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1. Gilat Satellite Networks, Ltd. v. United Coconut defendant UCPB.

One Virtual likewise failed to pay on the


Planters Bank succeeding payment installment date of 30 November 2000
General Insurance Co., Inc., G.R. No. 189563, April 7, 2014 prompting GILAT to send a second demand letter dated
January 24, 2001, for the payment of the full amount of
Facts: US$1,200,000.00 guaranteed under the surety bond, plus
interests and expenses and which letter was received by the
On September 15, 1999, One Virtual placed with GILAT defendant surety on January 25, 2001. However, defendant
a purchase order for various telecommunications equipment UCPB failed to settle the amount of US$1,200,000.00 or a
(sic), accessories, spares, services and software, at a total part thereof, hence, the instant complaint.
purchase price of Two Million One Hundred Twenty Eight RTC- rendered decision in favor of plaintiff and against the
Thousand Two Hundred Fifty Dollars (US$2,128,250.00). Of defendant
the said purchase price for the goods delivered, One Virtual SC - Plaintiff-appellant Gilat Satellite Networks Ltd., and
promised to pay a portion thereof totaling US$1.2 Million One Virtual are ordered to proceed to arbitration, the
in accordance with the payment schedule dated 22 November outcome of which shall necessary bind the parties, including
1999. To ensure the prompt payment of this amount, it the surety, defendant-appellant United Coconut Planters Bank
obtained defendant UCPB General Insurance Co., Inc. 's surety General Insurance Co., Inc.
bond dated 3 December 1999, in favor of GILAT.
During the period between September 1999 and June ISSUE: Whether or not the CA erred in dismissing the case
2000, GILAT shipped and delivered to One Virtual the and ordering petitioner and One Virtual to arbitrate.
purchased products and equipment, as evidenced by airway
bills/Bill of Lading. All of the equipment (including the RULLING:
software components for which payment was secured by the
surety bond, was shipped by GILAT and duly received by One YES,
Virtual. The assailed Decision and Resolution of the Court of
One Virtual failed to pay GILAT the amount of Appeals are REVERSED
(US$400,000.00) on the due date of May 30, 2000 The decision of RTC is reinstated.
in accordance with the payment scheduled prompting GILA T
to write the surety defendant UCPB on June 5, 2000, a The existence of a suretyship 
agreement does not give the
demand letter for payment of the said amount of suretyship the right to intervene in the principal
 contract,
US$400,000.00. No part of the amount set forth in this nor can an arbitration
 clause between the buyer and the

demand has been paid to date by either One Virtual or seller be invoked by a non-party such
 as the surety.
Section 24 of Republic Act No. 928542 is clear in stating that a judgment in favour of the spouses and ordered Stronghold to
referral to arbitration may only take place "if at least one pay them P4.5 Million plus 6% interest from the time of first
party so requests not later than the pre-trial conference, or demand. Both parties appealed to the CA. The latter decided
upon the request of both parties thereafter." Respondent has in favour of the spouses, and dismissed the appeal of
not presented even an iota of evidence to show that either Stronghold. Stronghold, without declaring in its petition for
petitioner or One Virtual submitted its contesting claim review on certiorari with the Supreme Court that it filed a
for arbitration. Partial Motion for Reconsideration of the CA, elevated the
case to the Supreme Court. It agues that the RTC had no
Strong hold vs Sps Stroem jurisdiction over the case, as it is the Construction Industry
Arbitration Committee which had jurisdiction over the subject
The Facts: matter, pursuant to the arbitration clause in the agreement
between the spouses and Asis-Leif, which are part and parcel
Rune and Lea (Spouses Stroem) entered into an Owners- of the conditions of the bond. Were it not for such
Contractor Agreement for the construction of a two-storey stipulations, Stronghold would not have agreed to the bond.
building with Asis-Leif & Company, Inc., Pursuant to the Likewise, Stronghold is liable only for the amount of the
agreement, Asis-Leif and Cynthia Asis-Leif secured unfinished work, not the entire obligation. On the other hand,
Performance Bond No. LP/G(13)83056 from Stronghold the spouses argue otherwise. They aver that Stronghold was
Insurance Company, Inc. (Stronghold), binding themselves guilty of forum-shopping; the Owners-Contractor Agreement
jointly and severally to pay the spouses Stroem the agreed is separate and distinct from the Performance Bond; the
amount of P4.5 Million in the event the construction project is company is liable to them for the entire amount as the terms
not finished. The company did not finish the project, and an of the bond clearly show that Stronghold bound itself as a
independent appraisal firm hired by the spouses to evaluate surety. Therefore, notice to Stronghold is not required for it
the project’s progress evaluated it as to percentage of to be liable.
completion: 47.53% of the residential building, 65.62% of the
garage, and 13.32% of the swimming pool, fence, gate, and The Issues:
land development. Despite demand from the spouses Stroem
for Asis-Leif to settle its obligations, no response was received 1. Whether or not Stronghold was guilty of forum shopping;
from the company. Hence, the spouses filed a Complaint with
Preliminary Attachment against Asis-Leif, Cunthia Asis-Leif, 2. Whether or not the CIAC, not the RTC had jurisdiction over
and Stronghold, for breach of contract and sum of money. the case;
Only Stronghold answered the summons, as Asis-Leif
absconded the country. After trial, the RTC rendered
3. Whether or not Stronghold is liable under the Performance Appeals’ Resolution requiring Comment on the Motion for
Bond; if so, the extent of its liability; and the nature of tis Partial Reconsideration. Still, petitioner did not disclose in its
liability, as an ordinary suretyship or as a corporate suretyship. Verification and Certification Against Forum Shopping the
pendency of respondents’ Motion for Partial Reconsideration.
The Court’s ruling:
For its part, petitioner claims that it did not commit forum
After considering the parties’ arguments and the records of shopping. It fully disclosed in its Petition that what it sought
this case, this court resolves to deny the Petition. to be reviewed was the Decision dated November 20, 2012 of
the Court of Appeals. “Petitioner merely exercised its
On forum-shopping available remedy with respect to the Decision of the Court of
Appeals by filing [the] Petition.” What the rules mandate to
Respondents argue that petitioner committed forum be stated in the Certification Against Forum Shopping is the
shopping; hence, the case should have been dismissed status of “any other action.” This other action involves the
outright. same issues and parties but is an entirely different case.

Records show that petitioner received a copy of the Decision Indeed, petitioner is guilty of forum shopping.
of the Court of Appeals on December 5, 2012. Petitioner did
not file a Motion for Reconsideration of the assailed Decision. There is forum shopping when:
It filed before this court a Motion for Extension of Time To File
Petition for Review requesting an additional period of 30 days as a result of an adverse opinion in one forum, a party seeks a
from December 20, 2012 or until January 19, 2013 to file the favorable opinion (other than by appeal or certiorari) in
Petition. another. The principle applies not only with respect to suits
filed in the courts but also in connection with litigations
Respondents filed their Motion for Partial Reconsideration of commenced in the courts while an administrative proceeding
the Court of Appeals Decision on December 11, 2012. They is pending[.] (Citation omitted)
sought the modification of the Decision as to the amounts of
moral damages, exemplary damages, attorney’s fees, and This court has enumerated the elements of forum-shopping:
costs of the suit. “(a) identity of parties, or at least such parties as represent the
same interests in both actions; (b) identity of rights asserted
Respondents alleged in their Comment that as early as and reliefs prayed for, the reliefs being founded on the same
January 9, 2013, petitioner received a copy of the Court of facts; and (c) the identity with respect to the two preceding
particulars in the two cases is such that any judgment Petitioner failed to carry out its duty of promptly informing
rendered in the pending cases, regardless of which party is this court of any pending action or proceeding before this
successful, amount to res judicata in the other case.” court, the Court of Appeals, or any other tribunal or agency.
This court cannot countenance petitioner’s disregard of the
Rule 42, Section 2 in relation to Rule 45, Section 4 of the Rules rules.
of Court mandates petitioner to submit a Certification Against
Forum Shopping and promptly inform this court about the This court has held before that:
pendency of any similar action or proceeding before other
courts or tribunals. The rule’s purpose is to deter the [u]ltimately, what is truly important to consider in
unethical practice of pursuing simultaneous remedies in determining whether forum-shopping exists or not is the
different forums, which “wreaks havoc upon orderly judicial vexation caused the courts and parties-litigant by a party who
procedure.” Failure to comply with the rule is a sufficient asks different courts and/or administrative agencies to rule on
ground for the dismissal of the petition. the same or related causes and/or to grant the same or
substantially the same reliefs, in the process creating the
Records show that petitioner’s duly authorized officer possibility of conflicting decisions being rendered by the
certified the following on January 21, 2013: different fora upon the same issue. (Emphasis supplied)

