Gonzales asked the RTC to set the case for pre-trial. [14] This
the RTC denied on 16 June 2000, holding that the petition for arbitration is a
special proceeding that is summary in nature. [15] However, on 7 July 2000, the
RTC granted Gonzaless motion for reconsideration of the 16 June 2000 Order
and set the case for pre-trial on 10 August 2000, it being of the view that
Gonzales had raised in his answer the issue of the making of the arbitration
agreement.[16]
 
Climax-Arimco then filed a motion to resolve its pending motion to compel
arbitration. The RTC denied the same in its 24 July 2000 order.
 
On 28 July 2000, Climax-Arimco filed a Motion to Inhibit Judge Herminio I.
Benito for not possessing the cold neutrality of an impartial judge. [17] On 5
August 2000, Judge Benito issued an Order granting the Motion to Inhibit and
ordered the re-raffling of the petition for arbitration. [18] The case was raffled to
the sala of public respondent Judge Oscar B. Pimentel of Branch 148.
 
On 23 August 2000, Climax-Arimco filed a motion for reconsideration of
the 24 July 2000 Order.[19] Climax-Arimco argued that R.A. No. 876 does not
authorize a pre-trial or trial for a motion to compel arbitration but directs the
court to hear the motion summarily and resolve it within ten days from
hearing. Judge Pimentel granted the motion and directed the parties to
arbitration. On 13 February 2001, Judge Pimentel issued the first assailed
order requiring Gonzales to proceed with arbitration proceedings and
appointing retired CA Justice Jorge Coquia as sole arbitrator.[20]
 
Gonzales moved for reconsideration on 20 March 2001 but this was denied in
the Order dated 7 March 2005.[21]
 
Gonzales thus filed the Rule 65 petition assailing the Orders
dated 13 February 2001 and 7 March 2005 of Judge Pimentel. Gonzales
contends that public respondent Judge Pimentel acted with grave abuse of
discretion in immediately ordering the parties to proceed with arbitration
despite the proper, valid, and timely raised argument in his Answer with
Counterclaim that the Addendum Contract, containing the arbitration clause,
is null and void. Gonzales has also sought a temporary restraining order to
prevent the enforcement of the assailed orders directing the parties to arbitrate,
and to direct Judge Pimentel to hold a pre-trial conference and the necessary
hearings on the determination of the nullity of the Addendum Contract.
 
In support of his argument, Gonzales invokes Sec. 6 of R.A. No.
876:
 
SEC. 6. Hearing by court.A party
aggrieved by the failure, neglect or refusal of another
to perform under an agreement in writing providing
for arbitration may petition the court for an order
directing that such arbitration proceed in the manner
provided for in such agreement. Five days notice in
writing of the hearing of such application shall be
served either personally or by registered mail upon
the party in default. The court shall hear the parties,
and upon being satisfied that the making of the
agreement or such failure to comply therewith is not
in issue, shall make an order directing the parties to
proceed to arbitration in accordance with the terms of
the agreement. If the making of the agreement or
default be in issue the court shall proceed to
summarily hear such issue. If the finding be that no
agreement in writing providing for arbitration was
made, or that there is no default in the proceeding
thereunder, the proceeding shall be dismissed. If the
finding be that a written provision for arbitration was
made and there is a default in proceeding thereunder,
an order shall be made summarily directing the
parties to proceed with the arbitration in accordance
with the terms thereof.
 
The court shall decide all motions,
petitions or applications filed under the provisions of
this Act, within ten (10) days after such motions,
petitions, or applications have been heard by it.
 
 
Gonzales also cites Sec. 24 of R.A. No. 9285 or the Alternative
Dispute Resolution Act of 2004:
SEC. 24. Referral to Arbitration.A court
before which an action is brought in a matter which is
the subject matter of an arbitration agreement shall, if
at least one party so requests not later than the pre-
trial conference, or upon the request of both parties
6
 thereafter, refer the parties to arbitration unless it
finds that the arbitration agreement is null and void,
inoperative or incapable of being performed.
 
According to Gonzales, the above-quoted provisions of law outline the
procedure to be followed in petitions to compel arbitration, which the RTC
did not follow. Thus, referral of the parties to arbitration by Judge Pimentel
despite the timely and properly raised issue of nullity of the Addendum
Contract was misplaced and without legal basis. Both R.A. No. 876 and R.A.
No. 9285 mandate that any issue as to the nullity, inoperativeness, or
incapability of performance of the arbitration clause/agreement raised by one
of the parties to the alleged arbitration agreement must be determined by the
court prior to referring them to arbitration. They require that the trial court
first determine or resolve the issue of nullity, and there is no other venue for
this determination other than a pre-trial and hearing on the issue by the trial
court which has jurisdiction over the case. Gonzales adds that the assailed 13
February 2001 Order also violated his right to procedural due process when
the trial court erroneously ruled on the existence of the arbitration agreement
despite the absence of a hearing for the presentation of evidence on the nullity
of the Addendum Contract.
 
Respondent Climax-Arimco, on the other hand, assails the mode of review
availed of by Gonzales. Climax-Arimco cites Sec. 29 of R.A. No. 876:
 
SEC. 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 an
appeal, including the judgment thereon shall be
governed by the Rules of Court in so far as they are
applicable.
 
 
Climax-Arimco mentions that the special civil action for certiorari employed
by Gonzales is available only where there is no appeal or any plain, speedy,
and adequate remedy in the ordinary course of law against the challenged
orders or acts. Climax-Arimco then points out that R.A. No. 876 provides for
an appeal from such orders, which, under the Rules of Court, must be filed
within 15 days from notice of the final order or resolution appealed from or of
the denial of the motion for reconsideration filed in due time.Gonzales has not
denied that the relevant 15-day period for an appeal had elapsed long before
he filed this petition for certiorari. He cannot use the special civil action of
certiorari as a remedy for a lost appeal.
 
Climax-Arimco adds that an application to compel arbitration under Sec. 6 of
R.A. No. 876 confers on the trial court only a limited and special
jurisdiction, i.e., a jurisdiction solely to determine (a) whether or not the
parties have a written contract to arbitrate, and (b) if the defendant has failed
to comply with that contract. Respondent cites La Naval Drug Corporation v.
Court of Appeals,[22] which holds that in a proceeding to compel arbitration,
[t]he arbitration law explicitly confines the courts authority only to pass upon
the issue of whether there is or there is no agreement in writing providing for
arbitration, and [i]n the affirmative, the statute ordains that the court shall
issue an order summarily directing the parties to proceed with the arbitration
in accordance with the terms thereof. [23] Climax-Arimco argues that R.A. No.
876 gives no room for any other issue to be dealt with in such a proceeding,
and that the court presented with an application to compel arbitration may
order arbitration or dismiss the same, depending solely on its finding as to
those two limited issues. If either of these matters is disputed, the court is
required to conduct a summary hearing on it. Gonzaless proposition
contradicts both the trial courts limited jurisdiction and the summary nature of
the proceeding itself.
 
