1

Republic of the Philippines

Supreme Court
Manila


THIRD DIVISION

ERNESTO Z. ORBE,
Complainant,



- versus -



JUDGE MANOLITO Y. GUMARANG, Pairing Judge,
Municipal Trial Court, Imus, Cavite,
Respondent.
A.M. No. MTJ-11-1792
[Formerly OCA I.P.I No. 10-2294-MTJ]

Present:

PERALTA, J., Acting Chairperson,
ABAD,
PEREZ,*
MENDOZA, and
PERLAS-BERNABE, JJ.

Promulgated:

September 26, 2011
x---------------------------------------------------------------------------------------x


DECISION


PERALTA, J.:


Before us is an administrative complaint1[1] filed by complainant Ernesto Z. Orbe (Orbe) against Judge Manolito Y.
Gumarang (respondent), Pairing Judge, Municipal Trial Court (MTC), Imus, Cavite for Violation of the Rule of Procedure for Small
Claims Cases and the Code of Judicial Conduct.

The antecedent facts are as follows:


Orbe is the plaintiff of a small claims case docketed as Civil Case No. ICSCC 09-65 entitled E.Z. Orbe Tax Accounting Services,
thru, Ernesto Z. Orbe v. L.G.M. Silver Star Credit Corporation, represented by Librado Montano, filed before the MTC of Imus, Cavite,
presided by Judge Emily A. Geluz.

During the hearing of the case on February 9, 2010, the parties failed to reach an amicable settlement. On the same day,
the case was assigned to respondent Judge Manolito Y. Gumarang, Assisting Judge of the MTC of Imus, Cavite, for the continuation
of the trial.

Complainant alleged that the case was scheduled for hearing on March 4, 2010, but was postponed by respondent to
March 11, 2010 because of power interruption. On March 11, 2010, again the hearing was reset by respondent Judge Gumarang to
March 25, 2010 as he was due for medical check-up. On March 25, 2010, respondent conducted another Judicial Dispute Resolution
(JDR), and again reset the hearing to April 15, 2010 when the parties failed to reach an amicable agreement.

Complainant argued that Judge Gumarang violated the Rule of Procedure for Small Claims Cases for failure to decide the
civil case within five (5) days from receipt of the order of reassignment.

On August 2, 2010, the Office of the Court Administrator (OCA) directed Judge Gumarang to submit his comment on the
complaint against him.2[2]

* Designated additional member in lieu of Associate Justice Presbitero J. Velasco, Jr., per Special Order
No. 1102 dated September 21, 2011.
1[1] Rollo, pp. 1-4.
2[2] Id. at 43.
2


In his Comment3[3] dated September 13, 2010, Judge Gumarang explained that as Assisting Judge in the MTC of Bacoor,
Cavite, he tried small claims cases only on Thursdays. He admitted that he failed to decide the case within five (5) working days from
receipt of the order, as mandated by the Rule. However, he pointed out that the Rule needed clarification since, as in his case, the
five (5) working days should be construed to refer to five (5) calendared trial dates falling on Thursdays only, considering that he
allotted only one day, that is Thursday, to hear and try small claims cases.

On May 10, 2011, the OCA, in its Memorandum,4[4] recommended that the instant matter be redocketed as a regular
administrative complaint. It likewise found Judge Gumarang guilty of Gross Ignorance of the Law, but recommended that he be fined
in the amount of Five Thousand Pesos (P5,000.00) only for violating the Rule of Procedure for Small Claims Cases.

We agree with the findings and recommendation of the OCA.

Indeed, Section 22 of the Rule of Procedure for Small Claims Cases clearly provided for the period within which judgment
should be rendered, to wit:

Section 22. Failure of Settlement If efforts at settlement fail, the hearing shall proceed in an informal and
expeditious manner and be terminated within one (1) day. Either party may move in writing to have another judge
hear and decide the case. The reassignment of the case shall be done in accordance with existing issuances.

The referral by the original judge to the Executive Judge shall be made within the same day the motion is
filed and granted, and by the Executive Judge to the designated judge within the same day of the referral. The new
judge shall hear and decide the case within five (5) days from the receipt of the order of reassignment.5[5]


In this case, it is undisputed that it took more than two (2) months for respondent to render a decision on the subject case
as he himself admitted the series of postponements which occurred during the pendency of the case. His lone argument was that he
hears small claims cases on Thursdays only, hence, he claimed that, in his case, the period of five (5) working days being referred to
by Section 22 of the Rule should pertain only to Thursdays.

We are unconvinced.

Judge Gumarang must have missed the very purpose and essence of the creation of the Rule of Procedure for Small Claims
Cases, as his interpretation of the Rule is rather misplaced. It is, therefore, imperative to emphasize what the Court sought to
accomplish in creating the Rule of Procedure for Small Claims Cases, to wit:

x x x Thus, pursuant to its rule-making power, the Court, under the present Constitution, can adopt a special rule of
procedure to govern small claims cases and select pilot courts that would empower the people to bring suits
before them pro se to resolve legal disputes involving simple issues of law and procedure without the need for
legal representation and extensive judicial intervention. This system will enhance access to justice, especially by
those who cannot afford the high costs of litigation even in cases of relatively small value. It is envisioned that
by facilitating the traffic of cases through simple and expeditious rules and means, our Court can improve the
perception of justice in this country, thus, giving citizens a renewed stake in preserving peace in the land. x x
x6[6]


The theory behind the small claims system is that ordinary litigation fails to bring practical justice to the parties when the
disputed claim is small, because the time and expense required by the ordinary litigation process is so disproportionate to the
amount involved that it discourages a just resolution of the dispute. The small claims process is designed to function quickly and
informally. There are no lawyers, no formal pleadings and no strict legal rules of evidence.7[7]

Thus, the intent of the law in providing the period to hear and decide cases falling under the Rule of Procedure for Small
Claims Cases, which is within five (5) days from the receipt of the order of assignment, is very clear. The exigency of prompt
rendition of judgment in small claims cases is a matter of public policy. There is no room for further interpretation; it does not
require respondent's exercise of discretion. He is duty-bound to adhere to the rules and decide small claims cases without undue
delay.

3[3] Id. at 41-42.
4[4] Id. at 45-47.
5[5] Emphasis supplied.


3


The need for prompt resolution of small claims cases is further emphasized by Section 19 of the Rule, which provides that:

SEC. 19. Postponement When Allowed. A request for postponement of a hearing may be granted only
upon proof of the physical inability of the party to appear before the court on the scheduled date and time. A party
may avail of only one (1) postponement.


In the instant case, it is noteworthy to mention that the postponements were not attributed to any of the parties to the
case. The numerous postponements, which in some instances were upon respondent's initiative, were uncalled for and unjustified,
considering that it was already established that all efforts for amicable settlement were futile. Thus, the postponements were clear
violation of the Rule and defeat the very essence of the Rule.

Time and again, we have ruled that when the rules of procedure are clear and unambiguous, leaving no room for
interpretation, all that is needed to do is to simply apply it. Failure to apply elementary rules of procedure constitutes gross
ignorance of the law and procedure. In the instant case, neither good faith nor lack of malice will exonerate respondent, as the rules
violated were basic procedural rules.

We cannot countenance undue delay in the disposition of cases or motions, especially now when there is an all-out effort
to minimize if not totally eradicate the problem of congestion long plaguing our courts. The requirement that cases be decided
within the reglementary period is designed to prevent delay in the administration of justice. For obviously, justice delayed is justice
denied. Delay in the disposition of cases erodes the faith and confidence of our people in the judiciary, lowers its standards, and
brings it into disrepute.8[8]

Section 9 (1), Rule 140 of the Revised Rules of Court, as amended, provides that undue delay in rendering a decision or
order is classified as a less serious charge, which is punishable by suspension from office, without salary and other benefits for not
less than one (1) or more than three (3) months; or a fine of more than P10,000.00 but not exceeding P20,000.00. Considering that
the Rule on small claims is a new rule, and that this is respondent judges first violation of the rule, we deem it proper to impose a
fine in the amount of P5,000.00.

WHEREFORE, the Court finds Judge Manolito Y. Gumarang, Municipal Trial Court, Imus, Cavite, GUILTY of Undue Delay in
Rendering a Decision and Violation of the Rule of Procedure for Small Claims Cases, and is hereby ORDERED to pay a fine of Five
Thousand Pesos (P5,000.00) and WARNED that a repetition of the same or similar act shall be dealt with more severely.
SO ORDERED







Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 196877 November 21, 2012
ELOISA R. NARCISO, Petitioner,
vs.
ESTELITA P. GARCIA, Respondent.
D E C I S I O N
ABAD, J.:

This case is about the propriety of declaring a defendant in default when the time for filing the answer has not yet elapsed.

The Facts and the Case

Plaintiff Estelita P. Garcia (respondent in this case) filed a complaint for damages against defendant Eloisa R. Narciso (petitioner)
before the Regional Trial Court (RTC) of San Fernando, Pampanga. Narciso filed a motion to dismiss the complaint, alleging that the
RTC had no jurisdiction over the subject matter of the complaint since it averred facts constitutive of forcible entry. Narciso also
assailed the venue as improperly laid since the acts Garcia complained of were committed in Angeles City.

Plaintiff Garcia opposed the motion to dismiss and at the same time sought to have defendant Narciso declared in default. Garcia
cited the Supreme Courts administrative circular that discouraged the filing of a motion to dismiss in lieu of answer. Since the time
to file an answer had already elapsed, said Garcia, she was entitled to have Narciso declared in default.


4


The RTC set the two motions for hearing on November 5, 2004 at which hearing it deemed the incidents submitted for resolution.
On November 30, 2004, the RTC denied Narcisos motion to dismiss and, as a consequence, declared her in default for failing to file
an answer.

On December 22, 2004 defendant Narciso filed a motion for reconsideration of the orders denying her motion to dismiss and
declaring her in default for failing to file an answer, which motion Garcia opposed. In her opposition, the latter also sought to
present her evidence ex parte. Meantime, the presiding judge, Pedro M. Sunga, retired and Judge Divina Luz Aquino-Simbulan
replaced him as acting judge of the concerned RTC branch.
Judge Simbulan referred the case for mediation on June 23, 2005. When mediation failed, on August 1, 2005 the trial court set the
case for judicial dispute resolution (JDR) as component of pre-trial, presided over by Judge Maria Amifaith S. Fider-Reyes. Since the
JDR also failed, the case was re-raffled for pre-trial proper and trial to Branch 44, presided over by Judge Esperanza Paglinawan-
Rozario.

On March 26, 2007, having noted that the court had not yet acted on Narcisos motion for reconsideration of the orders denying her
motion to dismiss and declaring her in default, the trial court set the case for hearing and required the parties to submit their
respective written manifestations to the court.

On August 24, 2007 the trial court denied Narcisos motion for reconsideration. It ruled that since she had already been declared in
default as early as November 30, 2004 and since she had not filed any motion to lift the order of default within the allowable time,
Narciso could no longer assail such default order.

On September 3, 2007 Narciso filed a motion to lift the order of default against her. She claimed that the protracted resolution of
her motion for reconsideration and the referral of the case for mediation prevented her from filing an answer. She also pointed out
that she filed a case for ejectment against Garcia and succeeded in obtaining a decision against the latter.

On April 8, 2008 the trial court denied Narcisos motion. She filed a motion for reconsideration of this order but the court also
denied the same on October 13, 2008, prompting Narciso to file a petition for certiorari before the Court of Appeals (CA). On
December 8, 2010
1
the CA denied her petition and affirmed the RTCs order. The CA held that, while a motion to lift order of default
may be filed at any time after notice and before judgment, Narciso needed to allege facts constituting fraud, accident, mistake, or
excusable negligence that prevented her from answering the complaint. She also needed to show a meritorious defense or that
something would be gained by having the order of default set aside.
2
For the CA, petitioner failed to do these things. It denied
Narcisos motion for reconsideration of its decision on April 11, 2011.
3


Claiming that the CA committed grave abuse of discretion amounting to lack or excess of jurisdiction, Narciso filed the present
petition for certiorari with prayer for the issuance of a temporary restraining order (TRO) and injunction. In a Resolution dated June
8, 2011 the Court issued a TRO in the case, enjoining the RTC from proceeding with its hearing until further orders.
4


The Issue Presented
The sole issue presented in this case is whether or not the CA gravely abused its discretion in affirming the order of default that the
RTC issued against petitioner Narciso.

The Courts Ruling
Section 3, Rule 9 of the Rules of Court provides that a defending party may be declared in default upon motion of the claiming party
with notice to the defending party, and proof of failure to file an answer within the time allowed for it. Thus:

SEC. 3. Default; declaration of. If the defending party fails to answer within the time allowed therefor, the court shall, upon
motion of the claiming party with notice to the defending party, and proof of such failure, declare the defending party in default. x x
x

Here, however, defendant Narciso filed a motion to dismiss plaintiff Garcias complaint against her before filing an answer. Section
1, Rule 16 allows her this remedy. Thus:

SEC. 1. Grounds. Within the time for but before filing the answer to the complaint or pleading asserting a claim, a motion to
dismiss may be made on any of the following grounds: x x x.

As a consequence of the motion to dismiss that defendant Narciso filed, the running of the period during which the rules required
her to file her answer was deemed suspended. When the trial court denied her motion to dismiss, therefore, she had the balance of
her period for filing an answer under Section 4, Rule 16 within which to file the same but in no case less than five days, computed
from her receipt of the notice of denial of her motion to dismiss. Thus:

SEC. 4. Time to plead. If the motion is denied, the movant shall file his answer within the balance of the period prescribed by Rule
11 to which he was entitled at the time of serving his motion, but not less than five (5) days in any event, computed from his receipt
of the notice of the denial. If the pleading is ordered to be amended, he shall file his answer within the period prescribed by Rule 11
counted from service of the amended pleading, unless the court provides a longer period.
But apart from opposing defendants motion to dismiss, plaintiff Garcia asked the trial court to declare Narciso in default for not
filing an answer, altogether disregarding the suspension of the running of the period for filing such an answer during the pendency
of the motion to dismiss that she filed in the case. Consequently, when the trial court granted Garcias prayer and simultaneously
5

denied Narcisos motion to dismiss and declared her in default, it committed serious error.1wphi1 Narciso was not yet in default
when the trial court denied her motion to dismiss. She still had at least five days within which to file her answer to the complaint.
What is more, Narciso had the right to file a motion for reconsideration of the trial courts order denying her motion to dismiss. No
rule prohibits the filing of such a motion for reconsideration. Only after the trial court shall have denied it does Narciso become
bound to file her answer to Garcias complaint. And only if she did not do so was Garcia entitled to have her declared in default.
Unfortunately, the CA failed to see this point.
WHEREFORE, the Court ANNULS and SETS ASIDE the Decision of the Court of Appeals dated December 8, 2010 and Resolution dated
April 11, 2011 in CA-G.R. SP 106425, LIFTS the order of default that the Regional Trial Court of San Fernando, Pampanga, Branch 44,
entered against petitioner Eloisa Narciso, and DIRECTS that court to allow her to file her answer to the complaint and proceed to
hear the case with dispatch. The court DISSOLVES the temporary restraining order that it issued on June 8, 2011 to enable the trial
court to resume proceedings in the case.
SO ORDERED.

_____________________________________________________________________________




Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 143581 January 7, 2008
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.

D E C I S I O N

VELASCO, JR., J.:

In our jurisdiction, the policy is to favor alternative methods of resolving disputes, particularly in civil and commercial disputes.
Arbitration along with mediation, conciliation, and negotiation, being inexpensive, speedy and less hostile methods have long been
favored by this Court. The petition before us puts at issue an arbitration clause in a contract mutually agreed upon by the parties
stipulating that they would submit themselves to arbitration in a foreign country. Regrettably, instead of hastening the resolution of
their dispute, the parties wittingly or unwittingly prolonged the controversy.

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
1
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
2
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
3
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
4
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.
5


When KOGIES deposited the checks, these were dishonored for the reason "PAYMENT STOPPED." Thus, on May 8, 1998, KOGIES
sent a demand letter
6
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
6

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.

On May 14, 1998, PGSMC replied that the two checks it issued KOGIES were fully funded but the payments were stopped for reasons
previously made known to KOGIES.
7


On June 1, 1998, PGSMC informed KOGIES that PGSMC was canceling their Contract dated March 5, 1997 on the ground that KOGIES
had altered the quantity and lowered the quality of the machineries and equipment it delivered to PGSMC, and that PGSMC would
dismantle and transfer the machineries, equipment, and facilities installed in the Carmona plant. Five days later, PGSMC filed before
the Office of the Public Prosecutor an Affidavit-Complaint for Estafa docketed as I.S. No. 98-03813 against Mr. Dae Hyun Kang,
President of KOGIES.
On June 15, 1998, KOGIES wrote PGSMC informing the latter that PGSMC could not unilaterally rescind their contract nor dismantle
and transfer the machineries and equipment on mere imagined violations by KOGIES. It also insisted that their disputes should be
settled by arbitration as agreed upon in Article 15, the arbitration clause of their contract.

On June 23, 1998, PGSMC again wrote KOGIES reiterating the contents of its June 1, 1998 letter threatening that the machineries,
equipment, and facilities installed in the plant would be dismantled and transferred on July 4, 1998. Thus, on July 1, 1998, KOGIES
instituted an Application for Arbitration before the Korean Commercial Arbitration Board (KCAB) in Seoul, Korea pursuant to Art. 15
of the Contract as amended.

On July 3, 1998, KOGIES filed a Complaint for Specific Performance, docketed as Civil Case No. 98-117
8
against PGSMC before the
Muntinlupa City Regional Trial Court (RTC). The RTC granted a temporary restraining order (TRO) on July 4, 1998, which was
subsequently extended until July 22, 1998. In its complaint, KOGIES alleged that PGSMC had initially admitted that the checks that
were stopped were not funded but later on claimed that it stopped payment of the checks for the reason that "their value was not
received" as the former allegedly breached their contract by "altering the quantity and lowering the quality of the machinery and
equipment" installed in the plant and failed to make the plant operational although it earlier certified to the contrary as shown in a
January 22, 1998 Certificate. Likewise, KOGIES averred that PGSMC violated Art. 15 of their Contract, as amended, by unilaterally
rescinding the contract without resorting to arbitration. KOGIES also asked that PGSMC be restrained from dismantling and
transferring the machinery and equipment installed in the plant which the latter threatened to do on July 4, 1998.

On July 9, 1998, PGSMC filed an opposition to the TRO arguing that KOGIES was not entitled to the TRO since Art. 15, the arbitration
clause, was null and void for being against public policy as it ousts the local courts of jurisdiction over the instant controversy.

On July 17, 1998, PGSMC filed its Answer with Compulsory Counterclaim
9
asserting that it had the full right to dismantle and transfer
the machineries and equipment because it had paid for them in full as stipulated in the contract; that KOGIES was not entitled to the
PhP 9,000,000 covered by the checks for failing to completely install and make the plant operational; and that KOGIES was liable for
damages amounting to PhP 4,500,000 for altering the quantity and lowering the quality of the machineries and equipment.
Moreover, PGSMC averred that it has already paid PhP 2,257,920 in rent (covering January to July 1998) to Worth and it was not
willing to further shoulder the cost of renting the premises of the plant considering that the LPG cylinder manufacturing plant never
became operational.

After the parties submitted their Memoranda, on July 23, 1998, the RTC issued an Order denying the application for a writ of
preliminary injunction, reasoning that PGSMC had paid KOGIES USD 1,224,000, the value of the machineries and equipment as
shown in the contract such that KOGIES no longer had proprietary rights over them. And finally, the RTC held that Art. 15 of the
Contract as amended was invalid as it tended to oust the trial court or any other court jurisdiction over any dispute that may arise
between the parties. KOGIES prayer for an injunctive writ was denied.
10
The dispositive portion of the Order stated:

WHEREFORE, in view of the foregoing consideration, this Court believes and so holds that no cogent reason exists for this
Court to grant the writ of preliminary injunction to restrain and refrain defendant from dismantling the machineries and
facilities at the lot and building of Worth Properties, Incorporated at Carmona, Cavite and transfer the same to another site:
and therefore denies plaintiffs application for a writ of preliminary injunction.

On July 29, 1998, KOGIES filed its Reply to Answer and Answer to Counterclaim.
11
KOGIES denied it had altered the quantity and
lowered the quality of the machinery, equipment, and facilities it delivered to the plant. It claimed that it had performed all the
undertakings under the contract and had already produced certified samples of LPG cylinders. It averred that whatever was
unfinished was PGSMCs fault since it failed to procure raw materials due to lack of funds. KOGIES, relying on Chung Fu Industries
(Phils.), Inc. v. Court of Appeals,
12
insisted that the arbitration clause was without question valid.

After KOGIES filed a Supplemental Memorandum with Motion to Dismiss
13
answering PGSMCs memorandum of July 22, 1998 and
seeking dismissal of PGSMCs counterclaims, KOGIES, on August 4, 1998, filed its Motion for Reconsideration
14
of the July 23, 1998
Order denying its application for an injunctive writ claiming that the contract was not merely for machinery and facilities worth USD
1,224,000 but was for the sale of an "LPG manufacturing plant" consisting of "supply of all the machinery and facilities" and "transfer
of technology" for a total contract price of USD 1,530,000 such that the dismantling and transfer of the machinery and facilities
would result in the dismantling and transfer of the very plant itself to the great prejudice of KOGIES as the still unpaid owner/seller
of the plant. Moreover, KOGIES points out that the arbitration clause under Art. 15 of the Contract as amended was a valid
arbitration stipulation under Art. 2044 of the Civil Code and as held by this Court in Chung Fu Industries (Phils.), Inc.
15


7

In the meantime, PGSMC filed a Motion for Inspection of Things
16
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. KOGIES opposed the motion
positing that the queries and issues raised in the motion for inspection fell under the coverage of the arbitration clause in their
contract.

On September 21, 1998, the trial court issued an Order (1) granting PGSMCs motion for inspection; (2) denying KOGIES motion for
reconsideration of the July 23, 1998 RTC Order; and (3) denying KOGIES motion to dismiss PGSMCs compulsory counterclaims as
these counterclaims fell within the requisites of compulsory counterclaims.
On October 2, 1998, KOGIES filed an Urgent Motion for Reconsideration
17
of the September 21, 1998 RTC Order granting inspection
of the plant and denying dismissal of PGSMCs compulsory counterclaims.

Ten days after, on October 12, 1998, without waiting for the resolution of its October 2, 1998 urgent motion for reconsideration,
KOGIES filed before the Court of Appeals (CA) a petition for certiorari
18
docketed as CA-G.R. SP No. 49249, seeking annulment of the
July 23, 1998 and September 21, 1998 RTC Orders and praying for the issuance of writs of prohibition, mandamus, and preliminary
injunction to enjoin the RTC and PGSMC from inspecting, dismantling, and transferring the machineries and equipment in the
Carmona plant, and to direct the RTC to enforce the specific agreement on arbitration to resolve the dispute.

In the meantime, on October 19, 1998, the RTC denied KOGIES urgent motion for reconsideration and directed the Branch Sheriff to
proceed with the inspection of the machineries and equipment in the plant on October 28, 1998.
19


Thereafter, KOGIES filed a Supplement to the Petition
20
in CA-G.R. SP No. 49249 informing the CA about the October 19, 1998 RTC
Order. It also reiterated its prayer for the issuance of the writs of prohibition, mandamus and preliminary injunction which was not
acted upon by the CA. KOGIES asserted that the Branch Sheriff did not have the technical expertise to ascertain whether or not the
machineries and equipment conformed to the specifications in the contract and were properly installed.

On November 11, 1998, the Branch Sheriff filed his Sheriffs Report
21
finding that the enumerated machineries and equipment were
not fully and properly installed.

The Court of Appeals affirmed the trial court and declared
the arbitration clause against public policy
On May 30, 2000, the CA rendered the assailed Decision
22
affirming the RTC Orders and dismissing the petition for certiorari filed by
KOGIES. The CA found that the RTC did not gravely abuse its discretion in issuing the assailed July 23, 1998 and September 21, 1998
Orders. Moreover, the CA reasoned that KOGIES contention that the total contract price for USD 1,530,000 was for the whole plant
and had not been fully paid was contrary to the finding of the RTC that PGSMC fully paid the price of USD 1,224,000, which was for
all the machineries and equipment. According to the CA, this determination by the RTC was a factual finding beyond the ambit of a
petition for certiorari.

On the issue of the validity of the arbitration clause, the CA agreed with the lower court 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.

On the issue of nonpayment of docket fees and non-attachment of a certificate of non-forum shopping by PGSMC, the CA held that
the counterclaims of PGSMC were compulsory ones and payment of docket fees was not required since the Answer with
counterclaim was not an initiatory pleading. For the same reason, the CA said a certificate of non-forum shopping was also not
required.

