NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURG, PA/AMERICAN

INTERNATIONAL UNDERWRITER (PHIL.) INC., petitioners,

vs.
STOLT-NIELSEN PHILIPPINES, INC. and COURT OF APPEALS, respondents.
Fajardo Law Offices for petitioners.
Sycip, Salazar, Hernandez & Gatmaitan for Stolt-Nielsen Phil., Inc.
MELENCIO-HERRERA, J.:
We uphold the ruling of respondent Court of Appeals that the claim or dispute herein is arbitrable.
On 9 January 1985, United Coconut Chemicals, Inc. (hereinafter referred to as SHIPPER) shipped 404.774
metric tons of distilled C6-C18 fatty acid on board MT "Stolt Sceptre," a tanker owned by Stolt-Nielsen
Philippines Inc. (hereinafter referred to as CARRIER), from Bauan, Batangas, Philippines, consigned to
"Nieuwe Matex" at Rotterdam, Netherlands, covered by Tanker Bill of Lading BL No. BAT-1. The shipment
was insured under a marine cargo policy with Petitioner National Union Fire Insurance Company of Pittsburg
(hereinafter referred to as INSURER), a non-life American insurance corporation, through its settling agent in
the Philippines, the American International Underwriters (Philippines), Inc., the other petitioner herein.
It appears that the Bill of Lading issued by the CARRIER contained a general statement of incorporation of the
terms of a Charter Party between the SHIPPER and Parcel Tankers, Inc., entered into in Greenwich,
Connecticut, U.S.A.
Upon receipt of the cargo by the CONSIGNEE in the Netherlands, it was found to be discolored and totally
contaminated. The claim filed by the SHIPPER-ASSURED with the CARRIER having been denied, the
INSURER indemnified the SHIPPER pursuant to the stipulation in the marine cargo policy covering said
shipment.
On 21 April 1986, as subrogee of the SHIPPER-ASSURED, the INSURER filed suit against the CARRIER,
before the Regional Trial Court of Makati, Branch 58 (RTC), for recovery of the sum of P1,619,469.21, with
interest, representing the amount the INSURER had paid the SHIPPER-ASSURED. The CARRIER moved to
dismiss/suspend the proceedings on the ground that the RTC had no jurisdiction over the claim the same being
an arbitrable one; that as subrogee of the SHIPPER-ASSURED, the INSURER is subject to the provisions of
the Bill of Lading, which includes a provision that the shipment is carried under and pursuant to the terms of the
Charter Party, dated 21 December 1984, between the SHIPPER-ASSURED and Parcel Tankers, Inc. providing
for arbitration.
The INSURER opposed the dismissal/suspension of the proceedings on the ground that it was not legally bound
to submit the claim for arbitration inasmuch as the arbitration clause provided in the Charter Party was not
incorporated into the Bill of Lading, and that the arbitration clause is void for being unreasonable and unjust.
On 28 July 1987, the RTC 1 denied the Motion, but subsequently reconsidered its action on 19 November 1987,
and deferred resolution on the Motion to Dismiss/Suspend Proceedings until trial on the merits "since the
ground alleged in said motion does not appear to be indubitable."
The CARRIER then resorted to a Petition for Certiorari and Prohibition with prayer for Preliminary Injunction
and/or Temporary Restraining Order before the respondent Appellate Court seeking the annulment of the 19
November 1987 RTC Order. On 12 April 1989, the respondent Court 2 promulgated the Decision now under
review, with the following dispositive tenor:
WHEREFORE', the order of respondent Judge dated November 19, 1987 deferring resolution on petitioner
Stolt-Nielsen's Motion to Dismiss/Suspend Proceedings is hereby SET ASIDE; private respondent NUFIC
(the INSURER) is ordered to refer its claims for arbitration; and respondent Judge is directed to suspend the
proceedings in Civil case No. 13498 pending the return of the corresponding arbitral award.
On 21 August 1989, we resolved to give due course and required the parties to submit their respective
Memoranda, which they have done, the last filed having been Noted on 23 October 1989.
First, herein petitioner-INSURER alleges that the RTC Order deferring resolution of the CARRIER's Motion to
Dismiss constitutes an interlocutory order, which can not be the subject of a special civil action on certiorari
and prohibition.