Climax-Arimco further notes that Gonzaless attack on or repudiation of the
Addendum Contract also is not a ground to deny effect to the arbitration
clause in the Contract. The arbitration agreement is separate and severable
from the contract evidencing the parties commercial or economic transaction,
it stresses. Hence, the alleged defect or failure of the main contract is not a
ground to deny enforcement of the parties arbitration agreement. Even the
party who has repudiated the main contract is not prevented from enforcing its
arbitration provision. R.A. No. 876 itself treats the arbitration clause or
agreement as a contract separate from the commercial, economic or other
transaction to be arbitrated. The statute, in particular paragraph 1 of Sec. 2
thereof, considers the arbitration stipulation an independent contract in its own
right whose enforcement may be prevented only on grounds which legally
make the arbitration agreement itself revocable, thus:
 
SEC. 2. Persons and matters subject to
arbitration.Two or more persons or parties may
submit to the arbitration of one or more arbitrators
any controversy existing, between them at the time of
the submission and which may be the subject of an
action, or the parties to any contract may in such
contract agree to settle by arbitration a controversy
thereafter arising between them.Such submission or
contract shall be valid, enforceable and irrevocable,
save upon such grounds as exist at law for the
revocation of any contract.
 
xxxx
 
The grounds Gonzales invokes for the revocation of the Addendum
Contractfraud and oppression in the execution thereofare also not grounds for
the revocation of the arbitration clause in the Contract, Climax-Arimco
notes. Such grounds may only be raised by way of defense in the arbitration
itself and cannot be used to frustrate or delay the conduct of arbitration
proceedings. Instead, these should be raised in a separate action for rescission,
it continues.
 
Climax-Arimco emphasizes that the summary proceeding to compel
arbitration under Sec. 6 of R.A. No. 876 should not be confused with the
procedure in Sec. 24 of R.A. No. 9285. Sec. 6 of R.A. No. 876 refers to an
application to compel arbitration where the courts authority is limited to
resolving the issue of whether there is or there is no agreement in writing
providing for arbitration, while Sec. 24 of R.A. No. 9285 refers to an ordinary
action which covers a matter that appears to be arbitrable or subject to
arbitration under the arbitration agreement. In the latter case, the statute is
clear that the court, instead of trying the case, may, on request of either or
both parties, refer the parties to arbitration, unless it finds that the arbitration
agreement is null and void, inoperative or incapable of being
performed. Arbitration may even be ordered in the same suit brought upon a
matter covered by an arbitration agreement even without waiting for the
outcome of the issue of the validity of the arbitration agreement. Art. 8 of the
UNCITRAL Model Law[24]states that where a court before which an action is
brought in a matter which is subject of an arbitration agreement refers the
parties to arbitration, the arbitral proceedings may proceed even while the
action is pending.
 
Thus, the main issue raised in the Petition for Certiorari is whether 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.The resolution of both
Climax-Arimcos Motion for Partial Reconsideration and/or Clarification in
G.R. No. 161957 and Gonzaless Petition for Certiorari in G.R. No. 167994
essentially turns on whether the question of validity of the Addendum
Contract bears upon the applicability or enforceability of the arbitration clause
contained therein. The two pending matters shall thus be jointly resolved.
 
We address the Rule 65 petition in G.R. No. 167994 first from the
remedial law perspective. It deserves to be dismissed on procedural grounds,
as it was filed in lieu of appeal which is the prescribed remedy and at that far
beyond the reglementary period. It is elementary in remedial law that the use
of an erroneous mode of appeal is cause for dismissal of the petition for
certiorari and it has been repeatedly stressed that a petition for certiorari is not
a substitute for a lost appeal. As its nature, a petition for certiorari lies only
where there is no appeal, and no plain, speedy and adequate remedy in the
ordinary course of law.[25] The Arbitration Law specifically provides for an
appeal by certiorari, i.e., a petition for review under certiorari under Rule 45
of the Rules of Court that raises pure questions of law. [26] There is no merit to
Gonzaless argument that the use of the permissive term may in Sec. 29, R.A.
No. 876 in the filing of appeals does not prohibit nor discount the filing of a
petition for certiorari under Rule 65.[27] Proper interpretation of the aforesaid
provision of law shows that the term may refers only to the filing of an appeal,
not to the mode of review to be employed. Indeed, the use of may merely
reiterates the principle that the right to appeal is not part of due process of law
but is a mere statutory privilege to be exercised only in the manner and in
accordance with law.
 
Neither can BF Corporation v. Court of Appeals[28] cited by
Gonzales support his theory. Gonzales argues that said case recognized and
allowed a petition for certiorari under Rule 65 appealing the order of the
Regional Trial Court disregarding the arbitration agreement as an acceptable
remedy.[29] The BF Corporation case had its origins in a complaint for
collection of sum of money filed by therein petitioner BF Corporation against
Shangri-la Properties, Inc. (SPI). SPI moved to suspend the proceedings
alleging that the construction agreement or the Articles of Agreement between
the parties contained a clause requiring prior resort to arbitration before
judicial intervention. The trial court found that an arbitration clause was
incorporated in the Conditions of Contract appended to and deemed an
integral part of the Articles of Agreement. Still, the trial court denied the
motion to suspend proceedings upon a finding that the Conditions of Contract
were not duly executed and signed by the parties. The trial court also found
that SPI had failed to file any written notice of demand for arbitration within
the period specified in the arbitration clause. The trial court denied SPI's
motion for reconsideration and ordered it to file its responsive
pleading. Instead of filing an answer, SPI filed a petition for certiorari under
Rule 65, which the Court of Appeals, favorably acted upon. In a petition for
review before this Court, BF Corporation alleged, among others, that the
Court of Appeals should have dismissed the petition for certiorari since the
order of the trial court denying the motion to suspend proceedings is a
resolution of an incident on the merits and upon the continuation of the
proceedings, the trial court would eventually render a decision on the merits,
which decision could then be elevated to a higher court in an ordinary appeal.
[30]
 
7
 The Court did not uphold BF Corporations argument. The issue
raised before the Court was whether SPI had taken the proper mode of appeal
before the Court of Appeals.The question before the Court of Appeals was
whether the trial court had prematurely assumed jurisdiction over the
controversy. The question of jurisdiction in turn depended on the question of
existence of the arbitration clause which is one of fact. While on its face the
question of existence of the arbitration clause is a question of fact that is not
proper in a petition for certiorari, yet since the determination of the question
obliged the Court of Appeals as it did to interpret the contract documents in
accordance with R.A. No. 876 and existing jurisprudence, the question is
likewise a question of law which may be properly taken cognizance of in a
petition for certiorari under Rule 65, so the Court held.[31]
 
The situation in B.F. Corporation  is not availing in the present
petition. The disquisition in B.F. Corporation led to the conclusion that in
order that the question of jurisdiction may be resolved, the appellate court had
to deal first with a question of law which could be addressed in a certiorari
proceeding. In the present case, Gonzaless petition raises a question of law,
but not a question of jurisdiction. Judge Pimentel acted in accordance with the
procedure prescribed in R.A. No. 876 when he ordered Gonzales to proceed
with arbitration and appointed a sole arbitrator after making the determination
that there was indeed an arbitration agreement. It has been held that as long as
a court acts within its jurisdiction and does not gravely abuse its discretion in
the exercise thereof, any supposed error committed by it will amount to
nothing more than an error of judgment reviewable by a timely appeal and not
assailable by a special civil action of certiorari.[32] Even if we overlook the
employment of the wrong remedy in the broader interests of justice, the
petition would nevertheless be dismissed for failure of Gonzalez to show
grave abuse of discretion.
 