Furthermore, the CA held that the petition for certiorari had been filed prematurely since KOGIES did not wait for the resolution of
its urgent motion for reconsideration of the September 21, 1998 RTC Order which was the plain, speedy, and adequate remedy
available. According to the CA, the RTC must be given the opportunity to correct any alleged error it has committed, and that since
the assailed orders were interlocutory, these cannot be the subject of a petition for certiorari.

Hence, we have this Petition for Review on Certiorari under Rule 45.




The Issues
Petitioner posits that the appellate court committed the following errors:
a. PRONOUNCING THE QUESTION OF OWNERSHIP OVER THE MACHINERY AND FACILITIES AS "A QUESTION OF FACT"
"BEYOND THE AMBIT OF A PETITION FOR CERTIORARI" INTENDED ONLY FOR CORRECTION OF ERRORS OF JURISDICTION OR
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF (SIC) EXCESS OF JURISDICTION, AND CONCLUDING THAT THE TRIAL
COURTS FINDING ON THE SAME QUESTION WAS IMPROPERLY RAISED IN THE PETITION BELOW;
b. DECLARING AS NULL AND VOID THE ARBITRATION CLAUSE IN ARTICLE 15 OF THE CONTRACT BETWEEN THE PARTIES FOR
BEING "CONTRARY TO PUBLIC POLICY" AND FOR OUSTING THE COURTS OF JURISDICTION;
c. DECREEING PRIVATE RESPONDENTS COUNTERCLAIMS TO BE ALL COMPULSORY NOT NECESSITATING PAYMENT OF
DOCKET FEES AND CERTIFICATION OF NON-FORUM SHOPPING;
d. RULING THAT THE PETITION WAS FILED PREMATURELY WITHOUT WAITING FOR THE RESOLUTION OF THE MOTION FOR
RECONSIDERATION OF THE ORDER DATED SEPTEMBER 21, 1998 OR WITHOUT GIVING THE TRIAL COURT AN OPPORTUNITY
TO CORRECT ITSELF;
8

e. PROCLAIMING THE TWO ORDERS DATED JULY 23 AND SEPTEMBER 21, 1998 NOT TO BE PROPER SUBJECTS OF
CERTIORARI AND PROHIBITION FOR BEING "INTERLOCUTORY IN NATURE;"
f. NOT GRANTING THE RELIEFS AND REMEDIES PRAYED FOR IN HE (SIC) PETITION AND, INSTEAD, DISMISSING THE SAME
FOR ALLEGEDLY "WITHOUT MERIT."
23


The Courts Ruling
The petition is partly meritorious.
Before we delve into the substantive issues, we shall first tackle the procedural issues.
The rules on the payment of docket fees for counterclaims
and cross claims were amended effective August 16, 2004

KOGIES strongly argues that when PGSMC filed the counterclaims, it should have paid docket fees and filed a certificate of non-
forum shopping, and that its failure to do so was a fatal defect.
We disagree with KOGIES.

As aptly ruled by the CA, the counterclaims of PGSMC were incorporated in its Answer with Compulsory Counterclaim dated July 17,
1998 in accordance with Section 8 of Rule 11, 1997 Revised Rules of Civil Procedure, the rule that was effective at the time the
Answer with Counterclaim was filed. Sec. 8 on existing counterclaim or cross-claim states, "A compulsory counterclaim or a cross-
claim that a defending party has at the time he files his answer shall be contained therein."

On July 17, 1998, at the time PGSMC filed its Answer incorporating its counterclaims against KOGIES, it was not liable to pay filing
fees for said counterclaims being compulsory in nature. We stress, however, that effective August 16, 2004 under Sec. 7, Rule 141,
as amended by A.M. No. 04-2-04-SC, docket fees are now required to be paid in compulsory counterclaim or cross-claims.

As to the failure to submit a certificate of forum shopping, PGSMCs Answer is not an initiatory pleading which requires a
certification against forum shopping under Sec. 5
24
of Rule 7, 1997 Revised Rules of Civil Procedure. It is a responsive pleading,
hence, the courts a quo did not commit reversible error in denying KOGIES motion to dismiss PGSMCs compulsory counterclaims.

Interlocutory orders proper subject of certiorari
Citing Gamboa v. Cruz,
25
the CA also pronounced that "certiorari and Prohibition are neither the remedies to question the propriety
of an interlocutory order of the trial court."
26
The CA erred on its reliance on Gamboa. Gamboa involved the denial of a motion to
acquit in a criminal case which was not assailable in an action for certiorari since the denial of a motion to quash required the
accused to plead and to continue with the trial, and whatever objections the accused had in his motion to quash can then be used as
part of his defense and subsequently can be raised as errors on his appeal if the judgment of the trial court is adverse to him. The
general rule is that interlocutory orders cannot be challenged by an appeal.
27
Thus, in Yamaoka v. Pescarich Manufacturing
Corporation, we held:
The proper remedy in such cases is an ordinary appeal from an adverse judgment on the merits, incorporating in said
appeal the grounds for assailing the interlocutory orders. Allowing appeals from interlocutory orders would result in the
sorry spectacle of a case being subject of a counterproductive ping-pong to and from the appellate court as often as a trial
court is perceived to have made an error in any of its interlocutory rulings. However, where the assailed interlocutory order
was issued with grave abuse of discretion or patently erroneous and the remedy of appeal would not afford adequate and
expeditious relief, the Court allows certiorari as a mode of redress.
28

Also, appeals from interlocutory orders would open the floodgates to endless occasions for dilatory motions. Thus, where the
interlocutory order was issued without or in excess of jurisdiction or with grave abuse of discretion, the remedy is certiorari.
29


The alleged grave abuse of discretion of the respondent court equivalent to lack of jurisdiction in the issuance of the two assailed
orders coupled with the fact that there is no plain, speedy, and adequate remedy in the ordinary course of law amply provides the
basis for allowing the resort to a petition for certiorari under Rule 65.

Prematurity of the petition before the CA
Neither do we think that KOGIES was guilty of forum shopping in filing the petition for certiorari. Note that KOGIES motion for
reconsideration of the July 23, 1998 RTC Order which denied the issuance of the injunctive writ had already been denied. Thus,
KOGIES only remedy was to assail the RTCs interlocutory order via a petition for certiorari under Rule 65.

While the October 2, 1998 motion for reconsideration of KOGIES of the September 21, 1998 RTC Order relating to the inspection of
things, and the allowance of the compulsory counterclaims has not yet been resolved, the circumstances in this case would all ow an
exception to the rule that before certiorari may be availed of, the petitioner must have filed a motion for reconsideration and said
motion should have been first resolved by the court a quo. The reason behind the rule is "to enable the lower court, in the first
instance, to pass upon and correct its mistakes without the intervention of the higher court."
30


The September 21, 1998 RTC Order directing the branch sheriff to inspect the plant, equipment, and facilities when he is not
competent and knowledgeable on said matters is evidently flawed and devoid of any legal support. Moreover, there is an urgent
necessity to resolve the issue on the dismantling of the facilities and any further delay would prejudice the interests of KOGIES.
Indeed, there is real and imminent threat of irreparable destruction or substantial damage to KOGIES equipment and machineries.
We find the resort to certiorari based on the gravely abusive orders of the trial court sans the ruling on the October 2, 1998 motion
for reconsideration to be proper.

The Core Issue: Article 15 of the Contract
9

We now go to the core issue of the validity of Art. 15 of the Contract, the arbitration clause. It provides:
Article 15. Arbitration.All disputes, controversies, or differences which may arise between the parties, out of or in relation
to or in connection with this Contract or for the breach thereof, shall finally be settled by arbitration in Seoul, Korea in
accordance with the Commercial Arbitration Rules of the Korean Commercial Arbitration Board. The award rendered by
the arbitration(s) shall be final and binding upon both parties concerned. (Emphasis supplied.)

Petitioner claims the RTC and the CA erred in ruling that the arbitration clause is null and void.
Petitioner is correct.

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." (Emphasis supplied.)

Arts. 2038,
31
2039,
32
and 2040
33
abovecited refer to instances where a compromise or an arbitral award, as applied to Art. 2044
pursuant to Art. 2043,
34
may be voided, rescinded, or annulled, but these would not denigrate the finality of the arbitral award.

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.,
35
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.
36
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."
37


Arbitration clause not contrary to public policy
The arbitration clause which stipulates that the arbitration must be done in Seoul, Korea in accordance with the Commercial
Arbitration Rules of the KCAB, and that the arbitral award is final and binding, is not contrary to public policy. This Court has
sanctioned the validity of arbitration clauses in a catena of cases. In the 1957 case of Eastboard Navigation Ltd. v. Juan Ysmael and
Co., Inc.,
38
this Court had occasion to rule that an arbitration clause to resolve differences and breaches of mutually agreed
contractual terms is valid. In BF Corporation v. Court of Appeals, we held that "[i]n this jurisdiction, arbitration has been held valid
and constitutional. Even before the approval on June 19, 1953 of Republic Act No. 876, this Court has countenanced the settlement
of disputes through arbitration. Republic Act No. 876 was adopted to supplement the New Civil Codes provisions on arbitration."
39

And in LM Power Engineering Corporation v. Capitol Industrial Construction Groups, Inc., we declared that:
Being an inexpensive, speedy and amicable method of settling disputes,

arbitrationalong with mediation, conciliation and
negotiationis encouraged by the Supreme Court. Aside from unclogging judicial dockets, arbitration also hastens the
resolution of disputes, especially of the commercial kind. It is thus regarded as the "wave of the future" in international civil
and commercial disputes. Brushing aside a contractual agreement calling for arbitration between the parties would be a
step backward.
Consistent with the above-mentioned policy of encouraging alternative dispute resolution methods, courts should liberally
construe arbitration clauses. Provided such clause is susceptible of an interpretation that covers the asserted dispute, an
order to arbitrate should be granted. Any doubt should be resolved in favor of arbitration.
40


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.

RA 9285 incorporated the UNCITRAL Model law
to which we are a signatory
For domestic arbitration proceedings, we have particular agencies to arbitrate disputes arising from contractual relations. In case a
foreign arbitral body is chosen by the parties, the arbitration rules of our domestic arbitration bodies would not be applied. As
signatory to the Arbitration Rules of the UNCITRAL Model Law on International Commercial Arbitration
41
of the United Nations
Commission on International Trade Law (UNCITRAL) in the New York Convention on June 21, 1985, the Philippines committed itself
to be bound by the Model Law. We have even incorporated the Model Law in Republic Act No. (RA) 9285, otherwise known as the
Alternative Dispute Resolution Act of 2004 entitled An Act to Institutionalize the Use of an Alternative Dispute Resolution System in
the Philippines and to Establish the Office for Alternative Dispute Resolution, and for Other Purposes, promulgated on April 2, 2004.
Secs. 19 and 20 of Chapter 4 of the Model Law are the pertinent provisions:

CHAPTER 4 - INTERNATIONAL COMMERCIAL ARBITRATION
SEC. 19. Adoption of the Model Law on International Commercial Arbitration.International commercial arbitration shall be
governed by the Model Law on International Commercial Arbitration (the "Model Law") adopted by the United Nations
Commission on International Trade Law on June 21, 1985 (United Nations Document A/40/17) and recommended for
enactment by the General Assembly in Resolution No. 40/72 approved on December 11, 1985, copy of which is hereto
attached as Appendix "A".
SEC. 20. Interpretation of Model Law.In interpreting the Model Law, regard shall be had to its international origin and to
the need for uniformity in its interpretation and resort may be made to the travaux preparatories and the report of the
Secretary General of the United Nations Commission on International Trade Law dated March 25, 1985 entitled,
10

"International Commercial Arbitration: Analytical Commentary on Draft Trade identified by reference number A/CN.
9/264."

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.
42


Among the pertinent features of RA 9285 applying and incorporating the UNCITRAL Model Law are the following:

(1) The RTC must refer to arbitration in proper cases
Under Sec. 24, the RTC does not have jurisdiction over disputes that are properly the subject of arbitration pursuant to an arbitration
clause, and mandates the referral to arbitration in such cases, thus:
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 requests not later than 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.


(2) Foreign arbitral awards must be confirmed by the RTC
Foreign arbitral awards while mutually stipulated by the parties in the arbitration clause to be final and binding are not immediately
enforceable or cannot be implemented immediately. Sec. 35
43
of the UNCITRAL Model Law stipulates the requirement for the
arbitral award to be recognized by a competent court for enforcement, which court under Sec. 36 of the UNCITRAL Model Law may
refuse recognition or enforcement on the grounds provided for. RA 9285 incorporated these provisos to Secs. 42, 43, and 44 relative
to Secs. 47 and 48, thus:
SEC. 42. Application of the New York Convention.The New York Convention shall govern the recognition and enforcement
of arbitral awards covered by said Convention.
The recognition and enforcement of such arbitral awards shall be filed with the Regional Trial Court in accordance with the
rules of procedure to be promulgated by the Supreme Court. Said procedural rules shall provide that the party relying on
the award or applying for its enforcement shall file with the court the original or authenticated copy of the award and the
arbitration agreement. If the award or agreement is not made in any of the official languages, the party shall supply a duly
certified translation thereof into any of such languages.
The applicant shall establish that the country in which foreign arbitration award was made in party to the New York
Convention.
x x x x
SEC. 43. Recognition and Enforcement of Foreign Arbitral Awards Not Covered by the New York Convention.The
recognition and enforcement of foreign arbitral awards not covered by the New York Convention shall be done in
accordance with procedural rules to be promulgated by the Supreme Court. The Court may, on grounds of comity and
reciprocity, recognize and enforce a non-convention award as a convention award.
SEC. 44. Foreign Arbitral Award Not Foreign Judgment.A foreign arbitral award when confirmed by a court of a foreign
country, shall be recognized and enforced as a foreign arbitral award and not as a judgment of a foreign court.
A foreign arbitral award, when confirmed by the Regional Trial Court, shall be enforced in the same manner as final and
executory decisions of courts of law of the Philippines
x x x x
SEC. 47. Venue and Jurisdiction.Proceedings for recognition and enforcement of an arbitration agreement or for
vacations, setting aside, correction or modification of an arbitral award, and any application with a court for arbitration
assistance and supervision shall be deemed as special proceedings and shall be filed with the Regional Trial Court (i) where
arbitration proceedings are conducted; (ii) where the asset to be attached or levied upon, or the act to be enjoined is
located; (iii) where any of the parties to the dispute resides or has his place of business; or (iv) in the National Judicial
Capital Region, at the option of the applicant.
SEC. 48. Notice of Proceeding to Parties.In a special proceeding for recognition and enforcement of an arbitral award, the
Court shall send notice to the parties at their address of record in the arbitration, or if any part cannot be served notice at
such address, at such partys last known address. The notice shall be sent al least fifteen (15) days before the date set for
the initial hearing of the application.

It is now clear that foreign arbitral awards when confirmed by the RTC are deemed not as a judgment of a foreign court but as a
foreign arbitral award, and when confirmed, are enforced as final and executory decisions of our courts of law.

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.

(3) The RTC has jurisdiction to review foreign arbitral awards
11

Sec. 42 in relation to Sec. 45 of RA 9285 designated and vested the RTC with specific authority and jurisdiction to set aside, reject, or
vacate a foreign arbitral award on grounds provided under Art. 34(2) of the UNCITRAL Model Law. Secs. 42 and 45 provide:
SEC. 42. Application of the New York Convention.The New York Convention shall govern the recognition and enforcement
of arbitral awards covered by said Convention.
The recognition and enforcement of such arbitral awards shall be filed with the Regional Trial Court in accordance with the
rules of procedure to be promulgated by the Supreme Court. Said procedural rules shall provide that the party relying on
the award or applying for its enforcement shall file with the court the original or authenticated copy of the award and the
arbitration agreement. If the award or agreement is not made in any of the official languages, the party shall supply a duly
certified translation thereof into any of such languages.
The applicant shall establish that the country in which foreign arbitration award was made is party to the New York
Convention.
If the application for rejection or suspension of enforcement of an award has been made, the Regional Trial Court may, if it
considers it proper, vacate its decision and may also, on the application of the party claiming recognition or enforcement of
the award, order the party to provide appropriate security.
x x x x
SEC. 45. Rejection of a Foreign Arbitral Award.A party to a foreign arbitration proceeding may oppose an application for
recognition and enforcement of the arbitral award in accordance with the procedures and rules to be promulgated by the
Supreme Court only on those grounds enumerated under Article V of the New York Convention. Any other ground raised
shall be disregarded by the Regional Trial Court.

Thus, while the RTC does not have jurisdiction over disputes governed by arbitration mutually agreed upon by the parties, sti ll the
foreign arbitral award is subject to judicial review by the RTC which can set aside, reject, or vacate it. In this sense, what this Court
held in Chung Fu Industries (Phils.), Inc. relied upon by KOGIES is applicable insofar as the foreign arbitral awards, while final and
binding, do not oust courts of jurisdiction since these arbitral awards are not absolute and without exceptions as they are still
judicially reviewable. Chapter 7 of RA 9285 has made it clear that all arbitral awards, whether domestic or foreign, are subject to
judicial review on specific grounds provided for.

(4) Grounds for judicial review different in domestic and foreign arbitral awards
The differences between a final arbitral award from an international or foreign arbitral tribunal and an award given by a local arbitral
tribunal are the specific grounds or conditions that vest jurisdiction over our courts to review the awards.

For foreign or international arbitral awards which must first be confirmed by the RTC, the grounds for setting aside, rejecti ng or
vacating the award by the RTC are provided under Art. 34(2) of the UNCITRAL Model Law.
For final domestic arbitral awards, which also need confirmation by the RTC pursuant to Sec. 23 of RA 876
44
and shall be recognized
as final and executory decisions of the RTC,
45
they may only be assailed before the RTC and vacated on the grounds provided under
Sec. 25 of RA 876.
46


(5) RTC decision of assailed foreign arbitral award appealable
Sec. 46 of RA 9285 provides for an appeal before the CA as the remedy of an aggrieved party in cases where the RTC sets aside,
rejects, vacates, modifies, or corrects an arbitral award, thus:
SEC. 46. Appeal from Court Decision or Arbitral Awards.A decision of the Regional Trial Court confirming, vacating, setting
aside, modifying or correcting an arbitral award may be appealed to the Court of Appeals in accordance with the rules and
procedure to be promulgated by the Supreme Court.
The losing party who appeals from the judgment of the court confirming an arbitral award shall be required by the
appellate court to post a counterbond executed in favor of the prevailing party equal to the amount of the award in
accordance with the rules to be promulgated by the Supreme Court.
Thereafter, the CA decision may further be appealed or reviewed before this Court through a petition for review under Rule 45 of
the Rules of Court.

PGSMC has remedies to protect its interests
Thus, based on the foregoing features of RA 9285, PGSMC must submit to the foreign arbitration as it bound itself through the
subject contract. While it may have misgivings on the foreign arbitration done in Korea by the KCAB, it has available remedies under
RA 9285. Its interests are duly protected by the law which requires that the arbitral award that may be rendered by KCAB must be
confirmed here by the RTC before it can be enforced.
With our disquisition above, petitioner is correct in its contention that an arbitration clause, stipulating that the arbitral award is
final and binding, does not oust our courts of jurisdiction as the international arbitral award, the award of which is not absolute and
without exceptions, is still judicially reviewable under certain conditions provided for by the UNCITRAL Model Law on ICA as applied
and incorporated in RA 9285.
Finally, it must be noted that there is nothing in the subject Contract which provides that the parties may dispense with the
arbitration clause.

Unilateral rescission improper and illegal
Having ruled that the arbitration clause of the subject contract is valid and binding on the parties, and not contrary to public policy;
consequently, being bound to the contract of arbitration, a party may not unilaterally rescind or terminate the contract for whatever
cause without first resorting to arbitration.

What this Court held in University of the Philippines v. De Los Angeles
47
and reiterated in succeeding cases,
48
that the act of treating a
contract as rescinded on account of infractions by the other contracting party is valid albeit provisional as it can be judicially assailed,
12

is not applicable to the instant case on account of a valid stipulation on arbitration. Where an arbitration clause in a contract is
availing, neither of the parties can unilaterally treat the contract as rescinded since whatever infractions or breaches by a party or
differences arising from the contract must be brought first and resolved by arbitration, and not through an extrajudicial rescission or
judicial action.
The issues arising from the contract between PGSMC and KOGIES on whether the equipment and machineries delivered and
installed were properly installed and operational in the plant in Carmona, Cavite; the ownership of equipment and payment of the
contract price; and whether there was substantial compliance by KOGIES in the production of the samples, given the alleged fact
that PGSMC could not supply the raw materials required to produce the sample LPG cylinders, are matters proper for arbitration.
Indeed, we note that on July 1, 1998, KOGIES instituted an Application for Arbitration before the KCAB in Seoul, Korea pursuant to
Art. 15 of the Contract as amended. Thus, it is incumbent upon PGSMC to abide by its commitment to arbitrate.

Corollarily, the trial court gravely abused its discretion in granting PGSMCs Motion for Inspection of Things on September 21, 1998,
as the subject matter of the motion is under the primary jurisdiction of the mutually agreed arbitral body, the KCAB in Korea.

In addition, whatever findings and conclusions made by the RTC Branch Sheriff from the inspection made on October 28, 1998, as
ordered by the trial court on October 19, 1998, is of no worth as said Sheriff is not technically competent to ascertain the actual
status of the equipment and machineries as installed in the plant.
For these reasons, the September 21, 1998 and October 19, 1998 RTC Orders pertaining to the grant of the inspection of the
equipment and machineries have to be recalled and nullified.

Issue on ownership of plant proper for arbitration
Petitioner assails the CA ruling that the issue petitioner raised on whether the total contract price of USD 1,530,000 was for the
whole plant and its installation is beyond the ambit of a Petition for Certiorari.
Petitioners position is untenable.

It is settled that questions of fact cannot be raised in an original action for certiorari.
49
Whether or not there was full payment for
the machineries and equipment and installation is indeed a factual issue prohibited by Rule 65.
However, what appears to constitute a grave abuse of discretion is the order of the RTC in resolving the issue on the ownership of
the plant when it is the arbitral body (KCAB) and not the RTC which has jurisdiction and authority over the said issue. The RTCs
determination of such factual issue constitutes grave abuse of discretion and must be reversed and set aside.

RTC has interim jurisdiction to protect the rights of the parties
Anent the July 23, 1998 Order denying the issuance of the injunctive writ paving the way for PGSMC to dismantle and transfer the
equipment and machineries, we find it to be in order considering the factual milieu of the instant case.

Firstly, while the issue of the proper installation of the equipment and machineries might well be under the primary jurisdiction of
the arbitral body to decide, yet the RTC under Sec. 28 of RA 9285 has jurisdiction to hear and grant interim measures to protect
vested rights of the parties. Sec. 28 pertinently provides:
SEC. 28. Grant of interim Measure of Protection.(a) It is not incompatible with an arbitration agreement for a party to
request, before constitution of the tribunal, from a Court to grant such measure. After constitution of the arbitral tribunal
and during arbitral proceedings, a request for an interim measure of protection, or modification thereof, may be made with
the arbitral or to the extent that the arbitral tribunal has no power to act or is unable to act effectivity, the request may
be made with the Court. The arbitral tribunal is deemed constituted when the sole arbitrator or the third arbitrator, who
has been nominated, has accepted the nomination and written communication of said nomination and acceptance has
been received by the party making the request.
(b) The following rules on interim or provisional relief shall be observed:
Any party may request that provisional relief be granted against the adverse party.
Such relief may be granted:
(i) to prevent irreparable loss or injury;
(ii) to provide security for the performance of any obligation;
(iii) to produce or preserve any evidence; or
(iv) to compel any other appropriate act or omission.
(c) The order granting provisional relief may be conditioned upon the provision of security or any act or omission specified
in the order.
(d) Interim or provisional relief is requested by written application transmitted by reasonable means to the Court or arbitral
tribunal as the case may be and the party against whom the relief is sought, describing in appropriate detail the precise
relief, the party against whom the relief is requested, the grounds for the relief, and the evidence supporting the request.

(e) The order shall be binding upon the parties.
(f) Either party may apply with the Court for assistance in implementing or enforcing an interim measure ordered by an
arbitral tribunal.
(g) A party who does not comply with the order shall be liable for all damages resulting from noncompliance, including all
expenses, and reasonable attorney's fees, paid in obtaining the orders judicial enforcement. (Emphasis ours.)

Art. 17(2) of the UNCITRAL Model Law on ICA defines an "interim measure" of protection as:
Article 17. Power of arbitral tribunal to order interim measures
xxx xxx xxx
13

(2) An interim measure is any temporary measure, whether in the form of an award or in another form, by which, at any
time prior to the issuance of the award by which the dispute is finally decided, the arbitral tribunal orders a party to:
(a) Maintain or restore the status quo pending determination of the dispute;
(b) Take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or
prejudice to the arbitral process itself;
(c) Provide a means of preserving assets out of which a subsequent award may be satisfied; or
(d) Preserve evidence that may be relevant and material to the resolution of the dispute.

