GR NO.

126619

DECEMBER 20, 2006

UNIWIDE SALES AND RESOURCES CORPORATION vs. TITAN IKEDA CONSTUCTION AND DEVELOPMENT CORPORATION

FACTS: Titan Ikeda and Uniwide entered into three construction agreements. Upon the completion of these projects, Titan Ikeda tried to collect from Uniwide some unpaid billable but to no avail, thus, Titan Ikeda filed an action for collection of sum of money before the RTC of Pasay City. Said action was suspended to give way for arbitration before the CIAC. Upon the submission of the parties respective memoranda, the arbitrators ruled that;

On Project 1 - Libis: [Uniwide] is absolved of any liability for the claims made by [Titan] on this Project.

Project 2 - Edsa Central: [Uniwide] is absolved of any liability for VAT payment on this project, the same being for the account of the [Titan]. On the other hand, [Titan] is absolved of any liability on the counterclaim for defective construction of this project. [Uniwide] is held liable for the unpaid balance in the amount of P6,301,075.77 which is ordered to be paid to the [Titan] with 12% interest per annum commencing from 19 December 1992 until the date of payment.

On Project 3 - Kalookan:
Page

[Uniwide] is held liable for the unpaid balance in the amount of P5,158,364.63 which is ordered to be paid to the [Titan] with 12% interest per annum commencing from 08 September 1993 until the date of payment. [Uniwide] is held liable to pay in full the VAT on this project, in such amount as may be computed by the Bureau of Internal Revenue to be paid directly thereto. The BIR is hereby notified that [Uniwide] Sales Realty and Resources Corporation has assumed responsibility and is held liable for VAT payment on this project. This accordingly exempts Claimant Titan-Ikeda Construction and Development Corporation from this obligation.

Uniwide filed a motion for reconsideration which was later denied by the CIAC. The case was submitted for review before the Court of Appeals, unsatisfied by the decision, Uniwide filed a motion for reconsideration, said motion was denied by the CA.

ISSUE: Whether or not the findings of fact in the CIAC has gained finality.

HELD: As a rule, findings of fact of administrative agencies and quasijudicial bodies, which have acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not only respect, but also finality, especially when affirmed by the Court of Appeals. In particular, factual findings of construction arbitrators are final and conclusive and not reviewable by this Court on appeal. This rule, however admits of certain exceptions. In David v. Construction Industry and Arbitration Commission , we ruled that, as exceptions, factual findings of construction arbitrators may be reviewed by this Court when the petitioner proves affirmatively that: (1) the
Page

award was procured by corruption, fraud or other undue means; (2) there was evident partiality or corruption of the arbitrators or of any of them; (3)

the arbitrators were guilty of misconduct in refusing to hear evidence pertinent and material to the controversy; (4) one or more of the arbitrators were disqualified to act as such under Section nine of Republic Act No. 876 and willfully refrained from disclosing such disqualifications or of any other misbehavior by which the rights of any party have been materially prejudiced; or (5) the arbitrators exceeded their powers, or so imperfectly executed them, that a mutual, final and definite award upon the subject matter submitted to them was not made. Other recognized exceptions are as follows: (1) when there is a very clear showing of grave abuse of discretion resulting in lack or loss of jurisdiction as when a party was deprived of a fair opportunity to present its position before the Arbitral Tribunal or when an award is obtained through fraud or the corruption of arbitrators, (2) when the findings of the Court of Appeals are contrary to those of the CIAC, and (3) when a party is deprived of administrative due process.

Page

GR NO. 163101

FEBRUARY 13, 2008

BENGUET CORPORATION vs. DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES MINES ADJUCIATION BOARD and J.G REALTY AND MINING CORPORATION

FACTS: A Royalty Agreement With Option to Purchase (RAWOP) was entered into by Benguet Corp. and J.G Realty, the RAWOP was for the four mining claims owned by J.G Realty. After sometime, J.G realty manifested that they are no longer interested in the continuing the RAWOP and that it was terminating the same. J.G Realty then filed a Petition for the Declaration of Nullity/Cancellation of the RAWOP before the Legaspi City Panel of Arbitrators (POA). The Legaspi POA ruled in favor of J.G Realty and nullified the RAWOP. Benguet Corp then filed a notice of appeal before the Mines Adjudication Board (MAB).