Arbitration, as an alternative mode of settling disputes, has long been
recognized and accepted in our jurisdiction. The Civil Code is explicit on the
matter.[33] R.A. No. 876 also expressly authorizes arbitration of domestic
disputes. Foreign arbitration, as a system of settling commercial disputes of an
international character, 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. [34] The enactment of R.A. No.
9285 on 2 April 2004 further institutionalized the use of alternative dispute
resolution systems, including arbitration, in the settlement of disputes.
 
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, thus:
 
SEC. 2. Persons and matters subject to
arbitration.Two or more persons or parties
may submit to the arbitration of one or more
arbitrators any controversy existing, between
them at the time of the submission and which may be
the subject of an action, or the parties to any contract
may in such contract agree to settle by arbitration a
controversy thereafter arising between them. Such
submission or contract shall be valid, enforceable
and irrevocable, save upon such grounds as exist
at law for the revocation of any contract.
 
Such submission or contract may include question
arising out of valuations, appraisals or other
controversies which may be collateral, incidental,
precedent or subsequent to any issue between the
parties.
 
 
A controversy cannot be arbitrated where one of the
parties to the controversy is an infant, or a person
judicially declared to be incompetent, unless the
appropriate court having jurisdiction approve a
petition for permission to submit such controversy to
arbitration made by the general guardian or
guardian ad litem of the infant or of the
incompetent. [Emphasis added.]
 
 
Thus, we held in Manila Electric Co. v. Pasay Transportation Co.
[35]
 that a submission to arbitration is a contract. A clause in a contract
providing that all matters in dispute between the parties shall be referred to
arbitration is a contract,[36] and in Del Monte Corporation-USA v. Court of
Appeals[37] 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. As a rule, contracts are respected as the law between the
contracting parties and produce effect as between them, their assigns and
heirs.[38]
The special proceeding under Sec. 6 of R.A. No. 876 recognizes
the contractual nature of arbitration clauses or agreements. It provides:
 
SEC. 6. Hearing by court.A party
aggrieved by the failure, neglect or refusal of another
to perform under an agreement in writing providing
for arbitration may petition the court for an order
directing that such arbitration proceed in the manner
provided for in such agreement. Five days notice in
writing of the hearing of such application shall be
served either personally or by registered mail upon
the party in default. The court shall hear the parties,
and upon being satisfied that the making of the
agreement or such failure to comply therewith is
not in issue, shall make an order directing the parties
to proceed to arbitration in accordance with the terms
of the agreement. If the making of the agreement or
default be in issue the court shall proceed to
summarily hear such issue. If the finding be that
no agreement in writing providing for
arbitration was made, or that there is no default in
the proceeding thereunder, the proceeding shall be
dismissed. If the finding be that a written provision
for arbitration was made and there is a default in
proceeding thereunder, an order shall be made
summarily directing the parties to proceed with the
arbitration in accordance with the terms thereof.
 
The court shall decide all motions,
petitions or applications filed under the provisions of
this Act, within ten days after such motions, petitions,
or applications have been heard by it.[Emphasis
added.]
 
 
This special proceeding is the procedural mechanism for the enforcement of
the contract to arbitrate. The jurisdiction of the courts in relation to Sec. 6 of
R.A. No. 876 as well as the nature of the proceedings therein was expounded
upon in La Naval Drug Corporation v. Court of Appeals.[39] There it was held
that R.A. No. 876 explicitly confines the court's authority only to the
determination of whether or not there is an agreement in writing providing for
arbitration. In the affirmative, the statute ordains that the court shall issue an
order "summarily directing the parties to proceed with the arbitration in
accordance with the terms thereof." If the court, upon the other hand, finds
that no such agreement exists, "the proceeding shall be dismissed." [40] The
cited case also stressed that the proceedings are summary in nature. [41] The
same thrust was made in the earlier case of Mindanao Portland Cement Corp.
v. McDonough Construction Co. of Florida[42] which held, thus:
 
 
Since there obtains herein a written
provision for arbitration as well as failure on
respondent's part to comply therewith, the court a
quo rightly ordered the parties to proceed to
arbitration in accordance with the terms of their
agreement (Sec. 6, Republic Act 876). Respondent's
arguments touching upon the merits of the dispute are
improperly raised herein. They should be addressed
to the arbitrators. This proceeding is merely a
summary remedy to enforce the agreement to
arbitrate. The duty of the court in this case is not to
resolve the merits of the parties' claims but only to
determine if they should proceed to arbitration or not.
x x x x[43]
 
 
Implicit in the summary nature of the judicial proceedings is the
separable or independent character of the arbitration clause or agreement. This
was highlighted in the cases of Manila Electric Co. v. Pasay Trans. Co.
[44]
 and Del Monte Corporation-USA v. Court of Appeals.[45]
 
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.[46]
 
 
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.[47]
 
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.[48]
The separability doctrine was dwelt upon at length in the U.S. case
of Prima Paint Corp. v. Flood & Conklin Manufacturing Co. [49] In that case,
Prima Paint and Flood and Conklin (F & C) entered into a consulting
8
agreement whereby F & C undertook to act as consultant to Prima Paint for
six years, sold to Prima Paint a list of its customers and promised not to sell
paint to these customers during the same period. The consulting agreement
contained an arbitration clause. Prima Paint did not make payments as
provided in the consulting agreement, contending that F & C had fraudulently
misrepresented that it was solvent and able for perform its contract when in
fact it was not and had even intended to file for bankruptcy after executing the
consultancy agreement. Thus, F & C served Prima Paint with a notice of
intention to arbitrate. Prima Paint sued in court for rescission of the consulting
agreement on the ground of fraudulent misrepresentation and asked for the
issuance of an order enjoining F & C from proceeding with arbitration. F & C
moved to stay the suit pending arbitration. The trial court granted F & Cs
motion, and the U.S. Supreme Court affirmed.
 
The U.S. Supreme Court did not address Prima Paints argument
that it had been fraudulently induced by F & C to sign the consulting
agreement and held that no court should address this argument. Relying on
Sec. 4 of the Federal Arbitration Actwhich provides that if a party [claims to
be] aggrieved by the alleged failure x x x of another to arbitrate x x x, [t]he
court shall hear the parties, and upon being satisfied that the making of the
agreement for arbitration or the failure to comply therewith is not in issue, the
court shall make an order directing the parties to proceed to arbitration x x
x. If the making of the arbitration agreement or the failure, neglect, or refusal
to perform the same be in issue, the court shall proceed summarily to the trial
thereofthe U.S. High Court held that the court should not order the parties to
arbitrate if the making of the arbitration agreement is in issue. The parties
should be ordered to arbitration if, and only if, they have contracted to submit
to arbitration. Prima Paint was not entitled to trial on the question of whether
an arbitration agreement was made because its allegations of fraudulent
inducement were not directed to the arbitration clause itself, but only to the
consulting agreement which contained the arbitration agreement. [50] Prima
Paint held that arbitration clauses are separable from the contracts in which
they are embedded, and that where no claim is made that fraud was directed to
the arbitration clause itself, a broad arbitration clause will be held to
encompass arbitration of the claim that the contract itself was induced by
fraud.[51]
 
There is reason, therefore, to rule against Gonzales when he alleges
that Judge Pimentel acted with grave abuse of discretion in ordering the
parties to proceed with arbitration. Gonzaless argument that the Addendum
Contract is null and void and, therefore the arbitration clause therein is void as
well, is not tenable. First, 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, Gonzaless 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 partys 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.
 
