ALTERNATIVE

 DISPUTE  RESOLUTION  (2019-­‐2020)  

ATTY.  DARNIEL  BUSTAMANTE  
 
I.GENERAL  PRINCIPLES  
A.CASES  
 
1.   DEPARTMENT   OF   FOREIGN   AFFAIRS   AND   BANGKO   SENTRAL   NG   PILIPINAS  
VS.  FALCON  AND  BCA  INTERNATIONAL  CORPORATION;  
 G.R.  NO.  225051  &  210858,  JULY  19,2017  
PERALTA,  J.  
 
FACTS:  
In   an   Amended   Build-­‐Operate-­‐Transfer  (BOT)  Agreement1  dated   April   5,  
2002  (Agreement),  petitioner   DF   A   awarded   the   Machine   Readable   Passport   and   Visa  
Project  (MRP/V   Project)  to   respondent   BCA   International   Corporation.   In   the   course   of  
implementing   the  MRPN  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,  2009.2  
In   its   Statement   of   Claims3  dated   August   24,   2009,   respondent   sought   the   following   reliefs  
against   petitioner:   (a)   a   judgment   nullifying   and   setting   aside   the   Notice   of   Termination   dated  
December  9,  2005  of  the  DFA,  including  its  demand  to  BCA  to  pay  liquidated  damages  equivalent  
to  the  corresponding  performance  security  bond  posted  by  BCA;  (b)  a  judgment  confirming  the  
Notice  of  Default  dated  December  22,  2005  issued  by  BCA  to  the  DF  A  and  ordering  the  DF  A  to  
perform  its  obligation  under  the  Amended  BOT  Agreement  dated  April  5,  2002  by  approving  the  
site  of  the  Central  Facility  at  the  Star  Mall  Complex  in  Shaw  Boulevard,  Mandaluyong  City,  within  
five  days  from  receipt  of  the  Arbitral  A  ward;  (c)  a  judgment  ordering  the  DF  A  to  pay  damages  
to   BCA,   reasonably   estimated   at   ₱l00,000,000.00   as   of   this   date,   representing   lost   business  
opportunities;  financing  fees,  costs  and  commissions;  travel  expenses;  legal  fees  and  expenses;  
and   cost   of   arbitration,   including   the   fees   of   the   members   of   the   Arbitral   Tribunal;   and   (d)   other  
just  or  equitable  relief.  
 
On   October   5,   2013,   respondent  manifested  that  it  shall  file  an  Amended  Statement  of  Claims   so  
that  its  claim  may  conform  to  the  evidence  they  have  presented.4  
Petitioner   opposed   respondent's   manifestation,   arguing   that   such   amendment   at   the   very   late  
stage   of   the   proceedings   will   cause   undue   prejudice   to   its   interests.   However,   the   Arbitral  
Tribunal   gave   respondent   a   period   of   time   within   which   to   file   its   Amended   Statement   of   Claims  
and  gave  petitioner  time  to  formally  interpose  its  objections.5  
 
In   the   Amended   Statement   of   Claims6  dated   October   25,   2013,   respondent   interposed   the  
alternative   relief   that,   in   the   event   specific   performance   by   petitioner   was   no   longer   possible,  
petitioner   prayed   that   the   Arbitral   Tribunal   shall   render   judgment   ordering   petitioner   to   pay  
respondent   ₱l   ,648,611,531.00,   representing   the   net   income   respondent   is   expected   to   earn  
under  the  Agreement,  and  ₱l00,000,000.00  as  exemplary,  temperate  or  nominal  damages.7  
In   an   Opposition   dated   December   19,   2013,   petitioner   objected   to   respondent's   Amended  
Statement   of   Claims,   averring   that   its   belated   filing   violates   its   right   to   due   process   and   will  
prejudice  its  interest  and  that  the  Tribunal  has  no  jurisdiction  over  the  alternative  reliefs  sought  
by  respondent.8  
 

 
  ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020     1  
  ATTY.  BUSTAMANTE    
ABSR  
   
On  August  6,  2014,  respondent  filed  a  Motion  to  Withdraw  Amended  Statement  of  Claims9  in  the  
light   of   petitioner's   opposition   to   the   admission   of   the   Amended   Statement   of   Claims   and   to  
avoid  further  delay  in  the  arbitration  of  its  claims,  without  prejudice  to  the  filing  of  such  claims  
for   liquidated   and   other   damages   at   the   appropriate   time   and   proceeding.   Thereafter,  
respondent  filed  a  motion  to  resume  proceedings.  
 
However,   on   May   4,   2015,   respondent   filed   anew   a   Motion   to   Admit   Attached   Amended  
Statement   of   Claims   dated   April   30,   2015,   increasing   the   actual   damages   sought   to  
₱390,000,000.00,   plus   an   additional   ₱l0,000,000.00   for   exemplary,   temperate   or   nominal  
damages.10  
On   November   6,   2015,   petitioner   filed   an   Opposition   to   the   Motion   to   Admit   Attached   Amended  
Statement  of  Claims.  
   
PROCEDURAL  ORDER  NO.  11  
Grants  the  Motion  to  Admit  on  the  premise  that  BCA  will  no  longer  present  any  additional  
evidence-­‐in-­‐chief  to  prove  the  bigger  claim  in  the  Amended  Statement.  
 
For  the  additional  claim  of  300  million  pesos,  BCA  should  pay  the  additional  fee  of  5%  or  
15   million   pesos.   Having   paid   12   million   pesos,   the   balance   of   3   million   pesos   shall   be  
payable   upon   submission   of   this   case   for   resolution.   No   award   shall   be   issued   and  
promulgated   by   the   Tribunal   unless   the   balance   of   40%   in   the   Arbitrators'   fees   for   the  
original   Claim   and   Counterclaim,   respectively,   and   the   balance   of   3   million   for   the  
Amended  Claim,  are  all  fully  paid  by  the  parties.  
 
BOTH  PARTIES  FILED  AN  MR  
 
PROCEDURAL  ORDER  NO.  12  
 
Denied   petitioner's   motion   for   reconsideration   of   Procedural   Order   No.   11,   petitioner  
filed   this   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.  
Petitioner   stated   that   it   opted   to   file   the   petition   directly   with   this   court   in   view   of   the  
immensity  of  the  claim  concerned,  significance  of  the  public  interest  involved  in  this  case,  
and   the   circumvention   of   the   temporary   restraining   order   issued   by   this   Court  
in  Department   of   Foreign   Affairs   v.   BCA   International   Corporation,  docketed   as   G.R.   No.  
210858.   It   cited  Department   of   Foreign   Affairs,   et   al.   v.   Hon.   Judge   Falcon,15  wherein   the  
Court   overlooked   the   rule   on   hierarchy   of   courts   and   took   cognizance   of   the   petition  
for  certiorari.  
 
 
ISSUE:   WHETHER   OR   NOT   THE   ALTERNATIVE   RELIEF   IN   THE   AMENDED   STATEMENT   OF  
CLAIMS  FALLS  OUTSIDE  THE  SCOPE  OF  THE  ARBITRATION  CLAUSE;  HENCE,  OUTSIDE  THE  
JURISDICTION  OF  THE  AD  HOC  ARBITRAL  TRIBUNAL  
 
HELD:  NO.  
 
The  Agreement  provides  for  the  resolution  of  dispute  between  the  parties  in  Section  
19.02  thereof,  thus:  
2   ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020    
A ATTY.  BUSTAMANTE    
ABSR  
 
  
If   the   Dispute   cannot   be   settled   amicably   within   ninety   (90)   days   by   mutual  
discussion  as  contemplated  under  Section  19.01  herein,  the  Dispute  shall  be  settled  
with  finality  by  an  arbitrage  tribunal  operating  under  International  Law,  hereinafter  
referred   to   as   the  "Tribunal,"  under   the   UNCITRAL   Arbitration   Rules   contained   in  
Resolution   31/98   adopted   by   the   United   Nations   General   Assembly   on   December  
15,   1976,   and   entitled  "Arbitration   Rules   on   the   United   Nations   Commission   on   the  
International  Trade  Law."  The   DFA   and   BCA   undertake   to   abide   by   and   implement  
the   arbitration   award.   The   place   of   arbitration   shall   be   Pasay   City,   Philippines,   or  
such  other  place  as  may  mutually  be  agreed  upon  by  both  parties.  The  Arbitration  
proceeding  shall  be  conducted  in  the  English  language.  
Under   Article   33   of   the   UNCITRAL   Arbitration   Rules   governing   the   parties,   "the  
arbitral   tribunal   shall   apply   the   law   designated   by   the   parties   as   applicable   to   the  
substance   of   the   dispute."   "Failing   such   designation   by   the   parties,   the   arbitral  
tribunal   shall   apply   the   law   determined   by   the   conflict   of   laws   rules   which   it  
considers  applicable."  Established  in  this  jurisdiction  is  the  rule  that  the  law  of  the  
place  where  the  contract  is  made  governs,  or  lex  loci  contractus.17  As  the  parties  did  
not   designate   the   applicable   law   and   the   Agreement   was   perfected   in   the  
Philippines,   our   Arbitration   laws,   particularly,   RA   No.   876,18  RA   No.   928519  and   its  
IRR,   and   the   Special   ADR   Rules   apply.20  The   IRR   of   RA   No.   9285   provides   that   "[t]he  
arbitral  tribunal  shall  decide  the  dispute  in  accordance  with  such  law  as  is  chosen  by  
the  parties.  In  the  absence  of  such  agreement,  Philippine  law  shall  apply.”  
 
x  x  x  x  
The  IRR  of  RA  9285  reiterate  that  RA  9285  is  procedural  in  character  and  applicable  
to   all   pending   arbitration   proceedings.   Consistent   with   Article   2046   of   the   Civil  
Code,  the  Special  ADR  Rules  were  formulated  and  were  also  applied  to  all  pending  
arbitration   proceedings   covered   by   RA   9285,   provided   no   vested   rights   are  
impaired.   Thus,   contrary   to   DFA's   contention,   RA   9285,   its   IRR,   and   the   Special   ADR  
Rules  are  applicable  to  the  present  arbitration  proceedings.  The  arbitration  between  
the   DF   A   and   BCA   is   still   pending,   since   no   arbitral   award   has   yet   been   rendered.  
Moreover,  DF  A  did  not  allege  any  vested  rights  impaired  by  the  application  of  those  
procedural  rules.  
 
2. G.R.  No.  210858  
June  29,  2016  
DEPARTMENT  OF  FOREIGN  AFFAIRS,  Petitioner,    
vs.  
BCA  INTERNATIONAL  CORPORATION,  Respondent.  
CARPIO,  J.:  
 
ISSUE   AT   POINT: :   WHETHER   OR   NOT   THE   1976   UNCITRAL   ARBITRATION  
RULES   AND   THE   RULES   OF   COURT   APPLY   TO   THE   PRESENT   ARBITRATION  
PROCEEDINGS,  NOT  RA  9285  AND  THE  SPECIAL  ADR  RULES  
 
 
  ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020     3  
  ATTY.  BUSTAMANTE    
ABSR  
   
HELD:    
 
Arbitration  is  deemed  a  special  proceeding13  and  governed  by  the  special  provisions  
of   RA   9285,   its   IRR,   and   the   Special   ADR   Rules.  14  RA   9285   is   the   general   law  
applicable   to   all   matters   and   controversies   to   be   resolved   through   alternative  
dispute   resolution   methods.  15  While   enacted   only   in   2004,   we   held   that   RA   9285  
applies   to   pending   arbitration   proceedings   since   it   is   a   procedural   law,   which   has  
retroactive  effect:  
 
While  RA  9285  was  passed  only  in  2004,  it  nonetheless  applies  in  the  instant  case  
since  it  is  a  procedural  law  which  has  a  retroactive  effect.  Likewise,  KOGIES  filed  its  
application   for   arbitration   before   the   KCAB   on   July   1,   1998   and   it   is   still   pending  
because  no  arbitral  award  has  yet  been  rendered.  Thus,  RA  9285  is  applicable  to  the  
instant   case.   Well-­‐settled   is   the   rule   that   procedural   laws   are   construed   to   be  
applicable  to  actions  pending  and  undetermined  at  the  time  of  their  passage,  and  are  
deemed   retroactive   in   that   sense   and   to   that   extent.  As   a   general   rule,   the  
retroactive   application   of   procedural   laws   does   not   violate   any   personal   rights  
because   no   vested   right   has   yet   attached   nor   arisen   from   them.  16  (Emphasis  
supplied)  
 
The  IRR  of  RA  9285  reiterate  that  RA  9285  is  procedural  in  character  and  applicable  
to   all   pending   arbitration   proceedings.17  Consistent   with   Article   2046   of   the   Civil  
Code,  18  the  Special  ADR  Rules  were  formulated  and  were  also  applied  to  all  pending  
arbitration   proceedings   covered   by   RA   9285,   provided   no   vested   rights   are  
impaired.  19Thus,   contrary   to   DFA's   contention,   RA   9285,   its   IRR,   and   the   Special  
ADR   Rules   are   applicable   to   the   present   arbitration   proceeding.   The   arbitration  
between   the   DFA   and   BCA   is   still   pending,   since   no   arbitral   award   has   yet   been  
rendered.   Moreover,   DFA   did   not   allege   any   vested   rights   impaired   by   the  
application  of  those  procedural  rules.  
 
RA  9285,  its  IRR,  and  the  Special  ADR  Rules  provide  that  any  party  to  an  arbitration,  
whether  domestic  or  foreign,  may  request  the  court  to  provide  assistance  in  taking  
evidence   such   as   the   issuance   of   subpoena  ad   testificandum  and   subpoena  duces  
tecum.20  The   Special   ADR   Rules   specifically   provide   that   they   shall   apply   to  
assistance   in   taking   evidence,21  and   the   RTC   order   granting   assistance   in   taking  
evidence   shall   be   immediately   executory   and   not   subject   to   reconsideration   or  
appeal.22  An  appeal  with  the  Court  of  Appeals  (CA)  is  only  possible  where  the  RTC  
denied   a   petition   for   assistance   in   taking   evidence.  23  An   appeal   to   the   Supreme  
Court  from  the  CA  is  allowed  only  under  any  of  the  grounds  specified  in  the  Special  
ADR  Rules.24  We  rule  that  the  DFA  failed  to  follow  the  procedure  and  the  hierarchy  
of  courts  provided  in  RA  9285,  its  IRR,  and  the  Special  ADR  Rules,  when  DFA  directly  
appealed   before   this   Court   the   RTC   Resolution   and   Orders   granting   assistance   in  
taking  evidence.  
 
4   ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020    
A ATTY.  BUSTAMANTE    
ABSR  
 
DFA  contends  that  the  RTC  issued  the  subpoenas  on  the  premise  that  RA  9285  and  
the   Special   ADR   Rules   apply   to   this   case.   However,   we   find   that   even   without  
applying  RA  9285  and  the  Special  ADR  Rules,  the  RTC  still  has  the  authority  to  issue  
the  subpoenas  to  assist  the  parties  in  taking  evidence.  
 
The  1976  UNCITRAL  Arbitration  Rules,  agreed  upon  by  the  parties  to  govern  them,  
state   that   the   "arbitral   tribunal   shall   apply   the   law   designated   by   the   parties   as  
applicable   to   the   substance   of   the   dispute.   Failing   such   designation   by   the   parties,  
the   arbitral   tribunal   shall   apply   the   law   determined   by   the   conflict   of   laws   rules  
which  it  considers  applicable.  "25  Established  in  this  jurisdiction  is  the  rule  that  the  
law   of   the   place   where   the   contract   is   made   governs,   or  lex  loci  contractus.26  Since  
there   is   no   law   designated   by   the   parties   as   applicable   and   the   Agreement   was  
perfected   in   the   Philippines,   "The   Arbitration   Law,"   or   Republic   Act   No.   876   (RA  
876),  applies  
 
Considering  that  this  petition  was  not  filed  in  accordance  with  RA  9285,  the  Special  
ADR  Rules  and  1976  UNCITRAL  Arbitration  Rules,  this  petition  should  normally  be  
denied.   However,   we   have   held   time   and   again   that   the   ends   of   justice   are   better  
served   when   cases   are   determined   on   the   merits   after   all   parties   are   given   full  
opportunity   to   ventilate   their   causes   and   defenses   rather   than   on   technicality   or  
some   procedural   imperfections.  29More   importantly,   this   case   is   one   of   first  
impression   involving   the   production   of   evidence   in   an   arbitration   case   where  
the  deliberative  process  privilege  is  invoked.  
 
3. G.R.  No.  135362  December  13,  1999  
HEIRS  OF  AUGUSTO  L.  SALAS,  JR  
vs.  
LAPERAL  REALTY  CORPORATION,  ROCKWAY  REAL  ESTATE  CORPORATION,  
SOUTH  RIDGE  VILLAGE,  INC.,  MAHARAMI  DEVELOPMENT  CORPORATION  
DE  LEON,  JR.,  J.:  
 
FACTS:  
Augusto   Salas,   Jr.   was   the   registered   owner   of   a   vast   tract   of   land   in   Lipa  
City,   Batangas.   He   entered   into   an   Owner-­‐Contractor   Agreement   with  
Respondent   Laperal   Realty   Corporation   to   render   and   provide   complete  
(horizontal)   construction   services   on   his   land.   Said   agreement   contains  
an   arbitration   clause,   to   wit:  
 
“ARTICLE   VI.   ARBITRATION.  
All   cases   of   dispute   between   CONTRACTOR   and   OWNER’S  
representative  shall  be  referred  to  the  committee  represented  by:  
 
1.One  representative  of  the  OWNER;  
2.One  representative  of  the  CONTRACTOR;  

 
  ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020     5  
  ATTY.  BUSTAMANTE    
ABSR  
   
3.  One  representative  acceptable  to  both  OWNER  and  CONTRACTOR.”  
 
Salas,  Jr.  then  executed  a  Special  Power  of  Attorney  in  favor  of  Respondent  Laperal  
Realty   to   exercise   general   control,   supervision   and   management   of   the   sale   of   his  
land,  for  cash  or  on  installment  basis.  By  virtue  thereof,  Respondent  Laperal  Realty  
subdivided  said  land  and  sold  portions  thereof  to  Respondents  Rockway  Real  Estate  
Corporation  and  South  Ridge  Village,  Inc.  in  1990;  to  Respondent  spouses  Abrajano  
and   Lava   and   Oscar   Dacillo   in   1991;   and   to   Respondents   Eduardo   Vacuna,  
Florante   de   la   Cruz   and   Jesus   Vicente   Capalan   in   1996   (Respondent   Lot  
Buyers   hereinafter).   Back   in   1989,   Salas,   Jr.   left   his   home   in   the   morning   for   a  
business   trip   to   Nueva   Ecija.   He,   however,   never   returned   on   that   unfaithful  
morning.   Seven   years   later   or   in   1996,   his   wife,   Teresita   Diaz-­‐Salas   filed   with   the  
RTC   of   Makati   City   a   verified   Petition   for   the   Declaration   of   Presumptive   Death,  
which   Petition   was   granted.  
 
In   1998,   Petitioners,   as   heirs   of   Salas,   Jr.   filed   in   the   RTC   of   Lipa   City  
a   Complaint   for   Declaration   of   Nullity   of   Sale,   Reconveyance,   Cancellation   of  
Contract,  Accounting  and  Damages  against  Respondents.  Respondent  Laperal  Realty  
filed   a   Motion   to   Dismiss   on   the   ground   that   Petitioners   failed   to   submit   their  
grievance   to   arbitration   as   required   under   Article   VI   of   the   Owner-­‐Contractor  
Agreement.  Respondent  spouses  Abrajano  and  Lava  and  Respondent  Dacillo  filed  a  
Joint  Answer  with  Counterclaim  and  Crossclaim  praying  for  dismissal  of  Petitioners’  
Complaint   for   the   same   reason.  
 
The   RTC   then   issued   the   herein   assailed   Order   dismissing   Petitioners’  
Complaint   for   non-­‐compliance   with   the   foregoing   arbitration   clause.  
Hence   the   present   Petition   for   Review   on   Certiorari   under   Rule   45.  
 
ISSUE:  
 
WHETHER   OR   NOT   THE   ARBITRATION   CLAUSE   UNDER   ARTICLE   VI   OF   THE  
OWNERCONTRACTOR   AGREEMENT   IS   BINDING   UPON   THE   RESPONDENT   LOT  
BUYERS  
 
ARGUMENTS:  
Petitioners   argue   that   (1)   their   causes   of   action   did   not   emanate   from  
the   Owner-­‐Contractor   Agreement,   (2)   that   their   causes   of   action   for  
cancellation   of   contract   and   accounting   are   covered   by   the   exception  
under   the   Arbitration   Law,   and   (3)   that   failure   to   arbitrate   is   not   a  
ground  for  dismissal.  
 
Petitioners   claim   that   they   suffered   lesion   of   more   than   one-­‐fourth   (1/4)  
of   the   value   of   Salas,   Jr.’s   land   when   Respondent   Laperal   Realty   subdivided   it   and  
sold   portions   thereof   to   Respondent   Lot   Buyers.   Thus,   they   instituted   action   against  
6   ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020    
A ATTY.  BUSTAMANTE    
ABSR  
 
both   Respondent   Laperal   Realty   and   Respondent   Lot   Buyers   for   rescission   of   the  
sale  transactions  and  reconveyance  to  them  of  the  subdivided  lots.  They  argue  that  
rescission,   being   their   cause   of   action,   falls   under   the   exception   clause   in   Sec.   2  
ofRepublic   Act   No.   876   which   provides   that   “such   submission   [to]   or   contract   [of  
arbitration]  shall  be  valid,  enforceable  and  irrevocable,  save  upon  such  grounds  as  
exist   at   law   for   the   revocation   of   any   contract”.  
 