4. I further certify that: (a) I have not commenced any other On this basis, this case should be dismissed.
action or proceeding involving the same issues in the Supreme
Court, Court of Appeals, or any other tribunal or agency; (b) to On arbitration and the CIAC’s jurisdiction
the best of my knowledge, no such action or proceeding is
pending in the Supreme Court, the Court of Appeals or Petitioner changed the theory of its case since its participation
different Divisions thereof, or any tribunal or agency; (c) if I in the trial court proceedings. It raised the issue of lack of
should thereafter learn that a similar action or proceeding has jurisdiction in view of an arbitration agreement for the first
been filed or is pending before the Supreme Court, the Court time.
of Appeals, or different Divisions thereof, or any other tribunal
or agency, I undertake to promptly inform the aforesaid courts Generally, parties may not raise issues for the first time on
and such tribunal or agency of the fact within five (5) days appeal. Such practice is violative of the rules and due process
therefrom. and is frowned upon by the courts. However, it is also well-
settled that jurisdiction can never be waived or acquired by
estoppel. Jurisdiction is conferred by the Constitution or by
law. “Lack of jurisdiction of the court over an action or the
subject matter of an action cannot be cured by the silence, by SEC. 35. Coverage of the Law. – Construction disputes which
acquiescence, or even by express consent of the parties.” fall within the original and exclusive jurisdiction of the
Construction Industry Arbitration Commission (the
Section 4 of Executive Order No. 1008 is clear in defining the “Commission”) shall include those between or among parties
exclusive jurisdiction of the CIAC: to, or who are otherwise bound by, an arbitration agreement,
directly or by reference whether such parties are project
SECTION 4. Jurisdiction – The CIAC shall have original and owner, contractor, subcontractor, quantity surveyor,
exclusive jurisdiction over disputes arising from, or connected bondsman or issuer of an insurance policy in a construction
with, contracts entered into by parties involved in project.
construction in the Philippines, whether the dispute arises
before or after the completion of the contract, or after the The Commission shall continue to exercise original and
abandonment or breach thereof. These disputes may involve exclusive jurisdiction over construction disputes although the
government or private contracts. For the Board to acquire arbitration is “commercial” pursuant to Section 21 of this Act.
jurisdiction, the parties to a dispute must agree to submit the (Emphasis supplied)
same to voluntary arbitration.
In Heunghwa Industry Co., Ltd., v. DJ Builders Corporation,
The jurisdiction of the CIAC may include but is not limited to this court held that “there are two acts which may vest the
violation of specifications for materials and workmanship; CIAC with jurisdiction over a construction dispute. One is the
violation of the terms of agreement; interpretation and/or presence of an arbitration clause in a construction contract,
application of contractual time and delays; maintenance and and the other is the agreement by the parties to submit the
defects; payment, default of employer or contractor and dispute to the CIAC.”
changes in contract cost.
This court has ruled that when a dispute arises from a
Excluded from the coverage of this law are disputes arising construction contract, the CIAC has exclusive and original
from employer-employee relationships which shall continue jurisdiction. Construction has been defined as referring to “all
to be covered by the Labor Code of the Philippines. (Emphasis on-site works on buildings or altering structures, from land
supplied) clearance through completion including excavation, erection
and assembly and installation of components and equipment.”
Similarly, Section 35 of Republic Act No. 9285 or the
Alternative Dispute Resolution Act of 2004 states:
In this case, there is no dispute as to whether the Owners- The delay in the construction project resulted in ALI’s
Contractor Agreement between Asis-Leif and respondents is a termination of the contract and claim against the performance
construction contract. Petitioner and respondents recognize bond. “ALI [subsequently] commenced arbitration
that CIAC has jurisdiction over disputes arising from the proceedings against KRDC and PGAI in the CIAC.” PGAI,
agreement. however, argued that it was not a party to the construction
contract.
What is at issue in this case is the parties’ agreement, or lack
thereof, to submit the case to arbitration. Respondents argue The CIAC ruled that PGAI was not liable under the
that petitioner is not a party to the arbitration agreement. performance bond. Upon review, the Court of Appeals held
Petitioner did not consent to arbitration. It is only respondent that PGAI was jointly and severally liable with KRDC under the
and Asis-Leif that may invoke the arbitration clause in the performance bond.
contract.
PGAI appealed the Court of Appeals Decision and claimed that
This court has previously held that a performance bond, which CIAC did not have jurisdiction over the performance bond.
is meant “to guarantee the supply of labor, materials, tools, This court ruled:
equipment, and necessary supervision to complete the
project[,]” is significantly and substantially connected to the A guarantee or a surety contract under Article 2047 of the Civil
construction contract and, therefore, falls under the Code of the Philippines is an accessory contract because it is
jurisdiction of the CIAC. dependent for its existence upon the principal obligation
guaranteed by it.
Prudential Guarantee and Assurance Inc. v. Anscor Land, Inc.
involved circumstances similar to the present case. In In fact, the primary and only reason behind the acquisition of
Prudential, property owner Anscor Land, Inc. (ALI) entered the performance bond by KRDC was to guarantee to ALI that
into a contract for the construction of an eight-unit the construction project would proceed in accordance with
townhouse located in Capitol Hills, Quezon City with the contract terms and conditions. In effect, the performance
contractor Kraft Realty and Development Corporation (KRDC). bond becomes liable for the completion of the construction
KRDC secured the completion of the construction project project in the event KRDC fails in its contractual undertaking.
through a surety and performance bond issued by Prudential
Guarantee and Assurance Inc. (PGAI). Because of the performance bond, the construction contract
between ALI and KRDC is guaranteed to be performed even if
KRDC fails in its obligation. In practice, a performance bond is
usually a condition or a necessary component of construction It is settled that the surety’s solidary obligation for the
contracts. In the case at bar, the performance bond was so performance of the principal debtor’s obligation is indirect
connected with the construction contract that the former was and merely secondary. Nevertheless, the surety’s liability to
agreed by the parties to be a condition for the latter to push the “creditor or promisee of the principal is said to be direct,
through and at the same time, the former is reliant on the primary and absolute; in other words, he is directly and
latter for its existence as an accessory contract. equally bound with the principal.”

Although not the construction contract itself, the performance Verily, “[i]n enforcing a surety contract, the ‘complementary-
bond is deemed as an associate of the main construction contracts-construed-together’ doctrine finds application.
contract that it cannot be separated or severed from its According to this principle, an accessory contract must be read
principal. The Performance Bond is significantly and in its entirety and together with the principal agreement.”
substantially connected to the construction contract that Article 1374 of the Civil Code provides:
there can be no doubt it is the CIAC, under Section 4 of EO No.
1008, which has jurisdiction over any dispute arising from or ART. 1374. The various stipulations of a contract shall be
connected with it. (Emphasis supplied, citations omitted) interpreted together, attributing to the doubtful ones that
sense which may result from all of them taken jointly.
At first look, the Owners-Contractor Agreement and the
performance bond reference each other; the performance Applying the “complementary-contracts-construed-together”
bond was issued pursuant to the construction agreement. doctrine, this court in Prudential held that the surety willingly
acceded to the terms of the construction contract despite the
A performance bond is a kind of suretyship agreement. A silence of the performance bond as to arbitration:
suretyship agreement is an agreement “whereby a party,
called the surety, guarantees the performance by another In the case at bar, the performance bond was silent with
party, called the principal or obligor, of an obligation or regard to arbitration. On the other hand, the construction
undertaking in favor of another party, called the obligee.” In contract was clear as to arbitration in the event of disputes.
the same vein, a performance bond is “designed to afford the Applying the said doctrine, we rule that the silence of the
project owner security that the . . . contractor, will faithfully accessory contract in this case could only be construed as
comply with the requirements of the contract . . . and make acquiescence to the main contract. The construction contract
good [on the] damages sustained by the project owner in case breathes life into the performance bond. We are not ready to
of the contractor’s failure to so perform.” assume that the performance bond contains reservations with
regard to some of the terms and conditions in the
construction contract where in fact it is silent. On the other
hand, it is more reasonable to assume that the party who Bill of Quantities
issued the performance bond carefully and meticulously
studied the construction contract that it guaranteed, and if it Attachment 5.4
had reservations, it would have and should have mentioned
them in the surety contract. (Emphasis supplied) CONTRACTOR Business License

