TEODORO VEGA vs. THE SAN CARLOS MILLING CO.

, LTD
(G.R. No. L-21549 | October 22, 1924 |ROMUALDEZ, J.)

The courts generally will not construe an arbitration clause as ousting them of their jurisdiction unless such
construction is inevitable

FACTS: The defendant company appealed from the judgment of the CFI of Occidental Negros where the
plaintiff was held to have a better right to the possession of the 32,959 kilos of centrifugal sugar manufactured
in the defendant’s central and the latter is sentenced to deliver them to the plaintiff, and alleges that the lower
court erred in having held itself with jurisdiction to take cognizance of and render judgment in the cause; in
holding that the defendant was bound to supply cars gratuitously to the plaintiff for the cane; in not ordering the
plaintiff to pay to the defendant the sum of P2,866 for the cars used by him, with illegal interest on said sum
from the filing of the counterclaim, and the costs, and that said judgment is contrary to the weight of the
evidence and the law.

The first assignment of error is based on clause 23 of the Mill's covenants and clause 14 of the Planter's
Covenant wherein they agreed that they will submit any and all differences that may arise between the parties of
the decision of arbitrators, two of whom shall be chosen by the said parties of the first part and two by the said
party of the second part, who in case of inability to agree, shall select a fifth arbitrator, and will respect and
abide by the decision of said arbitrators, or any three of them, as the case may be.

It is an admitted fact that the differences which arose between the parties, and which are the subject of
the present litigation have not been submitted to the arbitration provided for in Clauses 23 and 14
abovementioned. Defendant contends that as such stipulations on arbitration are valid, they constitute a
condition precedent, to which the plaintiff should have resorted before applying to the courts, as he prematurely
did.

ISSUE: WON arbitration is a condition precedent to a suit upon the contract.

RULING: NO. The defendant is right in contending that such covenants on arbitration are valid, but they are
not for the reason a bar to judicial action, in view of the way they are expressed:

An agreement to submit to arbitration, not consummated by an award, is no bar to suit at law or

in equity concerning the subject matter submitted. And the rule applies both in respect of agreements to
submit existing differences and agreements to submit differences which may arise in the future. (5 C. J.,
42.)

And in view of the terms in which the said covenants on arbitration are expressed, it cannot be held that in
agreeing on this point, the parties proposed to establish the arbitration as a condition precedent to judicial
action, because these clauses quoted do not create such a condition either expressly or by necessary inference.

Clauses in insurance and other contracts providing for arbitration in case of disagreement are very
similar, and the question whether submission to arbitration is a condition precedent to a suit upon the contract
depends upon the language employed in each particular stipulation. Where by the same agreement which
creates the liability, the ascertainment of certain facts by arbitrators is expressly made a condition precedent to a
right of action thereon, suit cannot be brought until the award is made. But the courts generally will not construe
an arbitration clause as ousting them of their jurisdiction unless such construction is inevitable, and
consequently when the arbitration clause is not made a condition precedent by express words or necessary
implication, it will be construed as merely collateral to the liability clause, and so no bar to an action in the
courts without an award. (2 R. C. L., 362, 363.)
 CORDOBA V. CONDE
([1903], 2 Phil., 445)

FACTS: In 1901, the plaintiff and the defendant entered into mercantile partnership. The seventh clause of the
contract contains the following:

○ "7. In all matters not provided for in the said contract, the partners will be bound by the
provisions of the Spanish Code of Commerce, it being agreed that all doubts, disputes, or
disagreements which may arise between the partners during the existence of the partnership, as
well as during the period of its dissolution and liquidation, will be decided by friendly
adjusters."
● In 1903, when the case was first filed, all of the provisions relating to the suit of friendly adjusters
disappeared with the repeal of the Spanish Law of Civil Procedure. The plaintiff filed an action for the
dissolution of the partnership and the lower court, in view of the clause, dismissed the case.

ISSUE: Whether the parties still have to abide by the arbitration clause in their contract pursuant to the then old
Spanish Law of Civil Procedure.

HELD: No. The parties have no obligation to abide by the clause in their contract regarding the arbitration of
the dissolution of their partnership based on a repealed law. A general clause in contract entered into at a time
when the Spanish Law of Civil Procedure was in force and made with a view to that law, agreeing to refer all
disputes to friendly adjusters (amigables componedores), becomes inoperative by the repeal of the law, and the
parties may resort to the courts without a previous offer to submit their differences to adjustment by arbitration.

I’ll quote below the pertinent Spanish Civil Procedure regarding arbitration discussed in the case just in
case.

● The adjusters had to be men who could read and write.

● The number had to be odd, and could not exceed five.
● A third person could not be given the power to name them.
● Unless the agreement of submission was executed before a notary, it was void.
● It was also void if it did not contain five specified particulars.
● An adjuster could be challenged if he had an interest in the subject-matter of the suit or was manifestly
antagonistic to either party, provided the cause for challenge arose or came to the knowledge of the party
after the appointment.
● If the adjuster challenged refused to withdraw, the matter had to be tried in the Court of First Instance
where the adjuster resided.
● The decision of the dispute by the adjusters was void if not made before a notary.
● Against this decision the party aggrieved could, within sixty days, prosecute a writ of error in the
supreme court of Spain, on the grounds that the judgment was rendered outside of the time limited
therefor, or that it decided questions not submitted.
● If no writ of error was sued out, or if it was dismissed, the judgment of the adjusters was to be executed
by the Court of First Instance of the district where the decision was made in the same manner as other
judgments.
 METRO RAIL TRANSIT DEVELOPMENT CORPORATION vs. GAMMON PHILIPPINES, INC.
(G.R. No. 200401, January 17, 2018 | Leonen, J.)

FACTS: Parsons Interpro JV (Parsons), the management team authorized to oversee the construction’s
execution of MRT’s project, issued a Letter of Award and Notice to Proceed for the construction of the podium
structure. Consequently, MRTDC sent a letter to Gammon, notifying the latter of the suspension of all the
undertakings because of the currency crisis (current developments in the PH’s foreign exchange rate and
soaring interest rates) at the time. On April 2, 1998, MRT issued in favor of Gammon another Notice of Award
and Notice to Proceed (Third Notice to Proceed). Gammon received from Parsons the Contract for the
Construction and Development of the Superstructure, MRT-3 North Triangle - Amended Notice to Proceed
dated June 10, 1998 (Fourth Notice to Proceed). Gammon qualifiedly accepted the Fourth Notice to Proceed.
MRT treated it as a new offer, thus it informed Gammon that the contract would be awarded to Filsystems if
Gammon would not accept the Fourth Notice to Proceed within 5 days. Gammon replied to MRT,
acknowledging the latter's intent to grant the Fourth Notice to Proceed to another party despite having granted
the First Notice to Proceed to Gammon. Thus, it notified MRT of its claims for reimbursement for costs, losses,
charges, damages, and expenses it had incurred due to the rapid mobilization program in response to MRT's
additional work instructions, suspension order, ongoing discussions, and the consequences of its award to
another party.

In a Letter dated July 15, 1998, MRT expressed its disagreement with Gammon and its amenability to
discussing claims for reimbursement. Gammon filed a Notice of Claim before CIAC against MRT. MRT filed a
Motion to Dismiss arguing that CIAC had no jurisdiction to arbitrate the dispute. CIAC ruled in favor of
Gammon. MRT filed a Petition for review arguing that there was no perfected contract between MRT and
Gammon, hence, Gammon is not entitled to CIAC’s award.

ISSUE: Whether CIAC has jurisdiction over the dispute?

RULING: Yes. Under the Construction Industry Arbitration Law, CIAC acquires jurisdiction when the parties
agree to submit the matter to voluntary arbitration. The agreement to arbitrate is separate from the construction
contract entered into by parties. Thus, the Court ruled that CIAC does not have jurisdiction over
construction contracts. Rather, it has jurisdiction over the dispute arising from or connected to construction
contracts, such that it still acquires jurisdiction even if the contract has been breached, abandoned, terminated,
or rescinded. 

On the basis of this ruling, this Court concluded that CIAC has jurisdiction over the dispute between MRT and
Gammon. Their contract need not be valid or in force before CIAC may arbitrate the matter, so long as there is
an agreement to arbitrate.

RATIO: CIAC was created under Executive Order No. 1008 to establish an arbitral machinery that will settle
expeditiously problems arising from, or connected with, contracts in the construction industry.

Its jurisdiction includes construction disputes between or among parties to an arbitration agreement, or those
who are otherwise bound by the latter, directly or by reference. Thus, any project owner, contractor,
subcontractor, fabricator, or project manager of a construction project who is bound by an arbitration agreement
in a construction contract is under CIAC's jurisdiction in case of any dispute.

CIAC is a quasi-judicial body exercising quasi-judicial powers.

A quasi-judicial agency is a government body, not part of the judiciary or the legislative branch, which
adjudicates disputes and creates rules which affect private parties' rights. It is created by an enabling statute, and
thus, its existence continues beyond the resolution of a dispute and is independent from the will of the parties.
Its powers are limited to those expressly granted or necessarily implied in the enabling law.

Quasi-judicial or administrative adjudicatory power has been defined as the power: "(1) to hear and
determine questions of fact to which legislative policy is to apply, and (2) to decide in accordance with
the standards laid down by the law itself in enforcing and administering the same law."

Arbitration under a quasi-judicial body is similar to commercial arbitration in that its factual findings are
generally accorded respect and finality. However, commercial arbitration is conducted by ad-hoc bodies created
by stipulation of parties for the purpose of settling disputes concerning their private or proprietary interests. In
general, the findings in commercial arbitration are respected to uphold the autonomy of arbitral awards.

On the other hand, quasi-judicial agencies were created for a speedier resolution of controversies on matters of
state interest that require specialized knowledge and expertise.

CIAC exercises quasi-judicial powers over arbitration disputes concerning construction contracts. Thus, its
findings are accorded respect because it comes with the presumption that CIAC is technically proficient in
efficiently and speedily resolving conflicts in the construction industry.

Thus, under the Construction Industry Arbitration Law, arbitral awards are binding and shall be final and
unappealable, except on pure questions of law.

Initially, CIAC decisions are appealable only to this Court. However, when the Rules of Court were enacted,
appeals from CIAC decisions became appealable to the Court of Appeals under Rule 43. While Rule 43
petitions may pertain to questions of fact, questions of law, or both questions of law and fact, it has been
established that factual findings of CIAC may not be reviewed on appeal.

Thus, even as exceptions to the highly restrictive nature of appeals may be contemplated, these exceptions are
only on the narrowest of grounds. Factual findings of CIAC arbitral tribunals may be revisited not merely
because arbitral tribunals may have erred, not even on the already exceptional grounds traditionally available in
Rule 45 Petitions. Rather, factual findings may be reviewed only in cases where the CIAC arbitral tribunals
conducted their affairs in a haphazard, immodest manner that the most basic integrity of the arbitral process was
imperiled.

Thus, CIAC's factual findings on construction disputes are final, conclusive, and not reviewable by this Court
on appeal. The only exceptions are when:

(1) [T]he award was procured by corruption, fraud or other undue means; (2) there was evident partiality or
corruption of the arbitrators or of any of them; (3) the arbitrators were guilty of misconduct in refusing to
postpone the hearing upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the
controversy; (4) one or more of the arbitrators were disqualified to act as such under section nine of Republic
Act No. 876 and willfully refrained from disclosing such disqualifications or of any other misbehavior by which
the rights of any party have been materially prejudiced; or (5) the arbitrators exceeded their powers, or so
imperfectly executed them, that a mutual, final and definite award upon the subject matter submitted to them
was not made.105 (Citation omitted)

Necessarily, before petitioner may raise any question of fact, it must prove that the above circumstances exist in
the case at bar.
((Note: The court ruled that there was a perfected contract between MRT and Gammon on the ground that the
contract is still in force and effect, albeit temporarily suspended.))