HELD:NO.  
 Respondent   Lot   Buyers   are   neither   parties   to   the   Agreement   nor   the  
latter’s   assigns   or   heirs.   Consequently,   the   right   to   arbitrate   as   provided  
in   Article   VI   of   the   Agreement   was   never   vested   in   Respondent   Lot  
Buyers.  
 
Respondent   Laperal   Realty,   on   the   other   hand,   as   a   contracting   party   to   the  
Agreement,   has   the   right   to   compel   Petitioners   to   first   arbitrate   before   seeking  
judicial   relief.   However,   to   split   the   proceedings   into   arbitration   for   Respondent  
Laperal  Realty  and  trial  for  the  Respondent  Lot  Buyers,  or  to  hold  trial  in  abeyance  
pending   arbitration   betweenPetitioners   and   Respondent   Laperal   Realty,   would   in  
effect   result   in   multiplicity   of   suits,   duplicitous   procedure   and   unnecessary   delay.  
On   the   other   hand,   it   would   be   in   the   interest   of   justice   if   the   trial   court  hears   the  
complaint   against   all   herein   Respondents   and   adjudicates   Petitioners’   rights   as  
against   theirs   in   a   single   and   complete   proceeding.   Petition   is   GRANTED.   The  
assailed   Order   of   RTC   of   Lipa   City   is  
NULLIFIED  and  SET  ASIDE.  
 
4.HOME  BANKERS  SAVINGS  AND  TRUST  COMPANY,  petitioner,    
vs.  
COURT  OF  APPEALS  and  FAR  EAST  BANK  &  TRUST  CO.,  INC.  respondents.  
G.R.  No.  115412,  November  19,  1999  
BUENA,  J.:  
 
FACTS:  
Victor  Tancuan  issued  Petitioner  Home  Bankers  Savings  and  Trust  Company  a  check  
while   Eugene   Arriesgado   issued   Private   Respondent   Far   East   Bank   and   Trust  
Company  three  checks;  both  checks  totaling  the  amount  of  P25,250,000.00.  Tancuan  
and   Arriesgado   exchanged   each   other’s   checks   and   deposited   them   with   their  
respective  banks  for  collection.  When  FEBTC  presented  Tancuan’s  HBSTC  check  for  
clearing,   it   was   dishonored   for   being   DAIF.   Meanwhile,   HBSTC   sent   Arriesgado’s   3  
FEBTC  checks  through  the  Philippine  Clearing  House  Corporation  (PCHC)  to  FEBTC  
but  was  returned  for  being  DAIF.  HBSTC  receive  the  notice  of  dishonor  but  refused  
to  accept  the  checks  and  returned  them  to  FEBTC  through  the  PCHC  for  the  reason  
“Beyond  Reglementary  Period,”  implying  that  HBSTC  already  treated  the  3  checks  as  
cleared   and   allowed   the   proceeds   thereof   to   be   withdrawn.   FEBTC   demanded  
reimbursement   for   the   returned   checks   and   inquired   from   HBSTC   whether   it   had  
permitted   any   withdrawal   of   funds   against   the   unfunded   checks.   HBSTC,   however  
 
  ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020     7  
  ATTY.  BUSTAMANTE    
ABSR  
   
refused   to   make   any   reimbursement   and   to   provide   FEBTC   with   the   needed  
information.   Thus,   FEBTC   submitted   the   dispute   for   arbitration   before   the   PCHC  
Arbitration   Committee,   under   its   Supplementary   Rules   on   Regional   Clearing   to  
which   FEBTC   and   HBSTC   are   bound   as   participants   in   the   regional   clearing  
operations   administered   by   the   PCHC.   While   the   arbitration   proceeding   was   still  
pending,   FEBTC   filed   an   action   for   sum   of   money   and   damages   with   preliminary  
attachment  against  HBSTC.  HBSTC  moved  to  dismiss  on  the  ground  that  there  is  no  
cause  of  action  and  because  it  seeks  to  enforce  an  arbitral  award  which  as  yet  does  
not   exist.   The   trial   court   denied   the   motion   to   dismiss   and   the   motion   for  
reconsideration.   Petitioner   then   filed   a   petition   for   certiorari   with   respondent   CA   to  
which  it  had  dismissed.  
 
ISSUE:  
Whether   or   not   private   respondent   which   commenced   an   arbitration   proceeding  
under  the  auspices  of  the  PCHC  may  subsequently  file  a  separate  case  in  court  over  
the   same   subject   matter   despite   the   pendency   of   that   arbitration,   simply   to   obtain  
the   provisional   remedy   of   attachment   against   the   adverse   party   in   the   arbitration  
proceeding.  
 
HELD:  
We  find  no  merit  in  the  petition.  Section  14  of  Republic  Act  876,  otherwise  known  as  
the   Arbitration   Law,   allows   any   party   to   the   arbitration   proceeding   to   petition   the  
court   to   take   measures   to   safeguard   and/or   conserve   any   matter   which   is   the  
subject  of  the  dispute  in  arbitration.  
 
Petitioner’s   exposition   of   the   foregoing   provision   deserves   scant   consideration.  
Section   14   simply   grants   an   arbitrator   the   power   to   issue   subpoena   and  
subpoena  duces  tecum  at  any  time  before  rendering  the  award.  The  exercise  of  such  
power   is   without   prejudice   to   the   right   of   a   party   to   file   a   petition   in   court   to  
safeguard  any  matter  which  is  the  subject  of  the  dispute  in  arbitration.  In  the  case  at  
bar,  private  respondent  filed  an  action  for  a  sum  of  money  with  prayer  for  a  writ  of  
preliminary  attachment.  Undoubtedly,  such  action  involved  the  same  subject  matter  
as  that  in  arbitration,  i.e.,  the  sum  of  P25,200,000.00  which  was  allegedly  deprived  
from   private   respondent   in   what   is   known   in   banking   as   a   “kiting   scheme.”  
However,   the   civil   action   was   not   a   simple   case   of   a   money   claim   since   private  
respondent   has   included   a   prayer   for   a   writ   of   preliminary   attachment,   which   is  
sanctioned  by  section  14  of  the  Arbitration  Law.  
 
Simply   put,   participants   in   the   regional   clearing   operations   of   the   Philippine  
Clearing   House   Corporation  cannot   bypass   the   arbitration   process   laid   out   by   the  
body  and  seek  relief  directly  from  the  courts.   In   the   case   at   bar,   undeniably,   private  
respondent   has   initiated   arbitration   proceedings   as   required   by   the   PCHC   rules   and  
regulations,   and   pending   arbitration   has   sought   relief   from   the   trial   court   for  
measures  to  safeguard  and/or  conserve  the  subject  of  the  dispute  under  arbitration,  
8   ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020    
A ATTY.  BUSTAMANTE    
ABSR  
 
as  sanctioned  by  section  14  of  the  Arbitration  Law,  and  otherwise  not  shown  to  be  
contrary  to  the  PCHC  rules  and  regulations.  
 
At   this   point,   we   emphasize   that   arbitration,   as   an   alternative   method   of   dispute  
resolution,   is   encouraged   by   this   Court.   Aside   from   unclogging   judicial   dockets,   it  
also  hastens  solutions  especially  of  commercial  disputes.  The  Court  looks  with  favor  
upon   such   amicable   arrangement   and   will   only   interfere   with   great   reluctance   to  
anticipate   or   nullify   the   action   of   the   arbitrator.   Wherefore,   premises   considered,  
the  petition  is  hereby  dismissed  and  the  decision  of  the  court  a  quo  is  affirmed.  
5.  G.R.  No.  141833                        March  26,  2003  
LM  POWER  ENGINEERING  CORPORATION,  petitioner,    
vs.  
CAPITOL  INDUSTRIAL  CONSTRUCTION  GROUPS,  INC.,  respondent.  
PANGANIBAN,  J.:  
 
FACTS:  
LM  Power  Engineering  Corporation  and  Capitol  Industrial  Construction  Groups  Inc.  
entered  into  a  Subcontract  Agreement  involving  electrical  work  at  the  Third  Port  of  
Zamboanga.   Due   to   the   inability   of   the   petitioner   to   procure   materials,   Capitol  
Industrial   took   over   some   of   the   work   contracted   to   the   former.   After   the  
completion   of   the   contract,   petitioner   billed   respondent   in   the   amount   of   P6,  
711,813.90  but  the  respondent  refused  to  pay.  
 
Petitioner  filed  with  the  RTC  of  Makati  a  Complaint  for  the  collection  of  the  amount  
representing   the   alleged   balance   due   it   under   the   subcontract.   Respondent   filed   a  
Motion  to  Dismiss,  alleging  that  the  Complaint  was  premature,  due  to  the  absence  of  
prior  recourse  to  arbitration.  
 
RTC    denied      the  Motion    on    the      ground    that      the    dispute    did  not      involve    the      
interpretation  or      the  implementation  of  the  Agreement  and  was  not  covered  by  the  
arbitral  clause  and  ruled  in  favor  of  the  petitioner.  Respondent  appealed  to  the  CA,  
the   latter   reversed   the   decision   of   the   RTC   and   ordered   the   referral   of   the   case   to  
arbitration.  
 
ISSUE:  
WHETHER  OR  NOT  THERE  IS  A  NEED  FOR  THE  PRIOR  ARBITRATION  BEFORE  
FILING  OF  THE  COMPLAINT  WITH  THE  COURT.  
 
HELD:  YES.  
The  case  at  hand  involves  technical  discrepancies  that  are  better  left  to  an  arbitral  
body  that  has  expertise  in  the  subject  matter.  Moreover,  the  agreement  between  the  
parties   contains   arbitral   clause   that   “any   dispute   or   conflict   as   regards   to  
interpretation   and   implementation   of   this   agreement   which   cannot   be   settled  
between   respondent   and   petitioner   amicably   shall   be   settled   by   means   of  

 
  ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020     9  
  ATTY.  BUSTAMANTE    
ABSR  
   
arbitration”.   The   resolution   of   the   dispute   between   the   parties   herein   requires   a  
referral  to  the  provisions  of  their  agreement.  
 
Within   the   scope   of   the   arbitration   clause   are   discrepancies   as   to   the   amount   of  
advances   and   billable   accomplishments,   the   application   of   the   provision   on  
termination,   and   the   consequent   set-­‐off   of   expenses.     There   is   no   need   for   prior  
request   for   arbitration   by   the   parties   with   the   CIAC   in   order   for   it   to   acquire  
jurisdiction  because  when  a  contract  contains  a  clause  for  the  submission  of  a  future  
controversy   to   arbitration,   it   is   not   necessary   for   the   parties   to   enter   into   a  
submission  agreement  before  the  claimant  may  invoke  the  jurisdiction  of  CIAC.  The  
arbitral  clause  in  the  agreement  is  a  commitment  on  the  part  of  the  parties  to  submit  
to  arbitration  the  disputes  covered  therein.    
 
6.   LUZON   IRON   DEVELOPMENT   GROUP   CORPORATION   AND   CONSOLIDATED  
IRON   SANDS,   LTD.,Petitioners,  v.  BRIDESTONE   MINING   AND   DEVELOPMENT  
CORPORATION   AND   ANACONDA   MINING   AND   DEVELOPMENT  
CORPORATION,  Respondents.  
G.R.  No.  220546,  December  07,  2016  
MENDOZA,  J.:  
 
FACTS:  
On  October  25,  2012,  respondents  Bridestone  Mining  and  Development  Corporation  
(Bridestone)  and  Anaconda  Mining  and  Development  Corporation  (Anaconda)  filed  
separate  complaints  before  the  RTC  for  rescission  of  contract  and  damages  against  
petitioners  Luzon  Iron  Development  Group  Corporation  (Luzon  Iron)  and  
Consolidated  Iron  Sands,  Ltd.  (Consolidated  Iron),  docketed  as  Civil  Case  No.  12-­‐
1053  and  Civil  Case  No.  12-­‐1054,  respectively.  Both  complaints  sought  the  
rescission  of  the  Tenement  Partnership  and  Acquisition  Agreement  (TPAA)4  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  
the  former  in  favor  of  the  latter.  The  complaints  also  sought  the  return  of  the  
Exploration  Permits  to  Bridestone  and  Anaconda.5  
 
Thereafter,  Luzon  Iron  and  Consolidated  Iron  filed  their  Special  Appearance  with  
Motion  to  Dismiss6separately  against  Bridestone's  complaint  and  Anaconda's  
complaint.  Both  motions  to  dismiss  presented  similar  grounds  for  dismissal.  They  
contended  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.  
 
On  December  19,  2012,  the  RTC  ordered  the  consolidation  of  the  two  
cases.7  Subsequently,  Luzon  Iron  and  Consolidated  Iron  filed  their  Special  
Appearance  and  Supplement  to  Motions  to  Dismiss,8  dated  January  31,  2013,  
10   ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020    
ATTY.  BUSTAMANTE    
ABSR  
 
seeking  the  dismissal  of  the  consolidated  cases.  The  petitioners  alleged  that  
Bridestone  and  Anaconda  were  guilty  of  forum  shopping  because  they  filed  similar  
complaints  before  the  Department  of  Environment  and  Natural  Resources  (DENR),  
Mines  and  Geosciences  Bureau,  Regional  Panel  of  Arbitrators  against  Luzon  Iron.  
 
RTC:  Denied  the  motions  to  dismiss,  as  well  as  the  supplemental  motion  to  dismiss,  
finding  that  Consolidated  Iron  was  doing  business  in  the  Philippines,  with  Luzon  
Iron  as  its  resident  agent.  
 
CA:  It  agreed  that  the  court  acquired  jurisdiction  over  the  person  of  Consolidated  
Iron  because  the  summons  may  be  validly  served  through  its  agent  Luzon  Iron,  
considering  that  the  latter  was  merely  the  business  conduit  of  the  former.  The  CA  
also  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  
 
ISSUE:  WHETHER  THE  COURT  OF  APPEALS  ERRED  IN  RULING  THAT  THE  
TRIAL  COURT  HAS  JURISDICTION  OVER  THE  SUBJECT  MATTER  OF  THE  
CONSOLIDATED  CASES  
 
HELD:  YES.  
If,  for  any  reasonable  reason,  the  Parties  cannot  resolve  a  material  fact,  material  
event  or  any  dispute  arising  out  of  or  in  connection  with  this  TPAA,  including  any  
question  regarding  its  existence,  validity  or  termination,  within  90  days  from  its  
notice,  shall  be  referred  to  and  finally  resolved  by  arbitration  in  Singapore  in  
accordance  with  the  Arbitration  Rules  of  the  Singapore  International  Arbitration  
Centre  ("SIAC  Rules")  for  the  time  being  in  force,  which  rules  are  deemed  to  be  
incorporated  by  reference  in  this  clause  15.1.30  
 
The  RTC,  as  the  CA  agreed,  countered  that  Paragraph  14.8  of  the  TPAA  allowed  the  
parties  to  directly  resort  to  courts  in  case  of  a  direct  and/or  blatant  violation  of  the  
provisions  of  the  TPAA.  Paragraph  14.8  stated:  
 
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)  (sic)  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.31  
 
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  

 
  ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020     1
  ATTY.  BUSTAMANTE     1  
ABSR  
   
views  the  interpretation  forwarded  by  the  petitioners  as  more  in  line  with  the  state  
policy  favoring  arbitration.  
 
Paragraphs  14.8  and  15.1  of  the  TPAA  should  be  harmonized  in  such  a  way  that  the  
arbitration  clause  is  given  life,  especially  since  such  construction  is  possible  in  the  
case  at  bench.  A  synchronized  reading  of  the  abovementioned  TPAA  provisions  will  
show  that  a  claim  or  action  raising  the  sufficiency,  validity,  legality  or  
constitutionality  of:  (a)  the  assignments  of  the  EP  to  Luzon  Iron;  (b)  any  other  
assignments  contemplated  by  the  TPAA;  or  (c)  any  agreement  to  which  the  EPs  may  
be  converted,  may  be  instituted  only  when  there  is  a  direct  and/or  blatant  violation  
of  the  TPAA.  In  turn,  the  said  action  or  claim  is  commenced  by  proceeding  with  
arbitration,  as  espoused  in  the  TPAA.  
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.  If  such  
interpretation  is  to  be  espoused,  the  arbitration  clause  would  be  rendered  inutile  as  
practically  all  matters  may  be  directly  brought  before  the  courts.  Such  construction  
is  anathema  to  the  policy  favoring  arbitration.  
 
A  closer  perusal  of  the  TPAA  will  also  reveal  that  paragraph  14  and  all  its  sub-­‐
paragraphs  are  general  provisions,  whereas  paragraphs  15  and  all  its  sub-­‐clauses  
specifically  refer  to  arbitration.  When  general  and  specific  provisions  are  
inconsistent,  the  specific  provision  shall  be  paramount  and  govern  the  general  
provision.34  
 
7. GR.  No.  196072,  September  20,  2017  
STEAMSHIP  MUTUAL  UNDERWRITING  ASSOCIATION  (BERMUDA)  
LIMITED,  Petitioner,  v.  SULPICIO  LINES,  INC.,  Respondent.  
LEONEN,  J.:  
 
FACTS:
An   insured   member   may   be   compelled   to   arbitration   pursuant   to   the   Rules   of   the  
Protection  and  Indemnity  Club,  which  were  incorporated  in  the  insurance  policy  by  
reference.  Where  there  are  multiple  parties,  the  court  must  refer  to  arbitration  the  
parties   covered   by   the   agreement   while   proceeding   with   the   civil   action   against  
those  who  were  not  bound  by  the  arbitration  agreement.  
 
Steamship  was  a  Bermuda-­‐based  Protection  and  Indemnity  Club,  managed  outside  
London,  England.6  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.7  
 
Sulpicio   insured   its   fleet   of   inter-­‐island   vessels   with   Steamship   for   Protection   &  
Indemnity   risks   through   local   insurance   agents,   Pioneer   Insurance   and   Surety  
12   ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020    
ATTY.  BUSTAMANTE    
ABSR  
 
Corporation  (Pioneer  Insurance)  or  Seaboard-­‐Eastern  Insurance  Co.,  Inc.  (Seaboard-­‐
Eastern).8  One   (1)   of   these   vessels   was   the   M/V   Princess   of   the   World,   evidenced   by  
a  Certificate  of  Entry  and  Acceptance  issued  by  Steamship.  
 
On   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.  The  fire  incident  was  
found   by   the   Department   of   Interior   and   Local   Government   to   be   "accidental"   in  
nature.10  
 
Sulpicio   claimed   indemnity   from   Steamship   under   the   Protection   &   Indemnity  
insurance   policy.   Steamship   denied   the   claim   and   subsequently   rescinded   the  
insurance   coverage   of   Sulpicio's   other   vessels   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."11  
 
On   June   28,   2007,   Sulpicio   filed   a   Complaint12  with   the   Regional   Trial   Court   of  
Makati   City   against   Steamship;   one   (1)   of   its   directors,   Gary   Rynsard;   and   its   local  
insurance  agents  Pioneer  Insurance  and  Seaboard-­‐Eastern  for  specific  performance  
and  damages.  This  Complaint  was  docketed  as  Civil  Case  No.  07-­‐577,  was  amended  
on   August   10,   2007,13  and   further   amended   on   September   11,   2007.14  
 
Steamship  filed  its  Motion  to  Dismiss  and/or  to  Refer  Case  to  Arbitration15  pursuant  
to   Republic   Act   No.   9285,   or   the   Alternative   Dispute   Resolution   Act   of   2004   (ADR  
Law),  and  to  Rule  4716  of  the  2005/2006  Club  Rules,  which  supposedly  provided  for  
arbitration  in  London  of  disputes  between  Steamship  and  its  members.17  The  other  
defendants   filed   separate   motions   to   dismiss.18  
 
Branch  149,  Regional  Trial  Court,  Makati  City  denied  the  motions  to  dismiss.  In  its  
July   11,   2008   Order,19  denying   Steamship's   motion   and   supplemental   motion   to  
dismiss   and   citing20European   Resources   and   Technologies,   Inc.   v.   Ingenieuburo  
Birkhann   +   Nolte,   Ingeniurgesellschaft   Gmbh21  the   Regional   Trial   Court   held   that  
"arbitration  [did]  not  appear  to  be  the  most  prudent  action,  .  .  .  considering  that  the  
other   defendants   .   .   .   ha[d]   already   filed   their   [respective]   [a]nswers."22  Steamship  
filed   its   Motion   for   Reconsideration,23  but   it   was   likewise   denied   in   the  
Order24  dated   September   24,   2008.  
 
Steamship  assailed  trial  court  orders  before  the  Court  of  Appeals  through  a  Rule  65  
Petition,  docketed  as  CA-­‐G.R.  SP  No.  106103.25  The  Court     of  Appeals  dismissed  the  
petition  in  its  November  26,  2010  Decision.26  It  found  no  grave  abuse  of  discretion  
on   the   part   of   the   trial   court   in   denying   Steamship's   Motion   to   Dismiss   and/or   to  
Refer   Case   to   Arbitration27  or   any   convincing   evidence   to   show   that   a   valid  
arbitration   agreement   existed   between   the   parties.28  Steamship's   Motion   for  
Reconsideration   of   this   Decision   was   likewise   denied   in   the   Resolution29  dated  
March  10,  2011.  
 
