CARGILL PHILIPPINES, INCORPORATED

VS.
SAN FERNANDO REGALA TRADING
INCORPORATED
(GR NO: 175404, JANUARY 31, 2011)
WHAT IS MOLASSES?
3RD EXTRACTION
 VARIETIES OF MOLASSES

Light Molasses: This is the syrup left over after the first boiling cycle of
sugarcane juice. It is the lightest in color, has the highest sugar
content, and the least viscous texture.

Dark or Medium Molasses: Produced as a byproduct of the second

boiling cycle of sugarcane. This molasses is darker and more viscous
than light molasses and contains less sugar.

BLACKSTRAP MOLASSES: This is the final byproduct of

the third boiling cycle in the sugar making process. This
variety contains the least amount of sugar and has the
highest concentration of vitamins and minerals. Blackstrap
molasses has a very dark color, is extremely viscous in
texture, and, because it's highly concentrated, it has a
deep, spicy, almost bitter flavor.
CARGILL PHILIPPINES, INCORPORATED
VS.
SAN FERNANDO REGALA TRADING
INCORPORATED
(GR NO: 175404, JANUARY 31, 2011)
THE PLACE
JURISDICTION OF MAKATI CITY
 CASE
PROPER
JULY 11, 1996

SFTI

CARGILL
JULY 11, 1996
• THAT, SFTI would PURCHASE
from CARGILL 12,000 metric
tons of Thailand origin cane
blackstrap molasses at the
price of US$192 per metric ton

• THAT, the DELIVERY of the

molasses was to be made in
January/February 1997

• THAT, the MODE OF PAYMENT

is by virtue of Irrevocable
Letter of Credit payable at
sight, to be opened by
September 15, 1996
JULY 11, 1996
• THAT, any dispute which
the Buyer and Seller may
not be able to settle by
mutual agreement shall
be settled by arbitration
in the City of New York
before the American
Arbitration Association.
The Arbitration Award shall
be final and binding on both
parties.
PRIOR SEPTEMBER 15, 1996
• THAT, the parties agreed
that instead of
January/February 1997,
the DELIVERY would be
made in April/May 1997

• THAT, the MODE OF

PAYMENT shall be
Irrevocable Letter of
Credit payable at sight, to
be opened upon
CARGILL’S advice
JUNE 18, 1998

SFTI

+ DAMAGES
JULY 24, 1998
MOTION TO DISMISS

“No contract was

consummated. SFTI failed to
return the proposed agreement
with written acceptance and
conformity therewith”

CARGILL “The Regional Trial Court is

not the proper forum as the
contract contains an
ARBITRATION CLAUSE”
JULY 24, 1998-September 16, 1998
OPPOSITION

“The Regional Trial Court HAS

JURISDICTION for action for
rescission of contract.

According to well-settled and

numerous jurisprudence,
ARBITRATION CLAUSE was struck
down due to contrary to public SFTI
policy because once there’s an
award, It shall be final and binding
to the parties resulting to oust the
court’s jurisdiction”
JULY 24, 1998-September 16, 1998
REPLY

“Those jurisprudences were

inapplicable by virtue of 1950
New Civil Code as well as the
1953 Arbitration Law

CARGILL
JULY 24, 1998-September 16, 1998
REJOINDER

“ARBITRATION CLAUSE
was INVALID AND
UNENFORCEABLE
considering the fact that
condition sine qua non
under the Arbitration Law SFTI

failed to comply
therewith”
JULY 24, 1998-September 16, 1998
SUR-REJOINDER

“ARBITRATION CLAUSE is
VALID AND ENFORCEABLE in
lieu of the ARBITRATION LAW”

CARGILL
September 17, 1998
MOTION TO DISMISS

CARGILL
 September 17, 1998
• NO CLEAR BASIS TO WARRANT OF COURT’S
DISMISSAL – THE COURT HAS JURISDICTION
Section 7. Stay of civil action. - If (1) ANY SUIT OR
PROCEEDING BE BROUGHT upon an (2) ISSUE
ARISING OUT OF AN AGREEMENT (3) PROVIDING FOR
THE ARBITRATION thereof, the court in which such suit
or proceeding is pending, upon being satisfied that the
issue involved in such suit or proceeding is referable to
arbitration, shall stay the action or proceeding
until an arbitration has been had in accordance
with the terms of the agreement: Provided, That the
applicant, for the stay is not in default in proceeding
with such arbitration. (1953 ARBITRATION LAW)
 September 17, 1998
• NO CLEAR BASIS TO WARRANT OF COURT’S
DISMISSAL – THE COURT HAS JURISDICTION
Section 7. Stay of civil action. - If (1) ANY SUIT OR
PROCEEDING BE BROUGHT upon an (2) ISSUE
ARISING OUT OF AN AGREEMENT (3) PROVIDING FOR
THE ARBITRATION thereof, the court in which such suit
or proceeding is pending…

