LM POWER ENGINEERING COPORATION v CAPITOL INDUSTRIAL CONSTRUCTION

GROUPS
G.R No. 141833 March 26 2003
FACTS:
LM Power Engineering Corporation (Petitioner) and Capitol Industrial Construction Groups (Respondent)
entered into a Subcontract Agreement involving electrical work at the Port of Zamboanga. Respondent
then took over some of the work contracted to Petitioner, It was alleged that the petitioner failed to finish it
because of its inability to procure materials. Upon completion of the task, Petitioner billed the respondent
the amount of 6,711,813.90pesos. Respondent refused to pay and contested the accuracy of the amount
of advances and billable accomplishments listed by the petitioner. Respondent also took refuge in the
termination clause agreement which allowed it to set off the cost of the work that petitioner had failed to
undertake (due to termination of take over).
Because of the dispute, the Petitioner filed a complaint foe collection of the balance due under the
subcontract agreement. However, instead of filing an answer, the respondent filed a Motion to Dismiss,
alleging that the complaint was premature because there was no prior recourse to arbitration. RTC denied
the motion on the ground that the dispute did not involve the interpretation or implementation of the
agreement and was, therefore, not covered by the arbitral clause. Also, the RTC ruled that the take over
of some work items by the respondent was not equivalent to termination but a mere modification of the
subcontract.

ISSUE:
Whether or not there exists a dispute between petitioner and respondent regarding the interpretation and
implementation of the Sub-Contract Agreement that requires prior recourse tovoluntary arbitration.

RULING:
Yes. The instant case involves technical discrepancies that are better left to an arbitral
body that has expertise on those areas. The Subcontract has the Arbitral clause stating that the parties
agree that “Any dispute or conflict as regards to interpretation and implementation of this agreement
which cannot be settled between the parties amicably shall be settled by means of arbitration.” Within the
scope of the Arbitration clause are discrepancies as to the amount of advances and billable
accomplishments, the application of the provision on termination, and the consequent set-off expenses.
Also, there is no need for prior request for arbitration. As long as the parties agre to submit to voluntary
arbitration, regardless of what forum they may choose, their agreement will fall within the jurisdiction of
the CIAC, such that, even if they specifically choose another forum, the parties will not be precluded form
electing to submit their dispute before the CIAC because this right has been vested upon each party by
the law.

CHINA CHANG JIANG ENERGY CORPORATION vs ROSAL INFRASTRUCTURE BUILDERS, G.R.

No. 125706, September 30, 1996

By: Calatrava, Kim Lorenzo G.

FACTS:

China Chang is the operator of the Binga Hydroelectric Plant in Itogon, Benguet, which is under a
Rehabilitate Operate and Leaseback Contract with the National Power Corporation (NAPOCOR) and was
engaged in the rehabilitation of the power plant, including the construction of check dams.

On February 1994, petitioner China Chang engaged the services of Rosal Infrastructure Builders for the
construction of a Dam in Itogon, Benguet. In this contract, the parties agreed to submit disputes arising
therefrom to arbitration before the Arbitration of the International Chamber of Commerce.

When a dispute arose between the parties, Rosal filed a complaint before the Construction Industry
Arbitration Commission (CIAC) for arbitration. China Chang filed its answer with compulsory counterclaim
and raised therein the issue of lack of jurisdiction on the part of CIAC. In August 1995, the CIAC
considered the question of jurisdiction merely as a special defense which can be included as part of the
issues of the Terms of Reference. China Chang filed a motion for reconsideration which was denied by
CIAC in October 1995.