The MAB affirmed the decision of the POA, and denied the motion for reconsideration subsequently filed by Benguet Corp, thus, Benguet Corp elevated the matter before the Supreme Court.

It was alleged by the Benguet Corp that the agreement signed by the parties contained a stipulation that any disputes, differences or disagreements that cannot be settled amicably must be referred to a Board of Arbitrators. Thus, the POA should have not ruled upon the matter but should have submitted the action for arbitration.

On the other hand, J.G Realty posited that the action filed before the POA is not barred by their agreement as the POA does not fall on the
Page

meaning of the court contemplated by the parties and that arbitration is no longer necessary as POA is itself already engaged in arbitration.

ISSUE: Whether or not the dispute must first be submitted to arbitration.

HELD: In the event a case that should properly be the subject of voluntary arbitration is erroneously filed with the courts or quasi-judicial agencies, on motion of the defendant, the court or quasi-judicial agency shall determine whether such contractual provision for arbitration is sufficient and effective. If in affirmative, the court or quasi-judicial agency shall then order the enforcement of said provision. Besides, in BF Corporation v. Court of Appeals, we already ruled:

In this connection, it bears stressing that the lower court has not lost its jurisdiction over the case. Section 7 of Republic Act No. 876 provides that proceedings therein have only been stayed. After the special proceeding of arbitration has been pursued and completed, then the lower court may confirm the award made by the arbitrator. J.G. Realtys contention, that prior resort to arbitration is unavailing in the instant case because the POAs mandate is to arbitrate disputes involving mineral agreements, is misplaced. A distinction must be made between voluntary and compulsory arbitration. In Ludo and Luym Corporation v. Saordino, the Court had the occasion to distinguish between the two types of arbitrations: Comparatively, in Reformist Union of R.B. Liner, Inc. vs. NLRC, compulsory arbitration has been defined both as the process of settlement of labor disputes by a government agency which has the authority to investigate and to make
Page

an award which is binding on all the parties, and as a mode of

arbitration where the parties are compelled to accept the resolution of their dispute through arbitration by a third party. While a voluntary arbitrator is not part of the governmental unit or labor departments personnel, said arbitrator renders arbitration services provided for under labor laws.

There is a clear distinction between compulsory and voluntary arbitration. The arbitration provided by the POA is compulsory, while the nature of the arbitration provision in the RAWOP is voluntary, not involving any government agency. Thus, J.G. Realtys argument on this matter must fail. As to J.G. Realtys contention that the provisions of RA 876 cannot apply to the instant case which involves an administrative agency, it must be pointed out that Section 11.01 of the RAWOP states that:

[Any controversy with regard to the contract] shall not be cause of any action of any kind whatsoever in any court or administrative agency but shall, upon notice of one party to the other, be referred to a Board of Arbitrators consisting of three (3) members, one to be selected by BENGUET, another to be selected by the OWNER and the third to be selected by the aforementioned two arbiters so appointed.

There can be no quibbling that POA is a quasi-judicial body which forms part of the DENR, an administrative agency. Hence, the provision on mandatory resort to arbitration, freely entered into by the parties, must be held binding against them.

Page

In sum, on the issue of whether POA should have referred the case to voluntary arbitration, we find that, indeed, POA has no jurisdiction over the dispute which is governed by RA 876, the arbitration law.

However, we find that Benguet is already estopped from questioning the POAs jurisdiction. As it were, when J.G. Realty filed DENR Case No. 2000-01, Benguet filed its answer and participated in the proceedings before the POA, Region V. Secondly, when the adverse March 19, 2001 POA Decision was rendered, it filed an appeal with the MAB in Mines Administrative Case No. R-M-2000-01 and again participated in the MAB proceedings. When the adverse December 2, 2002 MAB Decision was promulgated, it filed a motion for reconsideration with the MAB. When the adverse March 17, 2004 MAB Resolution was issued, Benguet filed a petition with this Court pursuant to Sec. 79 of RA 7942 impliedly recognizing MABs jurisdiction. In this factual milieu, the Court rules that the jurisdiction of POA and that of MAB can no longer be questioned by Benguet at this late hour. What Benguet should have done was to immediately challenge the POAs jurisdiction by a special civil action for certiorari when POA ruled that it has jurisdiction over the dispute. To redo the proceedings fully participated in by the parties after the lapse of seven years from date of institution of the original action with the POA would be anathema to the speedy and efficient administration of justice.

