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Court of Appeals, 288 SCRA 267 the Conditions of Contract was not duly executed or signed by the
parties, and the failure of the defendants to submit any signed copy of
Facts: the said document,.
Petitioner and respondent Shangri-la Properties, Inc. entered The lower court then ruled that, assuming that the
into an agreement whereby the latter engaged the former to arbitration clause was valid and binding, still, it was "too late in the
construct the main structure of the "EDSA Plaza Project," a shopping day for defendants to invoke arbitration. Considering the fact that
mall complex in Mandaluyong. Petitioner incurred delay in the under the supposed Arbitration Clause invoked by defendants, it is
construction work that SPI considered as "serious and substantial." On required that "Notice of the demand for arbitration of a dispute shall
the other hand, according to petitioner, the construction works be filed in writing with the other party . . . . in no case . . . . later than
"progressed in faithful compliance with the First Agreement until a the time of final payment . . . "which apparently, had elapsed because
fire broke out damaging Phase I" of the Project. Hence, SPI proposed defendants have failed to file any written notice of any demand for
the re-negotiation of the agreement between them. arbitration during the said long period of one year and eight months.
The CA annulled the orders of the RTC.
Petitioner and SPI entered into a written agreement denominated as
"Agreement for the Execution of Builder's Work for the EDSA Plaza Issue: WON a petition for certiorari is proper
Project." Said agreement would cover the construction work on said
project as of May 1, 1991 until its eventual completion. According to Held:
SPI, petitioner "failed to complete the construction works and
abandoned the project." This resulted in disagreements between the Yes. The rule that the special civil action of certiorari may not
parties as regards their respective liabilities under the contract. be invoked as a substitute for the remedy of appeal. The Court has
likewise ruled that "certiorari will not be issued to cure errors in
Petitioner filed with the RTC of Pasig a complaint for proceedings or correct erroneous conclusions of law or fact. As long
collection of the balance due under the construction agreement. SPI as a court acts within its jurisdiction, any alleged errors committed in
and its co-defendants filed a motion to suspend proceedings instead the exercise of its jurisdiction will amount to nothing more than errors
of filing an answer. The motion was anchored on defendants' of judgment which are reviewable by timely appeal and not by a
allegation that the formal trade contract for the construction of the special civil action of certiorari."
project provided for a clause requiring prior resort to arbitration
before judicial intervention could be invoked in any dispute arising The question of jurisdiction, which is a question of law
from the contract. Petitioner opposed said motion claiming that depends on the determination of the existence of the arbitration
there was no formal contract between the parties although they clause, which is a question of fact. In the instant case, the lower court
entered into an agreement defining their rights and obligations in found that there exists an arbitration clause. However, it ruled that in
undertaking the project. contemplation of law, said arbitration clause does not exist. It is that
mode of appeal taken by private respondents before the CA that is
Thereafter, upon a finding that an arbitration clause indeed being questioned by the petitioners before this Court. But at the heart
exists, the lower court denied the motion to suspend proceedings as of said issue is the question of whether there exists an Arbitration
Clause because if an Arbitration Clause does not exist, then private The making of a contract or submission for arbitration described in
respondents took the wrong mode of appeal before the CA. section two hereof, providing for arbitration of any controversy, shall
be deemed a consent of the parties of the province or city where any
For this Court to be able to resolve the question of whether of the parties resides, to enforce such contract of submission.
private respondents took the proper mode of appeal, which, (Emphasis supplied.).
incidentally, is a question of law, then it has to answer the core issue
of whether there exists an Arbitration Clause which, admittedly, is a The formal requirements of an agreement to arbitrate are therefore
question of fact. the following:
Moreover, where a rigid application of the rule that (a) it must be in writing and
certiorari cannot be a substitute for appeal will result in a manifest
failure or miscarriage of justice, the provisions of the Rules of Court (b) it must be subscribed by the parties or their representatives.
which are technical rules may be relaxed. As we shall show
hereunder, had the CA dismissed the petition for certiorari, the issue There is no denying that the parties entered into a written contract
of whether or not an arbitration clause exists in the contract would that was submitted in evidence before the lower court. To "subscribe"
not have been resolved in accordance with evidence extant in the means to write underneath, as one's name; to sign at the end of a
record of the case. Consequently, this would have resulted in a document. 11 That word may sometimes be construed to mean to give
judicial rejection of a contractual provision agreed by the parties to consent to or to attest. 12
the contract.
The Court finds that, upon a scrutiny of the records of this case, these
In the same vein, this Court holds that the question of the requisites were complied with in the contract in question. The
existence of the arbitration clause in the contract between petitioner Articles of Agreement, which incorporates all the other contracts
and private respondents is a legal issue that must be determined in and agreements between the parties, was signed by representatives
this petition for review on certiorari. of both parties and duly notarized. The failure of the private
respondent's representative to initial the "Conditions of Contract"
This Court may as well proceed to determine whether the arbitration would therefore not affect compliance with the formal requirements
clause does exist in the parties' contract. Republic Act No. 876 for arbitration agreements because that particular portion of the
provides for the formal requisites of an arbitration agreement as covenants between the parties was included by reference in the
follows: Articles of Agreement.
Sec. 4. Form of arbitration agreement. - A contract to arbitrate a Petitioner's contention that there was no arbitration clause because
controversy thereafter arising between the parties, as well as a the contract incorporating said provision is part of a "hodge-podge"
submission to arbitrate an existing controversy, shall be in writing and document, is therefore untenable. A contract need not be contained
subscribed by the party sought to be charged, or by his lawful agent. 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. 13 A contract may be obtaining in this case, a one-month period from the time the parties
encompassed in several instruments even though every instrument is held a conference on July 12, 1993 until private respondent SPI
not signed by the parties, since it is sufficient if the unsigned notified petitioner that it was invoking the arbitration clause, is a
instruments are clearly identified or referred to and made part of the reasonable time. Indeed, petitioner may not be faulted for resorting
signed instrument or instruments. Similarly, a written agreement of to the court to claim what was due it under the contract. However,
which there are two copies, one signed by each of the parties, is we find its denial of the existence of the arbitration clause as an
binding on both to the same extent as though there had been only attempt to cover up its misstep in hurriedly filing the complaint before
one copy of the agreement and both had signed it. 14 the lower court.
This Court likewise does not find that the Court of Appeals erred in In this connection, it bears stressing that the lower court has not lost
ruling that private respondents were not in default in invoking the its jurisdiction over the case. Section 7 of Republic Act No. 876
provisions of the arbitration clause which states that "(t)he demand provides that proceedings therein have only been stayed. After the
for arbitration shall be made within a reasonable time after the special proceeding of arbitration 16 has been pursued and completed,
dispute has arisen and attempts to settle amicably had failed." then the lower court may confirm the award 17 made by the
Under the factual milieu, private respondent SPI should have paid its arbitrator.
liabilities tinder the contract in accordance with its terms. However,
misunderstandings appeared to have cropped up between the parties It should be noted that in this jurisdiction, arbitration has been held
ostensibly brought about by either delay in the completion of the valid and constitutional. Even before the approval on June 19, 1953 of
construction work or by force majeure or the fire that partially gutted Republic Act No. 876, this Court has countenanced the settlement of
the project. The almost two-year delay in paying its liabilities may not disputes through arbitration. 18 Republic Act No. 876 was adopted to
therefore be wholly ascribed to private respondent SPI. supplement the New Civil Code's provisions on arbitration. 19 Its
potentials as one of the alternative dispute resolution methods that
Besides, private respondent SPI's initiative in calling for a conference are now rightfully vaunted as "the wave of the future" in international
between the parties was a step towards the agreed resort to relations, is recognized worldwide. To brush aside a contractual
arbitration. However, petitioner posthaste filed the complaint before agreement calling for arbitration in case of disagreement between the
the lower court. Thus, while private respondent SPI's request for parties would therefore be a step backward.
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. 2. Sea-Land Service, Inc. v. Court of Appeals, 327 SCRA 135
The arbitration clause provides for a "reasonable time" within which FACTS: Petitioner Sea-Land Services, Inc. and private respondent A.P.
the parties may avail of the relief under that clause. "Reasonableness" Moller/Maersk Line (hereinafter referred to as "AMML"), both carriers
is a relative term and the question of whether the time within which of cargo in containerships as well as common carriers, entered into a
an act has to be done is reasonable depends on attendant contract entitled, "Co-operation in the Pacific" (hereinafter referred to
circumstances. 15 This Court finds that under the circumstances as the "Agreement"), a vessel sharing agreement whereby they
mutually agreed to purchase, share and exchange needed space for court. Respondent CA rendered the assailed Decision dismissing the
cargo in their respective containerships. Under the Agreement, they petition for certiorari. With the denial of its Motion for
could be, depending on the occasion, either a principal carrier (with a Reconsideration, petitioner filed the instant petition for review.
negotiable bill of lading or other contract of carriage with respect to
cargo) or a containership operator (owner, operator or charterer of ISSUES:
containership on which the cargo is carried).
(1) Whether CA erred in holding that arbitration is a condition precedent
During the lifetime of the said Agreement, Florex International, Inc. to suit where such an agreement to arbitrate exists.
(hereinafter referred to as "Florex") delivered to private respondent
AMML cargo of various foodstuffs, with Oakland, California as port of (2) Whether CA erred in refusing to have the third-party complaint
discharge and San Francisco as place of delivery. Pursuant to the dismissed for failure to state a cause of action and for ruling that the
Agreement, respondent AMML loaded the subject cargo on MS failure to state a cause of action may be remedied by reference to its
Sealand Pacer, a vessel owned by petitioner. Under this arrangement, attachments.
therefore, respondent AMML was the principal carrier while
petitioner was the containership operator. The consignee refused to RULING:
pay for the cargo, alleging that delivery thereof was delayed.