Art. 17 J of UNCITRAL Model Law on ICA also grants courts power and jurisdiction to issue interim measures:
Article 17 J. Court-ordered interim measures
A court shall have the same power of issuing an interim measure in relation to arbitration proceedings, irrespective of
whether their place is in the territory of this State, as it has in relation to proceedings in courts. The court shall exercise
such power in accordance with its own procedures in consideration of the specific features of international arbitration.

In the recent 2006 case of Transfield Philippines, Inc. v. Luzon Hydro Corporation, we were explicit that even "the pendency of an
arbitral proceeding does not foreclose resort to the courts for provisional reliefs." We explicated this way:
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.
50


It is thus beyond cavil that the RTC has authority and jurisdiction to grant interim measures of protection.
Secondly, considering that the equipment and machineries are in the possession of PGSMC, it has the right to protect and preserve
the equipment and machineries in the best way it can. Considering that the LPG plant was non-operational, PGSMC has the right to
dismantle and transfer the equipment and machineries either for their protection and preservation or for the better way to make
good use of them which is ineluctably within the management discretion of PGSMC.

Thirdly, and of greater import is the reason that maintaining the equipment and machineries in Worths property is not to the best
interest of PGSMC due to the prohibitive rent while the LPG plant as set-up is not operational. PGSMC was losing PhP322,560 as
monthly rentals or PhP3.87M for 1998 alone without considering the 10% annual rent increment in maintaining the plant.

Fourthly, and corollarily, while the KCAB can rule on motions or petitions relating to the preservation or transfer of the equipment
and machineries as an interim measure, yet on hindsight, the July 23, 1998 Order of the RTC allowing the transfer of the equipment
and machineries given the non-recognition by the lower courts of the arbitral clause, has accorded an interim measure of protection
to PGSMC which would otherwise been irreparably damaged.

Fifth, KOGIES is not unjustly prejudiced as it has already been paid a substantial amount based on the contract. Moreover, KOGIES is
amply protected by the arbitral action it has instituted before the KCAB, the award of which can be enforced in our jurisdiction
through the RTC. Besides, by our decision, PGSMC is compelled to submit to arbitration pursuant to the valid arbitration clause of its
contract with KOGIES.

PGSMC to preserve the subject equipment and machineries
Finally, while PGSMC may have been granted the right to dismantle and transfer the subject equipment and machineries, it does not
have the right to convey or dispose of the same considering the pending arbitral proceedings to settle the differences of the parties.
PGSMC therefore must preserve and maintain the subject equipment and machineries with the diligence of a good father of a
family
51
until final resolution of the arbitral proceedings and enforcement of the award, if any.
WHEREFORE, this petition is PARTLY GRANTED, in that:

(1) The May 30, 2000 CA Decision in CA-G.R. SP No. 49249 is REVERSED and SET ASIDE;
(2) The September 21, 1998 and October 19, 1998 RTC Orders in Civil Case No. 98-117 are REVERSED and SET ASIDE;
(3) The parties are hereby ORDERED to submit themselves to the arbitration of their dispute and differences arising from the subject
Contract before the KCAB; and
(4) PGSMC is hereby ALLOWED to dismantle and transfer the equipment and machineries, if it had not done so, and ORDERED to
preserve and maintain them until the finality of whatever arbitral award is given in the arbitration proceedings.
No pronouncement as to costs.
SO ORDERED.
___________________________________________________________________________

Republic of the Philippines
SUPREME COURT
Manila


THIRD DIVISION

14


LOURDES DELA CRUZ, G.R. No. 139442
Petitioner,
Present:

QUISUMBING, J., Chairperson,
- versus - CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.

HON. COURT OF APPEALS Promulgated:
and MELBA TAN TE,
Respondents. December 6, 2006
x-----------------------------------------------------------------------------------------x


D E C I S I O N


VELASCO, JR., J.:

For unto every one that hath shall be given, and he shall have abundance: but from him that hath not
shall be taken away even that which he hath.

Holy Bible, Matthew 25:29


The Case

This petition for review seeks to nullify the April 30, 1999 Decision and the July 16, 1999 Resolution of the Court of Appeals
in CA-G.R. SP No. 49097, which reversed the Decision of the Manila Regional Trial Court (RTC), Branch 35, in Civil Case No. 98-89174,
and reinstated the Decision of the Manila Metropolitan Trial Court (MeTC), Branch 20, which ordered petitioner Dela Cruz to vacate
the subject lot in favor of respondent Tan Te.9[1]
The Facts

The Reyes family, represented by Mr. Lino Reyes, owned the lot located at No. 1332 Lacson Street (formerly Gov. Forbes
Street), Sampaloc, Manila. Petitioner Lourdes Dela Cruz was one of their lessees, and she religiously paid rent over a portion of the
lot for well over 40 years. Sometime in 1989, a fire struck the premises and destroyed, among others, petitioners dwelling. After
the fire, petitioner and some tenants returned to the said lot and rebuilt their respective houses; simultaneously, the Reyes family
made several verbal demands on the remaining lessees, including petitioner, to vacate the lot but the latter did not comply. On
February 21, 1994, petitioner was served a written demand to vacate said lot but refused to leave. Despite the setback, the Reyes
family did not initiate court proceedings against any of the lessees.

On November 26, 1996, the disputed lot was sold by the Reyeses to respondent Melba Tan Te by virtue of the November
26, 1996 Deed of Absolute Sale. Respondent bought the lot in question for residential purposes. Despite the sale, petitioner Dela
Cruz did not give up the lot.

On January 14, 1997, petitioner was sent a written demand to relinquish the premises which she ignored, prompting
respondent Tan Te to initiate conciliation proceedings at the barangay level. While respondent attempted to settle the dispute by
offering financial assistance, petitioner countered by asking PhP 500,000.00 for her house. Respondent rejected the counter offer
which she considered unconscionable. As a result, a certificate to file action was issued to Tan Te.

On September 8, 1997, respondent Tan Te filed an ejectment complaint with damages before the Manila MeTC, entitled
Melba Tan Te v. Lourdes Dela Cruz and docketed as Civil Case No. 156730-CV. The complaint averred that: (1) the previous owners,
the Reyeses were in possession and control of the contested lot; (2) on November 26, 1996, the lot was sold to Tan Te; (3) prior to
the sale, Dela Cruz forcibly entered the property with strategy and/or stealth; (4) the petitioner unlawfully deprived the respondent
of physical possession of the property and continues to do so; and, (5) the respondent sent several written demands to petitioner to
vacate the premises but refused to do so.

On October 24, 1997, petitioner filed her answer and alleged that: (1) the MeTC had no jurisdiction over the case because it
falls within the jurisdiction of the RTC as more than one year had elapsed from petitioners forcible entry; (2) she was a rent-paying
tenant protected by PD 20;10[2] (3) her lease constituted a legal encumbrance upon the property; and (4) the lot was subject of
expropriation.



15


The Ruling of the Manila MeTC

On April 3, 1998, the MeTC decided as follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff as follows:

1. Ordering the defendant and all persons claiming right under her to vacate the premises situated at
1332 Lacson Street (formerly Gov. Forbes Street), Sampaloc, Manila and peacefully return possession
thereof to plaintiff;

2. Ordering the defendant to pay the plaintiff the amount of P360.00 a month from December 1996 to
November 1997; P432.00 a month from December 1997 to November 1998, plus 20% for each subsequent
year until the premises shall have been vacated and turned over to the plaintiff;



3. Ordering the defendant to pay the plaintiff the amount of P10,000.00 as attorneys fees; and, the
costs of the suit.

SO ORDERED.11[3]


The Ruling of the Regional Trial Court

Unconvinced, petitioner Dela Cruz appealed the Decision of the MeTC in the Manila RTC and the appeal was docketed as
Civil Case No. 98-89174. On September 1, 1998, the RTC rendered its judgment setting aside the April 3, 1998 Decision of the Manila
MeTC and dismissed respondent Tan Tes Complaint on the ground that it was the RTC and not the MeTC which had jurisdiction over
the subject matter of the case. The RTC believed that since Tan Tes predecessor-in-interest learned of petitioners intrusion into the
lot as early as February 21, 1994, the ejectment suit should have been filed within the one-year prescriptive period which expired on
February 21, 1995. Since the Reyes did not file the ejectment suit and respondent Tan Te filed the action only on September 8, 1997,
then the suit had become an accion publiciana cognizable by the RTC.

The Ruling of the Court of Appeals

Disappointed at the turn of events, respondent Tan Te appealed the adverse Decision to the Court of Appeals (CA) which
was docketed as CA-G.R. SP No. 49097. This time, the CA rendered a Decision in favor of respondent Tan Te reversing the Manila RTC
September 1, 1998 Decision and reinstated the Manila MeTC April 3, 1998 Decision.

Petitioner tried to have the CA reconsider its Decision but was rebutted in its July 16, 1999 Resolution.

Unyielding to the CA Decision and the denial of her request for reconsideration, petitioner Dela Cruz now seeks legal
remedy through the instant Petition for Review on Certiorari before the Court.

The Issues

Petitioner Dela Cruz claims two (2) reversible errors on the part of the appellate court, to wit:

A

THE HON. COURT OF APPEALS, WITH DUE RESPECT, WENT BEYOND THE ISSUES OF THE CASE AND
CONTRARY TO THOSE OF THE TRIAL COURT.

B

THE HON. COURT OF APPEALS, WITH DUE RESPECT, ERRED IN REVERSING THE DECISION OF THE RTC AND IN
EFFECT, REINSTATING THE DECISION OF THE [MeTC] WHICH IS CONTRADICTED BY THE EVIDENCE ON
RECORD.12[4]


The Courts Ruling

Discussion on Rule 45



16


Before we dwell on the principal issues, a few procedural matters must first be resolved.

Petitioner Dela Cruz asks the Court to review the findings of facts of the CA, a course of action proscribed by Section 1, Rule
45. Firm is the rule that findings of fact of the CA are final and conclusive and cannot be reviewed on appeal to this Court provided
they are supported by evidence on record or substantial evidence. Fortunately for petitioner, we will be liberal with her petition
considering that the CAs factual findings contradict those of the RTC, and there was an asseveration that the court a quo went
beyond the issues of the case. Indeed, these grounds were considered exceptions to the factual issue bar rule.

Secondly, the petition unnecessarily impleaded the CA in violation of Section 4, Rule 45. We will let this breach pass only
because there is a need to entertain the petition due to the conflicting rulings between the lower courts; however, a repetition may
result to sanctions.

The actual threshold issue is which court, the Manila RTC or the Manila MeTC, has jurisdiction over the Tan Te ejectment
suit. Once the jurisdictional issue is settled, the heart of the dispute is whether or not respondent is entitled to the ejectment of
petitioner Dela Cruz from the premises.

However, the petition is bereft of merit.

On the Issue of Jurisdiction

Jurisdiction is the power or capacity given by the law to a court or tribunal to entertain, hear and determine certain
controversies.13[5] Jurisdiction over the subject matter is conferred by law.

Section 33 of Chapter III -- on Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts of B. P.
No. 12914[6] provides:

Section 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial
Courts in civil cases.Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts
shall exercise:
x x x x

(2) Exclusive original jurisdiction over cases of forcible entry and unlawful detainer: Provided,
That when, in such cases, the defendant raises the question of ownership in his pleadings and the question
of possession cannot be resolved without deciding the issue of ownership, the issue of ownership shall be
resolved only to determine the issue of possession.


Thus exclusive, original jurisdiction over ejectment proceedings (accion interdictal) is lodged with the first level courts. This
is clarified in Section 1, Rule 70 of the 1997 Rules of Civil Procedure that embraces an action for forcible entry (detentacion), where
one is deprived of physical possession of any land or building by means of force, intimidation, threat, strategy, or stealth. In actions
for forcible entry, three (3) requisites have to be met for the municipal trial court to acquire jurisdiction. First, the plaintiffs must
allege their prior physical possession of the property. Second, they must also assert that they were deprived of possession either by
force, intimidation, threat, strategy, or stealth. Third, the action must be filed within one (1) year from the time the owners or legal
possessors learned of their deprivation of physical possession of the land or building.

The other kind of ejectment proceeding is unlawful detainer (desahucio), where one unlawfully withholds possession of the
subject property after the expiration or termination of the right to possess. Here, the issue of rightful possession is the one decisive;
for in such action, the defendant is the party in actual possession and the plaintiffs cause of action is the termination of the
defendants right to continue in possession.15[7] The essential requisites of unlawful detainer are: (1) the fact of lease by virtue of a
contract express or implied; (2) the expiration or termination of the possessors right to hold possession; (3) withholding by the
lessee of the possession of the land or building after expiration or termination of the right to possession; (4) letter of demand upon
lessee to pay the rental or comply with the terms of the lease and vacate the premises; and (5) the action must be filed within one
(1) year from date of last demand received by the defendant.

A person who wants to recover physical possession of his real property will prefer an ejectment suit because it is governed
by the Rule on Summary Procedure which allows immediate execution of the judgment under Section 19, Rule 70 unless the
defendant perfects an appeal in the RTC and complies with the requirements to stay execution; all of which are nevertheless
beneficial to the interests of the lot owner or the holder of the right of possession.

On the other hand, Section 19, of Chapter II of B.P. No. 129 on Regional Trial Courts provides:




17


Section 19. Jurisdiction in civil cases.Regional Trial Courts shall exercise exclusive original
jurisdiction:

x x x x

(2) In all civil actions which involve the title to, or possession of, real property, or any interest
therein, except actions for forcible entry into and unlawful detainer of lands or buildings, original
jurisdiction over which is conferred upon Metropolitan Trial Courts, Municipal Trial Courts and Municipal
Circuit Trial Courts.


Two (2) kinds of action to recover possession of real property which fall under the jurisdiction of the RTC are: (1) the
plenary action for the recovery of the real right of possession (accion publiciana) when the dispossession has lasted for more than
one year or when the action was filed more than one (1) year from date of the last demand received by the lessee or defendant; and
(2) an action for the recovery of ownership (accion reivindicatoria) which includes the recovery of possession.

These actions are governed by the regular rules of procedure and adjudication takes a longer period than the summary
ejectment suit.

To determine whether a complaint for recovery of possession falls under the jurisdiction of the MeTC (first level court) or
the RTC (second level court), we are compelled to go over the allegations of the complaint. The general rule is that what determines
the nature of the action and the court that has jurisdiction over the case are the allegations in the complaint. These cannot be made
to depend upon the defenses set up in the answer or pleadings filed by the defendant.16[8]

This general rule however admits exceptions. In Ignacio v. CFI of Bulacan, it was held that while the allegations in the
complaint make out a case for forcible entry, where tenancy is averred by way of defense and is proved to be the real issue, the case
should be dismissed for lack of jurisdiction as the case should properly be filed with the then Court of Agrarian Relations.17[9]

The cause of action in a complaint is not what the designation of the complaint states, but what the allegations in the body
of the complaint define and describe. The designation or caption is not controlling, more than the allegations in the complaint
themselves are, for it is not even an indispensable part of the complaint.18[10]

Let us refer to the allegations of the complaint filed in the Manila MeTC in Civil Case No. 98-89174, which we quote
verbatim:

3. That plaintiff is the absolute and registered owner of a parcel of land located at No. 1332,
Lacson Street, Sampaloc, Manila now being occupied by defendant;

4. That plaintiff purchased the above-said parcel of land together with its improvements from
the legal heirs of the late EMERLINDA DIMAYUGA REYES on November 26, 1996, under and by virtue of a
Deed of Absolute Sale x x x;

5. That pursuant to the said deed of sale, the title to the land and all its improvements was
transferred in plaintiffs name as evidenced by Transfer Certificate of Title No. 233273 issued by the
Register of Deeds of Manila on April 22, 1997 x x x;

6. That prior to said sale, the previous owners, represented by Mr. Lino Reyes, husband of the
said deceased Emerlinda D. Reyes and the administrator of her estate, was in possession and control of the
property subject of this complaint;

7. That also prior to said sale, defendant, without the knowledge and consent of Mr. Lino Reyes,
surreptitiously and by means of stealth and strategy entered, used and occupied the said premises thus
depriving the former of rightful possession thereof;

8. That on February 21, 1994, Mr. Lino Reyes, through Atty. Alejo Sedico, his lawyer, furnished
the defendants a letter formally demanding that defendant vacate the premises x x x;

9. That, however, defendant failed and refused to vacate despite just and legal demand by Mr.
Lino Reyes;





18

10. That after the sale to plaintiff of said premises, plaintiff has several times demanded of
defendants to vacate the premises, the last demand having been made on them personally and in writing
on January 14, 1997 x x x;

11. That defendant failed and refused and still fails and refuses to vacate the premises without
legal cause or justifiable reason whatsoever;19[11]


The answer of petitioner averred:

4. The Court has no jurisdiction over the case, having been filed by plaintiff more than the
reglementary one year period to commence forcible entry case, which is reckoned from the date of the
alleged unlawful entry of defendant by the use of stealth and strategy into the premises;

5. For more than four decades now, defendant has been and still is a rent-paying tenant of the
subject land occupied by their residential house, dating back to the original owner-lessor, the Dimayuga
family. Her lease with no definite duration, commenced with a rent at P60.00 per month until it was
gradually increased in the ensuing years. As of November 1996, it stood at P300.00 a month;

6. In this circumstances [sic], defendant enjoys the protective mantle of P.D. 20 and the
subsequent rental control status against dispossession. She cannot be ejected other than for causes
prescribed under B.P. Blg. 25. Further, in case of sale of the land, she has the right of first refusal under the
express provision of P.D. 1571;

7. Throughout the years of her tenancy, defendant has been updated in her rental payment
until the collector of the original owner-lessor no longer came around as she has done theretofore;

7.1. As a result, she was compelled to file a petition for consignation of rent before
the Metropolitan Trial Court of Manila;

8. A bona fide tenant within the ambit if [sic] P.D. 20 and the subsequent rental control status,
including B.P. Blg. 25, under its terms, cannot be ousted on a plea of expiration of her monthly lease;

9. Her lease constitutes a legal encumbrance upon the property of the lessor/owner and binds
the latters successor-in-interest who is under obligation to respect it;

10. The land at bench is the subject of a pending expropriation proceedings;

11. Plaintiff being a married woman cannot sue or be sued without being joined by her
husband;20[12]


Undeniably, the aforequoted allegations of the complaint are vague and iffy in revealing the nature of the action for
ejectment.

The allegations in the complaint show that prior to the sale by Lino Reyes, representing the estate of his wife Emerlinda
Reyes, he was in possession and control of the subject lot but were deprived of said possession when petitioner, by means of stealth
and strategy, entered and occupied the same lot. These circumstances imply that he had prior physical possession of the subject lot
and can make up a forcible entry complaint.

On the other hand, the allegation that petitioner Dela Cruz was served several demands to leave the premises but refused
to do so would seem to indicate an action for unlawful detainer since a written demand is not necessary in an action for forcible
entry. It is a fact that the MeTC complaint was filed on September 8, 1997 within one (1) year from the date of the last written
demand upon petitioner Dela Cruz on January 14, 1997.

As previously discussed, the settled rule is jurisdiction is based on the allegations in the initiatory pleading and the defenses
in the answer are deemed irrelevant and immaterial in its determination. However, we relax the rule and consider the complaint at
bar as an exception in view of the special and unique circumstances present. First, as in Ignacio v. CFI of Bulacan,21[13] the defense
of lack of jurisdiction was raised in the answer wherein there was an admission that petitioner Dela Cruz was a lessee of the former
owners of the lot, the Reyeses, prior to the sale to respondent Tan Te. The fact that petitioner was a tenant of the predecessors-in-
interest of respondent Tan Te is material to the determination of jurisdiction. Since this is a judicial admission against the interest of




19

petitioner, such admission can be considered in determining jurisdiction. Second, the ejectment suit was filed with the Manila MeTC
on September 8, 1997 or more than nine (9) years ago. To dismiss the complaint would be a serious blow to the effective
dispensation of justice as the parties will start anew and incur additional legal expenses after having litigated for a long time.
Equitable justice dictates that allegations in the answer should be considered to aid in arriving at the real nature of the action.
Lastly, Section 6, Rule 1 of the Rules of Court clearly empowers the Court to construe Rule 70 and other pertinent procedural
issuances in a liberal manner to promote just, speedy, and inexpensive disposition of every action and proceeding.

Based on the complaint and the answer, it is apparent that the Tan Te ejectment complaint is after all a complaint for
unlawful detainer. It was admitted that petitioner Dela Cruz was a lessee of the Reyeses for around four (4) decades. Thus, initially
petitioner as lessee is the legal possessor of the subject lot by virtue of a contract of lease. When fire destroyed her house, the
Reyeses considered the lease terminated; but petitioner Dela Cruz persisted in returning to the lot and occupied it by strategy and
stealth without the consent of the owners. The Reyeses however tolerated the continued occupancy of the lot by petitioner. Thus,
when the lot was sold to respondent Tan Te, the rights of the Reyeses, with respect to the lot, were transferred to their subrogee,
respondent Tan Te, who for a time also tolerated the stay of petitioner until she decided to eject the latter by sending several
demands, the last being the January 14, 1997 letter of demand. Since the action was filed with the MeTC on September 8, 1997, the
action was instituted well within the one (1) year period reckoned from January 14, 1997. Hence, the nature of the complaint is one
of unlawful detainer and the Manila MeTC had jurisdiction over the complaint.

Thus, an ejectment complaint based on possession by tolerance of the owner, like the Tan Te complaint, is a specie of
unlawful detainer cases.

As early as 1913, case law introduced the concept of possession by tolerance in ejectment cases as follows:

It is true that the landlord might, upon the failure of the tenant to pay the stipulated rents, consider
the contract broken and demand immediate possession of the rented property, thus converting a legal
possession into illegal possession. Upon the other hand, however, the landlord might conclude to give the
tenant credit for the payment of the rents and allow him to continue indefinitely in the possession of the
property. In other words, the landlord might choose to give the tenant credit from month to month or from
year to year for the payment of their rent, relying upon his honesty of his financial ability to pay the same.
During such period the tenant would not be in illegal possession of the property and the landlord could not
maintain an action of desahucio until after he had taken steps to convert the legal possession into illegal
possession. A mere failure to pay the rent in accordance with the contract would justify the landlord, after
the legal notice, in bringing an action of desahucio. The landlord might, however, elect to recognize the
contract as still in force and sue for the sums due under it. It would seem to be clear that the landlord might
sue for the rents due and [unpaid, without electing to terminate the contract of tenancy;] [w]hether he can
declare the contract of tenancy broken and sue in an action desahucio for the possession of the property
and in a separate actions for the rents due and damages, etc.22[14]

The concept of possession by tolerance in unlawful detainer cases was further refined and applied in pertinent cases
submitted for decision by 1966. The rule was articulated as follows:

Where despite the lessees failure to pay rent after the first demand, the lessor did not choose to
bring an action in court but suffered the lessee to continue occupying the land for nearly two years, after
which the lessor made a second demand, the one-year period for bringing the detainer case in the justice of
the peace court should be counted not from the day the lessee refused the first demand for payment of
rent but from the time the second demand for rents and surrender of possession was not complied
with.23[15]

In Calubayan v. Pascual, a case usually cited in subsequent decisions on ejectment, the concept of possession by tolerance
was further elucidated as follows:

In allowing several years to pass without requiring the occupant to vacate the premises nor filing an
action to eject him, plaintiffs have acquiesced to defendants possession and use of the premises. It has
been held that a person who occupies the land of another at the latters tolerance or permission, without
any contract between them, is necessarily bound by an implied promise that he will vacate upon
demand, failing which a summary action for ejectment is the proper remedy against them. The status of
the defendant is analogous to that of a lessee or tenant whose term of lease has expired but whose
occupancy continued by tolerance of the owner. In such a case, the unlawful deprivation or withholding of
possession is to be counted from the date of the demand to vacate.24[16] (Emphasis supplied.)





20

From the foregoing jurisprudence, it is unequivocal that petitioners possession after she intruded into the lot after the
firewas by tolerance or leniency of the Reyeses and hence, the action is properly an unlawful detainer case falling under the
jurisdiction of the Manila MeTC.

Even if we concede that it is the RTC and not the MeTC that has jurisdiction over the Tan Te complaint, following the
reasoning that neither respondent nor her predecessor-in-interest filed an ejectment suit within one (1) year from February 21, 1994
when the Reyeses knew of the unlawful entry of petitioner, and hence, the complaint is transformed into an accion publiciana, the
Court deems it fair and just to suspend its rules in order to render efficient, effective, and expeditious justice considering the nine (9)
year pendency of the ejectment suit. More importantly, if there was uncertainty on the issue of jurisdiction that arose from the
averments of the complaint, the same cannot be attributed to respondent Tan Te but to her counsel who could have
been confused as to the actual nature of the ejectment suit. The lawyers apparent imprecise language used in the preparation of
the complaint without any participation on the part of Tan Te is sufficient special or compelling reason for the grant of relief.

