AGAN JR. VS. PIATCO [402 SCRA 612; G.R. No.

155001; 5 May 2003]

Facts:
Sometime in 1993, six business leaders, explored the possibility of investing in the new NAIA
airport terminal, so they formed Asians Emerging Dragon Corp. They submitted proposals to the
government for the development of NAIA Intl. Passenger Terminal III (NAIA IPT III). The
NEDA approved the NAIA IPT III project. Bidders were invited, and among the proposal
Peoples Air Cargo (Paircargo) was chosen. AEDC protested alleging that preference was given to
Paircargo, but still the project was awarded to Paircargo. Because of that, it incorporated into,
Phil. Intl. Airport Terminals Co. (PIATCO). The DOTC and PIATCO entered into a concession
agreement in 1997 to franchise and operate the said terminal for 21years. In Nov. 1998 it was
amended in the matters of pertaining to the definition of the obligations given to the
concessionaire, development of facilities and proceeds, fees and charges, and the termination of
contract. Since MIAA is charged with the maintenance and operations of NAIA terminals I and
II, it has a contract with several service providers. The workers filed the petition for prohibition
claiming that they would lose their job, and the service providers joined them, filed a motion for
intervention. Likewise several employees of the MIAA filed a petition assailing the legality of
arrangements. A group of congressmen filed similar petitions. Pres. Arroyo declared in her
speech that she will not honor PIATCO contracts which the Exec. Branch's legal office
concluded null and void.
Issue:
Whether or Not the 1997 concession agreement is void, together with its amendments for being
contrary to the constitution.

Held:
The 1997 concession agreement is void for being contrary to public policy. The amendments
have the effect of changing it into and entirely different agreement from the contract bidded
upon. The amendments present new terms and conditions which provide financial benefit to
PIATCO which may have the altered the technical and financial parameters of other bidders had
they know that such terms were available. The 1997 concession agreement, the amendments and
supplements thereto are set aside for being null and void. The petitioners have local standi. They
are prejudiced by the concession agreement as their livelihood is to be taken away from them.

G.R. No. 161957. February 28, 2005

JORGE GONZALES and PANEL OF ARBITRATORS, petitioners, vs. CLIMAX MINING
LTD., CLIMAX-ARIMCO MINING CORP., and AUSTRALASIAN PHILIPPINES
MINING INC., respondents.

FACTS: Gonzales filed a complaint before the Panel of Arbitrators, Region II, Mines and
Geosciences Bureau, of the Department of Environment and Natural Resources (DENR) against
respondents Climax- Mining Ltd, Climax-Arimco and Australasian Philippines Mining Inc,
seeking the declaration of nullity or termination of the addendum contract and the other contracts
emanating from it on the grounds of fraud and oppression. The Panel dismissed the complaint for
lack of jurisdiction. However, the Panel, upon petitioner's motion for reconsideration, ruled that
it had jurisdiction over the dispute maintaining that it was a mining dispute, since the subject
complaint arose from a contract between the parties which involved the exploration and
exploitation of minerals over the disputed area. Respondents assailed the order of the Panel of
Arbitrators via a petition for certiorari before the CA. The CA granted the petition and declared
that the Panel of Arbitrators did not have jurisdiction over the complaint, since its jurisdiction
was limited to the resolution of mining disputes, such as those which raised a question of fact or
matter requiring the technical knowledge and experience of mining authorities and not when the
complaint alleged fraud and oppression which called for the interpretation and application of
laws. The CA further ruled that the petition should have been settled through arbitration under
R.A. No. 876 the Arbitration Law as provided under the addendum contract.
ISSUE: Whether or not an agreement to arbitrate is a separate and distinct contract from the
main contract and whether POA has exclusive and original jurisdiction to hear and decide mining
disputes.
HELD: Panel of Arbitrators who, under R.A. No. 7942 of the Philippine Mining Act of 1995,
has exclusive and original jurisdiction to hear and decide mining disputes, such as mining areas,
mineral agreements, FTAAs or permits and surface owners, occupants and
claimholders/concessionaires, is bereft of jurisdiction over the complaint for declaration of
nullity of the addendum contract; thus, the Panels' jurisdiction is limited only to those mining
disputes which raised question of facts or matters requiring the technical knowledge and
experience of mining authorities.
An agreement to arbitrate is a separate and distinct contract from the main contract.
Further 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. The provision to
submit to arbitration any dispute arising therefrom and the relationship of the parties is a part of
that contract and is itself a contract.
The doctrine of separability, or severability as other writers call it, enunciates that an
arbitration agreement is independent of the main contract. The arbitration agreement is to be
treated as a separate agreement and the arbitration agreement does not automatically terminate
when the contract of which it is part comes to an end.
The separability of the arbitration agreement is especially significant to the determination
of whether the invalidity of the main contract also nullifies the arbitration clause. Indeed, the
doctrine denotes that the invalidity of the main contract, also referred to as the "container"
contract, does not affect the validity of the arbitration agreement. Irrespective of the fact that the
main contract is invalid, the arbitration clause/agreement still remains valid and enforceable.