WHEREFORE, petition is denied.

STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION (BERMUDA) LIMITED V. SULPICIO LINES,

INC.,
(G.R. Nos. 196072 & 208603, September 20, 2017 | Leonen, J.)

FACTS: Steamship was a Bermuda-based Protection and Indemnity Club, managed outside London, England. It
insures its members-shipowners against "third party risks and liabilities" for claims arising from (a) death or injury to
passengers; (b) loss or damage to cargoes; and (c) loss or damage from collisions.

Sulpicio insured its fleet of inter-island vessels with Steamship. One (1) of these vessels was the M/V
Princess of the World, evidenced by a Certificate of Entry and Acceptance issued by Steamship, the certificate
incorporated by reference as an arbitration agreement set forth in its Club Rules.

July 7, 2005, M/V Princess of the World was gutted by fire while on voyage from Iloilo to Zamboanga City,
resulting in total loss of its cargoes. This prompted Sulpicio to claim indemnity from Steamship before the RTC
Makati City. Steamship denied the claim and subsequently rescinded the insurance coverage on the ground that
Sulpicio was grossly negligent in conducting its business regarding safety, maintaining the seaworthiness of its
vessels as well as proper training of its crew.

Steamship filed its Motion to Dismiss and/or to Refer Case to Arbitration pursuant to RA No. 9285, or the
ADR Act of 2004, and to Rule 4716 of the 2005/2006 Club Rules, which supposedly provided for arbitration in
London of disputes between Steamship and its members. The other defendants filed separate Motion to Dismiss.

RTC Makati: denied the motions to dismiss holding that "arbitration did not appear to be the most prudent
action, considering that the other defendants had already filed their respective answers.

CA dismissed the petition. Found no grave abuse of discretion on the part of the RTC in denying Steamship's
Motion to Dismiss and/or to Refer Case to Arbitration or any convincing evidence to show that a valid arbitration
agreement existed between the parties.

Petition for Review before the SC: Steamship contends that the arbitration agreement set forth in its Club
Rules, which in turn is incorporated by reference in the Certificate of Entry and Acceptance of M/V  Princess of the
World, is valid and binding upon Sulpicio,

ISSUES:
1. Whether or not there is a valid and binding arbitration agreement between the parties.
2. Whether or not the RTC should suspend the proceedings and give way to arbitration.

HELD:
1. The contract between Sulpicio and Steamship is more than a contract of insurance between a marine insurer and a
shipowner. By entering its vessels in Steamship, Sulpicio not only obtains insurance coverage for its vessels but also
becomes a member of Steamship.

A contract of insurance is perfected between the parties upon Steamship's issuance of the Certificate of Entry
and Acceptance. Sulpicio's acceptance of the Certificate of Entry and Acceptance manifests its acquiescence to all its
provisions. Its acceptance, likewise, operated as an acceptance of the entire provisions of the Club Rules. The Club
Rules contain the terms and conditions of the relationship between the Steamship and its members.
 The Certificate clearly incorporates the entire Club Rules. The incorporation of the Club Rules in the
insurance policy is without any qualification. This includes the arbitration clause even if not particularly stipulated.

When a contract is embodied in two (2) or more writings, the writings of the parties should be read and
interpreted together in such a way as to render their intention effective. In this case, the Court of Appeals ruled that
the arbitration agreement in the 2005/2006 Club Rules is not valid because it was not signed by the parties.
In domestic arbitration, the formal requirements of an arbitration agreement are that it must "be in writing
and subscribed by the party sought to be charged, or by his lawful agent." In international commercial arbitration, it
is likewise required that the arbitration agreement must be in writing.

An arbitration agreement is in writing if it is contained (1) in a document signed by the parties, (2) in an
exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement,
or (3) in an exchange of statements of claim and defense in which the existence of an agreement is alleged by a party
and not denied by another. The reference in a contract to a document containing an arbitration clause
constitutes an arbitration agreement provided that the contract is in writing and the reference is such as to
make that clause part of the contract.

Thus, an arbitration agreement that was not embodied in the main agreement but set forth in another
document is binding upon the parties, where the document was incorporated by reference to the main agreement.
The arbitration agreement contained in the Club Rules, which in turn was referred to in the Certificate of Entry and
Acceptance, is binding upon Sulpicio even though there was no specific stipulation on dispute resolution in this
Certificate.

In this case, by its act of entering its fleet of vessels to Steamship and accepting without objection the
Certificate of Entry and Acceptance covering its vessels, Sulpicio manifests its consent to be bound by the Club
Rules. The contract between Sulpicio and Steamship gives rise to reciprocal rights and obligations. Steamship
undertakes to provide protection and indemnity cover to Sulpicio's fleet. On the other hand, Sulpicio, as a member,
agrees to observe Steamship's rules and regulations, including its provisions on arbitration.

2. Another issue in this case is that the Regional Trial Court should suspend proceedings to give way to arbitration.
Even if there are other defendants who are not parties to the arbitration agreement, arbitration is still proper.

Republic Act No. 9285 was approved on April 2, 2004 and was the controlling law at the time the original
and amended complaints were filed. Section 25 of Republic Act No. 9285 is explicit that:

Where action is commenced by or against multiple parties, one or more of whom are parties to an arbitration
agreement, the court shall refer to arbitration those parties who are bound by the arbitration agreement
although the civil action may continue as to those who are not bound by such arbitration agreement.

Rule 4.7 of the Special Rules on Alternative Dispute Resolution (2009 Special ADR Rules) further expresses:

The court shall not decline to refer some or all of the parties to arbitration for any of the following reasons:

a. Not all of the disputes subject of the civil action may be referred to arbitration;
b. Not all of the parties to the civil action are bound by the arbitration agreement and referral to
arbitration would result in multiplicity of suits;
c. The issues raised in the civil action could be speedily and efficiently resolved in its entirety by the
court rather than in arbitration;
d. Referral to arbitration does not appear to be the most prudent action; or
e. The stay of the action would prejudice the rights of the parties to the civil action who are not bound
by the arbitration agreement.

Where a motion is filed in court for the referral of a dispute to arbitration, Section 24 of Republic Act No.
9285 ordains that the dispute shall be referred "to arbitration unless it finds that the arbitration agreement is null and
void, inoperative or incapable of being performed."

WHEREFORE, petition for review is granted.

FRUEHAUF ELECTRONICS PHILIPPINES CORP. vs. TECHNOLOGY ELECTRONICS ASSEMBLY

AND MANAGEMENT PACIFIC CORP.,
(G.R. No. 204197 | November 23, 2016 | Brion, J.)

FACTS: In 1978, Fruehauf Electronics Philippines Corp. (Fruehauf) leased several parcels of land in Pasig City to
Signetics Filipinas Corporation (Signetics) for a period of 25 years (until May 28, 2003). Signetics constructed a
semiconductor assembly factory on the land on its own account. In 1983, Signetics ceased its operations then in
1986, Team Holdings Limited (THL) bought Signetics. THL later changed its name to Technology Electronics
Assembly and Management Pacific Corp. (TEAM).

In March 1987, Fruehauf filed an unlawful detainer case against TEAM. In an effort to amicably settle the dispute,
both parties executed a Memorandum of Agreement where TEAM undertook to pay Fruehauf 14.7 million pesos as
unpaid rent (for the period of December 1986 to June 1988).

They also entered a 15-year lease contract (expiring on June 9, 2003) that was renewable for another 25 years upon
mutual agreement. The contract included an arbitration agreement. The contract also authorized TEAM to sublease
the property. TEAM subleased the property to Capitol Publishing House (Capitol) on December 2, 1996 after
notifying Fruehauf.

On May 31, 2003, the sublease between TEAM and Capitol expired. However, Capitol only vacated the premises on
March 5, 2005. In the meantime, the master lease between TEAM and Fruehauf expired on June 9, 2003. On March
9, 2004, Fruehauf instituted a petition before the Regional Trial Court (RTC) for "Submission of an Existing
Controversy for Arbitration, the petition was granted. On December 3, 2008, the arbitral tribunal awarded Fruehauf:
(1) 8.2 million pesos as (the balance of) unpaid rent from June 9, 2003 until March 5, 2005; and (2) 46.8 million
pesos as damages. 

RTC: TEAM filed a petition to vacate the arbitral award before the RTC --- found insufficient legal grounds under
Sections 24 and 25 of the Arbitration Law to modify or vacate the award.

CA: TEAM appealed to CA --- dismissed the appeal BUT amended its decision after motion for reconsideration,
resulting to REVERSAL and SETTING ASIDE of the arbitral award

ISSUE: Whether CA is correct in reversing and setting aside the arbitral award -- NO

HELD: Rule 19.10. Rule on judicial review on arbitration in the Philippines. - As a general rule, the court can only
vacate or set aside the decision of an arbitral tribunal upon a clear showing that the award suffers from any of the
infirmities or grounds for vacating an arbitral award under Section 24 of Republic Act No. 876 or under Rule 34 of
the Model Law in a domestic arbitration, or for setting aside an award in an international arbitration under Article 34
of the Model Law, or for such other grounds provided under these Special Rules.

The grounds for vacating a domestic arbitral award under Section 24 of the Arbitration Law contemplate the
following scenarios:

(a) when the award is procured by corruption, fraud, or other undue means; or
(b) there was evident partiality or corruption in the arbitrators or any of them; or
(c) the arbitrators were guilty of misconduct that materially prejudiced the rights of any party; or
 (d) the arbitrators exceeded their powers, or so imperfectly executed them, that a mutual, final and definite
award upon the subject matter submitted to them was not made.

The award may also be vacated if an arbitrator who was disqualified to act willfully refrained from disclosing his
disqualification to the parties.  

The court shall not set aside or vacate the award of the arbitral tribunal merely on the ground that the arbitral tribunal
committed errors of fact, or of law, or of fact and law, as the court cannot substitute its judgment for that of the
arbitral tribunal.

In this case, ground for vacating an award is not present and there is no misconduct of arbitrators. The CA reversed
the award because it revisited the merits of the arbitral award and found several errors in law and in fact. Simple
errors of fact, of law, or of fact and law committed by the arbitral tribunal are not justiciable errors in this
jurisdiction. 

WHEREFORE, CA is not correct in reversing and setting aside the arbitral award.

RATIO: Arbitration is an alternative mode of dispute resolution outside of the regular court system. Although
adversarial in character, arbitration is technically not litigation. It is a voluntary process in which one or more
arbitrators - appointed according to the parties' agreement or according to the applicable rules of the Alternative
Dispute Resolution (ADR) Law - resolve a dispute by rendering an award. While arbitration carries many advantages
over court litigation, in many ways these advantages also translate into its disadvantages.

Resort to arbitration is voluntary. It requires consent from both parties in the form of an arbitration clause that pre-
existed the dispute or a subsequent submission agreement. This written arbitration agreement is an independent and
legally enforceable contract that must be complied with in good faith. By entering into an arbitration agreement, the
parties agree to submit their dispute to an arbitrator (or tribunal) of their own choosing and be bound by the latter's
resolution.

However, this contractual and consensual character means that the parties cannot implead a third-party the
proceedings even if the latter's participation is necessary for a complete settlement of the dispute. The tribunal does
not have the power to compel a person to participate in the arbitration proceedings without that person's consent. It
also has no authority to decide on issues that the parties did not submit (or agree to submit) for its resolution.

As a purely private mode of dispute resolution, arbitration proceedings, including the records, the evidence, and
the arbitral award, are confidential unlike court proceedings which are generally public. This allows the parties to
avoid negative publicity and protect their privacy. Our law highly regards the confidentiality of arbitration
proceedings that it devised a judicial remedy to prevent or prohibit the unauthorized disclosure of confidential
information obtained therefrom.

