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Korean Technologies Co. Ltd. Vs Hon.

Alberto Lerma

Korea Technologies Co., Ltd. [Korea Tech], a Korean corporation, entered into a contract with Pacific General Steel
Manufacturing Corporation [Pacific General], a domestic corporation, where Korea Tech undertook to ship and install in Pacific
Generals site in Carmona, Cavite generate the machinery and facilities necessary for manufacturing LPG cylinders, and to
initially operate the plant after it is installed.

The plant, after completion of installation, could not be operated by Pacific General due to its financial difficulties affecting
the supply of materials. The last payments made by Pacific General to Korea Tech consisted of postdated checks which were
dishonored upon presentment. According to Pacific General, it stopped payment because Korea Tech had delivered a
hydraulic press which was different in kind and of lower quality than that agreed upon. Korea Tech also failed to deliver
equipment parts already paid for by it. Pacific threatened to cancel the contract with Korea Tech and dismantle the Carmona

Korea Tech initiated arbitration before the Korea Commercial Arbitration Board [KCAB] in Seoul, Korea and, at the same
time, commenced a civil action before the Regional Trial Court [the trial court] where it prayed that Pacific General be
restrained from dismantling the plant and equipment.

Pacific General opposed the application and argued that the arbitration clause was null and void, being contrary to public policy as
it ousts the local court of jurisdiction. It also alleged that Korea Tech was not entitled to the payment of the amount covered by
the two checks, and that Korea Tech was liable for damages.

The trial court denied the application for preliminary injunction and declared the arbitration agreement null and void. Korea
Tech moved to dismiss the counterclaims for damages.

Meanwhile, Pacific General filed a motion for inspection of things to determine whether there was indeed alteration of the
quantity and lowering of quality of the machineries and equipment and whether these were properly installed. Korea Tech
opposed the motion arguing that these issues were proper for determination in the arbitration proceeding.

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

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

Whether or not the arbitration clause stated in Article 15 of the contract is to be deemed null and void


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.)

So valid ang clause

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.)

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."
Arbitration clause not contrary to public policy

Industrial Construction Groups, Inc., we declared that:

Being an inexpensive, speedy and amicable method of settling disputes, arbitration along with mediation, conciliation and negotiation
is 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.

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.

QUESTION: 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

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=
UNCITRAL Model Law on International Commercial Arbitration

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

RA 9285 applying and incorporating the UNCITRAL Model Law:

1. RTC must refer to arbitration in proper cases

RTC does not have jurisdiction over disputes that are properly the subject of arbitration pursuant to an arbitration clause, and mandates the

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


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


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.

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.
3. RTC has jurisdiction to review foreign arbitral awards

while the RTC does not have jurisdiction over disputes governed by arbitration mutually agreed upon by the parties, still the foreign arbitral
award is subject to judicial review by the RTC which can set aside, reject, or vacate i
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

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

For foreign or international arbitral awards which must first be confirmed by the RTC, the grounds for setting aside, rejecting 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

(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

Other Issues:

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, 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.

RTC has interim jurisdiction to protect the rights of the parties

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

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

UNCITRAL Model Law on ICA also grants courts power and jurisdiction to issue interim measures
Keppel Cebu Shipyard Inc v Pioneer Insurance and Surety Corp

Keppel Cebu Shipyard vs. Pioneer Insurance and Surety September 25, 2009

Facts: KCSI and WG&A Jebsens Shipmanagement, Inc. (WG&A) executed a Shiprepair Agreement wherein KCSI would renovate and
reconstruct WG&As M/V Superferry 3 using its dry docking facilities pursuant to its restrictive safety and security rules and regulations.
Prior to the execution of the Shiprepair Agreement, Superferry 3 was already insured by WG&A with Pioneer for US$8,472,581.78. The
Shiprepair Agreement provides, among others, for the following terms: (1) that the owner shall inform its insurer and shall include Keppel
Cebu Shipyard as a co-assured in its insurance policy; (2) that the owner shall waive its right to claim for any loss of profit or loss of use or
damages consequential on such loss of use resulting from the delay in the redelivery of the above vessel; (3) that the owner shall indemnify
and hold Keppel Cebu Shipyard harmless from any or all claims, damages, or liabilities arising from death or bodily injuries to Owners
workers, or damages to the vessel or other property however caused.

In the course of its repair, M/V Superferry 3 was gutted by fire. Claiming that the extent of the damage was pervasive, WG&A declared
the vessels damage as a total constructive loss and, hence, filed an insurance claim with Pioneer. Pioneer paid the insurance claim in the
amount of US$8,472,581.78. WG&A, in turn, executed a Loss and Subrogation Receipt in favor of Pioneer. Pioneer then tried to collect
from KCSI, but the latter denied any responsibility for the loss of the subject vessel despite repeated demands. Hence, Pioneer, filed a
Request for Arbitration before the Construction Industry Arbitration Commission (CIAC) praying for the payment of the amount paid to
WG&A, the expenses of the arbitration (P500 million), and damages.

It further prayed that Clauses 1 and 2 on the unsigned page 1 of the Shiprepair Agreement as well as the hardly legible Clauses 20 and 22
(a) and other similar clauses printed in very fine print on the unsigned dorsal page thereof, be all declared illegal and void ab initio.

KCSI and WG&A reached an amicable settlement, leading to the dismissal of the claim of WG&A against KCSI and the arbitration to
proceed with Pioneer as the remaining claimant. Pioneer alleges that it is the real party in interest and that Keppel had custody of and
control over the M/V Superferry 3 while said vessel was in Respondent Keppels premises. It likewise alleged that the Vessels Safety
Manual cannot be relied upon as proof of the Masters continuing control over the vessel ; Yard is liable under the Doctrine of Res Ipsa
Loquitur. Moreover, the liability of Respondent does not arise merely from the application of the Doctrine of Res Ipsa Loquitur, but from
its negligence in this case. It futher allged that the shipowner had no legal duty to apply for a hotworks permit since it was not required by
the yard, and the owners hotworks were conducted by welders who remained employees of the yard. In supplying welders and equipment
as per The Work Order Dated 26 January 2000, the Yard did so at its own risk, and acted as a Less Than Prudent Ship Repairer.

KCI on the other hand allged: 1. that pioneer as claimant has no standing to file the Request for Arbitration and the Tribunal has no
jurisdiction over the case. 2. The Ship [R]epair Agreement was not imposed upon the Vessel. The Vessel knowingly and voluntarily
accepted that agreement. Moreover, there are no signing or other formal defects that can invalidate the agreement. 3. The proximate cause
of the fire and damage to the Vessel was not any negligence committed by Angelino Sevillejo in cutting the bulkhead door or any other
shortcoming by the Yard. On the contrary, the proximate cause of the fire was Dr. Jonigas and the Vessels deliberate decision to have
Angelino Sevillejo undertake cutting work in inherently dangerous conditions created by them. 4. Even assuming that Angelino Sevillejo
cut the bulkhead door close to the deck floor, and that this circumstance rather than the extremely hazardous conditions created by Dr.
Joniga and the Vessel for that activity caused the fire, the Yard may still not be held liable for the resulting damage. 5. Assuming that the
Yard is liable, it cannot be compelled to pay the full amount of P360 million paid by the Claimant as subrogee, for an amount greater than
that which the Vessel could have recovered, even if the Claimant may have paid a higher amount under its policies. In turn, the right of the
Vessel to recover is limited to actual damage to the MV Superferry 3, at the time of the fire.