The case of Barnes v. Padilla25[17] elucidates the rationale behind the exercise by this Court of the power to relax, or even
suspend, the application of the rules of procedure:

Let it be emphasized that the rules of procedure should be viewed as mere tools designed to facilitate
the attainment of justice. Their strict and rigid application, which would result in technicalities that tend to
frustrate rather than promote substantial justice, must always be eschewed. Even the Rules of Court reflect
this principle. The power to suspend or even disregard rules can be so pervasive and compelling as to alter
even that which this Court itself has already declared to be final x x x.

The emerging trend in the rulings of this Court is to afford every party litigant the amplest opportunity
for the proper and just determination of his cause, free from the constraints of technicalities. Time and
again, this Court has consistently held that rules must not be applied rigidly so as not to override substantial
justice.26[18]


Moreover, Section 8, Rule 40 authorizes the RTCin case of affirmance of an order of the municipal trial court dismissing a
case without trial on the merits and the ground of dismissal is lack of jurisdiction over the subject matterto try the case on the
merits as if the case was originally filed with it if the RTC has jurisdiction over the case. In the same vein, this Court, in the exercise
of its rule-making power, can suspend its rules with respect to this particular case (pro hac vice), even if initially, the MeTC did not
have jurisdiction over the ejectment suit, and decide to assume jurisdiction over it in order to promptly resolve the dispute.

The issue of jurisdiction settled, we now scrutinize the main issue.

At the heart of every ejectment suit is the issue of who is entitled to physical possession of the lot or possession de facto.

We rule in favor of respondent Tan Te for the following reasons:

1. Petitioner admitted in her Answer that she was a rent-paying tenant of the Reyeses, predecessors-in-interest of
respondent Tan Te. As such, she recognized the ownership of the lot by respondent, which includes the right of possession.

2. After the fire raged over the structures on the subject lot in late 1989 the contracts of lease expired, as a result of
which Lino Reyes demanded that all occupants, including petitioner, vacate the lot but the latter refused to abandon the premises.
During the duration of the lease, petitioners possession was legal but it became unlawful after the fire when the lease contracts
were deemed terminated and demands were made for the tenants to return possession of the lot.

3. Petitioners possession is one by the Reyeses tolerance and generosity and later by respondent Tan Tes.

Petitioner fully knows that her stay in the subject lot is at the leniency and magnanimity of Mr. Lino Reyes and later of
respondent Tan Te; and her acquiescence to such use of the lot carries with it an implicit and assumed commitment that she would
leave the premises the moment it is needed by the owner. When respondent Tan Te made a last, written demand on January 14,
1997 and petitioner breached her promise to leave upon demand, she lost her right to the physical possession of the lot. Thus,
respondent Tan Te should now be allowed to occupy her lot for residential purposes, a dream that will finally be realized after nine
(9) years of litigation.

Petitioner raises the ancillary issue that on March 15, 1998, the Manila City Council passed and approved Ordinance No.
7951:

[a]uthorizing the Manila City Mayor to acquire either by negotiation or expropriation certain parcels of
land covered by Transfer Certificates of Title Nos. 233273, 175106 and 140471, containing an area of One
Thousand Four Hundred Twenty Five (1,425) square meters, located at Maria Clara and Governor Forbes



21

Streets, Sta. Cruz, Manila, for low cost housing and award to actual bonafide residents thereat and further
authorizing the City Mayor to avail for that purpose any available funds of the city and other existing
funding facilities from other government agencies x x x.27[19]


It readily appears that this issue was not presented before the Court of Appeals in CA-G.R. SP No. 49097 despite the fact
that the respondents petition was filed on September 25, 1998, six months after the ordinance was passed. Thus, this issue is
proscribed as are all issues raised for the first time before the Court are proscribed.

Even granting for the sake of argument that we entertain the issue, we rule that the intended expropriation of respondents
lot (TCT No. 233273) by the city government of Manila will not affect the resolution of this petition. For one thing, the issue can be
raised by petitioner in the appropriate legal proceeding. Secondly, the intended expropriation might not even be implemented since
it is clear from the ordinance that the City Mayor will still locate available funds for project, meaning the said expense is not a
regular item in the budget.

WHEREFORE, this petition is DENIED for lack of merit. The April 30, 1999 Decision of the Court of Appeals reinstating the
April 3, 1998 MeTC Decision in Civil Case No. 156730-CV and the July 16, 1999 Resolution in CA-G.R. SP No. 49097 are hereby
AFFIRMED IN TOTO.

No costs.

SO ORDERED.
---------------------------------------------------------------------------------------------------------------------












Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

BENGUET CORPORATION, G.R. No. 163101
Petitioner,
Present:

- versus - QUISUMBING, J., Chairperson,
CARPIO,
CARPIO MORALES,
TINGA, and
DEPARTMENT OF ENVIRONMENT VELASCO, JR., JJ.
AND NATURAL RESOURCES
-MINES ADJUDICATION BOARD
and J.G. REALTY AND MINING Promulgated:
CORPORATION,
Respondents. February 13, 2008
x-----------------------------------------------------------------------------------------x

D E C I S I O N

VELASCO, JR., J.:

The instant petition under Rule 65 of the Rules of Court seeks the annulment of the December 2, 2002 Decision28[1] and
March 17, 2004 Resolution29[2] of the Department of Environment and Natural Resources-Mining Adjudication Board (DENR-MAB)



22

in MAB Case No. 0124-01 (Mines Administrative Case No. R-M-2000-01) entitled Benguet Corporation (Benguet) v. J.G. Realty and
Mining Corporation (J.G. Realty). The December 2, 2002 Decision upheld the March 19, 2001 Decision30[3] of the MAB Panel of
Arbitrators (POA) which canceled the Royalty Agreement with Option to Purchase (RAWOP) dated June 1, 198731[4] between
Benguet and J.G. Realty, and excluded Benguet from the joint Mineral Production Sharing Agreement (MPSA) application over four
mining claims. The March 17, 2004 Resolution denied Benguets Motion for Reconsideration.

The Facts

On June 1, 1987, Benguet and J.G. Realty entered into a RAWOP, wherein J.G. Realty was acknowledged as the owner of
four mining claims respectively named as Bonito-I, Bonito-II, Bonito-III, and Bonito-IV, with a total area of 288.8656 hectares,
situated in Barangay Luklukam, Sitio Bagong Bayan, Municipality of Jose Panganiban, Camarines Norte. The parties also executed a
Supplemental Agreement32[5] dated June 1, 1987. The mining claims were covered by MPSA Application No. APSA-V-0009 jointly
filed by J.G. Realty as claimowner and Benguet as operator.

In the RAWOP, Benguet obligated itself to perfect the rights to the mining claims and/or otherwise acquire the mining
rights to the mineral claims. Within 24 months from the execution of the RAWOP, Benguet should also cause the examination of the
mining claims for the purpose of determining whether or not they are worth developing with reasonable probability of profitable
production. Benguet undertook also to furnish J.G. Realty with a report on the examination, within a reasonable time after the
completion of the examination. Moreover, also within the examination period, Benguet shall conduct all necessary exploration in
accordance with a prepared exploration program. If it chooses to do so and before the expiration of the examination period,
Benguet may undertake to develop the mining claims upon written notice to J.G. Realty. Benguet must then place the mining claims
into commercial productive stage within 24 months from the written notice.33[6] It is also provided in the RAWOP that if the mining
claims were placed in commercial production by Benguet, J.G. Realty should be entitled to a royalty of five percent (5%) of net
realizable value, and to royalty for any production done by Benguet whether during the examination or development periods.

Thus, on August 9, 1989, the Executive Vice-President of Benguet, Antonio N. Tachuling, issued a letter informing J.G. Realty
of its intention to develop the mining claims. However, on February 9, 1999, J.G. Realty, through its President, Johnny L. Tan, then
sent a letter to the President of Benguet informing the latter that it was terminating the RAWOP on the following grounds:

a. The fact that your company has failed to perform the obligations set forth in the RAWOP, i.e., to
undertake development works within 2 years from the execution of the Agreement;

b. Violation of the Contract by allowing high graders to operate on our claim.

c. No stipulation was provided with respect to the term limit of the RAWOP.

d. Non-payment of the royalties thereon as provided in the RAWOP.34[7]


In response, Benguets Manager for Legal Services, Reynaldo P. Mendoza, wrote J.G. Realty a letter dated March 8,
1999,35[8] therein alleging that Benguet complied with its obligations under the RAWOP by investing PhP 42.4 million to rehabilitate
the mines, and that the commercial operation was hampered by the non-issuance of a Mines Temporary Permit by the Mines and
Geosciences Bureau (MGB) which must be considered as force majeure, entitling Benguet to an extension of time to prosecute such
permit. Benguet further claimed that the high graders mentioned by J.G. Realty were already operating prior to Benguets taking
over of the premises, and that J.G. Realty had the obligation of ejecting such small scale miners. Benguet also alleged that the nature
of the mining business made it difficult to specify a time limit for the RAWOP. Benguet then argued that the royalties due to J.G.
Realty were in fact in its office and ready to be picked up at any time. It appeared that, previously, the practice by J.G. Realty was to
pick-up checks from Benguet representing such royalties. However, starting August 1994, J.G. Realty allegedly refused to collect such
checks from Benguet. Thus, Benguet posited that there was no valid ground for the termination of the RAWOP. It also reminded J.G.
Realty that it should submit the disagreement to arbitration rather than unilaterally terminating the RAWOP.









23

On June 7, 2000, J.G. Realty filed a Petition for Declaration of Nullity/Cancellation of the RAWOP36[9] with the Legaspi City
POA, Region V, docketed as DENR Case No. 2000-01 and entitled J.G. Realty v. Benguet.

On March 19, 2001, the POA issued a Decision,37[10] dwelling upon the issues of (1) whether the arbitrators had
jurisdiction over the case; and (2) whether Benguet violated the RAWOP justifying the unilateral cancellation of the RAWOP by J.G.
Realty. The dispositive portion stated:

WHEREFORE, premises considered, the June 01, 1987 [RAWOP] and its Supplemental Agreement is
hereby declared cancelled and without effect. BENGUET is hereby excluded from the joint MPSA Application over
the mineral claims denominated as BONITO-I, BONITO-II, BONITO-III and BONITO-IV.

SO ORDERED.


Therefrom, Benguet filed a Notice of Appeal38[11] with the MAB on April 23, 2001, docketed as Mines Administrative Case
No. R-M-2000-01. Thereafter, the MAB issued the assailed December 2, 2002 Decision. Benguet then filed a Motion for
Reconsideration of the assailed Decision which was denied in the March 17, 2004 Resolution of the MAB. Hence, Benguet filed the
instant petition.

The Issues


1. There was serious and palpable error when the Honorable Board failed to rule that the contractual
obligation of the parties to arbitrate under the Royalty Agreement is mandatory.

2. The Honorable Board exceeded its jurisdiction when it sustained the cancellation of the Royalty
Agreement for alleged breach of contract despite the absence of evidence.

3. The Questioned Decision of the Honorable Board in cancelling the RAWOP prejudice[d] the
substantial rights of Benguet under the contract to the unjust enrichment of JG Realty.39[12]


Restated, the issues are: (1) Should the controversy have first been submitted to arbitration before the POA took
cognizance of the case?; (2) Was the cancellation of the RAWOP supported by evidence?; and (3) Did the cancellation of the RAWOP
amount to unjust enrichment of J.G. Realty at the expense of Benguet?

The Courts Ruling

Before we dwell on the substantive issues, we find that the instant petition can be denied outright as Benguet resorted to
an improper remedy.

The last paragraph of Section 79 of Republic Act No. (RA) 7942 or the Philippine Mining Act of 1995 states, A petition for
review by certiorari and question of law may be filed by the aggrieved party with the Supreme Court within thirty (30) days from
receipt of the order or decision of the *MAB+.

However, this Court has already invalidated such provision in Carpio v. Sulu Resources Development Corp.,40[13] ruling that
a decision of the MAB must first be appealed to the Court of Appeals (CA) under Rule 43 of the Rules of Court, before recourse to
this Court may be had. We held, thus:

To summarize, there are sufficient legal footings authorizing a review of the MAB Decision under Rule 43
of the Rules of Court. First, Section 30 of Article VI of the 1987 Constitution, mandates that *n+o law shall be
passed increasing the appellate jurisdiction of the Supreme Court as provided in this Constitution without its
advice and consent. On the other hand, Section 79 of RA No. 7942 provides that decisions of the MAB may be
reviewed by this Court on a petition for review by certiorari. This provision is obviously an expansion of the
Courts appellate jurisdiction, an expansion to which this Court has not consented. Indiscriminate enactment of
legislation enlarging the appellate jurisdiction of this Court would unnecessarily burden it.
Second, when the Supreme Court, in the exercise of its rule-making power, transfers to the CA pending






24

cases involving a review of a quasi-judicial bodys decisions, such transfer relates only to procedure; hence, it does
not impair the substantive and vested rights of the parties. The aggrieved partys right to appeal is preserved; what
is changed is only the procedure by which the appeal is to be made or decided. The parties still have a remedy and
a competent tribunal to grant this remedy.

Third, the Revised Rules of Civil Procedure included Rule 43 to provide a uniform rule on appeals from
quasi-judicial agencies. Under the rule, appeals from their judgments and final orders are now required to be
brought to the CA on a verified petition for review. A quasi-judicial agency or body has been defined as an organ of
government, other than a court or legislature, which affects the rights of private parties through either
adjudication or rule-making. MAB falls under this definition; hence, it is no different from the other quasi-judicial
bodies enumerated under Rule 43. Besides, the introductory words in Section 1 of Circular No. 1-91among
these agencies areindicate that the enumeration is not exclusive or conclusive and acknowledge the existence
of other quasi-judicial agencies which, though not expressly listed, should be deemed included therein.

Fourth, the Court realizes that under Batas Pambansa (BP) Blg. 129 as amended by RA No. 7902, factual
controversies are usually involved in decisions of quasi-judicial bodies; and the CA, which is likewise tasked to
resolve questions of fact, has more elbow room to resolve them. By including questions of fact among the issues
that may be raised in an appeal from quasi-judicial agencies to the CA, Section 3 of Revised Administrative Circular
No. 1-95 and Section 3 of Rule 43 explicitly expanded the list of such issues.

According to Section 3 of Rule 43, *a+n appeal under this Rule may be taken to the Court of Appeals
within the period and in the manner herein provided whether the appeal involves questions of fact, of law, or
mixed questions of fact and law. Hence, appeals from quasi-judicial agencies even only on questions of law may
be brought to the CA.

Fifth, the judicial policy of observing the hierarchy of courts dictates that direct resort from administrative
agencies to this Court will not be entertained, unless the redress desired cannot be obtained from the appropriate
lower tribunals, or unless exceptional and compelling circumstances justify availment of a remedy falling within
and calling for the exercise of our primary jurisdiction.41[14]


The above principle was reiterated in Asaphil Construction and Development Corporation v. Tuason, Jr. (Asaphil).42[15]
However, the Carpio ruling was not applied to Asaphil as the petition in the latter case was filed in 1999 or three years before the
promulgation of Carpio in 2002. Here, the petition was filed on April 28, 2004 when the Carpio decision was already applicable, thus
Benguet should have filed the appeal with the CA.

Petitioner having failed to properly appeal to the CA under Rule 43, the decision of the MAB has become final and
executory. On this ground alone, the instant petition must be denied.

Even if we entertain the petition although Benguet skirted the appeal to the CA via Rule 43, still, the December 2, 2002
Decision and March 17, 2004 Resolution of the DENR-MAB in MAB Case No. 0124-01 should be maintained.

First Issue: The case should have first been brought to
voluntary arbitration before the POA

Secs. 11.01 and 11.02 of the RAWOP pertinently provide:

11.01 Arbitration

Any disputes, differences or disagreements between BENGUET and the OWNER with reference to
anything whatsoever pertaining to this Agreement that cannot be amicably settled by them 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 arbitrators so
appointed.

x x x x

11.02 Court Action

No action shall be instituted in court as to any matter in dispute as hereinabove stated, except to enforce
the decision of the majority of the Arbitrators.43[16]




25



Thus, Benguet argues that the POA should have first referred the case to voluntary arbitration before taking cognizance of
the case, citing Sec. 2 of RA 876 on persons and matters subject to arbitration.

On the other hand, in denying such argument, the POA ruled that:

While the parties may establish such stipulations clauses, terms and conditions as they may deem
convenient, the same must not be contrary to law and public policy. At a glance, there is nothing wrong with the
terms and conditions of the agreement. But to state that an aggrieved party cannot initiate an action without
going to arbitration would be tying ones hand even if there is a law which allows him to do so.44[17]


The MAB, meanwhile, denied Benguets contention on the ground of estoppel, stating:

Besides, by its own act, Benguet is already estopped in questioning the jurisdiction of the Panel of
Arbitrators to hear and decide the case. As pointed out in the appealed Decision, Benguet initiated and filed an
Adverse Claim docketed as MAC-R-M-2000-02 over the same mining claims without undergoing contractual
arbitration. In this particular case (MAC-R-M-2000-02) now subject of the appeal, Benguet is likewise in estoppel
from questioning the competence of the Panel of Arbitrators to hear and decide in the summary proceedings J.G.
Realtys petition, when Benguet itself did not merely move for the dismissal of the case but also filed an Answer
with counterclaim seeking affirmative reliefs from the Panel of Arbitrators.45[18]


Moreover, the MAB ruled that the contractual provision on arbitration merely provides for an additional forum or venue
and does not divest the POA of the jurisdiction to hear the case.46[19]

In its July 20, 2004 Comment,47[20] J.G. Realty reiterated the above rulings of the POA and MAB. It argued that RA 7942 or
the Philippine Mining Act of 1995 is a special law which should prevail over the stipulations of the parties and over a general law,
such as RA 876. It also argued that the POA cannot be considered as a court under the contemplation of RA 876 and that
jurisprudence saying that there must be prior resort to arbitration before filing a case with the courts is inapplicable to the instant
case as the POA is itself already engaged in arbitration.

On this issue, we rule for Benguet.
Sec. 2 of RA 876 elucidates the scope of arbitration:

Section 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[s] arising out of valuations, appraisals or other
controversies which may be collateral, incidental, precedent or subsequent to any issue between the parties.
(Emphasis supplied.)


In RA 9285 or the Alternative Dispute Resolution Act of 2004, the Congress reiterated the efficacy of arbitration as an
alternative mode of dispute resolution by stating in Sec. 32 thereof that domestic arbitration shall still be governed by RA 876.
Clearly, a contractual stipulation that requires prior resort to voluntary arbitration before the parties can go directly to court is not
illegal and is in fact promoted by the State. Thus, petitioner correctly cites several cases whereby arbitration clauses have been
upheld by this Court.48[21]

Moreover, the contention that RA 7942 prevails over RA 876 presupposes a conflict between the two laws. Such is not the
case here. To reiterate, availment of voluntary arbitration before resort is made to the courts or quasi-judicial agencies of the
government is a valid contractual stipulation that must be adhered to by the parties. As stated in Secs. 6 and 7 of RA 876:







26

Section 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 terms thereof.

x x x x

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.)


In other words, 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.49[22]


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 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.50[23] (Emphasis supplied.)


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.51[24] (Emphasis supplied.)

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.52[25]






27

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.

Second Issue: The cancellation of the RAWOP
was supported by evidence

The cancellation of the RAWOP by the POA was based on two grounds: (1) Benguets failure to pay J.G. Realtys royalties for
the mining claims; and (2) Benguets failure to seriously pursue MPSA Application No. APSA-V-0009 over the mining claims.

As to the royalties, Benguet claims that the checks representing payments for the royalties of J.G. Realty were available for
pick-up in its office and it is the latter which refused to claim them. Benguet then thus concludes that it did not violate the RAWOP
for nonpayment of royalties. Further, Benguet reasons that J.G. Realty has the burden of proving that the former did not pay such
royalties following the principle that the complainants must prove their affirmative allegations.

With regard to the failure to pursue the MPSA application, Benguet claims that the lengthy time of approval of the
application is due to the failure of the MGB to approve it. In other words, Benguet argues that the approval of the application is
solely in the hands of the MGB.

Benguets arguments are bereft of merit.

Sec. 14.05 of the RAWOP provides:

14.05 Bank Account

OWNER shall maintain a bank account at ___________ or any other bank from time to time selected by
OWNER with notice in writing to BENGUET where BENGUET shall deposit to the OWNERs credit any and all
advances and payments which may become due the OWNER under this Agreement as well as the purchase price
herein agreed upon in the event that BENGUET shall exercise the option to purchase provided for in the
Agreement. Any and all deposits so made by BENGUET shall be a full and complete acquittance and release to
[sic] BENGUET from any further liability to the OWNER of the amounts represented by such deposits. (Emphasis
supplied.)


Evidently, the RAWOP itself provides for the mode of royalty payment by Benguet. The fact that there was the previous
practice whereby J.G. Realty picked-up the checks from Benguet is unavailing. The mode of payment is embodied in a contract
between the parties. As such, the contract must be considered as the law between the parties and binding on both. 53[26] Thus,
after J.G. Realty informed Benguet of the bank account where deposits of its royalties may be made, Benguet had the obligation to
deposit the checks. J.G. Realty had no obligation to furnish Benguet with a Board Resolution considering that the RAWOP itself
provided for such payment scheme.

Notably, Benguets claim that J.G. Realty must prove nonpayment of its royalties is both illogical and unsupported by law
and jurisprudence.

The allegation of nonpayment is not a positive allegation as claimed by Benguet. Rather, such is a negative allegation that
does not require proof and in fact transfers the burden of proof to Benguet. Thus, this Court ruled in Jimenez v. National Labor
Relations Commission:

As a general rule, one who pleads payment has the burden of proving it. Even where the plaintiff must
allege non-payment, the general rule is that the burden rests on the defendant to prove payment, rather than on
the plaintiff to prove non-payment. The debtor has the burden of showing with legal certainty that the obligation
has been discharged by payment.54[27] (Emphasis supplied.)




28


In the instant case, the obligation of Benguet to pay royalties to J.G. Realty has been admitted and supported by the
provisions of the RAWOP. Thus, the burden to prove such obligation rests on Benguet.

It should also be borne in mind that MPSA Application No. APSA-V-0009 has been pending with the MGB for a considerable
length of time. Benguet, in the RAWOP, obligated itself to perfect the rights to the mining claims and/or otherwise acquire the
mining rights to the mineral claims but failed to present any evidence showing that it exerted efforts to speed up and have the
application approved. In fact, Benguet never even alleged that it continuously followed-up the application with the MGB and that it
was in constant communication with the government agency for the expeditious resolution of the application. Such allegations
would show that, indeed, Benguet was remiss in prosecuting the MPSA application and clearly failed to comply with its obligation in
the RAWOP.

Third Issue: There is no unjust enrichment in the instant case

Based on the foregoing discussion, the cancellation of the RAWOP was based on valid grounds and is, therefore, justified.
The necessary implication of the cancellation is the cessation of Benguets right to prosecute MPSA Application No. APSA-V-0009
and to further develop such mining claims.

In Car Cool Philippines, Inc. v. Ushio Realty and Development Corporation, we defined unjust enrichment, as follows:

We have held that *t+here is unjust enrichment when a person unjustly retains a benefit to the loss of
another, or when a person retains money or property of another against the fundamental principles of justice,
equity and good conscience. Article 22 of the Civil Code provides that *e+very person who through an act of
performance by another, or any other means, acquires or comes into possession of something at the expense of
the latter without just or legal ground, shall return the same to him. The principle of unjust enrichment under
Article 22 requires two conditions: (1) that a person is benefited without a valid basis or justification, and (2) that
such benefit is derived at anothers expense or damage.

There is no unjust enrichment when the person who will benefit has a valid claim to such benefit.55[28]
(Emphasis supplied.)


Clearly, there is no unjust enrichment in the instant case as the cancellation of the RAWOP, which left Benguet without any
legal right to participate in further developing the mining claims, was brought about by its violation of the RAWOP. Hence, Benguet
has no one to blame but itself for its predicament.

WHEREFORE, we DISMISS the petition, and AFFIRM the December 2, 2002 Decision and March 17, 2004 Resolution of the
DENR-MAB in MAB Case No. 0124-01 upholding the cancellation of the June 1, 1987 RAWOP. No costs.