(1) YES, the terms of the contract requires arbitration as a condition
Thus, Florex filed a complaint against respondent Maersk-Tabacalera precedent to judicial action is erroneous. It is clear that arbitration is
Shipping Agency (Filipinas), Inc. for reimbursement of the value of the the mode provided by which respondent AMML as Principal Carrier
cargo and other charges. Respondent AMML filed its Answer alleging can seek damages and/or indemnity from petitioner, as Containership
that even on the assumption that Florex was entitled to Operator. Stated differently, respondent AMML is barred from taking
reimbursement; it was petitioner who should be liable. Accordingly, judicial action against petitioner by the clear terms of their
respondent AMML filed a Third Party Complaint against petitioner Agreement.
averring that whatever damages sustained by Florex were caused by
petitioner, which actually received and transported Florexs cargo on All told, when the text of a contract is explicit and leaves no doubt as
its vessels and unloaded them. to its intention, the court may not read into it any other intention that
would contradict its plain import. Arbitration being the mode of
Petitioner filed a Motion to Dismiss the Third Party Complaint on the settlement between the parties expressly provided for by their
ground of failure to state a cause of action and lack of jurisdiction. Agreement, the Third Party Complaint should have been dismissed.
Petitioner also prayed either for dismissal or suspension of the Third This Court has previously held that arbitration is one of the alternative
Party Complaint on the ground that there exists an arbitration methods of dispute resolution that is now rightfully vaunted as "the
agreement between it and respondent AMML. The lower court issued wave of the future" in international relations, and is recognized
an Order denying petitioners Motion to Dismiss. Petitioners Motion worldwide. To brush aside a contractual agreement calling for
for Reconsideration was likewise denied so they subsequently filed a arbitration in case of disagreement between the parties would
petition for certiorari with the Court of Appeals. Meanwhile, therefore be a step backward.
petitioner also filed its Answer to the Third Party Complaint in the trial
(2) NO, the pertinent clauses of the "Co-operation in the Pacific" contract accrues." However, the Court of Appeals failed to consider that,
entered into by the parties provide that the Principal Carrier shall precisely, arbitration is the mode by which the liability of the
have the right to seek damages and/or an indemnity from the Containership Operator may be finally determined. This is clear from
Containership Operator by arbitration pursuant to Clause 32 hereof. the mandate of Clause 16.3 that "(T)he Principal Carrier shall have the
The Principal Carrier shall be entitled to commence such arbitration at right to seek damages and/or an indemnity from the Containership
any time until one year after its liability has been finally determined Operator by arbitration" and that it "shall be entitled to commence
by agreement, arbitration award or judgment, such award or such arbitration at any time until one year after its liability has been
judgment not being the subject of appeal, provided that the finally determined by agreement, arbitration award or judgment".
Containership Operator has been given notice of the said claim in
writing by the Principal Carrier within three months of the Principal
Carrier receiving notice in writing of the claim.
3. Manila Electric Company v. Pasay Transportation Company, 57 Phil.
From the foregoing, it is clear: First, disputes between the Principal 600
Carrier and the Containership Operator arising from contracts of
carriage shall be governed by the provisions of the bills of lading Fast facts
issued to the Principal Carrier by the Containership Operator. Second,
the Principal Carrier shall use its best efforts to defend or settle all The case at bar relates with a petition of the Manila Electric
suits against it for loss of or damage to cargo pursuant to bills of Company (MEC, pet), requesting the members of the SC, sitting as a
lading issued by it. Third, the Principal Carrier shall have the right to board of arbitrators, to fix the terms upon which certain
seek damages and/or indemnity from the Containership Operator by transportation companies shall be permitted to use the Pasig bridge
arbitration, pursuant to Clause 32 of the agreement. Fourth, the of the MEC and the compensation to be paid to the MEC by such
Principal Carrier shall have the right to commence such arbitration transportation companies.
any time until one year after its liability has been finally determined
by agreement, arbitration award or judgment, provided that the Act NO. 1446, Section 11
Containership Operator was given notice in writing by the Principal
Carrier within three months of the Principal Carrier receiving notice in Relates with the legal act of the members of the SC, sitting as a
writing of said claim. board of arbitrators, to act on the petition.
Based from the foregoing matters, we find that both the trial court Issue
and the Court of Appeals erred in denying petitioners prayer for
arbitration. To begin with, allowing respondent AMMLs Third Party Concerns the legal right of the members of the SC, sitting as a board
Claim against petitioner to proceed would be in violation of Clause of arbitrators the decision of a majority of whom shall be final, to
16.2 of the Agreement. The Court of Appeals ruled that the terms of act in that capacity.
the Agreement "explicitly required that the principal carriers claim
against the containership operator first be finally determined by, Held & Ratio
among others, a court judgment, before the right to arbitration
Act 1446, Section 11 contravenes the maxims which guide the Pursuant to said Act, MERALCO filed a petition before the
operation of a democratic government constitutionally established, court requesting the members of the Supreme Court sitting
and that it would be improper and illegal for the members of the SC, as board of arbitrators to fix the terms upon which certain
sitting as a board or arbitrators, the decision of a majority of whom transportation companies shall be permitted to use the Pasig
shall be final, to act on the petition of the MEC. bridge of the MERALC
The decisions of the Board of Arbitration shall go through the regular Copies were sent to affected transpo company (one of which
court system (Trial Courts – Court of Appeals – SC). They will be is the Pasay Transpo) and to Atty-Gen which disclaimed any
reviewed by the lower courts and will ultimately be reviewed by interest.
themselves. The SC cannot sit as members of the Board of
Arbitration because it is not within their jurisdiction to decide on ISSUES: Whether or not the members of the Supreme Court can sit
cases on purely contractual situations. as arbitrators and fix the terms and compensation as is
asked of them in this case
Sec. 11 of Act 1446 provides:
HELD: No
“Whenever any franchise or right of way is granted
to any other person or corporation, now or The Supreme Court represents one of the three divisions of
hereafter in existence, over portions of the lines power in our government. It is judicial power and judicial
and tracks of the grantee herein, the terms on power only which is exercised by the Supreme Court. Just as
which said other person or corporation shall use the Supreme Court, as the guardian of constitutional rights,
such right of way, and the compensation to be paid should not sanction usurpations by any other department of
to the grantee herein by such other person or the government, so should it as strictly confine its own sphere
corporation for said use, shall be fixed by the of influence to the powers expressly or by implication
members of the Supreme Court sitting as a board conferred on it by the Organic Act.
of arbitrators, the decision of a majority of whom
shall be final.” The Supreme Court and its members should not and cannot
be required to exercise any power or to perform any trust or
Said Act provides that for every franchise to assume any duty not pertaining to or connected with the
granted, terms as to the usage and administering of judicial functions
compensation to be paid to the grantee shall
be fixed by the members of the Supreme Court The Organic Act provides that the Supreme Court of the
sitting as board of arbitrators, a majority vote Philippine Islands shall possess and exercise jurisdiction as
is required and this is final heretofore provided and such additional jurisdiction as shall
hereafter be prescribed by law (sec. 26).
When the Organic Act speaks of the prilled Urea in bulk. The Sales Contract provided, among others an
exercise of "jurisdiction" by the Supreme arbitration clause which states, thus:
Court, it could not only mean the exercise
of "jurisdiction" by the Supreme Court "9. Arbitration - Any disputes arising under this contract
acting as a court, and could hardly mean shall be settled by arbitration in London in accordance with
the exercise of "jurisdiction" by the the Arbitration Act 1950 and any statutory amendment or
members of the Supreme Court, sitting as a modification thereof. XXXX"
board of arbitrators
The shipment covered by 3 bills of lading was loaded on MV Liliana
A board of arbitrators is not a "court" in any proper sense of Dimitrova with Philipp Brothers as charterer of said vessel. When the
the term, and possesses none of the jurisdiction which the shipment covered by Bill of Lading 1 and 3 were discharged in Manila,
Organic Act contemplates shall be exercised by the Supreme it was found to be in bad order and condition, caked, hardened and
Court. lumpy, discoloured and contaminated with rust and dirt.
The power conferred on this court is exclusively judicial, and it Puromines filed a complaint with the Trial Court for breach of contract
cannot be required or authorized to exercise any other. . . . Its of carriage against Maritime, as ship-agent and Philipp Brothers, as
jurisdiction and powers and duties being defined in the charterer. Philipp filed a motion to dismiss on the ground that
organic law of the government, and being all strictly judicial, Petitioner should comply with the arbitration clause in the sales
Congress cannot require or authorize the court to exercise any contract. Puromines opposed contending that the sales contract does
other jurisdiction or power, or perform any other duty. not include contract of carriage, therefore, the latter is not covered by
the agreement on arbitration.
section 11 of Act No. 1446 contravenes the maxims which
guide the operation of a democratic government Issue: Whether or not the arbitration clause in the sales contract
constitutionally established, and that it would be improper covers claims for violations of contract of carriage.
and illegal for the members of the Supreme Court, sitting as a
board of arbitrators, the decision of a majority of whom shall Held:
be final, to act on the petition of the Manila Electric Company
Yes. The sales contract is comprehensive enough to include claims for
damages arising from carriage and delivery of the goods. Puromines
derives its right to the cargo from the bill of lading which is the
4. Puromines v. Court of Appeals, 220 SCRA 281 contract of affreightment together with the sales contract.
Consequently, it is bound by the provisions and terms of the said bill
Facts: of lading and of the arbitration clause incorporated in the sales
contract.