 
  ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020     1
  ATTY.  BUSTAMANTE     3  
ABSR  
   
  
 
ISSUE:   WHETHER   OR   NOT   THERE   IS   A   VALID   AND   BINDING   ARBITRATION  
AGREEMENT   BETWEEN   STEAMSHIP   MUTUAL   UNDERWRITING   (BERMUDA)  
LIMITED  AND  SULPICIO  LINES,  INC  
 
HELD:YES.  
 
It   is   the   State's   policy   to   promote   party   autonomy   in   the   mode   of   resolving  
disputes.126  Under   the   freedom   of   contract   principle,   parties   to   a   contract   may  
stipulate   on   a   particular   method   of   settling   any   conflict   between  
them.127     Arbitration   and   other   alternative   dispute   resolution   methods   like  
mediation,  negotiation,  and  conciliation  are  favored  over  court  action.  Republic  Act  
No.  9285128  expresses  this  policy:  
Section   2.  Declaration   of   Policy.  —   It   is   hereby   declared   the   policy   of   the   State   to  
actively  promote  party  autonomy  in  the  resolution  of  disputes  or  the  freedom  of  the  
parties  to  make  their  own  arrangements  to  resolve  their  disputes.  Towards  this  end,  
the   State   shall   encourage   and   actively   promote   the   use   of   Alternative   Dispute  
Resolution  (ADR)  as  an  important  means  to  achieve  speedy  and  impartial  justice  and  
declog  court  dockets.  As   such,   the   State   shall   provide   means   for   the   use   of   ADR   as   an  
efficient   tool   and   an   alternative   procedure   for   the   resolution   of   appropriate   cases.  
Likewise,  the  State  shall  enlist  active  private  sector  participation  in  the  settlement  of  
disputes   through   ADR.   This   Act   shall   be   without   prejudice   to   the   adoption   by   the  
Supreme   Court   of   any   ADR   system,   such   as   mediation,   conciliation,   arbitration,   or  
any   combination   thereof   as   a   means   of   achieving   speedy   and   efficient   means   of  
resolving   cases   pending   before   all   courts   in   the   Philippines   which   shall  be   governed  
by   such   rules   as   the   Supreme   Court   may   approve   from   time   to   time.   (Emphasis  
supplied)  
 
 
Arbitration,   as   a   mode   of   settling   disputes,   was   already   recognized   in   the   Civil  
Code.129  In   1953,   Republic   Act   No.   876   was   passed,   which   reinforced   domestic  
arbitration   as   a   process   of   dispute   resolution.   Foreign   arbitration   was   likewise  
recognized   through   the   Philippines'   adherence   to   the   United   Nations   Convention   on  
the   Recognition   and   Enforcement   of   Foreign   Arbitral   Awards   of   1958,   otherwise  
known   as   the   New   York   Convention.130  Republic   Act   No.   9285   sets   the   basic  
principles   in   the   enforcement   of   foreign   arbitral   awards   in   the   Philippines.131  
 
Consistent  with  State  policy,  "arbitration  agreements  are  liberally  construed  in  favor  
of  proceeding  to  arbitration."132  Every  reasonable  interpretation  is  indulged  to  give  
effect   to   arbitration   agreements.   Thus,   courts   must   give   effect   to   the   arbitration  
clause   as   much   as   the   terms   of   the   agreement   would   allow.133  "Any   doubt   should   be  
resolved  in  favor  of  arbitration."134  

14   ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020    

ATTY.  BUSTAMANTE    
ABSR  
 
Sulpicio's   acceptance   of   the   Certificate   of   Entry   and   Acceptance   manifests   its  
acquiescence  to  all  its  provisions.  There  is  no  showing  in  the  records  or  in  Sulpicio's  
contentions   that   it   objected   to   any   of   the   terms   in   this   Certificate.   Its   acceptance,  
likewise,   operated   as   an   acceptance   of   the   entire   provisions   of   the   Club   Rules.  
 
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.144  The  arbitration  clause  is  found  in  Rule  47  of  the  2005/2006  Club  Rules  
 
Under  Rule  47,  any  dispute  concerning  the  insurance  afforded  by  Steamship  must  first  be  brought  by  a  claiming  member  to  the  
Directors   for   adjudication.   If   this   member   disagrees   with   the   decision   of   the   Director,   the   dispute   must   be   referred   to  
arbitration   in   London.   Despite   the   member's   disagreement,   the   Managers   of   Steamship   may   refer   the   dispute   to   arbitration  
without  adjudication  of  the  Directors.  This  procedure  must  be  complied  with  before  the  member  can  pursue  legal  proceedings  
against   Steamship.  
 
There  is  no  ambiguity  in  the  terms  and  clauses  of  the  Certificate  of  Entry  Acceptance.  Contrary  to  the  ruling  of  the  Court  of  
Appeals,   the   Certificate   clearly   incorporates   the   entire   Club   Rules—not   only   those   provisions   relating   to   cancellation   and  
alteration   of   the   policy.148  
 
"[W]hen   the   text   of   a   contract   is   explicit   and   leaves   no   doubt   as   to   its   intention,   the   court   may   not   read   into   it   any   other  
intention   that   would   contradict   its   plain   import."149  
 
The  incorporation  of  the  Club  Rules  in  the  insurance  policy  is  without  any  qualification.  This  includes  the  arbitration  clause  
even   if   not   particularly   stipulated.   A   basic   rule   in   construction   is   that   the   entire   contract,   and   each  and   all   of   its   parts,   must   be  
read  together  and  given  effect,  with  all  its  clauses  and  provisions  harmomonized  with  one  another.150  
 

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."151  In   international   commercial   arbitration,152  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.153  
 

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  
 
  ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020     1
  ATTY.  BUSTAMANTE     5  
ABSR  
   
stipulation   on   dispute   resolution   in   this   Certificate.  
 
Furthermore,  as  stated  earlier,  Sulpicio  became  a  member  of  Steamship  by  the  very  
act  of  making  a  contract  of  insurance  with  it.  The  Certificate  of  Entry  and  Acceptance  
issued   by   Steamship   states   that   "[its]   name   has   been   entered   in   the   Register   of  
Members  of  the  Club  as  a  Member."157  Sulpicio  admits  its  membership  and  the  entry  
of   its   vessels   to   Steamship.  
 
 
 
 
 
 
 
8.DEPARTMENT  OF  PUBLIC  WORKS  AND  
HIGHWAYS,  Petitioner,  v.  CMC/MONARK/PACIFIC/HI-­‐TRI  JOINT    
VENTURE,  Respondent.  
G.R.  No.  179732,  September  13,  2017  
LEONEN,J.  
 
FACTS:  
As  the  administrative  agency  tasked  with  resolving  issues  pertaining  to  the  
construction  industry,  the  Construction  Industry  Arbitration  Commission  
enjoys  a  wide  latitude  in  recognition  of  its  technical  expertise  and  experience.  
Its  factual  findings  are,  thus,  accorded  respect  and  even  finality,  particularly  
when  they  are  affirmed  by  an  appellate  court.  
 
This  is  a  Petition  for  Review  on  Certiorari1  assailing  the  Court  of  Appeals  
Decision2  dated  September  20,  2007  in  CA-­‐G.R.  SP  Nos.  88953  and  88911,  which  
affirmed  the  March  1,  2005  Award  of  the  Construction  Industry  Arbitration  
Commission  (CIAC).  
 
On  April  29,  1999,  Republic  of  the  Philippines,  through  the  Department  of  Public  
Works  and  Highways  (DPWH),  and  CMC/Monark/Pacific/Hi-­‐Tri  J.V.  (the  Joint  
Venture)  executed  "Contract  Agreement  for  the  Construction  of  Contract  Package  
6MI-­‐9,  Pagadian-­‐Buug  Section,  Zamboanga  del  Sur,  Sixth  Road  Project,  Road  
Improvement  Component  Loan  No.  1473-­‐PHI"3  (Contract)  for  a  total  contract  
amount  of  P713,330,885.28.4  
 
Parts  I  (General  Conditions  with  forms  of  tender  +  agreement)  and  II  (Conditions  of  
Particular  Application  +  Guidelines  for  Preparation  of  Part  II  Clauses)  of  the  
"Conditions  of  Contract  for  Works  of  Civil  Engineering  Construction  of  the  
Federation  International  Des  Ingenieurs  -­‐  Conseils"  (Conditions  of  Contract)  formed.  
part  of  the  Contract.5  DPWH  hired  BCEOM  French  Engineering  Consultants  to  
16   ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020    
ATTY.  BUSTAMANTE    
ABSR  
 
oversee  the  project.6  
 
On  October  23,  2002,  or  while  the  project  was  ongoing,  the  Joint  Venture's  truck  and  
equipment  were  set  on  fire.  On  March  11,  2003,  a  bomb  exploded  at  Joint  Venture's  
hatching  plant  located  at  Brgy.  West  Boyogan,  Kumalarang,  Zamboanga  del  Sur.  
According  to  reports,  the  bombing  incident  was  caused  by  members  of  the  Moro  
Islamic  Liberation  Front.7  
 
The  Joint  Venture  made  several  written  demands  for  extension  and  payment  of  the  
foreign  component  of  the  Contract.  There  were  efforts  between  the  parties  to  settle  
the  unpaid  Payment  Certificates  amounting  to  P26,737,029.49.  Thus,  only  the  
foreign  component  of  US$358,227.95  was  up  for  negotiations  subject  to  further  
reduction  of  the  amount  on  account  of  payments  subsequently  received  by  the  Joint  
Venture  from  DPWH.8  
 
In  a  letter  dated  September  18,  2003,  BCEOM  French  Engineering  Consultants  
recommended  that  DPWH  promptly  pay  the  outstanding  monies  due  the  Joint  
Venture.9  The  letter  also  stated  that  the  actual  volume  of  the  Joint  Venture's  
accomplishment  was  "2,732m2  of  hardrock  and  4,444m3  of  rippable  rock,"  making  
the  project  80%  complete  when  it  was  halted.10  
 
On  March  3,  2004,  the  Joint  Venture  filed  a  Complaint11  against  DPWH  before  CIAC.  
 
Meanwhile,  on  July  8,  2004,  the  Joint  Venture  sent  a  "Notice  of  Mutual  Termination  
of  Contract",13  to  DPWH  requesting  for  a  mutual  termination  of  the  contract  subject  
of  the  arbitration  case.  This  is  due  to  its  diminished  financial  capability  due  to  
DPWH's  late  payments,  changes  in  the  project  involving  payment  terms,  peace  and  
order  problems,  and  previous  agreement  by  the  parties.  
 
On  July  16,  2004,  then  DPWH  Acting  Secretary  Florante  Soriquez  accepted  the  Joint  
Venture's  request  for  mutual  termination  of  the  contract.14  
 
After  hearing  and  submission  of  the  parties'  respective  memoranda,15  CIAC  
promulgated  an  Award16  on  March  1,  2005,  directing  DPWH  to  pay  the  Joint  Venture  
its  money  claims  plus  legal  interest.  CIAC,  however,  denied  the  Joint  Venture's  claim  
for  price  adjustment  due  to  the  delay  in  the  issuance  of  a  Notice  to  Proceed  under  
Presidential  Decree  
 
CA:  Sustained  CIAC's  Award  with  certain  modifications  and  remanded  the  case  
to  CIAC  for  the  determination  of  the  number  of  days'  extension  that  the  Joint  
Venture  is  entitled  to  and  "the  conversion  rate  in  peso.  
 
ISSUE:  WHETHER  OR  NOT  THE  COURT  OF  APPEALS  GRAVELY  ERRED  IN  
RENDERING  THE  ASSAILED  DECISION  BECAUSE  IT  COMPLETELY  IGNORED,  
OVERLOOKED,  OR  MISAPPRECIATED  FACTS  OF  SUBSTANCE,  WHICH,  IF  DULY  
 
  ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020     1
  ATTY.  BUSTAMANTE     7  
ABSR  
   
CONSIDERED,  WOULD  MATERIALLY  AFFECT  THE  OUTCOME  OF  THE  CASE  
 
HELD:NO.  
CIAC   was   created   under   Executive   Order   No.   1008,   or   the   "Construction   Industry  
Arbitration   Law."   It   was   originally   under   the   administrative   supervision   of   the  
Philippine   Domestic   Construction   Board59  which,   in   turn,   was   an   implementing  
agency  of  the  Construction  Industry  Authority  of  the  Philippines.60  The  Construction  
Industry   Authority   of   the   Philippines   is   presently   a   part   of   the   Department   of   Trade  
and   Industry   as   an   attached   agency.61  
 
CIAC's  specific  purpose  is  the  "early  and  expeditious  settlement  of  disputes"62  in  the  
construction   industry   as   a   recognition   of   the   industry's   role   in   "the   furtherance   of  
national   development   goals."63  
 
Section  4  of  the  Construction  Industry  Arbitration  Law  lays  out  CIAC's  jurisdiction:  
Section   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.  
 
The   jurisdiction   of   the   CIAC   may   include   but   is   not   limited   to   violation   of  
specifications  for  materials  and  workmanship;  violation  of  the  terms  of  agreement;  
interpretation  and/or  application  of  contractual  time  and  delays;  maintenance  and  
defects;  payment,  default  of  employer  or  contractor  and  changes  in  contract  cost.  
 
CIAC's   authority   to   arbitrate   construction   disputes   was   then   incorporated   into   the  
general  statutory  framework  on  alternative  dispute  resolution  through  Republic  Act  
No.  9285,  the  "Alternative  Dispute  Resolution  Act  of  2004".  Section  34  of  Republic  
Act   No.   9285   specifically   referred   to   the   Construction   Industry   Arbitration   Law,  
while  Section  35  confirmed  CIAC's  jurisdiction:  
CHAPTER  6  -­‐  ARBITRATION  OF  CONSTRUCTION  DISPUTES  
 
Section  34.  Arbitration  of  Construction  Disputes:  Governing  Law.  -­‐  The  arbitration  of  
construction   disputes   shall   be   governed   by   Executive   Order   No.   1008,   otherwise  
known   as   the   Constitution   Industry   Arbitration   Law.  
 
Section   35.   Coverage   of   the   Law.   -­‐   Construction   disputes   which   fall   within   the  
original   and   exclusive   jurisdiction   of   the   Construction   Industry   Arbitration  
Commission  (the  "Commission")  shall  include  those  between  or  among  parties  to,  or  
who   are   otherwise   bound   by,   an   arbitration   agreement,   directly   or   by   reference  
whether   such   parties   are   project   owner,   contractor,   subcontractor,   quantity  
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surveyor,   bondsman   or   issuer   of   an   insurance   policy   in   a   construction   project.  
 
The   Commission   shall   continue   to   exercise   original   and   exclusive   jurisdiction   over  
construction  disputes  although  the  arbitration  is  "commercial"  pursuant  to  Section  
21  of  this  Act.  
 
As   a   general   rule,   findings   of   fact   of   CIAC,   a   quasi-­‐judicial   tribunal   which   has  
expertise  on  matters  regarding  the  construction  industry,  should  be  respected  and  
upheld.   In  National  Housing  Authority  v.  First  United  Constructors  Corp.,64  this   Court  
held   that   CIAC's   factual   findings,   as   affirmed   by   the   Court   of   Appeals,   will   not   be  
overturned  except  as  to  the  most  compelling  of  reasons:  
 
As  this  finding  of  fact  by  the  CIAC  was  affirmed  by  the  Court  of  Appeals,  and  it  being  
apparent  that  the  CIAC  arrived  at  said  finding  after  a  thorough  consideration  of  the  
evidence   presented   by   both   parties,   the   same   may   no   longer   be   reviewed   by   this  
Court.  The   all   too-­‐familiar   rule   is   that   the   Court   will   not,   in   a   petition   for   review   on  
certiorari,   entertain   matters   factual   in   nature,   save   for   the   most   compelling   and  
cogent   reasons,   like   when   such   factual   findings   were   drawn   from   a   vacuum   or  
arbitrarily   reached,   or   are   grounded   entirely   on   speculation   or   conjectures,   are  
conflicting   or   are   premised   on   the   supposed   evidence   and   contradicted   by   the  
evidence   on   record   or   when   the   inference   made   is   manifestly   mistaken   or   absurd.  
This  conclusion  is  made  more  compelling  by  the  fact  that  the  CIAC  is  a  quasi-­‐judicial  
body  whose  jurisdiction  is  confined  to  construction  disputes.  Indeed,  settled  is  the  
rule  that  findings  of  fact  of  administrative  agencies  and  quasi-­‐judicial  bodies,  which  
have   acquired   expertise   because   their   jurisdiction   is   confined   to   specific   matters,  
are  generally  accorded  not  only  respect,  but  finality  when  affirmed  by  the  Court  of  
Appeals.65  (Emphasis  supplied)  
 
 
Excluded   from   the   coverage   of   this   law   are   disputes   arising   from   employer-­‐
employee   relationships   which   shall   continue   to   be   covered   by   the   Labor   Code   of   the  
Philippines.  
 
Republic   Act   No.   9184   or   the   "Government   Procurement   Reform   Act,"   recognized  
CIAC's  competence  in  arbitrating  over  contractual  disputes  within  the  construction  
industry:  
 
Section   59.   Arbitration,   Any   and   all   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   Republic   Act   No.   876,   otherwise   known   as   the  
"Arbitration   Law":  Provided,  however,  That,  disputes  that  are  within  the  competence  
of   the   Construction   Industry   Arbitration   Commission   to   resolve   shall   be   referred  
thereto.   The   process   of   arbitration   shall   be   incorporated   as   a   provision   in   the  
contract  that  will  be  executed  pursuant  to  the  provisions  of  this  Act:  Provided,  That  

 
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by   mutual   agreement,   the   parties   may   agree   in   writing   to   resort   to   alternative  
modes  of  dispute  resolution.  (Emphasis  supplied)  
 
CIAC's   authority   to   arbitrate   construction   disputes   was   then   incorporated   into   the  
general   statutory   framework   on   alternative   dispute   resolution   through   Republic   Act  
No.  9285,  the  "Alternative  Dispute  Resolution  Act  of  2004".  Section  34  of  Republic  Act  
No.   9285   specifically   referred   to   the   Construction   Industry   Arbitration   Law,   while  
Section  35  confirmed  CIAC's  jurisdiction.  
 
In   distinguishing   between   commercial   arbitration,   voluntary   arbitration   under  
Article   219(14)   of   the   Labor   Code,66  and   construction   arbitration,  Freuhauf  
Electronics   Philippines   Corporation   v.   Technology   Electronics   Assembly   and  
Management   Pacific67  ruled   that   commercial   arbitral   tribunals   are   purely   ad   hoc  
bodies   operating   through   contractual   consent,   hence,   they   are  not  quasi-­‐judicial  
agencies.  In  contrast,  voluntary  arbitration  under  the  Labor  Code  and  construction  
arbitration   derive   their   authority   from   statute   in   recognition   of   the   public   interest  
inherent   in   their   respective   spheres.   Furthermore,   voluntary   arbitration   under   the  
Labor   Code   and   construction   arbitration   exist   independently   of   the   will   of   the  
contracting  parties:  
 
Voluntary   Arbitrators   resolve   labor   disputes   and   grievances   arising   from   the  
interpretation  of  Collective  Bargaining  Agreements.  These  disputes  were  specifically  
excluded   from   the   coverage   of   both   the   Arbitration   Law   and   the   ADR   Law.  
 
Unlike  purely  commercial  relationships,  the  relationship  between  capital  and  labor  
are   heavily   impressed   with   public   interest.   Because   of   this,   Voluntary   Arbitrators  
authorized  to  resolve  labor  disputes  have  been  clothed  with  quasi-­‐judicial  authority.  
 
On  the  other  hand,  commercial  relationships  covered  by  our  commercial  arbitration  
laws  are  purely  private  and  contractual  in  nature.  Unlike  labor  relationships,  they  do  
not  possess  the  same  compelling  state  interest  that  would  justify  state  interference  
into   the   autonomy   of   contracts.   Hence,   commercial   arbitration   is   a   purely   private  
system   of   adjudication   facilitated   by   private   citizens   instead   of   government  
instrumentalities   wielding   quasi-­‐judicial   powers.  
 
Moreover,   judicial   or   quasi-­‐judicial   jurisdiction   cannot   be   conferred   upon   a   tribunal  
by   the   parties   alone.   The   Labor   Code   itself   confers   subject-­‐matter   jurisdiction   to  
Voluntary   Arbitrators.  
 
Notably,   the   other   arbitration   body   listed   in   Rule   43   -­‐   the   Construction   Industry  
Arbitration   Commission   (CIAC)   -­‐   is   also   a   government   agency   attached   to   the  
Department  of  Trade  and  Industry.  Its  jurisdiction  is  likewise  conferred  by  statute.  By  
contrast,   the   subject   matter   jurisdiction   of   commercial   arbitrators   is   stipulated   by  
the.parties.68  (Emphasis  supplied)  
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8.BASES  CONVERSION  DEVELOPMENT  AUTHORITY  v.  DMCI  PROJECT  
DEVELOPERS    
GR  No.  173137,  Jan  11,  2016  
LEONEN,  J.:  
 
An  arbitration  clause  in  a  document  of  contract  may  extend  to  subsequent  
documents  of  contract  executed  for  the  same  purpose.  Nominees  of  a  party  to  
and  beneficiaries  of  a  contract  containing  an  arbitration  clause  may  become  
parties  to  a  proceeding  initiated  based  on  that  arbitration  clause.  
 
FACTS:  
On  June  10,  1995,  Bases  Conversion  Development  Authority  (BCDA)  entered  into  a  
Joint  Venture  Agreement[1]  with  Philippine  National  Railways  (PNR)  and  other  
foreign  corporations.[2]  
 
Under  the  Joint  Venture  Agreement,  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.[3]  BCDA  shall  establish  North  Luzon  
Railways  Corporation  (Northrail)  for  purposes  of  constructing,  operating,  and  
managing  the  railroad  system.  
 