China Chang raised the issue of lack of jurisdiction with the CA. In February 1996, the CA dismissed the
petition. China Chang filed a Motion for Reconsideration, but was denied by the CA. China Chang now
questions the validity of Construction Industry Arbitration Commission (CIAC) Resolution 3- 93 amending
Section 1, Article III of CIAC Rules of Procedure Governing Construction Arbitration promulgated by the
CIAC pursuant to its rule-making power granted under Section 21 of Executive Order No. 1008, which
pertinently provides as follows:

Article III Effect of the Agreement to Arbitrate Section 1. Submission to CIAC Jurisdiction – An
arbitration clause in a construction contract or a submission to arbitration of a construction
dispute shall be deemed an agreement to submit an existing or future controversy to the CIAC
jurisdiction, notwithstanding the reference to a different arbitral institution or arbitral body in such
contract or submission.

ISSUES:

1. W/N the CIAC has acquired jurisdiction over the dispute.

2. W/N the parties in the case at bar can agree to submit to arbitration their construction
dispute under the CIAC.

HELD:

1. YES.

There is no restriction whatsoever on any party from submitting a dispute for arbitration to an
arbitral body other than the CIAC. On the contrary, the new rule, as amended merely implements
the letter and the spirit of its enabling law, E.O. No. 1008, which vests jurisdiction upon the CIAC:

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

What the law merely requires for a particular construction contract to fall within the jurisdiction of
CIAC is for the parties to agree to submit the same to voluntary arbitration.

Now that Section 1, Article III, as amended, is submitted to test in the present petition, the
Supreme Court ruled to uphold its validity with full certainty.

2. YES

However, this should not be understood to mean that the parties may no longer stipulate to
submit their disputes to a different forum or arbitral boy. Parties may continue to stipulate as
regards their preferred forum in case of voluntary arbitration, but in so doing, they may not divest
the CIAC of jurisdiction as provided by law. Under the elementary principle on the law on
contracts that laws obtaining in a jurisdiction form part of all agreements, when the law provides
that the Board acquires jurisdiction when the parties to the contract agree to submit the same to
voluntary arbitration, the law in effect, automatically gives the parties an alternative forum before
whom they may submit their disputes. That alternative forum is the CIAC.
Koppel, Inc. v. Makati Rotary Club Foundation, Inc. G.R. No. 198075 September 4, 2013 PEREZ, J.:

FACTS: Fedders Koppel, Inc. (FKI) owned a parcel of land in Paranaque. In 1975, FKI bequeathed the
subject property in favor of Makati Rotary Club, Inc. by way of a conditional donation whereby the donee
was required to lease the subject property to FKI under the terms specified in the Deed of Donation. The
period of lease shall be for 25 years (until May 25, 2000) renewable for another 25 years upon mutual
agreement. In case of disagreement, the matter shall be referred to a Board of arbitrators (3-member)
appointed. After the 2000 Lease Contract expired, FKI and respondent agreed to renew their lease for
another 5 years (2005 Lease Contract). In addition, the contract also obligated FKI to make a yearly
“donation” of money to respondent. In Aug 2008, FKI assigned all its interest and obligations in favor of
petitioner Koppel Inc. The next year, Koppel discontinued the payment of the rentals and “donations”
under the 2005 Lease Contract. Koppel’s refusal to pay was based on the premise that the subsequent
lease contracts violated one of the material conditions of the donation ofthe property. Makati Rotary Club
sent a demand letter notifying Koppel of its default. Petitioner Koppel refused to comply with the demands
of the respondent and instead, filed with RTC Paranaque a complaint for the rescission or cancellation of
the Deed of Donation. Thereafter, Makati Rotary Club filed an unlawful detainer case against Koppel
before MTC Paranaque. In the ejectment suit, Koppel questioned the jurisdiction of the MTC in view of the
arbitration clause contained in the Lease Contract.

ISSUE: WON the present dispute is subject to arbitration.