BF Corp vs CA Date: March 27, 1998Petitioner: BF Corporation

Respondents: CA, Shangri-la Properties Inc, Rufo Colayco, Alfredo Ramos, Maximo
Licauco, et al
Facts:
Petitioner and respondent Shangri-la Properties, Inc. entered into an agreement whereby the
latter engaged the former to construct the main structure of the "EDSA Plaza Project," a
shopping mall complex in Mandaluyong. Petitioner incurred delay in the construction work that
SPI considered as" serious and substantial."
On the other hand, according to petitioner, the construction works" progressed in faithful
compliance with the First Agreement until a fire broke out damaging Phase I "of the Project.
Hence, SPI proposed the re-negotiation of the agreement between them. Petitioner and SPI
entered into a written agreement denominated as "Agreement for the Execution of Builder's
Work for the EDSA Plaza Project." Said agreement would cover the construction work on said
project as of May 1, 1991 until its eventual completion. According to SPI, petitioner "failed to
complete the construction works and abandoned the project."
This resulted in disagreements between the parties as regards their respective liabilities under
the contract. Petitioner filed with the RTC of Pasig a complaint for collection of the balance due
under the construction agreement. SPI and its co-defendants filed a motion to suspend
proceedings instead of filing an answer. The motion was anchored on defendants' allegation that
the formal trade contract for the construction of the project provided for a clause requiring prior
resort to arbitration before judicial intervention could be invoked in any dispute arising from the
contract. Petitioner opposed said motion claiming that there was no formal contract between the
parties although they entered into an agreement defining their rights and obligations in
undertaking the project.
Thereafter, upon a finding that an arbitration clause indeed exists, the lower court denied the
motion to suspend proceedings as the Conditions of Contract was not duly executed or signed by

the parties, and the failure of the defendants to submit any signed copy of the said document,.
The lower court then ruled that, assuming that the arbitration clause was valid and binding, still,
it was" too late in the day for defendants to invoke arbitration. Considering the fact that under the
supposed Arbitration Clause invoked by defendants, it is required that "Notice of the demand for
arbitration of a dispute shall be filed in writing with the other party . . . . in no case . . . . later
than the time of final payment . . . "which apparently, had elapsed because defendants have failed
to file any written notice of any demand for arbitration during the said long period of one year
and eight months. The CA annulled the orders of the RTC.
Issue:
WON a petition for certiorari is proper
Held:
Yes
Ratio:
The rule that the special civil action of certiorari may not be invoked as a substitute for the
remedy of appeal. The Court has likewise ruled that" certiorari will not be issued to cure errors in
proceedings or correct erroneous conclusions of law or fact. As long as a court acts within its
jurisdiction , any alleged errors committed in the exercise of its jurisdiction will amount to
nothing more than errors of judgment which are reviewable by timely appeal and not by a special
civil action of certiorari ."
The question of jurisdiction, which is a question of law depends on the determination of the
existence of the arbitration clause, which is a question of fact. In the instant case, the lower court
found that there exists an arbitration clause. However, it ruled that in contemplation of law, said
arbitration clause does not exist. It is that mode of appeal taken by private respondents before the
CA that is being questioned by the petitioners before this Court. But at the heart of said issue is
the question of whether there exists an Arbitration Clause because if an Arbitration Clause does
not exist, then private respondents took the wrong mode of appeal before the CA. For this Court
to be able to resolve the question of whether private respondents took the proper mode of appeal,
which, incidentally, is a question of law, then it has to answer the core issue of whether there