Puromines, Inc. and Makati Agro Trading, Inc. entered into a contract
with private respondents Philipp Brothers Oceanic, Inc. for the sale of
Responsibility to third persons for goods shipped on board a vessel and was set for hearing on the 16th of April, 1902. (3) On the same
follows the vessel's possession and employment. Assuming the cause date, the parties having suggested the appointment of experts for the
of action is based on contract of carriage, it must be first determined examination of the accounts, the judge made an order for their
what kind of charter party had with the ship owner to determine appointment. The parties, however, subsequently agreed to
liability. If it is a contract of affreightment, the charterer is not liable substitute one of the experts by another, who was accepted by the
as possession is still with owner. If it is a charter of demise or court by an order of the 7th of June following. (4) On the 14th of the
bareboat, then the charterer is liable as it is considered the owner and same month the parties presented a petition in which they proposed
therefore would be liable for damage or loss. another person in substitution of the expert last named, who had
resigned, and in this petition they expressed the duties of these two
In any case, whether the liability of respondent should be based on persons in the following terms : "The said referees should
the same contract or that of the bill of lading, the parties are report solely upon the facts appearing from the record, in accordance
nevertheless obligated to respect the arbitration provisions on the with the provisions of article 134 of the Code Civil Procedure, and the
sales contract and/or the bill of lading. Petitioner being a signatory documents presented to the court." The court immediately thereafter
and party to the sales contract cannot escape from his obligation entered the following order: "Upon the filing of the preceding
under the arbitration clause as stated therein. stipulation of the parties, and in accordance therewith, the court will
issue a commission in favor of the gentlemen selected as referees in
Arbitration has been held valid and constitutional. The rule now is this case." (5) The clerk entered the following note: "On this date, and
that unless the agreement is such as absolutely to close the doors of in compliance with the preceding order, I have issued, under the seal
the courts against the parties, which agreement would be void, the of this court, the proper commission to the referees in favor of
courts will look with favor upon such amicable arrangements and will Messrs. William F. Nicholls and Felix Atienza, in accordance with the
only interfere with great reluctance to anticipate or nullify the action provisions of article 136 of the Code of Civil Procedure." (6) On the
of the arbitrator. same date, the 14th of June, the record shows that the papers were
delivered to the referees appointed, and on the 30th of June the
WHEREFORE, petition is hereby DISMISSED and decision of the court a papers were returned by the latter, together with a document called
quo is AFFIRMED. an account-current, prepared by the referees, and based, according to
their statements, solely upon the documents and accounts-current,
appearing in the record. With this they presented their report. (7) The
record discloses that the next step taken was to inform the judge of
5. Labayen v. Hernaez, 1 Phil. 587 the filing of this statement and report, and that the judge took time to
examine the account and report of the referees. Without further
From the record of this case it appears (1) That the complaint was proceedings than those above related the court below ordered
filed in accordance with the former law of Civil Procedure, and that by judgment against the plaintiff and in favor of the defendant in the
it a declarative action of greater import was brought, and that the sum of 13,498 pesos and 80 cents, concurring entirely in the report of
answer setting up a counterclaim was also filed in accordance with the referees.
the said law. (2) From this stage on the trial was conducted in
accordance with the provisions of the new Code of Civil Procedure,
The termination of this trial has been in a high degree irregular. The Doctrine: A condition in a contract that disputes arising out of it shall
judge had no authority, either by the consent of the parties or the be referred to arbitration is good where the amount of damages
provisions of the law, to enter judgment as he did. The will of the sustained by a breach of the contract is to be ascertained by specified
parties was that the experts called referees were to report solely upon arbitration before any right of action arises, but that it is illegal where
the facts appearing from the record and papers presented to the all the matters in dispute of whatever sort may be referred to
judge, and in accordance with the provisions of article 134 of the Code arbitrators and to them alone. In the first case a condition precedent
of Civil Procedure. Nevertheless, in their report they passed upon to the accrual of a right of action is imposed, while in the second it is
three questions of law, upon which they expressed their opinion, the attempted to prevent any right of action accruing at all, and this can
fact being that the parties, in accordance with the provisions of article not be permitted.
134 of the Code, sought nothing more than and agreement as to the
facts, and if these referees understood that they were to act a such in Facts:
accordance with the indication of the acting clerk in his note with
respect to article 136 of the Code of Civil Procedure, in this case they Wahl and Donaldson entered into a contract by which Wahl
should have complied with the provisions of the said article and those leased to the defendants a certain ship called Ptrarch for the
of the following articles, Nos. 138, 139, and 140. None of this, with term of 6 months
the exception of the issuance of the commissions and the collections Wahl then claimed that Donaldosn is still indebted to them
of fees, has been done. The result was a trial by referees, in violation (Wahl) a balance of $ 25, 484.38 with interest. Wahl then
of the provisions of law, this being a substantial defect which vitiates insituted a suit.
the judgment itself. Donaldson failed to answer the complaint. Consequently, a
judgment by default was rendered in favor of Wahl wherein
We therefore declare the judgment entered below to be null and Donaldson was asked to pay Wahl the sum of $17, 892.81
void, without special condemnation as to costs. It is directed that the After almost 2 months, Donaldson made an application to
record be returned to the court below. So ordered. the CFI for a new trial which was granted and eventually set
aside the judgment by default.
6. Wahl v. Donaldson, 2 Phil. 301 After the grant of motion for new trial, a demurrer was made
by Donaldson to the complaint which presented the question
Brief facts: A contract was entered into between Wahl and Donaldson of the competency of the CFI to try the case basing this
for the purpose of lease of a ship and a stipulation in said contract argument on a provision in the subject contract
provides that conflicts shall be submitted before arbitrators in HK. A o Contract provides that in case of conflict, the
complaint for sum of money was filed before the CFI. CFI first decided difference shall be referred for arbitration to 2
in favor of Wahl, but upon application, the judgment by default was competent persons in HK
set aside. The CFI in granting such motion to set aside judgment,
upheld the validity of the arbitration clause. The SC however reversed Issue: WON the provision is invalid as being against public policy (Yes)
the CFI and declared the clause contrary to public policy.
Ratio:
A condition in a contract that disputes arising out of it shall in dispute by arbitration at HK. Such is not
be referred to arbitration is meritorious.
o Valid – where the amount of damages sustained by
a breach of the contract is to be ascertained by Disposition: CFI decision set aside. Order for new trial issued.
specified arbitration before any right of action arises
Ratio for validity – it is a condition
precedent to the accrual of a right of action
o Illegal – where all the matters in dispute of 7. Chang v. Royal Exchange, 8 Phil. 399
whatever sort may be referred to arbitratiors and to
them alone Facts:
Ratio for invalidity – it is attempted to
prvent any right of action accruing at all, The arbitration clause in the fire policy includes that.ph "If a
and this cannot be permitted disagreement should at any time arise between the corporation and
Rule proviided above is the rule in the US which shall also be the assured respect of any loss or damage alleged to have been
applicable in our jurisdiction because our Code of Civil caused by fire, every such disagreement, when it may occur, shall be
Procedure, which is the law applicable in the case at bar, is referred to the arbitration of some person to be selected by
copied from the Civil Code of Procedure of California agreement of both parties . . . And by virtue of these presents it is
Moreover, the CFI erred in granting the motion for new hereby expressly declared to be a condition of this policy, and an
trial. essential element of the contract between the corporation and the
o The general rule for grant of the said motion is that insured that unless the corporation shall demand exemption from
the application should show merits, and that this liability by reason of fraud, breach of conditions, or waiver, as
should be done with some degree of certainty and stated..." lib
not left to surmise.
o In the case at bar, the affidavit submitted by The company may, however, by its conduct, waived the provisions of
Donaldson merely states that they have a this clause relating to arbitration.
counterclaim against Wahl based upon the failure
on the part of the plaintiffs (Wahl) to perform the The property insured was entirely destroyed by a fire. Plaintiffs
contract with regard to the Petrarch. The SC finds notified the agent of the defendant of the loss. Plaintiffs were notified
such statement too vague and uncertain to show by the company that this proof was insufficient and that they must
merits in the defense. obtain the sworn certificates of two merchants to the truth of their
o Also, after the application to set aside the judgment statement.
had been granted, a demurrer was submitted based
upon a purely technical ground that under the Various interviews were had between the agent of the defendant and
contract the parties had agreed to settle the matters the plaintiff Chang and the plaintiffs’ lawyer.
This action was commenced in June, 1905. The plaintiffs at no time
requested the appointment of arbitrators. The defendant requested policy of fire insurance contained a clause providing that in the event
in writing that arbitrators be appointed in accordance with the terms of a loss under the policy, unless the company should deny all liability,
of the policy. as a condition precedent to the bringing of any suit by the insured
upon the policy the latter should first submit the question of liability
The statement made by the company’s agent on the amounted to a and indemnity to arbitration. Such a condition is a valid one in law,
denial of liability on the ground that proper proofs of loss had not and unless it be first complied with no action can be brought.
been presented therefore, there had been a failure of the assured to
comply with one of the terms of the policy. If in the course of the settlement of a loss. however, the action of the
company or its agents amounts to a refusal to pay, the company will
The delay of the company in taking any affirmative action, its be deemed to have waived the condition precedent with reference to
repeated statements that the proofs were insufficient, and its final arbitration and a suit upon the policy will lie.
statement that it could go no further with the case, were sufficient
evidence to show that it did not intend to pay.
ISSUE:
Whether there has been a waiver?
8. Lopez v. Fajardo, 101 Phil. 1104
HELD:
NO. FACTS
The mere silence of the company would not amount to a waiver of its Children of the late Jacobo Puno, filed a petition in the CFI Manila,
right to insist upon the condition as to arbitration, but when it placed alleging that, pursuant to an agreement entered into by and between
its determination upon the grounds stated in the correspondence, it the widow and heirs of the deceased, they agreed to subdivide into
must be held to have waived the condition requiring arbitration. several lots the parcel of land in the province of Cotabato, and
adjudicate the lots thus subdivided to the groups of heirs.