The contractual nature of arbitral proceedings affords the parties substantial autonomy over the proceedings. The
parties are free to agree on the procedure to be observed during the proceedings. This lends considerable flexibility
to arbitration proceedings as compared to court litigation governed by the Rules of Court.

The parties likewise appoint the arbitrators based on agreement. There are no other legal requirements as to the
competence or technical qualifications of an arbitrator. Their only legal qualifications are: (1) being of legal age; (2)
full-enjoyment of their civil rights; and (3) the ability to read and write. The parties can tailor-fit the tribunal's
composition to the nature of their dispute. Thus, a specialized dispute can be resolved by experts on the subject.

However, because arbitrators do not necessarily have a background in law, they cannot be expected to have the legal
mastery of a magistrate. There is a greater risk that an arbitrator might misapply the law or misappreciate the facts  en
route to an erroneous decision.
This risk of error is compounded by the absence of an effective appeal mechanism. The errors of an arbitral
tribunal are not subject to correction by the judiciary. As a private alternative to court proceedings, arbitration is
meant to be an end, not the beginning, of litigation. Thus, the arbitral award is final and binding on the parties by
reason of their contract the arbitration agreement.

What are remedies from a final domestic arbitral award?

The right to an appeal is neither a natural right nor an indispensable component of due process; it is a mere statutory
privilege that cannot be invoked in the absence of an enabling statute. Neither the Arbitration Law nor the ADR Law
allows a losing party to appeal from the arbitral award. The statutory absence of an appeal mechanism reflects the
State's policy of upholding the autonomy of arbitration proceedings and their corresponding arbitral awards.

This Court recognized this when we enacted the Special Rules of Court on Alternative Dispute Resolution in 2009:

Rule 2.1. General policies. - It is the policy of the State to actively promote the use of various modes of ADR and to
respect party autonomy or the freedom of the parties to make their own arrangements in the resolution of disputes
with the greatest cooperation of and the least intervention from the courts. Xxx

The Court shall exercise the power of judicial review as provided by these Special ADR Rules.  Courts shall
intervene only in the cases allowed by law or these Special ADR Rules.

Rule 19.7. No appeal or certiorari on the merits of an arbitral award. - An agreement to refer a dispute to
arbitration shall mean that the arbitral award shall be final and binding. Consequently, a party to an arbitration
is precluded from filing an appeal or a petition for certiorari questioning the merits of an arbitral award.

As a rule, the award of an arbitrator cannot be set aside for mere errors of judgment either as to the law or as to the
facts. Courts are without power to amend or overrule merely because of disagreement with matters of law or
facts determined by the arbitrators. They will not review the findings of law and fact contained in an award,
and will not undertake to substitute their judgment for that of the arbitrators, since any other rule would make
an award the commencement, not the end, of litigation. Errors of law and fact, or an erroneous decision of matters
submitted to the judgment of the arbitrators, are insufficient to invalidate an award fairly and honestly made.
Judicial review of an arbitration is, thus, more limited than judicial review of a trial.

Nonetheless, an arbitral award is not absolute. Rule 19.10 of the Special ADR Rules - by referring to Section 24 of
the Arbitration Law and Article 34 of the 1985 United Nations Commission on International Trade Law
(UNCITRAL) Model Law - recognizes the very limited exceptions to the autonomy of arbitral awards:

Rule 19.10. Rule on judicial review on arbitration in the Philippines. - As a general rule, the court can only vacate
or set aside the decision of an arbitral tribunal upon a clear showing that the award suffers from any of the infirmities
or grounds for vacating an arbitral award under Section 24 of Republic Act No. 876 or under Rule 34 of the
Model Law in a domestic arbitration, or for setting aside an award in an international arbitration under Article 34
of the Model Law, or for such other grounds provided under these Special Rules.

If the Regional Trial Court is asked to set aside an arbitral award in a domestic or international arbitration on any
ground other than those provided in the Special ADR Rules, the court shall entertain such ground for the setting
aside or non-recognition of the arbitral award only if the same amounts to a violation of public policy.

The court shall not set aside or vacate the award of the arbitral tribunal merely on the ground that the arbitral
tribunal committed errors of fact, or of law, or of fact and law, as the court cannot substitute its judgment for
that of the arbitral tribunal.
The grounds for vacating a domestic arbitral award under Section 24 of the Arbitration Law contemplate the
following scenarios:
a. when the award is procured by corruption, fraud, or other undue means; or
b. there was evident partiality or corruption in the arbitrators or any of them; or
c. the arbitrators were guilty of misconduct that materially prejudiced the rights of any party; or
d. the arbitrators exceeded their powers, or so imperfectly executed them, that a mutual, final and definite
award upon the subject matter submitted to them was not made.

The award may also be vacated if an arbitrator who was disqualified to act willfully refrained from disclosing his
disqualification to the parties. Notably, none of these grounds pertain to the correctness of the award but relate to
the misconduct of arbitrators.

The RTC may also set aside the arbitral award based on Article 34 of the UNCITRAL Model Law. These grounds
are reproduced in Chapter 4 of the Implementing Rules and Regulations (IRR) of the 2004 ADR Act:
i. the party making the application furnishes proof that:
a. a party to the arbitration agreement was under some incapacity; or the said agreement is not valid under the
law to which the parties have subjected it or, failing any indication thereon, under the law of the Philippines;
or
b. the party making the application was not given proper notice of the appointment of an arbitrator or of the
arbitral proceedings or was otherwise unable to present his case; or
c. the award deals with a dispute not contemplated by or not falling within the terms of the submission to
arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that,
if the decisions on matters submitted to arbitration can be separated from those not so submitted, only the
part of the award which contains decisions on matters not submitted to arbitration may be set aside; or
d. the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of
the parties, unless such agreement was in conflict with a provision of ADR Act from which the parties
cannot derogate, or, failing such agreement, was not in accordance with ADR Act; or

ii. The Court finds that:

a. the subject-matter of the dispute is not capable of settlement by arbitration under the law of the
Philippines; or
b. the award is in conflict with the public policy of the Philippines.

Chapter 4 of the IRR of the, ADR Act applies particularly to International Commercial Arbitration. However, the
abovementioned grounds taken from the UNCITRAL. Model Law are specifically made applicable to domestic
arbitration by the Special ADR Rules.

Notably, these grounds are not concerned with the correctness of the award; they go into the validity of the
arbitration agreement or the regularity of the arbitration proceedings.

These grounds for vacating an arbitral award are exclusive. Under the ADR Law, courts are obliged to disregard any
other grounds invoked to set aside an award:

SEC. 41. Vacation Award. - A party to a domestic arbitration may question the arbitral award with the appropriate
regional trial court in accordance with the rules of procedure to be promulgated by the Supreme Court only on those
grounds enumerated in Section 25 of Republic Act No. 876. Any other ground raised against a domestic arbitral
award shall be disregarded by the regional trial court.

Consequently, the winning party can generally expect the enforcement of the award. This is a stricter rule that makes
Article 2044 of the Civil Code regarding the finality of an arbitral award redundant.

As established earlier, an arbitral award is not appealable via Rule 43 because: (1) there is no statutory basis for an
appeal from the final award of arbitrators; (2) arbitrators are not quasi-judicial bodies; and (3) the Special ADR
Rules specifically prohibit the filing of an appeal to question the merits of an arbitral award.

The Special ADR Rules allow the RTC to correct or modify an arbitral award pursuant to Section 25 of the
Arbitration Law. However, this authority cannot be interpreted as jurisdiction to review the merits of the award. The
RTC can modify or correct the award only in the following cases:
a. Where there was an evident miscalculation of figures or an evident mistake in the description of any person,
thing or property referred to in the award;
b. Where the arbitrators have awarded upon a matter not submitted to them, not affecting the merits of the
decision upon the matter submitted;
c. Where the arbitrators have omitted to resolve an issue submitted to them for resolution; or
d. Where the award is imperfect in a matter of form not affecting the merits of the controversy, and if it had
been a commissioner's report, the defect could have been amended or disregarded by the Court.

A losing party is likewise precluded from resorting to certiorari under Rule 65 of the Rules of Court. Certiorari is a
prerogative writ designed to correct errors of jurisdiction committed by a judicial or quasi-judicial body. 125 Because
an arbitral tribunal is not a government organ exercising judicial or quasi-judicial powers, it is removed from the
ambit of Rule 65.

Not even the Court's expanded certiorari jurisdiction under the Constitution 126 can justify judicial intrusion into the
merits of arbitral awards. While the Constitution expanded the scope of certiorari proceedings, this power remains
limited to a review of the acts of "any branch or instrumentality of the Government." As a purely private creature of
contract, an arbitral tribunal remains outside the scope of certiorari.
Lastly, the Special ADR Rules are a self-contained body of rules. The parties cannot invoke remedies and other
provisions from the Rules of Court unless they were incorporated in the Special ADR Rules:

Rule 22.1. Applicability of Rules of Court. - The provisions of the Rules of Court that are applicable to the
proceedings enumerated in Rule 1.1 of these Special ADR Rules have either been included and incorporated in
these Special ADR Rules or specifically referred to herein.

In Connection with the above proceedings, the Rules of Evidence shall be liberally construed to achieve the
objectives of the Special ADR Rules.

Contrary to TEAM's position, the Special ADR Rules actually forecloses against other remedies outside of itself.
Thus, a losing party cannot assail an arbitral award through, a petition for review under Rule 43 or a petition
for certiorari under Rule 65 because these remedies are not specifically permitted in the Special ADR Rules.

In sum, the only remedy against a final domestic arbitral award is to file petition to vacate or to modify/correct the
award not later than thirty (30) days from the receipt of the award. 128 Unless a ground to vacate has been established,
the RTC must confirm the arbitral award as a matter of course.

The remedies against an order confirming, vacating, correcting, or modifying an arbitral award

Once the RTC orders the confirmation, vacation, or correction/modification of a domestic arbitral award, the
aggrieved party may move for reconsideration within a non-extendible period of fifteen (15) days from receipt of the
order.129 The losing party may also opt to appeal from the RTC's ruling instead.

Under the Arbitration Law, the mode of appeal was via petition for review on certiorari:

Section 29. Appeals. - An appeal may be taken from an order made in a proceeding under this Act, or from
judgment entered upon an award through certiorari proceedings, but such appeals shall be limited to questions of
law. The proceedings upon such appeal, including the judgment thereon shall be governed by the Rules of Court in
so far as they are applicable.130
The Arbitration Law did not specify which Court had jurisdiction to entertain the appeal but left the matter to be
governed by the Rules of Court. As the appeal was limited to questions of law and was described as
"certiorari proceedings," the mode of appeal can be interpreted as an Appeal By Certiorari to this Court under Rule
45.

When the ADR Law was enacted in 2004, it specified that the appeal shall be made to the CA in accordance with
the rules of procedure to be promulgated by this Court. The Special ADR Rules provided that the mode of appeal
from the RTC's order confirming, vacating, or correcting/modifying a domestic arbitral award was through a petition
for review with the CA. However, the Special ADR Rules only took effect on October 30, 2009.

In the present case, the RTC disallowed TEAM's notice of appeal from the former's decision confirming the arbitral
award on July 3, 2009. TEAM moved for reconsideration which was likewise denied on November 15, 2009. In the
interim, the Special ADR Rules became effective. Notably, the Special ADR Rules apply retroactively in light of its
procedural character. TEAM filed its petition for certiorari soon after.

Nevertheless, whether we apply, Section 29 of the Arbitration Law, Section 46 of the ADR Law, or Rule 19.12 of
the Special ADR Rules, there is no legal basis that an ordinary appeal (via notice of appeal) is the correct remedy
from an order confirming, vacating, or correcting an arbitral award. Thus, there is no merit in the CA's ruling that the
RTC gravely abused its discretion when it refused to give due course to the notice of appeal.