Generally, this would be true. However, the case before us falls under the exception. While a Court Order
deferring action on a motion to dismiss until the trial is interlocutory and cannot be challenged until final

judgment, still, where it clearly appears that the trial Judge or Court is proceeding in excess or outside of its
jurisdiction, the remedy of prohibition would lie since it would be useless and a waste of time to go ahead with
the proceedings (University of Sto. Tomas vs. Villanueva, 106 Phil. 439, [1959] citing Philippine International
Fair, Inc., et al., vs. Ibanez, et al., 94 Phil. 424 [1954]; Enrique vs. Macadaeg, et al., 84 Phil. 674 [1949]; San
Beda College vs. CIR, 97 Phil. 787 [1955]). Even a cursory reading of the subject Bill of Lading, in relation to
the Charter Party, reveals the Court's patent lack of jurisdiction to hear and decide the claim.
We proceed to the second but more crucial issue: Are the terms of the Charter Party, particularly the provision
on arbitration, binding on the INSURER?
The INSURER postulates that it cannot be bound by the Charter Party because, as insurer, it is subrogee only
with respect to the Bill of Lading; that only the Bill of Lading should regulate the relation among the
INSURER, the holder of the Bill of Lading, and the CARRIER; and that in order to bind it, the arbitral clause in
the Charter Party should have been incorporated into the Bill of Lading.
We rule against that submission.
The pertinent portion of the Bill of Lading in issue provides in part:
This shipment is carried under and pursuant to the terms of the Charter dated December 21st 1984 at
Greenwich, Connecticut, U.S.A. between Parcel Tankers. Inc. and United Coconut Chemicals, Ind. as
Charterer and all the terms whatsoever of the said Charter except the rate and payment of freight specified
therein apply to and govern the rights of the parties concerned in this shipment. Copy of the Charter may be
obtained from the Shipper or Charterer. (Emphasis supplied)
While the provision on arbitration in the Charter Party reads:
H. Special Provisions.
xxx
xxx
xxx
4. Arbitration. Any dispute arising from the making, performance or termination of this Charter Party shall
be settled in New York, Owner and Charterer each appointing an arbitrator, who shall be a merchant, broker
or individual experienced in the shipping business; the two thus chosen, if they cannot agree, shall
nominate a third arbitrator who shall be an admiralty lawyer. Such arbitration shall be conducted in
conformity with the provisions and procedure of the United States arbitration act, and a judgment of the
court shall be entered upon any award made by said arbitrator. Nothing in this clause shall be deemed to
waive Owner's right to lien on the cargo for freight, deed of freight, or demurrage.
Clearly, the Bill of Lading incorporates by reference the terms of the Charter Party. It is settled law that the
charter may be made part of the contract under which the goods are carried by an appropriate reference in the
Bill of Lading (Wharton Poor, Charter Parties and Ocean Bills of Lading (5th ed., p. 71). This should include
the provision on arbitration even without a specific stipulation to that effect. The entire contract must be read
together and its clauses interpreted in relation to one another and not by parts. Moreover, in cases where a Bill
of Lading has been issued by a carrier covering goods shipped aboard a vessel under a charter party, and the
charterer is also the holder of the bill of lading, "the bill of lading operates as the receipt for the goods, and as
document of title passing the property of the goods, but not as varying the contract between the charterer and
the shipowner" (In re Marine Sulphur Queen, 460 F 2d 89, 103 [2d Cir. 1972]; Ministry of Commerce vs.
Marine Tankers Corp. 194 F. Supp 161, 163 [S.D.N.Y. 1960]; Greenstone Shipping Co., S.A. vs. Transworld
Oil, Ltd., 588 F Supp [D.El. 1984]). The Bill of Lading becomes, therefore, only a receipt and not the contract
of carriage in a charter of the entire vessel, for the contract is the Charter Party (Shell Oil Co. vs. M/T Gilda,
790 F 2d 1209, 1212 [5th Cir. 1986]; Home Insurance Co. vs. American Steamship Agencies, Inc., G.R. No. L25599, 4 April 1968, 23 SCRA 24), and is the law between the parties who are bound by its terms and condition
provided that these are not contrary to law, morals, good customs, public order and public policy (Article 1306,
Civil Code).
As the respondent Appellate Court found, the INSURER "cannot feign ignorance of the arbitration clause since
it was already charged with notice of the existence of the charter party due to an appropriate reference thereof in
the bill of lading and, by the exercise of ordinary diligence, it could have easily obtained a copy thereof either
from the shipper or the charterer.