CIA declared both WG&A and KCSI guilty of negligence.

The Court of appeals, in its amended decision ordered the Yard to pay Pioneer P25 Million, without legal interest, within 15 days from the
finality of the decision.


1.To whom may negligence over the fire that broke out on board M/V Superferry 3 be imputed?
2. Is subrogation proper? If proper, to what extent can subrogation be made?
3. Should interest be imposed on the award of damages? If so, how much?
4. Who should bear the cost of the arbitration?

With respect to the finding of negligence, the Court cannot maintain the earlier findings and rulings. The CIAC and the CA arrived at the
same Findings of Facts. In the September 25, 2009 Decision, the Third Division premised its re-evaluation of the facts regarding the issue
of negligence on its finding that the CA and the CIAC differed in their findings. Thus, it stated: To resolve these issues, it is imperative that
we digress from the general rule that in petitions for review under Rule 45 of the Rules of Court, only questions of law shall be entertained.
Considering the disparate findings of fact of the CIAC and the CA which led them to different conclusions, we are constrained to revisit the
factual circumstances surrounding this controversy. It appears, however, that there was no disparity in the findings of fact of the CIAC and
the CA. Neither was there any variance in the conclusions arrived at by the two tribunals that both KCSI and WG&A were equally
negligent in causing the fire which resulted in the burning and the loss of Superferry 3. As to the immediate cause of the fire, there is no
dispute that the same was caused by the ignition of the flammable lifejackets caused by the sparks or hot molten slags from the welding
works being done at the upper deck.

As to who was responsible for causing the fire, both the CIAC and the CA were one in finding that both KCSI and WG&A were equally
negligent. In fact, the CA, after its own review of the facts and evidence, quoted with approval a majority of the findings of the CIAC.

In other words, the issue of the conflicting claims between the parties - as to who should be responsible for the loss of Superferry 3 - was
resolved by the CIAC against both parties. As this finding of fact by the CIAC was affirmed by the CA, the Court must have a strong and
cogent reason to disturb it. It is a hornbook doctrine that, save for certain exceptions, the findings of fact of administrative agencies
and quasi-judicial bodies like the CIAC, which have acquired expertise because their jurisdiction is confined to specific matters, are
generally accorded not only respect, but finality when affirmed by the CA. It is well-settled that the consequent policy and practice
underlying our Administrative Law is that courts of justice should respect the findings of fact of said administrative agencies, unless there is
absolutely no evidence in support thereof or such evidence is clearly, manifestly and patently insubstantial. Moreover, in petitions for
review on certiorari, only questions of law may be put into issue. Be that as it may, the Court, after making its own assiduous assessment of
the case, concurs with the conclusions arrived at by the tribunals below that the loss of Superferry 3 cannot be attributed to one party alone.
WG&A was negligent because, although it utilized the welders of KCSI, it used them outside the agreed area, the restaurant of the
promenade deck. If they did not venture out of the restaurant, the sparks or the hot molten slags produced by the welding of the steel plates
would not have reached the combustible lifejackets stored at the deck below. On the part of KCSI, it failed to secure a hot work permit
pursuant to another work order. Had this been applied for by the KCSI worker, the hot work area could have been inspected and safety
measures, including the removal of the combustible lifejackets, could have been undertaken. In this regard, KCSI is responsible.
In short, both WG&A and KCSI were equally negligent for the loss of Superferry 3. The parties being mutually at fault, the degree of
causation may be impossible of rational assessment as there is no scale to determine how much of the damage is attributable to WG&As or
KCSIs own fault. Therefore, it is but fair that both WG&A and KCSI should equally shoulder the burden for their negligence. With respect
to the defenses of KCSI that it was a co-assured under Clause 22(a) of the contract and that its liability is limited to 50,000,000.00 under
Clause 20 of the Shiprepair Agreement, the Court maintains the earlier ruling on the invalidity of Clause 22(a) of the Shiprepair Agreement.
It cannot, however, maintain the earlier ruling on the invalidity of Clause 20 of the Shiprepair Agreement, which limited KCSIs liability to
50,000,000.00. In the September 25, 2009 Decision, the Third Division found Clause 20 of the Shiprepair Agreement invalid, seeing it as
an unfair imposition by KCSI, being the dominant party, on WG&A.

Basic is the rule that parties to a contract may establish such stipulations, clauses, terms, or conditions as they may deem convenient,
provided they are not contrary to law, morals, good customs, and public policy. While greater vigilance is required in determining the
validity of clauses arising from contracts of adhesion, the Court has nevertheless consistently ruled that contracts of adhesion are not invalid
per se and that it has, on numerous occasions, upheld the binding effect thereof. In its Decision, the Third Division placed great weight in
the testimony of Engr. Elvin F. Bello, WG&As fleet manager, that while he assented to the Shiprepair Agreement, he did not sign the fine-
print portion thereof where Clause 20 was found because he did not want WG&A to be bound by them. This testimony however, was
correctly found by the CIAC as clearly self-serving, because such intention of WG&A was belied by its actions before, during and after the
signing of the Shiprepair Agreement.

As pointed out by the CA, WG&A and its related group of companies, which were all extensively engaged in the shipping business, had
previously dry-docked and repaired its various ships with KCSI under ship repair agreements incorporating the same standard conditions on
at least 22 different occasions. Yet, in all these instances, WG&A had not been heard to complain of being strong-armed and forced to
accept the fine-print provisions imposed by KCSI to limit its liability. Also, as pointed out by the CIAC, if it were true that WG&A did not
want to be bound under such an onerous clause, it could have easily transacted with other ship repairers, which may not have included such
a provision. After the signing of the Shiprepair Agreement, the record is bereft of any other evidence to show that WG&A had protested
such a provision limiting the liability of KCSI. Indeed, the parties bound themselves to the terms of their contract which became the law
between them. While contracts of adhesion may be struck down as void and unenforceable for being subversive of public policy, the same
can only be done when, under the circumstances, the weaker party is imposed upon in dealing with the dominant bargaining party and is
reduced to the alternative of taking it or leaving it, completely depriving the former of the opportunity to bargain on equal footing. This is
not the situation in this case. The Court, thus, finds Clause 20 just and equitable under the circumstances and should be sustained as having
the force of law between the parties to be complied with in good faith.

With the liability of KCSI to WG&A for the loss of Superferry 3 being limited to 50,000,000.00, it goes without saying that Pioneer, as
subrogee of WG&A, may only claim the amount of 50,000,000.00 from KCSI.
Well settled is the rule that the insurer can be subrogated only to the rights as the insured may have against the wrongdoer. As Article 2207
of the Civil Code states: Article 2207. If the plaintiffs property has been insured, and he has received indemnity from the insurance
company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to
the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company
does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or
injury. In sum, both KCSI and WG&A should be held responsible for the loss of Superferry 3 assessed at 360,000,000.00. As stated by the
Third Division of the Court in its Decision, the salvage value recovered by Pioneer from M/V Superferry 3, amounting to 30,252,648.09
should be deducted, thus, leaving 329,747,351.91 as the amount of the loss. This amount, divided between KCSI and WG&A, results in
each party shouldering 164,873,675.95. Nevertheless, the limited liability clause of the Shiprepair Agreement being valid, Pioneer, as
subrogee of WG&A, may only claim a maximum amount of 50,000,000.00 from KCSI. The amount of 50,000,000.00 that KCSI is liable
to pay Pioneer should be with interest at 6% per annum from the filing of the case until the award becomes final and executory.
Thereafter, the rate of interest shall be 12% per annum from the date the award becomes final and executory until its full satisfaction.