Here, the counsel for the plaintiffs sought the interview for the
express purpose of finding out what the decision of the company was. In order to arrive at a fair distribution of the estate, a committee to
The plaintiffs were fully justified in bringing the action at once, appraise the value of the share adjudicated to each group of heirs was
without seeking any arbitration. formed. The parties agreed further that in case of conflict in the
reports, Edgardo Villavicencio shall submit a report on the value of
A great many witnesses were presented by each side, but the only the lots as appraised by him and his report shall be final and binding
persons who had any real knowledge as to the amount of stock in the upon the parties.
store at the time of the fire, and as to its value, were the plaintiff
Chang and his clerk. The arbitrators appointed by the defendant Upon the foregoing allegations, the petitioners prayed that the
found that the value was 2,106 pesos. probate court direct the Registrar of Deeds in and for the province of
Cotabato to annotate on the transfer certificate of title to be issued to At most that part of the report of the arbitrator awarding to the
Antonia J. Vda. de Fajardo for the lots adjudicated to her her herein petitioners the sum due from the administratrix, would merely
obligation to pay the sum of P44,539.68 due and owing to the be recommendatory but could not be deemed final and binding upon
petitioners. the administratrix. What is final and binding upon the parties is that
part of the report appraising the subdivided parcels of land and
Administratrix objected to the motion to annotate the lien on the improvements thereon.
ground that the sum of P44,539.68 awarded to the petitioners has not
yet been approved by the Court. Section 24(d), Republic Act No. 876, known as the Arbitration Law,
may be retroactively applied to the case at bar because it is
Petitioners filed a reply to the opposition alleging that the report of procedural in character. It provides that the court may vacate an
Edgardo Villavicencio was submitted in compliance with the award of an arbitrator when he has exceeded his powers.
agreement entered into by the heirs duly approved by the and that in
accordance with article 2044 of the new Civil Code, the report need The probate court in effect awards to the petitioners the sum of
not be approved by the Court to bind the parties therein. P44,539.68 as due from the administratrix upon the ground "that the
report of Edgardo Villavicencio in question does not require judicial
Court finds that the report of Edgardo Villavicencio in question does approval in view of the terms of the agreement above quoted, and
not require judicial approval in view of the terms of the agreement that the unreasonableness of the amount awarded is not one of the
above quoted, and that the unreasonableness of the amount awarded grounds provided for by law to contest the award or decision of an
is not one of the grounds provided for by law to contest the award or arbitrator."
decision of an arbitrator.
9. Chung Fu v. Court of Appeals, 206 SCRA 545
Administratix appealed.
FACTS:
ISSUE: Petitioner Chung Fu Industries and private respondent Roblecor
Whether Edgardo’s report is final and binding? Philippines, Inc. entered into a construction contract whereby private
respondent contractor committed to construct petitioner
HELD: corporation's industrial/factory complex in Tanawan, Tanza, Cavite. In
NO. the event of disputes arising from the performance of subject
contract, it was stipulated therein that the issue(s) shall be submitted
Nowhere in the agreement, is the arbitrator empowered to award to for resolution before a single arbitrator chosen by both parties.
any heir the sum of money he did award to the petitioners. The
purpose in forming the committee of two was to appraise the value of Respondent Roblecor failed to complete the work despite the
the estate as a step leading to its just and fair partition among the extension of time allowed it by Chung Fu. Subsequently, the latter had
heirs. to take over the construction when it had become evident that
Roblecor was not in a position to fulfill its obligation.
Claiming an unsatisfied account and unpaid progress billings, Roblecor provisions are present, judicial review of the award is properly
filed a petition for Compulsory Arbitration with prayer for Temporary warranted.
Restraining Order before respondent Regional Trial Court, pursuant to The proper remedy is certiorari under Rule 65 of the Revised Rules of
the arbitration clause in the construction agreement. Court. It is to be borne in mind, however, that this action will lie only
Respondent Regional Trial Court approved the arbitration agreement where a grave abuse of discretion or an act without or in excess of
which provides among others that the decision of the arbitrator shall jurisdiction on the part of the voluntary arbitrator is clearly shown.
be final and unappealable. Therefore, there shall be no further judicial For "the writ of certiorari is an extra-ordinary remedy and that
recourse if either party disagrees with the whole or any part of the certiorari jurisdiction is not to be equated with appellate jurisdiction.
arbitrator's award. Thereafter, Engr. Willardo Asuncion was appointed In a special civil action of certiorari, the Court will not engage in a
as the sole arbitrator. review of the facts found nor even of the law as interpreted or
applied by the arbitrator unless the supposed errors of fact or of law
Arbitrator Asuncion ordered petitioners to immediately pay
are so patent and gross and prejudicial as to amount to a grave abuse
respondent contractor and further declared the award as final and
of discretion or an exces de pouvoir on the part of the arbitrator."
unappealable, pursuant to the Arbitration Agreement precluding
judicial review of the award. Consequently, Roblecor moved for the
confirmation of said award. On the other hand, Chung Fu moved to
remand the case for further hearing and asked for a reconsideration
of the judgment.
ISSUE:
Whether or not the parties who agree to submit their disputes to 10. Allen v. Province of Tayabas, 38 Phil. 356
arbitration further provide that the arbitrators' award shall be final,
unappealable and executory FACTS:
HELD: No.
Province of Tayabas and Arthur F, Allen (Allen) entered into a
It is stated explicitly under Art. 2044 of the Civil Code that the finality contract whereby the contractor agreed to construct five reinforced
of the arbitrators' award is not absolute and without exceptions. concrete bridges. One provision of the contract was that the bridges
Where the conditions described in Articles 2038, 2039 and 2040 were to be constructed "in accordance with the said advertisements,
applicable to both compromises and arbitrations are obtaining, the instructions to bidders, general conditions, plans, specifications,
arbitrators' award may be annulled or rescinded. Additionally, under proposal, and this agreement”.
Sections 24 and 25 of the Arbitration Law, there are grounds for
vacating, modifying or rescinding an arbitrator's award. Thus, if and Four of the bridges were accepted by the Government and
when the factual circumstances referred to in the above-cited paid for. The dispute between the parties arose as to the fifth bridge.
As to this bridge, the Province of Tayabas partially paid but refused to HELD:
pay the balance because Allen had deviated from the specifications
and because the work was defective. Judgment AFFIRMED with modification as to amount.
Allen filed an action to recover the balance refused to be The Certification of the district engineer and the Director of
paid by Province of Tayabas. While the latter, on its defense, alleged Public Works is not an arbitration agreement but a condition
defective work on the part of the Allen, and that the contract was not precedent before a contractor can recover from a contract,
approved by the Governor-General under Act No. 1600. nevertheless, Allen is entitled to recover even without such Certificate
on the ground of substantial performance.
The trial court ruled in favor of Allen holding that the law
which makes the approval of the Governor-General a prerequisite Act No. 1401, as amended by Act No. 1752, was in force
only to the purchase or conveyance of real property by a province. when this action was instituted. The same provisions are now found in
slightly altered phraseology in section 1917-1923 of the
Since the Province of Tayabas’ Motion for New trial was Administrative Code of 1917. The law gives the district engineer
denied, it elevated the case to the Supreme Court contending that the supervision over all contacts connected with public works, which
certificate by the district engineer and the Director of Public Works exceed the estimated cost of P500.
must be obtained before suit can be brought on a contract; that the
findings of these officials are conclusive; and that the complaint must Allen speaks of the provisions of the law and the portions of
contain an averment to this effect. On the other hand, Allen contends the contract in questions as possibly constituting an arbitration
that neither the law nor the contract requires the submission to agreement. We deem these provisions to be more correctly labelled a
arbitration of disputes between the Government and the contractor. condition precedent to the contractor's right to obtain payment; the
condition is for the satisfaction of the Government.
ISSUE FACTS
Whether arbitration by the Service conformed with the Act Petitioner Mindanao Portland Cement Corporation and
respondent McDonough Construction Company of Florida,
HELD U.S.A., executed a contract for the construction of a dry
The Act was adopted to supplement-not to supplant-the portland cement plant in Iligan City. In a separate contract,
New Civil Code on arbitration. It expressly declares that "the Turnbull, Inc. — the "engineer" referred to in the
provisions of chapters one and two, Title XIV, Book IV of the construction contract — was engaged to design and manage
Civil Code shall remain in force." Under the New Civil Code the construction of the plant, as well, as check and certify all
the parties may select the arbitrator without court contractors' progress and fiscal requests for payment.
intervention. And section 8 of the Act impliedly permits them Alterations in the plans and specifications caused extensions
to do so. There is nothing in Republic Act 876 that requires of time for the termination of the project.
court permission or knowledge or intervention before the Respondent finally completed the project, except the
arbitrator selected by the parties may perform his assigned delivery of spare parts and finally complied with a month
work. after.
Section 5 of the Act states that Court action is needed Differences later arose. Petitioner claimed from respondent
when: (1) the parties, after entering into the contract to damages for the delay and alleged losses due to cost of extra
arbitrate, neglects, fails or refuses to arbitrate or (2) where work.
the arbitrator has not been selected by the parties who A conference was held between petitioner and Turnbull, Inc.,
have agreed to arbitrate. Nowhere in Section 5 means that on one hand, and respondent to settle the differences but no
there can be no arbitration without a previous court satisfactory results were reached.
actuation. Petitioner sent respondent, written invitations to arbitrate,
Here, court intervention was not required from the invoking a provision in their contract.
beginning, because they named the arbitrator: Severo Instead of answering said invitations, respondent submitted
Puncan. Defendant cannot question the authority of said to petitioner for payment its final statement of work
officer now, because he voluntarily submitted; and only accomplished, asking P403.700 as unpaid balance of the
turned around to deny such authority after the verdict. He consideration of the contract.
Petitioner filed the present action in CFI Manila to compel liability for alleged delay in completing the project and for
respondent to arbitrate. alleged losses due to change in the plans and specifications.
Respondent denied the existence of disagreement between Thus, the engineer is empowered to correct all discrepancies,
the parties. As special defense, it alleged that its claim for errors or omissions in the plans and specifications; to explain
P403,700 was not disputed and that the respective claims for all doubts that may arise thereon; and to furnish further
damages should be resolved by Turnbull, Inc., pursuant to plans and specifications as may be required. There is no
the exception in the arbitration clause of the construction mention as to the cost of the project.
contract. The disagreements in question do not belong to the
Court found that dispute or disagreement obtained between exceptions. Thus, the rule of arbitration applies. The parties
the parties with respect to their rights and obligations under in fact also stipulated in their contract, under "EXTRA
their contract and the existence of an arbitration clause. WORK", the cost of extra work to be paid shall be subject to
respondent appealed raising the purely legal question of negotiation. This negates the proposition that Turnbull, Inc.'s
whether under these facts respondent is duty-bound to cost estimates are final and conclusive.
submit to arbitration. The reason for the exceptions is the need to decide these
matters immediately. The same is not true as to matters
ISSUE relating to the liability for delay in the project's completion.
(1) Whether there is showing of disagreement; Y (2) if there is, The engineer does not have to resolve before the project can
whether the same falls under the exception, to be resolved go on.
by the engineer; N Since respondent failed to comply with the arbitration
clause, the court can order the parties to proceed to
HELD arbitration in accordance with the terms of their agreement.