This court, however, cannot apply the ruling in Prudential to ARTICLE 7. PERFORMANCE (SURETY) BOND
the present case. Several factors militate against petitioner’s
claim. 7.1 Within 30 days of the signing of this agreement,
CONTRACTOR shall provide to OWNERS a performance bond,
The contractual stipulations in this case and in Prudential are issued by a duly licensed authority acceptable to the OWNERS,
different. The relevant provisions of the Owners-Contractor and equal to the amount of PHP 4,500,000.00 (Four Million
Agreement in this case state: and Five Hundred Thousand Philippine Pesos), with the
OWNERS as beneficiary.
ARTICLE 5. THE CONTRACT DOCUMENTS
7.2 The performance bond will guarantee the satisfactory and
The following documents prepared by the CONTRACTOR shall faithful performance by the CONTRACTOR of all provisions
constitute an integral part of this contract as fully as if hereto stated within this contract.
attached or herein stated, except as otherwise modified by
mutual agreement of parties, and attached to this agreement. ARTICLE 8. ARBITRATION

Attachment 5.1 8.1 Any dispute between the parties hereto which cannot be
amicably settled shall be finally settled by arbitration in
Working Drawings accordance with the provision of Republic Act 876, of The
Philippines, as amended by the Executive Order 1008 dated
Attachment 5.2 February 4, 1985. (Emphasis in the original)

Outline Specifications In contrast, the provisions of the construction contract in


Prudential provide:
Attachment 5.3
Article 1 residence building with attic, pool, and landscaping over
respondents’ property.
CONTRACT DOCUMENTS
To be clear, it is in the Owners-Contractor Agreement that the
1.1 The following shall form part of this Contract and together arbitration clause is found. The construction agreement was
with this Contract, are known as the “Contract Documents”: signed only by respondents and the contractor, Asis-Leif, as
represented by Ms. Ma. Cynthia Asis-Leif. It is basic that
a. Bid Proposal “[c]ontracts take effect only between the parties, their assigns
and heirs[.]” Not being a party to the construction
.... agreement, petitioner cannot invoke the arbitration clause.
Petitioner, thus, cannot invoke the jurisdiction of the CIAC.
d. Notice to proceed
Moreover, petitioner’s invocation of the arbitration clause
.... defeats the purpose of arbitration in relation to the
construction business. The state has continuously encouraged
j. Appendices A & B (respectively, Surety Bond for the use of dispute resolution mechanisms to promote party
Performance and, Supply of Materials by the Developer) autonomy. In LICOMCEN, Incorporated v. Foundation
(Emphasis supplied) Specialists, Inc., this court upheld the CIAC’s jurisdiction in
line with the state’s policy to promote arbitration:
This court in Prudential held that the construction contract
expressly incorporated the performance bond into the The CIAC was created through Executive Order No. 1008 (E.O.
contract. In the present case, Article 7 of the Owners- 1008), in recognition of the need to establish an arbitral
Contractor Agreement merely stated that a performance bond machinery that would expeditiously settle construction
shall be issued in favor of respondents, in which case industry disputes. The prompt resolution of problems arising
petitioner and Asis-Leif Builders and/or Ms. Ma. Cynthia Asis- from or connected with the construction industry was
Leif shall pay P4,500,000.00 in the event that Asis-Leif fails to considered of necessary and vital for the fulfillment of
perform its duty under the Owners-Contractor Agreement. national development goals, as the construction industry
Consequently, the performance bond merely referenced the provides employment to a large segment of the national labor
contract entered into by respondents and Asis-Leif, which force and is a leading contributor to the gross national
pertained to Asis-Leif’s duty to construct a two-storey product. (Citation omitted)
However, where a surety in a construction contract actively
participates in a collection suit, it is estopped from raising
jurisdiction later. Assuming that petitioner is privy to the The Facts
construction agreement, we cannot allow petitioner to invoke
arbitration at this late stage of the proceedings since to do so On July 26, 1993, petitioner, through the Land Management
would go against the law’s goal of prompt resolution of cases Bureau (LMB), entered into an Agreement for Consultancy
in the construction industry. Services3 (Consultancy Agreement) with respondent United
Planners Consultants, Inc. (respondent) in connection with the
WHEREFORE, the petition is DENIED. The case is DISMISSED. LMB’s Land Resource Management Master Plan Project
Petitioner’s counsel is STERNLY WARNED that a repetition or (LRMMP).4 Under the Consultancy Agreement, petitioner
similar violation of the rule on Certification Against Forum committed to pay a total contract price of P4,337,141.00,
Shopping will be dealt with more severely. based on a predetermined percentage corresponding to the
particular stage of work accomplished.5 In December 1994,
SO ORDERED. respondent completed the work required, which petitioner
formally accepted on December 27, 1994.6 However,
petitioner was able to pay only 47% of the total contract price
in the amount of P2,038,456.30.7cralawred

DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES On October 25, 1994, the Commission on Audit (COA) released
(DENR), Petitioner, v. UNITED PLANNERS CONSULTANTS, INC. the Technical Services Office Report8 (TSO) finding the
(UPCI), Respondent. contract price of the Agreement to be 84.14% excessive.9 This
notwithstanding, petitioner, in a letter dated December 10,
DECISION 1998, acknowledged its liability to respondent in the amount
of P2,239,479.60 and assured payment at the soonest possible
PERLAS-BERNABE, J.: time.10cralawred

Assailed in this petition for review on certiorari1 is the For failure to pay its obligation under the Consultancy
Decision2 dated March 26, 2014 of the Court of Appeals (CA) Agreement despite repeated demands, respondent instituted
in CA-G.R. SP No. 126458 which dismissed the petition for a Complaint11 against petitioner before the Regional Trial
certiorari filed by petitioner the Department of Environment Court of Quezon City, Branch 222 (RTC), docketed as Case No.
and Natural Resources (petitioner).chanroblesvirtuallawlibrary Q-07-60321.12cralawred
Upon motion of respondent, the case was subsequently The Arbitral Tribunal rendered its Award24 dated May 7, 2010
referred to arbitration pursuant to the arbitration clause of (Arbitral Award) in favor of respondent, directing petitioner to
the Consultancy Agreement,13 which petitioner did not pay the latter the amount of (a) P2,285,089.89 representing
oppose.14 As a result, Atty. Alfredo F. Tadiar, Architect the unpaid progress billings, with interest at the rate of 12%
Armando N. Alli, and Construction Industry Arbitration per annum from the date of finality of the Arbitral Award
Commission (CIAC) Accredited Arbitrator Engr. Ricardo B. San upon confirmation by the RTC until fully paid; (b)
Juan were appointed as members of the Arbitral Tribunal. The P2,033,034.59 as accrued interest thereon; (c) ?500,000.00 as
court-referred arbitration was then docketed as Arbitration exemplary damages; and (d) P150,000.00 as attorney’s fees.25
Case No. A-001.15cralawred It also ordered petitioner to reimburse respondent its
proportionate share in the arbitration costs as agreed upon in
During the preliminary conference, the parties agreed to the amount of P182,119.44.26cralawred
adopt the CIAC Revised Rules Governing Construction
Arbitration16 (CIAC Rules) to govern the arbitration Unconvinced, petitioner filed a motion for reconsideration,27
proceedings.17 They further agreed to submit their respective which the Arbitral Tribunal merely noted without any action,
draft decisions in lieu of memoranda of arguments on or claiming that it had already lost jurisdiction over the case after
before April 21, 2010, among others.18cralawred it had submitted to the RTC its Report together with a copy of
the Arbitral Award.28cralawred
On the due date for submission of the draft decisions,
however, only respondent complied with the given Consequently, petitioner filed before the RTC a Motion for
deadline,19 while petitioner moved for the deferment of the Reconsideration29 dated May 19, 2010 (May 19, 2010 Motion
deadline which it followed with another motion for extension for Reconsideration) and a Manifestation and Motion30 dated
of time, asking that it be given until May 11, 2010 to submit its June 1, 2010 (June 1, 2010 Manifestation and Motion),
draft decision.20cralawred asserting that it was denied the opportunity to be heard when
the Arbitral Tribunal failed to consider its draft decision and
In an Order21 dated April 30, 2010, the Arbitral Tribunal merely noted its motion for reconsideration.31 It also denied
denied petitioner’s motions and deemed its non-submission receiving a copy of the Arbitral Award by either electronic or
as a waiver, but declared that it would still consider registered mail.32 For its part, respondent filed an opposition
petitioner’s draft decision if submitted before May 7, 2010, or thereto and moved for the confirmation33 of the Arbitral
the expected date of the final award’s promulgation.22 Award in accordance with the Special Rules of Court on
Petitioner filed its draft decision23 only on May 7, 2010.
Alternative Dispute Resolution (Special ADR In an Order41 dated July 9, 2012, the RTC denied petitioner’s
Rules).34cralawred motion to quash.