On the payment for the cost of arbitration

The arbitration costs shall be borne by both parties on a pro rata basis.

It is only fitting that both parties should share in the burden of the cost of arbitration, on a pro rata basis. We find that Pioneer had a valid
reason to institute a suit against KCSI, as it believed that it was entitled to claim reimbursement of the amount it paid to WG&A. However,
we disagree with Pioneer that only KCSI should shoulder the arbitration costs. KCSI cannot be faulted for defending itself for perceived
wrongful acts and conditions. Otherwise, we would be putting a price on the right to litigate on the part of Pioneer.
Filipinas (Pre-Fab Bldg) Systems Inc v. MRT Development Corp

The Metro Rail Transit Development Corporation (MRTDC) is the owner of the MRT-3 North Triangle Development Project located at the
corner of Epifanio Delos Santos Avenue (EDSA) and North Avenue in Quezon City. It undertook the North Triangle Project which was
conceived as a major hub of the light rail transit line system along EDSA starting from the North Triangle area near the corner of Quezon
Avenue and EDSA, and connecting to the Light Rail Transit-1 starting in Pasay City at the intersection of Taft Avenue and EDSA

MRTDC engaged Parsons Interpro JV (PIJV) to act as the Project Management Team (PMT) to supervise and monitor the project. PIJV
was a joint venture company composed of Parsons International, an international project management firm, and Interpro, a local
construction management company.

Each of these companies appointed a representative as project managers to supervise the project, namely: Engr. Augustus Salgado for
Interpro and Arch. Melvin Satok for PIJV. As joint project managers, their duties were to monitor the progress of construction on behalf of
the owner, to recommend the payment of regular progress billings, to ensure that work was being completed in accordance with the
construction schedule, and other similar matters. Directly under them was David Sampson, who was designated as the Area Construction
Manager, tasked to monitor the day-to-day activities on the site with the help of other PIJV area engineers

There were six contractors who submitted their respective bids. The Project was initially awarded to the lowest bidder, Gammon
Philippines, Inc. (GPI), while Filipinas Systems, Inc. (FSI) submitted the second
lowest bid.

Subsequently, MRTDC decided to construct levels one and two of the Project only with a third level to be constructed on the area above the
workshop. GPI submitted another proposal. Later, GPI was issued a Notice of Award/Notice to Proceed (NOA/NTP) dated June 10, 1998 in
its favor by MRTDC which required GPI to accept the award and NTP within ve (5) business days from receipt, failing which the award
and the NTP would be automatically withdrawn.

While negotiations with GPI were ongoing, MRTDC was conducting negotiations with FSI as the second lowest bidder to ensure that
another contractor would be in a position to immediately accept the Project and start construction. FSI submitted a letter-proposal

GPI refused the terms of the NOA/NTP dated June 10, 1998 due to the strict timetable imposed by MRTDC: to finish the Work within 6
months from acceptance of this NTP, inclusive of any rain delays but subject to force majeure as dened in the BLT Agreement a
photocopy of which is attached herewith. In addition, Filsystem hereby agrees to a bonus/penalty scheme as follows:
Liquidated Damages: US$100,000.00 per day of delay based on the Six-month period.
Bonus: US$30,000.00 per day of early accomplishment

FSI accepted the NTP. Construction period was reckoned on July 14, 1998 to end 180 days after or on January 14, 1999

there were several change orders issued by MRTDC to FSI. FSI finished 98.7% of the Project on April 30, 1999 or 106 days from the
original January. 14, 1999 deadline. Full completion was achieved on May 17, 1999.

On October 8, 1999 or almost six months after the completion of the Project, FSI issued a letter to David Sampson requesting an extension
of 228 days. Attached to the letter was a spreadsheet showing the time extensions that they were entitled to, which allegedly moved the
Project deadline to August 30, 1999. At the bottom right hand corner of the spreadsheet was the signature of David Sampson, ostensibly
approving the extension but only until August 2, 1999 for a period of 200 days.

FSI issued several letters to MRTDC asking for payment of additional amounts for owner-caused delays. FSI claimed or each day MRTDC
was delayed in paying FSI's progress billing, the latter was entitled to a corresponding additional day for the completion of the Project. FSI
contended that payment of the progress billings had been delayed for 1,800 days. Adding that to the previous 200-day extension approved
by David Sampson, the extension period would total 2,000 days

MRTDC refused to pay the claims. It alleged that FSI failed to nish the construction of the Project within the 180-day period agreed upon
and that it had already paid FSI the amounts due for work accomplished as well as for interest on delayed payments.

FSI filed with the Construction Industry Arbitration Commission (CIAC) a Request for Adjudication of its claims against MRTDC. FSI
reduced its claim for early completion bonus to USD 19,590,000 allegedly to lower the prohibitive filing fees of the CIAC.

the CIAC issued an Award dated May 6, 2003 in favor of FSI for USD 2,820,000 as early completion bonus, denying FSI's other claims
such as extra costs due to change in methodology, r extra overhead costs, damages, claim for reimbursement for interest. The CIAC ruled
that FSI is entitled to a technical time extension of 200 days or until August 2, 1999 as authorized by David Sampson. Therefore, FSI
substantially finished construction of the Project on April 30, 1999 or 94 days before the deadline. This translates to an early
accomplishment bonus of USD 2,820,000.
Filsystems and MRTDC are ordered to share the cost of arbitration equally.

Both parties filed their respective petition for review under Rule 43 of the Rules of Court with the CA: udgment is hereby rendered partially
reversing and setting aside the Award of the Construction Industry Arbitration Commission (CIAC) in these consolidated cases and
MODIFYING the same by deleting the award of US$2,820,000.00, while the rest of the Award is AFFIRMED. In deleting the award for
nancial time extension, the CA reasoned that the consent of the Project Manager was insufcient as change orders require a modication
of the contract which must be consented to by MRTDC itself.

FSI filed this Petition for Review on Certiorari.

1. WON FSI is entitled to be paid early completion bonus based on technical time extension
2. WON The parties must equally share the arbitration costs

The Court of Appeals inexplicably reversed and supplanted the CIAC Arbitral Tribunal's expert and technical determination in its Award
dated 06 May 2003 which ruled that the original contract period of 180 days was extended by 200 days of technical time extension, a
conclusion determined by the said tribunal after extensive technical evidentiary hearings.
A. The minimum of 200 days of technical time extension as determined by the CIAC Arbitral Tribunal is generally conclusive as a
specialized quasi- judicial body's factual and technical determination of equitable adjustment based on the evidence on record. This
minimum equitable adjustment of 200 days is not only in accord with the governing contractual documents, but is demanded by applicable
law, construction industry practice, and the approval by the Project Manager.