HELD: Yes. Petitioner may still invoke the arbitration clause of the 2005 Lease Contract notwithstanding
the fact that it assails the validity of such contract. This is due to the doctrine of separability. Under said
doctrine, an arbitration agreement is considered as independent of the main contract. Being a separate
contract in itself, the arbitration agreement may thus be invoked regardless of the possible nullity or
invalidity of the main contract. The operation of the arbitration clause in this case is not defeated by
Koppel’s failure to file a formal “request” or application with the MTC. In using the word “may” to qualify
the act of filing a “request” under Sec 24 of RA 9285 (Special ADR Rues) clearly did not intend to limit
invocation of an arbitration agreement in a pending suit solely via such request. As early as in its answer
with counterclaim, Koppel had already apprised MTC of the existence of the arbitration clause in the 2005
Lease Contract; such act is enough valid invocation of his right to arbitrate

Tuna Processing vs Philippine Kingford GR No. 185582 February 29, 2012

May a foreign corporation not licensed to do business in the Philippines, but which collects royalties from
entities in the Philippines, sue here to enforce a foreign arbitral award?

FACTS: Kanemitsu Yamaoka, co-patentee of a US Patent, Philippine Letters Patent, and an Indonesian
Patent, entered into a Memorandum of Agreement (MOA) with five Philippine tuna processors including
Respondent Philippine Kingford, Inc. (KINGFORD). The MOA provides for the enforcing of the
abovementioned patents, granting licenses under the same, and collecting royalties, and for the
establishment of herein Petitioner Tuna Processors, Inc. (TPI).

Due to a series of events not mentioned in the Petition, the tuna processors, including Respondent
KINGFORD, withdrew from Petitioner TPI and correspondingly reneged on their obligations. Petitioner
TPI submitted the dispute for arbitration before the International Centre for Dispute Resolution in the State
of California, United States and won the case against Respondent KINGFORD.

To enforce the award, Petitioner TPI filed a Petition for Confirmation, Recognition, and Enforcement of
Foreign Arbitral Award before the RTC of Makati City. Respondent KINGFORD filed a Motion to Dismiss,
which the RTC denied for lack of merit. Respondent KINGFORD then sought for the inhibition of the RTC
judge, Judge Alameda, and moved for the reconsideration of the order denying the Motion. Judge
Alameda inhibited himself notwithstanding “[t]he unfounded allegations and unsubstantiated assertions in
the motion.”

Judge Ruiz, to which the case was re-raffled, in turn, granted Respondent KINGFORDS’s Motion for
Reconsideration and dismissed the Petition on the ground that Petitioner TPI lacked legal capacity to sue
in the Philippines. Petitioner TPI is a corporation established in the State of California and not licensed to
do business in the Philippines. Hence, the present Petition for Review on Certiorari under Rule 45.

ISSUE: Whether or not a foreign corporation not licensed to do business in the Philippines, but which
collects royalties from entities in the Philippines, sue here to enforce a foreign arbitral award?

ARGUMENT: Petitioner TPI contends that it is entitled to seek for the recognition and enforcement of the
subject foreign arbitral award in accordance with RA No. 9285 ( Alternative Dispute Resolution Act of
2004), the Convention on the Recognition and Enforcement of Foreign Arbitral Awards drafted during the
United Nations Conference on International Commercial Arbitration in 1958 (New York Convention), and
the UNCITRAL Model Law on International Commercial Arbitration (Model Law ), as none of these
specifically requires that the party seeking for the enforcement should have legal capacity to sue.

RULING: YES. Petitioner TPI, although not licensed to do business in the Philippines, may seek
recognition and enforcement of the foreign arbitral award in accordance with the provisions of the
Alternative Dispute Resolution Act of 2004. A foreign corporation’s capacity to sue in the Philippines is not
material insofar as the recognition and enforcement of a foreign arbitral award is concerned.

