A D R C A S E D I G E S T S
Arbitration Agreement Later, disagreements arose between the parties as
BF CORP. V. CA
[G.R. No. 120105. March 27, 1998.]
FACTS: Petitioner BF Corporation and respondent
Shangri-la Properties, Inc. (SPI) entered into an
agreement.
Under the agreement, SPI engaged BF Corp. to
construct the main structure of the “EDSA Plaza
Project,” a shopping mall complex in the City of
Mandaluyong. SPI proposed the re-negotiation of
the agreement between them, after disagreements.
Consequently, petitioner and SPI entered into a
written agreement denominated as "Agreement for
the Execution of Builder's Work for the EDSA Plaza
Project." Said agreement would cover the
construction work on said project as of that time
until its eventual completion.
The Articles of Agreement have been duly signed by
President Rufo B. Colayco of Shangri-La Properties,
Inc. and President Bayani F. Fernando of BF and
their witnesses, and was thereafter acknowledged
before Notary Public Nilberto R. Briones of Makati,
Metro Manila.
The said Articles of Agreement also provides that
the “Contract Documents” therein listed “shall be
deemed an integral part of this Agreement.”
One of the said documents is the “Conditions of
Contract: which contains an Arbitration Clause.
However, the said “Conditions of Contract” is not
duly signed by the parties on any page thereof.
It, however, bears the initials of BF's representatives
(Bayani F. Fernando and Reynaldo M. de la Cruz)
without the initials thereon of any representative of
Shangri-La Properties, Inc.
arbitrate was beyond reasonable time as required by
regards their respective liabilities under the contract.
Thus, upon SPI's initiative, the parties' respective
representatives met in conference but they failed to
come to an agreement.
Barely two days later, petitioner filed with the RTC
of Pasig a complaint for collection of the balance
due under the construction agreement.
SPI and its co-defendants filed a motion to suspend
proceedings instead of filing an answer.
SPI: The formal trade contract for the construction
of the project provided for a clause requiring prior
resort to arbitration before judicial intervention could
be invoked in any dispute arising from the contract.
BF CORP.: Denied the existence of the arbitration
clause primarily on the ground that the
representatives of the contracting corporations did
not sign the "Conditions of Contract" that contained
the said clause.
RTC: Motion to Dismiss denied.
(1) The “Conditions of Contract” referred to,
contains the following provisions:
Three copies of the Contract Documents
referred to in the Articles of Agreement shall be
signed by the parties to the contract and
distributed to the Owner and the Contractor for
their safe keeping.
Since the “Conditions of Contract” is not duly signed
by the parties on any page thereof, the RTC
entertains serious doubt whether or not the
arbitration clause found in the said Conditions of
Contract is “binding upon the parties to the Articles
of Agreement.”
(2) Assuming that the arbitration clause was valid
and binding, still, it was “too late in the day for
defendants to invoke arbitration” since it the offer to
CHRISTIAN S. TADURAN
the agreement.
CA: Reversed.
ISSUES:
(1) W/N there was a binding arbitration agreement.
(2) W/N the offer to arbitrate was beyond
reasonable time.
RULING: (1) YES. RA 876 provides for the formal
requisites of an arbitration agreement as follows:
Section 4. Form of arbitration agreement. — A
contract to arbitrate a controversy thereafter
arising between the parties, as well as a
submission to arbitrate an existing controversy,
shall be in writing and subscribed by the party
sought to be charged, or by his lawful agent.
The making of a contract or submission for
arbitration described in section two hereof,
providing for arbitration of any controversy,
shall be deemed a consent of the parties of the
province or city where any of the parties
resides, to enforce such contract of
submission.
The formal requirements of an agreement to
arbitrate are therefore the following:
(1) It must be in writing; and
(2) It must be subscribed by the parties or their
representatives.
There is no denying that the parties entered into a
written contract that was submitted in evidence
before the lower court. To "subscribe" means to
write underneath, as one's name; to sign at the end
of a document. That word may sometimes be
construed to mean to give consent to or to attest.
Here, these requisites were complied with in the
contract in question. The articles of Agreement,
which incorporates all the other contracts and
agreements between the parties, was signed by
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representatives of both parties and duly notarized.