Page

GR NO. 143581

JANUARY 7, 2008

KOREA TECHNOLOGIES CO, LTD. vs. HON. ALBERTO A. LERMA and PACIFIC GENERAL STEEL AND MANUFACTURING CORPORATION

FACTS: Korea Technologies Co., Ltd. [Korea Tech], a Korean corporation, entered into a contract with Pacific General Steel Manufacturing Corporation [Pacific General], a domestic corporation, whereby Korea Tech undertook to ship and install in Pacific Generals site in Carmona, Cavite the machinery and facilities necessary for manufacturing LPG cylinders, and to initially operate the plant after it is installed. The plant, after completion of installation, could not be operated by Pacific General due to its financial difficulties affecting the supply of materials.

The last payments made by Pacific General to Korea Tech consisted of postdated checks which were dishonored upon presentment. According to Pacific General, it stopped payment because Korea Tech had delivered a hydraulic press which was different in kind and of lower quality than that agreed upon.

Korea Tech also failed to deliver equipment parts already paid for by it. It threatened to cancel the contract with Korea Tech and dismantle the Carmona plant. Korea Tech initiated arbitration before the Korea Commercial Arbitration Board [KCAB] in Seoul, Korea and, at the same time, commenced a civil action before the Regional Trial Court [the trial court] where it prayed that Pacific General be restrained from dismantling the plant and equipment. Pacific General opposed the application and argued that the arbitration clause was null and void, being contrary to public policy as it ousts the local court of jurisdiction. It also alleged that Korea Tech was
Page

not entitled to the payment of the amount covered by the two checks, and that Korea Tech was liable for damages.

The trial court denied the application for preliminary injunction and declared the arbitration agreement null and void. Korea Tech moved to dismiss the counterclaims for damages. Meanwhile, Pacific General filed a motion for inspection of things to determine whether there was indeed alteration of the quantity and lowering of quality of the machineries and equipment and whether these were properly installed. Korea Tech opposed the motion arguing that these issues were proper for determination in the arbitration proceeding.

The court denied the motion to dismiss and granted the motion for inspection of things. The court also directed the Branch Sheriff to proceed with the inspection of the machineries and equipment in the plant. The Branch Sheriff later reported his finding that the enumerated machineries and equipment were not fully and properly installed.

Korea Tech filed a petition for certiorari before the Court of Appeals [CA]. The court dismissed the petition and held that an arbitration clause which provided for a final determination of the legal rights of the parties to the contract by arbitration was against public policy. Further appeal was made to the Supreme Court by way of a petition for review.

ISSUES: (1) Whether or not the arbitration clause is valid. HELD: The arbitration clause is valid. It has not been shown to be contrary to any law, or against morals, good customs, public order or public policy. The arbitration clause stipulates that the arbitration must be done in Seoul,
Page

Korea in accordance with the Commercial Arbitration Rules of the KCAB,

and that the award is final and binding. This is not contrary to public policy. We find no reason why the arbitration clause should not be respected and complied with by both parties.

This ruling, the Court said, is consonant with the declared policy in Section 2 of the ADR Act that the State (shall) actively promote party autonomy in the resolution of disputes or the freedom of the parties to make their own arrangements to resolve their disputes. Citing Section 24 of the ADR Act5, the Court said the trial court does not have jurisdiction over disputes that are properly the subject of arbitration pursuant to an arbitration clause. In the earlier case of BF Corporation v. Court of Appeals and Shangri-la Properties, Inc., where the trial court refused to refer the parties to arbitration notwithstanding the existence of an arbitration agreement between them, the Supreme Court said the trial court had prematurely exercised its jurisdiction over the case.

The Court further emphasized that a submission to arbitration is a contract. As a rule, contracts are respected as the law between the contracting parties and produce effect between them, their assigns and heirs. Courts should liberally review arbitration clauses. Any doubt should be resolved in favor of arbitration.