The Resolution of the RTC is REVERSED and SET ASIDE. RATIO DECIDENDI: Sec. 45 of the

Alternative Dispute Resolution Act of 2004 provides that the opposing party inan application for
recognition and enforcement of the arbitral award may raise only those grounds that were enumerated
under Article V of the New York Convention, to wit:

Article V

1. Recognition and enforcement of the award may be refused, at the request of the party against whom it
is invoked, only if that party furnishes to the competent authority where the recognition and enforcement
is sought, proof that:

a. The parties to the agreement referred to in Article II were, under the law applicable to them, under
some incapacity, or the said agreement is not valid under the law to which the parties have subjected it
or, failing any indication thereon, under the law of the country where the award was made;

b. The party against whom the award is invoked was not given proper notice of the appointment of the
arbitrator or of the arbitration proceedings or was otherwise unable to present his case;

c. The award deals with a difference not contemplated by or not falling within the terms of the submission
to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration,
provided that, if the decisions on matters submitted to arbitration can be separated from those not so
submitted, that part of the award which contains decisions on matters submitted to arbitration may be
recognized and enforced;

d. The composition of the arbitral authority or the arbitral procedure was not in accordance with the
agreement of the parties, or, failing such agreement, was not in accordance with the law of the country
where the arbitration took place; or e. The award has not yet become binding on the parties, or has been
set aside or suspended by a competent authority of the country in which, or under the law of which, that
award was made. 2. Recognition and enforcement of an arbitral award may also be refused if the
competent authority in the country where recognition and enforcement is sought finds that: a. The subject
matter of the difference is not capable of settlement by arbitration under the law of that country; or b. The
recognition or enforcement of the award would be contrary to the public policy of that country. Not one of
the abovementioned exclusive grounds touched on the capacity to sue of the party seeking the
recognition and enforcement of the award.

Pertinent provisions of the Special Rules of Court on Alternative Dispute Resolution, which was
promulgated by the Supreme Court, likewise support this position. Rule 13.1 of the Special Rules
provides that “[a]ny party to a foreign arbitration may petition the court to recognize and enforce a foreign
arbitral award.”

The contents of such petition are enumerated in Rule 13.5. Capacity to sue is not included. Oppositely, in
the rule on local arbitral awards or arbitrations in instances where “the place of arbitration is in the
Philippines,” it is specifically required that a petition “to determine any question concerning the existence,
validity and enforceability of such arbitration agreement” available to the parties before the
commencement of arbitration and/or a petition for “judicial relief from the ruling of the arbitral tribunal on a
preliminary question upholding or declining its jurisdiction” after arbitration has already commenced
should state “[t]he facts showing that the persons named as petitioner or respondent have legal capacity
to sue or be sued.”

Indeed, it is in the best interest of justice that in the enforcement of a foreign arbitral award, the Court
deny availment by the losing party of the rule that bars foreign corporations not licensed to do business in
the Philippines from maintaining a suit in Philippine courts. When a party enters into a contract containing
a foreign arbitration clause and, as in this case, in fact submits itself to arbitration, it becomes bound by
the contract, by the arbitration and by the result of arbitration, conceding thereby the capacity of the other
party to enter into the contract, participate in the arbitration and cause the implementation of the result.
Although not on all fours with the instant case, also worthy to consider is the wisdom of then Associate
Justice Flerida Ruth P. Romero in her Dissenting Opinion in Asset Privatization Trust v. Court of Appeals
[1998] , to wit:

xxx Arbitration, as an alternative mode of settlement, is gaining adherents in legal and judicial circles
here and abroad. If its tested mechanism can simply be ignored by an aggrieved party, one who, it must
be stressed, voluntarily and actively participated in the arbitration proceedings from the very beginning, it
will destroy the very essence of mutuality inherent in consensual contracts. Clearly, on the matter of
capacity to sue, a foreign arbitral award should be respected not because it is favored over domestic laws
and procedures, but because Republic Act No.9285 has certainly erased any conflict of law question.
Finally, even assuming, only for the sake of argument, that the RTC correctly observed that the Model
Law, not the New York Convention, governs the subject arbitral award, Petitioner TPI may still seek
recognition and enforcement of the award in Philippine court, since the Model Law prescribes
substantially identical exclusive grounds for refusing recognition or enforcement.
J Plus Asia Development Corporation vs. Utility Assurance Corporation

G.R # 199650June 26.2013

Facts: Martin Mabunay entered into a construction agreement with petitioner J Plus Corporation to build
a 72-room condominium/hotel. Respondent Utility Assurance Corporation acted as a surety by providing a
Performance Bond equivalent to 20% down payment.