The failure of the private respondent's representative
to initial the 'Conditions of Contract' would therefor
not affect compliance with the formal requirements
for arbitration agreements because that particular
portion of the covenants between the parties was
included by reference in the Articles of Agreement.
A contract need not be contained in a single writing.
It may be collected from several different writings
which do not conflict with each other and which,
when connected, show the parties, subject matter,
terms and consideration, as in contracts entered
into by correspondence.
A contract may be encompassed in several
instruments even though every instrument is not
signed by the parties, since it is sufficient if the
unsigned instruments are clearly identified or
referred to and made part of the signed instrument
or instruments. Similarly, a written agreement of
which there are two copies, one signed by each of
the parties, is binding on both to the same extent as
though there had been only one copy of the
agreement and both had signed it.
(2) NO. Private respondent SPI's initiative in calling
for a conference between the parties was a step
towards the agreed resort to arbitration. However,
petitioner posthaste filed the complaint before the
lower court.
Thus, while private respondent SPI's request for
arbitration on August 13, 1993 might appear an
afterthought as it was made after it had filed the
motion to suspend proceedings, it was because
petitioner also appeared to act hastily in order to
resolve the controversy through the courts.
The arbitration clause provides for a "reasonable
time" within which the parties may avail of the relief
under that clause.
C A S E D I G E S T S
"Reasonableness" is a relative term and the
question of whether the time within which an act has
to be done is reasonable depends on attendant
circumstances.
This Court finds that under the circumstances
obtaining in this case, a one-month period from the
time the parties held a conference on July 12, 1993
until private respondent SPI notified petitioner that it
was invoking the arbitration clause, is a reasonable
time. Indeed, petitioner may not be faulted for
resorting to the court to claim what was due it under
the contract. However, we find its denial of the
existence of the arbitration clause as an attempt to
cover up its misstep in hurriedly ling the complaint
before the lower court.
In this connection, it bears stressing that the lower
court has not lost its jurisdiction over the case.
Section 7 of RA 876 provides that proceedings
therein have only been stayed.
After the special proceeding of arbitration has been
pursued and completed, then the lower court may
confirm the award made by the arbitrator.
Arbitration Agreement
STEAMSHIP V. SULPICIO LINES
[G.R. No. 196072. September 20, 2017.]
FACTS: Steamship Mutual insures its members-
shipowners against third party risks and liabilities.
Sulpicio Lines insured its fleet of vessels with
Steamship, among which was MV Princess of the
World, as evidenced by a Certificate of Entry and
Acceptance issued by Steamship.
MV Princess was gutted by fire while on voyage.
Sulpicio claimed indemnity from Steamship.
Steamship denied the claim and rescinded the
insurance coverage on the ground that Sulpicio was
grossly negligent in conducting its business.
CHRISTIAN S. TADURAN
Sulpicio thus filed a complaint with RTC. Steamship
moved to dismiss and to refer case to arbitration
pursuant to Rule 47 of the 2005/2006 Club Rules.
RTC: Denied the motion to dismiss, holding that
arbitration “did not appear to be the most prudent
action considering that other defendants had
already filed their answers.”
CA: Affirmed. The arbitration agreement in the
2005/2006 Club Rules is not valid since it was not
signed by the parties.
ISSUE: W/N the arbitration agreement in the
2005/2006 Club Rules, referenced by the Certificate
of Entry and Acceptance which was agreed to and
accepted by Sulpicio, is binding.
RULING: YES. By entering its vessels in Steamship,
Sulpicio also becomes a member of Steamship. A
protection and indemnity club like Steamship is an
association composed of shipowners for the
purpose of providing insurance cover of its
members. A shipowner wishing to enter its fleet of
vessels to Steamship must fill in an application for
entry form and sign it. Steamship then issues a
Certificate of Entry and Acceptance of the vessels,
showing its acceptance of the entry.
The certificate of entry and acceptance provides
that coverage would be to the extent specified in the
By-Laws and the Rules of the Club. Sulpicio’s
acceptance of the Certificate of Entry and
Acceptance manifests its acquiescence to all its
provisions. Its acceptance also operated as
acceptance of the entire provisions of the Club
Rules.
When a contract is in 2 or more writings, the writings
should be read and interpreted together. The
Certificate of Entry does not contain the details of
the insurance coverage, which are in the Club Rules.