BCDA  organized  and  incorporated  Northrail.[6]  Northrail  was  registered  with  the  
Securities  and  Exchange  Commission  on  August  22,  1995.[7]  
 
BCDA  invited  investors  to  participate  in  the  railroad  project's  financing  and  
implementation.  Among  those  invited  were  D.M.  Consunji,  Inc.  and  Metro  Pacific  
Corporation.[8]  
 
On  February  8,  1996,  the  Joint  Venture  Agreement  was  amended  to  include  D.M.  
Consunji,  Inc.  and/or  its  nominee  as  party.[9]  Under  the  amended  Joint  Venture  
Agreement,  D.M.  Consunji,  Inc.  shall  be  an  additional  investor  of  Northrail.[10]  It  shall  
subscribe  to  20%  of  the  increase  in  Northrail's  authorized  capital  stock.[11]  
 
On  February  8,  1996,  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.[12]  Under  this  agreement,  the  parties  agreed  that  the  initial  seed  capital  
of  P600  million  shall  be  infused  to  Northrail.[13]  Of  that  amount,  P200  million  shall  
be  D.M.  Consunji,  Inc.'s  share,  which  shall  be  converted  to  equity  upon  NorthraiPs  
privatization.[14]  Later,  D.M.  Consunji,  Inc.'s  share  was  increased  to  P300  million.[15]  
 
Upon  BCDA  and  Northrail's  request,[16]  DMCI  Project  Developers,  Inc.  (DMCI-­‐PDI)  
deposited  P300  million  into  NorthraiPs  account  with  Land  Bank  of  the  
Philippines.[17]  The  deposit  was  made  on  August  7,  1996[18]  for  its  "future  
subscription  of  the  Northrail  shares  of  stocks."[19]  In  NorthraiPs  1998  financial  
 
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statements  submitted  to  the  Securities  and  Exchange  Commission,  this  amount  was  
reflected  as  "Deposits  For  Future  Subscription."[20]  At  that  time,  NorthraiPs  
application  to  increase  its  authorized  capital  stock  was  still  pending  with  the  
Securities  and  Exchange  Commission.[21]  
 
In  letters[22]  dated  April  4,  1997,  D.M.  Consunji,  Inc.  informed  PNR  and  the  other  
parties  that  DMCI-­‐PDI  shall  be  its  designated  nominee  for  all  the  agreements  it  
entered  and  would  enter  with  them  in  connection  with  the  railroad  project.    
 
Later,  Northrail  withdrew  from  the  Securities  and  Exchange  Commission  its  
application  for  increased  authorized  capital  stock.[24]Moreover,  according  to  DMCI-­‐
PDI,  BCDA  applied  for  Official  Development  Assistance  from  Obuchi  Fund  of  
Japan.[25]  This  required  Northrail  to  be  a  100%  government-­‐owned  and  controlled  
corporation.[26]  
 
On  September  27,  2000,  DMCI-­‐PDI  started  demanding  from  BCDA  and  Northrail  the  
return  of  its  P300  million  deposit.[27]  DMCI-­‐PDI  cited  Northrail's  failure  to  increase  
its  authorized  capital  stock  as  reason  for  the  demand.[28]  BCDA  and  Northrail  
refused  to  return  the  deposit.  
 
Upon  BCDA's  request,  the  Office  of  the  Government  Corporate  Counsel  (OGCC)  
issued  Opinion  No.  116,  Series  of  2001[31]  on  June  27,  2001.  The  OGCC  stated  that  
"since  no  increase  in  capital  stock  was  implemented,  it  is  but  proper  to  return  the  
investments  of  both  FBDC  and  DMCI[.]"[32]  
 
In  a  January  19,  2005  letter,[33]  DMCI-­‐PDI  reiterated  the  request  for  the  refund  of  its  
P300  million  deposit  for  future  Northrail  subscription.  
 
On  August  17,  2005,[36]  DMCI-­‐PDI  served  a  demand  for  arbitration  to  BCDA  and  
Northrail,  citing  the  arbitration  clause  in  the  June  10,  1995  Joint  Venture  
Agreement.[37]  BCDA  and  Northrail  failed  to  respond.[38]  
 
DMCI-­‐PDI  filed  before  the  Regional  Trial  Court  of  Makati[39]  a  Petition  to  Compel  
Arbitration[40]  against  BCDA  and  Northrail,  pursuant  to  the  alleged  arbitration  
clause  in  the  Joint  Venture  Agreement.[41]  DMCI-­‐PDI  prayed  for  "an  order  directing  
the  parties  to  proceed  to  arbitration  in  accordance  with  the  terms  and  conditions  of  
the  agreement."[42]  
 
BCDA  filed  a  Motion  to  Dismiss[43]  on  the  ground  that  there  was  no  arbitration  
clause  that  DMCI-­‐PDI  could  enforce  since  DMCI-­‐PDI  was  not  a  party  to  the  Joint  
Venture  Agreement  containing  the  arbitration  clause.[44]  Northrail  filed  a  separate  
Motion  to  Dismiss[45]  on  the  ground  that  the  court  did  not  have  jurisdiction  over  it  
and  that  DMCI-­‐PDI  had  no  cause  for  arbitration  against  it.  
 
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RTC:  The  trial  court  ruled  that  the  arbitration  clause  in  the  Joint  Venture  Agreement  
should  cover  all  subsequent  documents  including  the  amended  Joint  Venture  
Agreement  and  the  Memorandum  of  Agreement.  The  three  (3)  documents  
constituted  one  contract  for  the  formation  and  funding  of  Northrail.[49]  
 
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.  
 
ISSUE:  WHETHER  DMCI-­‐PDI  MAY  COMPEL  BCDA  AND  NORTHRAIL  TO  SUBMIT  
TO  ARBITRATION.  
 
HELD:  YES.  
Arbitration  is  a  mode  of  settling  disputes  between  parties.[75]  Like  many  alternative  
dispute  resolution  processes,  it  is  a  product  of  the  meeting  of  minds  of  parties  
submitting  a  pre-­‐defined  set  of  disputes.  They  agree  among  themselves  to  a  process  
of  dispute  resolution  that  avoids  extended  litigation.  
 
The  state  adopts  a  policy  in  favor  of  arbitration.  Republic  Act  No.  
9285[76]  expresses  this  policy:  
 
 
SEC.  2.  Declaration  of  Policy.  -­‐  It  is  hereby  declared  the  policy  of  the  State  to  
actively  promote  party  autonomy  in  the  resolution  of  disputes  or  the  freedom  
of  the  parties  to  make  their  own  arrangements  to  resolve  their  
disputes.  Towards  this  end,  the  State  shall  encourage  and  actively  promote  the  
use  of  Alternative  Dispute  Resolution  (ADR)  as  an  important  means  to  achieve  
speedy  and  impartial  justice  and  declog  court  dockets.  As  such,  the  State  shall  
provide  means  for  the  use  of  ADR  as  an  efficient  tool  and  an  alternative  
procedure  for  the  resolution  of  appropriate  cases.  Likewise,  the  State  shall  
enlist  active  private  sector  participation  in  the  settlement  of  disputes  through  
ADR.  This  Act  shall  be  without  prejudice  to  the  adoption  by  the  Supreme  Court  
of  any  ADR  system,  such  as  mediation,  conciliation,  arbitration,  or  any  
combination  thereof  as  a  means  of  achieving  speedy  and  efficient  means  of  
resolving  cases  pending  before  all  courts  in  the  Philippines  which  shall  be  
governed  by  such  rules  as  the  Supreme  Court  may  approve  from  time  to  time.  
(Emphasis  supplied)  
 
Our  policy  in  favor  of  party  autonomy  in  resolving  disputes  has  been  reflected  in  our  
laws  as  early  as  1949  when  our  Civil  Code  was  approved.[77]  Republic  Act  No.  
876[78]  later  explicitly  recognized  the  validity  and  enforceability  of  parties'  decision  
to  submit  disputes  and  related  issues  to  arbitration.[79]  
 
Arbitration  agreements  are  liberally  construed  in  favor  of  proceeding  to  
 
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arbitration.[80]  We  adopt  the  interpretation  that  would  render  effective  an  
arbitration  clause  if  the  terms  of  the  agreement  allow  for  such  interpretation.  
Hence,  we  resolve  the  issue  of  whether  DMCI-­‐PDI  may  compel  BCDA  and  Northrail  
to  submit  to  arbitration  proceedings  in  light  of  the  policy  in  favor  of  arbitration.  
 
9. FRUEHAUF  ELECTRONICS  PHILIPPINES  CORPORATION,  Petitioner,    
vs.  
TECHNOLOGY  ELECTRONICS  ASSEMBLY  AND  MANAGEMENT  PACIFIC  
CORPORATION,  Respondent.  
G.R.  No.  204197  
BRION,  J.:  
 
The  fundamental  importance  of  this  case  lies  in  its  delineation  of  the  extent  of  
permissible  judicial  review  over  arbitral  awards.  We  make  this  determination  
from  the  prism  of  our  existing  laws  on  the  subject  and  the  prevailing  state  policy  
to  uphold  the  autonomy  of  arbitration  proceedings.  
 
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   after   the   Board   of  
Investments  (BOI)  withdrew   the   investment   incentives   granted   to   electronic  
industries  based  in  Metro  Manila.  
 
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  (MOA)  on   June   9,   1988.3  Under   the   MOA,   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   contract4  (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  2003,  TEAM  informed  Fruehauf  that  it  would  not  be  renewing  the  lease.  6  

24   ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020    

ATTY.  BUSTAMANTE    
ABSR  
 
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  SPProc.   No.11449  before  the  Regional  Trial  
Court  (RTC)  for  "Submission   of   an   Existing   Controversy   for   Arbitration."  7  It   alleged:  
(1)   that   when   the   lease   expired,   the   property   suffered   from   damage   that   required  
extensive  renovation;  (2)  that  when  the  lease  expired,  TEAM  failed  to  turn  over  the  
premises  and  pay  rent;  and  (3)  that  TEAM  did  not  restore  the  property  to  its  original  
condition  as  required  in  the  contract.  Accordingly,  the  parties  are  obliged  to  submit  
the  dispute  to  arbitration  pursuant  to  the  stipulation  in  the  lease  contract.  
 
RTC: Granted   the   petition   and   directed   the   parties   to   comply   with   the  
arbitration  clause  of  the  contract.  
 
Pursuant   to   the   arbitration   agreement,   the   dispute   was   referred   to   a   three-­‐
member   arbitration   tribunal.   TEAM   and   Fruehauf   appointed   one   member  
each   while   the   Chairman   was   appointed   by   the   first   two   members.   The  
tribunal   was   formally   constituted   ion   September   27,   2004   with   retired   CA  
Justice   Hector   L.   Hofileña,   as   chairman,   retired   CA   Justice   Mariano   M.   Umali  
and  Atty.  Maria  Clara  B.  Tankeh-­‐Asuncion  as  members  
 
The  Arbitral  Award  
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.    
 
The  tribunal  found  that  Fruehauf  made  several  demands  for  the  return  of  the  leased  
premises   before   and   after:   the   expiration   of   the   lease14  and   that   there   was   no  
express   or   implied   renewal   of   the   lease   after   June   9,   2003.   It   recognized   that   the  
sub-­‐lessor,   Capitol,   remained   in   possession   of   the   lease.   However,   relying   on   the  
commentaries  of  Arturo  Tolentino  on  the  subject,  the  tribunal  held  that  it  was  not  
enough  for  lessor  to  simply  vacate  the  leased  property;  it  is  necessary  that  he  place  
the   thing   at   the   disposal   of   the   lessor,   so   that   the   latter   can   receive   it   without   any  
obstacle.  15  
 
For   failing   to   return   the   property'   to   Fruehauf,   TEAM   remained   liable   for   the  
payment   of   rents.   However,   if   it   can   prove   that   Fruehauf   received   rentals   from  
Capitol,  TEAM  can  deduct  these  from  its  liability.  16  Nevertheless,  the  award  of  rent  
and   damages   was   without   prejudice   to   TEAM's   right   to   seek   redress   from   its   sub-­‐
lessee,  Capitol.  17  
 
TEAM   moved   for   reconsideration28  which   the   tribunal   denied.  29  Thus,   TEAM  
petitioned  the  RTC  to  partially  vacate  or  modify  the  arbitral  award.30  It  argued  that  

 
  ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020     2
  ATTY.  BUSTAMANTE     5  
ABSR  
   
the   tribunal   failed   to   properly   appreciate   the   facts   and   the   terms   of   the   lease  
contract.  
 
RTC: found  insufficient   legal   grounds  under   Sections   24   and   25   of   the   Arbitration  
Law  to  modify  or  vacate  the  award.32    
CA:DISMISSED,  BUT  AMENDED  AFTER  MR  
 
The  CA  held  that  Section  29  of  the  Arbitration  Law  does  not  preclude  the  aggrieved  
party  from  resorting  to  other  judicial  remedies.50  Citing  Asset  Privatization  Trust  v.  
Court   of   Appeals,51the   CA   held   that   the   aggrieved   party   may   resort   to   a   petition   for  
certiorari   when   the   R   TC   to   which   the   award   was   submitted   for   confirmation   Has  
acted  without  jurisdiction,  or  with  grave  abuse  of  discretion  and  there  is  no  appeal,  
nor  any  plain,  speedy  remedy  in  the  course  of  law.  
 

ISSUE:  WHAT  ARE  THE  REMEDIES  OR  THE  MODES  OF  APPEAL  AGAINST  AN  
UNFAVORABLE  ARBITRAL  AWARD?  

HELD:  

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.  

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.116  

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  
26   ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020    
ATTY.  BUSTAMANTE    
ABSR  
 
(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.  117  

The   award   may   also   be   vacated   if   an   arbitrator   who   was   disqualified   to   act   willfully  
refrained   from   disclosing   his   disqualification   to   the   parties.  118  Notably,   none   of  
these  grounds  pertain  to  the  correctness  of  the  award  but  relate  to  the  misconduct  of  
arbitrators.  

A  losing  party  is  likewise  precluded  from  resorting  to  certiorari  under  Rule  65  of  the  
Rules   of   Court.  124  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.  

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.  

 
  ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020     2
  ATTY.  BUSTAMANTE     7  
ABSR  
   
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   a   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.  131  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.  132  However,  the  Special  ADR  Rules  only  
took  effect  on  October  30,  2009.  

In   the   present   case,   the   R   TC   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.  133  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.  

12.GERARDO  LANUZA,  JR.  AND  ANTONIO  O.  OLBES,  Petitioners,    

vs.  
BF  CORPORATION,  SHANGRI-­‐LA  PROPERTIES,  INC.,  ALFREDO  C.  RAMOS,  RUFO  
B.  COLAYCO,  MAXIMO  G.  LICAUCO  III,  AND  BENJAMIN  C.  RAMOS,  Respondents.  

G.R.  No.  174938                              October  1,  2014  

LEONEN,  J.:  

28   ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020    

ATTY.  BUSTAMANTE    
ABSR  
 
Corporate  representatives  may  be  compelled  to  submit  to  arbitration  
proceedings  pursuant  to  a  contract  entered  into  by  the  corporation  they  
represent  if  there  are  allegations  of  bad  faith  or  malice  in  their  acts  
representing  the  corporation.  

FACTS:  

In   1993,   BF   Corporation   filed   a   collection   complaint   with   the   Regional   Trial   Court  
against   Shangri-­‐La   and   the   members   of   its   board   of   directors:   Alfredo   C.   Ramos,  
Rufo   B.   Colayco,   Antonio   O.   Olbes,   Gerardo   Lanuza,   Jr.,   Maximo   G.   Licauco   III,   and  
Benjamin  C.  Ramos.  

BF   Corporation   alleged   in   its   complaint   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.  

Shangri-­‐La   had   been   consistent   in   paying   BF   Corporation   in   accordance   with   its  

progress  billing  statements.  

However,  by  October  1991,  Shangri-­‐La  started  defaulting  in  payment.  

BF  Corporation  eventually  completed  the  construction  of  the  buildings.  

Shangri-­‐La   allegedly   took   possession   of   the   buildings   while   still   owing   BF  

Corporation  an  outstanding  balance.[  

BF   Corporation   alleged   that   despite   repeated   demands,   Shangri-­‐La   refused   to   pay  

the  balance  owed  to  it.  

Alfredo   C.   Ramos,   Rufo   B.   Colayco,   Maximo   G.   Licauco   III,   and   Benjamin   C.   Ramos  
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  

In   the   November   18,   1993   order,   the   Regional   Trial   Court   denied   the   motion   to  
suspend  proceedings.  

On   December   8,   1993,   petitioners   filed   an   answer   to   BF   Corporation's   complaint,  

with   compulsory   counterclaim   against   BF   Corporation   and   cross-­‐claim   against  
Shangri-­‐La.  

They  alleged  that  they  had  resigned  as  members  of  Shangri-­‐La's  board  of  directors  
as  of  July  15,  1991.  

 
  ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020     2
  ATTY.  BUSTAMANTE     9  
ABSR  
   
After  the  Regional  Trial  Court  denied...  the  motion  for  reconsideration  

Alfredo   C.   Ramos,   Rufo   B.   Colayco,   Maximo   G.   Licauco   III,   and   Benjamin   Ramos   filed  
a  petition  for  certiorari  with  the  Court  of  

Appeals.  

On   April   28,     1995,   the   Court   of   Appeals   granted   the   petition   for   certiorari   and  
ordered  the  submission  of  the  dispute  to  arbitration.  

Another  issue  arose  after  BF  Corporation  had  initiated  arbitration  proceedings.  BF  
Corporation   and   Shangri-­‐La   failed   to   agree   as   to   the   law   that   should   govern   the  
arbitration  proceedings.  

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.[  

The  Court  of  Appeals  ruled  that  Shangri-­‐La's  directors  were  necessary  parties  
in  the  arbitration  proceedings.  

They   were]   deemed   not   third-­‐parties   to   the   contract   as   they   [were]   sued   for   their  
acts   in   representation   of   the   party   to   the   contract   pursuant   to   Art.   31   of   the  
Corporation   Code,   and   that   as   directors   of   the   defendant   corporation,   [they],   in  
accordance  with  Art.  

1217   of   the   Civil   Code,   stand   to   be   benefited   or   injured   by   the   result   of   the  
arbitration   proceedings,   hence,   being   necessary   parties,   they   must   be   joined   in  
order  to  have  complete  adjudication  of  the  controversy.  

The   Court   of   Appeals   further   ruled   that   "excluding   petitioners   in   the   arbitration  
proceedings  .  .  .  would  be  contrary  to  the  policy  against  multiplicity  of  suits."  

ISSUE:   WHETHER   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:  

30   ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020    

ATTY.  BUSTAMANTE    
ABSR  
 
Because   a   corporation's   existence   is   only   by   fiction   of   law,   it   can   only   exercise   its  
rights   and   powers   through   its   directors,   officers,   or   agents,   who   are   all   natural  
persons.  A  corporation  cannot  sue  or  enter  into  contracts  without  them.  

As  a  general  rule,  therefore,  a  corporation's  representative  who  did  not  personally  

bind  himself  or  herself  to  an  arbitration  agreement  cannot  be  forced  to  participate  
in   arbitration   proceedings   made   pursuant   to   an   agreement   entered   into   by   the  
corporation.  He  or  she  is...  generally  not  considered  a  party  to  that  agreement.  

However,   there   are   instances   when   the   distinction   between   personalities   of  

directors,  officers,  and  representatives,  and  of  the  corporation,  are  disregarded.  We  
call  this  piercing  the  veil  of  corporate  fiction.  

Piercing   the   corporate   veil   is   warranted   when   "[the   separate   personality   of   a  

corporation]  is  used  as  a  means  to  perpetrate  fraud  or  an  illegal  act,  or  as  a  vehicle  
for  the  evasion  of  an  existing  obligation,  the  circumvention  of  statutes,  or  to  confuse  
legitimate...  issues."  

It  is  also  warranted  in  alter  ego  cases  "where  a  corporation  is  merely  a  farce  since  it  
is  a  mere  alter  ego  or  business  conduit  of  a  person,  or  where  the  corporation  is  so  
organized  and  controlled  and  its  affairs  are  so  conducted  as  to  make  it...  merely  an  
instrumentality,  agency,  conduit  or  adjunct  of  another  corporation."  

When   corporate   veil   is   pierced,   the   corporation   and   persons   who   are   normally  
treated  as  distinct  from  the  corporation  are  treated  as  one  person,  such  that  when  
the  corporation  is  adjudged  liable,  these  persons,  too,  become  liable  as  if  they  were  
the  corporation.  

Among   the   persons   who   may   be   treated   as   the   corporation   itself   under   certain  
circumstances  are  its  directors  and  officers.  

13. KOPPEL,  INC.  (formerly  known  as  KPL  AIRCON,  INC.),  Petitioner,    
vs.  
MAKATI  ROTARY  CLUB  FOUNDATION,  INC.,  Respondent.  

G.R.  No.  198075                              September  4,  2013  

PEREZ,  J.:  

FACTS:  
In  1975,  Fedders  Koppel,  Incorporated  (FKI)  bequeathed  a  parcel  of  land  exclusive  
of   improvements   thereon   in   favor   of   Respondent   Makati   Rotary   Club   Foundation,  
Inc.  by  way  of  aconditional  donation.  Respondent  accepted  the  donation  with  all  of  
its   conditions.   On   26   May   1975,   FKI   and   the   Respondent   executed   a   Deed   of  
Donation  evidencing  their  consensus.  