B. As correctly found by the CIAC Arbitral Tribunal, the governing contractual documents do not require the consent or approval of
respondent MRTDC as a precondition to petitioner Filsystems's entitlement to technical time extension:
1. Under Article 20.07 of the General Conditions of the Bid Documents, if the owner orders changes in the work with cost and time impact,
an equitable adjustment shall be made. In such cases, there is no requirement for petitioner Filsystems to submit a request for time extension
and for the approval by the owner, PMT, or Project Manager.
2. Contrary to the ruling of the Court of Appeals, under Article 21.04 of the General Conditions of the Bid Documents, the PMT, through
the Project Manager as its authorized representative, has the authority to grant time extensions independent of the approval of respondent
MRTDC. As admitted by respondent MRTDC itself and as provided under the governing contractual documents, there is no requirement
for another approval by respondent MRTDC of any time extension as determined and granted by the Project Manager.
3. The Court of Appeals arbitrarily disregarded the facts and conclusion correctly found by the CIAC Arbitral Tribunal and borne by the
evidence on record, conrming that petitioner Filsystems complied with the contractual requirements for claiming time extension.
C. The determination of an equitable adjustment of time extension cannot be left solely to the discretion of one of the parties. If there is a
dispute between the parties as to what the equitable adjustment should be, then resort may be had to the arbitration machinery as
contractually agreed upon by the parties. In this case, the grant by the CIAC Arbitral Tribunal of the 200-day technical time extension is a
factual and technical determination of the minimum equitable adjustment of the completion period to which petitioner Filsystems is, at the
very least, entitled. There is nothing to show that the CIAC Arbitral Tribunal acted with grave abuse of discretion, arbitrarily arrived at its
ndings of facts, or disregarded evidence on record, in granting 200-day technical time extension, either as approved by the Project
Manager or as a determination of equitable adjustment.
D. Finally, assuming that the owner's approval is necessary, the 200-day technical time extension was deemed approved by respondent
MRTDC considering that, as correctly found by the CIAC Arbitral Tribunal, the Project Manager in this case already approved/granted a
technical time extension of 200 days which approval/grant, despite receipt by respondent MRTDC, has not been disapproved not revoked
by the latter.


First Issue: FSI is entitled to be paid early completion bonus based on technical time extension

The CIAC granted FSI's claim for early completion bonus to the extent of 94 days, awarding FSI the amount of USD 2,820,000, based on a
200-day technical time extension. There was no evidence presented before the CIAC to prove that MRTDC authorized any technical time
extension. However, FSI presented a timetable showing technical time extension up to August 2, 1999 which was approved by the Project
Manager, David Sampson. FSI is not claiming payment for the change orders directed by MRTDC through David Sampson, such change
orders having already been paid. What FSI is claiming is that it is entitled to an extension to the agreed completion date and consequently to
early completion bonus.
This award was deleted by the CA in its assailed Decision on the ground that in order to bind MRTDC to the change orders issued by the
Project Manager, the consent of MRTDC to modify its contract with FSI is required. Since MRTDC did not order nor authorize the
modication of the contract, it is not bound to honor or pay for the change orders. The CA reasoned, as follows:
Thus, if the change orders caused an increase or decrease in the amount due, i.e., contract cost, and in the time required for its performance,
i.e., completion period of the project, an equitable adjustment shall be made but it is a requirement that the "Contract shall be modified in
writing accordingly".
Inasmuch as an equitable adjustment required the modication of the contract in writing, We nd and so rule that it should be MRTDC as
a contracting party, who should give its consent to such contractual modication. This was necessitated by the fact that in case of directed
changes, the scope or nature of works to be performed were to be altered and there would be additional price or costs to be paid by the
owner of the project. Necessarily, there was direct impact on performance period of the obligation.Besides, this power was NOT delegated
by MRTDC in the above-quoted Clause 20.07 because only the authority to make the change orders was given to the PMT but it did not
extend such authority to bind MRTDC in modifying the contract in writing. NO such provision could be read or even implied from the
above-quoted contractual provision. 11

We do not agree with the CA.

A plain reading of par. (c) of Art. 20.07 would show that change orders can be executed immediately and that contract modication is not
a pre- condition for it. Nowhere in the above provisions is it stated that the modication of the contract is a requisite for the execution of
the change orders. It only states that in the event that such changes cause an increase or decrease in the amount due under the contract, or in
the time required for its performance, an equitable adjustment shall be made and the contract shall be modied in writing accordingly. This
means that the contract could be made to conform to the agreement that has already been agreed upon.

Besides, MRTDC's proposition is absurd.

MRTDC admits that the Project Manager could order changes in the Contract Work but cannot bind the owner to it. Having to await for the
consent of the owner to change orders would defeat the purpose of authorizing the Project Manager to order such changes.

While the general rule is one cannot be bound to a contract entered into by another person, there are exceptions, such as when the
contracting person was authorized to enter a contract on behalf of another, or when such contract was ratied, as enunciated in the Civil

Article 1317. No one may contract in the name of another without being authorized by the latter, or unless he has by law a right to represent

A contract entered into in the name of another by one who has no authority or legal representation, or who has acted beyond his powers
shall be unenforceable, unless it is ratied, expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked
by the other contracting party.
Here, David Sampson was clearly authorized to issue change orders. The relationship between MRTDC as the owner, PIJV as the PMT,
and David Sampson as the Project Manager is embodied in Sections 1.02, 1.03 and 1.05 of the General Conditions of the Bid Documents.
Said provisions state:
the person or entity ordering the project for execution, including duly appointed successors, or authorized representatives.
1.03 PROJECT MANAGEMENT TEAM (PMT): shall mean PARSONS-INTERPRO JV, the authorized representative of the Owner to
oversee the execution of the Contract Work, either directly or through the properly authorized agents. Such agents shall be acting within the
scope of the particular duties to them. They are responsible to the Owner through the PARSONS-INTERPRO JV Program Director or
Project Manager.
xxx xxx xxx
1.05 PROJECT MANAGER (PROJECT MANAGER): shall mean the personally authorized representative of the PMT.

Evidently, David Sampson was the representative or agent of PIJV who was engaged as the Project Manager by MRTDC. However, the
relationship between MRTDC and PIJV cannot be strictly characterized as a contract of agency.

The practice in the construction industry is that the Project Manager exercises discretion on technical matters involving the construction
work, such as change orders. This is because owners of the Project are oftentimes not technically suited to oversee the construction work
and hire professional project managers precisely to oversee the day-to-day operations on the construction site and to exercise professional
judgment when expedient. Thus, the CIAC ruled:
In practice, in case of a dispute between the owner and the contractor, the independent third party project manager will exercise his own
independent professional judgment and render his independent decision on technical matters such as adjustments in cost and time
occasioned by a change order which he issued.
This is the reason why the PMT and the Project Manager were authorized under Art. 20.07, par. (a) of the General Conditions of the Bid
Documents to modify the Contract Work. It may thus be concluded that the PMT and consequently the Project Manager were authorized by
the owner to modify the Contract or the Project Specifications.

xxx xxx xxx

It is very clear from the above quoted contractual provisions that equitable adjustment of the cost and time were due to change orders or
directed changes and they are different from the causes provided in Clause 21.04 which had reference to obstruction or delay in the
prosecution or completion of the project by act, neglect, delay or default of the owner. Despite the glaring differences in the meaning and
coverage of the foregoing contractual provisions, CIAC mistakenly quoted Clause 21.04 as the basis in recognizing that Mr. David
Sampson had the power or authority to bind MRTDC to a contract modication, a situation clearly governed by paragraph c of Clause
20.07 of the General Conditions of the Bid Documents. 20
This is wrong.Actually, the CIAC stated in its Award that:
Also from the above discussion, it is the PMT or the PROJECT MANAGER as representative of the Owner MRTDC which has the
authority to grant the technical time extensions based on change orders/deviation/act/neglect/delay or default of the Owner, in accordance
with Articles 21.04 and 20.07. However, the formal approval of MRTDC of the time extensions as approved and recommended by the
PMT/PROJECT MANAGER is of ministerial [sic] in nature, except for grave error or collusion which is not the case here. MRTDC should
have acted upon recommendations by its technical personnel, the Project Manager, who had the direct knowledge and with accurate
assessments of the construction activities in the project. It is not accurate to state that the whole PIJV is the Project Manager because it is
composed of the President, the Vice-President, the Construction Manager and the Area Engineers. Looking at the technical functions and
responsibilities, the Arbitral Tribunal holds that Dave Sampson is the Project Manager who had the authority to grant time extension being
the highest technical personnel in the field for submittal to the Owner's formal approval.