The fact of disagreement has been determined by the court The proceeding in court is merely a summary remedy to
below upon the stipulation of facts and documentary enforce the agreement to arbitrate. The duty of the court in
evidence submitted. This should not be disturbed. The this case is not to resolve the merits of the parties' claims but
existence of disagreement is plainly shown in the record. only to determine if they should proceed to arbitration or
Respondent admits the existence of petitioner's claim but not. Mere fact that a defense exists against a claim does not
denies its merit. make it frivolous or baseless.
Regarding the second point, the parties agreed by way of
exception that disagreements with respect to the following 17. Bengzon v. Chan, 78 SCRA 113
matters shall be resolved by the engineer, instead of being
submitted to arbitration: (1) The interpretation of plans and FACTS:
specifications; (2) sufficiency of materials; and (3) the time, Bengson and Chan entered into a contract for the
sequence and method of performing the work. construction of a 6-story building on Bengson’s lot. In that
The disputes involved here, on the other hand, are on (1) the contract, Bengson found herself to pay Chan, the contractor,
proper computation of the total contract price, and (2) the P352k for the materials labor and construction expenses.
Construction should be finished within 12 calendar months
The arbitration clause provides that any disputes arising brought upon an issue arising out of an agreement
between the parties relative to the construction of the providing for the arbitration, the court in which such suit
building shall be determined by arbitration of 2 persons, is pending, upon being satisfied that the issue involved in
each chosen by the parties themselves. The determination of such suit is referable to arbitration, shall stay the action
the arbitration shall be final, conclusive and binding upon the or proceeding until an arbitrary has been had. Provided,
parties UNLESS they choose to go to court, in which case the that the applicant for the stay is not in default in
determination by arbitration is a condition precedent for proceeding with such arbitration.
taking any court action. In this case, the failure of Bengson to resort to
Bengson filed an action for damages against Chan alleging arbitration may be regarded as a refusal to comply with
that Chan violated the contract when it failed to finish the the stipulation for arbitration. Defendants defense that
1st and 2nd stories within the 5 month period. Chan and his arbitration is a condition precedent of a court action
sureties alleged that as an affirmative defense that complaint may be interpreted as a petition for an order that
states no cause of action since Bengson did not submit the arbitration should proceed. Instead of dismissing the
controversy for arbitration as stipulated in their contract. case, the proceedings should be suspended and parties
RTC ruled that the COAs were embraced under the contract should be directed to go through the motions of
hence they should’ve brought it up to the arbitration first. TC arbitration at least within 60 days. With the consent of
dimissed! So P Bengson appealed. the parties, TC may appoint a 3rd arbitrator to prevent
a deadlock between the 2 arbitrators. If the dispute
ISSUE: could not be settled by such, then the hearing of the
Whether or not the failure to resort to arbitration warrants the instant case should be resumed.
dismissal of a complaint. The Arbitration Law provides: SEC. 6. Hearing by court.
— A party aggrieved by the failure, neglect or refusal of
HELD: another to perform under an agreement in writing
NO. Bengson’s distinction between the contract for the providing for arbitration may petition the court for an
construction of the building and the construction of the order directing that such arbitration proceed in the
building is not convincing. It is still covered. Although the manner provided for in such agreement. Five days notice
causes of action in the complaint are covered by the in writing of the hearing of such application shall be
clause, her failure to resort to arbitration does not served either personally or by registered mail upon the
warrant the dismissal of her complaint. party in default. The court shall hear the parties, and
Arbitration may be resorted to during the pendency of upon being satisfied that the making of the agreement
the case. Arbitration Law Sec 6 provides that an or such failure to comply therewith is not in issue, shall
aggrieved party by the failure, neglect or refusal of make an order directing the parties to proceed to
another to perform under an agreement in writing arbitration in accordance with the terms of the
providing for arbitration may petition the court for an agreement. If the making of the agreement or default be
order directing the such arbitration proceed in the in issue the court shall proceed to summarily hear such
manner agreed upon. Sec 7 provides that in any suit issue. If the finding be that no agreement in writing
providing for arbitration was made, or that there is no (2) only if the action "be based upon the award as obtained."
default in the proceeding thereunder, the proceeding In the event of such an action, the venue thereof "shall be in
shall be dismissed. If the finding be that a written the City of Manila."
provision for arbitration was made and there is a default Western Minolco Corporation subsequently executed
in proceeding.xxxx another agreement with another firm, the Dreamers Mining
SEC. 7. Stay of civil action. — If any suit or proceeding be Association, for the validation of 36 mineral lode claims. The
brought upon an issue arising out of an agreement 36 claims were believed by Gregorian Mining Company to be
providing for the arbitration thereof, the court in which in conflict with its own claims.
such quit or proceeding is pending, upon being satisfied Gregorian Mining Company brought suit against Western
that the issue involved in such suit or proceeding is Minolco Corporation for the rescission of their agreements
referable to arbitration, shall stay the action or and damages in CFI Baguio.
proceeding until an arbitration has been had in Western Minolco moved to dismiss the complaint, theorizing
accordance with the terms of the agreement: Provided, that (a) venue had been improperly laid, and (b) the
That the applicant for the stay is not in default in complaint stated no cause of action. The Trial Court denied
proceeding with such arbitration. Western Minolco's motion to dismiss and reconsideration.
Western Minolco filed a petition with the CFI Manilato
18. Western Minolco v. Court of Appeals, 167 SCRA 592 compel arbitration, in line with its agreement with Gregorian.
Petition was granted.
FACTS CA dismissed Western Minolco’s petition
A series of contracts was entered into between Western
Minolco Corporation and Gregorian Mining Company, for the ISSUE
operation of mining claims. One of the stipulations in the Whether the issue falls under the disputes in the arbitration Clause.
contracts (a) declared certain particular disputes to be NO.
subject to arbitration and (b) specified the manner of
enforcement by court action of the resulting arbitration HELD
awards. They likewise stipulated the venue to be in Manila.
It is clear that there are two classes of disputes to be The terms of the applicable provision of the parties'
"referred to a board of arbitration." agreements are indeed "clear, unambiguous, and
1) those "regarding the meaning, application or effect unequivocal." Only 2 kinds of "disputes, differences or
of the agreement(s) or any clause thereof," and disagreements" have been made subject of arbitration:
2) those "in regard to the amount and computation of o those "regarding the meaning, application or effect
the royalties, deductions, or other item of expense" provided of the agreement(s) or any clause thereof;" and
in the agreement. o those "in regard to the amount and computation of
Also, no action concerning them may be instituted in any the royalties, deduction, or other item of expense"
court by either party (1) unless the controversy be " first provided in the agreement.
submitted to and received by said board of arbitrators," and
The controversy involved was the alleged violation by the Private respondents and petitioner General Insurance &
latter of its agreements with the former, consisting of its Surety Corporation entered into a First Surplus Reinsurance
entering into a contract with a third party for the validation Agreement which was executed by petitioners in London and
of mining claims which it knew had already been located by by the respondent in Manila. The parties agreed on
Gregorian. It was the breach of faith, or the double dealing of reciprocal reinsurance expressed and payable in pounds
Western Minolco. Clearly, such a controversy does not fall sterling. In the said reinsurance agreement, the petitioners
within either of the two categories of disputes which must and respondent expressly agreed to settle by arbitration all
first be submitted for arbitration. their differences of whatever nature or controversy arising
Even assuming that this should first be submitted to and out of the contract,
resolved by a board of arbitrators, the worst that could then In another civil case, the petitioners and the respondent
be said of the orders of the Trial Court, affirmed by the Court entered into a Retrocession Quota Share Fire Pool
of Appeals, is that they are attended by an error in the Agreement executed by the petitioners in London and by the
analysis and interpretation of the language and import of the respondent in Manila. The parties agreed on reciprocal
stipulation in question, but certainly not by that whimsical, reinsurance arrangements expressed and payable in pounds
capricious, or totally groundless exercise of adjudgment or sterling.
discretion as would justify the issuance of the extraordinary After a joint trial, the Court ordered both parties to submit
writ of certiorari or prohibition. The lower Courts did not act their respective memoranda. Judgment was then rendered
in arbitrary or despotic manner. declaring that a valid controversy existed and the petitioner
Since the stipulation as to venue becomes relevant only was ordered to submit to arbitration.
when an action has to be instituted "based upon the award MR was denied
as obtained" from the board of arbitrators and since there is
here no such award because no controversy subject to ISSUE
arbitration existed and was ever submitted to arbitration, no Whether a controversy or dispute exists under the circumstances to
error can possibly be imputed to the Trial Court in not warrant an order compelling the parties to submit to arbitration
applying the stipulation to the action. Thus, stipulation of
venue should be construed merely as an agreement on an HELD
additional forum, not as limiting venue to the specified place. A valid controversy existed between the parties, which is a
proper subject for arbitration. The 2 civil cases brought by
19. General Insurance v. Union Insurance, 179 SCRA 530 respondents alleged that there was still some amount
FACTS payable in pounds sterling due to it from the herein
petitioner.
The Union Insurance Society of Canton, Ltd. and the British Since it was not disputed that in both the First Surplus
Traders' Insurance Co., Ltd. are insurance corporations Reinsurance Agreement and the Retrocession Quota Share
organized and existing under the laws of Great Britain and Fire Pool Agreement the parties had agreed that any dispute
licensed to do business in the Philippines with head offices in arising from these agreements shall be referred to a set of
Hong Kong and branch offices in Manila.
arbitrators, the trial court correctly ordered the parties to Where there is an agreement to arbitrate and one party puts
submit to arbitration. up a claim which the other disputes, the need to arbitrate is
As regards the dispute on the amount the parties owe each imperative.
other, the same is a proper subject of arbitration.