In an Order35 dated March 30, 2011, the RTC merely noted It found no merit in petitioner’s contention that it was denied
petitioner’s aforesaid motions, finding that copies of the due process, ruling that its May 19, 2010 Motion for
Arbitral Award appear to have been sent to the parties by the Reconsideration was a prohibited pleading under Section
Arbitral Tribunal, including the OSG, contrary to petitioner’s 17.2,42 Rule 17 of the CIAC Rules. It explained that the
claim. On the other hand, the RTC confirmed the Arbitral available remedy to assail an arbitral award was to file a
Award pursuant to Rule 11.2 (A)36 of the Special ADR Rules motion for correction of final award pursuant to Section
and ordered petitioner to pay respondent the costs of 17.143 of the CIAC Rules, and not a motion for
confirming the award, as prayed for, in the total amount of reconsideration of the said award itself.44 On the other hand,
P50,000.00. From this order, petitioner did not file a motion the RTC found petitioner’s June 1, 2010 Manifestation and
for reconsideration. Motion seeking the resolution of its May 19, 2010 Motion for
Reconsideration to be defective for petitioner’s failure to
Thus, on June 15, 2011, respondent moved for the issuance of observe the three-day notice rule.45 Having then failed to
a writ of execution, to which no comment/opposition was avail of the remedies attendant to an order of confirmation,
filed by petitioner despite the RTC’s directive therefor. In an the Arbitral Award had become final and
Order37 dated September 12, 2011, the RTC granted executory.46cralawred
respondent’s motion.38cralawred
On July 12, 2012, petitioner received the RTC’s Order dated
Petitioner moved to quash39 the writ of execution, positing July 9, 2012 denying its motion to quash.47cralawred
that respondent was not entitled to its monetary claims. It
also claimed that the issuance of said writ was premature Dissatisfied, it filed on September 10, 2012 a petition for
since the RTC should have first resolved its May 19, 2010 certiorari48 before the CA, docketed as CA-G.R. SP No.
Motion for Reconsideration and June 1, 2010 Manifestation 126458, averring in the main that the RTC acted with grave
and Motion, and not merely noted them, thereby violating its abuse of discretion in confirming and ordering the execution
right to due process.40cralawred of the Arbitral Award.chanroblesvirtuallawlibrary

The RTC Ruling The CA Ruling


In a Decision49 dated March 26, 2014, the CA dismissed the System)55 in the Philippines. The Act, however, was without
certiorari petition on two (2) grounds, namely: (a) the petition prejudice to the adoption by the Supreme Court of any ADR
essentially assailed the merits of the Arbitral Award which is system as a means of achieving speedy and efficient means of
prohibited under Rule 19.750 of the Special ADR Rules;51 and resolving cases pending before all courts in the
(b) the petition was filed out of time, having been filed way Philippines.56cralawred
beyond 15 days from notice of the RTC’s July 9, 2012 Order, in
violation of Rule 19.2852 in relation to Rule 19.853 of said Accordingly, A.M. No. 07-11-08-SC was created setting forth
Rules which provide that a special civil action for certiorari the Special Rules of Court on Alternative Dispute Resolution
must be filed before the CA within 15 days from notice of the (referred herein as Special ADR Rules) that shall govern the
judgment, order, or resolution sought to be annulled or set procedure to be followed by the courts whenever judicial
aside (or until July 27, 2012). intervention is sought in ADR proceedings in the specific cases
where it is allowed.57cralawred
Aggrieved, petitioner filed the instant
petition.chanroblesvirtuallawlibrary Rule 1.1 of the Special ADR Rules lists down the instances
when the said rules shall apply, namely: “(a) Relief on the
The Issue Before the Court issue of Existence, Validity, or Enforceability of the Arbitration
Agreement; (b) Referral to Alternative Dispute Resolution
The core issue for the Court’s resolution is whether or not the (“ADR”); (c) Interim Measures of Protection; (d) Appointment
CA erred in applying the provisions of the Special ADR Rules, of Arbitrator; (e) Challenge to Appointment of Arbitrator; (f)
resulting in the dismissal of petitioner’s special civil action for Termination of Mandate of Arbitrator; (g) Assistance in Taking
certiorari. Evidence; (h) Confirmation, Correction or Vacation of Award in
Domestic Arbitration; (i) Recognition and Enforcement or
The Court’s Ruling Setting Aside of an Award in International Commercial
Arbitration; (j) Recognition and Enforcement of a Foreign
The petition lacks merit.chanroblesvirtuallawlibrary Arbitral Award; (k) Confidentiality/Protective Orders; and (l)
Deposit and Enforcement of Mediated Settlement
I. Agreements.”58cralawred

Republic Act No. (RA) 9285,54 otherwise known as the Notably, the Special ADR Rules do not automatically govern
Alternative Dispute Resolution Act of 2004,” institutionalized the arbitration proceedings itself. A pivotal feature of
the use of an Alternative Dispute Resolution System (ADR arbitration as an alternative mode of dispute resolution is that
it is a product of party autonomy or the freedom of the parties an evident mistake in the description of any party, person,
to make their own arrangements to resolve their own date, amount, thing or property referred to in the
disputes.59 Thus, Rule 2.3 of the Special ADR Rules explicitly award;ChanRoblesVirtualawlibrary
provides that “parties are free to agree on the procedure to
be followed in the conduct of arbitral proceedings. Failing where the arbitrators have awarded upon a matter not
such agreement, the arbitral tribunal may conduct arbitration submitted to them, not affecting the merits of the decision
in the manner it considers appropriate.”60cralawred upon the matter submitted;ChanRoblesVirtualawlibrary

In the case at bar, the Consultancy Agreement contained an where the arbitrators have failed or omitted to resolve certain
arbitration clause.61 Hence, respondent, after it filed its issue/s formulated by the parties in the Terms of Reference
complaint, moved for its referral to arbitration62 which was (TOR) and submitted to them for resolution, and
not objected to by petitioner.63 By its referral to arbitration,
the case fell within the coverage of the Special ADR Rules. where the award is imperfect in a matter of form not affecting
However, with respect to the arbitration proceedings itself, the merits of the controversy.
the parties had agreed to adopt the CIAC Rules before the The motion shall be acted upon by the Arbitral Tribunal or the
Arbitral Tribunal in accordance with Rule 2.3 of the Special surviving/remaining members.66cralawlawlibrary
ADR Rules.
Moreover, the parties may appeal the final award to the CA
On May 7, 2010, the Arbitral Tribunal rendered the Arbitral through a petition for review under Rule 43 of the Rules of
Award in favor of respondent. Under Section 17.2, Rule 17 of Court.67cralawred
the CIAC Rules, no motion for reconsideration or new trial
may be sought, but any of the parties may file a motion for Records do not show that any of the foregoing remedies were
correction64 of the final award, which shall interrupt the availed of by petitioner. Instead, it filed the May 19, 2010
running of the period for appeal,65 based on any of the Motion for Reconsideration of the Arbitral Award, which was a
following grounds, to wit:chanRoblesvirtualLawlibrary prohibited pleading under the Section 17.2,68 Rule 17 of the
CIAC Rules, thus rendering the same final and executory.
an evident miscalculation of figures, a typographical or
arithmetical error;ChanRoblesVirtualawlibrary Accordingly, the case was remanded to the RTC for
confirmation proceedings pursuant to Rule 11 of the Special
ADR Rules which requires confirmation by the court of the
final arbitral award. This is consistent with Section 40, Chapter
7 (A) of RA 9285 which similarly requires a judicial Regional Trial Court, in making a ruling under the Special ADR
confirmation of a domestic award to make the same Rules, has acted without or in excess of its jurisdiction, or with
enforceable:chanRoblesvirtualLawlibrary grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal or any plain, speedy, and
SEC. 40. Confirmation of Award. – The confirmation of a adequate remedy in the ordinary course of law, a party may
domestic arbitral award shall be governed by Section 2369 of file a special civil action for certiorari to annul or set aside a
R.A. 876.70cralawred ruling of the Regional Trial Court.” Thus, for failing to avail of
the foregoing remedies before resorting to certiorari, the CA
A domestic arbitral award when confirmed shall be enforced correctly dismissed its petition.chanroblesvirtuallawlibrary
in the same manner as final and executory decisions of the
regional trial court. II.