The Motion for Reconsideration of Gonzales in G.R. No. 161957
should also be denied. In the motion, Gonzales raises the same question of
jurisdiction, more particularly that the complaint for nullification of the
Addendum Contract pertained to the DENR Panel of Arbitrators, not the
regular courts. He insists that the subject of his complaint is a mining dispute
since it involves a dispute concerning rights to mining areas, the Financial and
Technical Assistance Agreement (FTAA) between the parties, and it also
involves claimowners. He adds that the Court failed to rule on other issues he
raised, such as whether he had ceded his claims over the mineral deposits
located within the Addendum Area of Influence; whether the complaint filed
before the DENR Panel of Arbitrators alleged ultimate facts of fraud; and
whether the action to declare the nullity of the Addendum Contract on the
ground of fraud has prescribed.
 
 
These are the same issues that Gonzales raised in his Rule 45
petition in G.R. No. 161957 which were resolved against him in the Decision
of 28 February 2005. Gonzales does not raise any new argument that would
sway the Court even a bit to alter its holding that the complaint filed before
the DENR Panel of Arbitrators involves judicial issues which should properly
be resolved by the regular courts. He alleged fraud or misrepresentation in the
execution of the Addendum Contract which is a ground for the annulment of a
voidable contract. Clearly, such allegations entail legal questions which are
within the jurisdiction of the courts.
 
The question of whether Gonzales had ceded his claims over the
mineral deposits in the Addendum Area of Influence is a factual question
which is not proper for determination before this Court. At all events,
moreover, the question is irrelevant to the issue of jurisdiction of the DENR
Panel of Arbitrators. It should be pointed out that the DENR Panel of
Arbitrators made a factual finding in its Order dated 18 October 2001, which
it reiterated in its Order dated 25 June 2002, that Gonzales had, through the
various agreements, assigned his interest over the mineral claims all in favor
of [Climax-Arimco] as well as that without the complainant [Gonzales]
assigning his interest over the mineral claims in favor of [Climax-Arimco],
there would be no FTAA to speak of. [52] This finding was affirmed by the
Court of Appeals in its Decision dated 30 July 2003resolving the petition for
certiorari filed by Climax-Arimco in regard to the 18 October 2001 Order of
the DENR Panel.[53]
 
The Court of Appeals likewise found that Gonzaless complaint
alleged fraud but did not provide any particulars to substantiate it. The
complaint repeatedly mentioned fraud, oppression, violation of the
Constitution and similar conclusions but nowhere did it give any ultimate
facts or particulars relative to the allegations.[54]
 
Sec. 5, Rule 8 of the Rules of Court specifically provides that in all
averments of fraud, the circumstances constituting fraud must be stated with
particularity. This is to enable the opposing party to controvert the particular
facts allegedly constituting the same. Perusal of the complaint indeed shows
that it failed to state with particularity the ultimate facts and circumstances
constituting the alleged fraud. It does not state what particulars about Climax-
Arimcos financial or technical capability were misrepresented, or how the
misrepresentation was done. Incorporated in the body of the complaint are
verbatim reproductions of the contracts, correspondence and government
issuances that reportedly explain the allegations of fraud and
misrepresentation, but these are, at best, evidentiary matters that should not be
included in the pleading.
 
As to the issue of prescription, Gonzaless claims of fraud and
misrepresentation attending the execution of the Addendum Contract are
grounds for the annulment of a voidable contract under the Civil Code.
[55]
 Under Art. 1391 of the Code, an action for annulment shall be brought
within four years, in the case of fraud, beginning from the time of the
discovery of the same. However, the time of the discovery of the alleged fraud
is not clear from the allegations of Gonzaless complaint. That being the
situation coupled with the fact that this Court is not a trier of facts, any ruling
on the issue of prescription would be uncalled for or even unnecessary.
 
WHEREFORE, the Petition for Certiorari in G.R. No. 167994 is
DISMISSED. Such dismissal effectively renders superfluous formal action on
the Motion for Partial Reconsideration and/or Clarification filed by Climax
Mining Ltd., et al. in G.R. No. 161957.
 
The Motion for Reconsideration filed by Jorge Gonzales in G.R.
No. 161957 is DENIED WITH FINALITY.
 