We hold, therefore, that the INSURER cannot avoid the binding effect of the arbitration clause. By subrogation,
it became privy to the Charter Party as fully as the SHIPPER before the latter was indemnified, because as
subrogee it stepped into the shoes of the SHIPPER-ASSURED and is subrogated merely to the latter's rights. It

can recover only the amount that is recoverable by the assured. And since the right of action of the SHIPPERASSURED is governed by the provisions of the Bill of Lading, which includes by reference the terms of the
Charter Party, necessarily, a suit by the INSURER is subject to the same agreements (see St. Paul Fire and
Marine Insurance Co. vs. Macondray, G.R. No. L-27796, 25 March 1976, 70 SCRA 122).
Stated otherwise, as the subrogee of the SHIPPER, the INSURER is contractually bound by the terms of the
Charter party.1wphi1 Any claim of inconvenience or additional expense on its part should not render the
arbitration clause unenforceable.
Arbitration, as an alternative mode of settling disputes, has long been recognized and accepted in our
jurisdiction (Chapter 2, Title XIV, Book IV, Civil Code). Republic Act No. 876 (The Arbitration Law) 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. Thus, it pertinently provides:
1. Each Contracting State shall recognize an agreement in writing under which the parties undertake to
submit to arbitration all or any differences which have arisen or which may arise between them in respect of
a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement
by arbitration.
2. The term "agreement in writing" shall include an arbitral clause in a contract or an arbitration agreement,
signed by the parties or contained in an exchange of letters or telegrams.
3. The court of a Contracting State, when seized of an action in a matter in respect of which the parties have
made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the
parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of
being performed.
It has not been shown that the arbitral clause in question is null and void, inoperative, or incapable of being
performed. Nor has any conflict been pointed out between the Charter Party and the Bill of Lading.
In fine, referral to arbitration in New York pursuant to the arbitration clause, and suspension of the proceedings
in Civil Case No. 13498 below, pending the return of the arbitral award, is, indeed called for.
WHEREFORE, finding no reversible error in respondent Appellate Court's 12 April 1989 Decision, the instant
Petition for Review on certiorari is DENIED and the said judgment is hereby AFFIRMED. Costs against
petitioners.
SO ORDERED.
PUROMINES, INC., Petitioner, vs. COURT OF APPEALS and PHILIPP BROTHERS OCEANIC, INC.,
Respondents.
Fajardo Law Offices for petitioner.chanrobles virtual law library
Del Rosario & Del Rosario for private respondent.
NOCON, J.:
This is a special civil action for certiorari and prohibition to annul and set aside the Decision of the respondent
Court of Appeals dated November 16, 1989 1reversing the order of the trial court and dismissing petitioner's
complaint in Civil Case No. 89-47403, entitled Puromines, Inc. v. Maritime Factors, Inc. and Philipp Brothers
Oceanic, Inc.chanroblesvirtualawlibrarychanrobles virtual law library
Culled from the records of this case, the facts show that petitioner, Puromines, Inc. (Puromines for brevity) and
Makati Agro Trading, Inc. (not a party in this case) entered into a contract with private respondent Philipp
Brothers Oceanic, Inc. for the sale of prilled Urea in bulk. The Sales Contract No. S151.8.01018 provided,
among others an arbitration clause which states, thus:
9. Arbitration
Any disputes arising under this contract shall be settled by arbitration in London in accordance with the
Arbitration Act 1950 and any statutory amendment or modification thereof. Each party is to appoint an
Arbitrator, and should they be unable to agree, the decision of an Umpire appointed by them to be final. The
Arbitrators and Umpire are all to be commercial men and resident in London. This submission may be made a

rule of the High Court of Justice in England by either party. 2chanrobles virtual law library
On or about May 22, 1988, the vessel M/V "Liliana Dimitrova" loaded on board at Yuzhny, USSR a shipment of