The confirmation of a domestic award shall be made by the Note that the special civil action for certiorari described in
regional trial court in accordance with the Rules of Procedure Rule 19.26 above may be filed to annul or set aside the
to be promulgated by the Supreme Court. following orders of the Regional Trial Court.

A CIAC arbitral award need not be confirmed by the regional Holding that the arbitration agreement is inexistent, invalid or
trial court to be executory as provided under E.O. No. 1008. unenforceable;ChanRoblesVirtualawlibrary
(Emphases supplied)cralawlawlibrary
Reversing the arbitral tribunal’s preliminary determination
During the confirmation proceedings, petitioners did not upholding its jurisdiction;ChanRoblesVirtualawlibrary
oppose the RTC’s confirmation by filing a petition to vacate
the Arbitral Award under Rule 11.2 (D)71 of the Special ADR Denying the request to refer the dispute to
Rules. Neither did it seek reconsideration of the confirmation arbitration;ChanRoblesVirtualawlibrary
order in accordance with Rule 19.1 (h) thereof. Instead,
petitioner filed only on September 10, 2012 a special civil Granting or refusing an interim
action for certiorari before the CA questioning the propriety of relief;ChanRoblesVirtualawlibrary
(a) the RTC Order dated September 12, 2011 granting
respondent’s motion for issuance of a writ of execution, and Denying a petition for the appointment of an
(b) Order dated July 9, 2012 denying its motion to quash. arbitrator;ChanRoblesVirtualawlibrary
Under Rule 19.26 of the Special ADR Rules, “[w]hen the
Confirming, vacating or correcting a domestic arbitral
award;ChanRoblesVirtualawlibrary In this case, petitioner asserts that its petition is not covered
by the Special ADR Rules (particularly, Rule 19.28 on the 15-
Suspending the proceedings to set aside an international day reglementary period to file a petition for certiorari) but by
commercial arbitral award and referring the case back to the Rule 65 of the Rules of Court (particularly, Section 4 thereof
arbitral tribunal;ChanRoblesVirtualawlibrary on the 60-day reglementary period to file a petition for
certiorari), which it claimed to have suppletory application in
Allowing a party to enforce an international commercial arbitration proceedings since the Special ADR Rules do not
arbitral award pending appeal;ChanRoblesVirtualawlibrary explicitly provide for a procedure on execution.

Adjourning or deferring a ruling on whether to set aside, The position is untenable.