The correctness or incorrectness of the arbitral award

We have deliberately refrained from passing upon the merits of the arbitral award - not because the award was
erroneous but because it would be improper. None of the grounds to vacate an arbitral award are present in this case
and as already established, the merits of the award cannot be reviewed by the courts.

Our refusal to review the award is not a simple matter of putting procedural technicalities over the substantive merits
of a case; it goes into the very legal substance of the issues. There is no law granting the judiciary authority to review
the merits of an arbitral award. If we were to insist on reviewing the correctness of the award ( or consent to the CA's
doing so), it would be tantamount to expanding our jurisdiction without the benefit of legislation. This translates to
judicial legislation - a breach of the fundamental principle of separation of powers.

The CA reversed the arbitral award - an action that it has no power to do - because it disagreed with the tribunal's
factual findings and application of the law. However, the alleged incorrectness of the award is insufficient cause to
vacate the award, given the State's policy of upholding the autonomy of arbitral awards.

The CA passed upon questions such as: (1) whether or not TEAM effectively returned the property upon the
expiration of the lease; (2) whether or not TEAM was liable to pay rentals after the expiration of the lease; and (3)
whether or not TEAM was liable to pay Fruehauf damages corresponding to the cost of repairs. These were the same
questions that were specifically submitted to the arbitral tribunal for its resolution.

The CA disagreed with the tribunal's factual determinations and legal interpretation of TEAM's obligations under the
contract - particularly, that TEAM's obligation to turn over the improvements on the land at the end of the lease in
the same condition as when the lease commenced translated to an obligation to make ordinary repairs necessary for
its preservation.

Assuming arguendo that the tribunal's interpretation of the contract was incorrect, the errors would have been
simple errors of law. It was the tribunal - not the RTC or the CA - that had jurisdiction and authority over the issue
by virtue of the parties' submissions; the CA's substitution of its own judgment for the arbitral award cannot be more
compelling than the overriding public policy to uphold the autonomy of arbitral awards. Courts are precluded from
disturbing an arbitral tribunal's factual findings and interpretations of law.The CA's ruling is an unjustified judicial
intrusion in excess of its jurisdiction - a judicial overreach.

Upholding the CA's ruling would weaken our alternative dispute resolution mechanisms by allowing the courts to
"throw their weight around" whenever they disagree with the results. It erodes the obligatory force of arbitration
agreements by allowing the losing parties to "forum shop" for a more favorable ruling from the judiciary.

Whether or not the arbitral tribunal correctly passed upon the issues is irrelevant. Regardless of the amount, of the
sum involved in a case, a simple error of law remains a simple error of law. Courts are precluded from revising the
award in a particular way, revisiting the tribunal's findings of fact or conclusions of law, or otherwise encroaching
upon the independence of an arbitral tribunal. At the risk of redundancy, we emphasize Rule 19.10 of the Special
ADR Rules promulgated by this Court en banc:

Rule 19.10. Rule on judicial review on arbitration in the Philippines. - As a general rule, the court can only vacate
or set aside the decision of an arbitral tribunal upon a clear showing that the award suffers from any of the
infirmities or grounds for vacating an arbitral award under Section 24 of Republic Act No. 876 or under Rule
34 of the Model Law in a domestic arbitration, or for setting aside an award in an international arbitration under
Article 34 of the Model Law, or for such other grounds provided under these Special Rules.

If the Regional Trial Court is asked to set aside an arbitral award in a domestic or international arbitration on any
ground other than those provided in the Special ADR Rules, the court shall entertain such ground for the setting
aside or non-recognition of the arbitral award only if the same amounts to a violation of public policy.

The court shall not set aside or vacate the award of the arbitral tribunal merely on the ground that the arbitral
tribunal committed errors of fact, or of law, or of fact and law, as the court cannot substitute its judgment for
that of the arbitral tribunal.

In other words, simple errors of fact, of law, or of fact and law committed by the arbitral tribunal are not justiciable
errors in this jurisdiction.

TEAM agreed to submit their disputes to an arbitral tribunal. It understood all the risks -  including the absence of an
appeal mechanism and found that its benefits (both legal and economic) outweighed the disadvantages. Without a
showing that any of the grounds to vacate the award exists or that the same amounts to a violation of an overriding
public policy, the award is subject to confirmation as a matter of course.

WHEREFORE, we GRANT the petition.

 LUZON IRON DEVELOPMENT GROUP CORPORATION and CONSOLIDATED IRON SANDS, LTD. vs.
BRIDESTONE MINING AND DEVELOPMENT CORPORATION and ANACONDA MINING AND
DEVELOPMENT CORPORATION
(G.R. No. 220546 | December 7, 2016 | Mendoza, J.)

FACTS: Respondents Bridestone and Anaconda filed separate complaints before the RTC for rescission of contract and
damages against petitioners Luzon Iron and Consolidated Iron. Both complaints sought the rescission of the Tenement
Partnership and Acquisition Agreement entered into by Luzon Iron and Consolidated Iron, on one hand, and Bridestone and
Anaconda, on the other, for the assignment of the Exploration Permit Application of petitioners in favor of the respondents and
it also sought the return of the Exploration Permits to Bridestone and Anaconda.

Petitioners filed their Special Appearance with Motion to Dismiss separately against respondents’ complaint contending that the
RTC could not acquire jurisdiction over Consolidated Iron because it was a foreign corporation that had never transacted
business in the Philippines. Likewise, they argued that the RTC had no jurisdiction over the subject matter because of an
arbitration clause in the TPAA. Moreover, they also contend that respondents are also guilty of forum shopping for filing the
same case before the DENR.

RTC denied the motions finding that Consolidated Iron was doing business in the Philippines, with Luzon Iron as its resident
agent. The RTC ruled that it had jurisdiction over the subject matter because under clause 14.8 of the TPAA, the parties could
go directly to courts when a direct and/or blatant violation of the provisions of the TPAA had been committed and opined that
the complaint filed before the DENR did not constitute forum shopping because there was neither identity of parties nor identity
of reliefs sought. CA affirmed and sustained the jurisdiction of the RTC over the subject matter opining that the arbitration
clause in the TPAA provided for an exception where parties could directly go to court. Hence, this present petition.

ISSUE: Whether or not the controversy must be referred for arbitration

HELD: Yes, pursuant to the TPAA.

Paragraph 14.8 of the TPAA provides that each party agrees not to commence or procure the commencement of any challenge
or claim, action, judicial or legislative enquiry, review or other investigation into the sufficiency, validity, legality or
constitutionality of (i) the assignments of the Exploration Permit Applications(s) to LIDGC, (ii) any other assignments
contemplated by this TPAA, and/or (iii) or (sic) any agreement to which the Exploration Permit Application(s) may be
converted, unless a direct and/or blatant violation of the provisions of the TPAA has been committed.

Court emphasized that the State favored arbitration, in which the state adopts a policy in favor of arbitration pursuant to
Republic Act No. 9285. Thus, consistent with the state policy of favoring arbitration, the present TPAA must be construed in
such a manner that would give life to the arbitration clause rather than defeat it, if such interpretation is permissible. With this in
mind, the Court views the interpretation forwarded by the petitioners as more in line with the state policy favoring arbitration.
The Court disagrees with the respondents that Paragraph 14.8 of the TPAA should be construed as an exception to the
arbitration clause where direct court action may be resorted to in case of direct and/or blatant violation of the TPAA occurs. 

The petitioners' failure to refer the case for arbitration, however, does not render the arbitration clause in the TPAA inoperative.
In Koppel, Inc. v. Makati Rotary Club Foundation, Inc., the Court explained that an arbitration clause becomes operative,
notwithstanding the lack of a formal request, when a party has appraised the trial court of the existence of an arbitration clause,
In this case, it is conceded that petitioner was not able to file a separate "request" of arbitration before the MeTC.  However, it is
equally conceded that the petitioner, as early as in its Answer with Counterclaim, had already apprised the MeTC of the
existence of the arbitration clause in the 2005 Lease Contract and, more significantly, of its desire to have the same enforced in
this case. This act of petitioner is enough valid invocation of his right to arbitrate.

Generally, the action of the court is stayed if the matter raised before it is subject to arbitration. In the case at bench, however,
the complaints filed before the RTC should have been dismissed considering that the petitioners were able to establish the
ground for their dismissal, that is, violating the prohibition on forum shopping. The parties, nevertheless, are directed to initiate
arbitration proceedings as provided in the TPAA.

WHEREFORE, the petition is GRANTED. 

ORMOC SUGARCANE PLANTERS'ASSOCIATION, INC. ET AL vs. THE COURT OF APPEALS
(GR No. 156660 | August 24, 2009 | Leanordo De Castro, J)

FACTS: Petitioners are associations organized by and whose members are individual sugar planters (Planters). The
membership of each association follows:
o 64 Planters were members of OSPA;
o 533 Planters belong to OLFAMCA;
o 617 Planters joined UNIFARM;
o 760 Planters enlisted with ONDIMCO; and
o the rest belong to BAP-MPC which did not join the lawsuit.
 Respondents Hideco Sugar Milling Co., Inc. (Hideco) and Ormoc Sugar Milling Co, Inc. (OSCO) are sugar
centrals engaged in grinding and milling sugarcane delivered to them by numerous individual sugar planters,
who may or may not be members of an association such as petitioners.
 Petitioners assert that the relationship between respondents and the individual sugar planters is governed by
milling contracts. To buttress this claim, petitioners presented representative samples of the milling contracts.
 Under Article VII of the milling contracts provides that 34% of the sugar and molasses produced from
milling the Planter’s sugarcane shall belong to the centrals (respondents) as compensation, 65% thereof shall
go to the Planter and the remaining 1% shall go the association to which the Planter concerned belongs, as
aid to the said association.
 The 1% aid shall be used by the association for any purpose that it may deem fit for its members, laborers
and their dependents. If the Planter was not a member of any association, then the said 1% shall revert to the
centrals.
 Article XIV, paragraph B4 states that the centrals may not, during the life of the milling contract, sign or
execute any contract or agreement that will provide better or more benefits to a Planter, without the written
consent of the existing and recognized associations except to Planters whose plantations are situated in areas
beyond thirty (30) kilometers from the mill.
 Article XX provides that all differences and controversies which may arise between the parties concerning
the agreement shall be submitted for discussion to a Board of Arbitration, consisting of five (5) members—
two (2) of which shall be appointed by the centrals, two (2) by the Planter and the fifth to be appointed by the
four appointed by the parties.
 Petitioners, without impleading any of their individual members, filed twin petitions with the RTC for
Arbitration under R.A. 876.

Contention of Petitioners:
 Petitioners claimed that respondents violated the Milling Contract when they gave to independent
planters who do not belong to any association the 1% share, instead of reverting said share to the
centrals.
 Petitioners contended that respondents unduly accorded the independent Planters more benefits and thus
prayed that an order be issued directing the parties to commence with arbitration in accordance with the
terms of the milling contracts.
 They also demanded that respondents be penalized by increasing their member Planters’ 65% share
provided in the milling contract by 1%, to 66%.
  Respondents filed a motion to dismiss on ground of lack of cause of action because petitioners had no
milling contract with respondents. 

Contention of Respondents:
 According to respondents, only some eighty (80) Planters who were members of OSPA, one of the
petitioners, executed milling contracts.
 Respondents and these 80 Planters were the signatories of the milling contracts. Thus, it was the
individual Planters, and not petitioners, who had legal standing to invoke the arbitration clause in the
milling contracts.
 Petitioners, not being privy to the milling contracts, had no legal standing whatsoever to demand or
sue for arbitration.