SO ORDERED.
---------------------------------------------------------------------------------------------------------------------

Republic of the Philippines
SUPREME COURT
Manila
SPECIAL SECOND DIVISION
G.R. No. 161957 January 22, 2007
JORGE GONZALES and PANEL OF ARBITRATORS, Petitioners,
vs.
CLIMAX MINING LTD., CLIMAX-ARIMCO MINING CORP., and AUSTRALASIAN PHILIPPINES MINING INC., Respondents.
x--------------------------------------------------------------------------------- x
G.R. No. 167994 January 22, 2007
JORGE GONZALES, Petitioner,
vs.
HON. OSCAR B. PIMENTEL, in his capacity as PRESIDING JUDGE of BR. 148 of the REGIONAL TRIAL COURT of MAKATI CITY, and
CLIMAX-ARIMCO MINING CORPORATION, Respondents.
R E S O L U T I O N

TINGA, J.:
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
1
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
2
that the


29

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
3
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.
4
Respondents, citing American jurisprudence
5
and the UNCITRAL Model Law,
6
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 Gonzaless 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 Gonzaless having "impugn*ed+ the
existence or validity" of the addendum contract. If so, it supposedly conveys the idea that Gonzaless 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.

Both parties were required to file their respective comments to the other partys motion for reconsideration/clarification.
7

Respondents filed their Comment on 17 August 2005,
8
while Gonzales filed his only on 25 July 2006.
9


On the other hand, G.R. No. 167994 is a Rule 65 petition filed on 6 May 2005, or while the motions for reconsideration in G.R. No.
161957
10
were pending, wherein Gonzales challenged the orders of the Regional Trial Court (RTC) requiring him to proceed with the
arbitration proceedings as sought by Climax-Arimco Mining Corporation (Climax-Arimco).

On 5 June 2006, the two cases, G.R. Nos. 161957 and 167994, were consolidated upon the recommendation of the Assistant Division
Clerk of Court since the cases are rooted in the same Addendum Contract.

We first tackle the more recent case which is G.R. No. 167994. It stemmed from the petition to compel arbitration filed by
respondent Climax-Arimco before the RTC of Makati City on 31 March 2000 while the complaint for the nullification of the
Addendum Contract was pending before the DENR Panel of Arbitrators. On 23 March 2000, Climax-Arimco had sent Gonzales a
Demand for Arbitration pursuant to Clause 19.1
11
of the Addendum Contract and also in accordance with Sec. 5 of R.A. No. 876. The
petition for arbitration was subsequently filed and Climax-Arimco sought an order to compel the parties to arbitrate pursuant to the
said arbitration clause. The case, docketed as Civil Case No. 00-444, was initially raffled to Br. 132 of the RTC of Makati City, with
Judge Herminio I. Benito as Presiding Judge. Respondent Climax-Arimco filed on 5 April 2000 a motion to set the application to
compel arbitration for hearing.

On 14 April 2000, Gonzales filed a motion to dismiss which he however failed to set for hearing. On 15 May 2000, he filed an Answer
with Counterclaim,
12
questioning the validity of the Addendum Contract containing the arbitration clause. Gonzales alleged that the
Addendum Contract containing the arbitration clause is void in view of Climax-Arimcos acts of fraud, oppression and violation of the
Constitution. Thus, the arbitration clause, Clause 19.1, contained in the Addendum Contract is also null and void ab initio and legally
inexistent.1awphi1.net
On 18 May 2000, the RTC issued an order declaring Gonzaless motion to dismiss moot and academic in view of the filing of his
Answer with Counterclaim.
13


On 31 May 2000, Gonzales asked the RTC to set the case for pre-trial.
14
This the RTC denied on 16 June 2000, holding that the
petition for arbitration is a special proceeding that is summary in nature.
15
However, on 7 July 2000, the RTC granted Gonzaless
motion for reconsideration of the 16 June 2000 Order and set the case for pre-trial on 10 August 2000, it being of the view that
Gonzales had raised in his answer the issue of the making of the arbitration agreement.
16


Climax-Arimco then filed a motion to resolve its pending motion to compel arbitration. The RTC denied the same in its 24 July 2000
order.

On 28 July 2000, Climax-Arimco filed a Motion to Inhibit Judge Herminio I. Benito for "not possessing the cold neutrality of an
impartial judge."
17
On 5 August 2000, Judge Benito issued an Order granting the Motion to Inhibit and ordered the re-raffling of the
petition for arbitration.
18
The case was raffled to the sala of public respondent Judge Oscar B. Pimentel of Branch 148.

On 23 August 2000, Climax-Arimco filed a motion for reconsideration of the 24 July 2000 Order.
19
Climax-Arimco argued that R.A.
No. 876 does not authorize a pre-trial or trial for a motion to compel arbitration but directs the court to hear the motion summarily
and resolve it within ten days from hearing. Judge Pimentel granted the motion and directed the parties to arbitration. On 13
February 2001, Judge Pimentel issued the first assailed order requiring Gonzales to proceed with arbitration proceedings and
appointing retired CA Justice Jorge Coquia as sole arbitrator.
20


Gonzales moved for reconsideration on 20 March 2001 but this was denied in the Order dated 7 March 2005.
21

Gonzales thus filed the Rule 65 petition assailing the Orders dated 13 February 2001 and 7 March 2005 of Judge Pimentel. Gonzales
contends that public respondent Judge Pimentel acted with grave abuse of discretion in immediately ordering the parties to proceed
with arbitration despite the proper, valid, and timely raised argument in his Answer with Counterclaim that the Addendum Contract,
containing the arbitration clause, is null and void. Gonzales has also sought a temporary restraining order to prevent the
30

enforcement of the assailed orders directing the parties to arbitrate, and to direct Judge Pimentel to hold a pre-trial conference and
the necessary hearings on the determination of the nullity of the Addendum Contract.

In support of his argument, Gonzales invokes Sec. 6 of R.A. No. 876:
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 terms thereof.

The court shall decide all motions, petitions or applications filed under the provisions of this Act, within ten (10) days after such
motions, petitions, or applications have been heard by it.

Gonzales also cites Sec. 24 of R.A. No. 9285 or the "Alternative Dispute Resolution Act of 2004:"
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 requests not later than 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.

According to Gonzales, the above-quoted provisions of law outline the procedure to be followed in petitions to compel arbitration,
which the RTC did not follow. Thus, referral of the parties to arbitration by Judge Pimentel despite the timely and properly raised
issue of nullity of the Addendum Contract was misplaced and without legal basis. Both R.A. No. 876 and R.A. No. 9285 mandate that
any issue as to the nullity, inoperativeness, or incapability of performance of the arbitration clause/agreement raised by one of the
parties to the alleged arbitration agreement must be determined by the court prior to referring them to arbitration. They require
that the trial court first determine or resolve the issue of nullity, and there is no other venue for this determination other than a pre-
trial and hearing on the issue by the trial court which has jurisdiction over the case. Gonzales adds that the assailed 13 February
2001 Order also violated his right to procedural due process when the trial court erroneously ruled on the existence of the
arbitration agreement despite the absence of a hearing for the presentation of evidence on the nullity of the Addendum Contract.

Respondent Climax-Arimco, on the other hand, assails the mode of review availed of by Gonzales. Climax-Arimco cites Sec. 29 of R.A.
No. 876:

Sec. 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 an appeal,
including the judgment thereon shall be governed by the Rules of Court in so far as they are applicable.
Climax-Arimco mentions that the special civil action for certiorari employed by Gonzales is available only where there is no appeal or
any plain, speedy, and adequate remedy in the ordinary course of law against the challenged orders or acts. Climax-Arimco then
points out that R.A. No. 876 provides for an appeal from such orders, which, under the Rules of Court, must be filed within 15 days
from notice of the final order or resolution appealed from or of the denial of the motion for reconsideration filed in due time.
Gonzales has not denied that the relevant 15-day period for an appeal had elapsed long before he filed this petition for certiorari. He
cannot use the special civil action of certiorari as a remedy for a lost appeal.

Climax-Arimco adds that an application to compel arbitration under Sec. 6 of R.A. No. 876 confers on the trial court only a limited
and special jurisdiction, i.e., a jurisdiction solely to determine (a) whether or not the parties have a written contract to arbitrate, and
(b) if the defendant has failed to comply with that contract. Respondent cites La Naval Drug Corporation v. Court of Appeals,
22
which
holds that in a proceeding to compel arbitration, "*t+he arbitration law explicitly confines the courts authority only to pass upon the
issue of whether there is or there is no agreement in writing providing for arbitration," and "[i]n 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."
23
Climax-Arimco argues that R.A. No. 876 gives no room for any other issue to be dealt with in such a proceeding, and that
the court presented with an application to compel arbitration may order arbitration or dismiss the same, depending solely on its
finding as to those two limited issues. If either of these matters is disputed, the court is required to conduct a summary hearing on
it. Gonzaless proposition contradicts both the trial courts limited jurisdiction and the summary nature of the proceeding itself.

Climax-Arimco further notes that Gonzaless attack on or repudiation of the Addendum Contract also is not a ground to deny effect
to the arbitration clause in the Contract. The arbitration agreement is separate and severable from the contract evidencing the
parties commercial or economic transaction, it stresses. Hence, the alleged defect or failure of the main contract is not a ground to
deny enforcement of the parties arbitration agreement. Even the party who has repudiated the main contract is not prevented from
enforcing its arbitration provision. R.A. No. 876 itself treats the arbitration clause or agreement as a contract separate from the
commercial, economic or other transaction to be arbitrated. The statute, in particular paragraph 1 of Sec. 2 thereof, considers the
arbitration stipulation an independent contract in its own right whose enforcement may be prevented only on grounds which legally
make the arbitration agreement itself revocable, thus:
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
31

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.

x x x x
The grounds Gonzales invokes for the revocation of the Addendum Contractfraud and oppression in the execution thereofare
also not grounds for the revocation of the arbitration clause in the Contract, Climax-Arimco notes. Such grounds may only be raised
by way of defense in the arbitration itself and cannot be used to frustrate or delay the conduct of arbitration proceedings. Instead,
these should be raised in a separate action for rescission, it continues.

Climax-Arimco emphasizes that the summary proceeding to compel arbitration under Sec. 6 of R.A. No. 876 should not be confused
with the procedure in Sec. 24 of R.A. No. 9285. Sec. 6 of R.A. No. 876 refers to an application to compel arbitration where the courts
authority is limited to resolving the issue of whether there is or there is no agreement in writing providing for arbitration, while Sec.
24 of R.A. No. 9285 refers to an ordinary action which covers a matter that appears to be arbitrable or subject to arbitration under
the arbitration agreement. In the latter case, the statute is clear that the court, instead of trying the case, may, on request of either
or both parties, refer the parties to arbitration, unless it finds that the arbitration agreement is null and void, inoperative or
incapable of being performed. Arbitration may even be ordered in the same suit brought upon a matter covered by an arbitration
agreement even without waiting for the outcome of the issue of the validity of the arbitration agreement. Art. 8 of the UNCITRAL
Model Law
24
states that where a court before which an action is brought in a matter which is subject of an arbitration agreement
refers the parties to arbitration, the arbitral proceedings may proceed even while the action is pending.

Thus, the main issue raised in the Petition for Certiorari is whether 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. The resolution of both Climax-
Arimcos Motion for Partial Reconsideration and/or Clarification in G.R. No. 161957 and Gonzaless Petition for Certiorari in G.R. No.
167994 essentially turns on whether the question of validity of the Addendum Contract bears upon the applicability or enforceability
of the arbitration clause contained therein. The two pending matters shall thus be jointly resolved.

We address the Rule 65 petition in G.R. No. 167994 first from the remedial law perspective. It deserves to be dismissed on
procedural grounds, as it was filed in lieu of appeal which is the prescribed remedy and at that far beyond the reglementary period.
It is elementary in remedial law that the use of an erroneous mode of appeal is cause for dismissal of the petition for certiorari and it
has been repeatedly stressed that a petition for certiorari is not a substitute for a lost appeal. As its nature, a petition for certiorari
lies only where there is "no appeal," and "no plain, speedy and adequate remedy in the ordinary course of law."
25
The Arbitration
Law specifically provides for an appeal by certiorari, i.e., a petition for review under certiorari under Rule 45 of the Rules of Court
that raises pure questions of law.
26
There is no merit to Gonzaless argument that the use of the permissive term "may" in Sec. 29,
R.A. No. 876 in the filing of appeals does not prohibit nor discount the filing of a petition for certiorari under Rule 65.
27
Proper
interpretation of the aforesaid provision of law shows that the term "may" refers only to the filing of an appeal, not to the mode of
review to be employed. Indeed, the use of "may" merely reiterates the principle that the right to appeal is not part of due process of
law but is a mere statutory privilege to be exercised only in the manner and in accordance with law.

Neither can BF Corporation v. Court of Appeals
28
cited by Gonzales support his theory. Gonzales argues that said case recognized
and allowed a petition for certiorari under Rule 65 "appealing the order of the Regional Trial Court disregarding the arbitration
agreement as an acceptable remedy."
29
The BF Corporation case had its origins in a complaint for collection of sum of money filed by
therein petitioner BF Corporation against Shangri-la Properties, Inc. (SPI). SPI moved to suspend the proceedings alleging that the
construction agreement or the Articles of Agreement between the parties contained a clause requiring prior resort to arbitration
before judicial intervention. The trial court found that an arbitration clause was incorporated in the Conditions of Contract appended
to and deemed an integral part of the Articles of Agreement. Still, the trial court denied the motion to suspend proceedings upon a
finding that the Conditions of Contract were not duly executed and signed by the parties. The trial court also found that SPI had
failed to file any written notice of demand for arbitration within the period specified in the arbitration clause. The trial court denied
SPI's motion for reconsideration and ordered it to file its responsive pleading. Instead of filing an answer, SPI filed a petition for
certiorari under Rule 65, which the Court of Appeals, favorably acted upon. In a petition for review before this Court, BF Corporation
alleged, among others, that the Court of Appeals should have dismissed the petition for certiorari since the order of the trial court
denying the motion to suspend proceedings "is a resolution of an incident on the merits" and upon the continuation of the
proceedings, the trial court would eventually render a decision on the merits, which decision could then be elevated to a higher
court "in an ordinary appeal."
30


The Court did not uphold BF Corporations argument. The issue raised before the Court was whether SPI had taken the proper mode
of appeal before the Court of Appeals. The question before the Court of Appeals was whether the trial court had prematurely
assumed jurisdiction over the controversy. The question of jurisdiction in turn depended on the question of existence of the
arbitration clause which is one of fact. While on its face the question of existence of the arbitration clause is a question of fact that is
not proper in a petition for certiorari, yet since the determination of the question obliged the Court of Appeals as it did to interpret
the contract documents in accordance with R.A. No. 876 and existing jurisprudence, the question is likewise a question of law which
may be properly taken cognizance of in a petition for certiorari under Rule 65, so the Court held.
31


The situation in B.F. Corporation is not availing in the present petition. The disquisition in B.F. Corporation led to the conclusion that
in order that the question of jurisdiction may be resolved, the appellate court had to deal first with a question of law which could be
addressed in a certiorari proceeding. In the present case, Gonzaless petition raises a question of law, but not a question of
jurisdiction. Judge Pimentel acted in accordance with the procedure prescribed in R.A. No. 876 when he ordered Gonzales to
32

proceed with arbitration and appointed a sole arbitrator after making the determination that there was indeed an arbitration
agreement. It has been held that as long as a court acts within its jurisdiction and does not gravely abuse its discretion in the
exercise thereof, any supposed error committed by it will amount to nothing more than an error of judgment reviewable by a timely
appeal and not assailable by a special civil action of certiorari.
32
Even if we overlook the employment of the wrong remedy in the
broader interests of justice, the petition would nevertheless be dismissed for failure of Gonzalez to show grave abuse of discretion.

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.
33
R.A. No. 876 also expressly authorizes arbitration of domestic disputes. Foreign arbitration, as a system of
settling commercial disputes of an international character, 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.
34
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.

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, thus:

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. [Emphasis added.]

Thus, we held in Manila Electric Co. v. Pasay Transportation Co.
35
that a submission to arbitration is a contract. A clause in a contract
providing that all matters in dispute between the parties shall be referred to arbitration is a contract,
36
and in Del Monte
Corporation-USA v. Court of Appeals
37
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."
38


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 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. [Emphasis added.]

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.
39
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."
40
The cited
case also stressed that the proceedings are summary in nature.
41
The same thrust was made in the earlier case of Mindanao
Portland Cement Corp. v. McDonough Construction Co. of Florida
42
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 x
43

33


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.
44
and Del Monte Corporation-USA v. Court of
Appeals.
45


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.
46

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.
47


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.
48


The separability doctrine was dwelt upon at length in the U.S. case of Prima Paint Corp. v. Flood & Conklin Manufacturing Co.
49
In
that case, Prima Paint and Flood and Conklin (F & C) entered into a consulting agreement whereby F & C undertook to act as
consultant to Prima Paint for six years, sold to Prima Paint a list of its customers and promised not to sell paint to these customers
during the same period. The consulting agreement contained an arbitration clause. Prima Paint did not make payments as provided
in the consulting agreement, contending that F & C had fraudulently misrepresented that it was solvent and able for perform its
contract when in fact it was not and had even intended to file for bankruptcy after executing the consultancy agreement. Thus, F & C
served Prima Paint with a notice of intention to arbitrate. Prima Paint sued in court for rescission of the consulting agreement on the
ground of fraudulent misrepresentation and asked for the issuance of an order enjoining F & C from proceeding with arbitration. F &
C moved to stay the suit pending arbitration. The trial court granted F & Cs motion, and the U.S. Supreme Court affirmed.

The U.S. Supreme Court did not address Prima Paints argument that it had been fraudulently induced by F & C to sign the consulting
agreement and held that no court should address this argument. Relying on Sec. 4 of the Federal Arbitration Actwhich provides
that "if a party [claims to be] aggrieved by the alleged failure x x x of another to arbitrate x x x, [t]he court shall hear the parties, and
upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court
shall make an order directing the parties to proceed to arbitration x x x. If the making of the arbitration agreement or the failure,
neglect, or refusal to perform the same be in issue, the court shall proceed summarily to the trial thereof"the U.S. High Court held
that the court should not order the parties to arbitrate if the making of the arbitration agreement is in issue. The parties should be
ordered to arbitration if, and only if, they have contracted to submit to arbitration. Prima Paint was not entitled to trial on the
question of whether an arbitration agreement was made because its allegations of fraudulent inducement were not directed to the
arbitration clause itself, but only to the consulting agreement which contained the arbitration agreement.
50
Prima Paint held that
"arbitration clauses are separable from the contracts in which they are embedded, and that where no claim is made that fraud was
directed to the arbitration clause itself, a broad arbitration clause will be held to encompass arbitration of the claim that the
contract itself was induced by fraud."
51


There is reason, therefore, to rule against Gonzales when he alleges that Judge Pimentel acted with grave abuse of discretion in
ordering the parties to proceed with arbitration. Gonzaless argument that the Addendum Contract is null and void and, therefore
the arbitration clause therein is void as well, is not tenable. First, 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, Gonzaless 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 partys
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.

The Motion for Reconsideration of Gonzales in G.R. No. 161957 should also be denied. In the motion, Gonzales raises the same
question of jurisdiction, more particularly that the complaint for nullification of the Addendum Contract pertained to the DENR
Panel of Arbitrators, not the regular courts. He insists that the subject of his complaint is a mining dispute since it involves a dispute
concerning rights to mining areas, the Financial and Technical Assistance Agreement (FTAA) between the parties, and it also involves
claimowners. He adds that the Court failed to rule on other issues he raised, such as whether he had ceded his claims over the
mineral deposits located within the Addendum Area of Influence; whether the complaint filed before the DENR Panel of Arbitrators
alleged ultimate facts of fraud; and whether the action to declare the nullity of the Addendum Contract on the ground of fraud has
prescribed.1avvphi1.net

These are the same issues that Gonzales raised in his Rule 45 petition in G.R. No. 161957 which were resolved against him in the
Decision of 28 February 2005. Gonzales does not raise any new argument that would sway the Court even a bit to alter its holding
that the complaint filed before the DENR Panel of Arbitrators involves judicial issues which should properly be resolved by the
34

regular courts. He alleged fraud or misrepresentation in the execution of the Addendum Contract which is a ground for the
annulment of a voidable contract. Clearly, such allegations entail legal questions which are within the jurisdiction of the courts.

The question of whether Gonzales had ceded his claims over the mineral deposits in the Addendum Area of Influence is a factual
question which is not proper for determination before this Court. At all events, moreover, the question is irrelevant to the issue of
jurisdiction of the DENR Panel of Arbitrators. It should be pointed out that the DENR Panel of Arbitrators made a factual finding in its
Order dated 18 October 2001, which it reiterated in its Order dated 25 June 2002, that Gonzales had, "through the various
agreements, assigned his interest over the mineral claims all in favor of [Climax-Arimco]" as well as that without the complainant
[Gonzales] assigning his interest over the mineral claims in favor of [Climax-Arimco], there would be no FTAA to speak of."
52
This
finding was affirmed by the Court of Appeals in its Decision dated 30 July 2003 resolving the petition for certiorari filed by Climax-
Arimco in regard to the 18 October 2001 Order of the DENR Panel.
53


The Court of Appeals likewise found that Gonzaless complaint alleged fraud but did not provide any particulars to substantiate it.
The complaint repeatedly mentioned fraud, oppression, violation of the Constitution and similar conclusions but nowhere did it give
any ultimate facts or particulars relative to the allegations.
54


Sec. 5, Rule 8 of the Rules of Court specifically provides that in all averments of fraud, the circumstances constituting fraud must be
stated with particularity. This is to enable the opposing party to controvert the particular facts allegedly constituting the same.
Perusal of the complaint indeed shows that it failed to state with particularity the ultimate facts and circumstances constituting the
alleged fraud. It does not state what particulars about Climax-Arimcos financial or technical capability were misrepresented, or how
the misrepresentation was done. Incorporated in the body of the complaint are verbatim reproductions of the contracts,
correspondence and government issuances that reportedly explain the allegations of fraud and misrepresentation, but these are, at
best, evidentiary matters that should not be included in the pleading.

As to the issue of prescription, Gonzaless claims of fraud and misrepresentation attending the execution of the Addendum Contract
are grounds for the annulment of a voidable contract under the Civil Code.
55
Under Art. 1391 of the Code, an action for annulment
shall be brought within four years, in the case of fraud, beginning from the time of the discovery of the same. However, the time of
the discovery of the alleged fraud is not clear from the allegations of Gonzaless complaint. That being the situation coupled with the
fact that this Court is not a trier of facts, any ruling on the issue of prescription would be uncalled for or even unnecessary.

WHEREFORE, the Petition for Certiorari in G.R. No. 167994 is DISMISSED. Such dismissal effectively renders superfluous formal
action on the Motion for Partial Reconsideration and/or Clarification filed by Climax Mining Ltd., et al. in G.R. No. 161957.

The Motion for Reconsideration filed by Jorge Gonzales in G.R. No. 161957 is DENIED WITH FINALITY.
SO ORDERED.
DANTE O. TINGA
Associate Justice
WE CONCUR:
---------------------------------------------------------------------------------------------------------------------

SECOND DIVISION


TUNA PROCESSING, INC.,
Petitioner,




-versus-





PHILIPPINE KINGFORD, INC.,
Respondent.

G.R. No. 185582


Present:

CARPIO, J.,
Chairperson,
BRION,
PEREZ,
SERENO, and
REYES, JJ.

Promulgated:

February 29, 2012

x-----------------------------------------------------------------------------------------x
35


D E C I S I O N

PEREZ, J.:

Can a foreign corporation not licensed to do business in the Philippines, but which collects royalties from entities in the
Philippines, sue here to enforce a foreign arbitral award?

In this Petition for Review on Certiorari under Rule 45,56[1] petitioner Tuna Processing, Inc. (TPI), a foreign corporation not
licensed to do business in the Philippines, prays that the Resolution57[2] dated 21 November 2008 of the Regional Trial Court (RTC)
of Makati City be declared void and the case be remanded to the RTC for further proceedings. In the assailed Resolution, the RTC
dismissed petitioners Petition for Confirmation, Recognition, and Enforcement of Foreign Arbitral Award58[3] against respondent
Philippine Kingford, Inc. (Kingford), a corporation duly organized and existing under the laws of the Philippines,59[4] on the ground
that petitioner lacked legal capacity to sue.60[5]

The Antecedents

On 14 January 2003, Kanemitsu Yamaoka (hereinafter referred to as the licensor), co-patentee of U.S. Patent No.
5,484,619, Philippine Letters Patent No. 31138, and Indonesian Patent No. ID0003911 (collectively referred to as the Yamaoka
Patent),61[6] and five (5) Philippine tuna processors, namely, Angel Seafood Corporation, East Asia Fish Co., Inc., Mommy Gina
Tuna Resources, Santa Cruz Seafoods, Inc., and respondent Kingford (collectively referred to as the sponsors/licensees)62[7]
entered into a Memorandum of Agreement (MOA),63[8] pertinent provisions of which read:

1. Background and objectives. The Licensor, co-owner of U.S.Patent No. 5,484,619, Philippine Patent No. 31138,
and Indonesian Patent No. ID0003911 xxx wishes to form an alliance with Sponsors for purposes of enforcing his
three aforementioned patents, granting licenses under those patents, and collecting royalties.