The arbitration clause is in 2005/2006 Club Rules,
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Rule 47. Under Rule 47, any dispute concerning the
insurance afforded by Steamship must first be
brought by a claiming member to the Directors for
adjudication. If this member disagrees with the
decision of the Director, the dispute must be
referred to arbitration in London. Despite the
member's disagreement, the Managers of
Steamship may refer the dispute to arbitration
without adjudication of the Directors. This procedure
must be complied with before the member can
pursue legal proceedings against Steamship.
In domestic arbitration, the formal requirements of
an arbitration agreement are that it must “be in
writing and subscribed by the party sought to be
charged, or by his lawful agent."
In international commercial arbitration, it is likewise
required that the arbitration agreement must be in
writing.
An arbitration agreement is in writing if it is
contained:
(1) In a document signed by the parties;
(2) In an exchange of letters, telex, telegrams or
other means of telecommunication which
provide a record of the agreement; or
(3) In an exchange of statements of claim and
defense in which the existence of an agreement
is alleged by a party and not denied by another.
The reference in a contract to a document
containing an arbitration clause constitutes an
arbitration agreement provided that the contract is
in writing and the reference is such as to make that
clause part of the contract.
Thus, an arbitration agreement that was not
embodied in the main agreement but set forth in
another document is binding upon the parties,
where the document was incorporated by reference
to the main agreement. The arbitration agreement
contained in the Club Rules, which in turn was
referred to in the Certificate of Entry and
C A S E D I G E S T S
Acceptance, is binding upon Sulpicio even though
there was no specific stipulation on dispute
resolution in this Certificate.
Arbitration Agreement
CARGILL V. REGALA
[G.R. No. 175404. January 31, 2011.]
FACTS: Respondent San Fernando Regala Trading,
Inc. was engaged in buying and selling of molasses,
while petitioner Cargill Philippines, Inc. was one of
its various sources from whom it purchased
molasses.
They entered into a contract, wherein it was agreed
upon that respondent would purchase from
petitioner 12,000 metric tons of Thailand origin cane
blackstrap molasses at the price of US$192 per
metric ton.
The parties agreed that the delivery would be made
in April/May 1997 and that payment would be by an
Irrevocable Letter of Credit payable at sight, to be
opened upon petitioner's advice.
The contract contained an arbitration clause, to wit:
ARBITRATION
Any dispute which the Buyer and Seller may not
be able to settle by mutual agreement shall be
settled by arbitration in the City of New York
before the American Arbitration Association.
The Arbitration Award shall be final and binding
on both parties.
Petitioner, as seller, failed to comply with its
obligations under the contract, despite demands
from respondent.
Thus, respondent filed with the RTC of Makati City a
Complaint for Rescission of Contract with Damages
against petitioner.
CHRISTIAN S. TADURAN
Petitioner filed a Motion to Dismiss/Suspend
Proceedings and to Refer Controversy to Voluntary
Arbitration.
PETITIONER: The alleged contract between the
parties was never consummated because
respondent never returned the proposed agreement
bearing its written acceptance or conformity nor did
respondent open the Irrevocable Letter of Credit at
sight. The controversy between the parties was
whether or not the alleged contract between the
parties was legally in existence and the RTC was not
the proper forum to ventilate such issue.
RTC: Motion to Dismiss DENIED. The suspension of
the proceedings was not warranted, since the
Arbitration Law contemplates an arbitration
proceeding that must be conducted in the
Philippines under the jurisdiction and control of the
RTC; and before an arbitrator who resides in the
country; and that the arbitral award is subject to
court approval, disapproval and modification, and
that there must be an appeal from the judgment of
the RTC.
CA: Affirmed. In its Motion to Dismiss/Suspend
proceedings, petitioner alleged, as one of the
grounds thereof, that the subject contract between
the parties did not exist or it was invalid; that the
said contract bearing the arbitration clause was
never consummated by the parties. Arbitration is not
proper when one of the parties repudiated the
existence or validity of the contract.
ISSUE: W/N the issue must be settled through
arbitration.
RULING: YES. A contract is required for arbitration
to take place and to be binding. Submission to
arbitration is a contract and a clause in a contract
providing that all matters in dispute between the
parties shall be referred to arbitration is a contract.
The provision to submit to arbitration any dispute
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arising therefrom and the relationship of the parties
is part of the contract and is itself a contract.