SO ORDERED.
G.R. No. 87958               April 26, 1990
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURG,
PA/AMERICAN INTERNATIONAL UNDERWRITER (PHIL.)
INC., petitioners, 
vs.
STOLT-NIELSEN PHILIPPINES, INC. and COURT OF
APPEALS, respondents.
Fajardo Law Offices for petitioners. 
Sycip, Salazar, Hernandez & Gatmaitan for Stolt-Nielsen Phil., Inc.
MELENCIO-HERRERA, J.:
We uphold the ruling of respondent Court of Appeals that the claim or
dispute herein is arbitrable.
On 9 January 1985, United Coconut Chemicals, Inc. (hereinafter
referred to as SHIPPER) shipped 404.774 metric tons of distilled C6-
C18 fatty acid on board MT "Stolt Sceptre," a tanker owned by Stolt-
Nielsen Philippines Inc. (hereinafter referred to as CARRIER), from
Bauan, Batangas, Philippines, consigned to "Nieuwe Matex" at
Rotterdam, Netherlands, covered by Tanker Bill of Lading BL No. BAT-
1. The shipment was insured under a marine cargo policy with
Petitioner National Union Fire Insurance Company of Pittsburg
(hereinafter referred to as INSURER), a non-life American insurance
corporation, through its settling agent in the Philippines, the American
International Underwriters (Philippines), Inc., the other petitioner
herein.
9
It appears that the Bill of Lading issued by the CARRIER contained a
general statement of incorporation of the terms of a Charter Party
between the SHIPPER and Parcel Tankers, Inc., entered into in
Greenwich, Connecticut, U.S.A.
Upon receipt of the cargo by the CONSIGNEE in the Netherlands, it
was found to be discolored and totally contaminated. The claim filed by
the SHIPPER-ASSURED with the CARRIER having been denied, the
INSURER indemnified the SHIPPER pursuant to the stipulation in the
marine cargo policy covering said shipment.
On 21 April 1986, as subrogee of the SHIPPER-ASSURED, the
INSURER filed suit against the CARRIER, before the Regional Trial
Court of Makati, Branch 58 (RTC), for recovery of the sum of
P1,619,469.21, with interest, representing the amount the INSURER
had paid the SHIPPER-ASSURED. The CARRIER moved to
dismiss/suspend the proceedings on the ground that the RTC had no
jurisdiction over the claim the same being an arbitrable one; that as
subrogee of the SHIPPER-ASSURED, the INSURER is subject to the
provisions of the Bill of Lading, which includes a provision that the
shipment is carried under and pursuant to the terms of the Charter
Party, dated 21 December 1984, between the SHIPPER-ASSURED
and Parcel Tankers, Inc. providing for arbitration.
The INSURER opposed the dismissal/suspension of the proceedings
on the ground that it was not legally bound to submit the claim for
arbitration inasmuch as the arbitration clause provided in the Charter
Party was not incorporated into the Bill of Lading, and that the
arbitration clause is void for being unreasonable and unjust. On 28 July
1987, the RTC 1 denied the Motion, but subsequently reconsidered its
action on 19 November 1987, and deferred resolution on the Motion to
Dismiss/Suspend Proceedings until trial on the merits "since the
ground alleged in said motion does not appear to be indubitable."
The CARRIER then resorted to a Petition for Certiorari and Prohibition
with prayer for Preliminary Injunction and/or Temporary Restraining
Order before the respondent Appellate Court seeking the annulment of
the 19 November 1987 RTC Order. On 12 April 1989, the respondent
Court 2 promulgated the Decision now under review, with the following
dispositive tenor:
WHEREFORE', the order of respondent Judge dated
November 19, 1987 deferring resolution on petitioner Stolt-
Nielsen's Motion to Dismiss/Suspend Proceedings is hereby
SET ASIDE; private respondent NUFIC (the INSURER) is
ordered to refer its claims for arbitration; and respondent
Judge is directed to suspend the proceedings in Civil case
No. 13498 pending the return of the corresponding arbitral
award.
On 21 August 1989, we resolved to give due course and required the
parties to submit their respective Memoranda, which they have done,
the last filed having been Noted on 23 October 1989.
First, herein petitioner-INSURER alleges that the RTC Order deferring
resolution of the CARRIER's Motion to Dismiss constitutes an
interlocutory order, which can not be the subject of a special civil action
on certiorari and prohibition.
Generally, this would be true. However, the case before us falls under
the exception. While a Court Order deferring action on a motion to
dismiss until the trial is interlocutory and cannot be challenged until
final judgment, still, where it clearly appears that the trial Judge or
Court is proceeding in excess or outside of its jurisdiction, the remedy
of prohibition would lie since it would be useless and a waste of time to
go ahead with the proceedings (University of Sto. Tomas vs.
Villanueva, 106 Phil. 439, [1959] citing Philippine International Fair,
Inc., et al., vs. Ibanez, et al., 94 Phil. 424 [1954]; Enrique vs.
Macadaeg, et al., 84 Phil. 674 [1949]; San Beda College vs. CIR, 97
Phil. 787 [1955]). Even a cursory reading of the subject Bill of Lading,
in relation to the Charter Party, reveals the Court's patent lack of
jurisdiction to hear and decide the claim.
We proceed to the second but more crucial issue: Are the terms of the
Charter Party, particularly the provision on arbitration, binding on the
INSURER?
The INSURER postulates that it cannot be bound by the Charter Party
because, as insurer, it is subrogee only with respect to the Bill of
Lading; that only the Bill of Lading should regulate the relation among
the INSURER, the holder of the Bill of Lading, and the CARRIER; and
that in order to bind it, the arbitral clause in the Charter Party should
have been incorporated into the Bill of Lading.
We rule against that submission.
The pertinent portion of the Bill of Lading in issue provides in part:
This shipment is carried under and pursuant to the terms of
the Charter dated December 21st 1984 at Greenwich,
Connecticut, U.S.A. between Parcel Tankers. Inc. and
United Coconut Chemicals, Ind. as Charterer and all the
terms whatsoever of the said Charter except the rate and
payment of freight specified therein apply to and govern the
rights of the parties concerned in this shipment. Copy of the
Charter may be obtained from the Shipper or Charterer.
(Emphasis supplied)
While the provision on arbitration in the Charter Party reads:
H. Special Provisions.
x x x           x x x          x x x
4. Arbitration. Any dispute arising from the making,
performance or termination of this Charter Party shall be
settled in New York, Owner and Charterer each appointing
an arbitrator, who shall be a merchant, broker or individual
experienced in the shipping business; the two thus chosen, if
they cannot agree, shall nominate a third arbitrator who shall
be an admiralty lawyer. Such arbitration shall be conducted
in conformity with the provisions and procedure of the United
States arbitration act, and a judgment of the court shall be
entered upon any award made by said arbitrator. Nothing in
this clause shall be deemed to waive Owner's right to lien on
the cargo for freight, deed of freight, or demurrage.
Clearly, the Bill of Lading incorporates by reference the terms of the
Charter Party. It is settled law that the charter may be made part of the
contract under which the goods are carried by an appropriate
reference in the Bill of Lading (Wharton Poor, Charter Parties and
Ocean Bills of Lading (5th ed., p. 71). This should include the provision
on arbitration even without a specific stipulation to that effect. The
entire contract must be read together and its clauses interpreted in
relation to one another and not by parts. Moreover, in cases where a
Bill of Lading has been issued by a carrier covering goods shipped
aboard a vessel under a charter party, and the charterer is also the
holder of the bill of lading, "the bill of lading operates as the receipt for
the goods, and as document of title passing the property of the goods,
but not as varying the contract between the charterer and the
shipowner" (In re Marine Sulphur Queen, 460 F 2d 89, 103 [2d Cir.
1972]; Ministry of Commerce vs. Marine Tankers Corp. 194 F. Supp
161, 163 [S.D.N.Y. 1960]; Greenstone Shipping Co., S.A. vs.
Transworld Oil, Ltd., 588 F Supp [D.El. 1984]). The Bill of Lading
becomes, therefore, only a receipt and not the contract of carriage in a
charter of the entire vessel, for the contract is the Charter Party (Shell
Oil Co. vs. M/T Gilda, 790 F 2d 1209, 1212 [5th Cir. 1986]; Home
Insurance Co. vs. American Steamship Agencies, Inc., G.R. No. L-
25599, 4 April 1968, 23 SCRA 24), and is the law between the parties
who are bound by its terms and condition provided that these are not
contrary to law, morals, good customs, public order and public policy
(Article 1306, Civil Code).
As the respondent Appellate Court found, the INSURER "cannot feign
ignorance of the arbitration clause since it was already charged with
notice of the existence of the charter party due to an appropriate
reference thereof in the bill of lading and, by the exercise of ordinary
diligence, it could have easily obtained a copy thereof either from the
shipper or the charterer.
We hold, therefore, that the INSURER cannot avoid the binding effect
of the arbitration clause. By subrogation, it became privy to the Charter
Party as fully as the SHIPPER before the latter was indemnified,
because as subrogee it stepped into the shoes of the SHIPPER-
ASSURED and is subrogated merely to the latter's rights. It can
recover only the amount that is recoverable by the assured. And since
the right of action of the SHIPPER-ASSURED is governed by the
provisions of the Bill of Lading, which includes by reference the terms
of the Charter Party, necessarily, a suit by the INSURER is subject to
the same agreements (see St. Paul Fire and Marine Insurance Co. vs.
Macondray, G.R. No. L-27796, 25 March 1976, 70 SCRA 122).
Stated otherwise, as the subrogee of the SHIPPER, the INSURER is
contractually bound by the terms of the Charter party.1âwphi1 Any
claim of inconvenience or additional expense on its part should not
render the arbitration clause unenforceable.
Arbitration, as an alternative mode of settling disputes, has long been
recognized and accepted in our jurisdiction (Chapter 2, Title XIV, Book
IV, Civil Code). Republic Act No. 876 (The Arbitration Law) also
expressly authorizes arbitration of domestic disputes. Foreign
10
arbitration as a system of settling commercial disputes of an
international character 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. Thus, it pertinently provides:
1. Each Contracting State shall recognize an agreement in
writing under which the parties undertake to submit to
arbitration all or any differences which have arisen or which
may arise between them in respect of a defined legal