Page

10

GR NO. 156660

AUGUST 24, 2009

ORMOC SUGARCANE PLANTERS ASSOCIATION et al. vs. COURT OF APPEALS, et al.

FACTS: Petitioners are associations organized by and whose members are individual sugar planters (Planters). The membership of each association follows: 264 Planters were members of OSPA; 533 Planters belong to OLFAMCA; 617 Planters joined UNIFARM; 760 Planters enlisted with ONDIMCO; and the rest belong to BAP-MPC which did not join the lawsuit

Respondents Hideco Sugar Milling Co., Inc. (Hideco) and Ormoc Sugar Milling Co, Inc. (OSCO) are sugar centrals engaged in grinding and milling sugarcane delivered to them by numerous individual sugar planters, who may or may not be members of an association such as petitioners.

Petitioners assert that the relationship between respondents and the individual sugar planters is governed by milling contracts. To buttress this claim, petitioners presented representative samples of the milling contracts. In the milling contracts it provides that all differences and controversies which may arise between the parties concerning the agreement shall be submitted for discussion to a Board of Arbitration, consisting of five (5) memberstwo (2) of which shall be appointed by the centrals, two (2) by the Planter and the fifth to be appointed by the four appointed by the parties.

On June 4, 1999, petitioners, without impleading any of their individual members, filed twin petitions with the RTC for Arbitration under R.A. 876, Recovery of Equal Additional Benefits, Attorneys Fees and Damages, against HIDECO and OSCO. Petitioners claimed that respondents

Page

do not belong to any association the 1% share, instead of reverting said share

11

violated the Milling Contract when they gave to independent planters who

to the centrals. Petitioners contended that respondents unduly accorded the independent Planters more benefits and thus prayed that an order be issued directing the parties to commence with arbitration in accordance with the terms of the milling contracts. They also demanded that respondents be penalized by increasing their member Planters 65% share provided in the milling contract by 1%, to 66%.

Respondents filed a motion to dismiss on ground of lack of cause of action because petitioners had no milling contract with respondents. According to respondents, only some eighty (80) Planters who were members of OSPA, one of the petitioners, executed milling contracts. Respondents and these 80 Planters were the signatories of the milling contracts. Thus, it was the individual Planters, and not petitioners, who had legal standing to invoke the arbitration clause in the milling contracts. Petitioners, not being privy to the milling contracts, had no legal standing whatsoever to demand or sue for arbitration. The Court, acting on the petitions, directs the respondents to nominate two arbitrators to represent HIDECO/HISUMCO and OSCO in the Board of Arbitrators within fifteen (15) days from receipt of this Order. However, if the respondents fail to nominate their two arbitrators, upon proper motion by the petitioners, then the Court will be compelled to use its discretion to appoint the two (2) arbitrators, as embodied in the Milling Contract and R.A. 876. Their subsequent motion for reconsideration having been denied by the RTC respondents elevated the case to the Court of Appeals through a Petition for Certiorari with Prayer for the Issuance of Temporary Restraining Order and/or Writ of Preliminary Injunction. On December 7, 2001, the CA rendered its challenged Decision, setting aside the assailed Orders of the RTC. The CA held that petitioners neither had an existing contract with respondents nor were they privy to the milling contracts between

Page

reconsideration, but it too was denied by the CA. Hence this petition.

12

respondents and the individual Planters. Petitioners filed a motion for

ISSUE: Whether or not petitioners are clothed with legal personality to file a suit or demand an arbitration.

HELD: The Supreme Court agrees with the findings of the Court of Appeals. Two or more persons or parties may submit to the arbitration of one or more arbitrators any controversy existing between them at the time of the submission and which may be the subject of an action, the parties to any contract may in such contract agree to settle by arbitration a controversy thereafter arising between them. Such submission or contract shall be valid, enforceable and irrevocable, save upon such grounds as exist at law for the revocation of any contract. The foregoing provision speaks of two modes of arbitration: (a) an agreement to submit to arbitration some future dispute, usually stipulated upon in a civil contract between the parties, and known as an agreement to submit to arbitration, and (b) an agreement submitting an existing matter of difference to arbitrators, termed the submission agreement. Article XX of the milling contract is an agreement to submit to arbitration because it was made in anticipation of a dispute that might arise between the parties after the contracts execution. The formal requirements of an agreement to arbitrate are therefore the following: (a) it must be in writing and (b) it must be subscribed by the parties or their representatives. To subscribe means to write underneath, as ones name; to sign at the end of a document. Petitioners would argue that they could sue respondents,