Doctrine of Separability
Applying the ruling in Gonzales v. Climax Mining Ltd.
(G.R. Nos. 161957 & 167994, January 22, 1997),
an arbitration agreement which forms part of the
main contract shall not be regarded as invalid or
non-existent just because the main contract is
invalid or did not come into existence, since the
arbitration agreement shall be treated as a separate
agreement independent of the main contract.
To reiterate a contrary ruling would suggest that a
party's mere repudiation of the main contract is
sufficient to avoid arbitration and that is exactly the
situation that the separability doctrine sought to
avoid. Thus, we find that even the party who has
repudiated the main contract is not prevented from
enforcing its arbitration clause.
Moreover, it is worthy to note that respondent filed
a complaint for rescission of contract and damages
with the RTC. In so doing, respondent alleged that
a contract exists between respondent and
petitioner. It is that contract which provides for an
arbitration clause which states that "any dispute
which the Buyer and Seller may not be able to settle
by mutual agreement shall be settled before the City
of New York by the American Arbitration
Association. The arbitration agreement clearly
expressed the parties' intention that any dispute
between them as buyer and seller should be referred
to arbitration. It is for the arbitrator and not the
courts to decide whether a contract between the
parties exists or is valid.
Arbitration Agreement
PEZA V. BATAAN
[G.R. No. 179537. October 23, 2009.]
FACTS: Petitioner Philippine Economic Zone
Authority (PEZA) and respondent Edison (Bataan)
Cogeneration Corporation entered into a Power
C A S E D I G E S T S
Supply and Purchase Agreement (PSPA or
agreement).
Under the agreement, the respondent BATAAN
undertook to construct, operate, and maintain a
power plant which would sell, supply and deliver
electricity to petitioner PEZA for resale to business
locators in the Bataan Economic Processing Zone.
Under Clauses 14.1 and 14.2 of the Agreement, the
dispute shall be resolved through arbitration before
an Arbitration Committee composed of one
representative of each party and a third member
who shall be mutually acceptable to the parties.
In the course of the discharge of its obligation,
respondent BATAAN requested from petitioner
PEZA a tariff increase with a mechanism for
adjustment of the cost of fuel and lubricating oil.
PEZA did not respond to the requests.
Citing a tariff increase which PEZA granted to the
East Asia Utilities Corporation (EAUC), another
supplier of electricity in the Mactan Economic Zone,
respondent informed PEZA of a violation of its
obligation under Clause 4.9 of the PSPA not to give
preferential treatment to other power suppliers.
After the lapse of 90 days, respondent terminated
the PSPA, invoking its right thereunder, and
demanded P708,691,543.00 as pre-termination
fee.
PEZA disputed respondent's right to terminate the
agreement and refused to pay the pre-termination
fee.
Thus, respondent was prompted to request PEZA to
submit the dispute to arbitration pursuant to the
arbitration clause of the PSPA.
Petitioner PEZA refused to submit to arbitration.
CHRISTIAN S. TADURAN
Respondent BATAAN filed a Complaint against
PEZA for specific performance before the RTC of
Pasay.
PEZA: The refusal of the defendant to arbitrate is
justified considering that the provision on the pre-
termination fee subject of the plaintiff's Request for
Arbitration is invalid and unenforceable.
RTC: Granted respondent's Motion to Render
Judgment on the Pleadings.
This Court hereby appoints, subject to their
agreement as arbitrators, retired Supreme
Court Chief Justice Andres Narvasa, as
chairman of the committee, and retired
Supreme Court Justices Hugo Gutierrez, and
Justice Jose Y. Feria, as defendant's and
plaintiff's representative, respectively, to the
arbitration committee. Accordingly, let the
Request for Arbitration be immediately referred
to the Arbitration Committee so that it can
commence with the arbitration.
CA: Affirmed.
ISSUE: W/N the legality of the pre-termination fee
clause of the PSPA is arbitrable.
RULING: YES. The Court reiterated its ruling in
Gonzales, thus:
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 party's 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.
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Arbitration Agreement
BENGUET V. DENR
[G.R. No. 163101. February 13, 2008.]
FACTS: Petitioner Benguet Corporation (Benguet)
and private respondent J.G. Realty and Mining
Corporation (J.G. Realty) entered into a Royalty
Agreement with Option to Purchase (RAWOP).