 The RTC issued a Joint Order denying the motion to dismiss, declaring the existence of a milling contract
between the parties, and directing respondents to nominate two arbitrators to the Board of Arbitrators.

 The court directs the respondents to nominate two arbitrators to represent HIDECO/HISUMCO and
OSCO in the Board of Arbitrators within fifteen (15) days from receipt of this Order.
 If the respondents fail to nominate their two arbitrators, then the Court will be compelled to use its
discretion to appoint the two (2) arbitrators, as embodied in the Milling Contract and R.A. 876.
 The subsequent motion for reconsideration having been denied by the RTC, respondents elevated the case to the
CA.
 The CA rendered its challenged Decision, setting aside the assailed Orders of the RTC. The CA held that
petitioners neither had an existing contract with respondents nor were they privy to the milling contracts between
respondents and the individual Planters. In the main, the CA concluded that petitioners had no legal personality
to bring the action against respondents or to demand for arbitration.
 Petitioners filed a motion for reconsideration, but it too was denied by the CA in its Resolution.
 Hence, this petition.

ISSUE: Whether or not petitioners ― sugar planters’ associations ― are clothed with legal personality to file a suit
against, or demand arbitration from, respondents in their own name without impleading the individual Planters.

HELD: The court agrees with the findings of the CA.

Section 2 of R.A. No. 876 (the Arbitration Law) pertinently provides: Sec. 2. Persons and matters subject to
arbitration. – Two or more persons or parties may submit to the arbitration of one or more arbitrators any
controversy existing between them at the time of the submission and which may be the subject of an action,  or the
parties to any contract may in such contract agree to settle by arbitration a controversy thereafter arising between
them. Such submission or contract shall be valid, enforceable and irrevocable, save upon such grounds as exist at
law for the revocation of any contract. xxx (Emphasis ours)

The foregoing provision speaks of two modes of arbitration: (a) an agreement to submit to arbitration some future
dispute, usually stipulated upon in a civil contract between the parties, and known as an agreement to submit to
arbitration, and (b) an agreement submitting an existing matter of difference to arbitrators, termed the submission
agreement. Article XX of the milling contract is an agreement to submit to arbitration because it was made in
anticipation of a dispute that might arise between the parties after the contract’s execution.

Except where a compulsory arbitration is provided by statute, the first step toward the settlement of a difference by
arbitration is the entry by the parties into a valid agreement to arbitrate. An agreement to arbitrate is a contract, the
relation of the parties is contractual, and the rights and liabilities of the parties are controlled by the law of
contracts. In an agreement for arbitration, the ordinary elements of a valid contract must appear, including an
agreement to arbitrate some specific thing, and an agreement to abide by the award, either in express language or by
implication.
The requirements that an arbitration agreement must be written and subscribed by the parties thereto were enunciated
by the Court in B.F. Corporation v. CA.

During the proceedings before the CA, it was established that there were more than two thousand (2,000) Planters in
the district at the time the case was commenced at the RTC in 1999. The CA further found that of those 2,000
Planters, only about eighty (80) Planters, who were all members of petitioner OSPA, in fact individually executed
milling contracts with respondents. No milling contracts signed by members of the other petitioners were presented
before the CA.

By their own allegation, petitioners are associations duly existing and organized under Philippine law, i.e. they have
juridical personalities separate and distinct from that of their member Planters. It is likewise undisputed that the
eighty (80) milling contracts that were presented were signed only by the member Planter concerned and one of the
Centrals as parties. In other words, none of the petitioners were parties or signatories to the milling contracts. This
circumstance is fatal to petitioners' cause since they anchor their right to demand arbitration from the respondent
sugar centrals upon the arbitration clause found in the milling contracts. There is no legal basis for petitioners'
purported right to demand arbitration when they are not parties to the milling contracts, especially when the language
of the arbitration clause expressly grants the right to demand arbitration only to the parties to the contract.

Simply put, petitioners do not have any agreement to arbitrate with respondents. Only eighty (80) Planters who were
all members of OSPA were shown to have such an agreement to arbitrate, included as a stipulation in their individual
milling contracts. The other petitioners failed to prove that any of their members had milling contracts with
respondents, much less, that respondents had an agreement to arbitrate with the petitioner associations themselves.

Even assuming that all the petitioners were able to present milling contracts in favor of their members, it is
undeniable that under the arbitration clause in these contracts it is the parties thereto who have the right to submit a
controversy or dispute to arbitration.

Section 4 of R.A. 876 provides: Section 4. Form of Arbitration Agreement – A contract to arbitrate a controversy
thereafter arising between the parties, as well as a submission to arbitrate an existing controversy, shall be in writing
and subscribed by the party sought to be charged, or by his lawful agent.

The making of a contract or submission for arbitration described in section two hereof, providing for arbitration of
any controversy, shall be deemed a consent of the parties to the jurisdiction of the Court of First Instance of the
province or city where any of the parties resides, to enforce such contract of submission.

The formal requirements of an agreement to arbitrate are therefore the following: (a) it must be in writing and (b) it
must be subscribed by the parties or their representatives. To subscribe means to write underneath, as one’s name; to
sign at the end of a document. That word may sometimes be construed to mean to give consent to or to attest.

Petitioners would argue that they could sue respondents, notwithstanding the fact that they were not signatories in
the milling contracts because they are the recognized representatives of the Planters.

This claim has no leg to stand on since petitioners did not sign the milling contracts at all, whether as a party or as a
representative of their member Planters. The individual Planter and the appropriate central were the only signatories
to the contracts and there is no provision in the milling contracts that the individual Planter is authorizing the
association to represent him/her in a legal action in case of a dispute over the milling contracts.

Moreover, even assuming that petitioners are indeed representatives of the member Planters who have milling
contracts with the respondents and assuming further that petitioners signed the milling contracts as  representatives of
their members, petitioners could not initiate arbitration proceedings in their own name as they had done in the
present case. As mere agents, they should have brought the suit in the name of the principals that they purportedly
represent. Even if Section 4 of R.A. No. 876 allows the agreement to arbitrate to be signed by a representative, the
principal is still the one who has the right to demand arbitration.
 WHEREFORE, petition is dismissed.

TOURISM INFRASTRUCTURE AND ENTERPRISE ZONE AUTHORITY vs. GLOBAL-V

BUILDERS CO.
(G.R. No. 219708 | October 3, 2018 | Peralta, J.)

FACTS: Philippine Tourism Authority (PTA; later called TIEZA) entered into 5 MOA with Global-V:
1. Construction of stamped sidewalk, installation of streetlights (Boracay)
2. Boracay Environmental Infrastructure Project (BEIP)-Extension of drainage component
system (Boracay)
3. Additional sidewalk, streetlighting, drainage system (Boracay)
4. Widening of Boracay Road
5. Perimeter fence (Banaue)

MOA #2, and MOA #5 were procured thru bidding; the rest were obtained thru negotiated procurement
pursuant to Sec 53 (b) and (d) of RA 9184 (Government Procurement Reform Act).

Global filed a Request for Arbitration and a Complaint before CIAC, seeking payment from Tourism
Infrastructure and Enterprise Zone Authority (TIEZA) (the office that took over PTA functions), of unpaid bills
in the 5 projects, with interest and damages. The claims amounted to P16,663,736.

TIEZA filed a Refusal of Arbitration (for lack of jurisdiction), arguing that CIAC has no jurisdiction over
Global’s case because the complaint does not allege an agreement to arbitrate, and the contracts do not contain
an arbitration agreement pursuant to Sec 2.3, 2.3.1 of CIAC Revised Rules of Procedure Governing
Construction Arbitration (CIAC Rules).

Global opposed TIEZA’s refusal to arbitrate, arguing: RA 9184 gives CIAC jurisdiction over disputes involving
government infrastructure projects like in this case: Sec 59. Any disputes arising from the implementation of a
contract covered by this Act shall be submitted to arbitration in the Philippines according to the provisions of
RA 876 (Arbitration Law), provided that disputes that are within the competence of CIAC shall be referred
thereto.

Global argued that pertinent provisions of RA 9184 governing the subject infrastructure projects are deemed
part of contracts entered into by the parties. It is also TIEZA’s contention that Global failed to exhaust
administrative remedies by filing first its money claims with COA.

CIAC constituted an Arbitral Tribunal to handle the case. The Tribunal dismissed TIEZA’s motion to dismiss,
ruling that the absence of arbitration clause in the MOA is not fatal to Global’s case; that above-cited RA 9184
provisions are deemed incorporated in the MOA. TIEZA moved to reconsider, but was denied by the Tribunal.
The Tribunal resolved the issues, once again affirming its previous ruling in Global’s favor. Eventually, the
Tribunal promulgated its final award in Global’s favor, awarding P10,178,440. TIEZA filed with CA a petition
for review.

CA decided in TIEZA’s favor, but upon Global’s motion for reconsideration, CA reversed its previous decision
and upheld the Tribunal’s final award in Global’s favor. TIEZA moved to reconsider, but was denied. Hence,
this petition.

ISSUE: Whether or not CIAC has jurisdiction over the dispute

HELD: Yes. Here, TIEZA contends: although CA found an agreement to arbitrate in clause 20 in the contract,
TIEZA contends that a suspensive condition for its effectivity is provided: that the process of arbitration be
incorporated in the MOA’s. Without its incorporation in the MOA, it is invalid. That since the suspensive
condition was not complied with, there is no effective arbitration clause. That because of this, CIAC has no
jurisdiction over the case. TIEZA’s contention must fail.

Undoubtedly, Clause 20.2 of the General Conditions of Contract is an arbitration clause that clearly provides
that all disputes arising from the implementation of the contract covered by R.A. No. 9184 shall be submitted to
arbitration in the Philippines. In accordance with Section 4.1 of the CIAC Rules, the existence of the arbitration
clause in the General Conditions of Contract that formed part of the said MOAs shall be deemed an agreement
of the parties to submit existing or future controversies to CIAC's jurisdiction. Since CIAC's jurisdiction is
conferred by law, it cannot be subjected to any condition; nor can it be waived or diminished by the stipulation,
act or omission of the parties, as long as the parties agreed to submit their construction contract dispute to
arbitration, or if there is an arbitration clause in the construction contract. 44 Hence, the fact that the process of
arbitration was not incorporated in the contract by the parties is of no moment. Moreover, the contracts in this
case are expressly covered by R.A. No. 9184 (The Government Procurement Reform Act), which provides
under Section 5945 thereof that all disputes arising from the implementation of a contract covered by it shall be
submitted to arbitration in the Philippines, and disputes that are within the competence of CIAC to resolve shall
be referred thereto.

As CIAC's jurisdiction over the disputes arising from the said MOAs is conferred by E.O. No. 1008 and R.A.
No. 9184, the process of arbitration questioned to not have been incorporated in the contracts could then only
refer to the process of arbitration by CIAC, as provided in the CIAC Rules. Therefore, there is no vagueness in
the process of arbitration to follow even if it was not incorporated as a provision in the contracts.

For CIAC to acquire jurisdiction, the parties must be bound by an arbitration agreement in their contract or
subsequently agree to submit the same to voluntary arbitration, and that an arbitration clause in a construction
contract or a submission to arbitration of a construction shall be deemed an agreement to submit an
existing/future controversy to CIAC’s jurisdiction. (EO 1008)

In this case, there was an agreement to arbitrate in the contract, i.e., clause 20.2, forming part of the MOAs
above. Even if the process of arbitration was not incorporated in the contract, it is still valid. Thus, CIAC has
jurisdiction over the case.

WHEREFORE, the Amended Decision of the Court of Appeals upholding the Final Award of the
Arbitral Tribunal is affirmed.
 CARGILL PHILIPPINES, INC., vs. SAN FERNANDO REGALA TRADING, INC.,
(G.R. No. 175404 | January 31, 2011| Peralta, J.)