recognize and or enforce an international commercial arbitral
award;ChanRoblesVirtualawlibrary Execution is fittingly called the fruit and end of suit and the life
of the law. A judgment, if left unexecuted, would be nothing
Allowing a party to enforce a foreign arbitral award pending but an empty victory for the prevailing party.73cralawred
appeal; and
While it appears that the Special ADR Rules remain silent on
Denying a petition for assistance in taking evidence. (Emphasis the procedure for the execution of a confirmed arbitral award,
supplied) it is the Court’s considered view that the Rules’ procedural
cralawlawlibrary mechanisms cover not only aspects of confirmation but
necessarily extend to a confirmed award’s execution in light of
Further, Rule 19.772 of the Special ADR Rules precludes a the doctrine of necessary implication which states that every
party to an arbitration from filing a petition for certiorari statutory grant of power, right or privilege is deemed to
questioning the merits of an arbitral award. include all incidental power, right or privilege. In Atienza v.
Villarosa,74 the doctrine was explained,
If so falling under the above-stated enumeration, Rule 19.28 thus:chanRoblesvirtualLawlibrary
of the Special ADR Rules provide that said certiorari petition
should be filed “with the [CA] within fifteen (15) days from No statute can be enacted that can provide all the details
notice of the judgment, order or resolution sought to be involved in its application. There is always an omission that
annulled or set aside. No extension of time to file the petition may not meet a particular situation. What is thought, at the
shall be allowed.” time of enactment, to be an all-embracing legislation may be
inadequate to provide for the unfolding of events of the All the more is such interpretation warranted under the
future. So-called gaps in the law develop as the law is principle of ratio legis est anima which provides that a statute
enforced. One of the rules of statutory construction used to must be read according to its spirit or intent,76 for what is
fill in the gap is the doctrine of necessary implication. The within the spirit is within the statute although it is not within
doctrine states that what is implied in a statute is as much a its letter, and that which is within the letter but not within the
part thereof as that which is expressed. Every statute is spirit is not within the statute.77 Accordingly, since the Special
understood, by implication, to contain all such provisions as ADR Rules are intended to achieve speedy and efficient
may be necessary to effectuate its object and purpose, or to resolution of disputes and curb a litigious culture,78 every
make effective rights, powers, privileges or jurisdiction which interpretation thereof should be made consistent with these
it grants, including all such collateral and subsidiary objectives.
consequences as may be fairly and logically inferred from its
terms. Ex necessitate legis. And every statutory grant of Thus, with these principles in mind, the Court so concludes
power, right or privilege is deemed to include all incidental that the Special ADR Rules, as far as practicable, should be
power, right or privilege. This is so because the greater made to apply not only to the proceedings on confirmation
includes the lesser, expressed in the maxim, in eo plus sit, but also to the confirmed award’s execution.
simper inest et minus.75 (Emphases supplied)cralawlawlibrary
Further, let it be clarified that – contrary to petitioner’s stance
As the Court sees it, execution is but a necessary incident to – resort to the Rules of Court even in a suppletory capacity is
the Court’s confirmation of an arbitral award. To construe it not allowed. Rule 22.1 of the Special ADR Rules explicitly
otherwise would result in an absurd situation whereby the provides that “[t]he provisions of the Rules of Court that are
confirming court previously applying the Special ADR Rules in applicable to the proceedings enumerated in Rule 1.1 of these
its confirmation of the arbitral award would later shift to the Special ADR Rules have either been included and incorporated
regular Rules of Procedure come execution. Irrefragably, a in these Special ADR Rules or specifically referred to
court’s power to confirm a judgment award under the Special herein.”79 Besides, Rule 1.13 thereof provides that “[i]n
ADR Rules should be deemed to include the power to order its situations where no specific rule is provided under the Special
execution for such is but a collateral and subsidiary ADR Rules, the court shall resolve such matter summarily and
consequence that may be fairly and logically inferred from the be guided by the spirit and intent of the Special ADR Rules and
statutory grant to regional trial courts of the power to confirm the ADR Laws.”
domestic arbitral awards.
As above-mentioned, the petition for certiorari permitted
under the Special ADR Rules must be filed within a period of
fifteen (15) days from notice of the judgment, order or Nevertheless, while the Court sanctions the dismissal by the
resolution sought to be annulled or set aside.80 Hence, since CA of the petition for certiorari due to procedural infirmities,
petitioner’s filing of its certiorari petition in CA-G.R. SP No. there is a need to explicate the matter of execution of the
126458 was made nearly two months after its receipt of the confirmed Arbitral Award against the petitioner, a
RTC’s Order dated July 9, 2012, or on September 10, 2012,81 government agency, in the light of Presidential Decree No.
said petition was clearly dismissible.82cralawred (PD) 144584 otherwise known as the “Government Auditing
Code of the Philippines.”
III.
Section 26 of PD 1445 expressly provides that execution of
Discounting the above-discussed procedural considerations, money judgment against the Government or any of its
the Court still finds that the certiorari petition had no merit. subdivisions, agencies and instrumentalities is within the
primary jurisdiction of the COA, to
Indeed, petitioner cannot be said to have been denied due wit:chanRoblesvirtualLawlibrary
process as the records undeniably show that it was accorded
ample opportunity to ventilate its position. There was clearly SEC. 26. General jurisdiction. The authority and powers of the
nothing out of line when the Arbitral Tribunal denied Commission shall extend to and comprehend all matters
petitioner’s motions for extension to file its submissions relating to auditing procedures, systems and controls, the
having failed to show a valid reason to justify the same or in keeping of the general accounts of the Government, the
rendering the Arbitral Award sans petitioner’s draft decision preservation of vouchers pertaining thereto for a period of ten
which was filed only on the day of the scheduled years, the examination and inspection of the books, records,
promulgation of final award on May 7, 2010.83 The and papers relating to those accounts; and the audit and
touchstone of due process is basically the opportunity to be settlement of the accounts of all persons respecting funds or
heard. Having been given such opportunity, petitioner should property received or held by them in an accountable capacity,
only blame itself for its own procedural blunder. as well as the examination, audit, and settlement of all debts
and claims of any sort due from or owing to the Government
On this score, the petition for certiorari in CA-G.R. SP No. or any of its subdivisions, agencies and instrumentalities. The
126458 was likewise properly said jurisdiction extends to all government-owned or
dismissed.chanroblesvirtuallawlibrary controlled corporations, including their subsidiaries, and other
self-governing boards, commissions, or agencies of the
IV. Government, and as herein prescribed, including non-
governmental entities subsidized by the government, those
funded by donation through the government, those required LANUZA JR. VS BF CORPORATION (G.R. NO. 174938 OCTOBER
to pay levies or government share, and those for which the 1, 2014)
government has put up a counterpart fund or those partly Lanuza Jr. vs BF Corporation
funded by the government. (Emphases supplied) G.R. No. 174938 October 1, 2014
cralawlawlibrary
Facts: In 1993, BF Corporation filed a collection complaint with
From the foregoing, the settlement of respondent’s money the Regional Trial Court against Shangri-La and the members
claim is still subject to the primary jurisdiction of the COA of its board of directors: Alfredo C. Ramos, Rufo B.Colayco,
despite finality of the confirmed arbitral award by the RTC Antonio O. Olbes, Gerardo Lanuza, Jr., Maximo G. Licauco III,
pursuant to the Special ADR Rules.85 Hence, the respondent and Benjamin C. Ramos. BF Corporation alleged in its
has to first seek the approval of the COA of their monetary complaint that on December 11, 1989 and May 30, 1991, it
claim. This appears to have been complied with by the latter entered into agreements with Shangri-La wherein it undertook
when it filed a “Petition for Enforcement and Payment of Final to construct for Shangri-La a mall and a multilevel parking
and Executory Arbitral Award”86 before the COA. structure along EDSA.Shangri-La had been consistent in paying
Accordingly, it is now the COA which has the authority to rule BF Corporation in accordance with its progress billing
on this latter petition. statements. However, by October 1991, Shangri-La started
defaulting in payment. BF Corporation alleged that Shangri-La
WHEREFORE, the petition is DENIED. The Decision dated induced BF Corporation to continue with the construction of
March 26, 2014 of the Court of Appeals in CA-G.R. SP No. the buildings using its own funds and credit despite Shangri-
126458 which dismissed the petition for certiorari filed by La’s default. According to BF Corporation, Shangri-La
petitioner the Department of Environment and Natural misrepresented that it had funds to pay for its obligations with
Resources is hereby AFFIRMED. BF Corporation, and the delay in payment was simply a matter
of delayed processing of BF Corporation’s progress billing
SO ORDERED.cralawlawlibrary statements. BF Corporation eventually completed the
construction of the buildings. Shangri-La allegedly took
possession of the buildings while still owing BF Corporation an
outstanding balance. BF Corporation alleged that despite
repeated demands, Shangri-La refused to pay the balance
owed to it.It also alleged that the Shangri-La’s directors were
in bad faith in directing Shangri-La’s affairs. Therefore, they
should be held jointly and severally liable with Shangri-La for
its obligations as well as for the damages that BF Corporation corporation. They are not personally liable for obligations and
incurred as a result of Shangri-La’s default. On August 3, 1993, liabilities incurred on or in behalf of the corporation.
Shangri-La, Alfredo C. Ramos, Rufo B. Colayco, Maximo G.
Licauco III, and Benjamin C. Ramos filed a motion to suspend A submission to arbitration is a contract. As such, the
the proceedings in view of BF Corporation’s failure to submit Agreement, containing the stipulation on arbitration, binds
its dispute to arbitration, in accordance with the arbitration the parties thereto, as well as their assigns and heirs.
clause provided in its contract. Petitioners filed their comment
on Shangri-La’s and BF Corporation’s motions, praying that When there are allegations of bad faith or malice against
they be excluded from the arbitration proceedings for being corporate directors or representatives, it becomes the duty of
non-parties to Shangri-La’s and BF Corporation’s agreement. courts or tribunals to determine if these persons and the
corporation should be treated as one. Without a trial, courts
Issue: Whether or not petitioners as directors of Shangri-La is and tribunals have no basis for determining whether the veil
personally liable for the contractual obligations entered into of corporate fiction should be pierced. Courts or tribunals do
by the corporation. not have such prior knowledge. Thus, the courts or tribunals
must first determine whether circumstances exist towarrant
Held: No. Because a corporation’s existence is only by fiction the courts or tribunals to disregard the distinction between
of law, it can only exercise its rights and powers through its the corporation and the persons representing it. The
directors, officers, or agents, who are all natural persons. A determination of these circumstances must be made by one
corporation cannot sue or enter into contracts without them. tribunal or court in a proceeding participated in by all parties
involved, including current representatives of the corporation,
A consequence of a corporation’s separate personality is that and those persons whose personalities are impliedly the
consent by a corporation through its representatives is not sameas the corporation. This is because when the court or
consent of the representative, personally. Its obligations, tribunal finds that circumstances exist warranting the piercing
incurred through official acts of its representatives, are its of the corporate veil, the corporate representatives are
own. A stockholder, director, or representative does not treated as the corporation itself and should be held liable for
become a party to a contract just because a corporation corporate acts. The corporation’s distinct personality is
executed a contract through that stockholder, director or disregarded, and the corporation is seen as a mere
representative. aggregation of persons undertaking a business under the
collective name of the corporation.
Hence, a corporation’s representatives are generally not
bound by the terms of the contract executed by the
A corporation is an artificial entity created by fiction of law. to the limitations prescribed by law and the Constitution; 8. To
This means that while it is not a person, naturally, the law enter into merger or consolidation with other corporations as
gives it a distinct personality and treats it as such. A provided in this Code; 9. To make reasonable donations,
corporation, in the legal sense, is an individual with a including those for the public welfare or for hospital,
personality that is distinct and separate from other persons charitable, cultural, scientific, civic, or similar purposes:
including its stockholders, officers, directors, representatives, Provided, That no corporation, domestic or foreign, shall give
and other juridical entities. The law vests in corporations donations in aid of any political party or candidate or for
rights,powers, and attributes as if they were natural persons purposes of partisan political activity; 10. To establish pension,
with physical existence and capabilities to act on their own. retirement, and other plans for the benefit of its directors,
For instance, they have the power to sue and enter into trustees, officers and employees; and 11. To exercise such
transactions or contracts. Section 36 of the Corporation Code other powers as may be essential or necessary to carry out its
enumerates some of a corporation’s powers, thus: purpose or purposes as stated in its articles of incorporation.