relationship, whether contractual or not, concerning a subject
matter capable of settlement by arbitration.
2. The term "agreement in writing" shall include an arbitral
clause in a contract or an arbitration agreement, signed by
the parties or contained in an exchange of letters or
telegrams.
3. The court of a Contracting State, when seized of an action
in a matter in respect of which the parties have made an
agreement within the meaning of this article, shall, at the
request of one of the parties, refer the parties to arbitration,
unless it finds that the said agreement is null and void,
inoperative or incapable of being performed.
It has not been shown that the arbitral clause in question is null and
void, inoperative, or incapable of being performed. Nor has any conflict
been pointed out between the Charter Party and the Bill of Lading.
In fine, referral to arbitration in New York pursuant to the arbitration
clause, and suspension of the proceedings in Civil Case No. 13498
below, pending the return of the arbitral award, is, indeed called for.
WHEREFORE, finding no reversible error in respondent Appellate
Court's 12 April 1989 Decision, the instant Petition for Review
on certiorari is DENIED and the said judgment is hereby AFFIRMED.
Costs against petitioners.
SO ORDERED.
G.R. No. 91228. March 22, 1993.
PUROMINES, INC., petitioner, vs. COURT OF APPEAL and PHILIPP
BROTHERS OCEANIC, INC., respondents.
SYLLABUS
1. CIVIL LAW; OBLIGATIONS OF VENDOR; DAMAGES ARISING
FROM CARRIAGE AND DELIVERY. — We agree with the court a quo
that the sales contract is comprehensive enough to include claims for
damages arising from carriage and delivery of the goods. As a general
rule, the seller has the obligation to transmit the goods to the buyer,
and concomitant thereto, the contracting of a carrier to deliver the
same.
2. COMMERCIAL LAW; MARITIME TRANSPORTATION; MARITIME
COMMERCE; CHARTER PARTIES, CONSTRUED. — American
jurisprudence defines charter party as a contract by which an entire
ship or some principal part thereof is let by the owner to another
person for a specified time or use. Charter or charter parties are of two
kinds. Charter of demise or bareboat and contracts of affreightment.
3. ID.; ID.; ID.; ID.; KINDS; CHARTER OF DEMISE, CONSTRUED. —
Under the demise or bareboat charter of the vessel, the charterer will
generally be considered as owner for the voyage or service stipulated.
The charterer mans the vessel with his own people and becomes, in
effect, the owner pro hac vice, subject to liability to others for damages
caused by negligence. To create a demise the owner of a vessel must
completely and exclusively relinquish possession, anything short of
such a complete transfer is a contract of affreightment (time or voyage
charter party) or not a charter party at all.
4. ID.; ID.; ID.; ID.; ID.; CONTRACT OF AFFREIGNMENT,
CONSTRUED. — A contract of affreightment is in which the owner of
the vessel leases part or all of its space to haul goods for others. It is a
contract for a special service to be rendered by the owner of the vessel
and under such contract the general owner retains the possession,
command and navigation of the ship, the charterer or freighter merely
having use of the space in the vessel in return for his payment of the
charter hire. If the charter is a contract of affreightment, which leaves
the general owner in possession of the ship as owner for the voyage,
the rights, responsibilities of ownership rest on the owner and the
charterer is usually free from liability to third persons in respect of the
ship.
5. ID.; ID.; ID.; ID.; LIABILITY TO THIRD PERSONS FOR GOODS
SHIPPED ON BOARD A VESSEL. — Responsibility to third persons
for goods shipped on board a vessel follows the vessel's possession
and employment; and if possession is transferred to the charterer by
virtue of a demise, the charterer, and not the owner, is liable as carrier
on the contract of affreightment made by himself or by the master with
third persons, and is answerable for loss, damage or non-delivery of
goods received for transportation. An owner who retains possession of
the ship, though the hold is the property of the charterer, remains liable
as carrier and must answer for any breach of duty as to the care,
loading or unloading of the cargo.
6. ID.; ID.; ID.; ID.; BILLS OF LADING; ARBITRATION PROVISION
THEREOF, CONSIDERED AND RESPECTED. — Whether the liability
of respondent should be based on the same contract or that of the bill
of lading, the parties are nevertheless obligated to respect the
arbitration provisions on the sales contract and/or the bill of lading.
Petitioner being a signatory and party to the sales contract cannot
escape from his obligation under the arbitration clause as stated
therein. Arbitration has been held valid and constitutional. Even before
the enactment of Republic Act No. 876, this Court has countenanced
the settlement of disputes through arbitration. The rule now is that
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 arrangements and will only
interfere with great reluctance to anticipate or nullify the action of the
arbitrator. As pointed out in the case of Mindanao Portland Cement
Corp. v. McDough Construction Company of Florida 18 wherein the
plaintiff sued defendant for damages arising from a contract, the Court
said: "Since there obtains herein a written provision for arbitration as
well as failure on respondent's part to comply therewith, the court a
quo rightly ordered the parties to proceed to their arbitration in
accordance with the terms of their agreement (Sec. 6 Republic Act
876). Respondent's arguments touching upon the merits of the dispute
are improperly raised herein. They should be addressed to the
arbitrators. This proceeding is merely a summary remedy to enforce
the agreement to arbitrate. The duty of the court in this case is not to
resolve the merits of the parties' claims but only to determine if they
should proceed to arbitration or not. And although it has been ruled
that a privolous or patently baseless claim should not be ordered to
arbitration it is also recognized that the mere fact that a defense exist
against a claim does not make it frivolous or baseless."
7. REMEDIAL LAW; CIVIL PROCEDURE; PLEADINGS; COMPLAINT;
ANNEXES ATTACHED THEREOF, PART OF THE RECORD. —
Petitioner contend that the arbitration provision in the bills of lading
should not have been discussed as an issue in the decision of the
Court of Appeals since it was not raised as a special or affirmative
defense. The three bills of lading were attached to the complaint as
Annexes "A," "B," and "C," and are therefore parts thereof and may be
considered as evidence although not introduced as such. Hence, it
was then proper for the court a quo to discuss the contents of the bills
of lading, having been made part of the record.
DECISION
NOCON, J p:
This is a special civil action for certiorari and prohibition to annul and
set aside the Decision of the respondent Court of Appeals dated
November 16, 1989 1 reversing the order of the trial court and
dismissing petitioner's compliant in Civil Case No. 89-47403, entitled
Puromines, Inc. v. Maritime Factors, Inc. and Philipp Brothers Oceanic,
Inc.
Culled from the records of this case, the facts show that petitioner,
Puromines, Inc. (Puromines for brevity) and Makati Agro Trading, Inc.
(not a party in this case) entered into a contract with private
respondents Philipp Brothers Oceanic, Inc. for the sale of prilled Urea
in bulk. The Sales Contract No. S151.8.01018 provided, among others
an arbitration clause which states, thus:
"9. Arbitration
"Any disputes arising under this contract shall be settled by arbitration
in London in accordance with the Arbitration Act 1950 and any
statutory amendment or modification thereof. Each party is to appoint
an Arbitrator, and should they be unable to agree, the decision of an
Umpire appointed by them to be final. The Arbitrators and Umpire are
all to be commercial men and resident in London. This submission may
11
be made a rule of the High Court of Justice in England by either party."
2 charterer of the vessel MV 'Liliana Dimitrova' which transported the
On or about May 22, 1988, the vessel M/V "Liliana Dimitrova" loaded
on board at Yuzhny, USSR a shipment of 15,500 metric tons prilled
Urea in bulk complete and in good order and condition for transport to
Iloilo and Manila, to be delivered to petitioner. Three bills of lading
were issued by the ship-agent in the Philippines, Maritime Factors Inc.,
namely: Bill of Lading No. dated May 12, 1988 covering 10,000 metric
tons for discharge Manila; Bill of Lading No. 2 of even date covering
4,000 metric tons for unloading in Iloilo City; and Bill of Lading No. 3,
also dated May 12, 1988, covering 1,500 metric tons likewise for
discharged in Manila
The shipment covered by Bill of Lading No. 2 was discharged in Iloilo
City complete and in good order and condition. However, the
shipments covered by Bill of Lading Nos. 1 and 3 were discharged in
Manila in bad order and condition, caked, hardened and lumpy,
discolored and contaminated with rust and dirt. Damages were valued
at P683, 056. 29 including additional discharging expenses.
Consequently, petitioner filed a complaint 3 with the trial court 4 for
breach of contract of carriage against Maritime Factors Inc. (which was
not included as respondent in this petition) as ship-agent in the
Philippines for the owners of the vessel MV "Liliana Dimitrova," while
private respondent, Philipp Brothers Oceanic Inc., was impleaded as
charterer of the said vessel and proper party to accord petitioner
complete relief. Maritime Factors, Inc. filed its Answer 5 to the
complaint, while private respondent filed a motion to dismiss, dated
February 9, 1989, on the grounds that the complaint states no cause of
action; that it was prematurely filed; and that petitioner should comply
with the arbitration clause in the sales contract. 6
The motion to dismiss was opposed by petitioner contending the
inapplicability of the arbitration clause inasmuch as the cause of action
did not arise from a violation of the terms of the sales contract but
rather for claims of cargo damages where there is no arbitration
agreement. On April 26, 1989, the trial court denied respondent's
motion to dismiss in this wise:
"The sales contract in question states in part:
'Any disputes arising under this contract shall be settled by
arbitration . . .(emphasis supplied)
"A perusal of the facts alleged in the complaint upon which the
question of sufficiency of the cause of action of the complaint arose
from a breach of contract of carriage by the vessel chartered by the
defendant Philipp Brothers Oceanic, Inc. Thus, the aforementioned
arbitration clause cannot apply to the dispute in the present action