exists an Arbitration Clause which, admittedly, is a question of fact. Moreover, where a rigid
application of the rule that certiorari cannot be a substitute for appeal will result in a manifest
failure or miscarriage of justice, the provisions of the Rules of Court which are technical rules
may be relaxed. As we shall show here under, had the CA dismissed the petition for certiorari ,
the issue of whether or not an arbitration clause exists in the contract would not have been
resolved in accordance with evidence extant in the record of the case. Consequently, this would
have resulted in a judicial rejection of a contractual provision agreed by the parties to the
contract. In the same vein, this Court holds that the question of the existence of the arbitration
clause in the contract between petitioner and private respondentsis a legal issue that must be
determined in this petition for review on certiorari
Issue:
WON an arbitration clause exists
Held:
Ratio:
Petitioner denies the existence of the arbitration clause primarily on the ground that the
representatives of the contracting corporations did not sign the "Conditions of Contract" that
contained the said clause. Its other contentions, specifically that insinuating fraud as regards the
alleged insertion of the arbitration clause, are questions of fact that should have been threshed
out below. Court may as well proceed to determine whether the arbitration clause does exist in
the parties' contract. Republic Act No. 876 provides for the formal requisites of an arbitration.
The formal requirements of an agreement to arbitrate are therefore the following: (a) it must be
in writing and(b) it must be subscribed by the parties or their representatives. There is no denying
that the parties entered into a written contract that was submitted in evidence before the lower
court. To "subscribe" means to write underneath, as one's name; to sign at the end of a document.
That word may sometimes be construed to mean to give consent to or to attest. The Court finds
that, upon a scrutiny of the records of this case, these requisites were complied with in the
contract in question. The Articles of Agreement, which incorporates all the other contracts and
agreements between the parties, was signed by representatives of both parties and duly notarized.
The failure of the private respondent's representative to initial the "Conditions of Contract"

would there for not affect compliance with the formal requirements for arbitration agreements
because that particular portion of the covenants between the parties was included by reference in
the Articles of Agreement. Petitioner's contention that there was no arbitration clause because the
contract incorporating said provision is part of a "hodge-podge" document, is therefore
untenable. A contract need not be contained in a single writing. It may be collected from several
different writings which do not conflict with each other and which, when connected, show the
parties, subject matter, terms and consideration, as in contracts entered into by correspondence.
A contract may be encompassed in several instruments even though every instrument is not
signed by the parties, since it is sufficient if the unsigned instruments are clearly identified or
referred to and made part of the signed instrument or instruments. Similarly, a written agreement
of which there are two copies, one signed by each of the parties, is binding on both to the same
extent as though there had been only one copy of the agreement and both had signed it. The flaw
in petitioner's contentions therefore lies in its having segmented the various components of the
whole contract between the parties into several parts. This notwithstanding, petitioner ironically
admits the execution of the Articles of Agreement. Notably, too, the lower court found that the
said Articles of Agreement "also provides that the 'Contract Documents' therein listed 'shall be
deemed an integral part of this Agreement,' and one of the said documents is the 'Conditions of
Contract' which contains the Arbitration Clause.'" It is this Articles of Agreement that was duly
signed by Rufo B. Colayco, president of private respondent SPI, and Bayani F.Fernando,
president of petitioner corporation. The same agreement was duly subscribed before notary
public Nilberto R. Briones. In other words, the subscription of the principal agreement
effectively covered the other documents incorporated by reference therein. This Court likewise
does not find that the CA erred in ruling that private respondents were not in default in invoking
the provisions of the arbitration clause which states that "(t)he demand for arbitration shall be
made within a reasonable time after the dispute has arisen and attempts to settle amicably had
failed." Under the factual milieu, SPI should have paid its liabilities tinder the contract in
accordance with its terms. However, misunderstandings appeared to have cropped up between
the parties ostensibly brought about by either delay in the completion of the construction work or
by force majeure or the fire that partially gutted the project. The almost two-year delay in paying
its liabilities may not therefore be wholly ascribed to private respondent SPI. Besides, SPI's
initiative in calling for a conference between the parties was a step towards the agreed resort to