The Sponsors wish to be licensed under the aforementioned patents in order to practice the processes claimed in
those patents in the United States, the Philippines, and Indonesia, enforce those patents and collect royalties in
conjunction with Licensor.

xxx

4. Establishment of Tuna Processors, Inc. The parties hereto agree to the establishment of Tuna Processors, Inc.
(TPI), a corporation established in the State of California, in order to implement the objectives of this
Agreement.

5. Bank account. TPI shall open and maintain bank accounts in the United States, which will be used exclusively to
deposit funds that it will collect and to disburse cash it will be obligated to spend in connection with the
implementation of this Agreement.

6. Ownership of TPI. TPI shall be owned by the Sponsors and Licensor. Licensor shall be assigned one share of TPI
for the purpose of being elected as member of the board of directors. The remaining shares of TPI shall be held
by the Sponsors according to their respective equity shares. 64[9]

xxx











36

The parties likewise executed a Supplemental Memorandum of Agreement65[10] dated 15 January 2003 and an Agreement to
Amend Memorandum of Agreement66[11] dated 14 July 2003.

Due to a series of events not mentioned in the petition, the licensees, including respondent Kingford, withdrew from
petitioner TPI and correspondingly reneged on their obligations.67[12] Petitioner submitted the dispute for arbitration before the
International Centre for Dispute Resolution in the State of California, United States and won the case against respondent.68[13]
Pertinent portions of the award read:

13.1 Within thirty (30) days from the date of transmittal of this Award to the Parties, pursuant to the terms of this
award, the total sum to be paid by RESPONDENT KINGFORD to CLAIMANT TPI, is the sum of ONE MILLION SEVEN
HUNDRED FIFTY THOUSAND EIGHT HUNDRED FORTY SIX DOLLARS AND TEN CENTS ($1,750,846.10).
(A) For breach of the MOA by not paying past due assessments, RESPONDENT KINGFORD shall pay CLAIMANT the
total sum of TWO HUNDRED TWENTY NINE THOUSAND THREE HUNDRED AND FIFTY FIVE DOLLARS AND NINETY
CENTS ($229,355.90) which is 20% of MOA assessments since September 1, 2005[;]

(B) For breach of the MOA in failing to cooperate with CLAIMANT TPI in fulfilling the objectives of the MOA,
RESPONDENT KINGFORD shall pay CLAIMANT the total sum of TWO HUNDRED SEVENTY ONE THOUSAND FOUR
HUNDRED NINETY DOLLARS AND TWENTY CENTS ($271,490.20)[;]69[14] and

(C) For violation of THE LANHAM ACT and infringement of the YAMAOKA 619 PATENT, RESPONDENT KINGFORD
shall pay CLAIMANT the total sum of ONE MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS AND NO CENTS
($1,250,000.00). xxx

xxx70[15]

To enforce the award, petitioner TPI filed on 10 October 2007 a Petition for Confirmation, Recognition, and Enforcement of
Foreign Arbitral Award before the RTC of Makati City. The petition was raffled to Branch 150 presided by Judge Elmo M. Alameda.

At Branch 150, respondent Kingford filed a Motion to Dismiss.71[16] After the court denied the motion for lack of
merit,72[17] respondent sought for the inhibition of Judge Alameda and moved for the reconsideration of the order denying the
motion.73*18+ Judge Alameda inhibited himself notwithstanding *t+he unfounded allegations and unsubstantiated assertions in the
motion.74[19] Judge Cedrick O. Ruiz of Branch 61, to which the case was re-raffled, in turn, granted respondents Motion for
Reconsideration and dismissed the petition on the ground that the petitioner lacked legal capacity to sue in the Philippines.75[20]

Petitioner TPI now seeks to nullify, in this instant Petition for Review on Certiorari under Rule 45, the order of the trial court
dismissing its Petition for Confirmation, Recognition, and Enforcement of Foreign Arbitral Award.

Issue

The core issue in this case is whether or not the court a quo was correct in so dismissing the petition on the ground of
petitioners lack of legal capacity to sue.

Our Ruling













37

The petition is impressed with merit.

The Corporation Code of the Philippines expressly provides:

Sec. 133. Doing business without a license. - No foreign corporation transacting business in the Philippines
without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or
proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded
against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine
laws.

It is pursuant to the aforequoted provision that the court a quo dismissed the petition. Thus:
Herein plaintiff TPIs Petition, etc. acknowledges that it is a foreign corporation established in the State of
California and was given the exclusive right to license or sublicense the Yamaoka Patent and was assigned the
exclusive right to enforce the said patent and collect corresponding royalties in the Philippines. TPI likewise admits
that it does not have a license to do business in the Philippines.

There is no doubt, therefore, in the mind of this Court that TPI has been doing business in the Philippines,
but sans a license to do so issued by the concerned government agency of the Republic of the Philippines, when it
collected royalties from five (5) Philippine tuna processors*,+ namely*,+ Angel Seafood Corporation, East Asia Fish
Co., Inc., Mommy Gina Tuna Resources, Santa Cruz Seafoods, Inc. and respondent Philippine Kingford, Inc. This
being the real situation, TPI cannot be permitted to maintain or intervene in any action, suit or proceedings in any
court or administrative agency of the Philippines. A priori, the Petition, etc. extant of the plaintiff TPI should be
dismissed for it does not have the legal personality to sue in the Philippines.76[21]

The petitioner counters, however, that it is entitled to seek for the recognition and enforcement of the subject foreign
arbitral award in accordance with Republic Act No. 9285 (Alternative Dispute Resolution Act of 2004),77[22] the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards drafted during the United Nations Conference on International Commercial
Arbitration in 1958 (New York Convention), and the UNCITRAL Model Law on International Commercial Arbitration (Model
Law),78[23] as none of these specifically requires that the party seeking for the enforcement should have legal capacity to sue. It
anchors its argument on the following:

In the present case, enforcement has been effectively refused on a ground not found in the [Alternative
Dispute Resolution Act of 2004], New York Convention, or Model Law. It is for this reason that TPI has brought this
matter before this most Honorable Court, as it *i+s imperative to clarify whether the Philippines international
obligations and State policy to strengthen arbitration as a means of dispute resolution may be defeated by misplaced
technical considerations not found in the relevant laws.79[24]
Simply put, how do we reconcile the provisions of the Corporation Code of the Philippines on one hand, and the Alternative
Dispute Resolution Act of 2004, the New York Convention and the Model Law on the other?

In several cases, this Court had the occasion to discuss the nature and applicability of the Corporation Code of the
Philippines, a general law, viz-a-viz other special laws. Thus, in Koruga v. Arcenas, Jr.,80[25] this Court rejected the application of the
Corporation Code and applied the New Central Bank Act. It ratiocinated:

Korugas invocation of the provisions of the Corporation Code is misplaced. In an earlier case with similar
antecedents, we ruled that:
The Corporation Code, however, is a general law applying to all types of corporations, while
the New Central Bank Act regulates specifically banks and other financial institutions, including the
dissolution and liquidation thereof. As between a general and special law, the latter shall prevail
generalia specialibus non derogant. (Emphasis supplied)81[26]

Further, in the recent case of Hacienda Luisita, Incorporated v. Presidential Agrarian Reform Council,82[27] this Court held:









38

Without doubt, the Corporation Code is the general law providing for the formation, organization and
regulation of private corporations. On the other hand, RA 6657 is the special law on agrarian reform. As between a
general and special law, the latter shall prevailgeneralia specialibus non derogant.83[28]

Following the same principle, the Alternative Dispute Resolution Act of 2004 shall apply in this case as the Act, as its title -
An Act to Institutionalize the Use of an Alternative Dispute Resolution System in the Philippines and to Establish the Office for
Alternative Dispute Resolution, and for Other Purposes - would suggest, is a law especially enacted to actively promote party
autonomy in the resolution of disputes or the freedom of the party to make their own arrangements to resolve their
disputes.84[29] It specifically provides exclusive grounds available to the party opposing an application for recognition and
enforcement of the arbitral award.85[30]

Inasmuch as the Alternative Dispute Resolution Act of 2004, a municipal law, applies in the instant petition, we do not see
the need to discuss compliance with international obligations under the New York Convention and the Model Law. After all, both
already form part of the law.

In particular, the Alternative Dispute Resolution Act of 2004 incorporated the New York Convention in the Act by specifically
providing:

SEC. 42. Application of the New York Convention. - The New York Convention shall govern the recognition
and enforcement of arbitral awards covered by the said Convention.

xxx

SEC. 45. Rejection of a Foreign Arbitral Award. - A party to a foreign arbitration proceeding may oppose an
application for recognition and enforcement of the arbitral award in accordance with the procedural rules to be
promulgated by the Supreme Court only on those grounds enumerated under Article V of the New York Convention.
Any other ground raised shall be disregarded by the regional trial court.

It also expressly adopted the Model Law, to wit:

Sec. 19. Adoption of the Model Law on International Commercial Arbitration. International commercial
arbitration shall be governed by the Model Law on International Commercial Arbitration (the Model Law) adopted
by the United Nations Commission on International Trade Law on June 21, 1985 xxx.

Now, does a foreign corporation not licensed to do business in the Philippines have legal capacity to sue under the
provisions of the Alternative Dispute Resolution Act of 2004? We answer in the affirmative.

Sec. 45 of the Alternative Dispute Resolution Act of 2004 provides that the opposing party in an application for recognition
and enforcement of the arbitral award may raise only those grounds that were enumerated under Article V of the New York
Convention, to wit:

Article V

1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is
invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought,
proof that:
(a) The parties to the agreement referred to in article II were, under the law applicable to them, under some
incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any
indication thereon, under the law of the country where the award was made; or
(b) The party against whom the award is invoked was not given proper notice of the appointment of the
arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or
(c) The award deals with a difference not contemplated by or not falling within the terms of the submission to
arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if
the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the
award which contains decisions on matters submitted to arbitration may be recognized and enforced; or
(d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the
agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the
arbitration took place; or
(e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent
authority of the country in which, or under the law of which, that award was made.




39

2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the
country where recognition and enforcement is sought finds that:
(a) The subject matter of the difference is not capable of settlement by arbitration under the law of that
country; or
(b) The recognition or enforcement of the award would be contrary to the public policy of that country.

Clearly, not one of these exclusive grounds touched on the capacity to sue of the party seeking the recognition and enforcement of
the award.

Pertinent provisions of the Special Rules of Court on Alternative Dispute Resolution,86[31] which was promulgated by the
Supreme Court, likewise support this position.

Rule 13.1 of the Special Rules provides that *a+ny party to a foreign arbitration may petition the court to recognize and
enforce a foreign arbitral award. The contents of such petition are enumerated in Rule 13.5.87[32] Capacity to sue is not included.
Oppositely, in the Rule on local arbitral awards or arbitrations in instances where the place of arbitration is in the
Philippines,88[33] it is specifically required that a petition to determine any question concerning the existence, validity and
enforceability of such arbitration agreement89[34] available to the parties before the commencement of arbitration and/or a
petition for judicial relief from the ruling of the arbitral tribunal on a preliminary question upholding or declining its
jurisdiction90*35+ after arbitration has already commenced should state *t+he facts showing that the persons named as petitioner
or respondent have legal capacity to sue or be sued.91[36]

Indeed, it is in the best interest of justice that in the enforecement of a foreign arbitral award, we deny availment by
the losing party of the rule that bars foreign corporations not licensed to do business in the Philippines from maintaining a suit
in our courts. When a party enters into a contract containing a foreign arbitration clause and, as in this case, in fact submits
itself to arbitration, it becomes bound by the contract, by the arbitration and by the result of arbitration, conceding thereby the
capacity of the other party to enter into the contract, participate in the arbitration and cause the implementation of the result.
Although not on all fours with the instant case, also worthy to consider is the
wisdom of then Associate Justice Flerida Ruth P. Romero in her Dissenting Opinion in Asset Privatization Trust v. Court of
Appeals,92[37] to wit:

xxx Arbitration, as an alternative mode of settlement, is gaining adherents in legal and judicial circles here
and abroad. If its tested mechanism can simply be ignored by an aggrieved party, one who, it must be stressed,
voluntarily and actively participated in the arbitration proceedings from the very beginning, it will destroy the very
essence of mutuality inherent in consensual contracts.93[38]

Clearly, on the matter of capacity to sue, a foreign arbitral award should be respected not because it is favored over
domestic laws and procedures, but because Republic Act No. 9285 has certainly erased any conflict of law question.

Finally, even assuming, only for the sake of argument, that the court a quo correctly observed that the Model Law, not the
New York Convention, governs the subject arbitral award,94[39] petitioner may still seek recognition and enforcement of the award
in Philippine court, since the Model Law prescribes substantially identical exclusive grounds for refusing recognition or
enforcement.95[40]
Premises considered, petitioner TPI, although not licensed to do business in the Philippines, may seek recognition and
enforcement of the foreign arbitral award in accordance with the provisions of the Alternative Dispute Resolution Act of 2004.

II











40


The remaining arguments of respondent Kingford are likewise unmeritorious.

First. There is no need to consider respondents contention that petitioner TPI improperly raised a question of fact when it
posited that its act of entering into a MOA should not be considered doing business in the Philippines for the purpose of
determining capacity to sue. We reiterate that the foreign corporations capacity to sue in the Philippines is not material insofar as
the recognition and enforcement of a foreign arbitral award is concerned.

Second. Respondent cannot fault petitioner for not filing a motion for reconsideration of the assailed Resolution dated 21
November 2008 dismissing the case. We have, time and again, ruled that the prior filing of a motion for reconsideration is not
required in certiorari under Rule 45.96[41]

Third. While we agree that petitioner failed to observe the principle of hierarchy of courts, which, under ordinary
circumstances, warrants the outright dismissal of the case,97[42] we opt to relax the rules following the pronouncement in Chua v.
Ang,98[43] to wit:

[I]t must be remembered that [the principle of hierarchy of courts] generally applies to cases involving
conflicting factual allegations. Cases which depend on disputed facts for decision cannot be brought immediately
before us as we are not triers of facts.99[44] A strict application of this rule may be excused when the reason
behind the rule is not present in a case, as in the present case, where the issues are not factual but purely legal. In
these types of questions, this Court has the ultimate say so that we merely abbreviate the review process if we,
because of the unique circumstances of a case, choose to hear and decide the legal issues outright.100[45]

Moreover, the novelty and the paramount importance of the issue herein raised should be seriously considered.101[46] Surely,
there is a need to take cognizance of the case not only to guide the bench and the bar, but if only to strengthen arbitration as a
means of dispute resolution, and uphold the policy of the State embodied in the Alternative Dispute Resolution Act of 2004, to wit:

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 party 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. xxx

Fourth. As regards the issue on the validity and enforceability of the foreign arbitral award, we leave its determination to
the court a quo where its recognition and enforcement is being sought.

Fifth. Respondent claims that petitioner failed to furnish the court of origin a copy of the motion for time to file petition for
review on certiorari before the petition was filed with this Court.102*47+ We, however, find petitioners reply in order. Thus:

26. Admittedly, reference to Branch 67 in petitioner TPIs Motion for Time to File a Petition for Review
on Certiorari under Rule 45 is a typographical error. As correctly pointed out by respondent Kingford, the order
sought to be assailed originated from Regional Trial Court, Makati City, Branch 61.

27. xxx Upon confirmation with the Regional Trial Court, Makati City, Branch 61, a copy of petitioner TPIs
motion was received by the Metropolitan Trial Court, Makati City, Branch 67. On 8 January 2009, the motion was
forwarded to the Regional Trial Court, Makati City, Branch 61.103[48]

All considered, petitioner TPI, although a foreign corporation not licensed to do business in the Philippines, is not, for that
reason alone, precluded from filing the Petition for Confirmation, Recognition, and Enforcement of Foreign Arbitral Award before a
Philippine court.










41

WHEREFORE, the Resolution dated 21 November 2008 of the Regional Trial Court, Branch 61, Makati City in Special
Proceedings No. M-6533 is hereby REVERSED and SET ASIDE. The case is REMANDED to Branch 61 for further proceedings.
SO ORDERED.
-----------------------------------------------




-

FIRST DIVISION


THE PHILIPPINE AMERICAN LIFE & GENERAL
INSURANCE COMPANY,
Petitioner,




- versus -




JOSEPH ENARIO,
Respondent.
G.R. No. 182075

Present:

CORONA, C. J.,
Chairperson,
CARPIO-MORALES,*
VELASCO, JR.,
DEL CASTILLO, and
PEREZ, JJ.


Promulgated:
September 15, 2010
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

D E C I S I O N

PEREZ, J.:

The consequences of the failure of defendant to attend the pre-trial is the central issue in this case.

Assailed in this petition is the Decision104[1] dated 28 September 2007, as well as the Resolution105[2] dated 6 March
2008 of the Court of Appeals in CA-G.R. CV No. 82353, vacating and setting aside the orders dated 3 June 2003106[3] (June Order)
and 24 November 2003107[4], and the decision dated 24 February 2004108[5] of the Regional Trial Court of Manila109[6] declaring
respondent Joseph Enario in default and ordering him to pay Philamlife P1,122,781.66.

Respondent was appointed as agent of Philamlife on 12 November 1991.110[7] Aside from being an active agent of
Philamlife, respondent was appointed unit manager where he also regularly received his override commissions. He was afforded the
privilege of receiving cash advances from Philamlife, which the latter charges or debits against future commissions due respondent,
and the arrangement continued until his resignation in February 2000.111[8]

At the time of respondents resignation, Philamlife allegedly discovered that respondent had an outstanding debit balance
of P1,237,336.20, which he was obligated to settle and liquidate pursuant to the Revised Agency Contract he signed at the time of
his employment, the pertinent portion of which provides:










42

35. The Agent shall immediately at any time upon demand or without necessity of demand upon termination of
this Contract, return to the Company and all documents, agency materials, paraphernalia, and such other
properties which he may have received therefrom to effectively discharge and perform his duties and
obligations.112[9]

Philamlife sent three (3) successive demand letters to respondent for the settlement of his outstanding debit
account.113[10] On 31 October 2000, respondent requested that he be given time to review and settle his accountabilities as he
was still trying to reconcile his records. 114[11]

When the parties failed to reach an agreement regarding the settlement of the outstanding debit balance, Philamlife filed a
complaint for collection of a sum of money against respondent before the Regional Trial Court (RTC) of Manila on 22 June 2001.

In his Answer, respondent denied the allegations that he had an outstanding debit balance of P1,237,336.20 considering
that he and Philamlife had yet to reconcile the records of remittances with his compensation, as well as overri ding commissions.
Respondent prayed for the dismissal of the complaint and counterclaimed for damages.115[12]

On 30 October 2002, the RTC set the pre-trial conference on 3 and 17 December 2002. The parties were directed to file
their respective pre-trial briefs before the date of the pre-trial conference.116[13] Respondent moved for the postponement of the
pre-trial to 14 January 2003 due to conflict of schedule,117[14] which motion the RTC received on 2 December 2002.118[15]

On 14 January 2003, the opposing counsels agreed to amicably settle the case, prompting the RTC to reset the pre-trial to 8
May, 3 June and 1 July 2003.119[16]

On 7 May 2003, respondent sent a telegram requesting for another postponement of the pre-trial scheduled on the
following day due to medical reasons.

On 3 June 2003, respondent failed to appear. Consequently, Philamlife manifested that respondent be declared in default
for failure to appear at the pre-trial. The RTC granted the manifestation and allowed Philamlife to present its evidence on 1 July
2003.120[17] The June Order reads:

Appearance by Atty. Marivel A. Bautista Deodores, for the plaintiff. No appearance by Atty. Casiano
C. Vailoces, for the defendant.

Atty. Bautista-Deodores manifested that defendant be declared in default for failure to appear four
(4) times and that she be given 15 days from today to file a memorandum.

All manifestations, GRANTED. Plaintiff is allowed to present their evidence on July 1, 2003 at 8:30 in
the morning as previously scheduled.

SO ORDERED.121[18]


It was only on the following day, 4 June, that the RTC received respondents motion for postponement of the 3 June 2003
hearing, which was mailed on 30 May 2003.122[19]












43


The 1 July 2003 hearing was reset to 28 August 2003 and Philamlife was ordered to present its evidence ex parte.123[20]

Respondent filed a motion for reconsideration of the June Order.

Despite notice, respondent still failed to appear on the 28 August 2003 pre-trial. Philamlife was then allowed to present its
evidence ex parte, which it did on that same hearing. Meanwhile, Philamlife was also ordered to comment on the motion for
reconsideration of the order of default filed by respondent.124[21] Respondent denied receiving a notice of hearing for 28 August
2003.125[22]

In its Formal Offer of Evidence, Philamlife submitted statements of account to prove that respondent has an outstanding
debit account balance amounting to P1,237,390.26; and a summary of sale underwriter vouchers (SUV) as evidence of cash
advances, among others.126[23]

On 24 November 2003, the trial court issued an Order denying the motion for reconsideration of the order of default and
admitted Philamlifes Formal Offer of Evidence.127[24]

On 24 February 2004, the trial court rendered judgment ordering respondent to pay the following amount to Philamlife:

1. One Million One Hundred Twenty-two Thousand Seven Hundred Eighty- One and 66/100
(P1,122,781.66);

2. P10,000 as attorneys fees;
3. Costs of Suit.128[25]

Respondent elevated the case to the Court of Appeals via petition for certiorari under Rule 65 of the Rules of Court. On 28
September 2007, the Court of Appeals reversed the trial courts decision and ruled, thus:

WHEREFORE, the orders dated June 3, 2003 and November 24, 2003 and the decision dated
February 24, 2004 of the Regional Trial Court of Manila (Branch 8) are VACATED and SET ASIDE and the
case REMANDED to that court for pre-trial and other proceedings.

SO ORDERED.129[26]

The appellate court found that respondents failure to appear for pre-trial on 3 June 2003 does not constitute obstinate
refusal to comply with the lower courts order.130[27] Further, the appellate court held that the trial court erred in issuing an
Order of Default since Section 5, Rule 18 of the Rules of Court explicitly provides that failure to appear for pre-trial on the part of the
defendant shall be cause to allow the plaintiff to present evidence ex parte and the court to render judgment on the basis thereof.
131[28]

Philamlife filed a motion for reconsideration, which was denied by the Court of Appeals in its Resolution dated 6 March
2008.

Hence, this petition for certiorari was filed by Philamlife which attributes error on the part of the Court of Appeals in
vacating and setting aside the RTCs default order as a consequence of respondents failure to appear during pre-trial. Philamlife
concedes that the Court of Appeals correctly relied on Justice Florenz Regalados annotation in his book, REMEDIAL LAW
COMPENDIUM, that instead of defendant being declared in default by reason of his non-appearance, Section 5 Rule 18 of the Rules
of Court spells out that the procedure will be to allow the ex parte presentation of plaintiffs evidence and the rendition of judgment










44

on the basis thereof. Likewise from Justice Regalado, Philamlife argues that the reference to the word default which had been
deleted in the present rules solely for semantical propriety and terminological accuracy, is not an error as the standing procedure
was followed by the trial court in allowing the ex parte presentation of Philamlifes evidence. Philamlife insists that since pre-trial is
mandatory in any action, when a party fails to appear therein, he may be non-suited or declared in default.132[29]

On the other hand, respondent maintains that the RTC committed an egregious error when it issued an order of default
against him for failure to appear for pre-trial on 3 June 2003.

The fundamental issue is whether or not the RTC erred in declaring respondent in default and allowing Philamlife to present
its evidence ex parte.

The resolution of this issue hinges on the interpretation and application of Section 5, Rule 18 of the Rules of Court, which
states:

Section 5. Effect of failure to appear. The failure of the plaintiff to appear when so required
pursuant to the next preceding section shall be cause for dismissal of the action. The dismissal shall be
with prejudice, unless otherwise ordered by the court. A similar failure on the part of the defendant shall
be cause to allow the plaintiff to present his evidence ex parte and the court to render judgment on the
basis thereof.

The next preceding section mandates that:
Section 4. Appearance of parties. It shall be the duty of the parties and their counsel to appear
at the pre-trial. The non-appearance of a party may be excused only if a valid cause is shown therefor or if
a representative shall appear in his behalf fully authorized in writing to enter into an amicable settlement,
to submit to alternative modes of dispute resolution, and to enter into stipulations or admissions of facts
and of documents.

Note that nowhere in the first aforementioned provision was the word default mentioned. Prior to the 1997 Revised
Rules of Civil Procedure, the phrase as in default was initially included in Rule 20 of the old rules, and which read as follows:

Sec. 2. A party who fails to appear at a pre-trial conference may be non-suited or considered as in
default.