However, upon inspection, only 31.39% the project was completed from this, Chairman Lee of J Plus
Corporation terminated the contract and filed for arbitration with damages. Mabunay contended however
that the delay was caused by the retrofitting and other works ordered by Mr.Lee.

The Construction Industry Arbitrary Commission held respondent and Mabunay joint and severally liable.
The CA overturned said decision holding that Mabunay has not at all incurred delay, pointing out that the
obligation to perform or complete the project was not yet demandable when petitioner terminated the
contract on the account that the agreed completion date was still more than one month away. Since the
parties contemplated delay in the completion of the entire project, the CA concluded that the failure of the
contractor to catch up with the schedule of work facilities did not constitute delay giving rise to the
contractor’s liability for damages.

Issues

1.Whether or not Mabunay was in delay when Mr.Lee terminated the contract.

2.Whether or not Respondent Utility Assurance Corporation can be made liable for Mabunay’s delay.

Held

1.Yes. Mabunay was already in delay when Mr. Lee terminated the contract. The Court did not sustain the
CA’s interpretation as it is inconsistent with the terms of the Construction Agreement Article 1374 of the
Civil Code requires that the various stipulations of a contract shall be interpreted together, attributing to
the doubtful ones that sense which may result from all of them taken jointly.

2.Yes. Respondent Utility Assurance Corporation is liable for the delay caused by Mabunay. As ruled, the
Performance Bond guaranteed the full and faithful compliance of Mabunay’s obligations under the
Construction Agreement, and that nowhere in law or jurisprudence does it state that the obligation or
undertaking by a surety may be apportioned.
HEIRS OF AUGUSTO L. SALAS, JR. vs. LAPERAL REALTY CORPORATIONG.R. No.
135362December 13, 1999(320 SCRA 610)

FACTS:Petitioner Salas Jr. and Respondent Laperal Realty Corporation entered into an
agreement for the latter to develop and provide complete construction services on former’s land.
Petitioner executed a special power of attorney in favor of Respondent Corporation toexercise
general control, supervision and management of the sale of his land. On June10,1989 Petitioner left his
home for a business trip in Nueva Ecija but never returned again. Petitioner’s wife filed a petition for
presumptive death of her husband after seven years of absence. The trial court granted her petition.
On the other hand, Respondent Corporation already subdivided the property owned by SalasJr.
to different lot buyers. The heirs of Salas Jr. filed in the RTC of Lipa City a Complaint for nullity
of sale, reconveyance, cancellation of contract and damages against Laperal Realty Corporation
and lot buyers. Laperal Realty Corporation filed a motion to dismiss on the ground that the heirs of
Salas Jr. failed to submit their grievance to arbitration as stated in the agreement executed by Salas Jr.
and Laperal Realty Corporation. The lot buyers also filed a motion to dismiss based on the same
ground.

ISSUE:

(1) Whether or not the arbitration clause in the agreement between Salas Jr. andLaperal Realty binds
the heirs of the former.

(2) Whether or not the trial court must dismiss the case or must hear the casesimultaneously.

HELD:

(1) A submission to arbitration is a contract. As such, the Agreement, containing thestipulation on

arbitration, binds the parties thereto, as well as their assigns and heirs. Butonly they.
Petitioners, as heirs of Salas Jr., and respondent Laperal Realty Corporation arecertainly bound by the
agreement.

(2) The arbitration agreement is valid, binding and enforceable and not contrary to public policy so
much so when there obtains a written provision for arbitration which is not complied with, the trial
court should suspend the proceedings and order the parties to proceed to arbitration in accordance
with the terms of their agreement. However it would be in the interest of justice if the trial court hears
the complaint against all herein respondents and adjudicates petitioners rights as against theirs in
a singles and complete proceeding. The petition is granted the trial court must proceed with the hearing
of the case