 
  ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020     3
  ATTY.  BUSTAMANTE     1  
ABSR  
   
  
One  of  the  conditions  of  the  donation  required  the  Respondent  to  lease  the  subject  
land   back   to   FKI   under   terms   specified   in   their   Deed   of   Donation.   With   the  
Respondent’s   acceptance   of   the   donation,   a   lease   agreement   between   them   was,  
therefore,   effectively   incorporated   in   the   Deed   of   Donation.  
 

Pertinent   terms   of   such   lease   agreement,   as   provided   in   the   Deed   of   Donation,   were  
as   follows:  
1.   The   period   of   the   lease   is   for   twenty-­‐five   (25)   years,   or   until   the   25   th   of   May  
2.   The   amount   of   rent   to   be   paid   by   FKI   for   the   first   twenty-­‐five   (25)   years   is  
P40,126.00   perannum.  
 
2000;  
 
The   Deed   of   Donation   also   stipulated   that   the   lease   over   the   subject   property   is  
renewable  for  another  period  of  twenty-­‐five  (25)  years  “upon  mutual  agreement”  of  
FKI   and   the   Respondent.   In   which   case,   the   amount   of   rent   shall   be   determined   in  
accordance   with   item   2(g)   of   the   Deed   of   Donation.  
 

In  October  1976,  FKI  and  the  Respondent  executed  an  Amended  Deed  of  Donation  
that   reiterated   the   provisions   of   the   Deed   of   Donation,   including   those   relating   to  
the   lease   of   the   subject   land.  
 

Verily,   by   virtue   of   the   lease   agreement   contained   in   the   Deed   of   Donation   and  
Amended  Deed  of  Donation,  FKI  was  able  to  continue  in  its  possession  and  use  of  the  
subject   land.  
 

Two  (2)  days  before  the  lease  incorporated  in  the  Deed  of  Donation  and  Amended  
Deed   of   Donation   was   set   to   expire,   or   on   23   May   2000,   FKI   and   Respondent  
executed   another   contract   of   lease   (2000   Lease   Contract)  
covering  the  subject  land.  In  this  2000  Lease  Contract,  FKI  and  Respondent  agreed  
on  a  new  five-­‐year  lease  to  take  effect  on  the  26th  of  May  2000,  with  annual  rents  
ranging   from   P4M   for   the   first   year   up   to   P4.9M   for   the  
fifth   year.   The   2000   Lease   Contract   also   contained   an   arbitration   clause   enforceable  
in   the   event   the   parties   come   to   disagreement   about   the   “interpretation,   application  
and   execution”   of   the   lease.  
 

After   the   2000   Lease   Contract   expired,   FKI   and   Respondent   agreed   to   renew   their  
lease  for  another  five  (5)  years.  This  new  lease  (2005  Lease  Contract)  required  FKI  
32   ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020    
ATTY.  BUSTAMANTE    
ABSR  
 
to  pay  a  fixed  annual  rent  of  P4.2M.In  addition  to  paying  the  fixed  rent,  however,  the  
2005   Lease   Contract   also   obligated   FKI   to   make   a   yearly   “donation”   of   money   to   the  
Respondent.  Such  donations  ranged  from  P3M  for  the  first  year  up  to  P3.9M  for  the  
fifth   year.  
 

Notably,  the  2005  Lease  Contract  contained  an  arbitration  clause  similar  to  that  in  
the   2000   Lease   Contract,   to  
wit:  
19.  Governing  Law  –  The  provisions  of  this  [2005  Lease  Contract]  shall  be  governed,  
interpreted   and  
construed   in   all   aspects   in   accordance   with   the   laws   of   the   Republic   of   the  
Philippines.   Any   disagreement   as   to   the   interpretation,   application   or   execution   of  
this   [2005   Lease   Contract]   shall   be   submitted   to   a   board   of   three   (3)   arbitrators  
constituted  in  accordance  with  the  arbitration  law  of  the  Philippines.  The  decision  of  
the   majority   of   the   arbitrators   shall   be   binding   upon   [FKI   and   Respondent].  
(Emphasis  supplied)  

 
From   2005   to   2008,   FKI   faithfully   paid   the   rentals   and   “donations”   due   it   per   the  
2005   Lease   Contract.   But   in   June   of   2008,   FKI   sold   all   its   rights   and   properties  
relative   to   its   business   in   favor   of   herein   Petitioner   Koppel,  
Incorporated.  
 

On  29  August  2008,  FKI  and  Petitioner  executed  an  Assignment  and  Assumption  of  
Lease   and   Donation—  
wherein   FKI,   with   the   conformity   of   the   Respondent,   formally   assigned   all   of   its  
interests  and  obligations  under  the  Amended  Deed  of  Donation  and  the  2005  Lease  
Contract   in   favor   of   Petitioner.  
 

The  following  year,  Petitioner  discontinued  the  payment  of  the  rent  and  “donation”  
under   the   2005Lease  
Contract.  
 
Petitioner’s  refusal  to  pay  such  rent  and  “donation”  emanated  from  its  belief  that  the  
rental   stipulations   of   the   2005   Lease   Contract,   and   even   of   the   2000   Lease   Contract,  
cannot  be  given  effect  because  they  violated  one  of  the  “material  conditions”  of  the  
donation  of  the  subject  land,  as  stated  in  the  Deed  of  Donation  and  Amended  Deed  of  
Donation.  

 
According   to   Petitioner,   the   Deed   of   Donation   and   Amended   Deed   of   Donation  
actually   established   not   only   one   but   two   (2)   lease   agreements   between   FKI   and  
 
  ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020     3
  ATTY.  BUSTAMANTE     3  
ABSR  
   
Respondent,   i.e.,   one   lease   for   the   first   twenty-­‐five   (25)   years   or   from   1975   to   2000,  
and   another   lease   for   the   next   twenty-­‐five   (25)   years   thereafter   or   from   2000   to  
2025.   Both   leases   are   material   conditions   of   the   donation   of   the   subject   land.  
Petitioner   points   out   that   while   a   definite   amount   of   rent   for   the   second   twenty-­‐five  
(25)   year   lease   was   not   fixed   in   the   Deed   of   Donation   and   Amended   Deed   of  
Donation,   both   deeds   nevertheless   prescribed   rules   and  
limitations   by   which   the   same   may   be   determined.   Such   rules   and   limitations   ought  
to   be   observed   in   any   succeeding   lease   agreements   between   Petitioner   and  
Respondent   for   they   are,   in   themselves,   material   conditions   of   the   donation   of   the  
subject   land.   In   this   connection,   Petitioner   cites   item   2(g)   of   the   Deed   of   Donation  
and   Amended   Deed   of   Donation   that   supposedly   limits   the   amount   of   rent   for   the  
lease  over  the  second  twenty-­‐five  (25)  years  to  only  “three  percent  (3%)  of  the  fair  
market  value  of  the  [subject]  land  excluding  the  improvements.    

For   Petitioner   then,   the   rental   stipulations   of   both   the   2000   Lease   Contract   and  
2005   Lease   Contract   cannot   be   enforced   as   they   are   clearly,   in   view   of   their  
exorbitant   exactions,   in   violation   of   the   aforementioned   threshold   in  
item   2(g)   of   the   Deed   of   Donation   and   Amended   Deed   of   Donation.   Consequently,  
Petitioner  insists  that  the  amount  of  rent  it  has  to  pay  thereon  is  and  must  still  be  
governed   by   the   limitations   prescribed   in   the   Deed   of  
Donation   and   Amended   Deed   of   Donation.  
Respondent   then   sent   Demand   Letters   to   Petitioners   notifying   the   latter   of   its  
default,  demanding  for  the  settlement  of  the  rent  and  “donations”  due  for  the  year  
2009.  Respondent  intimated  of  cancelling  the  2005  Lease  Contract  should  Petitioner  
fail  to  settle  the  said  obligations.  In  its  last  sent  Demand  Letter,  Respondent  demand  
Petitioner   to   “immediately   vacate   the   leased   premises”   should   it   fail   to   pay   such  
obligations  within  seven  (7)  days  from  its  receipt  of  the  letter.  Petitioner  refused  to  
comply   with   the   demands   of   the   Respondent.   Instead,   on   30   September   2009,  
Petitioner   filed   with   the   RTC   of   Parañaque   City   a   Complaint   for   the   Rescission   or  
Cancellation   of   the   Deed   of   Donation   and   Amended   Deed   of   Donation   against   the  
Respondent.  
 

On   5   October   2009,   Respondent   filed   an   Unlawful   Detainer   case   against   the  

Petitioner   before   the   MeTC   of  
Parañaque   City.  
 

On  4  November  2009,  Petitioner  filed  an  Answer  with  Compulsory  Counterclaim.In  

it,  Petitioner  reiterated  its  objection  over  the  rental  stipulations  of  the  2005  Lease  
Contract  for  being  violative  of  the  material  conditions  of  the  Deed  of  Donation  and  
Amended   Deed   of   Donation.  
 

34   ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020    

ATTY.  BUSTAMANTE    
ABSR  
 
On   27   April   2010,   the   MeTC   rendered   judgment   in   favor   of   the   Petitioner.   While   the  
MeTC   refused   to   dismiss   the   action   on   the   ground   that   the   dispute   is   subject   to  
arbitration,   it   nonetheless   sided   with   the   Petitioner   with   respect   to   the   issues  
regarding  the  insufficiency  of  the  Respondent’s  demand  and  the  nullity  of  the  2005  
Lease   Contract.  
The   Respondent   appealed   to   the   RTC   which   reversed   the   MeTC’s   decision.  
Aggrieved,  the  Petitioner  appealed  to  the  CA  which  affirmed  the  decision  of  the  RTC.  
 

Hence,   the   present   Petition   for   Review   on   Certiorari   under   Rule   45.  
ISSUE:  
WHETHER   OR   NOT   THE   PRESENT   DISPUTE   IS   ARBITRABLE   UNDER   THE  
ARBITRATION   CLAUSE   OF   THE   2005   LEASE   AGREEMENT  
CONTRACT?  

 
ARGUMENTS:  
At   different   points   in   the   proceedings   of   this   case,   the   following   arguments   were  
offered   against   the   application  
of   the   arbitration   clause   of   the   2005   Lease   Contract:  
1.  The  disagreement  between  the  Petitioner  and  Respondent  is  non-­‐arbitrable  as  it  
will  inevitably  touch  upon  the  issue  of  the  validity  of  the  2005  Lease  Contract.  It  was  
submitted  that  one  of  the  reasons  offered  by  the  Petitioner  in  justifying  its  failure  to  
pay   under   the   2005   Lease   Contract   was   the   nullity   of  
such   contract   for   being   contrary   to   law   and   public   policy.   The   Supreme   Court,   in  
Gonzales   v.   Climax  
 
Mining,   Ltd.   [2005],   held   that   “the   validity   of   contract   cannot   be   subject   of  
arbitration   proceedings”   as   such   questions   are   “legal   in   nature   and   require   the  
application   and   interpretation   of   laws   and   jurisprudence   which   is   necessarily   a  
judicial   function.”  
2.   The   Petitioner   cannot   validly   invoke   the   arbitration   clause   of   the   2005   Lease  
Contract   while,   at   the   same   time,   impugn   such   contract’s   validity.  
3.  Even  assuming  that  it  can  invoke  the  arbitration  clause  whilst  denying  the  validity  
of  the2005  Lease  Contract,  Petitioner  still  did  not  file  a  formal  application  before  the  
MeTC  so  as  to  render  such  arbitration  clause  operational.  Section  24  of  Republic  Act  
No.   9285   requires   the   party   seeking  
arbitration  to  first  file  a  “request”  or  an  application  therefor  with  the  courtnot  later  
than   the   preliminary   conference.  
4.   Petitioner   and   Respondent   already   underwent   JDR   proceedings   before   the   RTC.  
Hence,   a   further   referral   of   the   dispute   to   arbitration   would   only   be   circuitous.  
Moreover,   an   ejectment   case,   in   view   of   its   summary   nature,   already   fulfills   the  
prime   purpose   of   arbitration,   i.e.,   to   provide   parties   in   conflict   with   an   expedient  
method   for   the   resolution   of   their   dispute.   Arbitration   then   would   no   longer   be  

 
  ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020     3
  ATTY.  BUSTAMANTE     5  
ABSR  
   
necessary   in   this   case.  
 

HELD:YES  
None   of   the   above-­‐mentioned   arguments   have   any   merit.   The   MeTC,   RTC   and   CA   all  
erred   in   overlooking   the   significance   of   the   arbitration   clause   incorporated   in   the  
2005   Lease   Contract.   As   the   SC   sees   it,   that   is   a   fatal   mistake.  
 

Hence,   the   Petition   is   GRANTED   and   thus   referring   the   Petitioner   and   the  
Respondent   to   arbitration   pursuant  
to  the  arbitration  clause  of  the  2005  Lease  Contract,  repeatedly  included  in  the  2000  
Lease   Contract   and   in   the  
1976  Amended  Deed  of  Donation.  

 
RATIO  DECIDENDI:  
The  arbitration  clause  of  the  2005  Lease  Contract  stipulates  that  “any  disagreement”  
as  to  the  “interpretation,  application  or  execution”  of  the  2005  Lease  Contract  ought  
to  be  submitted  to  arbitration.  To  the  mind  of  the  
Court,  such  stipulation  is  clear  and  is  comprehensive  enough  so  as  to  include  
virtually  any  kind  of  conflict  or  dispute  that  may  arise  from  the  2005  Lease  
Contractincluding  the  one  that  presently  besets  Petitioner  and  Respondent.  
First.  The  disagreement  between  the  Petitioner  and  Respondent  falls  within  the  all-­‐
encompassing  terms  of  the  arbitration  clause  of  the  2005  Lease  Contract.  While  it  
may  be  conceded  that  in  the  arbitration  of  such  disagreement,  the  validity  of  the  
2005  Lease  Contract,  or  at  least,  of  such  contract’s  rental  stipulations  would  have  to  
be  determined,  the  same  would  not  render  such  disagreement  non-­‐arbitrable.  The  
quotation  from  Gonzales  case  that  was  used  to  justify  the  contrary  position  was  
taken  out  of  context.  
 

The   pivotal   issue   that   confronted   the   Court   in   the   Gonzales   case   was   whether   the  
complaint   for   arbitration   raises   arbitrable   issues   that   the   Panel   of   Arbitrators   of   the  
Mines  and  Geosciences  Bureau  (PA-­‐MGB)  can  take  cognizance  of.  Gonzales  decided  
the  issue  in  the  negative.  In  holding  that  the  PA-­‐MGB  was  devoid  of  any  jurisdiction  
to   take   cognizance   of   the   complaint   for   arbitration,   this   Court   pointed   out   to   the  
provisions   of   R.A.   No.   7942,   or   the  
Mining  Act  of  1995,  which  granted  the  PA-­‐MGB  with  exclusive  original  jurisdiction  
only  over  mining  disputes,  i.e.,  disputes  involving  “rights  to  mining  areas,”  “mineral  
agreements   or   permits,”   and   “surface   owners,  
occupants,  claimholders  or  concessionaires”  requiring  the  technical  knowledge  and  
experience  of  mining  authorities  in  order  to  be  resolved.    

36   ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020    

ATTY.  BUSTAMANTE    
ABSR  
 
Accordingly,   since   the   complaint   for   arbitration   in   Gonzales   did   not  
raise  mining  disputes  as  contemplated  under  R.A.  No.  7942  but  only  issues  relating  
to   the   validity   of   certain   mining   related   agreements,   SC   held   that   such   complaint  
could   not   be   arbitrated   before   the   PA-­‐MGB.   It   is   in   this  
context   that   SC   made   the   pronouncement   now   in   discussion:  
 

Arbitration   before   the   Panel   of   Arbitrators   is   proper   only   when   there   is   a  

disagreement   between   the   parties   as   to   some   provisions   of   the   contract   between  
them,   which   needs   the   interpretation   and   the   application   of   that  
particular   knowledge   and   expertise   possessed   by   members   of   that   Panel.   It   is   not  
proper   when   one   of   the   parties   repudiates   the   existence   or   validity   of   such   contract  
or  agreement  on  the  ground  of  fraud  or  oppression  as  in  this  case.The  validity  of  the  
contract   cannot   be   subject   of   arbitration   proceedings.   Allegations   of   fraud   and  
duress   in   the   execution   of   a   contract   are   matters   within   the   jurisdiction   of   the  
ordinary   courts   of   law.   These   questions   are   legal   in   nature   and   require   the  
application   and   interpretation   of   laws   and   jurisprudence   which   is   necessarily   a  
judicial   function.   (Emphasis   supplied)  
 

SC  in  Gonzales  did  not  simply  base  its  rejection  of  the  complaint  for  arbitration  on  
the  ground  that  the  issue  raised  therein,  i.e.,  the  validity  of  contracts,  is  per  se  non-­‐
arbitrable.   The   real   consideration   behind   the   ruling  
was   the   limitation   that   was   placed   by   R.A.   No.   7942   upon   the   jurisdiction   of   the   PA-­‐
MGB  as  an  arbitral  body.  Gonzales  rejected  the  complaint  for  arbitration  because  the  
issue   raised   therein   is   not   a   mining   dispute   per   R.A.   No.   7942   and   it   is   for   this  
reason,   and   only   for   this   reason,   that   such   issue   is   rendered   nonarbitrable   before  
the  PA-­‐MGB.  As  stated  beforehand,  R.A.  No.  7942  clearly  limited  the  jurisdiction  of  
the   PAMGB   only   to   mining   disputes.  
Much   more   instructive   for   our   purposes,   on   the   other   hand,   is   the   recent   case   of  
Cargill   Philippines,   Inc.   v.   San   Fernando   Regal   Trading,   Inc   [2011].   In   Cargill,   SC  
answered  the  question  of  whether   issues  involving  the  rescission  of  a  contract  are  
arbitrable.  The  respondent  in  Cargill  argued  against  arbitrability,  also  citing  therein  
Gonzales.  After  dissecting  Gonzales,  SC  ruled  in  favor  of  arbitrability.    

Thus,   SC   held:  
Respondent   contends   that   assuming   that   the   existence   of   the   contract   and   the  
arbitration   clause   is   conceded,   the   CA’s   decision   declining   referral   of   the   parties’  
dispute   to   arbitration   is   still   correct.   It   claims   that   its   complaint  
in   the   RTC   presents   the   issue   of   whether   under   the   facts   alleged,   it   is   entitled   to  
rescind  the  contract  with  damages;  and  that  issue  constitutes  a  judicial  question  or  
one   that   requires   the   exercise   of   judicial   function   and   cannot   be   the   subject   of   an  
arbitration   proceeding.   Respondent   cites   our   ruling   in   Gonzales,   wherein   we   held  
that  a  panel  of  arbitrator  is  bereft  of  jurisdiction  over  the  complaint  for  declaration  
of   nullity/or   termination   of   the  
 
  ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020     3
  ATTY.  BUSTAMANTE     7  
ABSR  
   
subject  contracts  on  the  grounds  of  fraud  and  oppression  attendant  to  the  execution  
of   the   addendum   contract   and   the   other   contracts   emanating   from   it,   and   that   the  
complaint   should   have   been   filed   with   the   regular   courts  
as   it   involved   issues   which   are   judicial   in   nature.   Such   argument   is   misplaced   and  
respondent   cannot   rely   on   the   Gonzales   case   to   support   its  
argument.  (Emphasis  ours)  

 
Second.  Petitioner  may  still  invoke  the  arbitration  clause  of  the  2005  Lease  Contract  
notwithstanding   the   fact   that   it   assails   the   validity   of   such   contract.   This   is   due   to  
the   doctrine   of   separability.   Under   the   doctrine   of   separability,   an   arbitration  
agreement   is   considered   as   independent   of   the   main   contract.  
Being   a   separate   contract   in   itself,   the   arbitration   agreement   may   thus   be   invoked  
regardless   of   the   possible   nullity   or   invalidity   of   the   main   contract.  
 

Once  again  instructive  is  Cargill,  wherein  SC  held  that,  as  a  further  consequence  of  
the  doctrine  of  separability,  even  the  very  party  who  repudiates  the  main  contract  
may   invoke   its   arbitration   clause.  
 

Third.  The  operation  of  the  arbitration  clause  in  this  case  is  not  at  all  defeated  by  the  
failure   of   the   Petitioner   to   file   a   formal   “request”   or   application   therefor   with   the  
MeTC.   SC   finds   that   the   filing   of   a   “request”   pursuant   to  
Section  24  of  R.A.  No.  9285  is  not  the  sole  means  by  which  an  arbitration  clause  may  
be   validly   invoked   in   a   pending   suit.  
 