15,500 metric tons prilled Urea in bulk complete and in good order and condition for transport to Iloilo and
Manila, to be delivered to petitioner. Three bills of lading were issued by the ship-agent in the Philippines,
Maritime Factors Inc., namely: Bill of Lading No. 1 dated May 12, 1988 covering 10,000 metric tons for
discharge in Manila; Bill of Lading No. 2 of even date covering 4,000 metric tons for unloading in Iloilo City;
and Bill of Lading No. 3, also dated May 12, 1988, covering 1,500 metric tons likewise for discharge in
Manila.chanroblesvirtualawlibrarychanrobles virtual law library
The shipment covered by Bill of Lading No. 2 was discharged in Iloilo City complete and in good order and
condition. However, the shipments covered by Bill of Lading Nos. 1 and 3 were discharged in Manila in bad
order and condition, caked, hardened and lumpy, discolored and contaminated with rust and dirt. Damages were
valued at P683,056.29 including additional discharging expenses.chanroblesvirtualawlibrarychanrobles virtual
law library
Consequently, petitioner filed a complaint 3with the trial court 4for breach of contract of carriage against
Maritime Factors, Inc. (which was not included as respondent in this petition) as ship-agent in the Philippines
for the owners of the vessel MV "Liliana Dimitrova," while private respondent, Philipp Brothers Oceanic, Inc.,
was impleaded as charterer of the said vessel and proper party to accord petitioner complete relief. Maritime
Factors, Inc. filed its Answer 5to the complaint, while private respondent filed a motion to dismiss, dated
February 9, 1989, on the grounds that the complaint states no cause of action; that it was prematurely filed; and
that petitioner should comply with the arbitration clause in the sales contract. 6chanrobles virtual law library
The motion to dismiss was opposed by petitioner contending the inapplicability of the arbitration clause
inasmuch as the cause of action did not arise from a violation of the terms of the sales contract but rather for
claims of cargo damages where there is no arbitration agreement. On April 26, 1989, the trial court denied
respondent's motion to dismiss in this wise:
The sales contract in question states in part:
Any disputes arising under this contract shall be settled by arbitration . . . (emphasis supplied)
A perusal of the facts alleged in the complaint upon which the question of sufficiency of the cause of action is to
be determined shows quite clearly that the cause of action of the complaint arose from a breach of contract of
carriage by the vessel chartered by the defendant Philipp Brothers Oceanic, Inc. Thus, the aforementioned
arbitration clause cannot apply to the dispute in the present action which concerns plaintiff's claim for cargo
loss/damage arising from breach of contract of carriage.chanroblesvirtualawlibrarychanrobles virtual law
library
That the defendant is not the ship owner or common carrier and therefore plaintiff does not have a legal right
against it since every action must be brought against the real party in interest has no merit either for by the
allegations in the complaint the defendant herein has been impleaded as charterer of the vessel, hence, a proper
party. 7chanrobles virtual law library
Elevating the matter to the Court of Appeals, petitioner's complaint was dismissed. The appellate court found
that the arbitration provision in the sales contract and/or the bills of lading is applicable in the present case. Said
the court:
An examination of the sales contract No. S151.8.01018 shows that it is broad enough to include the claim for
damages
arising
from
the
carriage
and
delivery
of
the
goods
subject-matter
thereof.chanroblesvirtualawlibrarychanrobles virtual law library
It is also noted that the bills of lading attached as Annexes "A", "B" and "C" to the complaint state, in part, "any
dispute arising under this Bill of Lading shall be referred to arbitration of the Maritime Arbitration Commission
at the USSR Chamber of Commerce and Industry, 6 Kuibyshevskaia Str., Moscow, USSR, in accordance with
the rules of procedure of said commission."chanrobles virtual law library
Considering that the private respondent was one of the signatories to the sales contract . . . all parties are obliged
to respect the terms and conditions of the said sales contract, including the provision thereof on "arbitration."