It was however amended in the 1997 Revised Rules of Civil Procedure. Justice Regalado, in his book REMEDIAL LAW
COMPENDIUM, explained the rationale for the deletion of the phrase as in default in the amended provision, to wit:

1. This is a substantial reproduction of Section 2 of the former Rule 20 with the change that, instead of
defendant being declared as in default by reason of his non-appearance, this section now spells out that
the procedure will be to allow the ex parte presentation of plaintiffs evidence and the rendition of
judgment on the basis thereof. While actually the procedure remains the same, the purpose is one of
semantical propriety or terminological accuracy as there were criticisms on the use of the word default
in the former provision since that term is identified with the failure to file a required answer, not
appearance in court.133[30]

Still, in the same book, Justice Regalado clarified that while the order of default no longer obtains, its effects were retained,
thus:

Failure to file a responsive pleading within the reglementary period, and not failure to appear at
the hearing, is the sole ground for an order of default, except the failure to appear at a pre-trial
conference wherein the effects of a default on the part of the defendant are followed, that is, the plaintiff
shall be allowed to present evidence ex parte and a judgment based thereon may be rendered against
defendant.134[31]

As the rule now stands, if the defendant fails to appear for pre-trial, a default order is no longer issued. Instead, the trial
court may allow the plaintiff to proceed with his evidence ex parte and the court can decide the case based on the evidence
presented by plaintiff.

The position of Philamlife is in accord with the Rule. Indeed, the amendment did not change the essence of the original
provision. The legal ramification of defendants failure to appear for pre-trial is still detrimental to him while beneficial to the
plaintiff. The plaintiff is given the privilege to present his evidence without objection from the defendant, the likelihood being that
the court will decide in favor of the plaintiff, the defendant having forfeited the opportunity to rebut or present its own evidence.




45


Therefore, the June Order cannot be completely vacated because semantics aside, the order substantially complied with
Section 5 in relation to Section 4, Rule 18 of the Rules of Court.

The importance of pre-trial in civil actions cannot be overemphasized. In Balatico v. Rodriguez135[32], the Court, citing Tiu
v. Middleton136[33], delved on the significance of pre-trial, thus:
Pre-trial is an answer to the clarion call for the speedy disposition of cases. Although it was discretionary
under the 1940 Rules of Court, it was made mandatory under the 1964 Rules and the subsequent amendments in
1997. Hailed as "the most important procedural innovation in Anglo-Saxon justice in the nineteenth century, pre-trial
seeks to achieve the following:
(a) The possibility of an amicable settlement or of a submission to alternative modes of
dispute resolution;
(b) The simplification of the issues;
(c) The necessity or desirability of amendments to the pleadings;
(d) The possibility of obtaining stipulations or admissions of facts and of documents to
avoid unnecessary proof;
(e) The limitation of the number of witnesses;
(f) The advisability of a preliminary reference of issues to a commissioner;
(g) The propriety of rendering judgment on the pleadings, or summary judgment,
or of dismissing the action should a valid ground therefor be found to exist;
(h) The advisability or necessity of suspending the proceedings; and
(i) Such other matters as may aid in the prompt disposition of the action.137[34]

Therefore, pre-trial cannot be taken for granted. It is not a mere technicality in court proceedings for it serves a vital
objective: the simplification, abbreviation and expedition of the trial, if not indeed its dispensation.138[35] This considered, it is
required in Section 4 of Rule 20 of the Rules of Court that:

Section 4. Appearance of parties. It shall be the duty of the parties and their counsel to appear at the
pre-trial. The non-appearance of a party may be excused only if a valid cause is shown therefor or if a
representative shall appear in his behalf fully authorized in writing to enter into an amicable settlement, to submit
to alternative modes of dispute resolution, and to enter into stipulations or admissions of facts and of documents.
[Emphasis supplied]

Definitely, non-appearance of a party may only be excused for a valid cause. We see none in this case even if the positions
of the parties are given a second consideration.

Philamlife claims that respondent was absent the four (4) times that the case was called for pre-trial on 3 and 17 December
2002, 8 May 2003 and 3 June 2003. Philamlife underlines the belated filing of respondent of his motions for postponement. The
motion for the postponement of the 3 and 17 December 2002 pre-trial was received by the trial court on 3 December 2002 while
that for 8 May and 3 June 2003 pre-trial was received on 4 June 2003 or the day after the pre-trial, where and when respondent was
declared in default. Philamlife considers the manner by which respondent moved for postponements, as well as his claim that he
was not notified of the 28 August 2003 when records show that he was in fact notified, as clear demonstration of negligence,
irresponsibility and contumacy.

Respondent counters that he moved for the postponement of the 3 and 17 December 2002 pre-trial due to a conflict of
schedule while the 14 January 2003 pre-trial was reset on account of the parties agreement to settle the case amicably. The 8 May
2003 pre-trial was also postponed due to medical reasons. While he did not appear on the pre-trial of 3 June 2003, he filed on 30
May 2003 a motion for postponement, although received by the trial court only on 4 June 2003. Respondent added that on 3 June
and 1 July 2003 pre-trial days, petitioner was not even ready to present its evidence. It was only on 28 August 2003 that Philamlife
presented its evidence ex parte, despite the unresolved motion for reconsideration of the 3 June 2003 order.

The Court of Appeals dismissed Philamlifes contention and declared that respondents failure to appear for pre-trial on 3
June 2003 does not constitute obstinate refusal to comply with the lower courts order and that only on that date was respondent
absent when the case was actually called for pre-trial.139[36]

Respondent undeniably sought for postponement of the pre-trial at least three (3) times. First, he cited conflict in schedule
as reason to seek postponement of the 3 and 17 December 2002 pre-trial. Second, the 8 May 2003 pre-trial was reset upon motion






46

of respondent through a telegram due to medical reasons. Third, respondent also filed a motion to postpone the pre-trial for 3 June
2003 and he explained that defendant and plaintiffs Cebu Office are still negotiating the ways for the projected settlement on
possible monthly basis with property as guarantee to be embodied in their Compromise Agreement, and since plaintiffs Cebu
Officer could not always be available they have not yet wind-up to bring matters to plaintiffs Manila Office through their
counsel.140[37]

The first two (2) motions for postponement were granted by the trial court. Only the 3 June 2003 pre-trial proceeded in the
absence of respondent during which the trial court issued the default order. The trial courts denial of the motion for
reconsideration of the June Order amounted to a denial of his motion for postponement of the 3 June 2003 pre-trial date.

A motion for postponement is a privilege and not a right. A movant for postponement should not assume beforehand that
his motion will be granted. The grant or denial of a motion for postponement is a matter that is addressed to the sound discretion of
the trial court. Indeed, an order declaring a party to have waived the right to present evidence for performing dilatory actions
upholds the trial court's duty to ensure that trial proceeds despite the deliberate delay and refusal to proceed on the part of one
party. 141[38]

In deciding whether to grant or deny a motion for postponement of pre-trial, the court must take into account the following
factors: (a) the reason for the postponement, and (b) the merits of the case of movant.142[39]

The trial court correctly saw the reason proffered by respondent as insufficient to excuse his non-appearance. Indeed,
when the 14 January 2003 pre-trial was postponed to 8 May 2003, the parties were in fact given the opportunity to settle the case
amicably, as there was ample time for both parties to reconcile their records and agree on compromise figures. We cannot see how,
inspite of the length of time given to him, respondent can still use as reason a possible settlement, about which Philamlife even
denies having any knowledge.

Notably, the trial court could not have acted timely in his favor because the trial court received the motion one day after
the pre-trial schedule. About this, we note further the practice of respondent in filing his motions for postponement close to the
scheduled pre-trial date. In his motion to reset the 8 May 2003 pre-trial, his motion was mailed on 7 May 2003. Likewise, his
motion for postponement for the 3 June 2003 pre-trial was mailed on 30 May 2003. In those occasions, the trial court either
received his motions on the day of pre-trial or a day after the pre-trial date. The trial court, which at the day of the 3 June 2003 pre-
trial has not received any word from the respondent would logically, as it did, proceed with the hearing.
Respondent tries in vain to reason out that by allowing Philamlife to present its evidence ex parte, his right to due process
was denied.

"The essence of due process is to be found in the reasonable opportunity to be heard and submit any evidence one may
have in support of ones defense. Where the opportunity to be heard, either through verbal arguments or pleadings, is accorded,
and the party can present its side or defend its interest in due course, there is no denial of procedural due process."143[40]

Respondent had been given more than enough time to present his evidence. The pre-trial date was reset four (4) times for
a total period of 6 months before the trial court allowed Philamlife to present its evidence ex parte when respondent failed to
appear on the scheduled date.

With respect to the trial courts order for respondent to pay P1,122,781.66 representing the amount of his outstanding
debit balance, we affirm its findings which were based on records presented by Philamlife. As a consequence of respondents non-
appearance, he was deemed to have waived his right to present his own evidence, if there was any.

We overturn the ruling of the Court of Appeals on the foregoing basis.

WHEREFORE, the Decision dated 28 September 2007, as well as the Resolution dated 6 March 2008 of the Court of Appeals
in CA-G.R. CV No. 82353 are REVERSED and SET ASIDE. The Orders dated 3 June 2003 and 24 November 2003 and the Decision
dated 24 February 2004 of the Regional Trial Court of Manila ordering respondent Joseph Enario to pay Philamlife P1,122,781.66 are
REINSTATED.

SO ORDERED.
-------------------------------------------------------------------------------------------------------------------






47

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 159089 May 3, 2006
ISLANDERS CARP-FARMERS BENEFICIARIES MULTI-PURPOSE COOPERATIVE, INC., Petitioner,
vs.
LAPANDAY AGRICULTURAL AND DEVELOPMENT CORPORATION, Respondent.

D E C I S I O N

PANGANIBAN, CJ:
The Department of Agrarian Reform Adjudication Board (DARAB) has jurisdiction to determine and adjudicate all agrarian disputes
involving the implementation of the Comprehensive Agrarian Reform Law (CARL). Included in the definition of agrarian disputes are
those arising from other tenurial arrangements beyond the traditional landowner-tenant or lessor-lessee relationship. Expressly,
these arrangements are recognized by Republic Act 6657 as essential parts of agrarian reform. Thus, the DARAB has jurisdiction over
disputes arising from the instant Joint Production Agreement entered into by the present parties.

The Case
Before us is a Petition for Review
1
under Rule 45 of the Rules of Court, seeking to reverse the June 30, 2003 Decision
2
of the Court of
Appeals (CA) in CA-GR CV No. 65498. The assailed Decision disposed as follows:

"WHEREFORE, premises considered, the appealed decision dated October 18, 1999 dismissing the complaint filed by [petitioner]
issued by the Regional Trial Court of Tagum City, Branch 1, is hereby AFFIRMED."
3

The Facts

The facts of the case are narrated by the CA in this wise:
"On March 8, 1993, a certain Ramon Cajegas entered into a Joint Production Agreement for Islanders Carp-Farmer Beneficiaries
Multi-Purpose Cooperative, Inc. [petitioner] with Lapanday Agricultural and Development Corporation [respondent].

"Almost three years after, on April 2, 1996, [petitioner], represented by its alleged chairman, Manuel K. Asta, filed a complaint [with
the RTC] for Declaration of Nullity, Mandamus, Damages, with prayer for Preliminary Injunction against [respondent], the alleged x x
x officers [of petitioner] who entered into the agreement, and the Provincial Agrarian Reform Office of Davao (hereinafter PARO),
represented by Saturnino D. Sibbaluca. [Petitioner] subsequently filed an amended complaint with leave of court alleging that the
persons, who executed the contract were not authorized by it.

"[Respondent] then filed a Motion to Dismiss on April 18, 1996 x x x, stating that the Department of Agrarian Reform Adjudication
Board (hereinafter DARAB) has primary, exclusive, and original jurisdiction; that [petitioner] failed to comply with the compulsory
mediation and conciliation proceedings at the barangay level; and for the unauthorized institution of the complaint in behalf of
[petitioner]. [Respondent] also averred that [petitioner] was engaged in forum shopping because [it] also filed a petition before the
Department of Agrarian Reform praying for the disapproval of the Joint Production Agreement. x x x PARO also filed a motion to
dismiss on May 16, 1996.

"On August 21, 1996, [respondent] then filed a case at the DARAB for Breach of Contract, Specific Performance, Injunction with
Restraining Order, Damages and Attorneys Fees. On February 25, 1997, the DARAB decided the case in favor of *respondent+
declaring the Joint Production Agreement as valid and binding and ordering [petitioner] to account for the proceeds of the produce
and to comply with the terms of the contract.

"The [RTC] then issued [its] decision on October 18, 1999.
"[Petitioner], before [the CA], rais[ed] the following errors on appeal:
I
THE *RTC+ GRAVELY ERRED IN DISMISSING THE CASE AT BAR ON THE GROUND OF LACK OF JURISDICTION.
II
THE *RTC+ GRAVELY ERRED IN NOT DECLARING THE JOINT PRODUCTION AGREEMENT AS NULL AND VOID AB INITIO"
4

Ruling of the Court of Appeals
Finding the relationship between the parties to be an agricultural leasehold, the CA held that the issue fell squarely within the
jurisdiction of the DARAB. Hence, the appellate court ruled that the RTC had correctly dismissed the Complaint filed by petitioner.
Moreover, being in the nature of an agricultural leasehold and not a shared tenancy, the Joint Production Agreement entered into
by the parties was deemed valid by the CA. The agreement could not be considered contrary to public policy, simply because one of
the parties was a corporation.
Hence, this Petition.
5

Issues
Petitioner raises the following issues for the Courts consideration:
"I
"Whether or not x x x the x x x Court of Appeals gravely erred in affirming the dismissal of the case at bench by RTC of
Tagum City on the ground that it has no jurisdiction over the subject matter and nature of the suit.
"II
48

"Whether or not x x x the x x x Court of Appeals gravely erred in finding that the Joint Production Agreement is valid
instead of declaring it as null and void ab initio, its provisions, terms and condition, cause and purposes being violative of
[t]he express mandatory provision of R.A. 6657.
"III
"Whether or not x x x the x x x Court of Appeals gravely erred in holding that the Joint Production Agreement is a
leasehold contract and therefore valid.
"IV
"Whether or not x x x the x x x Court of Appeals gravely erred in interpreting and applying the prevailing doctrines and
jurisprudence delineating the jurisdiction between the regular court and DARAB on the matter of agricultural land and
tenancy relationship."
6

Simply put, the question to be resolved by the Court is this: which of the various government agencies has jurisdiction over the
controversy?

The Courts Ruling
The Petition has no merit.1avvphil.net
Sole Issue:
Jurisdiction
Section 50 of Republic Act 6657
7
and Section 17 of Executive Order 229
8
vests in the Department of Agrarian Reform (DAR) the
primary and exclusive jurisdiction, both original and appellate, to determine and adjudicate all matters involving the implementation
of agrarian reform.
9
Through Executive Order 129-A,
10
the President of the Philippines created the DARAB and authorized it to
assume the powers and functions of the DAR pertaining to the adjudication of agrarian reform cases.
11

Moreover, Rule II of the Revised Rules of the DARAB provides as follows:

"Section 1. Primary and Exclusive Original and Appellate Jurisdiction. -- The Board shall have primary and exclusive jurisdiction, both
original and appellate, to determine and adjudicate all agrarian disputes involving the implementation of the Comprehensive
Agrarian Reform Program (CARP) under Republic Act No. 6657, Executive Order Nos. 228 and 129-A, Republic Act No. 3844 as
amended by Republic Act No. 6389, Presidential Decree No. 27 and other agrarian laws and their implementing rules and
regulations. Specifically, such jurisdiction shall include but not be limited to cases involving the following:

a) The rights and obligations of persons, whether natural or juridical, engaged in the management, cultivation and use of all
agricultural lands covered by the CARP and other agrarian laws[.]"
12


The subject matter of the present controversy falls squarely within the jurisdiction of the DARAB. In question are the rights and
obligations of two juridical persons engaged in the management, cultivation and use of agricultural land acquired through the
Comprehensive Agrarian Reform Program (CARP) of the government.

Petitioner contends that, there being no tenancy or leasehold relationship between the parties, this case does not constitute an
agrarian dispute that falls within the DARABs jurisdiction.
13


We clarify. To prove tenancy or an agricultural leasehold agreement, it is normally necessary to establish the following elements: 1)
the parties are the landowner and the tenant or agricultural lessee; 2) the subject matter of the relationship is a piece of agricultural
land; 3) there is consent between the parties to the relationship; 4) the purpose of the relationship is to bring about agricultural
production; 5) there is personal cultivation on the part of the tenant or agricultural lessee; and 6) the harvest is shared between the
landowner and the tenant or agricultural lessee.
14


In the present case, the fifth element of personal cultivation is clearly absent. Petitioner is thus correct in claiming that the
relationship between the parties is not one of tenancy or agricultural leasehold. Nevertheless, we believe that the present
controversy still falls within the sphere of agrarian disputes.

An agrarian dispute "refers to any controversy relating to tenurial arrangements -- whether leasehold, tenancy, stewardship or
otherwise -- over lands devoted to agriculture. Such disputes include those concerning farm workers associations or representations
of persons in negotiating, fixing, maintaining, changing or seeking to arrange terms or conditions of such tenurial arrangements. Also
included is any controversy relating to the terms and conditions of transfer of ownership from landowners to farm workers, tenants
and other agrarian reform beneficiaries -- whether the disputants stand in the proximate relation of farm operator and beneficiary,
landowner and tenant, or lessor and lessee."
15


It is clear that the above definition is broad enough to include disputes arising from any tenurial arrangement beyond that in the
traditional landowner-tenant or lessor-lessee relationship.

Tenurial Arrangements Recognized by Law
The assailed Joint Production Agreement
16
is a type of joint economic enterprise. Joint economic enterprises are partnerships or
arrangements entered into by Comprehensive Agrarian Reform Program (CARP) land beneficiaries and investors to implement
agribusiness enterprises in agrarian reform areas.
17


Recognizing that agrarian reform extends beyond the mere acquisition and redistribution of land, the law acknowledges other
modes of tenurial arrangements to effect the implementation of CARP.
18


49

In line with its power to issue rules and regulations to carry out the objectives of Republic Act 6657,
19
the DAR issued Administrative
Order No. 2, Series of 1999, which issued "Rules and Regulations Governing Joint Economic Enterprises in Agrarian Reform Areas."
These rules and regulations were to provide CARP beneficiaries with alternatives to sustain operations of distributed farms and to
increase their productivity.
20


Section 10 of this administrative order states as follows:
"SEC. 10. Resolution of Disputes As a rule, voluntary methods, such as mediation or conciliation and arbitration, shall be preferred
in resolving disputes involving joint economic enterprises. The specific modes of resolving disputes shall be stipulated in the
contract, and should the parties fail to do so, the procedure herein shall apply.
"The aggrieved party shall first request the other party to submit the matter to mediation or conciliation by trained mediators or
conciliators from DAR, non-governmental organizations (NGOs), or the private sector chosen by them.
x x x x x x x x x
"Should the dispute remain unresolved, it may be brought to either of the following for resolution depending on the principal cause
of action:
(a) DAR Adjudication Board (DARAB) if it involves interpretation and enforcement of an agribusiness agreement or an agrarian
dispute as defined in Sec. 3(d) of RA 6657*.+"
The present controversy involves the interpretation and enforcement of the terms of the Joint Production Agreement. Thus, the
case clearly falls within the jurisdiction of the DARAB. This Court in fact recognized the authority of the DAR and the DARAB when it
ruled thus:
"All controversies on the implementation of the Comprehensive Agrarian Reform Program (CARP) fall under the jurisdiction of the
Department of Agrarian Reform (DAR), even though they raise questions that are also legal or constitutional in nature. All doubts
should be resolved in favor of the DAR, since the law has granted it special and original authority to hear and adjudicate agrarian
matters."
21

Validity of the Joint Production Agreement
As already discussed above, jurisdiction over the present controversy lies with the DARAB. As the RTC had correctly dismissed the
case on the ground of lack of jurisdiction, it was superfluous for the trial court -- and the CA for that matter -- to have ruled further
on the issue of the validity of the agreement.
The doctrine of primary jurisdiction precludes the courts from resolving a controversy over which jurisdiction has initially been
lodged with an administrative body of special competence.
22

Since the DARAB had already ruled in a separate case on the validity of the Joint Venture Agreement,
23
the proper remedy for
petitioner was to question the Boards judgment through a timely appeal with the CA.
24
Because of the manifest lack of jurisdiction
on the part of the RTC, we must defer any opinion on the other issues raised by petitioner until an appropriate review of a similar
case reaches this Court.
25

WHEREFORE, the Petition is DENIED. Costs against petitioner.
SO ORDERED.
ARTEMIO V. PANGANIBAN
Chief Justice
Chairman, First Division
WE CONCUR:
---------------------------------------------------------------------------------------------------------------------

FIRST DIVISION


PHILIPPINE COMMERCIAL G.R. No. 171137
INTERNATIONAL BANK,
Petitioner,
Present:

PUNO, C.J., Chairperson,
- versus - CARPIO,
CORONA,
LEONARDO-DE CASTRO, and
BERSAMIN, JJ.

SPOUSES WILSON DY HONG
PI and LOLITA DY and Promulgated:
SPOUSES PRIMO CHUYACO,
JR. and LILIA CHUYACO,
Respondents. June 5, 2009

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
50


D E C I S I O N

PUNO, C.J.:

Before the Court is a petition for review on certiorari assailing the Decision144[1] dated July 18, 2005 of the Court of
Appeals in CAG.R. SP. No. 85282, and its Resolution145[2] dated January 10, 2006, denying petitioners motion for reconsideration.

Spouses Damian and Tessie Amadeo are indebted to petitioner Philippine Commercial International Bank, a domestic uni-
banking corporation, as sureties for Streamline Cotton Development Corporation. The promissory notes became due and
demandable, but the Amadeo spouses failed to pay their outstanding obligations despite repeated demands. As of February 15,
1994, these obligations stood at Ten Million, Six Hundred Seventy-One Thousand, Seven Hundred Twenty-Six Pesos and Sixty-One
Centavos (P10,671,726.61).

Petitioner subsequently discovered that roughly a month before the due date of the promissory notes, the Amadeo spouses
(i) sold three (3) or nearly all of their real properties to respondents, Spouses Wilson and Lolita Dy and Spouses Primo and Lilia
Chuyaco, and (ii) immediately caused the transfer of the titles covering the parcels of land in favor of the latter. The consideration
for these sales was further alleged to have been grossly insufficient or inadequate.

Believing that the transfers were done in fraud of creditors, petitioner instituted an action for rescission and damages on
April 22, 1994. In its Complaint146[3] in Civil Case No. 94-1585 against Spouses Amadeo, Dy and Chuyaco, petitioner asked the
Regional Trial Court of Makati City for the following reliefs:
1. Annulling the Deeds of Absolute Sale both dated September 16, 1993 and thereafter, direct the
Registries of Deeds of Sultan Kudarat and Davao City to cancel the Transfer Certificates of Title Nos. (sic) T-27628,
T-202868, and T-202869 issued in the name of Wilson Dy Hong Pi and Lolita G. Dy AND Primo Chuyaco, Jr. and Lilia
O. Chuyaco, respectively, and in lieu thereof, issue new ones under the name of Damian and Tessie Amadeo.

2. Ordering the defendants to pay the plaintiff moral damages in the sum of P200,000.00; exemplary
damages in the sum of P200,000.00; and P100,000.00 as*,+ and for*,+ attorneys fees.147[4]

The case was then raffled to Branch 133, presided over by Judge Napoleon E. Inoturan.


Upon service of summons on the Amadeo spouses, the latter filed a Motion to Dismiss148[5] on the ground that the
Complaint violated the explicit terms of Supreme Court Circular No. 04-94, as the Verification was executed by petitioners legal
counsel. 149[6] Petitioner filed its Opposition to the Motion to Dismiss,150[7] where it argued that (i) the rule cited by the Amadeo
spouses should not be applied literally, and (ii) at any rate, petitioners legal counsel was authorized by petitioner to institute the
Complaint.151[8] On February 4, 1995, the trial court issued an Order152[9] denying the Motion to Dismiss.

The Amadeo spouses subsequently filed an Answer153[10] where they alleged that petitioner failed to release the loans to
Streamline Cotton Development Corporation on the agreed date, thereby constraining them to incur loans from third parties at high
interest rates to keep the company afloat. These loans were covered by postdated checks which had to be funded once the
obligations fell due, lest the Amadeo spouses face criminal prosecution. In order to pay the said loans, they thus had to sell the
properties subject of this case. The Amadeo spouses further claimed that the purchase price for the three (3) parcels of land was the
fair market value, and that they had other personal and real properties which may be availed of to answer for their obligations. In
their Counterclaim, they prayed for moral damages of P200,000.00, attorneys fees and expenses of litigation.











51


Petitioner filed its Reply and Answer to Counterclaim154[11] on March 8, 1995.