notwithstanding the fact that they were not signatories in the milling contracts because they are the recognized representatives of the Planters. This claim has no leg to stand on since petitioners did not sign the milling contracts at all, whether as a party or as a representative of their member Planters. The individual Planter and the appropriate central were the only

Page

that the individual Planter is authorizing the association to represent him/her

13

signatories to the contracts and there is no provision in the milling contracts

in a legal action in case of a dispute over the milling contracts. The petition is dismissed.

Page

14

GR NO. 175404

JANUARY 31, 2011

CARGILL PHILIPPINES INC., vs. SAN FERNANDO REGALA TRADING INC.

FACTS: San Fernando Regala Trading filed before the trial court a complaint for rescission of contract with damages against Cargill Philippines, Inc. In its complaint, San Fernando Regala Trading alleged that it was engaged in buying and selling molasses and that Cargill was one of its suppliers. San Fernando Regala Trading alleged that it purchased from Cargill, and the latter had agreed to sell, 12,000 tons of cane blackstrap molasses originating from Thailand at the price of $192 per metric ton, and that delivery would be made in April or May 1997. After San Fernando Regala Trading delivered the letter of credit, it claimed that Cargill failed to comply with its obligations under the contract, which included an arbitration clause as follows: "Any dispute which the Buyer and Seller may not be able to settle by mutual agreement shall be settled by arbitration in the City of New York before the American Arbitration Association. The Arbitration Award shall be final and binding on both parties." Cargill moved to dismiss and/or suspend the court proceedings citing the arbitration clause. San Fernando Regala Trading argued that since it was seeking rescission of the contract, it was in effect repudiating the contract which included the arbitration clause. Further, it argued that rescission constitutes a judicial issue, which requires the exercise of judicial function and cannot be the subject of arbitration. ISSUE: Whether or not the contention of San Fernando Regala is tenable.
Page

15

HELD: The Supreme Court held that the provision to submit to arbitration any dispute arising between the parties is part of the contract and is itself a contract. The arbitration agreement is to be treated as a separate agreement and does not automatically terminate when the contract of which it is a part comes to an end. To reiterate a contrary ruling would suggest that a party's mere repudiation of the main contract is sufficient to avoid arbitration; that is exactly the situation that the separability doctrine seeks to avoid.

San Fernando Regala Trading filed a complaint for rescission of contract and damages with the trial court. In so doing, it alleged that a contract existed. It was that contract which provided for an arbitration clause which expressed the parties' intention that any dispute to arise between them, as buyer and seller, should be referred to arbitration. It is for the arbitrator and not the court to decide whether a contract between the parties exists or is valid. Under the circumstances, the argument that rescission is judicial in nature is misplaced.

Page

16

GR NO. 161957

JANUARY 22, 2007

JORGE GONZALES and PANEL OF ARBITRATORS vs. CLIMAX MINING LTD, et al. FACTS: This is a consolidation of 2 previous cases in the same disputed Addendum Contract entered into by the parties. The first case stems from the petition to compel arbitration filed by Climax-Arimco before the RTC of Makati while the complaint for the nullification of the Addendum Contract was pending before the DENR Panel

of Arbitrators. Climax had sent Gonzales a demand for arbitration pursuant to the arbitration clause of the Addendum Contract.Gonzales filed a motion to dismiss alleging that the AddendumContract containing the

arbitration clause is void in view of the acts of fraud, oppression and violation of the Constitution and other acts committed by Climax.

The RTC granted Gonzales motion and set the case for pre-trial. Another motion for reconsideration filed by Climax claiming that RA 876 does not authorize a pre-trial but directs the court to hear the motion summarily and resolve the same within 10days. Judge Pimentel granted the motion and directed the parties to arbitration. Gonzales is now assailing the order of Judge Pimentel.