Hence, this petition.chanroblesvirtualawlibrarychanrobles virtual law library
The issue raised is: Whether the phrase "any dispute arising under this contract" in the arbitration clause of the
sales contract covers a cargo claim against the vessel (owners and/or charterers) for breach of contract of
carriage.chanroblesvirtualawlibrarychanrobles virtual law library

Petitioner states in its complaint that Philipp Brothers "was the charterer of the vessel MV "Liliana Dimitrova"
which transported the shipment from Yuzhny USSR to Manila." Petitioner further alleged that the caking and
hardening, wetting and melting, and contamination by rust and dirt of the damaged portions of the shipment
were due to the improper ventilation and inadequate storage facilities of the vessel; that the wetting of the cargo
was attributable to the failure of the crew to close the hatches before and when it rained while the shipment was
being unloaded in the Port of Manila; and that as a direct and natural consequence of theunseaworthiness and
negligence of the vessel (sic), petitioner suffered damages in the total amount of P683,056.29 Philippine
currency."8(emphasis supplied).chanroblesvirtualawlibrarychanrobles virtual law library
Moreover, in its Opposition to the Motion to Dismiss, petitioner said that "[t]he cause of action of the complaint
arose from breach of contract of carriage by the vessel that was chartered by defendant Philipp
Brothers."9chanrobles virtual law library
In the present petition, petitioner argues that the sales contract does not include the contract of carriage which is
a different contract entered into by the carrier with the cargo owners. That it was an error for the respondent
court to touch upon the arbitration provision of the bills of lading in its decision inasmuch as the same was not
raised as an issue by private respondent who was not a party in the bills of lading (emphasis Ours). Petitioner
contradicts itself.chanroblesvirtualawlibrarychanrobles virtual law library
We agree with the court a quo that the sales contract is comprehensive enough to include claims for damages
arising from carriage and delivery of the goods. As a general rule, the seller has the obligation to transmit the
goods to the buyer, and concomitant thereto, the contracting of a carrier to deliver the same. Art. 1523 of the
Civil Code provides:
Art. 1523. Where in pursuance of a contract of sale, the seller is authorized or required to send the goods to the
buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to
the buyer is deemed to be a delivery of the goods to the buyer, except in the cases provided for in article 1503,
first, second and third paragraphs, or unless a contrary intent appears.chanroblesvirtualawlibrarychanrobles
virtual law library
Unless otherwise authorized by the buyer, the seller must make such contract with the carrier on behalf of the
buyer as may be reasonable, having regard to the nature of the goods and the other circumstances of the case. If
the seller omit so to do, and the goods are lost or damaged in course of transit, the buyer may decline to treat the
delivery to the carrier as a delivery to himself, or may hold the seller responsible in damages.
xxx xxx xxx
The disputed sales contract provides for conditions relative to the delivery of goods, such as date of shipment,
demurrage, weight as determined by the bill of lading at load port and more particularly the following
provisions:
3. Intention is to ship in one bottom, approximately 5,000 metric tons to Puromines and approximately 15,000
metric tons to Makati Agro. However, Sellers to have right to ship material as partial shipment or co-shipment
in addition to above. In the event of co-shipment to a third party within Philippines same to be discussed with
and acceptable to both Puromines and Makati Agro.chanroblesvirtualawlibrarychanrobles virtual law library
4. Sellers to appoint neutral survey for Seller's account to conduct initial draft survey at first discharge port and
final survey at last discharge port. Surveyors results to be binding and final. In the event draft survey results
show a quantity less than the combined Bills of Lading quantity for both Puromines and Makati Agro, Sellers to
refund the difference. In the event that draft survey results show a quantity in excess of combined Bills of
Lading quantity of both Puromines and Makati Agro then Buyers to refund the
difference.chanroblesvirtualawlibrarychanrobles virtual law library
5. It is expressly and mutually agreed that neither Sellers nor vessel's Owners have any liability to separate
cargo or to deliver cargo separately or to deliver minimum/maximum quantities stated on individual Bills of
Lading. At each port vessel is to discharge in accordance with Buyers local requirements and it is Buyer's
responsibility to separate individual quantities required by each of them at each port during or after discharge.
As argued by respondent on its motion to dismiss, "the (petitioner) derives his right to the cargo from the bill of
lading which is the contract of affreightment together with the sales contract. Consequently, the (petitioner) is
bound by the provisions and terms of said bill of lading and of the arbitration clause incorporated in the sales
contract."chanrobles virtual law library
Assuming arguendo that the liability of respondent is not based on the sales contract, but rather on the contract

of carriage, being the charterer of the vessel MV "Liliana Dimitrova," it would, therefore, be material to show
what kind of charter party the respondent had with the shipowner to determine respondent's
liability.chanroblesvirtualawlibrarychanrobles virtual law library
American jurisprudence defines charter party as a contract by which an entire ship or some principal part
thereof is let by the owner to another person for a specified time or use. 10 Charter or charter parties are of two
kinds. Charter of demise or bareboat and contracts of affreightment.chanroblesvirtualawlibrarychanrobles
virtual law library
Under the demise or bareboat charter of the vessel, the charterer will generally be considered as owner for the