Under the agreement, J.G. Realty was
acknowledged as the owner of 4 mining claims
respectively named as Bonito-I, Bonito-II, Bonito-
III, and Bonito-IV.
The mining claims were covered by MPSA
Application No. APSA-V-0009 jointly filed by J.G.
Realty as claimowner and Benguet as operator.
Among others, Benguet obligated itself to: (1)
perfect the rights to the mining claims and/or
otherwise acquire the mining rights to the mineral
claims; and (2) pay a royalty of 5% of net realizable
value to respondent if the mining claims were placed
in commercial production by Benguet.
Secs. 11.01 and 11.02 of the RAWOP pertinently
provide:
11.01 Arbitration
Any disputes, differences or disagreements
between BENGUET and the OWNER with
reference to anything whatsoever pertaining to
this Agreement that cannot be amicably settled
by them shall not be cause of any action of any
kind whatsoever in any court or administrative
agency but shall, upon notice of one party to
the other, be referred to a Board of Arbitrators
consisting of three (3) members, one to be
selected by BENGUET, another to be selected
by the OWNER and the third to be selected by
the aforementioned two arbitrators so
appointed.
C A S E D I G E S T S
xxxx
11.02 Court Action
No action shall be instituted in court as to any
matter in dispute as hereinabove stated, except
to enforce the decision of the majority of the
Arbitrators.
The Executive Vice-President of Benguet, Antonio
N. Tachuling, issued a letter informing J.G. Realty
of its intention to develop the mining claims.
J.G. Realty, through its President, Johnny L. Tan,
then sent a letter to the President of Benguet
informing the latter that it was terminating the
RAWOP for Benguet’s failure to perform its
obligations thereunder.
Benguet reminded J.G. Realty that it should submit
the disagreement to arbitration rather than
unilaterally terminating the RAWOP.
J.G. Realty filed a Petition for Declaration of
Nullity/Cancellation of the RAWOP with the Legaspi
City MAB Panel of Arbitrators (POA), Region V.
POA: Declared the RAWOP and its Supplemental
Agreement cancelled and without effect. To state
that an aggrieved party cannot initiate an action
without going to arbitration would be tying one's
hand even if there is a law which allows him to do
so.
Benguet filed a Notice of Appeal.
DENR-MAB: Affirmed. Benguet is in estoppel from
questioning the competence of the POA to hear and
decide in the summary proceedings J.G. Realty's
petition, when Benguet itself did not merely move
for the dismissal of the case but also filed an Answer
with counterclaim seeking affirmative reliefs from
the Panel of Arbitrators. MR denied.
CHRISTIAN S. TADURAN
ISSUE: W/N the case should have first been brought
to voluntary arbitration before the POA.
RULING: YES. Petitioner having failed to properly
appeal to the CA under Rule 43, the decision of the
MAB has become final and executory. On this
ground alone, the instant petition must be denied.
Even if we entertain the petition, the decision and
resolution of the DENR-MAB should be maintained.
However, on this issue, we rule for Benguet.
A contractual stipulation that requires prior resort to
voluntary arbitration before the parties can go
directly to court is not illegal and is in fact promoted
by the State.
Under Secs. 6 and 7 of RA 876, in the event a case
that should properly be the subject of voluntary
arbitration is erroneously filed with the courts or
quasi-judicial agencies, on motion of the
defendant, the court or quasi-judicial agency shall
determine whether such contractual provision for
arbitration is sufficient and effective. If in
affirmative, the court or quasi-judicial agency shall
then order the enforcement of said provision.
Compulsory vs. Voluntary Arbitration
J.G. Realty's contention, that prior resort to
arbitration is unavailing in the instant case because
the POA's mandate is to arbitrate disputes involving
mineral agreements, is misplaced.
There is a clear distinction between compulsory and
voluntary arbitration. The arbitration provided by the
POA is compulsory, while the nature of the
arbitration provision in the RAWOP is voluntary, not
involving any government agency.
Thus, J.G. Realty's argument on this matter must
fail.
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Are Quasi-Judicial Agencies Covered?
J.G. Realty's contends that the provisions of RA 876
cannot apply to the instant case which involves an
administrative agency.