arbitration. However, petitioner post haste filed the complaint before the lower court. Thus, while
SPI's request for arbitration might appear an afterthought as it was made after it had filed the
motion to suspend proceedings, it was because petitioner acted hastily in order to resolve the
controversy through the courts. The arbitration clause provides for a "reasonable time" within
which the parties may avail of the relief under that clause. "Reasonableness" is a relative term
and the question of whether the time within which an act has to be done is reasonable depends on
attendant circumstances. This Court finds that under the circumstances obtaining in this case, a
one-month period from the time the parties held a conference on July 12, 1993 until private
respondent SPI notified petitioner that it was invoking the arbitration clause, is a reasonable time.
Indeed, petitioner may not be faulted for resorting to the court to claim what was due it under the
contract. However, we find its denial of the existence of the arbitration clause as an attempt to
cover up its misstep in hurriedly filing the complaint before the lower court. In this connection, it
bears stressing that the lower court has not lost its jurisdiction over the case. Section 7 of RA 876
provides that proceedings therein have only been stayed. After the special proceeding of
arbitration has been pursued andc ompleted, then the lower court may confirm the award made
by the arbitrator.

Chung Fu Industries vs CA (1992)

Petitioner: Chung Fu Industries, et al
Respondents: CA, Hon. Francisco Velez andRoblecor Philippines IncPonente: Romero
Facts: Petitioner Chung Fu Industries and Roblecor Philippines, Inc. forged a construction
agreement whereby respondent committed to construct and finish on December 31, 1989,
petitioner 's industrial/factory complex in Cavite for P42,000,000.In the event of disputes arising
from the performance of subject contract, it was stipulated therein that the issue(s) shall be
submitted for resolution before a single arbitrator chosen by both parties. Apart from the
construction agreement, Chung Fu and Roblecor entered into two (2) other ancillary contracts,
for the construction of a dormitory and support facilities and for the installation of electrical,
water and hydrant systems at the plant site. However, Roblecor failed to complete the work
despite the extension of time allowed it by Chung Fu. Subsequently, the latter had to take over
the construction. Claiming an unsatisfied account of P10,500,000.00 and unpaid progress billings
of P2,370,179.23, Roblecor filed a petition for Compulsory Arbitration with prayer for TRO
before the RTC, pursuant to the arbitration clause in the construction agreement. Chung Fu
moved to dismiss the petition and further prayed for the quashing of the restraining order.
Subsequent negotiations between the parties eventually led to the formulation of an arbitration
agreement. The RTC approved the agreement. Engr. Willardo Asuncion was appointed as the
sole arbitrator. Arbitrator Asuncion ordered petitioners to immediately pay respondent
P16,108,801.00. He declared the award as final and unappealable, pursuant to the Arbitration
Agreement precluding judicial review of the award. Roblecor moved for the confirmation of said
award. On the other hand, Chung Fu moved to remand the case for further hearing and asked for
a reconsideration of the judgment award claiming that Arbitrator Asuncion committed twelve
(12) instances of grave error by disregarding the provisions of the parties' contract. The lower
court denied petitioners motion to remand and granted Roblecors Motion for Confirmation of
Award. The CA affirmed.
Issue:
WON the arbitration award is beyond the ambit of the court's power of judicial review.
Held:
No
Ratio: Sparse though the law and jurisprudence maybe on the subject of arbitration in the
Philippines, it was nonetheless recognized in the Spanish Civil Code; specifically, the provisions
on compromises made applicable to arbitrations under Articles 1820and 1821. Although said
provisions were repealed by implication with the repeal of the Spanish Law of Civil Procedure,
these and additional ones were reinstated in the present Civil Code. Arbitration found a fertile