voyage or service stipulated. The charterer mans the vessel with his own people and becomes, in effect, the
owner pro hac vice, subject to liability to others for damages caused by negligence. 11 To create a demise the
owner of a vessel must completely and exclusively relinquish possession, command and navigation thereof to
the charterer; anything short of such a complete transfer is a contract of affreightment (time or voyage charter
party) or not a charter party at all.chanroblesvirtualawlibrarychanrobles virtual law library
On the other hand, a contract of affreightment is one in which the owner of the vessel leases part or all of its
space to haul goods for others. It is a contract for a special service to be rendered by the owner of the
vessel12and under such contract the general owner retains the possession, command and navigation of the ship,
the charterer or freighter merely having use of the space in the vessel in return for his payment of the charter
hire. 13If the charter is a contract of affreightment, which leaves the general owner in possession of the ship as
owner for the voyage, the rights, responsibilities of ownership rest on the owner and the charterer is usually free
from liability to third persons in respect of the ship. 14chanrobles virtual law library
Responsibility to third persons for goods shipped on board a vessel follows the vessel's possession and
employment; and if possession is transferred to the charterer by virtue of a demise, the charterer, and not the
owner, is liable as carrier on the contract of affreightment made by himself or by the master with third persons,
and is answerable for loss, damage or nondelivery of goods received for transportation. An owner who retains
possession of the ship, though the hold is the property of the charterer, remains liable as carrier and must answer
for any breach of duty as to the care, loading or unloading of the
cargo. 15chanrobles virtual law library
Assuming that in the present case, the charter party is a demise or bareboat charter, then Philipp Brothers is
liable to Puromines, Inc., subject to the terms and conditions of the sales contract. On the other hand, if the
contract between respondent and the owner of the vessel MV "Liliana Dimitrova" was merely that of
affreightment, then it cannot be held liable for the damages caused by the breach of contract of carriage, the
evidence of which is the bills of lading.chanroblesvirtualawlibrarychanrobles virtual law library
In any case, whether the liability of respondent should be based on the sales contract or that of the bill of lading,
the parties are nevertheless obligated to respect the arbitration provisions on the sales contract and/or the bill of
lading. Petitioner being a signatory and party to the sales contract cannot escape from his obligation under the
arbitration clause as stated therein.chanroblesvirtualawlibrarychanrobles virtual law library
Neither can petitioner contend that the arbitration provision in the bills of lading should not have been discussed
as an issue in the decision of the Court of Appeals since it was not raised as a special or affirmative defense. The
three bills of lading were attached to the complaint as Annexes "A," "B," and "C," and are therefore parts
thereof and may be considered as evidence although not introduced as such. 16Hence, it was then proper for the
court a quo to discuss the contents of the bills of lading, having been made part of the
record.chanroblesvirtualawlibrarychanrobles virtual law library
Going back to the main subject of this case, arbitration has been held valid and constitutional. Even before the
enactment of Republic Act No. 876, this Court has countenanced the settlement of disputes through arbitration.
The rule now is that unless the agreement is such as absolutely to close the doors of the courts against the
parties, which agreement would be void, the courts will look with favor upon such amicable arrangements and
will only interfere with great reluctance to anticipate or nullify the action of the arbitrator. 17chanrobles virtual
law library
As pointed out in the case of Mindanao Portland Cement Corp. v. McDonough Construction Company of
Florida 18wherein the plaintiff sued defendant for damages arising from a contract, the Court said:
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 their 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. And although it has been ruled
that a frivolous or patently baseless claim should not be ordered to arbitration it is also recognized that the mere
fact that a defense exists against a claim does not make it frivolous or baseless. 19chanrobles virtual law library
In the case of Bengson v. Chan, 20We upheld the provision of a contract which required the parties to submit
their disputes to arbitration and We held as follows:
The trial court sensibly said that "all the causes of action alleged in the plaintiff's amended complaint are based
upon the supposed violations committed by the defendants of the "Contract of Construction of a Building" and
that "the provisions of paragraph 15 hereof leave a very little room for doubt that the said causes of action are
embraced within the phrase "any and all questions, disputes or differences between the parties hereto relative to
the construction of the building," which must be determined by arbitration of two persons and such
determination by the arbitrators shall be "final, conclusive and binding upon both parties" unless they go to
court, in which the case the determination by arbitration is a condition precedent "for taking any court action."
xxx xxx xxxchanrobles virtual law library
We hold that the terms of paragraph 15 clearly express the intention of the parties that all disputes between them
should first be arbitrated before court action can be taken by the aggrieved party. 21chanrobles virtual law library
Premises considered, We uphold the validity and applicability of the arbitration clause as stated in Sales
Contract No. S151.8.01018 to the present dispute.chanroblesvirtualawlibrarychanrobles virtual law library
WHEREFORE, petition is hereby DISMISSED and the decision of the courta quo is
AFFIRMED.chanroblesvirtualawlibrarychanrobles virtual law library
SO ORDERED.