Section  24  of  R.A.  No.  9285  reads:  

SEC.  24.  Referral  to  Arbitration.  –  A  court  before  which  an  action  is  brought  in  a  
matter  which  is  the  subject  matter  of  an  arbitration  agreement  shall,  if  at  least  one  
party  so  requestsnot  later  that  the  pre-­‐trial  conference,  or  upon  the  request  of  both  
parties  thereafter,  refer  the  parties  to  arbitration  unless  it  finds  that  the  arbitration  
agreement  is  null  and  void,  inoperative  or  incapable  of  being  performed.  [Emphasis  
ours;  italics  original]  

 
The  “request”  referred  to  in  the  above  provision  is,  in  turn,  implemented  by  Rules  
4.1  to  4.3  of  A.M.  No.  07-­‐1108-­‐SC  or  the  Special  Rules  of  Court  on  Alternative  
Dispute  Resolution  (Special  ADR  Rules):  

 
RULE  4:  REFERRAL  TO  ADR  
Rule  4.1.  Who  makes  the  request.  –  A  party  to  a  pending  action  filed  in  violation  of  
38   ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020    
ATTY.  BUSTAMANTE    
ABSR  
 
the  arbitration  agreement,  whether  contained  in  an  arbitration  clause  or  in  a  
submission  agreement,  may  request  the  court  to  refer  the  
parties  to  arbitration  in  accordance  with  such  agreement.  
Rule  4.2.  When  to  make  request.  –  (A)  Where  the  arbitration  agreement  exists  
before  the  action  is  filed.  –  The  request  for  referral  shall  be  made  not  later  than  the  
pre-­‐trial  conference.  After  the  pre-­‐trial  conference,  the  court  
will  only  act  upon  the  request  for  referral  if  it  is  made  with  the  agreement  of  all  
parties  to  the  case.  
(B)  Submission  agreement.  –  If  there  is  no  existing  arbitration  agreement  at  the  time  
the  case  is  filed  but  the  parties  subsequently  enter  into  an  arbitration  agreement,  
they  may  request  the  court  to  refer  their  dispute  to  arbitration  at  any  time  during  
the  proceedings.  
Rule  4.3.  Contents  of  request.  –  The  request  for  referral  shall  be  in  the  form  of  a  
motion,  which  shall  state  that  the  dispute  is  covered  by  an  arbitration  agreement.    

Apart  from  other  submissions,  the  movant  shall  attach  to  his  motion  an  authentic  
copy  of  the  arbitration  agreement.  
 
The  request  shall  contain  a  notice  of  hearing  addressed  to  all  parties  specifying  the  
date  and  time  when  it  would  be  heard.  The  party  making  the  request  shall  serve  it  
upon  the  respondent  to  give  him  the  opportunity  to  
file  a  comment  or  opposition  as  provided  in  the  immediately  succeeding  Rule  before  
the  hearing.  [Emphasis  ours;  italics  original]  
 

Attention  must  be  paid,  however,  to  the  salient  wordings  of  Rule  4.1.  It  reads:  “[a]  
party  to  a  pending  action  filed  in  violation  of  the  arbitration  agreement  x  x  x  may  
request  the  court  to  refer  the  parties  to  arbitration  in  
accordance  with  such  agreement.”  
 

In  using  the  word  “may”  to  qualify  the  act  of  filing  a  “request”  under  Section  24  of  
R.A.   No.   9285,   the   Special   ADR   Rules   clearly   did   not   intend   to   limit   the   invocation   of  
an   arbitration   agreement   in   a   pending   suit  
solely   via   such   “request.”   After   all,   non-­‐compliance   with   an   arbitration   agreement   is  
a  valid  defense  to  any  offending  suit  and,  as  such,  may  even  be  raised  in  an  answer  
as   provided   in   our   ordinary   rules   of   procedure.  
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.  
 

 
  ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020     3
  ATTY.  BUSTAMANTE     9  
ABSR  
   
Fourth.  The  fact  that  the  Petitioner  and  Respondent  already  underwent  through  JDR  
proceedings   before   the   RTC,   will   not   make   the   subsequent   conduct   of   arbitration  
between   the   parties   unnecessary   or   circuitous.   The  
JDR   system   is   substantially   different   from   arbitration   proceedings.   The   JDR  
framework   is   based   on   the   processes   of   mediation,   conciliation   or   early   neutral  
evaluation  which  entails  the  submission  of  a  dispute  before  a  “JDR  judge”  who  shall  
merely  “facilitate  settlement”  between  the  parties  in  conflict  or  make  a  “non-­‐binding  
evaluation  or  assessment  of  the  chances  of  each  party’s  case.”  Thus  in  JDR,  the  JDR  
judge  lacks  the  authority  to  render  a  resolution  of  the  dispute  that  is  binding  upon  
the  parties  in  conflict.  In  arbitration,  on  the  other  hand,  the  dispute  is  submitted  to  
an   arbitrator/s—a   neutral   third   person   or   a   group   of   thereof—who   shall   have   the  
authority   to   render   a   resolution   binding   upon   the   parties.  
 

Clearly,  the  mere  submission  of  a  dispute  to  JDR  proceedings  would  not  necessarily  
render  the  subsequent  conduct  of  arbitration  a  mere  surplusage.  The  failure  of  the  
parties   in   conflict   to   reach   an   amicable   settlement  
before  the  JDR  may,  in  fact,  be  supplemented  by  their  resort  to  arbitration  where  a  
binding  resolution  to  the  dispute  could  finally  be  achieved.  This  situation  precisely  
finds   application   to   the   case   at   bench.  
Neither  would  the  summary  nature  of  ejectment  cases  be  a  valid  reason  to  disregard  
the   enforcement   of   the   arbitration   clause   of   the   2005   Lease   Contract.  
Notwithstanding   the   summary   nature   of   ejectment   cases,  
arbitration   still   remains   relevant   as   it   aims   not   only   to   afford   the   parties   an  
expeditious   method   of   resolving   their   dispute.  
 

A  pivotal  feature  of  arbitration  as  an  alternative  mode  of  dispute  resolution  is  that  it  
is,  first  and  foremost,  a  product  of  party  autonomy  or  the  freedom  of  the  parties  to  
“make   their   own   arrangements   to   resolve   their   own  
disputes.”   Arbitration   agreements   manifest   not   only   the   desire   of   the   parties   in  
conflict   for   an   expeditious   resolution   of   their   dispute.   They   also   represent,   if   not  
more  so,  the  parties’  mutual  aspiration  to  achieve  such   resolution  outside  of  judicial  
auspices,  in  a  more  informal  and  less  antagonistic  environment  under  the  terms  of  
their   choosing.   Needless   to   state,   this   critical   feature   can   never   be   satisfied   in   an  
ejectment   case   no   matter  
how   summary   it   may   be.  
 

Legal   Effect   of   the   Application   of   the   Arbitration   Clause  

Since   there   really   are   no   legal   impediments   to   the   application   of   the   arbitration  
clause   of   the   2005   Contract   of  
Lease  in  this  case,  We  find  that  the  instant  unlawful  detainer  action  was  instituted  in  

40   ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020    

ATTY.  BUSTAMANTE    
ABSR  
 
violation   of   such   clause.  
 

The   Law,   therefore,   should   have   governed   the   fate   of   the   parties   and   this   suit:  
R.A.   No.   876  
Section  7.  Stay  of  civil  action.  –  If  any  suit  or  proceeding  be  brought  upon  an  issue  
arising   out   of   an   agreement   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.   [Emphasis  
supplied]  

 
R.A.  No.  9285  
Section  24.  Referral  to  Arbitration.  –  A  court  before  which  an  action  is  brought  in  a  
matter  which  is  the  subject  matter  of  an  arbitration  agreement  shall,  if  at  least  one  
party  so  requests  not  later  that  the  pre-­‐trial  conference,  or  upon  the  request  of  both  
parties  thereafter,  refer  the  parties  to  arbitration  unless  it  finds  that  the  arbitration  
agreement  is  null  and  void,  inoperative  or  incapable  of  being  performed.  [Emphasis  
supplied]  
It  is  clear  that  under  the  law,  the  instant  unlawful  detainer  action  should  have  been  
stayed;  the  Petitioner  and  the  Respondent  should  have  been  referred  to  arbitration  
pursuant  to  the  arbitration  clause  of  the  2005  Lease  Contract.  The  MeTC,  however,  
did  not  do  so  in  violation  of  the  law—which  violation  was,  in  turn,  affirmed  by  the  
RTC  and  Court  of  Appeals  on  appeal.    

The   violation   by   the   MeTC   of   the   clear   directives   under   R.A.   Nos.   876   and   9285  
renders   invalid   all   proceedings   it   undertook   in   the   ejectment   case   after   the   filing   by  
Petitioner   of   its   Answer   with   Counterclaim—the   point   when  
the   Petitioner   and   the   Respondent   should   have   been   referred   to   arbitration.   This  
case   must,   therefore,   be   remanded   to   the   MeTC   and   be   suspended   at   said   point.  
Inevitably,   the   decisions   of   the   MeTC,   RTC   and   the   Court   of   Appeals   must   all   be  
vacated  and  set  aside.  The  Petitioner  and  the  Respondent  must  then  be  referred  to  
arbitration   pursuant   to   the   arbitration   clause   of  
the   2005   Lease   Contract.  
 

14.  KOREA  TECHNOLOGIES  CO.,  LTD.,  petitioner,    

vs.  
HON.  ALBERTO  A.  LERMA,  in  his  capacity  as  Presiding  Judge  of  Branch  256  of  
Regional  Trial  Court  of  Muntinlupa  City,  and  PACIFIC  GENERAL  STEEL  
MANUFACTURING  CORPORATION,  respondents.  

 
  ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020     4
  ATTY.  BUSTAMANTE     1  
ABSR  
   
G.R.  No.  143581                          January  7,  2008  

VELASCO,  JR.,  J.:  

FACTS:    

Petitioner   Korea   Technologies   Co.,   Ltd.   (KOGIES)   is   a   Korean   corporation   which   is  

engaged   in   the   supply   and   installation   of   Liquefied   Petroleum   Gas   (LPG)   Cylinder  
manufacturing   plants,   while   private   respondent   Pacific   General   Steel   Manufacturing  
Corp.   (PGSMC)   is   a   domestic   corporation.   On   March   5,   1997,   PGSMC   and   KOGIES  
executed  a  Contract  whereby  KOGIES  would  set  up  an  LPG  Cylinder  Manufacturing  
Plant  in  Carmona,  Cavite.  The  contract  was  executed  in  the  Philippines.  On  April  7,  
1997,   the   parties   executed,   in   Korea,   an   Amendment   for   Contract   No.   KLP-­‐970301  
dated   March   5,   1997   amending   the   terms   of   payment.   The   contract   and   its  
amendment  stipulated  that  KOGIES  will  ship  the  machinery  and  facilities  necessary  
for   manufacturing   LPG   cylinders   for   which   PGSMC   would   pay   USD   1,224,000.  
KOGIES  would  install  and  initiate  the  operation  of  the  plant  for  which  PGSMC  bound  
itself   to   pay   USD   306,000   upon   the   plants   production   of   the   11-­‐kg.   LPG   cylinder  
samples.  Thus,  the  total  contract  price  amounted  to  USD  1,530,000.  On  October  14,  
1997,  PGSMC  entered  into  a  Contract  of  Lease  with  Worth  Properties,  Inc.  (Worth)  
for   use   of   Worths   5,079-­‐square   meter   property   with   a   4,032-­‐square   meter  
warehouse  building  to  house  the  LPG  manufacturing  plant.  The  monthly  rental  was  
PhP  322,560  commencing  on  January  1,  1998  with  a  10%  annual  increment  clause.  
Subsequently,   the   machineries,   equipment,   and   facilities   for   the   manufacture   of   LPG  
cylinders  were  shipped,  delivered,  and  installed  in  the  Carmona  plant.  PGSMC  paid  
KOGIES   USD   1,224,000.   However,   gleaned   from   the   Certificate   executed   by   the  
parties  on  January  22,  1998,  after  the  installation  of  the  plant,  the  initial  operation  
could   not   be   conducted   as   PGSMC   encountered   financial   difficulties   affecting   the  
supply   of   materials,   thus   forcing   the   parties   to   agree   that   KOGIES   would   be   deemed  
to   have   completely   complied   with   the   terms   and   conditions   of   the   March   5,   1997  
contract.   For   the   remaining   balance   of   USD306,000   for   the   installation   and   initial  
operation   of   the   plant,   PGSMC   issued   two   postdated   checks:   (1)   BPI   Check   No.  
0316412  dated  January  30,  1998  for  PhP  4,500,000;  and  (2)  BPI  Check  No.  0316413  
dated   March   30,   1998   for   PhP   4,500,000.   When   KOGIES   deposited   the   checks,   these  
were  dishonored  for  the  reason  PAYMENT  STOPPED.  Thus,  on  May  8,  1998,  KOGIES  
sent   a   demand   letter   to   PGSMC   threatening   criminal   action   for   violation   of   Batas  
Pambansa   Blg.   22   in   case   of   nonpayment.   On   the   same   date,   the   wife   of   PGSMCs  
President   faxed   a   letter   dated   May   7,   1998   to   KOGIES   President   who   was   then  
staying   at   a   Makati   City   hotel.   She   complained   that   not   only   did   KOGIES   deliver   a  
different   brand   of   hydraulic   press   from   that   agreed   upon   but   it   had   not   delivered  
several  equipment  parts  already  paid  for.  

ISSUE:  WHETHER  OR  NOT  THE  ARBITRATION  CLAUSE  IN  THE  CONTRACT  OF  
THE  PARTIES  SHOULD  GOVERN.  
42   ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020    
ATTY.  BUSTAMANTE    
ABSR  
 
Held:  YES.    

Established   in   this   jurisdiction   is   the   rule   that   the   law   of   the   place   where   the  
contract  is  made  governs.  Lex  loci  contractus.  The  contract  in  this  case  was  perfected  
here   in   the   Philippines.   Therefore,   our   laws   ought   to   govern.   Nonetheless,   Art.   2044  
of   the   Civil   Code   sanctions   the   validity   of   mutually   agreed   arbitral   clause   or   the  
finality  and  binding  effect  of  an  arbitral  award.  Art.  2044  provides,  Any  stipulation  
that   the   arbitrators   award   or   decision   shall   be   final,   is   valid,   without   prejudice   to  
Articles  2038,  2039  and  2040.  

The  arbitration  clause  was  mutually  and  voluntarily  agreed  upon  by  the  parties.  It  
has   not   been   shown   to   be   contrary   to   any   law,   or   against   morals,   good   customs,  
public  order,  or  public  policy.  There  has  been  no  showing  that  the  parties  have  not  
dealt  with  each  other  on  equal  footing.  We  find  no  reason  why  the  arbitration  clause  
should   not   be   respected   and   complied   with   by   both   parties.   In   Gonzales   v.   Climax  
Mining   Ltd.,   we   held   that   submission   to   arbitration   is   a   contract   and   that   a   clause   in  
a  contract  providing  that  all  matters  in  dispute  between  the  parties  shall  be  referred  
to  arbitration  is  a  contract.  Again  in  Del  Monte  Corporation-­‐USA  v.  Court  of  Appeals,  
we   likewise   ruled   that   [t]he   provision   to   submit   to   arbitration   any   dispute   arising  
therefrom  and  the  relationship  of  the  parties  is  part  of  that  contract  and  is  itself  a  
contract.  

Having  said  that  the  instant  arbitration  clause  is  not  against  public  policy,  we  come  
to  the  question  on  what  governs  an  arbitration  clause  specifying  that  in  case  of  any  
dispute  arising  from  the  contract,  an  arbitral  panel  will  be  constituted  in  a  foreign  
country  and  the  arbitration  rules  of  the  foreign  country  would  govern  and  its  award  
shall  be  final  and  binding.  

Thus,   it   can   be   gleaned   that   the   concept   of   a   final   and   binding   arbitral   award   is  
similar  to  judgments  or  awards  given  by  some  of  our  quasi-­‐judicial  bodies,  like  the  
National   Labor   Relations   Commission   and   Mines   Adjudication   Board,   whose   final  
judgments  are  stipulated  to  be  final  and  binding,  but  not  immediately  executory  in  
the  sense  that  they  may  still  be  judicially  reviewed,  upon  the  instance  of  any  party.  
Therefore,  the  final  foreign  arbitral  awards  are  similarly  situated  in  that  they  need  
first  to  be  confirmed  by  the  RTC.  

15. JORGE  GONZALES  and  PANEL  OF  ARBITRATORS,  Petitioners,    

vs.  
CLIMAX  MINING  LTD.,  CLIMAX-­‐ARIMCO  MINING  CORP.,  and  AUSTRALASIAN  
PHILIPPINES  MINING  INC.,Respondents.  

G.R.  No.  161957                          January  22,  2007  

TINGA,  J.:  

 
  ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020     4
  ATTY.  BUSTAMANTE     3  
ABSR  
   
FACTS:  

 This   is   a   consolidation   of   two   petitions   rooted   in   the   same   disputed   Addendum  

Contract  entered  into  by  the  parties.  In  G.R.  No.  161957,  the  Court  in  its  Decision  of  
28   February   2005   denied   the   Rule   45   petition   of   petitioner   Jorge   Gonzales  
(Gonzales).  It  held  that  the  DENR  Panel  of  Arbitrators  had  no  jurisdiction  over  the  
complaint   for   the   annulment   of   the   Addendum   Contract   on   grounds   of   fraud   and  
violation   of   the   Constitution   and   that   the   action   should   have   been   brought   before  
the  regular  courts  as  it  involved  judicial  issues.  Both  parties  filed  separate  motions  
for  reconsideration.  Gonzales  avers  in  his  Motion  for  Reconsideration  that  the  Court  
erred   in   holding   that   the   DENR   Panel   of   Arbitrators   was   bereft   of   jurisdiction,  
reiterating  its  argument  that  the  case  involves  a  mining  dispute  that  properly  falls  
within  the  ambit  of  the  Panels  authority.  Gonzales  adds  that  the  Court  failed  to  rule  
on   other   issues   he   raised   relating   to   the   sufficiency   of   his   complaint   before   the  
DENR   Panel   of   Arbitrators   and   the   timeliness   of   its   filing.   Respondents   Climax  
Mining   Ltd.,   et   al.,   (respondents)   filed   their   Motion   for   Partial   Reconsideration  
and/or  Clarification  seeking  reconsideration  of  that  part  of  the  Decision  holding  that  
the   case   should   not   be   brought   for   arbitration   under   Republic   Act   (R.A.)   No.   876,  
also  known  as  the  Arbitration  Law.  Respondents,  citing  American  jurisprudence  and  
the   UNCITRAL   Model   Law,   argue   that   the   arbitration   clause   in   the   Addendum  
Contract  should  be  treated  as  an  agreement  independent  of  the  other  terms  of  the  
contract,  and  that  a  claimed  rescission  of  the  main  contract  does  not  avoid  the  duty  
to   arbitrate.   Respondents   add   that   Gonzales   argument   relating   to   the   alleged  
invalidity  of  the  Addendum  Contract  still  has  to  be  proven  and  adjudicated  on  in  a  
proper   proceeding;   that   is,   an   action   separate   from   the   motion   to   compel  
arbitration.   Pending   judgment   in   such   separate   action,   the   Addendum   Contract  
remains  valid  and  binding  and  so  does  the  arbitration  clause  therein.  Respondents  
add  that  the  holding  in  the  Decision  that  the  case  should  not  be  brought  under  the  
ambit   of   the   Arbitration   Law   appears   to   be   premised   on   Gonzales   having  
impugn[ed]  the  existence  or  validity  of  the  addendum  contract.  If  so,  it  supposedly  
conveys   the   idea   that   Gonzales   unilateral   repudiation   of   the   contract   or   mere  
allegation   of   its   invalidity   is   all   it   takes   to   avoid   arbitration.   Hence,   respondents  
submit  that  the  courts  holding  that  the  case  should  not  be  brought  under  the  ambit  
of   the   Arbitration   Law   be   understood   or   clarified   as   operative   only   where   the  
challenge  to  the  arbitration  agreement  has  been  sustained  by  final  judgment.  

ISSUE:  WHETHER  OR  NOT  IT  WAS  PROPER  FOR  THE  RTC,  IN  THE  PROCEEDING  
TO   COMPEL   ARBITRATION   UNDER   R.A.   NO.   876,   TO   ORDER   THE   PARTIES   TO  
ARBITRATE  EVEN  THOUGH  THE  DEFENDANT  THEREIN  HAS  RAISED  THE  TWIN  
ISSUES   OF   VALIDITY   AND   NULLITY   OF   THE   ADDENDUM   CONTRACT   AND,  
CONSEQUENTLY,  OF  THE  ARBITRATION  CLAUSE  THEREIN  AS  WELL  

HELD:  YES.    

44   ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020    

ATTY.  BUSTAMANTE    
ABSR  
 
Disputes  do  not  go  to  arbitration  unless  and  until  the  parties  have  agreed  to  abide  
by  the  arbitrators  decision.  Necessarily,  a  contract  is  required  for  arbitration  to  take  
place   and   to   be   binding.   R.A.   No.   876   recognizes   the   contractual   nature   of   the  
arbitration  agreement.  

The  doctrine  of  separability,  or  severability  as  other  writers  call  it,  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  part  comes  to  an  
end.  

The   separability   of   the   arbitration   agreement   is   especially   significant   to   the  

determination   of   whether   the   invalidity   of   the   main   contract   also   nullifies   the  
arbitration   clause.   Indeed,   the   doctrine   denotes   that   the   invalidity   of   the   main  
contract,  also  referred  to  as  the  container  contract,  does  not  affect  the  validity  of  the  
arbitration  agreement.  Irrespective  of  the  fact  that  the  main  contract  is  invalid,  the  
arbitration  clause/agreement  still  remains  valid  and  enforceable.  

The  separability  of  the  arbitration  clause  is  confirmed  in  Art.  16(1)  of  the  UNCITRAL  
Model  Law  and  Art.  21(2)  of  the  UNCITRAL  Arbitration  Rules.  

The   proceeding   in   a   petition   for   arbitration   under   R.A.   No.   876   is   limited   only   to   the  
resolution  of  the  question  of  whether  the  arbitration  agreement  exists.  Second,  the  
separability   of   the   arbitration   clause   from   the   Addendum   Contract   means   that  
validity  or  invalidity  of  the  Addendum  Contract  will  not  affect  the  enforceability  of  
the   agreement   to   arbitrate.   Thus,   Gonzales   petition   for  certiorari  should   be  
dismissed.  