which concerns plaintiff's claim for cargo loss/damage arising from
breach of contract of carriage.
"That the defendant is not the ship owner or common carrier and
therefore plaintiff does not have legal right against it since every action
must be brought against the real party in interest has no merit either for
by the allegations in the complaint the defendant herein has been
impleaded as charterer of the vessel, hence, a proper party." 7
Elevating the matter to the Court of Appeals, petitioner's complaint was
dismissed. The appellate court found that the arbitration provision in
the sales contract and/or the bills of lading is applicable in the present
case. Said the court:
"An examination of the sales contract No. S151.8.01018 shows that it
is broad enough to include the claim for damages arising from the
carriage and delivery of the goods subject-matter thereof.
"It is also noted that the bills of lading attached as Annexes 'A', 'B' and
'C' to the complaint state, in part, 'any dispute arising under this Bill of
Lading shall be referred to arbitration of the Maritime Arbitration
Commission at the USSR Chamber of Commerce and Industry, 6
Kuibyshevskaia Str., Moscow, USSR, in accordance with the rules of
procedure of said commission.'
Considering that the private respondent was one of the signatories to
the sales contract . . . all parties are obliged o respect the terms and
conditions of the said sales contract, including the provision thereof on
'arbitration.' "
Hence, this petition The issue raised is: Whether the phrase "any
dispute arising under this contract" in the arbitration clause of the sales
contract covers a cargo claim against the vessel (owner and/or
charterers) for breach of contract of carriage.
Petitioner states in its complainants that Philipp Brothers "was the
shipment from Yuzhny USSR to Manila." Petitioner further alleged that
the caking and hardening, wetting and melting, and contamination by
rust and dirt of the damaged portions of the shipment were due to the
improper ventilation and inadequate storage facilities of the vessel; that
the wetting of the cargo was attributable to the failure of the crew to
close the hatches before and when it rained while the shipment was
being unloaded in the Port of Manila; and that as a direct and natural
consequence of the unseaworthiness and negligence of the vessel
(sic), petitioner suffered damages in the total amount of P683, 056.29
Philippine currency." 8 (Emphasis supplied)
Moreover, in its Opposition to the Motion to Dismiss, petitioner said
that "[t]he cause of action of the complaint arose from breach of
contract of carriage by the vessel that was chartered by defendant
Philipp Brothers." 9
In the present petition, petitioner argues that the sales contract does
not include the contract of carriage which is a different contract entered
into by the carrier with the cargo owners. That it was an error for the
respondent court to touch upon the arbitration provision of the bills
lading in its decision inasmuch as the same was not raised as an issue
by private respondent who was not a party in the bills of lading
(emphasis Ours). Petitioner contradicts itself.
We agree with the court a quo that the sales contract is comprehensive
enough to include claims for damages arising from carriage and
delivery of the goods. As a general rule, the seller has the obligation to
transmit the goods to the buyer, and concomitant thereto, the
contracting of a carrier to deliver the same. Art. 1523 of the Civil Code
provides:
"Art. 1523. Where in pursuance of a contract of sale, the seller in
authorized or required to send the goods to the buyer, delivery of the
goods to a carrier, whether named by the buyer or not, for the purpose
of transmission to the buyer is deemed to be a delivery of the goods to
the buyer, except in the cases provided for in article 1503, first, second
and third paragraphs, or unless a contrary intent appear.
"Unless otherwise authorized by the buyer, the seller must take such
contract with the carrier on behalf of the buyer as may be reasonable,
having regard to the nature of the goods and the other circumstances
of the case. If the seller omit so to do, and the goods are lost or
damaged in course of transit, the buyer may decline to treat the
delivery to the carrier as a delivery to himself,, or may hold the seller
responsible in damages."
xxx xxx xxx
The disputed sales contact provides for conditions relative to the
delivery of goods, such as date of shipment, demurrage, weight as
determined by the bill of lading at load port and more particularly the
following provisions:
"3. Intention is to ship in one bottom, approximately 5,000 metrics tons
to Puromines and approximately 15,000 metric tons to Makati Agro.
However, Sellers to have right to ship material as partial shipment or
co-shipment in addition to above. In the event of co-shipment to a third
party within Philippines same to be discussed with and acceptable to
both Puromines and Makati Agro.
"4. Sellers to appoint neutral survey for Seller's account to conduct
initial draft survey at first discharge port and final survey at last
discharge port. Surveyors results to be binding and final. In the event
draft survey results show a quantity less than the combined Bills of
Lading quantity for both Puromines and Makati Agro, Sellers to refund
the difference. In the event that draft survey results show a quantity in
excess of combined Bills of Lading of quantity of both Puromines and
Makati Agro then Buyers to refund the difference.
"5. It is expressly and mutually agreed that neither Sellers nor vessel's
Owners have any liability to separate cargo or to deliver cargo
separately or to deliver minimum/maximum quantities stated on
individual Bills of Lading. At each port vessel is to discharge in
accordance with Buyers local requirements and it is Buyer's
responsibility to separate individual quantities required by each of them
at each port during or after discharged."
As argued by respondent on its motion to dismiss, "the (petitioner)
derives his right to the cargo from the bill of lading which is the contract
of affreightment together with the sales contract. Consequently, the
(petitioner) is bound by the provisions and terms of said bill of lading
and of the arbitration clause incorporated in the sales contract."
12
Assuming arguendo that the liability of respondent is not based on the
sales contract, but rather on the contract of carriage, being the
charterer of the vessel MV "Liliana Dimitrova," it would, therefore, be
material to show what kind of charter party the respondent had with the
shipowner to determine respondent's liability.
American jurisprudence defines charter party as a contract by which an
entire ship or some principal part thereof is let by the owner to another
person for a specified time or use. 10 Charter or charter parties are of
two kinds. Charter of demise or bareboat and contracts of
affreightment.
Under the demise or bareboat charter of the vessel, the charterer will
generally be considered as owner for the voyage or service stipulated.
The charterer mans the vessel with his own people and becomes, in
effect, the owner pro hac vice, subject to liability to others for damages
caused by negligence. 11 To create a demise the owner of a vessel
must completely and exclusively relinquish possession, anything short
of such a complete transfer is a contract of affreightment (time or
voyage charter party) or not a charter party at all.
On the other hand, a contract of affreightment is in which the owner of
the vessel leases part or all of its space to haul goods for others. It is a
contract for a special service to be rendered by the owner of the vessel
12 and under such contract the general owner retains the possession,
command and navigation of the ship, the charterer or freighter merely
having use of the space in the vessel in return for his payment of the
charter hire. 13 If the charter is a contract of affreightment, which
leaves the general owner in possession of the ship as owner for the
voyage, the rights, responsibilities of ownership rest on the owner and
the charterer is usually free from liability to third persons in respect of
the ship. 14
Responsibility to third persons for goods shipped on board a vessel
follows the vessel's possession and employment; and if possession is
transferred to the charterer by virtue of a demise, the charterer, and
not the owner, is liable as carrier on the contract of affreightment made
by himself or by the master with third persons, and is answerable for
loss, damage or non-delivery of goods received for transportation. An
owner who retains possession of the ship, though the hold is the
property of the charterer, remains liable as carrier and must answer for
any breach of duty as to the care, loading or unloading of the cargo. 15
raised herein. They should be addressed to the arbitrators. This
proceeding is merely a summary remedy to enforce the agreement to
arbitrate. The duty of the court in this case is not to resolve the merits
of the parties' claims but only to determine if they should proceed to
arbitration or not. And although it has been ruled that a frivolous or
patently baseless claim should not be ordered to arbitration it is also
recognized that the mere fact that a defense exist against a claim does
not make it frivolous or baseless." 19
In the case of Bengson v. Chan, 20 We upheld the provision of a
contract which required the parties to submit their disputes to
arbitration and We held as follows:
"The trial court sensibly said that 'all the causes of action alleged in the
plaintiffs amended complaint are based upon the supposed violations
committed by the defendants of the 'Contract of Construction of a
Building' and that 'the provisions of paragraph 15 hereof leave a very
little room for doubt that the said causes of action are embraced within
the phrase 'any and all questions, disputes or differences between the
parties hereto relative to the construction of the building,' which must
be determined by arbitration of two persons and such determination by
the arbitrators shall be 'final, conclusive and binding upon both parties
unless they to court, in which the case the determination by arbitration
is a condition precedent 'for taking any court action."
xxx xxx xxx
"We hold that the terms of paragraph 15 clearly express the intention
of the parties that all disputes between them should first be arbitrated
before court action can be taken by the aggrieved party." 21
Premises considered, We uphold the validity and applicability of the
arbitration clause as stated in Sales Contract No. S151.8.01018 to the
present dispute.
WHEREFORE, petition is hereby DISMISSED and decision of the
court a quo is AFFIRMED.
SO ORDERED.