On September 13, 1995, petitioner filed an Ex Parte Motion for Leave to Serve Summons by Publication155[12] on Spouses
Dy and Chuyaco. However, this was denied in an Order156[13] dated September 14, 1995 on the ground that summons by
publication cannot be availed of in an action in personam.

Accordingly, on March 4, 1996, petitioner filed an Amended Complaint157[14] to include allegations in support of, and a
prayer for, a writ of preliminary attachment. Petitioner then presented evidence in relation thereto, and on February 25, 1997, the
trial court issued an Order158[15] for the issuance of the writ. Upon petitioners ex-parte motion, the trial court likewise directed
the Clerk of Court of the Regional Trial Court of Davao City to designate a Special Sheriff to implement the writ of preliminary
attachment.159[16]

In Orders160[17] dated January 12, 1998 and February 20, 1998, respectively, petitioner was directed to inform the court
whether it still intended to pursue the case. This appears to have been motivated by the fact that no property of the defendants had
been attached as of yet. Petitioner did not comply with the said Orders; consequently, the case was dismissed without prejudice on
June 26, 1998 for failure to prosecute.161[18] By this time, petitioner had already caused the annotation of a notice of lis pendens at
the back of the titles of the properties subject of this case (i.e., TCT Nos. T-27628, T-202868, and T-202869).

On August 3, 1998, petitioner filed a Motion for Reconsideration of the June 26, 1998 Order, alleging that its failure to
notify the trial court of its intention to pursue the case was prompted solely by the difficulty of locating properties against which the
writ of attachment could be enforced. In the interest of justice, the trial court granted the motion.162[19]

Defendant Spouses Amadeo, Dy and Chuyaco then filed an Omnibus Motion to Dismiss and to Annul All the Proceedings
Taken Against the Defendants163[20] on December 11, 1998, in which motion they questioned the jurisdiction of the trial court
over their persons. Petitioner filed its Opposition164[21] thereto on February 15, 1999. Defendants filed their Reply165[22] on
March 10, 1999, while petitioner filed its Rejoinder166[23] on June 9, 1999. Said motion, however, was merely noted without action
in an August 2, 2001 Order167[24] since its notice of hearing was addressed only to the Clerk of Court, viz.:
It appears from the Motion that its Notice of Hearing is not addressed to any of the parties concerned as
otherwise required by Rule 15[,] Section 5 of the 1997 Rules of Civil Procedure. Such being the case, the Motion is
deemed a mere scrap of paper as held in Provident International Resources Corporation vs. Court of Appeals, 259
SCRA 510.

In any event, the record shows that defendants Sps. Amadeo have been duly served with summons as
early as November 11, 1994 per Sheriffs Return of Service dated November 14, 1994, and they are therefore
within the jurisdiction of the Court. However, defendants Spouses Dy and Chuyaco have not been served with
summons as evidenced by Officers Return dated May 24, 1994 and Return of Service dated June 10, 1994,















52

respectively, and so the Court has not yet acquired jurisdiction over them. Since aforesaid Motion is deemed a
scrap of paper, it cannot be construed to manifest a (sic) voluntary appearance on their part.

Wherefore, the Omnibus Motion is noted without action. Let alias summons be issued to defendants-
spouses Dy and Chuyaco. For plaintiffs guidance, it may avail itself of Rule 14*,+ Section 14 on summons by
publication if it so desires, upon proper motion.

SO ORDERED. (underscoring in the original)

Spouses Dy and Chuyaco subsequently filed a Motion to Dismiss (for Lack of Jurisdiction)168[25] on February 18, 2002, in
which motion they essentially accused petitioner of not causing summons to be served upon them and losing interest in the case.
Petitioner filed its Opposition169[26] thereto, and in an April 23, 2002 Order,170[27] the trial court denied the Motion to Dismiss on
account of (i) petitioners Compliance and Manifestation171[28] that it had not lost interest in pursuing the case, and (ii) the Motion
for Leave of Court to Serve Summons by Publication that petitioner filed simultaneously with its Opposition. On April 24, 2002, the
Motion for Leave of Court to Serve Summons by Publication was submitted for resolution.172[29]

Respondent Spouses Dy and Chuyaco next filed a Motion to Dismiss for Failure to Prosecute173[30] on June 17, 2003. The
significant portions of the motion state:
2. That based on the order of this Honorable Court dated April 23, 2003 (sic), the Motion for Leave of
Court to Serve Summons by Publication was submitted for resolution, but the movants-defendants would like to
remind the Honorable Court that a Motion of the same nature was already filed on September 13, 1995 and was
DENIED on September 14, 1995. xxx;

3. That therefore, the order dated August 21, 2001 of this Honorable Court which advised the
complainant to avail of Rule 14 Section 14 of the Rules is contrary to its order dated September 14, 1995;

4. That up to this date, the complainant has not lifted a finger to pursue this case against movants-
defendants, hence, this Motion to Dismiss.

WHEREFORE, premises considered, it is most respectfully prayed that this case be dismissed against the
movants-defendants and to order the deletion of the Notice of Lis Pendens at the back of the subject title (sic).

This was opposed by petitioner, arguing that it had already filed a motion for the service of summons by publication, but the trial
court had yet to act on it.174[31] On July 25, 2003, this Motion was submitted for resolution.175[32]

On November 4, 2003, Spouses Dy and Chuyaco personally, and not through their counsel, filed a Motion for Inhibition
without submitting themselves to the jurisdiction of this Honorable Court,176[33] the relevant portions of which state:
1. That since 1998, the defendants-movants have been moving for the dismissal of this case as far as the
movants are concerned and to nullify the proceedings taken against them since the Honorable Court has not yet
acquired jurisdiction over their persons when the plaintiff presented its evidence against defendants (sic) Sps.
Damian and Tessie Amadeo and even thereafter;

2. That, however only on (sic) August 2, 2001 or after more than three (3) years, that this Honorable Court
denied the said Motion to Dismiss due to technicality (sic) and merely require (sic) the plaintiff to serve the
summons either personally or thru publication;











53

3. That, however in the order of this Honorable Court dated September 14, 1995, it already denied the Ex-
Parte Motion for Leave to Serve Summons by Publication considering that the action herein is in personam,
hence, this order is contrary to its latest order dated August 2, 2001;

4. That another Motion to Dismiss was filed last June 11, 2003177[34] on the ground of lack of interest to
pursue the case but up to this date, the Honorable Court has done nothing that delays (sic) the proceedings to the
prejudice of the defendants-movants;

5. That this continuous delay in the proceedings shows that the Honorable Court may not be competent
enough to further hear this case.

WHEREFORE, premises considered, it is most respectfully prayed for the inhibition of this Honorable Court
(sic) from further hearing this case.

This was submitted for resolution on November 13, 2003.

The motion for inhibition was adopted by their counsel on record, Clarissa Castro, through a Motion to Adopt Motion for
Inhibition and Manifestation, which was filed on February 11, 2004178[35] and noted by the trial court in a February 20, 2004
Order.179[36] On June 23, 2004, however, the trial court (i) denied the motion for inhibition for lack of merit, (ii) ruled that Spouses
Dy and Chuyaco have voluntarily submitted themselves to the jurisdiction of the trial court, and (iii) gave them fifteen (15) days from
receipt of the Order within which to file their respective answers, as follows:
Acting on the Motion for Inhibition, the Court hereby denies the same for lack of legal basis.

In any event, the fact that defendants Wilson Dy and Primo Chuyaco, Jr. signed said Motion themselves
and in behalf of their respective spouses undoubtedly indicates their voluntary appearance in this case and their
submission to the jurisdiction of this Court. The phrase without submitting themselves to the jurisdiction of this
Honorable Court in the heading of said Motion can not qualify the clear import of Rule 14 section 20 which states:

Voluntary appearance. The defendant's voluntary appearance in the action shall be
equivalent to service of summons. The inclusion in a motion to dismiss of other grounds aside
from lack of jurisdiction over the person of the defendant shall not be deemed a voluntary
appearance. (23a)

It may be noted that subject Motion for Inhibition is not a Motion to Dismiss.

Wherefore, defendants-spouses Dy and Chuyaco are given fifteen (15) days from receipt hereof within
which to file their respective answers.

All pending incidents are deemed resolved.180[37]

Unsatisfied with the Order, respondent Spouses Dy and Chuyaco filed a Petition for Certiorari under Rule 65181[38] before
the CA, alleging that the public respondent committed grave abuse of discretion when he considered the Motion to Inhibit (without
submitting to the jurisdiction of the Honorable Court) which they had filed to question his impartiality and competence due to the
delay in resolving the Motion to Dismiss based on lack of jurisdiction, as voluntary appearance, and wherein he required the
respondents to file their Answer within the required period. The CA granted the petition in this wise:
The old provision under Section 23, Rule 14 of the Revised Rules of Court provided that:

Section 23. What is equivalent to service. The defendants voluntary appearance in the
action shall be equivalent to service.

Under Section 20, Rule 14 of the 1997 Rules of Civil Procedure, the provision now reads as follows:

Sec. 20. Voluntary Appearance. The defendant's voluntary appearance in the action
shall be equivalent to service of summons. The inclusion in a motion to dismiss of other grounds
aside from lack of jurisdiction over the person of the defendant shall not be deemed a voluntary
appearance.







54

What remains the same, carry (sic) over from the old doctrine, is that the issue of jurisdiction must be
raised seasonably.

But everything else changed.

What changed is that: if a motion is filed, whatever kind it is, it need no longer be for the sole and
separate purpose of objecting to the jurisdiction of the court because the motion may raise myriad issues in that
one motion of special appearance as long as the objection to the jurisdiction of the court is included. xxx

What necessarily changed also is that the medium of special appearance is no longer restricted to a
motion to dismiss because one could now file any type of motion provided you included the issue of lack of
jurisdiction due to defective service of summons.

Thus, in this case at bar, the two motions to dismiss and the motion to inhibit may be treated as
special appearance since they all included the issue of lack of jurisdiction due to non-service of summons. They
did not constitute as submitting the movant to the jurisdiction of the court.

xxx xxx xxx

There being no proper service of summons on petitioners and there being no voluntary appearance by
petitioners, the trial court did not acquire jurisdiction over the persons of the defendants, the herein petitioners.
Any proceeding undertaken by the trial court against them would consequently be null and void.

WHEREFORE, premises considered, the assailed June 23, 2004 Order of the Regional Trial Court of Makati
City, Branch 133, is hereby DECLARED NULL AND VOID as against herein petitioners. The April 22, 1994 complaint
filed by Philippine Commercial International Bank is hereby DISMISSED as against herein petitioners DY and
CHUYACO only, no jurisdiction over their persons having been acquired.

SO ORDERED.182[39]

Petitioners motion for reconsideration was denied by the appellate court.183[40]

Hence this appeal, where petitioner argues that:
I.

THE COURT OF APPEALS ERRED IN DECLARING THE JUNE 23, 2004 ORDER OF THE TRIAL COURT NULL AND VOID
AND IN DISMISSING THE COMPLAINT AS AGAINST RESPONDENTS DY AND CHUYACO AND RENDERING THE
QUESTIONED DECISION AND RESOLUTION IN A WAY THAT IS NOT IN ACCORD WITH THE FACTS AND APPLICABLE
LAWS AND JURISPRUDENCE, WHICH HOLD THAT BY THEIR SUCCESSIVE FILING OF MOTIONS WITH THE
CONVENIENT CAVEAT THAT THEY ARE NOT SUBMITTING TO THE JURISDICTION OF THE COURT A QUO, THEY HAVE
VOLUNTARILY SUBMITTED TO THE TRIAL COURTS JURISDICTION.

A. THE HONORABLE COURT OF APPEALS ERRED WHEN IT DISMISSED THE CASE AS AGAINST DY AND CHUYACO.

B. THE SPOUSES DY AND CHUYACO HAVE LOST THEIR RIGHT TO QUESTION THE TRIAL COURTS JURISDICTION
OVER THEM WHEN THEY DID NOT RAISE THE DENIAL OF THEIR APRIL 22, 2002 MOTION TO DISMISS TO THE
COURT OF APPEALS.

C. THE SPOUSES DY AND CHUYACO HAVE MISERABLY FAILED TO SHOW BASIS IN SEEKING THE TRIAL COURTS
JURISDICTION.

D. THE SPOUSES DY AND CHUYACO HAVE VOLUNTARILY SUBMITTED THEMSELVES TO THE TRIAL COURTS
JURISDICTION.

II.

THE COURT OF APPEALS ERRED IN A WAY THAT IS NOT IN ACCORD WITH APPLICABLE LAWS AND JURISPRUDENCE
IN NOT DISMISSING THE PETITION FOR CERTIORARI NOTWITHSTANDING THAT THE DY AND CHUYACO SPOUSES
FAILED TO SHOW THAT THERE IS NO APPEAL, OR ANY PLAIN, SPEEDY AND ADEQUATE REMEDY IN THE ORDINARY
COURSE OF LAW AVAILABLE TO THEM.184[41]





55

Simply stated, the issues are: (1) Was the petition for certiorari prematurely filed? (2) Has there been voluntary appearance
on the part of respondent Spouses Dy and Chuyaco as to confer the trial court with jurisdiction over their persons? and (3) Did the
trial court correctly deny the motion for inhibition?

We shall discuss these issues in seriatim.

First Issue: Propriety of Certiorari

Petitioner contends that respondents subverted the settled rule that a Petition for Certiorari under Rule 65 is available only
when there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law.185[42] It asserts that
respondents failure to move for reconsideration of the June 23, 2004 Order of the trial court, denying the latters motion f or
inhibition, provides sufficient cause for the outright dismissal of the instant petition.

We disagree.

Petitioner is correct that a motion for reconsideration, as a general rule, must have first been filed before the tribunal,
board, or officer against whom the writ of certiorari is sought.186[43] This is intended to afford the latter an opportunity to correct
any actual or fancied error attributed to it.187[44] However, there are several exceptions where the special civil action for certiorari
will lie even without the filing of a motion for reconsideration, namely:

a. where the order is a patent nullity, as where the court a quo has no jurisdiction;
b. where the questions raised in the certiorari proceeding have been duly raised and passed upon by the lower
court, or are the same as those raised and passed upon in the lower court;
c. where there is an urgent necessity for the resolution of the question and any further delay would prejudice the
interests of the government or the petitioner, or the subject matter of the action is perishable;
d. where, under the circumstances, a motion for reconsideration would be useless;
e. where petitioner was deprived of due process and there is extreme urgency for relief;
f. where, in a criminal case, relief from an order of arrest is urgent and the granting of such relief by the trial court
is improbable;
g. where the proceedings in the lower court are a nullity for lack of due process;
h. where the proceedings were ex parte or in which the petitioner had no opportunity to object; and
i. where the issue raised is one purely of law or where public interest is involved.188[45]

Otherwise stated, a motion for reconsideration may be dispensed with only if there are concrete, compelling, and valid reasons for
doing so.189[46]

We find that respondents non-filing of a motion for reconsideration is justifiable under the circumstances of this case. It is
not disputed that the trial court, rightly or wrongly, considered them to have voluntarily submitted to its jurisdiction by virtue of
their motion for inhibition. Thus, respondents apprehension that the motion for reconsideration might be construed as further
manifesting their voluntary appearance is certainly well-grounded. They may not, therefore, be faulted for having resorted
immediately to a special civil action for certiorari.

Second Issue: Voluntary Appearance

Preliminarily, jurisdiction over the defendant in a civil case is acquired either by the coercive power of legal processes
exerted over his person, or his voluntary appearance in court.190[47] As a general proposition, one who seeks an affirmative relief is
deemed to have submitted to the jurisdiction of the court.191[48] It is by reason of this rule that we have had occasion to declare
that the filing of motions to admit answer, for additional time to file answer, for reconsideration of a default judgment, and to lift
order of default with motion for reconsideration, is considered voluntary submission to the courts jurisdiction.192[49] This,









56

however, is tempered by the concept of conditional appearance, such that a party who makes a special appearance to challenge,
among others, the courts jurisdiction over his person cannot be considered to have submitted to its authority.193[50]

Prescinding from the foregoing, it is thus clear that:

(1) Special appearance operates as an exception to the general rule on voluntary appearance;
(2) Accordingly, objections to the jurisdiction of the court over the person of the defendant must be explicitly made, i.e., set
forth in an unequivocal manner; and
(3) Failure to do so constitutes voluntary submission to the jurisdiction of the court, especially in instances where a pleading
or motion seeking affirmative relief is filed and submitted to the court for resolution.

Measured against these standards, it is readily apparent that respondents have acquiesced to the jurisdiction of the trial
court as early as June 17, 2003, when they filed their Motion to Dismiss for Failure to Prosecute. Significantly, the motion did not
categorically and expressly raise the jurisdiction of the court over their persons as an issue. It merely (i) reminded the court of its
purportedly conflicting Orders in respect of summons by publication, (ii) alleged that because petitioner has not lifted a finger to
pursue this case against movants-defendants, the case may be dismissed for failure to prosecute, and (iii) prayed additionally for
the deletion of the Notice of Lis Pendens indicated at the back of the transfer certificates of title covering the subject properties. We
note, furthermore, that the motion failed to qualify the capacity in which respondents were appearing and seeking recourse.194[51]
It is in this light that the Courts pronouncement in Busuego v. Court of Appeals195[52] finds cogent application:
A voluntary appearance is a waiver of the necessity of a formal notice. An appearance in whatever form,
without explicitly objecting to the jurisdiction of the court over the person, is a submission to the jurisdiction of the
court over the person. While the formal method of entering an appearance in a cause pending in the courts is to
deliver to the clerk a written direction ordering him to enter the appearance of the person who subscribes it, an
appearance may be made by simply filing a formal motion, or plea or answer. This formal method of appearance is
not necessary. He may appear without such formal appearance and thus submit himself to the jurisdiction of the
court. He may appear by presenting a motion, for example, and unless by such appearance he specifically objects to
the jurisdiction of the court, he thereby gives his assent to the jurisdiction of the court over his person.196[53]
(emphasis supplied)

Besides, any lingering doubts on the issue of voluntary appearance dissipate when the respondents motion for inhibition is
considered. This motion seeks a sole relief: inhibition of Judge Napoleon Inoturan from further hearing the case. Evidently, by
seeking affirmative relief other than dismissal of the case, respondents manifested their voluntary submission to the courts
jurisdiction. It is well-settled that the active participation of a party in the proceedings is tantamount to an invocation of the courts
jurisdiction and a willingness to abide by the resolution of the case, and will bar said party from later on impugning the courts
jurisdiction.197[54]

To be sure, the convenient caveat in the title of the motion for inhibition (i.e., without submitting themselves to the
jurisdiction of this Honorable Court) does not detract from this conclusion. It would suffice to say that the allegations in a pleading
or motion are determinative of its nature; the designation or caption thereof is not controlling.198[55] Furthermore, no amount of
caveat can change the fact that respondents tellingly signed the motion to inhibit in their own behalf and not through counsel, let
alone through a counsel making a special appearance.

Third Issue: Inhibition

Respondents argue that the trial courts so-called continuous delay in the proceedings is indicative of the fact that it is
incompetent to continue hearing the case. Respondents therefore assert that the trial court acted with grave abuse of discretion
amounting to lack or excess of jurisdiction when it denied their motion to inhibit and required them to file their Answer.

We are not convinced.

Under the first paragraph of Section 1, Rule 137 of the Rules of Court, a judge or judicial officer shall be mandatorily
disqualified to sit in any case in which:







57


(a) he, or his wife or child, is pecuniarily interested as heir, legatee, creditor or otherwise; or
(b) he is related to either party within the sixth degree of consanguinity or affinity, or to counsel within the fourth degree,
computed according to the rules of civil law; or
(c) he has been executor, administrator, guardian, trustee or counsel; or
(d) he has presided in any inferior court when his ruling or decision is the subject of review, without the written consent of
all parties in interest, signed by them and entered upon the record.199[56]

Paragraph two of the same provision meanwhile provides for the rule on voluntary inhibition and states: *a+ judge may, in
the exercise of his sound discretion, disqualify himself from sitting in a case, for just or valid reasons other than those mentioned
above. That discretion is a matter of conscience and is addressed primarily to the judges sense of fairness and justice.200[57] We
have elucidated on this point in Pimentel v. Salanga,201[58] as follows:
A judge may not be legally prohibited from sitting in a litigation. But when suggestion is made of record
that he might be induced to act in favor of one party or with bias or prejudice against a litigant arising out of
circumstances reasonably capable of inciting such a state of mind, he should conduct a careful self-examination.
He should exercise his discretion in a way that the people's faith in the courts of justice is not impaired. A salutary
norm is that he reflect on the probability that a losing party might nurture at the back of his mind the thought that
the judge had unmeritoriously tilted the scales of justice against him. That passion on the part of a judge may be
generated because of serious charges of misconduct against him by a suitor or his counsel, is not altogether
remote. He is a man, subject to the frailties of other men. He should, therefore, exercise great care and caution
before making up his mind to act in or withdraw from a suit where that party or counsel is involved. He could in
good grace inhibit himself where that case could be heard by another judge and where no appreciable prejudice
would be occasioned to others involved therein. On the result of his decision to sit or not to sit may depend to a
great extent the all-important confidence in the impartiality of the judiciary. If after reflection he should resolve to
voluntarily desist from sitting in a case where his motives or fairness might be seriously impugned, his action is to
be interpreted as giving meaning and substances to the second paragraph of Section 1, Rule 137. He serves the
cause of the law who forestalls miscarriage of justice.

The present case not being covered by the rule on mandatory inhibition, the issue thus turns on whether Judge Napoleon
Inoturan should have voluntarily inhibited himself.

At the outset, we underscore that while a party has the right to seek the inhibition or disqualification of a judge who does
not appear to be wholly free, disinterested, impartial and independent in handling the case, this right must be weighed with the
duty of a judge to decide cases without fear of repression.202[59] Respondents consequently have no vested right to the issuance of
an Order granting the motion to inhibit, given its discretionary nature.203[60]

However, the second paragraph of Rule 137, Section 1 does not give judges unfettered discretion to decide whether to
desist from hearing a case.204[61] The inhibition must be for just and valid causes, and in this regard, we have noted that the mere
imputation of bias or partiality is not enough ground for inhibition, especially when the charge is without basis.205[62] This Court
has to be shown acts or conduct clearly indicative of arbitrariness or prejudice before it can brand them with the stigma of bias or
partiality.206[63] Moreover, extrinsic evidence is required to establish bias, bad faith, malice or corrupt purpose, in addition to
palpable error which may be inferred from the decision or order itself.207[64] The only exception to the rule is when the error is so
gross and patent as to produce an ineluctable inference of bad faith or malice.208[65]












58

We do not find any abuse of discretion by the trial court in denying respondents motion to inhibit. Our pronouncement in
Webb, et al. v. People of the Philippines, et al.209[66] is apropos:
A perusal of the records will reveal that petitioners failed to adduce any extrinsic evidence to prove that
respondent judge was motivated by malice or bad faith in issuing the assailed rulings. Petitioners simply lean on
the alleged series of adverse rulings of the respondent judge which they characterized as palpable errors. This is not
enough. We note that respondent judge's rulings resolving the various motions filed by petitioners were all made
after considering the arguments raised by all the parties. xxx

xxx xxx xxx

We hasten to stress that a party aggrieved by erroneous interlocutory rulings in the course of a trial is not
without remedy. The range of remedy is provided in our Rules of Court and we need not make an elongated
discourse on the subject. But certainly, the remedy for erroneous rulings, absent any extrinsic evidence of malice or
bad faith, is not the outright disqualification of the judge. For there is yet to come a judge with the omniscience to
issue rulings that are always infallible. The courts will close shop if we disqualify judges who err for we all err.
(emphasis supplied)

Truth be told, respondents are not entirely blameless for any perceived delay in the resolution of the various incidents of
the case. For instance, they make much of the fact that close to three years passed before their Omnibus Motion to Dismiss and to
Annul All the Proceedings Taken Against the Defendants, filed on December 11, 1998, was noted by the trial court. But the fact
remains that the said motion, not having a notice of hearing addressed to the adverse party, is legally a mere scrap of
paper.210[67] It presents no question which merits the attention and consideration of the court, and is not entitled to judicial
cognizance.211[68]

Considering the foregoing, we rule that respondents accusations of delay, incompetence, and bias on the part of the trial
court are unfounded. Hence, they are not entitled to the inhibition of Judge Inoturan as a relief.

IN VIEW WHEREOF, the Petition is hereby GRANTED. The Decision dated July 18, 2005 of the Court of Appeals and its
Resolution dated January 10, 2006 are hereby REVERSED and SET ASIDE, and another in their stead is hereby rendered ORDERING
respondent Spouses Dy and Chuyaco to answer the Complaint in Civil Case No. 94-1585 within fifteen (15) days from receipt of this
Decision.

The trial court is directed to proceed hearing the case, and to resolve the same with dispatch.

No costs.

SO ORDERED.