ISSUE: Whether or not the action should undergo arbitration.

HELD: Arbitration, as an alternative mode of settling disputes, has long been recognized and accepted in our jurisdiction. The Civil Code is explicit on the matter. R.A. No. 876 also expressly authorizes arbitration of domestic

adhered to the United Nations "Convention on the Recognition and the

Page

an international character, was likewise recognized when the Philippines

17

disputes. Foreign arbitration, as a system of settling commercial disputes of

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. The enactment of R.A. No. 9285 on 2 April 2004 further institutionalized the use of alternative dispute resolution systems, including arbitration, in the settlement of disputes. SEC. 2. Persons and matters subject to arbitration.Two or more persons or parties may submit to the arbitration of one or more arbitrators any controversy existing, between them at the time of the submission and which may be the subject of an action, or the parties to any contract may in such contract agree to settle by arbitration a controversy thereafter arising between them. Such submission or contract shall be valid, enforceable and irrevocable, save upon such grounds as exist at law for the revocation of any contract. Such submission or contract may include question arising out of valuations, appraisals or other controversies which may be collateral, incidental, precedent or subsequent to any issue between the parties. A controversy cannot be arbitrated where one of the parties to the controversy is an infant, or a person judicially declared to be incompetent, unless the appropriate court having jurisdiction approve a petition for permission to submit such controversy to arbitration made by the general guardian or guardian ad litem of the infant or of the incompetent.

Thus, we held in Manila Electric Co. v. Pasay Transportation Co. that

Page

all matters in dispute between the parties shall be referred to arbitration is a

18

a submission to arbitration is a contract. A clause in a contract providing that

contract, and in Del Monte Corporation-USA v. Court of Appeals 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. As a rule, contracts are respected as the law between the contracting parties and produce effect as between them, their assigns and heirs.

The special proceeding under Sec. 6 of R.A. No. 876 recognizes the contractual nature of arbitration clauses or agreements. It provides: SEC. 6. Hearing by court.A party aggrieved by the failure, neglect or refusal of another to perform under an agreement in writing providing for arbitration may petition the court for an order directing that such arbitration proceed in the manner provided for in such agreement. Five days notice in writing of the hearing of such application shall be served either personally or by registered mail upon the party in default. The court shall hear the parties, and upon being satisfied that the making of the agreement or such failure to comply therewith is not in issue, shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement. If the making of the agreement or default be in issue the court shall proceed to summarily hear such issue. If the finding be that no agreement in writing providing for arbitration was made, or that there is no default in the proceeding thereunder, the proceeding shall be dismissed. If the finding be that a written provision for arbitration was made and there is a default in proceeding thereunder, an order shall be made summarily directing the parties to proceed with the arbitration in accordance with the

Page

19

terms thereof.

The court shall decide all motions, petitions or applications filed under the provisions of this Act, within ten days after such motions, petitions, or applications have been heard by it.

This special proceeding is the procedural mechanism for the enforcement of the contract to arbitrate. The jurisdiction of the courts in relation to Sec. 6 of R.A. No. 876 as well as the nature of the proceedings therein was expounded upon in La Naval Drug Corporation v. Court of Appeals. There it was held that R.A. No. 876 explicitly confines the court's authority only to the determination of whether or not there is an agreement in writing providing for arbitration. In the affirmative, the statute ordains that the court shall issue an order "summarily directing the parties to proceed with the arbitration in accordance with the terms thereof." If the court, upon the other hand, finds that no such agreement exists, "the proceeding shall be dismissed." The cited case also stressed that the proceedings are summary in nature. The same thrust was made in the earlier case of Mindanao Portland Cement Corp. v. McDonough Construction Co. of Florida]which held, thus: Since there obtains herein a written provision for arbitration as well as failure on respondent's part to comply therewith, the court a quo rightly ordered the parties to proceed to arbitration in accordance with the terms of their agreement (Sec. 6, Republic Act 876). Respondent's arguments touching upon the merits of the dispute are improperly raised herein. They should be addressed to the arbitrators. This proceeding is merely a summary remedy to enforce the agreement to arbitrate. The duty of the court in this case is not to resolve the merits of the parties' claims but only to determine if they should proceed to arbitration or not. x x x

Page

20

Implicit in the summary nature of the judicial proceedings is the separable or independent character of the arbitration clause or

agreement. This was highlighted in the cases of Manila Electric Co. v. Pasay Trans. Co. and Del Monte Corporation-USA v. Court of Appeals. 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.