While MRTDC did not formally grant or approve any technical time extension, nevertheless Filsystems is entitled to time extension based
on the contract, the law and industry practice. This is clear from Articles 21.04 and 20.07 of the General Conditions of the Bid Documents
which are part of the contract between the parties. This conclusion is likewise justied by the construction industry practice and that of
Construction Industry Authority of the Philippines (CIAP)
The appellate court erred in ruling that Arts. 20.07 and 21.04 of the General Conditions of the Bid Documents cannot be harmonized and
applied simultaneously. To clarify, Art. 20.07 deals with changes in the Work, such as change orders and who may issue them. Art. 21.04,
on the other hand, deals with the circumstances that could allow for extension of time for completion of the work. An order by the owner
certainly is encompassed as an "act, neglect, delay, or default of the Owner".

In our view, the CIAC correctly cited Article 21.04 of the General Conditions of the Bid Documents and CIAP Document No. 102, par.
21.04-A(a) as giving authority to the Project Manager to modify the contract with regard the extension of the contract's completion date.
As to the observation that the performance period was extended after the completion of the Project, we note that the technical time
extension on the change orders was the subject of evaluation from both FSI and Project Technical Group of PIJV. Thus, the CIAC noted,
Both Filsystems and PTG's graphical representation had credited an average of 20-day technical time extensions for each
change/extra/variation orders affecting the critical path per project area. This average of 20-day technical time extension of all the
change/extra/variation orders was derived from the joint evaluations per project area and agreed by both the engineers and technical
personnel of Filsystems and the PTG who were directly involved in the eld, and adopted by the Area Construction Manager, as duly
authorized representatives of the Owner.

Clearly, it could be gleaned from the aforecited nding that the technical time extension could not have been submitted to MRTDC for
approval prior to the completion of the Project.

As to David Sampson's authority to approve such time extension at a time when the Project was already completed and his term as Project
Manager already terminated, note that he was the one who directed the change orders in the rst place, and, thus, he was uniquely situated
to approve the time extension relative to such change orders. He was the most competent person to do it. In addition, to delegate such
function to another person not privy to the change orders would render their results questionable at best.
Furthermore, although the construction of the Project was already completed, the winding up of the contractual obligations relative to the
Project was not yet nished. The bonus scheme employed by MRTDC could only be implemented upon the completion of the Project after
computing for time extensions. Although David Sampson may have been already employed as a consultant by MRTDC at the time that he
approved the 200-day technical time extension, it must be stressed that his engagement as the Project Manager did not end with the
completion of the construction works. David Sampson signed Certicate of Payment No. MRT-1299 dated July 22, 1999 22 as the Area
Construction Manager or Project Manager along with the signatures of: Gaudioso Del Rosario, AVP Operations; Augustus V. Salgado,
President; and an Owner's Representative. Patently, David Sampson was still engaged as the Project Manager at the time that he approved
the 200-day technical time extension.

Hence, FSI is entitled to the 200-day Technical Time Extension and, consequently, to the 94-day early accomplishment bonus awarded by
the CIAC.

The parties must equally share the arbitration costs

Philippine National Construction Corporation v. Court of Appeals provides the general rule in the determination of who should bear the
costs of arbitration, to wit:
In respect of the costs of arbitration, Sec. 5, Article XV of the Rules of Procedure Governing Construction Arbitration states:
Decision as to Cost of Arbitration. In the case of non-monetary claims or where the parties agreed that the sharing of fees shall be
determined by the Arbitrator(s), the award shall, in addition to dealing with the merits of the case, x the cost of arbitration,
and/or decide which of the parties shall bear the cost(s) or in what proportion the cost(s) shall be borne by each.

Rule 142 of the Revised Rules of Court of the Philippines governing the imposition of costs likewise provides the following:
Section 1. Costs Ordinarily follow the result of suit. Unless otherwise provided in these rules, costs shall be allowed to the prevailing party
as a matter of course, but the court shall have power for special reasons, to adjudge that either party shall pay the cost of an action, or that
the same shall be divided, as may be equitable. 27

In the instant case, there is no basis for assessing the arbitration costs against one party or the other, as the parties' prayers were only
partially granted. We nd it is just and equitable that both parties equally share the costs of arbitration.

WHEREFORE, the petition is hereby PARTIALLY GRANTED. The January 6, 2004 CA Decision is hereby MODIFIED with the
reinstatement of the CIAC's award to FSI of early accomplishment bonus in the amount of TWO MILLION EIGHT HUNDRED TWENTY
THOUSAND US DOLLARS (USD 2,820,000). The May 6, 2003 Award of the CIAC is AFFIRMED IN TOTO. No pronouncement as to
Aboitiz Transport System Corp v Gothong


ASC, CAGLI, and William Lines, Inc. (WLI), principally owned by the Aboitiz, Gothong, and Chiongbian families, respectively, entered
into an Agreement5 dated January 8, 1996, which was signed by Jon Ramon Aboitiz for ASC, Benjamin D. Gothong (Gothong) for CAGLI,
and respondent Chiongbian for WLI. In the said Agreement, ASC and CAGLI agreed to transfer their shipping assets to WLI in exchange
for the latters shares of capital stock. The parties likewise agreed that WLI would run the merged shipping business and be renamed
WG&A, Inc. Pertinently, Section 11.06 of the Agreement provides that all disputes arising out of or in connection with the Agreement
shall be finally settled by arbitration in accordance with Republic Act No. (RA) 876, otherwise known as The Arbitration Law,6 and that
each of the parties shall appoint one arbitrator, and the three arbitrators would then appoint the fourth arbitrator who shall act as Chairman.

Among the attachments to the Agreement was a letter7 dated January 8, 1996 written by respondent Chiongbian and addressed to Gothong,
stating that WLI committed to acquire from CAGLIs inventory certain spare parts and materials not exceeding P400 Million. In this
relation, a valuation of CAGLIs inventory was conducted wherein it was shown that the same amounted to P514 Million.8 Thereafter, WLI
received inventory valued at P558.89 Million, but only paid CAGLI the amount of P400 Million as agreed upon in the Agreement. 9
Dissatisfied, CAGLI sent to WLI various letters in 2001, demanding that the latter pay or return the inventory that it received in excess of
P400 Million.10cralawred

Sometime in 2002, the Chiongbian and Gothong families decided to sell their respective interests in WLI/WG&A to the Aboitiz family.
This resulted in the execution of a Share Purchase Agreement11 whereby Aboitiz Equity Ventures (AEV) agreed to purchase and acquire the
WLI/WG&A shares of the Chiongbian and Gothong families. Thereafter, the corporate name of WLI/WG&A was changed to

Six (6) years later, or in 2008, CAGLI sent a letter 13 dated February 14, 2008 to ATSC demanding that the latter pay the excess inventory it
delivered to WLI amounting to P158,399,700.00. CAGLI likewise demanded AEV and respondent Chiongbian that they refer their dispute
to arbitration.14 In response, AEV countered that the excess inventory had already been returned to CAGLI and that it should not be
included in the dispute, considering that it is an entity separate and distinct from ATSC. 15 Thus, CAGLI was constrained to file a
complaint16 before the RTC against Chiongbian, ATSC, ASC, and AEV to compel them to submit to arbitration.

