G.R. No.

129916            March 26, 2001

MAGELLAN vs. ROLANDO M. ZOSA and HON. JOSE P. SOBERANO, JR.

BUENA, J.:

FACTS:
This is a case of involving the validity of arbitration clause as provided in the
“Employment Agreement” among Magellan Capital Holdings Corporation.

Petitioners and respondent Rolando Zosa entered into “Employment Agreement”

designating the latter as President and CEO of MCHC. Respondent Zosa then was
elected to a new position as MCHC’s Vice-Chairman/Chairman New Ventures
Development. MCHC communicated its non-acceptance to the resignation and
advised respondent that the agreement is terminated on account of the latter’s
breach thereof. Respondent invoked the Arbitration Clause of the agreement and
both parties designated their arbitrators in the panel. Petitioners’s motion to dismiss
was denied. The RTC in compliance with the decision, declared the arbitration clause
in the agreement partially void and of no effect insofar as it concerns the
composition of arbitrators.

ISSUE:
Whether the Arbitration Clause in the Employment Agreement is Valid.

RULING:
NO. The arbitration clause in the employment agreement is invalid.

Under the law, Any clause giving one of the parties power to choose more
arbitrators than the other is void and of no effect.

Here,  It appears that the two (2) defendants [petitioners] (MCMC and MCHC) have
one (1) arbitrator each to compose the panel of three (3) arbitrators. As the
defendant MCMC is the Manager of defendant MCHC, its decision or vote in the
arbitration proceeding would naturally and certainly be in favor of its employer and
the defendant MCHC would have to protect and preserve its own interest; hence,
the two (2) votes of both defendants (MCMC and MCHC) would certainly be against
the lone arbitrator for the plaintiff [herein defendant]. In fairness and justice to the
plaintiff [defendant], the two defendants (MCMC and MCHC) [herein petitioners]
which represent the same interest should be considered as one and should be
entitled to only one arbitrator to represent them in the arbitration proceedings.

Any arrangement or scheme that would give undue advantage to a party in the
negotiating table is anathema to the very purpose of arbitration and should,
therefore, be resisted.
G. R. No. 146717             November 22, 2004

TRANSFIELD PHILIPPINES, INC vs. LUZON HYDRO CORPORATION

TINGA, J.:
 
FACTS:
This is a case of involving the collection from the letter of credit despite the pending
arbitration case.

Transfield Phils. (TPI) and Luzon Hydro (LHC) entered into a Turnkey Contract* where
TPI undertook to construct a hydro electric power station in Benguet and Ilocos. In
order to guarantee performance by Transfield, two stand-by letters of credit were
required to be opened. During the construction of the plant, Transfield requested for
extension of time citing typhoon and various disputes delaying the construction.

LHC did not give due course to the extension of the period prayed for but referred
the matter to arbitration committee.Because of the delay in the construction of the
plant, LHC called on the stand-by letters of credit because of default. However, the
demand was objected by Transfield on the ground that there is still pending
arbitration on their request for extension of time. Because of the delay in the
construction of the plant, LHC called on the stand-by letters of credit because of
default. However, the demand was objected by Transfield on the ground that there
is still pending arbitration on their request for extension of time.

ISSUE:
Whether Luzon Hydro Corporation can collect from the letters of credit despite the
pending arbitration case.

RULING:
Yes. Luzon Hydro Corporation can collect from the letter of credit despite the
pending arbitration case.

The independent nature of the letter of credit may be: (a) independence in toto
where the credit is independent from the justification aspect and is a separate
obligation from the underlying agreement like for instance a typical standby; or (b)
independence may be only as to the justification aspect like in a commercial letter of
credit or repayment standby, which is identical with the same obligations under the
underlying agreement. In both cases the payment may be enjoined if in the light of
the purpose of the credit the payment of the credit would constitute fraudulent
abuse of the credit.

Jurisprudence has laid down a clear distinction between a letter of credit and a
guarantee in that the settlement of a dispute between the parties is not a pre-
requisite for the release of funds under a letter of credit. In other words, the
argument is incompatible with the very nature of the letter of credit. If a letter of
credit is drawable only after settlement of the dispute on the contract entered into
by the applicant and the beneficiary, there would be no practical and beneficial use
for letters of credit in commercial transactions.

G.R. No. 180640               April 24, 2009

HUTAMA-RSEA JOINT OPERATIONS, INC. vs. CITRA METRO MANILA TOLLWAYS

CORPORATION

CHICO-NAZARIO, J.:

FACTS:
Petitioner HUTAMA-RSEA Joint Operations Incorporation and respondent Citra
Metro Manila Tollways Corporation are corporations organized and existing under
Philippine laws. Petitioner is a sub-contractor engaged in engineering and
construction works. Respondent, on the other hand, is the general contractor and
operator of the South Metro Manila Skyway Project (Skyway Project).

During the construction of the Skyway Project, petitioner wrote respondent on

several occasions requesting payment of the former’s interim billings, pursuant to
the provisions of the EPCC. Respondent only partially paid the said interim billings
but respondent still failed to do so.

Petitioner Hutama filed a Request for Arbitration, seeking to enforce its money
claims against respondent. Respondent Citra averred that the CIAC had no
jurisdiction over the case as the filing by petitioner was premature because a
condition precedent,   i.e.,   prior referral by the parties of their dispute to the
Dispute  Adjudication Board (DAB), required by Clause 20.4 of the EPCC, had not
been satisfied or complied with.

The CIAC ruled that it had jurisdiction over the case, and that the determination of
whether petitioner had complied with Clause 20.4 of the EPCC was a factual issue
that may be resolved during the trial.

Respondent Citra filed a  Motion for Reconsideration of the CIAC Order. CIAC
however  denied the motion as prior resort by the parties to DAB was not a condition
precedent for it to assume  jurisdiction over CIAC.

ISSUE:
Whether or not the CIAC has jurisdiction over the dispute.

RULING:
Yes. The CIAC has jurisdiction over a dispute involving a construction contract.

Based on Section 4 of EO 1008 and Section 1, Article III of the CIAC Rules of
Procedure, the CIAC shall have jurisdiction over a dispute involving a construction
contract if said contract contains an arbitration clause or, even in the absence of
such a clause in the construction contract, the parties still agree to submit their
dispute to arbitration.

Here, it is true that Clause 20.4 of the EPCC states that a dispute between petitioner
and respondent as regards the EPCC shall be initially referred to the DAB for
decision, and only when the parties are dissatisfied with the decision of the DAB
should arbitration commence. This does not mean, however, that  the CIAC is barred
from assuming jurisdiction over the dispute if such clause was not complied with.

Since the jurisdiction of CIAC 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.