Section 36. Corporate powers and capacity.– Every KOPPEL INC V. MAKATI ROTARY CLUB FOUNDATION INC,
corporation incorporated under this Code has the power and G.R. NO 198075 (2013)
capacity: 1. To sue and be sued in its corporate name; 2. Of FACTS: Fedders Koppel Inc (FKI) owned a parcel of land in
succession by its corporate name for the period of time stated Paranaque. Within the subject property are buildings and
in the articles of incorporation and the certificate other improvements dedicated to the business of FKI
ofincorporation; 3. To adopt and use a corporate seal; 4. To 1. In 1975, FKI bequeathed the subject property
amend its articles of incorporation in accordance with the (exclusive of the improvements) in favor of Makati Rotary Club
provisions of this Code; 5. To adopt by-laws, not contrary to by way of a conditional donation
law, morals, or public policy, and to amend or repeal the same 2. The donation provides that the donee, Makati Rotary
in accordance with this Code; 6. In case of stock corporations, Club, was required to lease the subject property to FKI under
to issue or sell stocks to subscribers and to sell treasury stocks the terms specified in the Deed of Donation.
in accordance with the provisions of this Code; and to admit 3. The stipulations in the donation provides:
members to the corporation if it be a non-stock corporation; a. that the period of lease shall be for 25 years (until
7. To purchase, receive, take or grant, hold, convey, sell, lease, May 25, 2000) and the annual rent for the first 25 years is
pledge, mortgage and otherwise deal with such real and P40,126
personal property, including securities and bonds of other b. The lease is subject to renewable for another 25 years
corporations, as the transaction of the lawful business of the upon mutual agreement of the donor and donee
corporation may reasonably and necessarily require, subject
c. In case of disagreement, the matter shall be referred limited to only 3% of the fair market value of the subject
to a Board of arbitrators (3-member) appointed and with property excluding the improvements
powers in accordance with the Arbitration Law of the 7. On June 1, 2009, Makati Rotary Club sent a demand
Philippines (RA 878) letter notifying Koppel of its default. Petitioner (Sept 22, 2009)
4. Before the lease contract was set to expire, FKI and sent a reply expressing its disagreement over the rental
Makati Rotary Club executed another contract extending the stipulations of the 2005 Lease Contract and offered to pay
lease for 5 years, with annual rents ranging from P4,000,000 P80,502.79 instead of P8,394,000 as demanded by respondent
for the 1st year up to P4,900,00 for the 5th year. The 2000 8. Respondent send a subsequent demand letter (Sept
Lease contract an arbitration clause worded as: 25, 2009) ordering Koppel Inc to vacate the premises should it
Any disagreement as to the interpretation, application or fail to pay its obligation within 7 days from receipt of letter.
execution of the [2000 Lease] contract shall be submitted to a 9. Petitioner Koppel refused to comply with the demands
board of 3 arbitrators constituted in accordance with the of the respondent and instead, filed with RTC Paranaque a
Arbitration Law of the Philippines. The decision of the majority complaint for the rescission or cancellation of the Deed of
of the board shall be binding upon FKI and respondent Donation
5. After the 2000 Lease Contract expired, FKI and 10. Thereafter, Makati Rotary Club filed an unlawful
respondent agreed to renew their lease for another 5 years at detainer case against Koppel before MTC Paranaque. In the
a fixed rate pf P4,200,000 per annum (2005 Lease Contract). In ejectment suit, Koppel reiterated its objections over the rental
addition, the contract also obligated FKI to make a yearly stipulations of the 2005 Lease Contract and questioned the
“donation” of money to respondent ranging from P3 million jurisdiction of the MTC in view of the arbitration clause
for the 1st year up to P3.9 million for the 5th year. The lease contained in the Lease Contract
contract contained an arbitration clause similar to the 2000 11. In the ejectment case, RTC ruled in favor of Koppel Inc.
lease contract. From 2005 to 2008, FKI paid the rentals and While it did not dismiss the action on the ground of
“donations” due based on the 2005 Lease Contract. arbitration, MTC sided with petitioner with respect to the
6. In Aug 2008, FKI assigned all its interest and obligations issues regarding the insufficiency of the respondent’s demand
in favor of petitioner Koppel Inc. The next year, Koppel and the nullity of the 2005 Lease contract
discontinued the payment of the rentals and “donations” 12. On appeal, RTC reversed the MTC decision and ordered
under the 2005 Lease Contract. Koppel’s refusal to pay was Koppel to vacate the subject property. As to the existing
based on the premise that the subsequent lease contracts improvements, RTC held that the same were built in good
violated one of the material conditions of the donation of the faith subject to the provisions under Art 1678 NCC. CA
property, i.e. Item 2(g) of the Deed of Donation states that the affirmed
rent of the subject property over the second 25 years was 13. Arguments against arbitration:
• The dispute between petitioner and respondent Petitioner may still invoke the arbitration clause of the 2005
involves the validity of the 2005 Lease Contract. Citing Lease Contract notwithstanding the fact that it assails the
Gonzales v. Climax Mining: The validity of contract cannot be validity of such contract. This is due to the doctrine of
subject the arbitration proceedings as such questions are legal separability. Under said doctrine, an arbitration agreement is
in nature and require the application of interpretation of laws considered as independent of the main contract. Being a
and jurisprudence which is necessarily a judicial function separate contract in itself, the arbitration agreement may thus
• Petitioner cannot validly invoke the arbitration clause be invoked regardless of the possible nullity or invalidity of the
while at the same time, impugn such contract’s validity main contract.
• Petitioner did not file a formal application before the
MTC so as to render the arbitration clause operational The operation of the arbitration clause in this case is not
• The parties underwent Judicial Dispute Resolution defeated by Koppel’s failure to file a formal “request” or
(JDR); further referral of the dispute to arbitration would only application with the MTC. In using the word “may” to qualify
be circuitous the act of filing a “request” under Sec 24 of RA 9285 (Special
ADR Rues) clearly did not intend to limit invocation of an
ISSUE: WON the present dispute is subject to arbitration arbitration agreement in a pending suit solely via such
request. After all, non-compliance with an arbitration
HELD: Yes. Respondent took the ruling in the Gonzales case agreement is a valid defense to any offending suit and, as
out of context. PA-MGB was devoid of any jurisdiction to take such, may even be raised in an answer as provided in our
cognizance of the complaint for arbitration because RA 7942 ordinary rules of procedure.
(Mining Act of 1995) grants PA-MGB with exclusive original
jurisdiction only over mining disputes. Since the complaint for CAB: As early as in its answer with counterclaim, Koppel had
arbitration in the Gonzales case did not raise mining disputes already apprised MTC of the existence of the arbitration
as contemplated under RA 7942, the SC held such complaint clause in the 2005 Lease Contract; such act is enough valid
could not arbitrated before the PA-MGB. invocation of his right to arbitrate.