Petitioner's invocation of R.A. 529 as a defense was raised for
the first time only in its memorandum. It is a basic rule in 20. Philippine Airlines v. National Labor Relations Commission ,
procedure that defenses and objections not pleaded either in 180 SCRA 555
a motion to dismiss or in the answer are deemed waived, the FACTS:
only exceptions recognized under the rule being: 1) a failure Petitioner PAL admitted respondent DOLINA at their Aviation
to state a cause of action; and 2) lack of jurisdiction. School for training as pilot with an agreement to provide
Assuming petitioner’s invocation of R.A. 529 is valid, it would regular and permanent employment to DOLINA upon
not in any way help petitioner's effort to success fully evade completion of the 6-month training.
its duty, under their agreement, to submit to arbitration. DOLINA logged only 84H 55M flying time, much lower than
Whether petitioner agreed to pay its obligation in pounds the required 500H flying time for regularization. He was
sterling or in US dollars, "it is settled that, ". . . if there is any extended to complete this requirement but still failed to
agreement to pay the (instant) obligation in a currency other reach the 500H minimum. He was extended for the second
than the Philippine currency, the same is null and void as time where he finished the minimum requirement and
contrary to public policy (Republic Act No. 529) applied for regularization. He was extended for the third
What RA 529 declares as null and void is the provision to time.
such effect. Consequently, the transaction or contract On the psychological exam, he was found unacceptable in his
subsists. The most that could be demanded is to pay said “Adaptability Rating” and rendered him disqualified for
obligation in Philippine currency. regular employment. PAL placed DOLINA on preventive
Here, the obligation was incurred between the years 1958- suspension pending their application for clearance for the
1961, or after the enactment of R.A. 529. Hence, the rate of latter’s termination. DOLINA filed a complaint for illegal
exchange shall be that prevailing at the time of payment. dismissal to which the OIC of DOLE Regional Office IV lifted
Finally, petitioner, while admitting the existence of the the suspension with full backwages but referred the
provision to refer to arbitration any dispute or controversy termination and damages to the Labor Arbiter.
arising from the reinsurance and the retrocession PAL appealed the OIC’s order to Sec of Labor. Pending
agreements, likewise contended that said provision can no resolution, the parties agreed before the Undersec. Of Labor
longer be enforced 5 years after the termination of both to consider DOLINA in the payroll pending the case’s final
contracts. resolution by arbitration. The Labor Arbiter granted PAL’s
The language of the reinsurance contract on arbitration of termination clearance and denied claim for damages.
any dispute between them which may arise before or after DOLINA appealed to NLRC, contending that LA’s decision is
the termination of the agreement is clear. not final due to timely appeal. PAL opposed the motion.
NLRC rendered decision that the termination sufficiently
passed test of validity, but DOLINA should be returned to the
payroll pending the case’s final resolution. Hence, this decide the case in controversy. When the consent of
petition. one of the parties is enforced by statutory provisions,
ISSUE: the proceeding is referred to as compulsory arbitration.
Whether or not the NLRC committed grave abuse of discretion in In labor cases, compulsory arbitration is the process of
holding that DOLINA is entitled to his salaries “until the case’s settlement of labor disputes by a government agency
final resolution. which has the authority to investigate and to make an
HELD: award which is binding on all the parties Under the
YES. The stipulation in the agreement that Dolina shall Labor Code, it is the Labor Arbiter who is clothed with
be included in the payroll of PAL until final resolution of the authority to conduct compulsory arbitration on
the case by arbitration was intended to supersede the cases involving termination disputes [Article 217, Pres.
order of the Regional Director which, by stipulation of Decree No. 442, as amended].
the parties, was rendered moot and academic. When the Labor Arbiter renders his decision, compulsory
In lieu of reinstatement and the payment of his arbitration is deemed terminated because by then the
backwages, private respondent was included in hearing and determination of the controversy has
petitioner's payroll, effective from the time he was ended. Any appeal raised by an aggrieved party from
preventively suspended until final resolution of the case the Labor Arbiter's decision is already beyond the
by arbitration, without having to perform any work for scope of arbitration since in the appeal stage, the NLRC
the petitioner. en banc merely reviews the Labor Arbiter's decision for
In entering into the agreement, the parties could not errors of fact or law and no longer duplicates the
have intended to include in the clause "final resolution proceedings before the Labor Arbiter. Thus, the clause
of the case by arbitration" the whole adjudicatory "pending final resolution of the case by arbitration"
process, including appeal. For if it were so, even should be understood to be limited only to the
proceedings on certiorari before this Court would be proceedings before the Labor Arbiter, such that when
embraced by the term "arbitration" and Dolina will the latter rendered his decision, the case was finally
continue to receive monthly salary without rendering resolved by arbitration.
any service to PAL regardless of the outcome of the
proceedings before the Labor Arbiter, for as long as one 21. PHIVIDEC v. Velez, 199 SCRA 405
of the parties appeal to the NLRC and until the case is
finally resolved by this Court. FACTS
This is clearly an absurdity which could not have been Respondent Philippine Veterans Assistance Commission
contemplated by the parties. Neither can proceedings (PVAC), filed a complaint in RTC for foreclosure of mortgage
on appeal before the NLRC en banc be considered as against the petitioners — the Philippine Veterans Investment
part of the arbitration proceeding. Development Corporation (PHIVIDEC) and PHIVIDEC
In its broad sense, arbitration is the reference of a Industrial Authority (PIA).
dispute to an impartial third person, chosen by the On November 20, 1987, PHIVIDEC and PIA alleged lack of
parties or appointed by statutory authority to hear and jurisdiction by the trial court over the case for it is allegedly
covered by the arbitration powers of the Government controversies arising from the interpretation and application
Corporate Counsel under Sec 1, 3-b and 6 of PD. 242 of statutes, contracts or agreements.
government-owned or controlled corporations, Sections 1, 3- The procedure is not much different, and no less desirable,
b and 6 of P.D. 242, which provide that such cases shall be than the arbitration procedures provided in Republic Act No.
administratively settled. 876 (Arbitration Law) and in Section 26, R.A. 6715 (The Labor
Judge Velez denied the motion to dismiss on the ground that Code). It is an alternative to, or a substitute for, traditional
P.D. No. 242 is "unconstitutional for being an act that litigation in court with the added advantage of avoiding the
amounts to an emasculation and impairment of the judicial delays, vexations and expense of court proceedings
power of review of this court and of the Supreme Court Section 1, subpar. (a), Rule 20 of the Rules of Court makes a
under the 1987 Constitution" pre-trial mandatory so that the parties to a suit may meet in
Petitioners filed in this Court a petition for certiorari and conference to consider, among other matters, "the possibility
prohibition with a prayer for preliminary injunction. of . . . a submission to arbitration."
SC referred the case to the CA and CA eventually returned P.D. No. 242 is a valid law prescribing an administrative
the case for resolution of MR arbitration procedure for certain disputes among offices,
agencies and instrumentalities under the executive control
ISSUE and supervision of the President of the Philippines.
Whether PD 242 applies to the case. Y Since PVAC filed Civil Case No. 11157 against PHIVIDEC and
PIA without first passing through the administrative channel,
HELD the judicial action was premature for non-exhaustion of
PHIVIDEC and PIA manifested that they are government- administrative remedies, hence, dismissible on that account
owned and controlled corporations created under P.D. No.
243 and P.D. No. 538, respectively. 22. Tesco v. Vera, 209 SCRA 440
Respondent PVAC similarly manifested that pursuant to P.D.
No. 244, it is a government office or agency. FACTS
Since the foreclosure proceeding filed by PVAC against Petitioner TESCO and private respondent LAROSA
PHIVIDEC and PIA arose from the interpretation and entered into a subcontract agreement with the former
application of the mortgage contract between them, P.D. No. as contractor and the latter as the sub-contractor, for
242 applies to the case. the execution of the Civil Works under the PLDT's 5th
P.D. No. 242 is not unconstitutional. It does not diminish the Expansion Program.
jurisdiction of courts but only prescribes an administrative TESCO alleged that LAROSA failed to perform the work
procedure for the settlement of certain types of disputes required of the latter within the time frame set out in
between or among departments, bureaus, offices, agencies, the Subcontract agreement.
and instrumentalities of the National Government, including TESCO sent LAROSA a 30-day notice of termination of
government-owned or controlled corporations, so that they the Sub-contract agreement pursuant to Article 25 of the
need not always repair to the courts for the settlement of said contract stating as ground therefor non-compliance
with the project schedule.
TESCO again sent a letter-request for the early jurisdiction over the disputes arising from the Sub-
termination of contract. contract agreement between petitioner TESCO and
LAROSA filed a Petition for Injunction with Prayer for private respondent LAROSA. While both parties in the
Issuance of a Writ of Preliminary Injunction and a TRO Sub-contract had agreed to submit the matter to
with RTC. TRO was granted. arbitration, this was only between themselves, no
TESCO filed Certiorari and Prohibition with Prayer for a request having been made by both with the CIAC.
TRO questioning the jurisdiction of the court Hence, the CIAC has no jurisdiction over the dispute.
ISSUE:
whether CIAC has jurisdiction over the subject matter of this case 23. Toyota v. Court of Appeals, 216 SCRA 236
FACTS
HELD: SC ruled that employees of the respondent Toyota Motor
NO. Article 26 of the Sub-contract agreement provides Philippines Corporation (TMPC) belonging to the Level 5
the procedure to be followed by the parties in the event positions under its Single Salary Structure set up were
of any dispute. Nowhere in said article does it mention supervisory employees. (Final and Executory) Respondent
the Construction Industry Arbitration Commission put up and implemented its Three-Function Salary Structure
(CIAC), much less vest jurisdiction with the CIAC. for its personnel/employees.