FACTS: San Fernando Regala alleged that it entered into a contract with Cargill to purchase 12,000 metric tons of
Thailand origin cane blackstrap molasses to be delivered in April/May 1997. However, Cargill failed to comply with
its obligation to deliver despite demands. Thus, San Fernando Regala prayed for rescission of the contract and
payment of damages before the RTC of Makati City in June 1998. 

In July 1998, Cargill filed a Motion to Dismiss/Suspend Proceedings and To Refer Controversy to Voluntary
Arbitration claiming that their contract contained an arbitration clause which provides that any dispute shall be
settled by arbitration in the City of New York before the American Arbitration Association. Hence, Cargill must first
comply with the arbitration clause before resorting to court. San Fernando Regala argued that the RTC has
jurisdiction over the action for rescission of contract and could not be changed by the subject arbitration clause.

In September 1998, RTC denied the Motion To Dismiss/Suspend Proceedings and To Refer Controversy To
Voluntary Arbitration and San Fernando Regala’s subsequent Motion for Reconsideration.

This prompt San Fernando Regala to file a petition for certiorari with the CA raising that the RTC erred in refusing
to dismiss or at least suspend the proceedings, despite the fact that the party’s agreement to arbitrate had not been
complied with.

CA denied the petition and affirmed the RTC Orders. The CA ruled that arbitration cannot be ordered in this case,
since Cargill alleged that the contract between the parties did not exist or was invalid and arbitration is not proper
when one of the parties repudiates the existence or validity of the contract. Petitioner’s motion for reconsideration
was denied in a Resolution dated November 13, 2006. Hence, this petition for review on certiorari.

ISSUES:
1. Whether or not the case cannot be brought under the arbitration law for the purpose of suspending the
proceedings in the RTC

HELD: No. Arbitration, as an alternative mode of settling disputes, has long been recognized and accepted in our
jurisdiction. R.A. No. 876 authorizes arbitration of domestic disputes. Foreign arbitration, as a system of settling
commercial disputes of an international character, is likewise recognized. The enactment of R.A. No. 9285 on April
2, 2004 further institutionalized the use of alternative dispute resolution systems, including arbitration, in the
settlement of disputes.
Applying the Gonzales ruling, an arbitration agreement which forms part of the main contract shall not be regarded
as invalid or non-existent just because the main contract is invalid or did not come into existence, since the
arbitration agreement shall be treated as a separate agreement independent of the main contract. To reiterate a
contrary ruling would suggest that a party’s mere repudiation of the main contract is sufficient to avoid arbitration
and that is exactly the situation that the separability doctrine sought to avoid. Thus, we find that even the party who
has repudiated the main contract is not prevented from enforcing its arbitration clause.

A contract is required for arbitration to take place and to be binding. Submission to arbitration is a contract and a
clause in a contract providing that all matters in dispute between the parties shall be referred to arbitration is a
contract. The provision to submit to arbitration any dispute arising therefrom and the relationship of the parties is
part of the contract and is itself a contract.

“The doctrine of separability enunciates that an arbitration agreement is independent of the main contract. The
arbitration agreement is to be treated as a separate agreement and the arbitration agreement does not automatically
terminate when the contract of which it is a part comes to an end.

WHEREFORE, petition is granted.

HYGIENIC PACKAGING CORPORATION vs. NUTRI-ASIA, INC
(G.R. No. 201302 | January 23, 2019 | Leonen, J.)

FACTS: Petitioner Hygienic Packaging Corporation (Hygienic) is a domestic corporation that manufactures and sells
packaging materials such as plastic bottles. On the other hand, respondent Nutri-Asia, also a domestic corporation,
manufactures, and distributes food products such as banana-based and tomato-based condiments, vinegar, soy sauce, and other
sauces.

From 1998 to 2009, Hygienic supplied Nutri-Asia with plastic bottles for its banana catsup products. Every transaction was
covered by a Purchase Order issued by respondent and a Sale Invoice issued by petitioner. The Purchase Order contains terms
and conditions, among others, that “Arbitration of all disputes arising in connection with this Contract shall be referred to an
Arbitration Committee, in accordance with the Philippine Arbitration Law xxx” While the Sales Invoice contains a stipulation
that the parties submit themselves to the jurisdiction of the Courts of the City of Manila in any legal action arising out of their
transactions.

In 2009, petitioner filed a Complaint before the RTC of Manila for sum of money against respondent when the latter refused to
pay for the plastic containers amounting to P9,737,674.62 despite oral and written demands. In its Answer, respondent argued
that the dispute should have been first referred to the Arbitration Committee, pursuant to the arbitration clause under the Terms
and Conditions of the Purchase Orders.

The lower court ruled in favor of the petitioner. It held that the venue was properly laid as the signatures of Nutri-Asia’s
representatives in the Sales Invoices as the company’s concurrence that any dispute would be raised before the courts of Manila.
Nutri-Asia filed a Motion for Reconsideration. However, it was denied. On appeal, the appellate court granted the petition.
Hygienic filed a Motion for Reconsideration, but it was denied by the Court of Appeals.

Hence, the instant case wherein the petitioner maintains that the arbitration clause lacks the elements of a valid arbitration
agreement because it was not properly subscribed, and the person who signed the Purchase Orders was only a messenger, not its
authorized agent. On the other hand, Nutri-Asia contends that both parties subscribed to the Terms and Conditions of the
Purchase Orders. By reflecting in its Sales Invoices the serial numbers of Nutri-Asia’s Purchase Orders, Hygienic “effectively
incorporated the Purchase Order and its contents into the Sales Invoice, including the arbitration clause.” Thus, for failing to
refer the case to arbitration, a condition precedent before taking judicial action, the case should be dismissed.

ISSUE: Whether or not the arbitration clause in the Purchase Order binding between Hygienic and Nutri-Asia.

HELD: No. Article 1306 of the Civil Code provides that, “The contracting parties may establish such stipulations, clauses,
terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order,
or public policy.” Furthermore, there must be a meeting of the minds between the parties for a contract to be valid, as required
by the same Code.
Upon examination of the Sales Invoices and the Purchase Orders, this Court cannot consider the documents as contracts that
would bind the parties as to the venue of dispute resolution.

A closer look at the Sales Invoices issued by petitioner reveals that above the signature of respondent's representative is the
phrase, "Received the above goods in good order and condition." Clearly, the purpose of respondent's representative in signing
the Sales Invoices is merely to acknowledge that he or she has received the plastic containers in good condition. He or she did
not affix his or her signature in any other capacity except as the recipient of the goods. To extend the effect of the signature by
including the venue stipulation would be to stretch the intention of the signatory beyond his or her objective. This Court, then,
cannot bind respondent to the other stipulations in the Sales Invoices.

In this case, while it is true that the parties may constitute any stipulation on the venue or mode of dispute resolution as part of
their freedom to contract, the parties failed to provide evidence of any contract, which could have contained stipulations on the
venue of dispute resolution. There is no evidence that shows that petitioner and respondent had a meeting of minds and agreed
to submit any future issue either to the trial court or to arbitration. The Sales Invoices and the Purchase Orders cannot be
considered as contracts that would bind the parties as to the venue of dispute resolution. Since there is no contractual stipulation
that can be enforced on the venue of dispute resolution, the venue of petitioner’s personal action will be governed by the 1997
Revised Rules of Civil Procedure.

WHEREFORE, the arbitration clause in the Purchase Order is not binding between the petitioner Hygienic and
respondent Nutri-Asia.

FEDERAL BUILDERS, INC. vs. POWER FACTORS, INC.

(G.R. No. 211504 | March 8, 2017 | Bersamin, J.)

FACTS: Federal Builders, Inc. (Federal) was the general contractor of the Buillion Mall (Mall) under a
construction agreement with Bullion Investment and Development Corporaton (BIDC).  Federal engaged Power
Factors, Inc. (Power) as its subcontractor for the electric works at the Mall and the Precinct Building (Precinct). 
Upon completion of the electrical works, Power demanded payment from Federal for the unpaid amount for the
electrical works performed at Precinct which Federal answered that its outstanding balance under the original
contract should be addressed directly to BDIC.  Said demand only fall unto the deaf ear of Federal.  Anent to
this, Power seek intervention from Construction Industry Arbitration Commission (CIAC). Federal contended
that in the absence of the agreement for arbitration, the CIAC had no jurisdiction to hear and decide the case.
CIAC rendered the Final Award ordering Federal to pay Power the unpaid balance on the original contract plus
damages. CA affirmed. Hence, this petition.

ISSUES:
1. Whether or not the CIAC has jurisdiction over the case;
2. Whether or not Federal was liable to pay Power the amount of the unpaid balance on the original
contract plus damages.

HELD: 1. Yes the parties Federal and Power had an effective agreement to submit to voluntary arbitration;
hence, the CIAC had jurisdiction.

The need to establish a proper arbitral machinery to settle disputes expeditiously was recognized by the
Government in order to promote and maintain the development of the country's construction industry. With
such recognition came the creation of the CIAC through Executive Order No. 1008 (E.O. No. 1008), also
known as The Construction Industry Arbitration Law. Section 4 of E.O. No. 1008 provides:

Sec. 4. Jurisdiction. - The CIAC shall have original and exclusive jurisdiction over disputes arising from, or
connected with, contracts entered into by parties involved in construction in the Philippines, whether the
dispute arises before or after the completion of the contract, or after the abandonment or breach thereof. These
disputes may involve government or private contracts. For the Board to acquire jurisdiction, the parties to a
dispute must agree to submit the same to voluntary arbitration.
All that is required for the CIAC to acquire jurisdiction is for the parties of any construction contract to agree to
submit their dispute to arbitration.  It may be reflected in the arbitration clause of their contract, or by
subsequently agreeing to submit their dispute to voluntary arbitration, which need not be signed or be formally
agreed upon in the contract, because it can also be in the form of other modes of communication in writing. 
Consistent with the policy of encouraging alternative dispute resolution methods, any doubt should be resolved
in favor of the arbitration.  The Contract of Service between Federal and Power, reads: “15. Arbitration
Committee – all disputes, controversies, or differences, which may arise between the parties herein, out of or in
relation to or in connection with this Agreement, or for breach thereof shall be settled by the CIAC which shall
have original and exclusive jurisdiction over the aforementioned disputes.”

2. Yes, the amounts as modified by the CA are correct.

Power did not sufficiently establish that the change or increase of the cost of materials and labor was to be
separately determined and approved by both parties as provided under Article 1724 of the Civil Code. As such,
Federal should not be held liable for the labor cost escalation. The Court AFFIRMS the decision promulgated
on August 12, 2013; and ORDERS the petitioner to pay the costs of suit.

WHEREFORE, the Court affirms the decision of the CA and orders the petitioner to pay the costs of

suit.

JACQUES A. DUPASQUIER vs. ASCENDAS (PHILIPPINES) CORPORATION

(G.R. No. 211044 | July 24, 2019 | Jardeleza, J. )

FACTS: The Net Group and Ascendas entered into a Memorandum of Understanding (MOU). The MOU provided
an Arbitration clause, as part of Clause 14 entitled "Miscellaneous Provision," On September 14, 2007, Ascendas
wrote another letter to The Net Group specifying that the parties have until September 28, 2007 to resolve the
disputes between them, otherwise, Ascendas will refer the dispute to arbitration.

The Net Group filed a petition for declaratory relief with an application for preliminary injunction/temporary
restraining order (TRO) before the RTC in Makati City In its petition, The Net Group alleged that Ascendas' demand
to arbitrate is baseless. According to its interpretation of the MOU, the Arbitration Clause would not survive the
lapse of the MOU on March 31, 2007 because the parties agreed that only the confidentiality clause will survive the
termination or lapse of the MOU. Hence, The Net Group pleaded for a judicial declaration that the arbitration
agreement contained in the MOU be declared ineffective and that Ascendas can no longer compel The Net Group to
submit to arbitration pursuant to the relevant clause. In addition, The Net Group sought for a judicial declaration that
it is already entitled to the Due Diligence L/C on the basis of the MOU. 