Section 11.01 of the RAWOP states that:
[Any controversy with regard to the contract]
shall not be cause of any action of any kind
whatsoever in any court or administrative
agency but shall, upon notice of one party to
the other, be referred to a Board of Arbitrators
consisting of three (3) members, one to be
selected by BENGUET, another to be selected
by the OWNER and the third to be selected by
the aforementioned two arbiters so appointed.
There can be no quibbling that POA is a quasi-
judicial body which forms part of the DENR, an
administrative agency. Hence, the provision on
mandatory resort to arbitration, freely entered into
by the parties, must be held binding against them.
Issue on Estoppel
We find that Benguet is already estopped from
questioning the POA's jurisdiction for the following
reasons:
(1) When J.G. Realty filed DENR Case No. 2000-
01, Benguet filed its answer and participated in
the proceedings before the POA, Region V.
(2) When the adverse POA Decision was rendered,
it filed an appeal with the MAB and again
participated in the MAB proceedings.
(3) When the adverse MAB Decision was
promulgated, it filed a Motion for
Reconsideration with the MAB.
(4) When the adverse MAB Resolution was issued,
Benguet filed a petition with this Court pursuant
to Sec. 79 of RA 7942 impliedly recognizing
MAB's jurisdiction.
C A S E D I G E S T S
In this factual milieu, the Court rules that the
jurisdiction of POA and that of MAB can no longer
be questioned by Benguet at this late hour.
What Benguet should have done was to immediately
challenge the POA's jurisdiction by a special civil
action for certiorari when POA ruled that it has
jurisdiction over the dispute. To redo the
proceedings fully participated in by the parties after
the lapse of seven years from date of institution of
the original action with the POA would be anathema
to the speedy and efficient administration of justice.
Arbitration Agreement
BENGSON V. CHAN
[G.R. No. L-27283. July 29, 1977.]
FACTS: Petitioner Soledad F. Bengson and
respondent Mariano M. Chan entered into a contract
for the construction of a six-story building on
Bengson's lot located at Rizal Avenue, San
Fernando, La Union.
The contract contains the following arbitration
clause:
"15. Any and all questions, disputes or
differences arising between the parties hereto
relative to the construction of the BUILDING
shall be determined by arbitration of two
persons, each chosen by the parties
themselves. The determination of said
arbitration shall be final, conclusive and
binding upon both parties hereto, unless they
choose to go to court, in which case the
determination by arbitration is a condition
precedent for tasing any court action. The
expenses of arbitration shall be borne by both
parties equally."
In that contract, Soledad F. Bengson bound herself
to pay Chan, the contractor, the sum of P352,000
for the materials, labor and construction expenses.
CHRISTIAN S. TADURAN
On the other hand, respondent bound himself to the
construct the first and second stories, together with
the theater, within a 5-month period.
Dispute arose between the parties because of
alleged failure of each party to comply with their
obligations under the agreement.
Soledad F. Bengson filed an action for damages
against Mariano M. Chan and the sureties on his
performance bond.
Respondent Chan filed counterclaims for the
balance due on the contract, the value of the
materials in the construction yard, the
reimbursement of the expenses for the demolition
of the old building, the value of his construction
equipment under Bengson's control and the
payment of damages.
The respondents filed an amended answer wherein
they alleged as an additional affirmative defense
that the complaint states no cause of action
because Soledad F. Bengson did not first submit
the controversy for arbitration.
TRIAL COURT: Complaint is DISMISSED.
PETITIONER: Causes of action do not involve
disputes relative to the construction of the building
and, consequently, should not be submitted for
arbitration. Paragraph 15 refers to disputes as to
"the technical process of putting up the building,"
meaning whether there was an adherence to the
plans and specifications, and that her causes of
action for damages do not involve questions as to
the construction of the building but refer to disputes
"based on violation of the contract for construction."
She pointed out that the contract for the
construction of the building and the construction of
the building are different concepts. A dispute
relating to the construction contract is not
necessarily a dispute relative to the construction of
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the building. The parties did not have any dispute
prior to the filing of the complaint, and that it was
only after the filing of the case that a dispute arose
between them.
ISSUE: W/N the issue is arbitrable.
RULING: YES. 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.