Page

21

GR NO. 169332

FEBRUARY 11, 2008

ABS-CBN BROADCASTING CORPORATION, vs. WORLD INTERACTIVE NETWORK SYSTEMS (WINS) JAPAN CO.

FACTS: ABS-CBN Broadcasting Corporation (ABS-CBN), a domestic corporation, entered into a licensing agreement (Agreement) with World Interactive Network Systems (WINS) Japan Co., Ltd. (WINS), a foreign corporation licensed under the laws of Japan. Under the Agreement, ABSCBN granted WINS an exclusive license to distribute and sublicense the television service known as The Filipino Channel (TFC) in Japan.

Arbitration proceedings were commenced by WINS after ABS-CBN threatened to terminate the Agreement on the ground that WINS allegedly inserted, without authority, several episodes of WINS Weekly, a weekly 35-minute community news program for Filipinos in Japan, into the TFC programming. The arbitrator ruled in favor of WINS, finding that ABS-CBN had in fact given its approval for the airing of WINS Weekly and that it threatened to terminate the Agreement merely as a strategy to re-negotiate for higher fees.

WINS filed a petition for the confirmation of the award before the Philippine trial court.

ABS-CBN, on the other hand, questioned the arbitral award by filing with the Court of Appeals a petition for review under Rule 43 of the Rules of Court (a mode of appeal to question errors of fact and/or law) or, in the alternative, a petition for certiorari under Rule 65 (an original action based on grave abuse of discretion amounting to lack or excess of jurisdiction).

Page

22

The Court of Appeals dismissed ABS-CBNs petition for lack of jurisdiction, holding that it is the trial court which has jurisdiction over questions relating to arbitration. The Court of Appeals held that the only instance it can exercise jurisdiction over an arbitral award is an appeal from the trial court's decision confirming, vacating or modifying the arbitral award.

ISSUE: Whether or not an aggrieved party in a voluntary arbitration dispute may avail of, directly in the CA, a petition for review under Rule 43 or a petition for certiorari under Rule 65 of the Rules of Court, instead of filing a petition to vacate the award in the RTC when the grounds invoked to overturn the arbitrators decision are other than those for a petition to vacate an arbitral award enumerated under RA 876.

HELD: According to the Supreme Court, a party aggrieved by an arbitral award has three (3) remedies, to wit: (a) a petition in the proper trial court to issue an order to vacate the award under Republic Act No. 876 (which applies to domestic arbitration); (b) a petition for review with the Court of Appeals under Rule 43 of the Rules of Court on questions of fact, of law, or mixed questions of fact and law; and (c) a petition for certiorari with the Court of Appeals under Rule 65 of the Rules of Court if the arbitrator acted without or in excess of his jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction.

Section 24 of R.A. No. 876

The grounds to vacate under Section 24 are:

(a) The award was procured by corruption, fraud, or other undue means; or

Page

23

(b) That there was evident partiality or corruption in the arbitrators or any of them; or

(c) That the arbitrators were guilty of misconduct in refusing to postpone the hearing upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; that one or more of the arbitrators was disqualified to act as such under section nine hereof, and willfully refrained from disclosing such disqualifications or of any other misbehavior by which the rights of any party have been materially prejudiced; or (d) That 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. Rule 43 The Supreme Court noted that Rule 43 of the Rules of Court expressly applies to awards, judgments, final orders or resolutions of quasi-judicial agencies, including voluntary arbitrators authorized by law. Rule 65 As for the remedy under Rule 65, the Supreme Court stressed that it will not hesitate to review a voluntary arbitrators award where there is a showing of grave abuse of authority or discretion amounting to lack or excess of jurisdiction, and there is no appeal, nor any plain, speedy remedy in the course of law. It should be noted that the Philippine Alternative Dispute Resolution Act of 2004 (ADR Law) adopted and incorporated the provisions of the UNCITRAL Model Law on International Commercial Arbitration (Model Law), which limits recourse against an international arbitral award only to the grounds specified under Section 34 of the Model Law (e.g., incapacity of a party to the arbitration agreement or the invalidity of the arbitration agreement under the applicable law). Neither the Model Law, nor the New

Page

Awards, to which the Philippines acceded in 1967, recognize the setting

24

York Convention on the Recognition and Enforcement of Foreign Arbitral

aside of international/foreign on the broader grounds of errors of law and/or fact or grave abuse of discretion.