Ascendas argued that the MOU had not lapsed and assuming it had lapsed, the Arbitration Clause therein survived
and thus, the condition precedent, which is the referral to arbitration, for filing the claim was not complied with.

RTC declared that respondent cannot compel petitioners to proceed to arbitration on the basis of said arbitration
clause. Ascendas then filed a notice of appeal. CA unanimously set aside the RTC's Order. It ruled that considering
the separability doctrine wherein the Arbitration Clause remains operative despite the termination of the contract, the
RTC cannot exercise jurisdiction over the dispute because the parties should have referred the matter to arbitration.

ISSUE: Whether or not the expiration of the MOU also terminated the effectivity of the subject arbitration clause

HELD: The doctrine of separability or severability enunciates that an arbitration agreement is independent of the
main contract. It denotes that the invalidity of the main contract does not affect the validity of the arbitration
agreement. We have to balance the application of this doctrine with the manifest intention of the contracting parties.
To our mind, this doctrine is relevant in the absence of the parties' specific stipulation as to the Arbitration Clause's
term of effectivity
In no uncertain way that this time-limit refers to the non-signing of extension or substitute contract before the
expiration of a date certain. It is thus wise to rule that the parties intended that the happening of the date certain
would give no effect to all parts of the MOU, including the Arbitration Clause. This ruling, however, should not be
understood as abandoning the doctrine of separability, but merely giving way to the manifest intention of the
contracting parties.

Moreover, the parties agreed to exempt the Confidentiality Clause in the effects of the Closing Date is an indication
of their intent. The parties expressly specified the provision of the contract that is not time-limited. Since the
Arbitration Clause is not one mentioned as an item to survive upon the termination or lapse of the MOU, the only
conclusion is that said provision has been deliberately included to be time-limited. There is more reason for us to
conclude that the parties manifested that the Arbitration Clause should cease to effect simply because they
incorporated a phrase which would not be affected by the lapse of the period. If the parties intended the Arbitration
Clause to survive, there is no reason why they would not have so stated it expressly.

To reiterate, where a contract is clear and unambiguous as to the intent of the parties, it is the court's obligation to
enforce its wordings accordingly. Thus, the Arbitration Clause of the MOU ceased to have an effect by March 31,
2007 and should not be considered a condition precedent prior to the filing of an appropriate case before our courts.

WHEREFORE, the petition is granted.

GERARDO LANUZA, JR. AND ANTONIO O. OLBES vs. BF CORPORATION, SHANGRI-LA

PROPERTIES, INC., ALFREDO C. RAMOS, RUFO B. COLAYCO, MAXIMO G. LICAUCO III, AND
BENJAMIN C. RAMOS
(G.R. No. 174938 | October 1, 2014 | Leonen, J.)

FACTS: BF Corporation filed a collection complaint with the RTC against Shangri-La and the members of its
board of directors alleging that it entered into agreements with Shangri-La wherein it undertook to construct for
Shangri-La a mall and a multilevel parking structure along EDSA. That despite repeated demands to pay BF
Corporation, Shangri-La refused to pay it upon allegedly taking possession of the buildings.

Shangri-La et. al filed a motion to suspend the proceedings in view of BF Corporation's failure to submit its
dispute to arbitration, in accordance with the arbitration clause provided in its contract. BF Corporation opposed
the motion to suspend proceedings.

RTC denied the motion to suspend proceedings. CA granted the petition for certiorari and ordered the
submission of the dispute to arbitration. Aggrieved by the CA’s decision, BF Corporation filed a petition for
review on certiorari with this court, which also affirmed CA’s decision.

Shangri-La filed an omnibus motion and BF Corporation an urgent motion for clarification, both seeking to
clarify the term, "parties," and whether Shangri-La's directors should be included in the arbitration proceedings
and served with separate demands for arbitration.

Petitioners filed their comment on Shangri-La's and BF Corporation's motions, praying that they be excluded
from the arbitration proceedings for being non-parties to Shangri-La's and BF Corporation's agreement.

Petitioners filed a petition for certiorari with the Court of Appeals, alleging grave abuse of discretion in the
issuance of orders compelling them to submit to arbitration proceedings despite being third parties to the
contract between Shangri-La and BF Corporation.

Court of Appeals dismissed petitioners' petition for certiorari. The Court of Appeals ruled that Shangri-La's
directors were necessary parties in the arbitration proceedings. That "excluding petitioners in the arbitration
proceedings . . . would be contrary to the policy against multiplicity of suits." CA denied petitioners' motion for
reconsideration.
ISSUE: Whether or not petitioners should be made parties to the arbitration proceedings, pursuant to the
arbitration clause provided in the contract between BF Corporation and Shangri-La.

HELD: Yes, petitioners may be compelled to submit to the arbitration proceedings in accordance with Shangri-
Land BF Corporation’s agreement, in order to determine if the distinction between Shangri-La’s personality and
their personalities should be disregarded.

This jurisdiction adopts a policy in favor of arbitration. Arbitration allows the parties to avoid litigation and
settle disputes amicably and more expeditiously by themselves and through their choice of arbitrators. The
policy in favor of arbitration has been affirmed in the Civil Code, which was approved as early as 1949. It was
later institutionalized by the approval of Republic Act No. 876, which expressly authorized, made valid,
enforceable, and irrevocable parties’ decision to submit their controversies, including incidental issues, to
arbitration.

In view of the policy to adopt arbitration as a manner of settling disputes, arbitration clauses are liberally
construed to favor arbitration. Being an inexpensive, speedy and amicable method of settling disputes,
arbitration — along with mediation, conciliation and negotiation — is encouraged by the Supreme Court. Aside
from unclogging judicial dockets, arbitration also hastens the resolution of disputes, especially of the
commercial kind. It is thus regarded as the "wave of the future" in international civil and commercial disputes.
Brushing aside a contractual agreement calling for arbitration between the parties would be a step backward.

Consistent with the above-mentioned policy of encouraging alternative dispute resolution methods, courts
should liberally construe arbitration clauses. Provided such clause is susceptible of an interpretation that covers
the asserted dispute, an order to arbitrate should be granted. Any doubt should be resolved in favor of
arbitration.

It is because the personalities of petitioners and the corporation may later be found to be indistinct that the court
rules that petitioners may be compelled to submit to arbitration.

However, in ruling that petitioners may be compelled to submit to the arbitration proceedings, the court is not
overturning Heirs of Augusto Salas wherein such affirmed the basic arbitration principle that only parties to an
arbitration agreement may be compelled to submit to arbitration. In that case, this court recognized that persons
other than the main party may be compelled to submit to arbitration, e.g., assignees and heirs. Assignees and
heirs may be considered parties to an arbitration agreement entered into by their assignor because the assignor’s
rights and obligations are transferred to them upon assignment. In other words, the assignor’s rights and
obligations become their own rights and obligations. In the same way, the corporation’s obligations are treated
as the representative’s obligations when the corporate veil is pierced. Moreover, in Heirs of Augusto Salas, this
court affirmed its policy against multiplicity of suits and unnecessary delay. This court said that "to split the
proceeding into arbitration for some parties and trial for other parties would "result in multiplicity of suits,
duplicitous procedure and unnecessary delay." This court also intimated that the interest of justice would be best
observed if it adjudicated rights in a single proceeding. While the facts of that case prompted this court to direct
the trial court to proceed to determine the issues of that case, it did not prohibit courts from allowing the case to
proceed to arbitration, when circumstances warrant.

Lastly, in cases alleging solidary liability with the corporation or praying for the piercing of the corporate veil,
parties who are normally treated as distinct individuals should be made to participate in the arbitration
proceedings in order to determine if such distinction should indeed be disregarded and, if so, to determine the
extent of their liabilities.

WHEREFORE, the petition is denied.

 DFA vs. BCA CORPORATION INTERNATIONAL and AD HOC ARBITRAL TRIBUNAL
(G.R. No. 225051 | July 19, 2017 | Peralta, J.)

FACTS: In an Amended Build-Operate-Transfer (BOT) Agreement dated April 5, 2002 (Agreement),

petitioner DFA awarded the Machine Readable Passport and Visa Project (MRP/V Project) to respondent BCA
International Corporation. In the course of implementing the MRPV Project, conflict arose and petitioner sought
to terminate the Agreement.

Respondent opposed the termination and filed a Request for Arbitration on April 20, 2006. The Arbitral
Tribunal was constituted on June 29, 2009. Subsequently, the respondent filed a Motion to Admit the Attached
Amended Statement of Claims modifying the claim for damages.

The petitioner opposed such amendment made at the very late stage of the proceedings on the grounds that it
would cause undue prejudice to its interests.

The Arbitral Tribunal granted respondent's Motion to Admit Attached Amended Statement of Claims in
Procedural Order No.11. Thereafter, it issued Procedural Order No. 12 dated June 8, 2016, which resolved
respondent's Motion for Partial Reconsideration of Procedural Order No. 11 and denied such.

Petitioner filed a petition for certiorari under Rule 65 of the Rules of Court with application for issuance of a
temporary restraining order and/or writ of preliminary injunction, seeking to annul and set aside Procedural
Order No. 11 dated February 15, 2016 and Procedural Order No. 12 dated June 8, 2016.

ISSUE: Whether or not a petition for review by certiorari is availing in a pending arbitration process.

HELD: No, a petition for review by certiorari to the Court is unavailing in a pending arbitration process.

Although, in an earlier decided petition (DFA v. BCA - G.R. No. 210858), the Court held that RA 9285, its
IRR, and the Special ADR Rules are applicable to the arbitration proceedings. It is clear therein that an appeal
by certiorari to the Supreme Court is from a judgment or final order or resolution of the Court of Appeals and
only questions of law may be raised. There have been instances when the rule on hierarchy of courts was
overlooked and took cognizance of a petition for certiorari alleging grave abuse of discretion by the Regional
Trial Court when it granted interim relief to a party and issued an Order assailed by the petitioner, considering
the transcendental importance of the issue involved therein or to better serve the ends of justice when the case is
determined on the merits rather on technicality.

However, the instant appeal by certiorari is not from a final Order of the Court of Appeals or the Regional Trial
Court.

WHEREFORE, the petition must be dismissed for failure to observe the rules on court intervention
allowed by RA No. 9285 and the Special ADR Rules, specifically Rule 19.36 and Rule 19.37 of the
latter, in the pending arbitration proceedings of the parties to this case, as this is from an interlocutory
order of the Arbitral Tribunal.

GILAT SATELLITE NETWORKS, LTD., vs. UNITED COCONUT PLANTERS BANK GENERAL

INSURANCE CO., INC., 
(G.R. No. 189563 | April 7, 2014 | Sereno, CJ)

FACTS: In September 1999, One Virtual placed with GILAT a purchase order for various telecommunications
equipment, accessories, spares, services and software, at a total purchase price of US$2,128,250.00). One Virtual
promised to pay a portion thereof totalling US$1.2 Million in accordance with the payment schedule dated 22
November 1999. To ensure the prompt payment of this amount, it obtained UCPB General Insurance Co., Inc.’s
surety bond dated December 3, 1999, in favor of GILAT.

From September 1999 to June 2000, GILAT shipped and delivered the subject purchased products. However, One
Virtual failed to pay GILAT the amount of US$400,000.00 on the due date of May 30, 2000 in accordance with
the payment schedule, prompting GILAT to write the surety UPCB a demand letter. No part of the amount set forth
in this demand has been paid to date by either One Virtual or UCPB. One Virtual likewise failed to pay on the
succeeding payment instalment date of 30 November 2000.