It is true that under EO 1008 (Construction Industry Petitioner Toyota Motor Philippines Corporation Workers'
Arbitration Law), the CIAC shall have original and Association (TMPCWA) filed a petition for certification
exclusive jurisdiction over disputes arising from, or election in an unorganized establishment, particularly for the
connected with, contracts entered into by parties rank-and-file employees at the Sta. Rosa and Bicutan Plants
involved in the construction industry in the Philippines, before the Med-Arbitration Unit of the DOLE-NCR. TMPC
whether the dispute arises before or after the opposed the petition on the ground that a case was pending
completion of the contract or after the abandonment or in SC between it and another union, the TMPCLU, whose
breach thereof. However, for the Board to acquire registration certificate has been cancelled. It asserted that
jurisdiction, the parties to a dispute must first agree to the petitioner's membership is the same as that of the
submit the same to voluntary arbitration. TMPCLU, which sought to represent the same bargaining
Under the Rules governing Construction Arbitration, a unit.
party to a construction contract wishing to have Med-Arbiter Lameyra dismissed the petition. DOLE reversed
recourse to arbitration by CIAC shall submit its Request and ordered the conduct of a certification election. The DOLE
for Arbitration in sufficient copies to the Secretariat of denied the MR.
the CIAC TMPC filed a petition for certiorari. CA Denied. Thus, the
The records do not show that the parties agreed to Decision of the SOLE became final. The certification election
submit the disputes to arbitration by the CIAC. Neither was set on March 8, 2000.
was there a Request for Arbitration filed with the During the inclusion and exclusion proceedings before the
Secretariat of the CIAC. Hence, CIAC did not acquire Med-Arbiter, the respondent submitted a list of 1,110
employees at its Bicutan and Sta. Rosa Plants included in the plethora of decisions of this Court that in certification
payroll list. The petitioner, however, questioned the elections, the employer is a bystander; it has no right or
eligibility of the 120 employees in the list, contending that material interest to assail the certification election.
they were not rank-and-file employees but supervisory. The Second. The CA took into account the pleadings of the
respondent asserted that the establishment of its Three- parties and their admissions during the hearing of
Function Salary Structure had already superseded the SC respondent's plea for injunctive relief.
decision where the real supervisors or managers are The issue of whether or not the respondent is entitled to
distinguished from the rank-and-file employees in terms of injunctive relief is interwoven with the principal issue on the
the duties/functions of the employees. merits of the petition, whether or not the respondent is the
Petitioner sought to be declared as the certified bargaining real party-in-interest to assail the resolution of the SOLE and
agent of the respondent at its Sta. Rosa and Bicutan Plants the resolution of the Med-Arbiter. By granting the
after getting affirmative votes, with 105 challenged votes. respondent's plea for a writ of preliminary injunction, the CA,
Respondent prayed with the Med-Arbiter for the opening of in effect, ruled that the respondent is the real party-in-
the challenged votes. interest, and not merely a bystander in the certification
After the submission position papers, Med-Arbiter Lameyra election; hence, has a material and substantial right sought
certified the petitioner as the exclusive bargaining agent of to be protected. Thus, through the issuance of the writ, the
the rank-and-file employees. She held that the challenged CA may be perceived as having prejudged the principal issue
voters were supervisory employees under the Three- before it.
Function Salary Structure. In light of the express manifestations and guarantee made by
Respondent appealed before DOLE. 105 challenged voters the petitioner, through counsel, which were unrebutted by
filed motion to remand the case to he Med-Arbiter. DOLE the respondent, there was no longer any emergency,
reaffirmed Med-Arbiter’s decision. urgency or a pressing necessity for the CA to still issue a writ
CA grant respondent’s writ of preliminary injunction. of preliminary injunction. There is no showing in the record
Petitioner filed instant petition. that despite the assumption by the SOLE of the dispute
between the petitioner and the respondent, the petitioner is
ISSUE bent on staging a strike against the respondent in defiance
W CA committed grave abuse of discretion in granting respondent’s by the petitioner of the order of the SOLE.
plea.
ISSUE
Whether or not a foreign corporation not licensed to do business in contract, participate in the arbitration and cause the
the Philippines have the legal capacity to sue under the provisions of implementation of the result.
the Alternative Dispute Resolution Act of 2004 Clearly, on the matter of capacity to sue, a foreign arbitral
award should be respected not because it is favored over
HELD domestic laws and procedures, but because Republic Act No.
Yes. In the present case, enforcement has been effectively 9285 has certainly erased any conflict of law question.
refused on a ground not found in the the [Alternative Finally, even assuming, only for the sake of argument, that
Dispute Resolution Act of 2004], New York Convention, or the court a quo correctly observed that the Model Law, not
Model Law. It is for this reason that TPI has brought this the New York Convention, governs the subject arbitral
matter before this most Honorable Court, as it [i]s imperative award, petitioner may still seek recognition and enforcement
to clarify whether the Philippines’ international obligations of the award in Philippine court, since the Model Law
and State policy to strengthen arbitration as a means of prescribes substantially identical exclusive grounds for
dispute resolution may be defeated by misplaced technical refusing recognition or enforcement.
considerations not found in the relevant laws. Thus, petitioner TPI, although not licensed to do business in
the Alternative Dispute Resolution Act of 2004 shall apply in the Philippines, may seek recognition and enforcement of
this case as the Act, as its title –An Act to Institutionalize the the foreign arbitral award in accordance with the provisions
Use of an Alternative Dispute Resolution System in the of the Alternative Dispute Resolution Act of 2004.
Philippines and to to Establish the Office for Alternative
Dispute Resolution, and for Other Purposes – would suggest, 37. ABS-CBN v. World Interactive, 544 SCRA 308
is a law especially enacted “to actively promote party FACTS
autonomy in the resolution of disputes or the freedom of the ABS-CBN Broadcasting Corporation entered into a licensing
party to make their own arrangements to resolve their agreement with respondent, World Interactive Network
disputes.” Systems (WINS) Japan Co., Ltd., a foreign corporation
It specifically provides exclusive grounds available to the licensed under the laws of Japan.
party opposing an application for recognition and Under the agreement, respondent was granted the exclusive
enforcement of the arbitral award. Indeed, it is in the best license to distribute and sublicense the distribution of the
interest of justice that in the enforcement of a foreign television service known as the “The Filipino Channel” (TFC)
arbitral award, we deny availment by the losing party of the in Japan. The dispute arose between the parties, when
rule that bars foreign corporations not licensed to do petitioner accused respondent of inserting nine episodes of
business in the Philippines from maintaining a suit in our WINS WEEKLY, a weekly 35-minute community news
courts. program for Filipinos in Japan, into the TFC programming
When a party enters into a contract containing a foreign from March to May 2002 in which the petitioner claimed that
arbitration clause and, as in this case, in fact submits itself to these were unauthorized insertions consisting a material
arbitration, it becomes bound by the contract, by the breach of their agreement.
arbitration and by the result of arbitration, conceding The parties entered into arbitration and the arbitrator ruled
thereby the capacity of the other party to enter into the in favor of the respondent. Petitioner filed in the CA petition
to review under Rule 43 of the Rules of Court or, in the remedy on the grounds of errors of fact and/or law or grave
alternative, a petition for certiorari under Rule 65 of the abuse of discretion to overturn an arbitral award.
same rules Therefore, the remedy petitioner availed of, namely: petition
Meanwhile, the respondent filed a petition for confirmation to review under Rule 43 and petition for certiorari under Rule
if the arbitral award before the RTC of Quezon City. 65, was wrong.
Consequently, petitioner file a supplemental petition in the
CA seeking to enjoin the RTC in Quezon City from further 38. Aboitiz Transport v. Carlos Gothong Lines, 730 SCRA 178
proceeding with the hearing of respondent’s petition for FACTS
confirmation of arbitral award which was granted. ASC, CAGLI, and William Lines, Inc. (WLI), principally owned
Respondent filed a motion for reconsideration in the CA and by the Aboitiz, Gothong, and Chiongbian families,
was denied because of lack of jurisdiction. It ruled that it is respectively, entered into an Agreement which was signed by
the RTC which has jurisdiction over questions relating to Jon Ramon Aboitiz for ASC, Benjamin D. Gothong (Gothong)
arbitration. Petitioner moved for reconsideration and the for CAGLI, and respondent Chiongbian for WLI.
same was denied In the said Agreement, ASC and CAGLI agreed to transfer
ISSUE their shipping assets to WLI in exchange for the latter’s
Whether aggrieved party in a voluntary arbitration dispute may avail shares of capital stock. The parties likewise agreed that WLI
of, directly in the CA, a petition for review under Rule 43 or a petition would run the merged shipping business and be renamed
for certiorari under Rule 65 of the Rules of Court, instead of filing a "WG&A, Inc."
petition to vacate the award in the RTC when the grounds invoked to Pertinently, Section 11.06 of the Agreement provides that all
overturn the arbitrator’s decision are other than those for a petition disputes arising out of or in connection with the Agreement
to vacate and award enumerated under R.A. 876. shall be finally settled by arbitration in accordance with
HELD Republic Act No. (RA) 876.
NO. R.A. 876 itself mandates that it is the Court if First Among the attachments to the Agreement was a letter
Instance, now the RTC, which has jurisdiction over questions written by respondent Chiongbian and addressed to
relating to arbitration, such as to vacate an arbitral award. Gothong, stating that WLI committed to acquire from CAGLI’s
Sec. 24 of R.A. 876 enumerates the grounds for a petition to inventory certain spare parts and materials not exceeding
vacate an award made by an arbitrator. The law itself clearly ₱400 Million. In this relation, a valuation of CAGLI’s inventory
provides that the RTC must issue an order vacating an was conducted wherein it was shown that the same
arbitral award only “in any of the . . . . .cases” enumerated amounted to ₱514 Million.
therein. As it did not expressly provide for errors of fact Thereafter, WLI received inventory valued at ₱558.89
and/or law and grave abuse of discretion (proper grounds for Million, but only paid CAGLI the amount of ₱400 Million as
a petition for review under Rule 43 and a petition for agreed upon in the Agreement.
certiorari under Rule 65, respectively) as grounds Dissatisfied, CAGLI sent to WLI various letters, demanding
maintaining a petition to vacate an arbitral award in the RTC, that the latter pay or return the inventory that it received in
it necessarily follows that a party may not avail of the latter excess of ₱400 Million.
Chiongbian and Gothong families decided to sell their upon the issue of whether there is or there is no
respective interests in WLI/WG&A to the Aboitiz family. This agreement in writing providing for arbitration. If
resulted in the execution of a Share Purchase Agreement there is such agreement, the court shall issue an
whereby Aboitiz Equity Ventures (AEV) agreed to purchase order summarily directing the parties to proceed
and acquire the WLI/WG&A shares of the Chiongbian and with the arbitration in accordance with the terms
Gothong families. Thereafter, the corporate name of thereof; otherwise, the proceeding shall be
WLI/WG&A was changed to ATSC. dismissed.