Assuming that in the present case, the charter party is a demise or

bareboat charter, then Philipp Brothers is liable to Puromines, Inc.,
subject to the terms and conditions of the sales contract. On the other
hand, if the contract between respondent and the owner of the vessel
MV "Liliana Dimitrova" was merely that of affreightment, then it cannot
be held liable for the damages caused by the breach of contract of
carriage, the evidence of which is the bills of lading

In any case, whether the liability of respondent should be based on the

same contract or that of the bill of lading, the parties are nevertheless
obligated to respect the arbitration provisions on the sales contract
and/or the bill of lading. Petitioner being a signatory and party to the
sales contract cannot escape from his obligation under the arbitration
clause as stated therein.

Neither can petitioner contend that the arbitration provision in the bills
of lading should not have been discussed as an issue in the decision of
the Court of Appeals since it was not raised as a special or affirmative
defense. The three bills of lading were attached to the complaint as
Annexes "A," "B," and "C," and are therefore parts thereof and may be
considered as evidence although not introduced as such. 16 Hence, it
was then proper for the court a quo to discuss the contents of the bills
of lading, having been made part of the record.

Going back to the main subject of this case, arbitration has been held
valid and constitutional. Even before the enactment of Republic Act
No. 876, this Court has countenanced the settlement of disputes
through arbitration. The rule now is that 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 arrangements and will only interfere with great reluctance to
anticipate or nullify the action of the arbitrator. 17

As pointed out in the case of Mindanao Portland Cement Corp. v.

McDonough Construction Company of Florida 18 wherein the plaintiff
sued defendant for damages arising from a contract, the Court said:

"Since there obtains herein a written provision for arbitration as well as

failure on respondent's part to comply therewith, the court a quo rightly
ordered the parties to proceed to their arbitration in accordance with
the terms of their agreement (Sec. 6 Republic Act 876). Respondent's
arguments touching upon the merits of the dispute are improperly

13