Bengson's interpretation of paragraph 15 as being
limited to controversies with respect "to the joining
together of stones, steel, wood and other material
to put up a building" has a sophistical flavor. Her
superfine distinction between the contract for the
construction of the building and the construction of
the building is specious but not convincing.
However, although the causes of action in
Bengson's complaint are covered by paragraph 15,
her failure to resort to arbitration does not warrant
the dismissal of her complaint. We agree with her
alternative contention that arbitration may be
resorted to during the pendency of the case.
In other words, under Sec. 6 of RA 876, the failure
of Soledad F. Bengson to resort to arbitration may
be regarded as a refusal to comply with the
stipulation for arbitration.
And defendants' interposition of the defense that
arbitration is a condition precedent to the institution
of a court action may be interpreted as a petition for
an order that arbitration should proceed as
contemplated in section 15.
Therefore, instead of dismissing the case, the
proceedings therein should be suspended and the
parties should be directed to go through the motions
of arbitration at least within a sixty-day period.
C A S E D I G E S T S
Arbitration Agreement
GENERAL INSURANCE V. UNION
[G.R. Nos. L-30475-76. November 22, 1989.]
FACTS: This case involves two consolidated cases:
Civil Case No. 68558 and Civil Case No. 68559.
Respondents Union Insurance Society of Canton,
Ltd. and British Traders' Insurance Co., Ltd. are
insurance corporations organized and existing under
the laws of Great Britain and licensed to do business
in the Philippines. The other respondents are also
engaged in insurance business and are mere
subsidiaries of the Union Insurance Society of
Canton, Ltd. of Hong Kong.
In Civil Case No. 68558 the respondents and the
petitioner General Insurance & Surety Corporation
entered into a First Surplus Reinsurance Agreement.
The parties agreed on reciprocal reinsurance
expressed and payable in pounds sterling between
the petitioners and respondent commencing on
January 1, 1959, and terminating on December 31,
1961.
In Art. XII of the reinsurance agreement:
In the event of any dispute at any time arising
out of or in any way connected with or relating
to this Agreement, whether before or after the
termination of notice under the Agreement the
same shall be referred to the decision of two
arbitrators … and it shall be a condition
precedent that unless and until an award has
been made neither party shall have any right of
action against the other.
In Civil Case No. 68559 the respondents and the
petitioner entered into a Retrocession Quota Share
Fire Pool Agreement.
In said agreement the parties agreed on reciprocal
reinsurance arrangements expressed and payable in
CHRISTIAN S. TADURAN
pounds sterling which would commence on January
1, 1960, and would terminate on December 31,
1961.
In Art. XII of the retrocession agreement:
All differences of whatever nature arising out of
this Agreement shall be settled according to an
equitable rather than a strictly legal
interpretation of its provisions. Such
differences shall be submitted to a Court of
Arbitration in London composed of two
independent Fire Insurance experts who shall
be Managers of Insurance or Reinsurance
Companies of whom each party shall select
one and of an Umpire to be chosen by the
Arbitrators prior to the hearing of the case and
who has only to act in the event of a
disagreement between the Arbitrators.
Both agreements were terminated on December 31,
1961, and on the said date the respondents claim
that there was due from the petitioner the sum of
4,784.5.1 (reinsurance) and 1,035.2.7
(retrocession).
Respondents requested the petitioner to pay the
aforesaid sums in pounds sterling or in Philippine
pesos at the exchange rate prevailing on the date of
payment.
However, petitioner refused and insisted that it
should pay the said amounts in Philippine pesos at
the old official exchange rate of P2.015 to $1.00.
In view of the petitioner’s refusal to pay in the
manner demanded by the respondents, the latter
made a written formal demand upon petitioner to
proceed with the arbitration, which demand was
received by the respondent on August 18, 1966.
Respondents filed the two civil cases, both praying
for a declaration that a dispute exists between the
parties that is subject to arbitration.
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TRIAL COURT: A valid controversy existed and the
petitioner was ordered to submit to arbitration.
PETITIONER: Admitted the existence of the
provision to refer to arbitration any dispute or
controversy arising from the reinsurance and the
retrocession agreements, but the said provision can
no longer be enforced 5 years after the termination
of both contracts on December 31, 1961.
ISSUE: W/N the issues may submitted to arbitration
despite termination of the agreements.
RULING: YES. The language of the reinsurance
contract on arbitration of any dispute between them
which may arise before or after the termination of
the agreement is clear.