This  brings  us  back  to  G.R.  No.  161957.  The  adjudication  of  the  petition  in  G.R.  No.  
167994   effectively   modifies   part   of   the   Decision   dated   28   February   2005   in   G.R.   No.  
161957.   Hence,   we   now   hold   that   the   validity   of   the   contract   containing   the  
agreement  to  submit  to  arbitration  does  not  affect  the  applicability  of  the  arbitration  
clause  itself.  A  contrary  ruling  would  suggest  that  a  parties  mere  repudiation  of  the  
main  contract  is  sufficient  to  avoid  arbitration.  That  is  exactly  the  situation  that  the  
separability   doctrine,   as   well   as   jurisprudence   applying   it,   seeks   to   avoid.   We   add  
that  when  it  was  declared  in  G.R.  No.  161957  that  the  case  should  not  be  brought  for  
arbitration,  it  should  be  clarified  that  the  case  referred  to  is  the  case  actually  filed  by  
Gonzales  before  the  DENR  Panel  of  Arbitrators,  which  was  for  the  nullification  of  the  
main   contract   on   the   ground   of   fraud,   as   it   had   already   been   determined   that   the  
case  should  have  been  brought  before  the  regular  courts  involving  as  it  did  judicial  
issues.  

16.DEL  MONTE  CORPORATION-­‐USA,  PAUL  E.  DERBY,  JR.,  DANIEL  

COLLINS  and  LUIS  HIDALGO,  petitioners,    
vs.  
 
  ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020     4
  ATTY.  BUSTAMANTE     5  
ABSR  
   
COURT  OF  APPEALS,  JUDGE  BIENVENIDO  L.  REYES  in  his  capacity  as  Presiding  
Judge,  RTC-­‐Br.  74,  Malabon,  Metro  Manila,  MONTEBUENO  MARKETING,  INC.,  
LIONG  LIONG  C.  SY  and  SABROSA  FOODS,  INC.,  respondents.  

G.R.  No.  136154                February  7,  2001  

BELLOSILLO,  J.:  

There   is   no   doubt   that   arbitration   is   valid   and   constitutional   in   our  

jurisdiction.[21]   Even   before   the   enactment   of   RA   876,   this   Court   has  
countenanced   the   settlement   of   disputes   through   arbitration.   Unless   the  
agreement   is   such   as   absolutely   to   close   the...   doors   of   the   courts   against   the  
parties,   which   agreement   would   be   void,   the   courts   will   look   with   favor   upon  
such   amicable   arrangement   and   will   only   interfere   with   great   reluctance   to  
anticipate  or  nullify  the  action  of  the  arbitrator.[22]  Moreover,  as  RA  

876   expressly   authorizes   arbitration   of   domestic   disputes,   foreign   arbitration  

as   a   system   of   settling   commercial   disputes   was   likewise   recognized   when   the  
Philippines   adhered   to   the   United   Nations   "Convention   on   the   Recognition   and  
the  Enforcement  of  Foreign  Arbitral  Awards...  of  1958"  under  the  10  May  1965  
Resolution   No.   71   of   the   Philippine   Senate,   giving   reciprocal   recognition   and  
allowing  enforcement  of  international  arbitration  agreements  between  parties  
of  different  nationalities  within  a  contracting  state  

FACTS:  

In  a  Distributorship  Agreement,  petitioner  Del  Monte  Corporation-­‐USA...  appointed  

Montebueno  Marketing,  Inc.  (MMI)  as  the  sole  and  exclusive  distributor  of  its  Del  
Monte  products  in  the  Philippines  for  a  period  of  five  (5)  years,...  renewable  for  two  
(2)  consecutive  five  (5)  year  periods  with  the  consent  of  the  parties.  The  Agreement  
provided...  for  an  arbitration  clause  which  states  -­‐  

12. GOVERNING  LAW  AND  ARBITRATION[4]  

This  Agreement  shall  be  governed  by  the  laws  of  the  State  of  California  and/or,  
if  applicable,  the  United  States  of  America.  All  disputes  arising  out  of  or  
relating  to  this  Agreement  or  the  parties'  relationship,  including  the  
termination  thereof,  shall  be  resolved  by...  arbitration  in  the  City  of  San  
Francisco,  State  of  California,  under  the  Rules  of  the  American  Arbitration  
Association.  The  arbitration  panel  shall  consist  of  three  members,  one  of  
whom  shall  be  selected  by  DMC-­‐USA,  one  of  whom  shall  be  selected  by  MMI,  
and  third  of  whom  shall...  be  selected  by  the  other  two  members  and  shall  
46   ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020    
ATTY.  BUSTAMANTE    
ABSR  
 
have  relevant  experience  in  the  industry  x  x  x  x...  after  its  appointment,  
private  respondent  MMI  appointed  Sabrosa  Foods,  Inc.  (SFI),  with  the  
approval  of  petitioner  DMC-­‐USA,  as  MMI's  marketing  arm  to  concentrate  on  its  
marketing  and  selling  function  as  well  as  to  manage  its  critical  relationship  
with  the  trade...  private  respondents  MMI,  SFI  and  MMI's  Managing  Director  
Liong  Liong  C.  Sy  (LILY  SY)  filed  a  Complaint[5]  against  petitioners  DMC-­‐USA,  
Paul  E.  Derby,  Jr.,[6]  Daniel  Collins[7]  and  Luis  Hidalgo,[8]  and  Dewey  Ltd.[9]  
before  the  Regional  Trial  Court  of  Malabon,  Metro  Manila.  

On  the  alleged  violations  by  petitioners  of  Arts.  20,[10]  21[11]  and  23[12]  of  
the  Civil  Code.  

According  to  private  respondents,  DMC-­‐USA  products  continued  to  be  brought  into  
the   country   by   parallel   importers   despite   the   appointment   of   private   respondent  
MMI  as  the  sole  and  exclusive  distributor  of  Del  Monte  products  

They   alleged   that   the   products   brought   into   the   country   by   these   importers   were  
aged,  damaged,  fake  or  counterfeit  

Private   respondents   claimed   that   they...   had   exhausted   all   possible   avenues   for   an  
amicable  resolution  and  settlement  of  their  grievances...  petitioners  filed  a  Motion  to  
Suspend   Proceedings[13]   invoking   the   arbitration   clause   in   their   Agreement   with  
private  respondents.  

Trial   court   deferred   consideration   of   petitioners'   Motion   to   Suspend   Proceedings   as  

the   grounds   alleged   therein   did   not   constitute   the   suspension   of   the   proceedings  
considering   that   the   action   was   for     damages   with   prayer  for   the   issuance   of   Writ   of  
Preliminary  Attachment  and  not  on  the  Distributorship  Agreement.  

The  Motion  to  Suspend  Proceedings  was  denied  by  the  trial  court  

On  appeal,  the  Court  of  Appeals  affirmed  the  decision  of  the  trial  court.  

Motion   for   Reconsideration   of   the   affirmation   was   denied.   Hence,   this   Petition   for  
Review.  

Petitioners  contend  that  the  subject  matter  of  private  respondents'  causes  of  action  
arises   out   of   or   relates   to   the   Agreement   between   petitioners   and   private  
respondents.   Thus,   considering   that   the   arbitration   clause   of   the   Agreement  
provides  that  all  disputes  arising  out  of  or...  relating  to  the  Agreement  or  the  parties'  
relationship,  including  the  termination  thereof,  shall  be  resolved  by  arbitration,  they  
insist  on  the  suspension  of  the  proceedings  in  Civil  Case  No.  2637-­‐MN  as  mandated  
by  Sec.  7  of  RA  876  

 
  ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020     4
  ATTY.  BUSTAMANTE     7  
ABSR  
   
Private  respondents  claim,  on  the  other  hand,  that  their  causes  of  action  are  rooted  
in  Arts.  20,  21  and  23  of  the  Civil  Code,[19]  the  determination  of  which  demands  a  
full  blown  trial  

Private   respondents   further   contend   that   the   arbitration   clause   centers   more   on  
venue  rather  than  on  arbitration.  

They  insist  that  the  filing  of  the  petition  to  compel  arbitration  in  the  United  States  
made   the   petition   filed   before...   this   Court   an   alternative   remedy   and,   in   a   way,   an  
abandonment   of   the   cause   they   are   fighting   for   here   in   the   Philippines,   thus  
warranting  the  dismissal  of  the  present  petition  before  this  Court.  

ISSUE:  WHETHER  THE  DISPUTE  BETWEEN  THE  PARTIES  WARRANTS  AN  

ORDER  COMPELLING  THEM  TO  SUBMIT  TO  ARBITRATION  

HELD:  YES.  

A   careful   examination   of   the   instant   case   shows   that   the   arbitration   clause   in   the  
Distributorship   Agreement   between   petitioner   DMC-­‐USA   and   private   respondent  
MMI  is  valid  and  the  dispute  between  the  parties  is  arbitrable.  However,  this  Court  
must  deny  the  petition.  

The   Agreement   between   petitioner   DMC-­‐USA   and   private   respondent   MMI   is   a  

contract.  The  provision  to  submit  to  arbitration  any  dispute  arising  therefrom  and  
the   relationship   of   the   parties   is   part   of   that   contract   and   is   itself   a   contract.   As   a  
rule,   contracts   are   respected   as...   the   law   between   the   contracting   parties   and  
produce  effect  as  between  them,  their  assigns  and  heirs.  

Clearly,   only   parties   to   the   Agreement,   i.e.,   petitioners   DMC-­‐USA   and   its   Managing  
Director   for   Export   Sales   Paul   E.   Derby,   Jr.,   and   private...   respondents   MMI   and   its  
Managing  Director  LILY  SY  are  bound  by  the  Agreement  and  its  arbitration  clause  as  
they  are  the  only  signatories  thereto.  

Petitioners  Daniel  Collins  and  Luis  Hidalgo,  and  private  respondent  SFI,  not  parties  
to   the   Agreement   and   cannot   even   be   considered...   assigns   or   heirs   of   the   parties,  
are   not   bound   by   the   Agreement   and   the   arbitration   clause   therein.   Consequently,  
referral   to   arbitration   in   the   State   of   California   pursuant   to   the   arbitration   clause  
and   the   suspension   of   the   proceedings   in   Civil   Case   No.   2637-­‐MN   pending   the...  
return  of  the  arbitral  award  could  be  called  for[25]  but  only  as  to  petitioners  DMC-­‐
USA  and  Paul  E.  Derby,  Jr.,  and  private  respondents  MMI  and  LILY  SY,  and  not  as  to  
the  other  parties  in  this  case...  only  parties  to  the  Agreement,  their  assigns  or  heirs  
have   the   right   to   arbitrate   or   could   be   compelled   to...   arbitrate.   The   Court   went  
further   by   declaring   that   in   recognizing   the   right   of   the   contracting   parties   to  
arbitrate  or  to  compel  arbitration,  the  splitting  of  the  proceedings  to  arbitration  as  
48   ALTERNATIVE  DISPUTE  RESOLUTION  CASE  DIGEST  A.Y.  2019-­‐2020    
ATTY.  BUSTAMANTE    
ABSR  
 
to  some  of  the  parties  on  one  hand  and  trial  for  the  others  on  the  other  hand,  or  the...  
suspension  of  trial  pending  arbitration  between  some  of  the  parties,  should  not  be  
allowed   as   it   would,   in   effect,   result   in   multiplicity   of   suits,   duplicitous   procedure  
and  unnecessary  delay  

The  object  of  arbitration  is  to  allow  the  expeditious  determination  of  a  dispute.[31]  
Clearly,   the   issue   before   us   could   not   be   speedily   and   efficiently   resolved   in   its  
entirety   if   we   allow   simultaneous   arbitration   proceedings   and   trial,   or   suspension  
of...   trial   pending   arbitration.   Accordingly,   the   interest   of   justice   would   only   be  
served   if   the   trial   court   hears   and   adjudicates   the   case   in   a   single   and   complete  
proceeding  

Principles:  

There   is   no   doubt   that   arbitration   is   valid   and   constitutional   in   our   jurisdiction.[21]  

Even  before  the  enactment  of  RA  876,  this  Court  has  countenanced  the  settlement  of  
disputes   through   arbitration.   Unless   the   agreement   is   such   as   absolutely   to   close  
the...   doors   of   the   courts   against   the   parties,   which   agreement   would   be   void,   the  
courts  will  look  with  favor  upon  such  amicable  arrangement  and  will  only  interfere  
with   great   reluctance   to   anticipate   or   nullify   the   action   of   the   arbitrator.[22]  
Moreover,  as  RA  

876   expressly   authorizes   arbitration   of   domestic   disputes,   foreign   arbitration   as   a  

system   of   settling   commercial   disputes   was   likewise   recognized   when   the  
Philippines  adhered  to  the  United  Nations  "Convention  on  the  Recognition  and  the  
Enforcement   of   Foreign   Arbitral   Awards...   of   1958"   under   the   10   May   1965  
Resolution   No.   71   of   the   Philippine   Senate,   giving   reciprocal   recognition   and  
allowing   enforcement   of   international   arbitration   agreements   between   parties   of  
different  nationalities  within  a  contracting  state  

17. SEA-­‐LAND  SERVICE,  INC.,  petitioner,    

vs.  
COURT  OF  APPEALS,  A.P.  MOLLER/MAERSK  LINE  and  MAERSK-­‐TABACALERA  
SHIPPING  AGENCY  (FILIPINAS),  INC.,  respondents.  

G.R.  No.  126212                          March  2,  2000  

YNARES-­‐SANTIAGO,  J.:  

FACTS:  

On  April  29,  1991,  petitioner  Sea-­‐Land  Services,  Inc.  and  private  respondent  A.P.  
Moller/Maersk  Line  (hereinafter  referred  to  as  "AMML"),  both  carriers  of  cargo  in  
containerships  as  well  as  common  carriers,  entered  into  a  contract  entitled,  "Co-­‐
operation  in  the  Pacific"2  (hereinafter  referred  to  as  the  "Agreement"),  a  vessel  
 
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sharing  agreement  whereby  they  mutually  agreed  to  purchase,  share  and  exchange  
needed  space  for  cargo  in  their  respective  containerships.  Under  the  Agreement,  
they  could  be,  depending  on  the  occasion,  either  a  principal  carrier  (with  a  
negotiable  bill  of  lading  or  other  contract  of  carriage  with  respect  to  cargo)  or  a  
containership  operator  (owner,  operator  or  charterer  of  containership  on  which  the  
cargo  is  carried).  

During  the  lifetime  of  the  said  Agreement,  or  on  18  May  1991,  Florex  International,  
Inc.  (hereinafter  referred  to  as  "Florex")  delivered  to  private  respondent  AMML  
cargo  of  various  foodstuffs,  with  Oakland,  California  as  port  of  discharge  and  San  
Francisco  as  place  of  delivery.  The  corresponding  Bill  of  Lading  No.  MAEU  
MNL110263  was  issued  to  Florex  by  respondent  AMML.  Pursuant  to  the  Agreement,  
respondent  AMML  loaded  the  subject  cargo  on  MS  Sealand  Pacer,  a  vessel  owned  by  
petitioner.  Under  this  arrangement,  therefore,  respondent  AMML  was  the  principal  
carrier  while  petitioner  was  the  containership  operator.  

The  consignee  refused  to  pay  for  the  cargo,  alleging  that  delivery  thereof  was  
delayed.  Thus,  on  June  26,  1992,  Florex  filed  a  complaint  against  respondent  
Maersk-­‐Tabacalera  Shipping  Agency  (Filipinas),  Inc.  for  reimbursement  of  the  value  
of  the  cargo  and  other  charges.3  According  to  Florex,  the  cargo  was  received  by  the  
consignee  only  on  June  28,  1991,  since  it  was  discharged  in  Long  Beach,  California,  
instead  of  in  Oakland,  California  on  June  5,  1991  as  stipulated.  

ISSUE:  WHETHER  OR  NOT  THE  COURT  OF  APPEALS  DISREGARDED  AN  
AGREEMENT  TO  ARBITRATE  IN  VIOLATION  OF  STATUTE  AND  SUPREME  
COURT  DECISIONS  HOLDING  THAT  ARBITRATION  IS  A  CONDITION  
PRECEDENT  TO  SUIT  WHERE  SUCH  AN  AGREEMENT  TO  ARBITRATE  EXISTS.  

HELD:  YES  

To  begin  with,  allowing  respondent  AMML's  Third  Party  Claim  against  petitioner  to  
proceed  would  be  in  violation  of  Clause  16.2  of  the  Agreement.  As  summarized,  the  
clause  provides  that  whatever  dispute  there  may  be  between  the  Principal  Carrier  
and  the  Containership  Operator  arising  from  contracts  of  carriage  shall  be  governed  
by   the   provisions   of   the   bills   of   lading   deemed   issued   to   the   Principal   Carrier   by   the  
Containership   Operator.   On   the   other   hand,   to   sustain   the   Third   Party   Complaint  
would  be  to  allow  private  respondent  to  hold  petitioner  liable  under  the  provisions  
of  the  bill  of  lading  issued  by  the  Principal  Carrier  to  Florex,  under  which  the  latter  
is   suing   in   its   Complaint,   not   under   the   bill   of   lading   petitioner,   as   containership  
operator,   issued   to   respondent   AMML,   as   Principal   Carrier,   contrary   to   what   is  
contemplated  in  Clause  16.2.  

The  Court  of  Appeals  ruled  that  the  terms  of  the  Agreement  "explicitly  required  that  
the   principal   carrier's   claim   against   the   containership   operator   first   be   finally  
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determined   by,   among   others,   a   court   judgment,   before   the   right   to   arbitration  
accrues."  However,  the  Court  of  Appeals  failed  to  consider  that,  precisely,  arbitration  
is   the   mode   by   which   the   liability   of   the   Containership   Operator   may   be   finally  
determined.   This   is   clear   from   the   mandate   of   Clause   16.3   that   "(T)he   Principal  
Carrier   shall   have   the   right   to   seek   damages   and/or   an   indemnity   from   the  
Containership   Operator  by   arbitration"   and   that   it   "shall   be   entitled   to   commence  
such   arbitration   at   any   time   until   one   year  after   its   liability   has   been   finally  
determined  by  agreement,  arbitration  award  or  judgment".  

For  respondent  Court  of  Appeals  to  say  that  the  terms  of  the  contract  do  not  require  
arbitration  as  a  condition  precedent  to  judicial  action  is  erroneous.  In  the  light  of  the  
Agreement  clauses  aforequoted,  it  is  clear  that  arbitration  is  the  mode  provided  by  
which   respondent   AMML   as   Principal   Carrier   can   seek   damages   and/or   indemnity  
from  petitioner,  as  Containership  Operator.  Stated  differently,  respondent  AMML  is  
barred   from   taking   judicial   action   against   petitioner   by   the   clear   terms   of   their  
Agreement.  

As   the   Principal   Carrier   with   which   Florex   directly   dealt   with,   respondent   AMML  
can  and  should  be  held  accountable  by  Florex  in  the  event  that  it  has  a  valid  claim  
against   the   former.   Pursuant   to   Clause   16.3   of   the   Agreement,   respondent   AMML,  
when  faced  with  such  a  suit  "shall  use  all  reasonable  endeavours  to  defend"  itself  or  
"settle   such   suits   for   as   low   a   figure   as   reasonably   possible".   In   turn,   respondent  
AMML   can   seek   damages   and/or   indemnity   from   petitioner   as   Containership  
Operator   for   whatever   final   judgment   may   be   adjudged   against   it   under   the  
Complaint   of   Florex.   The   crucial   point   is   that   collection   of   said   damages   and/or  
indemnity  from  petitioner  should  be  by  arbitration.  

All  told,  when  the  text  of  a  contract  is  explicit  and  leaves  no  doubt  as  to  its  intention,  
the   court   may   not   read   into   it   any   other   intention   that   would   contradict   its   plain  
import.  11  Arbitration   being   the   mode   of   settlement   between   the   parties   expressly  
provided   for   by   their   Agreement,   the   Third   Party   Complaint   should   have   been  
dismissed.  

This  Court  has  previously  held  that  arbitration  is  one  of  the  alternative  methods  of  
dispute   resolution   that   is   now   rightfully   vaunted   as   "the   wave   of   the   future"   in  
international   relations,   and   is   recognized   worldwide.   To   brush   aside   a   contractual  
agreement  calling  for  arbitration  in  case  of  disagreement  between  the  parties  would  
therefore  be  a  step  backward.  12  

18.  MAGELLAN  CAPITAL  MANAGEMENT  CORPORATION  and  MAGELLAN  

CAPITAL  HOLDINGS  CORPORATION,  petitioners,    
vs.  
ROLANDO  M.  ZOSA  and  HON.  JOSE  P.  SOBERANO,  JR.,  in  his  capacity  as  
Presiding  Judge  of  Branch  58  of  the  Regional  Trial  Court  of  Cebu,  7th  Judicial  
Region,  respondents.  
 
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G.R.  No.  129916                        March  26,  2001  

BUENA,  J.  