GR NO 146717 MAY 19, 2006 TRANSFIELD PHILIPPINES INC. vs. LUZON HYDRO CORPORATION, et al.

FACTS: Transfield entered into a turn-key contract with Luzon Hydro Corp. (LHC). Under the contract, Transfield were to construct a hydroelectric plants in Benguet and Ilocos. The contract provides for a period for which the project is to be completed and also allows for the extension of the period provided that the extension is based on justifiable grounds such as fortuitous event. In order to guarantee performance by Transfield, two standby letters of credit were required to be opened. During the construction of the plant, Transfield requested for extension of time citing fortuitous events brought about by typhoon, barricades and demonstration. LHC did not give due course to the extension of the period prayed for but referred the matter to arbitration committee.

ISSUE: Whether or not the filing of a civil case before the regular court and an action for arbitration constitutes forum shopping.

HELD: The arbitration case, ICC Case No. 11264 TE/MW, is an arbitral proceeding commenced pursuant to the Turnkey Contract between TPI and LHC, to determine the primary issue of whether the delays in the construction of the project were excused delays, which would consequently render valid TPIs claims for extension of time to finish the

project. Together with the primary issue to be settled in the arbitration case

Page

25

is the equally important question of monetary awards to the aggrieved party.

On the other hand, Civil Case No. 00-1312, the precursor of the instant petition, was filed to enjoin LHC from calling on the securities and respondent banks from transferring or paying the securities in case LHC calls on them. However, in view of the fact that LHC collected the proceeds, TPI, in its appeal and petition for review asked that the same be returned and placed in escrow pending the resolution of the disputes before the ICC arbitral tribunal.

While the ICC case thus calls for a thorough review of the facts which led to the delay in the construction of the project, as well as the attendant responsibilities of the parties therein, in contrast, the present petition puts in issue the propriety of drawing on the letters of credit during the pendency of the arbitral case, and of course, absent a final determination by the ICC Arbitral tribunal. Moreover, as pointed out by TPI, it did not pray for the return of the proceeds of the letters of credit. What it asked instead is that the said moneys be placed in escrow until the final resolution of the arbitral case. Meanwhile, in Civil Case No. 04-332, TPI no longer seeks the issuance of a provisional relief, but rather the issuance of a writ of execution to enforce the Third Partial Award.

Neither is there an identity of parties between and among the three (3) cases. The ICC case only involves TPI and LHC logically since they are the parties to the Turnkey Contract. In comparison, the instant petition includes Security Bank and ANZ Bank, the banks sought to be enjoined from releasing the funds of the letters of credit. The Court agrees with TPI that it would be ineffectual to ask the ICC to issue writs of preliminary injunction against Security Bank and ANZ Bank since these banks are not parties to the arbitration case, and that the ICC Arbitral tribunal would not even be able to compel LHC to obey any writ of preliminary injunction issued from its end.

Page

26

Civil Case No. 04-322, on the other hand, logically involves TPI and LHC

only, they being the parties to the arbitration agreement whose partial award is sought to be enforced.

As a fundamental point, the pendency of arbitral proceedings does not foreclose resort to the courts for provisional reliefs. The Rules of the ICC, which governs the parties arbitral dispute, allows the application of a party to a judicial authority for interim or conservatory measures. Likewise, Section 14 of Republic Act (R.A.) No. 876 (The Arbitration Law) recognizes the rights of any party to petition the court to take measures to safeguard and/or conserve any matter which is the subject of the dispute in arbitration. In addition, R.A. 9285, otherwise known as the Alternative Dispute Resolution Act of 2004, allows the filing of provisional or interim measures with the regular courts whenever the arbitral tribunal has no power to act or to act effectively.

Page

27