In the case at bar: (1) action for rescission, (2)

contract to sell, (3) there’s an arbitration clause
… proceeding is pending (filed in court)
 September 17, 1998
• NO CLEAR BASIS TO WARRANT OF COURT’S
DISMISSAL – THE COURT HAS JURISDICTION
Section 7. …upon being satisfied that the issue involved
in such suit or proceeding is referable to arbitration,
shall stay the action or proceeding until an
arbitration has been had in accordance with the
terms of the agreement:

In the case at bar: If capable for arbitration, then

the action filed shall be stayed (held in
abeyance) to pursue the terms of the agreement.
DECEMBER 1988 – NOVEMBER 16, 2006

PETITION FOR CERTIORARI

“The trial court REFUSED TO

DISMISS/SUSPEND despite the
non-compliance with the
party’s agreement to arbitrate”

CARGILL
DECEMBER 1988 – NOVEMBER 16, 2006
• VALID AND CONSTITUTIONAL

• VALID OR CONSTITUTIONAL

Constitution contains basic PRINCIPLES AND LAWS of a

nation, state, or social group that determine the powers and
duties of the government and guarantee certain rights to the
people in it
https://legalknowledgebase.com/what-is-the-difference-between-constitution-and-constitutional-law

Binding; possessing legal force or strength; legally sufficient. A

valid contract, for example, is one that has been executed in
compliance with all the requisite legal formalities and is binding
upon, and enforceable by, the individuals who executed it.
https://legal-dictionary.thefreedictionary.com/valid
 THE SUPREME COURT RULED…
• VALID AND CONSTITUTIONAL – ARBITRATION ITSELF AND
MAKING CLAUSES
VALID CONSTITUTIONAL
• Long accepted • General Law: Civil Code (Title XIV,
Ch. 2)
• Not against public policy • Specific Law: The Arbitration Law
(Republic Act 876) – for domestic
arbitration

• Not illegal • Nowhere in the aforementioned

laws that (1) arbitration can only be
conducted in the Philippines, (2)
arbitrators should be Philippine
residents
• Arbitration is not proper when one
of the parties repudiated the
existence or validity of the contract
 IN THE CASE AT BAR…
• VALID AND CONSTITUTIONAL – ARBITRATION AND ITS CLAUSE
CONSTRUED BY REGIONAL TRIAL COURT

VALID? CONSTITUTIONAL?
• The Regional Trial Court erred in • Simple failure to comply with the
construing the context of requirements under the law will
arbitration NOT INVALIDATE THE
ARBITRATION
• The case cannot be brought
under the Arbitration Law for the
purpose of suspending the
proceedings before the RTC
• The Regional Trial Court erred in • Effectively invalidated not only
invalidating arbitration and its the disputed arbitration clause,
clause but all other agreements which
provide for foreign arbitration
DECEMBER 1988 – NOVEMBER 16, 2006

Question of fact: Contract between

the parties did not exist or it was
invalid; that the said contract bearing
the arbitration clause was never
consummated by the parties, thus, it
was proper that such issue be first
resolved by the court through an
appropriate trial
NOVEMBER 17, 2006 – JANUARY 2011

PETITION FOR REVIEW

“The case should be

suspended to give way for
arbitration”

CARGILL
NOVEMBER 17, 2006 – JANUARY 2011

CARGILL
 NOVEMBER 17, 2006 – JANUARY 2011
• Explicitly confines the court’s authority only to the
determination of whether there is an agreement in
writing providing for arbitration

• The Regional Trial Court went beyond its authority by

directing the petitioner to file an answer instead of
ordering the parties to proceed to arbitration,

• A contrary ruling would suggest that a party’s mere

repudiation of the main contract is sufficient to avoid
arbitration.

• That is exactly the situation that the separability

doctrine seeks to avoid