On the other hand, the retrocession agreement is
also clear that all differences of whatever nature
arising out of the agreement shall be submitted to a
court of arbitration. No restriction as to time was
contemplated by the parties.
Further, the provision on arbitration is the remedy by
which the parties may resort to for disputes arising
from the agreements. While the two agreements
have been terminated, the provision requiring
arbitration remains as a remedy to settle any
dispute/controversy arising from the agreements.
Arbitration Agreement
TUNA PROCESSING V. PHILIPPINE KINGFORD
[G.R. No. 185582. February 29, 2012.]
FACTS: Kanemitsu Yamaoka (LICENSOR) and 5
Philippine tuna processors, namely, Angel Seafood
Corporation, East Asia Fish Co., Inc., Mommy Gina
Tuna Resources, Santa Cruz Seafoods, Inc., and
respondent Philippine Kingford, Inc. (LICENSEES),
entered into a MOA.
The parties agreed to the establishment of petitioner
Tuna Processors, Inc. (TPI), a corporation
C A S E D I G E S T S
established in the State of California, in order to
implement the objectives of this Agreement.
Due to a series of events not mentioned in the
petition, the licensees, including respondent
Kingford, withdrew from petitioner TPI and
correspondingly reneged on their obligations.
Petitioner 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.
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 was denied.
Respondent sought for the inhibition of Judge
Alameda and moved for the reconsideration of the
order denying the motion.
Judge Cedrick O. Ruiz, to which the case was re-
raffled, in turn, granted respondent's Motion for
Reconsideration and dismissed the petition on the
ground that the petitioner lacked legal capacity to
sue in the Philippines.
PETITIONER: It is entitled to seek for the recognition
and enforcement of the subject foreign arbitral
award in accordance with:
(1) RA 9285 (Alternative Dispute Resolution Act of
2004);
(2) 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
(3) UNCITRAL Model Law on International
Commercial Arbitration (Model Law).
CHRISTIAN S. TADURAN
None of these specifically requires that the party
seeking for the enforcement should have legal
capacity to sue.
ISSUE: W/N the dismissal was proper.
RULING: NO. The Corporation Code of the
Philippines expressly provides:
Sec. 133. Doing business without a license. —
No foreign corporation transacting business in
the Philippines without a license, or its
successors or assigns, shall be permitted to
maintain or intervene in any action, suit or
proceeding in any court or administrative
agency of the Philippines; but such corporation
may be sued or proceeded against before
Philippine courts or administrative tribunals on
any valid cause of action recognized under
Philippine laws.
How do we reconcile the provisions of the
Corporation Code of the Philippines on one hand,
and the Alternative Dispute Resolution Act of 2004,
the New York Convention and the Model Law on the
other?
As between a general and special law, the latter
shall prevail —generalia specialibus non derogant.
Following the same principle, the ADR Act of 2004
shall apply in this case as the Act is a law especially
enacted "to actively promote party autonomy in the
resolution of disputes or the freedom of the party to
make their own arrangements to resolve their
disputes." It specifically provides exclusive grounds
available to the party opposing an application for
recognition and enforcement of the arbitral award.
In particular, the ADR Act of 2004 incorporated the
New York Convention in the Act by specifically
providing:
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 A D R C A S E D I G E S T S

SEC. 42. Application of the New York
Convention. — The New York Convention shall
govern the recognition and enforcement of
arbitral awards covered by the said Convention.
It also expressly adopted the Model Law, to wit:
Sec. 19. Adoption of the Model Law on
International Commercial Arbitration. —
International commercial arbitration shall be
governed by the Model Law on International
Commercial Arbitration (the "Model Law")
adopted by the United Nations Commission on
International Trade Law on June 21, 1985."
Sec. 45 of the Alternative Dispute Resolution Act of
2004 provides that the opposing party in an
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.
petitioner or respondent have legal capacity to sue
or be sued."
It is in the best interest of justice that in the
enforcement of a foreign arbitral award, we 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 our 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.

Clearly, not one of those exclusive grounds touched

on the capacity to sue of the party seeking the
recognition and enforcement of the award.

Rule 13.1 of the Special Rules provides that "Any

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 13.5.32 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

CHRISTIAN S. TADURAN 9