field in the resolution of labor-management disputes in the Philippines. Although early on, CA
103 (1936) provided for compulsory arbitration as the state policy to be administered by the CIR,
in time such a modality gave way to voluntary arbitration. The Industrial Peace Act which was
passed in 1953 as RA875, favored the policy of free collective bargaining and resort to grievance
procedure, in particular, as the preferred mode of settling disputes in industry. It was accepted
and enunciated more explicitly in the Labor Code, which was passed on November 1, 1974 as
PD 442, with the amendments later introduced by RA6715 (1989).That there was a growing need
for a law regulating arbitration in general was acknowledged when RA876 (1953), otherwise
known as the Arbitration Law, was passed. "Said Act was obviously adopted to supplement
not to supplant the New Civil Code on arbitration. It expressly declares that "the provisions of
chapters one and two, Title XIV, Book IV of the Civil Code shall remain in force. "In
recognition of the pressing need for an arbitral machinery for the early and expeditious
settlement of disputes in the construction industry, a CIAC was created by EO 1008, enacted on
February 4, 1985.In practice nowadays, absent an agreement of the parties to resolve their
disputes via a particular mode, it is the regular courts that remain the for a to resolve such
matters. However, the parties may opt for recourse to third parties, exercising their basic freedom
to "establish such stipulation, clauses, terms and conditions as they may deem convenient,
provided they are not contrary to law, morals, good customs, public order or public policy." In
such a case, resort to the arbitration process may be spelled out by them in a contract in
anticipation of disputes that may arise between them. Or this maybe stipulated in a submission
agreement when they are actually confronted by a dispute. Whatever be the case, such recourse
to an extrajudicial means of settlement is not intended to completely deprive the courts of
jurisdiction. But certainly, the stipulation to refer all future disputes to an arbitrator or to submit
an ongoing dispute to one is valid. Being part of a contract between the parties, it is binding and
enforceable in court in case one of them neglects, fails or refuses to arbitrate. Going a step
further, in the event that they declare their intention to refer their differences to arbitration first
before taking court action, this constitutes a condition precedent, such that where a suit has been
instituted prematurely, the court shall suspend the same and the parties shall be directed forth
with to proceed to arbitration. A court action may likewise be proven where the arbitrator has not
been selected by the parties. Under present law, may the parties who agree to submit their
disputes to arbitration further provide that the arbitrators' award shall be final, unappealable and
executory? Article 2044 of the Civil Code recognizes the validity of such stipulation, thus: Any
stipulation that the arbitrators' award or decision shall be final is valid, without prejudice to
Articles 2038, 2039 and2040. Similarly, the Construction Industry Arbitration Law provides that
the arbitral award "shall be final and inappealable except on questions of law which shall be
appealable to the Supreme Court. "Under the original Labor Code, voluntary arbitration awards
or decisions were final, unappealable and executory. "However, voluntary arbitration awards or
decisions on money claims, involving an amount exceeding P100,000 or 40% of the paid-up
capital of the respondent employer, whichever is lower, maybe appealed to the NLRC on any of
the following grounds: (a) abuse of discretion; and (b) gross incompetence." It is to be noted that
the appeal in the instances cited were to be made to the NLRC and not to the courts. With the