FACTS:  

Under  a  management  agreement  entered  into,  MCHC  appointed  MCMC  as  manager  
for   the   operation   of   its   business   and   affairs.   Pursuant   thereto,   petitioners   and  
private   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  to  which  he  communicated  his  resignation  on  the  ground  that  it  had  
less  responsibility  and  scope  and  demanded  that  he  be  given  termination  benefits  as  
provided   in   the   Employment   Agreement.   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.  However,  
instead   of   submitting   the   dispute   to   arbitration,   respondent   filed   an   action   for  
damages   against   petitioners   before   the   RTC.   Petitioners’s   motion   to   dismiss   was  
denied.  Petitioners  filed  a  petition  for  certiorari  and  prohibition  in  the  CA  to  which  it  
was   given   due   course.   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.   Petitioners   then   filed   this   petition   for  
review  on  certiorari.  

ISSUE:  WHETHER  OR  NOT  THE  ARBITRATION  CLAUSE  IN  THE  EMPLOYMENT  
AGREEMENT  IS  PARTIALLY  VOID  AND  OF  NO  EFFECT.  

HELD:  

We  rule  against  the  petitioners.  

Even  if  procedural  rules  are  disregarded,  and  a  scrutiny  of  the  merits  of  the  case  is  
undertaken,  this  Court  finds  the  trial  court’s  observations  on  why  the  composition  of  
the   panel   of   arbitrators   should   be   voided,   incisively   correct   so   as   to   merit   our  
approval.  Thus,  

“From   the   memoranda   of   both   sides,   the   Court   is   of   the   view   that   the   defendants  
[petitioner]  MCMC  and  MCHC  represent  the  same  interest.  There  is  no  quarrel  that  
both   defendants   are   entirely   two   different   corporations   with   personalities   distinct  
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and  separate  from  each  other  and  that  a  corporation  has  a  personality  distinct  and  
separate  from  those  persons  composing  the  corporation  as  well  as  from  that  of  any  
other   legal   entity   to   which   it   may   be   related.    But   as   the   defendants   [herein  
petitioner]  represent  the  same  interest,  it  could  never  be  expected,  in  the  arbitration  
proceedings,  that  they  would  not  protect  and  preserve  their  own  interest,  much  less,  
would   both   or   either   favor   the   interest   of   the   plaintiff.   The   arbitration   law,   as   all  
other   laws,   is   intended   for   the   good   and   welfare   of   everybody.   In   fact,   what   is   being  
challenged   by   the   plaintiff   herein   is   not   the   law   itself   but   the   provision   of   the  
Employment   Agreement   based   on   the   said   law,   which   is   the   arbitration   clause   but  
only  as  regards  the  composition  of  the  panel  of  arbitrators.  

“From   the   foregoing   arbitration   clause,   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].  
Hence,   apparently,   plaintiff   [defendant]   would   never   get   or   receive   justice   and  
fairness  in  the  arbitration  proceedings  from  the  panel  of  arbitrators  as  provided  in  
the   aforequoted   arbitration   clause.   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.   Accordingly,  
the   arbitration   clause,   insofar   as   the   composition   of   the   panel   of   arbitrators   is  
concerned   should   be   declared   void   and   of   no   effect,   because   the   law   says,   “Any  
clause  giving  one  of  the  parties  power  to  choose  more  arbitrators  than  the  other  is  
void  and  of  no  effect”  (Article  2045,  Civil  Code).  

“The   dispute   or   controversy   between   the   defendants   (MCMC   and   MCHC)   [herein  
petitioners]  and  the  plaintiff  [herein  defendant]  should  be  settled  in  the  arbitration  
proceeding  in  accordance  with  the  Employment  Agreement,  but  under  the  panel  of  
three  (3)  arbitrators,  one  (1)  arbitrator  to  represent  the  plaintiff,  one  (1)  arbitrator  
to  represent  both  defendants  (MCMC  and  MCHC)  [herein  petitioners]  and  the  third  
arbitrator   to   be   chosen   by   the   plaintiff   [defendant   Zosa]   and   defendants  
[petitioners].  

We  need  only  to  emphasize  in  closing  that  arbitration  proceedings  are  designed  to  
level  the  playing  field  among  the  parties  in  pursuit  of  a  mutually  acceptable  solution  
to   their   conflicting   claims.   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.  Wherefore,  premises  considered,  the  
petition  is  hereby  dismissed  and  the  decision  of  the  trial  court  is  affirmed.  

 
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19.  CARGILL  PHILIPPINES,  INC.,  petitioner,  vs.  SAN  FERNANDO  REGALA  
TRADING,  INC.,  respondent.    
G.R.  No.  175404,  January  31,  2011  
PERALTA,  J.:    
 
FACTS:    
Respondent   San   Fernando   Regala   Trading   filed   with   the   RTC   of   Makati   City   a  
Complaint   for   Rescission   of   Contract   with   Damages   against   petitioner   Cargill.   It  
alleged   that   it   agreed   that   it   would   purchase   from   Cargill   12,000   metric   tons   of  
Thailand   origin   cane   blackstrap   molasses   and   that   the   payment   would   be   by   an  
Irrevocable   Letter   of   Credit   payable   at   sight.   The   parties   agreed   that   the   delivery  
would   be   made   in   April/May.   Cargill   failed   to   comply   with   its   obligations   despite  
demands  from  respondent.  The  respondent  then  filed  for  rescission.  The  petitioner  
filed  a  Motion  to  Dismiss/Suspend  proceeding,  arguing  that  they  must  first  resort  to  
arbitration   as   stated   in   their   agreement   before   going   to   court.   However,   the   RTC  
ruled  in  favor  of  the  respondent.  The  CA  affirmed  the  RTC  decision,  adding  that  the  
case  cannot  be  brought  under  the  Arbitration  Law  for  the  purpose  of  suspending  the  
proceedings   before   the   RTC,   since   in   its   Motion   to   Dismiss/Suspend   proceedings,  
petitioner  alleged,  as  one  of  the  grounds  thereof,  that  the  subject  contract  between  
the   parties   did   not   exist   or   it   was   invalid;   that   the   said   contract   bearing   the  
arbitration  clause  was  never  consummated  by  the  parties,  thus,  it  was  proper  that  
such  issue  be  first  resolved  by  the  court  through  an  appropriate  trial;  that  the  issue  
involved  a  question  of  fact  that  the  RTC  should  first  resolve.  
 
 ISSUE:   WHETHER   THE   CA   ERRED   IN   FINDING   THAT   THIS   CASE   CANNOT   BE  
BROUGHT   UNDER   THE   ARBITRATION   LAW   FOR   THE   PURPOSE   OF  
SUSPENDING  THE  PROCEEDINGS  IN  THE  RTC.  
 
HELD:    
The  petition  is  meritorious.  CIVIL  LAW  -­‐  Arbitration;  alternative  dispute  resolution;  
contracts   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.  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   validity   of   the   contract   containing   the  
agreement  to  submit  to  arbitration  does  not  affect  the  applicability  of  the  arbitration  
clause  itself.  A  contrary  ruling  would  suggest  that  a  party's  mere  repudiation  of  the  
main  contract  is  sufficient  to  avoid  arbitration.  That  is  exactly  the  situation  that  the  
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separability   doctrine,   as   well   as   jurisprudence   applying   it,   seeks   to   avoid.   Petition   is  
GRANTED.  

20.RCBC  CAPITAL  CORPORATION,  Petitioners,    

vs.  
BANCO  DE  ORO  UNIBANK,  INC.,  Respondent.  

G.R.  No.  196171                              December  10,  2012  

VILLARAMA,  JR.,  J.:  

FACTS:  

On   May   24,   2000,   RCBC   entered   into   a   Share   Purchase   Agreement5  (SPA)   with  
Equitable-­‐PCI   Bank,   Inc.   (EPCIB),   George   L.   Go   and   the   individual   shareholders6  of  
Bankard,  Inc.  (Bankard)  for  the  sale  to  RCBC  of  226,460,000   shares  (Subject  Shares)  
of  Bankard,  constituting  67%  of  the  latter’s  capital  stock.  After  completing  payment  
of   the   contract   price   (₱1,786,769,400),   the   corresponding   deeds   of   sale   over   the  
subject  shares  were  executed  in  January  2001.  

The   dispute   between  the   parties   arose   sometime   in   May   2003   when   RCBC   informed  
EPCIB   and   the   other   selling   shareholdersof   an   overpayment   of   the   subject   shares,  
claiming   there   was   an   overstatement   of   valuation   of   accounts   amounting   to   ₱478  
million  and  that  the  sellers  violated  their  warrantyunder  Section  5(g)of  the  SPA.7  

As   no   settlement   was   reached,   RCBC   commenced   arbitration   proceedings   with   the  

ICC-­‐ICA  in  accordance  with  Section  10  of  the  SPA.  

Subsequently,   the   Arbitration   Tribunal   was   constituted.   Mr.   Neil   Kaplan   was  
nominated  by  RCBC;  Justice  Santiago  M.  Kapunan  (a  retired  Member  of  this  Court)  
was  nominated  by  the  Respondents;  and  Sir  Ian  Barker  was  appointed  by  the  ICC-­‐
ICA  as  Chairman.  

On  August  13,  2004,  the  ICC-­‐ICA  informed  the  parties  that  they  are  required  to  pay  
US$350,000   as   advance   on   costs   pursuant   to   Article   30   (3)   of   the   ICC   Rules   of  
Arbitration  (ICC  Rules).  RCBC  paid  its  share  of  US$107,000,  the  balance  remaining  
after   deducting   payments   of   US$2,500   and   US$65,000   it   made   earlier.   Respondents’  
share  of  the  advance  on  costs  was  thus  fixed  at  US$175,000.  

On   October   26,   2007,   RCBC   filed   with   the   Makati   City   RTC,   Branch   148   (SP   Proc.  
Case   No.   M-­‐6046)amotion   to   confirm   the   First   Partial   Award,   while   Respondents  
filed  a  motion  to  vacate  the  same.  

ICC-­‐ICA   by   letter25  dated   October   12,   2007   increased   the   advance   on   costs   from  
US$450,000  to  US$580,000.  Under  this  third  assessment,  RCBC  paid  US$130,000  as  

 
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its  share  on  the  increment.  Respondents  declined  to  pay  its  adjudged  total  share  of  
US$290,000   on   account   of   its   filing   in   the   RTC   of   a   motion   to   vacate   the   First   Partial  
Award.26  The   ICC-­‐ICA   then   invited   RCBC   to   substitute   for   Respondents   in   paying   the  
balance   of   US$130,000   by   December   21,   2007.27  RCBC   complied   with   the   request,  
making  its  total  payments  in  the  amount  of  US$580,000.28  

While   RCBC   paid   Respondents’   share   in   the   increment   (US$130,000),   it   reiterated  

its   plea   that   Respondents   be   declared   as   in   default   and   the   counterclaimsdeemed   as  
withdrawn.29  

Meanwhile,  on  January  8,  2008,  the  Makati  City  RTC,  Branch  148  issued  an  order  in  
SP   Proc.   Case   No.   M-­‐6046   confirming   the   First   Partial   Award   and   denying  
Respondents’   separate   motions   to   vacate   and   to   suspend   and   inhibit   Barker   and  
Kaplan.   Respondents’   motion   for   reconsideration   was   likewise   denied.   Respondents  
directly   filed   with   this   Court   a   petition   for   review   on   certiorari   under   Rule   45,  
docketed  as  G.R.  No.  182248  and  entitled  Equitable  PCI  Banking  Corporation  v.  RCBC  
Capital   Corporation.32  In   our   Decision   dated   December   18,   2008,   we   denied   the  
petition  and  affirmed  the  RTC’s  ruling  confirming  the  First  Partial  Award.  

On   January   18,   2008,   the   Arbitration   Tribunal   set   a   timetable   for   the   filing   of  
submission   by   the   parties   on   whether   it   should   issue   a   Second   Partial   Award   in  
respect  of  the  Respondents’  refusal  to  pay  an  advance  on  costs  to  the  ICC-­‐ICA.  

on  June  16,  2010,  the  Arbitration  Tribunal  issued  the  Final  Award.  

On  July  1,  2010  BDO  filed  in  the  Makati  City  RTC  a  Petition  to  Vacate  Final  Award  Ad  
Cautelam,51  docketed  as  SP  Proc.  Case  No.  M-­‐6995,  which  was  raffled  to  Branch  65.  

On  July  28,  2010,  RCBC  filed  with  the  Makati  City  RTC,  Branch  148  (SP  Proc.  Case  No.  
M-­‐6046)  a  Motion  to  Confirm  Final  Award.52  BDO  filed  its  Opposition  With  Motion  to  
Dismiss53  on  grounds  that  a  Petition  to  Vacate  Final  Award  Ad  Cautelamhad  already  
been  filed  in  SP  Proc.  Case  No.  M-­‐6995.  BDO  also  pointed  out  that  RCBC  did  not  file  
the  required  petition  but  instead  filed  a  mere  motion  which  did  not  go  through  the  
process  of  raffling  to  a  proper  branch  of  the  RTC  of  Makati  City  and  the  payment  of  
the  required  docket/filing  fees.  Even  assuming  that  Branch  148  has  jurisdiction  over  
RCBC’s  motion  to  confirm  final  award,  BDO  asserted  that  RCBC  had  filed  before  the  
Arbitration   Tribunal   an   Application   for   Correction   and   Interpretation   of   Award  
under   Article   29   of   the   ICC   Rules,   which   is   irreconcilable   with   its   Motion   to   Confirm  
Final   Award   before   said   court.   Hence,   the   Motion   to   Confirm   Award   was   filed  
precipitately.  

Meanwhile,  on  November  10,  2010,  Branch  148  (SP  Proc.  Case  No.  M-­‐6046)  issued  
an   Order56  confirming   the   Final   Award   "subject   to   the   correction/interpretation  

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thereof  by  the  Arbitral  Tribunal  pursuant  to  the  ICC  Rules  and  the  UNCITRAL  Model  
Law,"  and  denying  BDO’s  Opposition  with  Motion  to  Dismiss.  

On  December  30,  2010,  George  L.  Go,  in  his  personal  capacity  and  as  attorney-­‐in-­‐fact  
of   the   other   listed   shareholders   of   Bankard,   Inc.   in   the   SPA   (Individual  
Shareholders),   filed   a   petition   in   the   CA,   CA-­‐G.R.   SP   No.   117451,   seeking   to   set   aside  
the   above-­‐cited   November   10,   2010   Order   and   to   enjoin   Branch   148   from   further  
proceeding  in  SP  Proc.  Case  No.  M-­‐6046.  By  Decision57  dated  June  15,  2011,  the  CA  
dismissed   the   said   petition.   Their   motion   for   reconsideration   of   the   said   decision  
was  likewise  denied  by  the  CA  in  its  Resolution58  dated  December  14,  2011.  

ISSUE: WHETHER  THERE  IS  LEGAL  GROUND  TO  VACATE  THE  SECOND  PARTIAL  
AWARD    

HELD:  

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.78  

Accordingly,   we   examine   the   merits   of   the   petition   before   us   solely   on   the   statutory  
ground   raised   for   vacating   the   Second   Partial   Award:   evident   partiality,   pursuant   to  
Section   24   (b)   of   the   Arbitration   Law   (RA   876)   and   Rule   11.4   (b)   of   the   Special   ADR  
Rules.  

Evident  Partiality  

Evident   partiality   is   not   defined   in   our   arbitration   laws.   As   one   of   the   grounds   for  
vacating   an   arbitral   award   under   the   Federal   Arbitration   Act   (FAA)   in   the   United  
States   (US),   the   term   "encompasses   both   an   arbitrator’s   explicit   bias   toward   one  
party  and  an  arbitrator’s  inferred  bias  when  an  arbitrator  fails  to  disclose  relevant  
information  to  the  parties."  

From   a   recent   decision80  of   the   Court   of   Appeals   of   Oregon,   we   quote   a   brief  
discussion  of  the  common  meaning  of  evident  partiality:  

To   determine   the   meaning   of   "evident   partiality,"   we   begin   with   the   terms  

themselves.   The   common   meaning   of   "partiality"   is   "the  inclination   to   favor   one  
 
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side."Webster’s   Third   New   Int'l   Dictionary  1646   (unabridged   ed   2002);  see   also  
id.  (defining   "partial"   as   "inclined   to   favor   one   party   in   a   cause   or   one   side   of   a  
question   more   than   the   other:   biased,   predisposed"   (formatting   in   original)).  
"Inclination,"   in   turn,   means   "a   particular   disposition   of   mind   or   character   :  
propensity,   bent"   or   "a   tendency   to   a   particular   aspect,   state,   character,   or  
action."Id.  at  1143  (formatting  in  original);  see  also  id.  (defining  "inclined"  as  "having  
inclination,  disposition,  or  tendency").  

Evident  partiality  in  its  common  definition  thus  implies  "the  existence  of  signs  and  
indications  that   must   lead   to   an   identification   or   inference"   of   partiality.81  Despite  
the   increasing   adoption   of   arbitration   in   many   jurisdictions,   there   seems   to   be   no  
established   standard   for   determining   the   existence   of   evident   partiality.   In   the   US,  
evident   partiality   "continues   to   be   the   subject   of   somewhat   conflicting   and  
inconsistent   judicial   interpretation   when   an   arbitrator’s   failure   to   disclose   prior  
dealings  is  at  issue."82  

EPCIB/BDO,   in   moving   to   vacate   the   Second   Partial   Award   claimed   that   the  
Arbitration  Tribunal  exceeded  its  powers  in  deciding  the  issue  of  advance  cost  not  
contemplated   in   the   TOR,   and   that   Chairman   Barker   acted   with   evident   partiality   in  
making  such  award.  The  RTC  held  that  BDO  failed  to  substantiate  these  allegations.  
On  appeal,  the  CA  likewise  found  that  the  Arbitration  Tribunal  did  not  go  beyond  the  
submission  of  the  parties  because  the  phrasing  of  the  scope  of  the  agreed  issues  in  
the   TOR   ("[t]he   issues   to   be   determined   by   the   Tribunal   are   those   issues   arising  
from   the   said   Request   for   Arbitration,   Answer   and   Reply   and   such   other   issues   as  
may   properly   arise   during   the   arbitration")is   broad   enough   to   accommodate   a  
finding   on   the   liability   and   the   repercussions   of   BDO’s   failure   to   share   in   the  
advances  on  costs.  Section  10  of  the  SPA  also  gave  the  Arbitration  Tribunal  authority  
to  decide  how  the  costs  should  be  apportioned  between  them.  

issuance   of   the   Second   Partial   Award   are   not   in   issue   here.   Courts   are   generally  
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.   A   contrary   rule   would   make   an   arbitration  
award   the   commencement,   not   the   end,   of   litigation.101  It   is   the   finding   of   evident  
partiality  which  constitutes  legal  ground  for  vacating  the  Second  Partial  Award  and  
not   the   Arbitration   Tribunal’s   application   of   the   ICC   Rules   adopting   the   "contractual  
approach"  tackled  in  Secomb’s  article.  

Alternative   dispute   resolution   methods   or   ADRs   –   like   arbitration,   mediation,  

negotiation  and  conciliation  –  are  encouraged  by  this  Court.  By  enabling  parties  to  
resolve   their   disputes   amicably,   they   provide   solutions   that   are   less   time-­‐
consuming,  less  tedious,  less  confrontational,  and  more  productive  of  goodwill  and  
lasting   relationship.102Institutionalization   of   ADR   was   envisioned   as   "an   important  
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means   to   achieve   speedy   and  impartial  justice   and   declog   court   dockets."103  The  
most   important   feature   of   arbitration,   and   indeed,   the   key   to   its   success,   is   the  
public’s   confidence   and   trust   in   the   integrity   of   the   process.104  For   this   reason,   the  
law  authorizes  vacating  an    

INJUNCTION  AGAINST  EXECUTION  OF  ARBITRAL  AWARD  

Before  an  injunctive  writ  can  be  issued,  it  is  essential  that  the  following  
requisites  are  present:  (1)  there  must  be  a  right  inesse  or  the  existence  of  a  
right  to  be  protected;  and  (2)  the  act  against  which  injunction  to  be  directed  is  
a  violation  of  such  right.  The  onus  probandi  is  on  movant  to  show  that  there  
exists  a  right  to  be  protected,  which  is  directly  threatened  by  the  act  sought  to  
be  enjoined.  Further,  there  must  be  a  showing  that  the  invasion  of  the  right  is  
material  and  substantial  and  that  there  is  an  urgent  and  paramount  necessity  
for  the  writ  to  prevent  a  serious  damage.105  

We   find   no   reversible   error   or   grave   abuse   of   discretion   in   the   CA’s   denial   of   the  
application   for   stay   order   or   TRO   upon   its   finding   that   BDO   failed   to   establish   the  
existence  of  a  clear  legal  right  to  enjoin  execution  of  the  Final  Award  confirmed  by  
the   Makati   City   RTC,   Branch   148,   pending   resolution   of   its   appeal.It   would   be  
premature  to  address  on  the  merits  the  issues  raised  by  BDO  in  the  present  petition  
considering   that   the   CA   still   has   to   decide   on   the   validity   of   said   court's   orders  
confirming   the   Final   Award.   But   more   important,   since   BOO   had   already   paid  
₱637,941,185.55  m  manager's  check,  albeit  under  protest,  and  which  payment  was  
accepted  by  RCBC  as  full  and  complete  satisfaction  of  the  writ  of  execution,  there  is  
no  more  act  to  be  enjoined.  

Settled  is  the  rule  that  injunctive  reliefs  are  preservative  remedies  for  the  protection  
of   substantive   rights   and   interests.   Injunction   is   not   a   cause   of   action   in   itself,   but  
merely  a  provisional  remedy,  an  adjunct  to  a  main  suit.  When  the  act  sought  to  be  
enjoined   has   become  fait   accompli,  the   prayer   for   provisional   remedy   should   be  
denied.  106  

 
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