For their part, ATSC and AEV moved for the dismissal of the case, contending that CAGLI did not have a cause of action for arbitration
since its claim had already been paid or otherwise, extinguished, and, in any event, said action had already prescribed

Issue: WON respondent Chiongbian should be excluded from the arbitration proceedings.


B. Parties covered by Arbitration Proceedings.

Section 2 of RA 876 specifies who may be subjected to arbitration, to wit:chanRoblesvirtualLawlibrary

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.


In Gonzales, the Court explained that [d]isputes 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. 38 Furthermore, in Del Monte Corporation
USA v. Court of Appeals,39 the Court stated that [t]he provision to submit to arbitration any dispute arising therefrom and the relationship
of the parties is part of that contract. As a rule, contracts are respected as the law between the contracting parties and produce effect as
between them, their assigns and heirs.40 Succinctly put, only those parties who have agreed to submit a controversy to arbitration who, as
against each other, may be compelled to submit to arbitration.

In the present case, Section 11.06 of the Agreement, which embodies the Arbitration Agreement among the parties,

All disputes arising out of or in connection with this Agreement including any issue as to this Agreement's validity or enforceability, which
cannot be settled amicably among the parties, shall be finally settled by arbitration in accordance with the Arbitration Law (Republic Act
No. 876) by an arbitration tribunal composed of four (4) arbitrators. Each of the parties shall appoint one (1) arbitrator, the three (3) to
appoint the fourth arbitrator who shall act as Chairman. Any award by the arbitration tribunal shall be final and binding upon the parties
and shall be enforced by judgment of the Courts of Cebu or Metro Manila. 41

The three parties to the Agreement and necessarily to the arbitration agreement embodied therein are: (a) ASC, (b) CAGLI, and (c)
WLI/WG&A/ATSC. Contracts, like the subject arbitration agreement, take effect only between the parties, their assigns and heirs. 42
Respondent Chiongbian, having merely physically signed the Agreement as a representative of WLI, is not a party thereto and to the
arbitration agreement contained therein. Neither is he an assignee or an heir of any of the parties to the arbitration agreement. Hence,
respondent Chiongbian cannot be included in the arbitration proceedings.

WHEREFORE, the petitions are GRANTED. The Orders dated August 13, 2010, April 15, 2011, and July 6, 2011 of the Regional Trial
Court of Cebu City, Branch 20 (RTC) in Civil Case No. CEB-34951 are hereby REVERSED and SET ASIDE. The Order dated February
26, 2010 of the RTC is REINSTATED with MODIFICATION excluding Victor S. Chiongbian from the arbitration proceedings.

DENR v. United Planners Consultants Inc.


On July 26, 1993, petitioner, through the Land Management Bureau (LMB), entered into an Agreement for Consultancy Services
(Consultancy Agreement) with respondent United Planners Consultants, Inc. (respondent) in connection with the LMBs Land Resource
Management Master Plan Project (LRMMP). Petitioner was able to pay only 47% of the total contract price.

For failure to pay its obligation under the Consultancy Agreement despite repeated demands, respondent instituted a Complaint against
petitioner before the Regional Trial Court of Quezon City. Upon motion of respondent, the case was subsequently referred to arbitration
pursuant to the arbitration clause of the Consultancy Agreement, which petitioner did not oppose.

During the preliminary conference, the parties agreed to adopt the CIAC Revised Rules Governing Construction Arbitration (CIAC Rules)
to govern the arbitration proceedings. They further agreed to submit their respective draft decisions in lieu of memoranda of arguments on
or before April 21, 2010, among others. On the due date for submission of the draft decisions, however, only respondent complied with the
given deadline.

The Arbitral Tribunal rendered its Award dated May 7, 2010 (Arbitral Award) in favor of respondent, directing petitioner to pay.

Unconvinced, petitioner filed a motion for reconsideration, which the Arbitral Tribunal merely noted without any action, claiming that it
had already lost jurisdiction over the case after it had submitted to the RTC its Report together with a copy of the Arbitral Award.

Consequently, petitioner filed before the RTC a Motion for Reconsideration29 dated May 19, 2010 (May 19, 2010 Motion for
Reconsideration) and a Manifestation and Motion30 dated June 1, 2010 (June 1, 2010 Manifestation and Motion). In an Order dated
March 30, 2011, the RTC merely noted petitioners aforesaid motions

The RTC confirmed the Arbitral Award. From this order, petitioner did not file a motion for reconsideration.

Thus, on June 15, 2011, respondent moved for the issuance of a writ of execution, to which no comment/opposition was filed by petitioner
despite the RTCs directive therefor. In an Order dated September 12, 2011, the RTC granted respondents motion.

Issue: WON ROC can be applied suppletority to the ADR Rules


Rules of Court cannot be applied suppletorily to the ADR Rules

While it appears that the Special ADR Rules remain silent on the procedure for the execution of a confirmed arbitral award, it is the
Courts considered view that the Rules procedural mechanisms cover not only aspects of confirmation but necessarily extend to a
confirmed awards execution in light of the doctrine of necessary implication which states that every statutory grant of power, right
or privilege is deemed to include all incidental power, right or privilege. In Atienza v. Villarosa, the doctrine was explained, thus:

No statute can be enacted that can provide all the details involved in its application. There is always an omission that may not meet a
particular situation. What is thought, at the time of enactment, to be an all-embracing legislation may be inadequate to provide for the
unfolding of events of the future. So-called gaps in the law develop as the law is enforced. One of the rules of statutory construction used to
fill in the gap is the doctrine of necessary implication. The doctrine states that what is implied in a statute is as much a part thereof as that
which is expressed.

Every statute is understood, by implication, to contain all such provisions as may be necessary to effectuate its object and purpose,
or to make effective rights, powers, privileges or jurisdiction which it grants, including all such collateral and subsidiary
consequences as may be fairly and logically inferred from its terms. Ex necessitate legis. And every statutory grant of power, right
or privilege is deemed to include all incidental power, right or privilege. This is so because the greater includes the lesser, expressed in
the maxim,in eo plus sit, simper inest et minus. (Emphases supplied)

As the Court sees it, execution is but a necessary incident to the Courts confirmation of an arbitral award. To construe it otherwise
would result in an absurd situation whereby the confirming court previously applying the Special ADR Rules in its confirmation of
the arbitral award would later shift to the regular Rules of Procedure come execution.
Irrefragably, a courts power to confirm a judgment award under the Special ADR Rules should be deemed to include the power to order
its execution for such is but a collateral and subsidiary consequence that may be fairly and logically inferred from the statutory grant to
regional trial courts of the power to confirm domestic arbitral awards.

All the more is such interpretation warranted under the principle of ratio legis est anima which provides that a statute must be read
according to its spirit or intent, for what is within the spirit is within the statute although it is not within its letter, and that which is
within the letter but not within the spirit is not within the statute. Accordingly, since the Special ADR Rules are intended to achieve
speedy and efficient resolution of disputes and curb a litigious culture, every interpretation thereof should be made consistent with
these objectives.