Six (6) years later, or in 2008, CAGLI sent a letter to ATSC In the present case, the records show that the
demanding that the latter pay the excess inventory it primary relief sought for in CAGLI’s complaint, i.e.,
delivered to WLI amounting to 158,399,700.00. CAGLI to compel the parties to submit to arbitration, had
likewise demanded AEV and respondent Chiongbian that already been granted by the RTC through its Order
they refer their dispute to arbitration. dated February 26, 2010. Such Order partakes of a
In response, AEV countered that the excess inventory had judgment on the merits of the complaint for the
already been returned to CAGLI and that it should not be enforcement of the arbitration agreement.
included in the dispute, considering that it is an entity Verily, upon the rendition of a judgment or final
separate and distinct from ATSC. order, the period "before service of the answer or of
Thus, CAGLI was constrained to file a complaint before the a motion for summary judgment," mentioned in
RTC against Chiongbian, ATSC, ASC, and AEV to compel them Section 137 of Rule 17 of the Rules of Court when a
to submit to arbitration. notice of dismissal may be filed by the plaintiff, no
ATSC filed a Motion for Reconsideration. RTC found CAGLI’s longer applies.
Notice of Dismissal meritorious, and, thus, confirmed the As a consequence, a notice of dismissal filed by the
same and ordered the case dismissed without prejudice. plaintiff at such judgment stage should no longer be
ISSUES entertained or confirmed.
1. Whether RTC was correct in confirming CAGLI’s notice of 2. Parties covered by Arbitration Proceedings.
dismissal and, consequently, dismissing the case without Section 2 of RA 876 specifies who may be subjected
prejudice. NO. to arbitration, to wit: Sec. 2. Persons and matters
2. Whether respondent Chiongbian should be excluded from subject to arbitration. – Two or more persons or
the arbitration proceedings. YES. parties may submit to the arbitration of one or more
HELD arbitrators any controversy existing between them
1. Propriety of CAGLI’s Notice of Dismissal The Court notes that at the time of the submission and which may be the
the nature of the complaint filed by CAGLI before the RTC is subject of an action, or the parties to any contract
for the enforcement of an arbitration agreement, governed may in such contract agree to settle by arbitration a
by Section 6 of RA 8766. controversy thereafter arising between them.
Sec. 6 is the procedural mechanism for the Such submission or contract shall be valid,
enforcement of the contract to arbitrate. RA 876 enforceable and irrevocable, save upon such
explicitly confines the court’s authority only to pass
grounds as exist at law for the revocation of any P4.5M from Stronghold Insurance Company (SIC) whereby
contract the latter and ALCI bound themselves solidarily to pay the
As a rule, contracts are respected as the law Stroem spouses the agreed amount in the event the
between the contracting parties and produce effect construction is not completed.
as between them, their assigns and heirs ALCI failed to finish the project on time despite repeated
In the present case, Section 11.06 of the demands and the Spouses Stroem rescinded the agreement
Agreement, which embodies the Arbitration and hired an independent appraiser to evaluate the progress
Agreement among the parties, provides: All disputes of the construction project. They later filed a complaint for
arising out of or in connection with this Agreement breach of contract with damages against ALCI and SIC.
including any issue as to this Agreement's validity or Only SIC was served with summons. The RTC ruled in favor of
enforceability, which cannot be settled amicably the Spouses Stroem and ordered SIC to pay damages. SIC
among the parties, shall be finally settled by argued that the RTC should have dismissed the case in view
arbitration in accordance with the Arbitration Law of the arbitration clause in the agreement and that the
(Republic Act No. 876) stipulations in the Owners-Contractor Agreement are part
The three parties to the Agreement and necessarily and parcel of the conditions in the bond issued by it. On the
to the arbitration agreement embodied therein are: other hand, Spouses Stroem argued that the Owners-
(a) ASC, (b) CAGLI, and (c) WLI/WG&A/ATSC. Contractor Agreement is ―separate and distinct from the
Contracts, like the subject arbitration agreement, Bond.
take effect only between the parties, their assigns The parties to the Agreement are ALCI/Ms. Asis-Leif and
and heirs. Spouses Stroem, while the parties to the Bond are Spouses
Respondent Chiongbian, having merely physically Stroem and Stronghold. The considerations for the two
signed the Agreement as a representative of WLI, is contracts are likewise distinct. Thus, the arbitration clause in
not a party thereto and to the arbitration the Agreement is binding only on the parties thereto,
agreement contained therein. Neither is he an specifically ALCI/Ms. Asis-Leif and Spouses Stroem.
assignee or an heir of any of the parties to the ISSUE
arbitration agreement. Hence, respondent Whether or not the SIC as surety can invoke the CIAC has jurisdiction
Chiongbian cannot be included in the arbitration over the case based on the principal contract.
proceedings. HELD
NO. The SC ruled that SIC cannot invoke the stipulation in the
39. Stronghold Insurance Company, Inc. v. Spouses Stroem , G.R. principal contract providing for arbitration. What is at issue
No. 204689, 21 January 2015 in this case is the parties‘ agreement, or lack thereof, to
FACTS submit the case to arbitration. Spouses Stroem argue that SIC
Spouses Stroem entered an Owners-Contractor Agreement is not a party to the arbitration agreement.
with Asis-Leif & Company, Inc. (ALCI) represented by Cynthia SIC did not consent to arbitration. Only Spouses Stroem and
Asis-Leif for the construction of a two-storey house on their Asis-Leif may invoke the arbitration clause in the contract.
lot. ALCI secured a performance bond in the amount of This court has previously held that a performance bond,
which is meant "to guarantee the supply of labor, materials, invoke the arbitration clause and cannot thus invoke the
tools, equipment, and necessary supervision to complete the jurisdiction of the CIAC.
project is significantly and substantially connected to the
construction contract and, therefore, falls under the 40. Department of Environment and Natural Resources v. United
jurisdiction of the CIAC. Planners Consultants, Inc., G.R. No. 212081, 23 February
The Owners-Contractor Agreement and the performance 2015
bond referred to each other; the performance bond was FACTS
issued pursuant to the construction agreement. In enforcing Petitioner, through the Land Management Bureau (LMB),
a surety contract, the complementary-contracts-construed- entered into a Consultancy Agreement with respondent
together doctrine finds application. According to this United Planners Consultants, Inc. in connection with the
principle, an accessory contract must be read in its entirety LMB’s Land Resource Management Master Plan Project
and together with the principal agreement. (LRMMP). Under the Consultancy Agreement, petitioner
The ruling in Prudential Guarantee and Assurance Inc. v. committed to pay a total contract price of P4,337,141.00,
Anscor Land, Inc., (G.R. No. 177240, September 8, 2010) to based on a predetermined percentage corresponding to the
the effect that the Prudential willingly acceded to the terms particular stage of work accomplished.
of the principal contract providing for arbitration despite the Respondent completed the work required, which petitioner
absence of a similar stipulation in the performance bond formally accepted. However, petitioner was able to pay only
because the construction contract breathes life into the 47% of the total contract price. COA released TSO finding the
performance bond will not apply to the present case. In contract price of the Agreement to be 84.14% excessive. This
Prudential, the construction contract (principal contract) notwithstanding, petitioner acknowledged its liability.
expressly incorporated the performance bond into the respondent instituted a Complaint against petitioner before
principal contract. the RTC of Quezon City. Due to the existence of Arbitration
In the present case, the Owners-Contractor Agreement clause, the respondent moved for the issue to be tried
between ALCI and Spouses Stroem merely stated that a through arbitration.
performance bond shall be issued in favor of the latter. The The Arbitral Tribunal rendered its Award in favor of
performance bond merely referenced (not incorporated) the respondent. Petitioner filed a motion for reconsideration.
contract entered into by Spouses Stroem and ALCI, which Arbitral Tribunal claimed that it had already lost jurisdiction
pertained to ALCI‘s duty to construct a two-storey residence over the case after it had submitted to the RTC its Report
building. together with a copy of the Arbitral Award.
It is in the Owners-Contractor Agreement that the arbitration RTC merely noted petitioner’s aforesaid motions, finding that
clause is found. The construction agreement was signed only copies of the Arbitral Award appear to have been sent to the
by Spouses Stroem and the contractor, ALCI, as represented parties by the Arbitral Tribunal, including the OSG, contrary
by Ms. Ma. Cynthia Asis-Leif. It is basic that “contracts take to petitioner’s claim. On the other hand, the RTC confirmed
effect only between the parties, their assigns and heirs”. Not the Arbitral Award
being a party to the construction agreement, SIC cannot Respondent moved for the issuance of a writ of execution, to
which no comment/opposition was filed by petitioner
despite the RTC’s directive therefor. RTC granted efficient resolution of disputes and curb a litigious culture,
respondent’s motion. Petitioner moved to quash the writ of every interpretation thereof should be made consistent with
execution. RTC denied. CA dismissed Certiorari. these objectives.
ISSUE
Whether or not the Special ADR Rules be applied even until the
execution of the Arbitral Award, even if the Special Rules are silent as
to execution of a confirmed arbitral award.
HELD
Yes. While it appears that the Special ADR Rules remain silent
on the procedure for the execution of a confirmed arbitral
award, it is the Court’s considered view that the Rules’
procedural mechanisms cover not only aspects of
confirmation but necessarily extend to a confirmed award’s
execution in light of the doctrine of necessary implication
which states that every statutory grant of power, right or
privilege is deemed to include all incidental power, right or
privilege.
As the Court sees it, execution is but a necessary incident to
the Court’s confirmation of an arbitral award. To construe it
otherwise would result in an absurd situation whereby the
confirming court previously applying the Special ADR Rules in
its confirmation of the arbitral award would later shift to the
regular Rules of Procedure come execution.
A Court’s power to confirm a judgment award under the
Special ADR Rules should be deemed to include the power to
order its execution for such is but a collateral and subsidiary
consequence that may be fairly and logically inferred from
the statutory grant to regional trial courts of the power to
confirm domestic arbitral awards.
All the more is such interpretation warranted under the
principle of ratio legis est anima which provides that a
statute must be read according to its spirit or intent, for what
is within the spirit is within the statute although it is not
within its letter, and that which is within the letter but not
within the spirit is not within the statute. Accordingly, since
the Special ADR Rules are intended to achieve speedy and