subsequent deletion of the provision from the LC, the voluntary arbitrator is now mandated to
render an award or decision within 20calendar days from the date of submission of the dispute
and such decision shall be final and executory after 10 calendar days from receipt of the copy of
the award or decision by the parties. Where the parties agree that the decision of the arbitrator
shall be final and unappealable as in the instant case, the pivotal inquiry is whether subject
arbitration award is indeed beyond the ambit of the court's power of judicial review. We rule in
the negative. It is stated explicitly under Art. 2044 CC that the finality of the arbitrators' award is
not absolute and without exceptions. Where the conditions described in Articles 2038, 2039
and2040 applicable to both compromises and arbitrations are obtaining, the arbitrators' award
maybe annulled or rescinded. 19 Additionally, under Sections 24 and 25 of the Arbitration Law,
there are grounds for vacating, modifying or rescinding an arbitrator's award. Thus, if and when
the factual circumstances referred to in the above-cited provisions are present, judicial review of
the award is properly warranted. What if courts refuse or neglect to inquire into the factual milieu
of an arbitrator's award to determine whether it is in accordance with law or within the scope of
his authority? How may the power of judicial review be invoked? This is where the proper
remedy is certiorari under Rule 65 of the Revised Rules of Court. It is to be borne in mind,
however, that this action will lie only where a grave abuse of discretion or an act without or in
excess of jurisdiction on the part of the voluntary arbitrator is clearly shown. For "the writ of
certiorari is an extra-ordinary remedy and that certiorari jurisdiction is not to be equated with
appellate jurisdiction. In a special civil action of certiorari, the Court will not engage in a review
of the facts found nor even of the law as interpreted or applied by the arbitrator unless the
supposed errors of fact or of law are so patent and gross and prejudicial as to amount to a grave
abuse of discretion or an exces de pouvoir on the part of the arbitrator. "Even decisions of
administrative agencies which are declared "final" by law are not exempt from judicial review
when so warranted. It should be stressed, too, that voluntary arbitrators, by the nature of their
functions, act in a quasi-judicial capacity. It stands to reason, therefore, that their decisions
should not be beyond the scope of the power of judicial review of this Court. After closely
studying the list of errors, as well as petitioners' discussion of the same in their Motion to
Remand Case For Further Hearing and Reconsideration and Opposition to Motion for
Confirmation of Award, we find that petitioners have amply made out a case where the voluntary
arbitrator failed to apply the terms and provisions of the Construction Agreement which forms
part of the law applicable as between the parties, thus committing a grave abuse of discretion.
Furthermore, in granting unjustified extra compensation to respondent for several items, he
exceeded his powers all of which would have constituted ground for vacating the award under
Section 24 (d) of the Arbitration Law. But the respondent trial court's refusal to look into the
merits of the case, despite prima facie showing of the existence of grounds warranting judicial
review, effectively deprived petitioners of their opportunity to prove or substantiate their
allegations. In so doing, the trial court itself committed grave abuse of discretion. Likewise, the
appellate court, in not giving due course to the petition, committed grave abuse of discretion.
Respondent courts should not shirk from exercising their power to review, where under the
applicable laws and jurisprudence, such power may be rightfully exercised; more so where the

objections raised against an arbitration award may properly constitute grounds for annulling,
vacating or modifying said award under the laws on arbitration.

Puromines v CA

March 22, 1993PUROMINES, INC. vs.

COURT OF APPEALS and PHILIPP BROTHERS OCEANIC, INC
NOCON, J p:
SUMMARY:
A sales contract for the sale of prilled urea was entered into by Puromines and Makati Agro and
it was provided therein that any disputes arising from the contract shall be settled by arbitration
in London. The shipment covered by 3 bills of lading was undertaken by MV Liliana Dimitrova
with Philipp Brothers as charterer of said vessel. When shipment covered by Bill of Lading
2&3were discharged in Manila in bad order and condition, Puromines filed a complaint with TC
for breach of contract of carriage against Maritime, ship-agent and Philipp Brothers, as charterer.
Philipp filed a motion to dismiss on the basis that case should be brought to arbitration first.
Puromines opposed contending that the sales contract does not include contract of carriage, the
latter not covered by agreement on arbitration. SC: Granted Motion to Dismiss, sales contract
and bill of lading provides covers arbitration clause. Assuming the cause of action is based on
contract of carriage, it must be first determined what kind of charter party had with the ship
owner to determine liability. If contract of affreightment, charterer is not liable as possession is
still with owner. If charter of demise or bareboat, then charterer is liable as it is considered the
owner and therefore would be liable for damage or loss.
FACTS:
Puromines, Inc. and Makati Agro Trading, Inc. (not a party in this case) entered into a contract
with Philipp Brothers Oceanic, Inc .for the sale of prilled Ureain bulk.
Sales Contract provided an arbitration clause:
"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 areall to be commercial
men and resident in London. This submission may be made a rule of the High Court of Justice
inEngland by either party."
May 22, 88: M/V "Liliana Dimitrova" loaded on board at Yuzhny, USSR a shipment of 15k
metric tons prilled Urea in bulk complete and in good order and condition for transport to Iloilo
and Manila, to be delivered to Puromines.