Eventually, GILAT filed a Complaint against UCPB General Insurance Co., Inc., to recover the amounts supposedly
covered by the surety bond, plus interests and expenses. RTC rendered its decision in favor of GILAT and ordered
UCPB to pay the former the Principal debt, interest and litigation expenses including attorney’s fees.

Upon appeal, the CA dismissed the case for lack of jurisdiction. GILAT and One Virtual are ordered to proceed to
arbitration, the outcome of which shall necessary bind the parties, including the surety, UCPB. GILAT alleges that
arbitration laws mandate that no court can compel arbitration, unless a party entitled to it applies for this relief. This
referral, however, can only be demanded by one who is a party to the arbitration agreement. Considering that neither
petitioner nor One Virtual has asked for a referral, there is no basis for the CA’s order to arbitrate.

On the other hand, UCPB maintains that a surety contract is merely an accessory contract, which cannot exist
without a valid obligation. Thus, the surety may avail itself of all the defenses available to the principal debtor and
inherent in the debt – that is, the right to invoke the arbitration clause in the Purchase Agreement.

ISSUE: Whether or not the CA ERRED in dismissing the case and ordering petitioner and One Virtual to arbitrate
HELD: YES. In suretyship, the oft-repeated rule is that a surety’s liability is joint and solidary with that of the
principal debtor. This undertaking makes a surety agreement an ancillary contract, as it presupposes the existence of
a principal contract.

In Stronghold Insurance Co. Inc. v. Tokyu Construction Co. Ltd.,38 that "[the] acceptance [of a surety agreement],
however, does not change in any material way the creditor’s relationship with the principal debtor nor does it make
the surety an active party to the principal creditor-debtor relationship. In other words, the acceptance does not give
the surety the right to intervene in the principal contract. The surety’s role arises only upon the debtor’s default, at
which time, it can be directly held liable by the creditor for payment as a solidary obligor." Hence, the surety
remains a stranger to the Purchase Agreement and cannot invoke in its favor the arbitration clause in the Purchase
Agreement, because it is not a party to that contract.

Section 24 of Republic Act No. 928542 is clear in stating that a referral to arbitration may only take place "if at least
one party so requests not later than the pre-trial conference, or upon the request of both parties thereafter." In this
case, UCPB has not presented even an iota of evidence to show that either GILAT or One Virtual submitted its
contesting claim for arbitration.

WHEREFORE, CA erred in dismissing the case and ordering petitioner and One Virtual to arbitrate. Petition
for Review on Certiorari was granted.

BASES CONVERSION DEVELOPMENT AUTHORITY V. DMCI PROJECT DEVELOPERS, INC.

(G.R. No. 173137 | January 11, 2016 | Leonen, J.)

FACTS: On June 10, 1995, Bases Conversion Development Authority (BCDA) entered into a Joint Venture
Agreement (JVA) with Philippine National Railways (PNR) and other foreign corporations.
o Under the JVA, the parties agreed to construct a railroad system from Manila to Clark with
possible extensions to Subic Bay and La Union and later, possibly to Ilocos Norte and Nueva
Ecija. BCDA shall establish North Luzon Railways Corporation (Northrail) for purposes of
constructing, operating, and managing the railroad system.
o The JVA included an arbitration clause that provided that: “If any dispute arise hereunder
which cannot be settled by mutual accord between the parties to such dispute, then that dispute
shall be referred to arbitration…”
 On February 8, 1996, the Joint Venture Agreement was amended to include D.M. Consunji, Inc. and/or
its nominee as party.
o Under the amended Joint Venture Agreement (AJVA), D.M. Consunji, Inc. shall be an
additional investor of Northrail. It shall subscribe to 20% of the increase in Northrail’s
authorized capital stock.
 On the same day, BCDA and the other parties to the Joint Venture Agreement, including D.M. Consunji,
Inc. and/or its nominee, entered into a Memorandum of Agreement (MOA).
o Under this agreement, the parties agreed that the initial seed capital of P600 million shall be
infused to Northrail. The purpose was to privatize Northrail to speed up the implementation of
the project.
o Of that amount, P200 million shall be D.M. Consunji, Inc.’s share, which shall be converted to
equity upon Northrail’s privatization. Later, D.M. Consunji, Inc.’s share was increased to P300
million.
o Respondent DMCI-PDI was D.M. Consunji’s nominee
 Pursuant to the MOA, DMCI-PDI deposited P300 million.
  However, the privatization of Northrail did not go through. Northrail withdrew from the Securities and
Exchange Commission its application for increased authorized capital stock. Moreover, according to
DMCI-PDI, BCDA applied for Official Development Assistance from Obuchi Fund of Japan. This
required Northrail to be a 100% government-owned and -controlled corporation.
 On September 27, 2000, DMCI-PDI started demanding from BCDA and Northrail the return of its P300
million deposit. DMCI-PDI cited Northrail’s failure to increase its authorized capital stock as reason for
the demand.
o BCDA and Northrail refused to return the deposit on the grounds that DMCI, as a joint venture
partner, was privy to the decisions and policies made in the project and must share in profits and
losses. They also denied that the deposits were for future subscription. Instead, they asserted
that the P300 million was in the nature of a contribution.
 On August 17, 2005, DMCI-PDI served a demand for arbitration to BCDA and Northrail, citing the
arbitration clause in the June 10, 1995 Joint Venture Agreement. BCDA and Northrail failed to respond.
 DMCI-PDI filed before the Regional Trial Court of Makati a Petition to Compel Arbitration against
BCDA and Northrail, pursuant to the alleged arbitration clause in the Joint Venture Agreement. DMCI-
PDI prayed for “an order directing the parties to proceed to arbitration in accordance with the terms and
conditions of the agreement.”
o BCDA filed a Motion to Dismiss. It argued that DMCI-PDI could not enforce the arbitration
clause in the original JVA because DMCI-PDI was not a party thereto.
o Northrail filed a Motion to Dismiss. It argued that the court did not have jurisdiction over it and
that DMCI-PDI has no cause for arbitration against it.
 The RTC ruled that the arbitration clause in the original JVA should cover all subsequent documents
including the AJVA and the MOA. The 3 documents constituted one contract for the formation and
funding of Northrail. The trial court also ruled that even though DMCI-PDI was not a signatory to the
Joint Venture Agreement and the Memorandum of Agreement, it was an assignee of D.M. Consunji,
Inc.’s rights. Therefore, it could invoke the arbitration clause in the Joint Venture Agreement
o Petitioners BCDA reiterated its arguments in present petition for review. It further argued that
DMCI-PDI could not be considered the assignee of D.M. Consunji because BCDA did not
consent to the assignment to DMCI-PDI.
o In a separate petition for review, Northrail argued that it cannot be compelled to submit itself to
arbitration because it was not a party to the arbitration agreement.

ISSUES:
1. Whether or not DMCI-PDI could invoke the arbitration clause in the original JVA
2. Whether or not Northrail could be compelled to submit itself to arbitration, considering that it was not a
party or signatory to the arbitration agreement.

HELD:
1. Yes. DMCI-PDI could invoke the arbitration clause in the original JVA
2. Yes. Northrail could be compelled to submit itself to arbitration, although it was not a party or signatory
to the arbitration agreement.

DMCI-PDI can invoke the arbitration clause in the original JVA (Note: the construction of the arbitration
agreement is a question of law, not of fact. It is a proper subject of a petition for review)
  The arbitration clause should be interpreted in light of the state policy favoring arbitration and the rule
of liberal construction of arbitration agreements. We adopt the interpretation that would render effective
an arbitration clause if the terms of the agreement allow for such interpretation.
o Note: arbitration, defined - Arbitration is a mode of settling disputes between parties. Like
many alternative dispute resolution processes, it is a product of the meeting of minds of parties
submitting a predefined set of disputes. They agree among themselves to a process of dispute
resolution that avoids extended litigation.
 There is no rule that a contract should be contained in a single document. A whole contract may be
contained in several documents that are consistent with one other.
o A reading of all the documents of agreement shows that they were executed by the same parties.
Initially, the Joint Venture Agreement was executed only by BCDA, PNR, and the foreign
corporations. When the Joint Venture Agreement was amended to include D.M. Consunji, Inc.
and/or its nominee, D.M. Consunji, Inc. and/or its nominee were deemed to have been also a
party to the original Joint Venture Agreement executed by BCDA, PNR, and the foreign
corporations. D.M. Consunji, Inc. and/or its nominee became bound to the terms of both the Joint
Venture Agreement and its amendment.
o Moreover, each document was executed to achieve the single purpose of implementing the
railroad project, such that documents of agreement succeeding the original Joint Venture
Agreement merely amended or supplemented the provisions of the original Joint Venture
Agreement.
 The Joint Venture Agreement, the amended Joint Venture Agreement, and the Memorandum of
Agreement should be treated as one contract because they all form part of a whole agreement. Hence,
the arbitration clause in the Joint Venture Agreement should not be interpreted as applicable only to the
Joint Venture Agreement’s original parties. The arbitration clause should extend to all the agreements
and its parties since it is still consistent with all the terms and conditions of the amendments and
supplements. Therefore, DMCI-PDI can invoke the arbitration clause in the original JVA.
 The argument that DMCI-PDI is not a party even to the MOA because BCDA and Northrail did not
consent to D.M. Consunji’s assignment of rights to DMCI-PDI is untenable. DMCI-PDI was the
nominee, not the assignee of D.M. Consunji. The prohibition in Section 17.1 of the JVA against the
assignment of rights without the consent of the other parties does not apply. Instead, Section 17.2 of the
JVA applies, which provides that the agreement shall be binding on nominees.
o Note: nominee, defined – “…the term ‘nominee’ refers to one who is designated to act for
another usually in a limited way; a person in whose name a stock or bond certificate is registered
but who is not the actual owner thereof… [It] does not connote the transfer or assignment to the
nominee of any property in, or ownership of, the rights of the person nominating him”
(COCOFED v. Republic)

Northrail could be compelled to submit itself to arbitration, although it was not a party or signatory to
the arbitration agreement.
 Having been funded and created through the contract comprised of the JVA, AJVA, and MOA,
Northrail is a beneficiary of said contract.
 DMCI-PDI is correct in arguing that if Article 1311 of the Civil Code gives third party beneficiaries to a
contract the right to demand the contract’s fulfillment in its favor, it should also be bound by said
contract. A beneficiary who communicated his or her acceptance to the terms of the agreement before
its revocation may be compelled to abide by the terms of an agreement, including the arbitration clause.
 In this case, Northrail is deemed to have communicated its acceptance of the terms of the agreements
when it accepted D.M. Consunji, Inc.’s funds.
o Hence, when BCDA and Northrail decided not to proceed with Northrail’s privatization and the
transfer of subscriptions to D.M. Consunji, Inc., any obligation to return its supposed
subscription attached not only to BCDA as party to the agreement but primarily to Northrail as
beneficiary that impliedly accepted the terms of the agreement and received D.M. Consunji,
Inc.’s funds.

Note: state policy of arbitration and multiplicity of suits – “Moreover, in Heirs of Augusto Salas, Jr., this court
affirmed its policy against multiplicity of suits and unnecessary delay. This court said that ‘to split the
proceeding into arbitration for some parties and trial for other parties would result in multiplicity of suits,
duplicitous procedure and unnecessary delay.’ This court also intimated that the interest of justice would be best
observed if it adjudicated rights in a single proceeding. While the facts of that case prompted this court to direct
the trial court to proceed to determine the issues of that case, it did not prohibit courts from allowing the case to
proceed to arbitration, when circumstances warrant,” (Lanuza v. BF Corporation).

WHEREFORE, the petitions are DENIED. Regional Trial Court Decision and the June 9, 2006 Regional
Trial Court Order are AFFIRMED.