Thus, with these principles in mind, the Court so concludes that the Special ADR Rules, as far as practicable, should be made to
apply not only to the proceedings on confirmation but also to the confirmed awards execution.

Further, let it be clarified that contrary to petitioners stance resort to the Rules of Court even in a suppletory capacity is not allowed.
Rule 22.1 of the Special ADR Rules explicitly provides that [t]he provisions of the Rules of Court that are applicable to the
proceedings enumerated in Rule 1.1 of these Special ADR Rules have either been included and incorporated in these Special ADR
Rules or specifically referred to herein.

Besides, Rule 1.13 thereof provides that [i]n situations where no specific rule is provided under the Special ADR Rules, the court
shall resolve such matter summarily and be guided by the spirit and intent of the Special ADR Rules and the ADR Laws.

Despite the finality of the confirmed final award, the money claim is still subject to COAs primary jurisdiction
There is a need to explicate the matter of execution of the confirmed Arbitral Award against the petitioner, a government agency, in the
light of Presidential Decree No. (PD) 1445 otherwise known as the Government Auditing Code of the Philippines.
Section 26 of PD 1445 expressly provides that execution of money judgment against the Government or any of its subdivisions, agencies
and instrumentalities is within the primary jurisdiction of the COA, to wit: xxx
From the foregoing, the settlement of respondents money claim is still subject to the primary jurisdiction of the COA despite finality
of the confirmed arbitral award by the RTC pursuant to the Special ADR Rules. Hence, the respondent has to first seek the approval
of the COA of their monetary claim. This appears to have been complied with by the latter when it filed a Petition for Enforcement and
Payment of Final and Executory Arbitral Award before the COA. Accordingly, it is now the COA which has the authority to rule on this
latter petition.

Respondent San Fernando Regala Trading filed with the RTC of Makati City a Complaint for Rescission of Contract with Damages against
petitioner Cargill. It alleged that it agreed that it would purchase from Cargill 12,000 metric tons of Thailand origin cane blackstrap
molasses and that the payment would be by an Irrevocable Letter of Credit payable at sight. The parties agreed that the delivery would
be made in April/May. Cargill failed to comply with its obligations despite demands from respondent. The respondent then filed for
rescission. The petitioner filed a Motion to Dismiss/Suspend proceeding, arguing that they must first resort to arbitration as stated in their
agreement before going to court:

"Any dispute which the Buyer and Seller may not be able to settle by mutual agreement shall be settled by arbitration in the City of New
York before the American Arbitration Association. The Arbitration Award shall be final and binding on both parties."

Cargill moved to dismiss and/or suspend the court proceedings citing the arbitration clause. San Fernando Regala Trading argued that since
it was seeking rescission of the contract, it was in effect repudiating the contract which included the arbitration clause. Further, it argued
that rescission constitutes a judicial issue, which requires the exercise of judicial function and cannot be the subject of arbitration.

RTC ruled in favor of the respondent. The CA affirmed the RTC decision, adding that the case cannot be brought under the Arbitration
Law for the purpose of suspending the proceedings before the RTC, since in its Motion to Dismiss/Suspend proceedings, petitioner
alleged, as one of the grounds thereof, that the subject contract between the parties did not exist or it was invalid; that the said
contract bearing the arbitration clause was never consummated by the parties, thus, it was proper that such issue be first
resolved by the court through an appropriate trial; that the issue involved a question of fact that the RTC should first resolve.

ISSUE: Whether the CA erred in finding that this case cannot be brought under the arbitration law for the purpose of suspending the
proceedings in the RTC.

HELD: The petition is meritorious.

CIVIL LAW - Arbitration; alternative dispute resolution; contracts
Arbitration, as an alternative mode of settling disputes, has long been
recognized and accepted in our jurisdiction.

R.A. No. 876 authorizes arbitration of domestic disputes. Foreign arbitration, as a system of settling commercial disputes of an
international character, is likewise recognized. The enactment of R.A. No. 9285 on April 2, 2004 further institutionalized the use
of alternative dispute resolution systems, including arbitration, in the settlement of disputes.

A contract is required for arbitration to take place and to be binding.

Submission to arbitration is a contract and a clause in a contract providing that all matters in dispute between the parties
shall be referred to arbitration is a contract.

The provision to submit to arbitration any dispute arising therefrom and the relationship of the parties is part of the contract
and is itself a contract.

The validity of the contract containing the agreement to submit to arbitration does not affect the applicability of the arbitration clause
itself. A contrary ruling would suggest that a party's mere repudiation of the main contract is sufficient to avoid arbitration. That is
exactly the situation that the separability doctrine, as well as jurisprudence applying it, seeks to avoid.
While actions for rescission and damages are ordinarily judicial matters, the dispute at hand was to be referred to arbitration because the
contract which the plaintiff sought to have rescinded included an arbitration agreement

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

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

Petition is GRANTED.



Philippine Kingford, Inc. (Kingford) is a corporation duly organized and existing under the laws of the Philippines while Tuna Processing,
Inc. (TPI) is a foreign corporation not licensed to do business in the Philippines.

Due to circumstances not mentioned in the case, Kingford withdrew from petitioner TPI and correspondingly, reneged on their obligations.
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. To enforce the award, petitioner TPI filed a Petition for Confirmation, Recognition, and
Enforcement of Foreign Arbitral Award before the RTC of Makati City. The RTC dismissed the petition on the ground that the petitioner
lacked legal capacity to sue in the Philippines.

RTC denied for petitioners lack of capacity to sue

ISSUE: 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?

HELD: RTCs decision is reversed.

POLITICAL LAW: special vs. general law

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 (Corporation code)

However, in accordance with Republic Act No. 9285 (Alternative Dispute Resolution Act of 2004), 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),
none of these specifically requires that the party seeking for the enforcement should have legal capacity to sue

in Koruga v. Arcenas, Jr. the court 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 (special)shall prevail

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. It specifically provides exclusive grounds available to the party opposing an
application for recognition and enforcement of the arbitral award. The Corporation Code is the general law providing for the formation,
organization and regulation of private corporations.

As between a general and special law, the latter shall prevail generalia specialibus non derogant.

The Special Rules of Court on Alternative Dispute Resolution provides that any party to a foreign arbitration may petition the court to
recognize and enforce a foreign arbitral award.Indeed, it is in the best interest of justice that in the enforcement of a foreign arbitral award,
the losing party can not avail 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.
GR No. 172146; July 30, 2008

Nature of the case

For review under Rule 45 of the Rules of Court are the Decision] and Resolution of the CA, which reversed the Decision of the DARAB,
and reinstated the Decision of the Provincial Adjudicator in DARAB Cases No. 6489-6492 (Reg. Case Nos. 234-T91, 396-T93, 397-T93
and 827-T95).