3 bills of lading were issued by the ship-agent, Maritime Factors Inc:

Bill of Lading No. 1 dated May 12, 88 covering 10k metric tons for discharge to Manila;
Bill of Lading No. 2 of even date covering 4k metric tons for unloading in Iloilo City; and
Bill of Lading No. 3, same date, covering 1,500 metric tons likewise for discharge in Manila
Shipment covered by Bill of Lading No. 2 was discharged in Iloilo City complete and in good
order and condition. However, 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.
Puromines filed a complaint with the trial court for breach of contract of carriage against
Maritime Factors Inc. (not included as respondent in this petition) as ship-agent for the owners of
the vessel MV "Liliana Dimitrova," while Philipp Brothers Oceanic Inc. ,was impleaded as
charterer of the said vessel
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
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;
As a direct and natural consequence of the un seaworthiness and negligence of the vessel,
Puromines suffered damages in the total amount of P683, 056.29.
Maritime Factors, Inc. filed its Answer to the complaint, while Philipp filed a motion to dismiss
on the grounds that: the complaint states no cause of action; it was prematurely filed; and
Puromines should comply with the arbitration clause in the sales contract.
Puromines opposed motion to dismiss 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 noarbitration agreement.
TC: Denied Philipp's motion to dismiss. Arbitration not applicable.
Sales contract states in part:
'Any disputes arising under this contract shall be settled by arbitration
Facts alleged in the complaint show that the cause of action arose from a breach of contract of
carriage by the vesselchartered by Philipp Brothers thus; the arbitration clause cannot apply to

the dispute in the present action which concernsPuromines' claim for cargo loss/damage arising
from breach of contract of carriage.

No merit to allegations that Philipp, not being the ship owner, is therefore not the real party in
interest as it was impleadedas charterer of the vessel, hence, a proper party
CA: Complaint Dismissed. The arbitration provision in the sales contract and/or the bills of
lading is applicable in the present case. Sales contract is broad enough to include the claim for
damages arising from the carriage and delivery of the goods subject-matter thereof.
Bills of lading state: 'Any dispute arising under this Bill of Lading shall be referred to
arbitration of the Maritime Arbitration Commission
Hence, this special civil action for certiorari and prohibition.
Puromines 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.
Error for CA to touch upon the arbitration provision of the bills lading in its decision inasmuch
as the same was not raised as an issue by Philipp who was not a party in the bills of lading
ISSUES:
1) Whether the phrase "any dispute arising under this contract" in the arbitration clause of the
sales contract covers a cargo claim against the vessel (owner and/or charterers) for breach of
contract of carriage? (YES
2) Assuming that the cause of action arises from the contract of carriage, whether Philipp, as
charterer, would be liable for the loss or damage? (Depends on type of charter, YES if
charter of demise, NO if contract of affreightment)
3) Whether arbitration provision should not have been discussed as it was not raised as a
defense? (NO)
RATIO:
1) Sales contract is comprehensive enough to include claims for damages arising from carriage
and delivery of the goods.
GENERAL RULE: 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: 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 appear.

"Unless otherwise authorized by the buyer, the seller must take 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 omits 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."
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 provisions in the contract.
Puromines derives his right to the cargo from the bill of lading which is the contract of
affreightment together with the sales contract. It is BOUND by the provisions and terms of said
bill of lading and of the ARBITRATION CLAUSE incorporated in the sales contract.
2) Assuming that the liability of Philipp is not based on the sales contract, but rather on the
contract of carriage, being the charterer of the vessel MV "Liliana Dimitrova," it is material to
show what kind of charter party Philipp had with owner of vessel to determine former's liability.
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 Philipp 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 bill of lading
3) Puromines contention that the arbitration provision in the bills of lading should not have been
discussed as an issue in the CA decision since it was not raised as a special or affirmative defense
is without merit. The 3 bills of lading were attached to the complaint as Annexes and are
therefore parts thereof and may be considered as evidence although not introduced as such.
(Philippine Bank of Communications v. CA) It was then proper for CA/TC to discuss the
contents of the bills of lading, having been made part of the record.
DISPOSITIVE:
Arbitration clause stated in Sales Contract valid and applicable. CA Affirmed