1. DARAB Case No. 234-T91: Filed by petitioners and their predecessors-in interest against respondents for maintenance of peaceful
possession and for issuance of a writ of preliminary injunction. Petitioners contended that they had been farmers and full-fledged
tenants for more than 30 years of an agricultural landholding which was previously owned and registered in the name of Josefina
Roxas Omaa (JOSEFINA). Petitioners alleged that subject landholding is covered by RA 6657, but was sold by JOSEFINA to
respondents in contravention of the law. Meanwhile, LEAL HAVEN converted a portion of the subject landholding into a
memorial park. It is petitioners stance that when respondents entered into a contract of sale with JOSEFINA, they were aware of
the tenancy relationship which existed between petitioners and JOSEFINA.
2. DARAB Case No. 396-T93: Filed by petitioners against respondent LEAL REALTY and SPS. TUGADI for violation of RA 6657,
annulment of documents, title and damages. In addition, petitioners posited that LEAL REALTY executed a Deed of Absolute
Sale in favor of the SPS. TUGADI without proper conversion of the lot from agricultural to non-agricultural in breach of the
3. DARAB Case No. 397-T93: Filed by petitioners against respondent LEAL REALTY and SPS. ALCAZAREN for violation of
Republic Act No. 6657, annulment of documents, title and damages. Petitioners questioned the subdivision of the subject
landholding into smaller lots as contrary to law.
4. DARAB Case No. 329-T95: Filed by LEAL REALTY, with the PARAB (Tarlac) against petitioner Nita Cornes-Valenzuela
(VALENZUELA), for injunction with prayer for TRO and PI. LEAL REALTY alleged that despite its objection, VALENZUELA
constructed a residential house within the premises of the subject landholding; hence, it prayed for the removal of the construction
at VALENZUELAs expense.

Provincial Adjudicator Ruling

Dismissed Cases No. 234-T91, No. 396-T93, and No. 397-T93; Granted DARAB Case No. 329-T95. There was no tenancy relationship
which existed between the parties.

DARAB Ruling
Vacated the appealed Decision, declaring petitioners as bona fide tenants of the subject landholding. Right to security of tenure does not
only apply to bona fide tenants; but also to actual tillers of the land. It also declared that there was an implied tenancy between the
parties. The DARAB ruled that for more than 30 years, the petitioners were deemed tenants of the subject landholding.

CA Ruling
Granted respondents Petition for Review. The fact that petitioners had worked on the subject landholding did not give rise to the existence
of a tenancy relationship. MR denied.

Whether or not petitioners and their predecessors-in-interest are tenants de jure of the subject landholding

SC Ruling


In order for a tenancy agreement to arise, it is essential to establish all its indispensable elements, viz: 1) the parties are the landowner and
the tenant or agricultural lessee; 2) the subject matter of the relationship is an 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.

Petitioners failed to adduce substantial evidence to show the existence of all the indispensable requisites for the constitution of a tenancy

While it might have been shown and not contested that petitioners predecessors-in-interest, namely JACINTO, PABLO, JUANITO and
FRANCISCO occupied the subject landholding as tillers thereof, the records support the fact that their occupancy was in the nature of hired
laborers of JOSEFINA. As can be gleaned from the Entry No. E-17-7182 covering the subject landholding in the name of JOSEFINA, the
same was not tenanted. Moreover, Entry No. E-22-4361, also annotated on the aforesaid certificate of title, is explicit that the subject
landholding is not tenanted. Further, the records reveal that petitioners predecesssors-in-interest executed an affidavit attesting that they
were working on the subject landholding as hired laborers only. The fact alone of working on anothers landholding does not raise a
presumption of the existence of agricultural tenancy.

Neither was it shown to the satisfaction of this Court that there existed a sharing of harvests in the context of a tenancy relationship between
petitioners and/or their predecessors-in-interest and JOSEFINA. Jurisprudence is illuminating to the effect that to prove such sharing of
harvests, a receipt or any other evidence must be presented. None was shown, except the testimony of petitioner Rodolfo Cornes, which is
self-serving and is without evidentiary value.

The testimony of Araceli Pascua, an employee of the DAR in Victoria, Tarlac, that the subject landholding was tenanted cannot overcome
substantial evidence to the contrary. What cannot be ignored is the precedent ruling of this Court that the findings of or certifications issued
by the Secretary of Agrarian Reform, or his authorized representative, in a given locality concerning the presence or absence of a tenancy
relationship between the contending parties, are merely preliminary or provisional and are not binding upon the courts.

The element of consent in the creation of the tenancy relationship was sorely missing. As was seen earlier, even petitioners predecessors-in-
interest were unequivocal in their admission that they worked as hired laborers on the subject landholding. The intent, if any, to institute
them as tenants of the landholdings was debunked by their very admission.

One glaring factor that strikes the mind of this Court is the fact that petitioners did not implead JOSEFINA, who is an indispensable party.
Santos v. Heirs of Dominga Lustre


In Civil Case No. 1330, Cecilia Macaspac and Tarcisio Maniquiz, both heirs of Dominga Lustre, filed with the Regional Trial Court (RTC)
of Gapan, Nueva Ecija, a Complaint for Declaration of the Inexistence of Contract, Annulment of Title, Reconveyance and Damages
against Froilan M. Santos, son of the appellant spouses.

Civil Case No. 2115 was instituted while Civil Case no. 1330 was pending, It was filed by Lustres other heirs against the parties of this
case. They averred that the sale of the property to Natividad Santos was simulated, spurious or fake, and that they discovered that spouses
Santos transferred the property to Froilan Santos when the latter filed an ejectment suit against them. Thereafter, Froilan Santos, through
fraud and deceit, succeeded in transferring the property.

The RTC denied the respondents petition to dismiss. The petitioners claimed that the second action must be dismissed based on it being
barred by litis pendetia and prescription and laches.


1. Whether the second action is barred by litis pendentia.

2. Whether the action for reconveyance on the ground that the certificate of title was obtained by means of a fictitious deed of sale is
virtually an action for the declaration of its nullity, which does not prescribe.


1. No, the second action is not barred by litis pendentia because there is no identity of parties. In the case, respondents are not guilty
of forum shopping because the element of identity of parties is not present. The plaintiff in Civil Case No. 1330 does not, in fact,
share a common interest with the plaintiffs in Civil Case No. 2115.

Forum shopping exists when the elements of litis pendentia are present or when a final judgment in one case will amount to res judicata in
the other. Among its elements are identity of the parties, identity of the subject matter and identity of the causes of action in the two cases.

Plaintiff Cecilia Macaspac in Civil Case No. 1330 filed the complaint seeking the reconveyance of the property to her, and not to Dominga
Lustre or her heirs. This is a clear act of repudiation of the co-ownership which would negate a conclusion that she acted in privity with the
other heirs or that she filed the complaint in behalf of the co-ownership. In contrast, respondents were evidently acting for the benefit of the
co-ownership when they filed the complaint in Civil Case No. 2115.

2. Yes. The action for reconveyance on the ground that the certificate of title was obtained by means of a fictitious deed of sale is
virtually an action for the declaration of its nullity, which does not prescribe.Moreover, a person acquiring property through fraud
becomes, by operation of law, a trustee of an implied trust for the benefit of the real owner of the property. An action for
reconveyance based on an implied trust prescribes in ten years. And in such case, the prescriptive period applies only if there is an
actual need to reconvey the property as when the plaintiff is not in possession of the property. Otherwise, if plaintiff is in
possession of the property, prescription does not commence to run against him. Thus, when an action for reconveyance is
nonetheless filed, it would be in the nature of a suit for quieting of title, an action that is imprescriptible

It follows then that the respondents present action should not be barred by laches. Laches is a doctrine in equity, which may be used only
in the absence of, and never against, statutory law. Obviously, it cannot be set up to resist the enforcement of an imprescriptible legal right.
Autocorp group v. ISAC