The Court in Gonzales did not simply reject the complaint on The fact that petitioner and respondent already underwent
the ground that the issue of validity of contracts per se is non- through JDR proceedings before the RTC, will not make the
arbitrable. The real consideration bind the ruling was the subsequent arbitration between the parties unnecessary or
limitation that was placed by RA 7942 upon the jurisdiction of circuitous. The JDR system is substantially different from
PA-MGB as an arbitral body. arbitration proceedings.
The JDR framework is based on the processes of mediation, Lease in this case, the unlawful detainer action was instituted
conciliation or early neutral evaluation which entails the in violation of such clause.
submission of a dispute before a “JDR judge” who shall merely
“facilitate settlement” between the parties in conflict or make Under Sec 7, RA 9285, the instant unlawful detainer action
a “non-binding evaluation or assessment of the chances of should have been stayed; the petitioner and the respondent
each party’s case.” Thus in JDR, the JDR judge lacks the should have been referred to arbitration pursuant to the
authority to render a resolution of the dispute that is binding arbitration clause of the 2005 Lease Contract. The MeTC,
upon the parties in conflict. In arbitration, on the other hand, however, did not do so in violation of the law—which violation
the dispute is submitted to an arbitrator/s—a neutral third was, in turn, affirmed by the RTC and Court of Appeals on
person or a group of thereof—who shall have the authority to appeal.
render a resolution binding upon the parties.
The violation by the MTC of the clear directives under R.A.
ISSUE: What is the nature of an arbitration proceeding? Nos. 876 and 9285 renders invalid all proceedings it undertook
in the ejectment case after the filing by petitioner of its
HELD: A pivotal feature of arbitration as an alternative mode Answer with Counterclaim—the point when the petitioner
of dispute resolution is that it is, first and foremost, a product and the respondent should have been referred to arbitration.
of party autonomy or the freedom of the parties to “make This case must, therefore, be remanded to the MeTC and be
their own arrangements to resolve their own disputes.” suspended at said point. Inevitably, the decisions of the MeTC,
Arbitration agreements manifest not only the desire of the RTC and the Court of Appeals must all be vacated and set
parties in conflict for an expeditious resolution of their aside.
dispute. They also represent, if not more so, the parties’
mutual aspiration to achieve such resolution outside of judicial G.R. No. 196171 January 15, 2014
auspices, in a more informal and less antagonistic
environment under the terms of their choosing. Needless to RCBC CAPITAL CORPORATION, Petitioner,
state, this critical feature can never be satisfied in an vs.
ejectment case no matter how summary it may be. BANCO DE ORO UNIBANK, INC. (now BDO UNIBANK, INC.),
Respondent.
ISSUE: What are the legal effects of the arbitration clause?
x-----------------------x
HELD: Since there really are no legal impediments to the
application of the arbitration clause of the 2005 Contract of G.R. No. 199238
filed in G.R. No. 200213 by BDO and RCBC Capital thru their
BANCO DE ORO UNIBANK, INC., Petitioner, respective counsel.
vs.
COURT OF APPEALS and RCBC CAPITAL CORPORATION, All three petitions emanated from arbitration proceedings
Respondents. commenced by RCBC Capital pursuant to the arbitration
clause under its Share Purchase Agreement (SPA) with EPCIB
x-----------------------x involving the latter’s shares in Bankard, Inc. In the course of
arbitration conducted by the Tribunal constituted and
G.R. No. 200213 administered by the International Chamber of Commerce-
International Commercial Arbitration (ICC-ICA), EPCIB was
BANCO DE ORO UNIBANK, INC., Petitioner, merged with BDO which assumed all its liabilities and
vs. obligations.
RCBC CAPITAL CORPORATION and THE ARBITRAL TRIBUNAL IN
ICC ARBITRATION REF. NO. 13290/MS/JEM AND/OR RICHARD G.R. No. 196171 is a petition for review under Rule 45 seeking
IAN BARKER, NEIL KAPLAN AND SANTIAGO KAPUNAN, in their to reverse the Court of Appeals (CA) Decision dated December
official capacity as Members of THE ARBITRATION TRIBUNAL, 23, 2010 in CA-G.R. SP No. 113525 which reversed and set
Respondents. aside the June 24, 2009 Order of the Regional Trial Court (RTC)
of Makati City, Branch 148 in SP Proc. Case No. M-6046. The
RESOLUTION RTC confirmed the Second Partial Award issued by the
Arbitration Tribunal ordering BDO to pay RCBC Capital
VILLARAMA, JR., J.: proportionate share in the advance costs and dismissing
BDO’s counterclaims.
Before the Court are: (1) the Joint Motion and Manifestation
dated October 1, 2013 filed in G.R. Nos. 196171 & 199238 by G.R. No. 199238 is a petition for certiorari under Rule 65
RCBC Capital Corporation ("RCBC Capital"), BDO Unibank, Inc. assailing the September 13, 2011 Resolution in CA-G.R. SP No.
("BDO"), and George L. Go, in his personal capacity and as 120888 which denied BDO’s application for the issuance of a
attorney-in-fact of the individual stockholders as listed in the stay order and/or temporary restraining order
Share Purchase Agreement dated May 27, 2000 (TRO)/preliminary injunction against the RTC of Makati City,
("Go/Shareholders"), thru their respective counsels; and (2) Branch 148 in Sp. Proc. Case No. M-6046. Acting upon RCBC
the Joint Motion and Manifestation dated October 1, 2013 Capital’s urgent motion, the RTC issued on August 22, 2011 a
writ of execution for the implementation of the court’s order
confirming the Final Award rendered by the Arbitration
Tribunal on June 16, 2010. Both RCBC Capital and BDO filed motions for partial
reconsideration of the above decision.
On the other hand, G.R. No. 200213, filed on February 6, 2012,
is a petition for review under Rule 45 praying for the reversal Meanwhile, in G.R. No. 200213, RCBC Capital filed its
of the CA’s Decision dated February 24, 2011 and Resolution Comment, to which a Reply was filed by BDO. By Resolution
dated January 13, 2012 in CA-G.R. SP No. 113402. The CA dated July 22, 2013, both parties were directed to submit their
denied BDO’s petition for certiorari and prohibition with respective memoranda within 30 days from notice.
application for issuance of a TRO and/or writ of preliminary
injunction against the RTC of Makati City, Branch 148 in Sp. In their Joint Motion and Manifestation filed in G.R. Nos.
Proc. Case No. M-6046. By Order dated June 24, 2009, the RTC 196171 & 199238, the parties submit and pray that –
denied BDO’s motion for access of the computerized
accounting system of Bankard, Inc. after Chairman Richard Ian 5. After negotiations, the Parties have mutually agreed that it
Barker had denied BDO’s request that it be given access to the is in their best interest and general benefit to settle their
said source of facts or data used in preparing the accounting differences with respect to their respective causes of action,
summaries submitted in evidence before the Arbitration claims or counterclaims in the RCBC Capital Petition and the
Tribunal. BDO Petition, with a view to a renewal of their business
relations.
G.R. Nos. 196171 & 199238 were consolidated and a Decision
was rendered by this Court on December 10, 2012, the 6. Thus, the parties have reached a complete, absolute and
dispositive portion of which states: final settlement of their claims, demands, counterclaims and
causes of action arising, directly or indirectly, from the facts
WHEREFORE, premises considered, the petition in G.R. No. and circumstances giving rise to, surrounding or arising from
199238 is DENIED. The Resolution dated September 13, 2011 both Petitions, and have agreed to jointly terminate and
of the Court of Appeals in CA-G.R. SP No. 120888 is AFFIRMED. dismiss the same in accordance with their agreement.

The petition in G.R. No. 196171 is DENIED. The Decision dated 7. In view of the foregoing compromise between the Parties,
December 23, 2010 of the Court of Appeals in CA-G.R. SP No. BDO, RCBC Capital and Go/Shareholders, with the assistance
113525 is hereby AFFIRMED. of their respective counsels, have decided to jointly move for
the termination and dismissal of the above-captioned cases
SO ORDERED.1 with prejudice.
5. In view of the foregoing compromise between the Parties,
PRAYER BDO and RCBC Capital, with the assistance of their respective
counsels, have decided to jointly move for the termination
WHEREFORE, RCBC CAPITAL CORPORATION, BDO UNIBANK, and dismissal of the above-captioned case with
INC. and GEORGE L. GO, IN HIS PERSONAL CAPACITY AND AS prejudice.1âwphi1
ATTORNEY-IN-FACT OF THE INDIVIDUAL STOCKHOLDERS AS
LISTED IN THE SHARE PURCHASE AGREEMENT DATED 27 MAY PRAYER
2000 respectfully pray that this Honorable Court order the
termination and dismissal of the above-captioned cases, with WHEREFORE, BDO UNIBANK, INC. and RCBC CAPITAL
prejudice. RCBC Capital BDO and Go/Shareholders respectfully CORPORATION respectfully pray that this Honorable Court
pray for such other relief as may be deemed just or equitable order the termination and dismissal of the above-captioned
under the premises.2 case, with prejudice.

BDO and RCBC Capital likewise submit and pray in their Joint BDO and RCBC Capital respectfully pray for such other relief as
Motion and Manifestation in G.R. No. 200213 that – may be deemed just or equitable under the premises.3

3. After negotiations, the Parties have mutually agreed that it Under this Court s Resolution dated November 27, 2013, G.R.
is in their best interest and general benefit to settle their No. 200213 is ordered consolidated with G.R. Nos. 196171
differences with respect to their respective causes of action, 199238.
claims or counterclaims in the above-captioned case, with a
view to a renewal of their business relations. IN VIEW OF THE FOREGOING and as prayed for, G.R. Nos.
196171, 199238 and 200213 are hereby ordered DISMISSED
4. Thus, the Parties have reached a complete, absolute and with prejudice and are deemed CLOSED and TERMINATED.
final settlement of their claims, demands, counterclaims and
causes of action arising, directly or indirectly, from the facts SO ORDERED.
and circumstances giving rise to, surrounding or arising from
the present Petition, and have agreed to jointly terminate and
dismiss the present Petition in accordance with their
agreement.
G.R. No. 199650 (June 26, 2013) by the joint inspection and evaluation by the Petitioner and
Mabunay that, as of November 14, 2008, the project was only
VILLARAMA, JR., J.: 31.39% complete and that the uncompleted portion was
68.61%.
FACTS:
On November 19, 2008, Petitioner terminated the contract
Petitioner J Plus Asia Development Corporation and Martin E. and sent Demand Letters to Mabunay and Respondent surety.
Mabunay entered into a Construction Agreement on As its demands went unheeded, Petitioner filed a Request for
December 24, 2007 whereby the latter undertook to build the Arbitration before the Construction Industry Arbitration
former’s 72-room condominium/hotel located in Boracay Commission (CIAC).
Island.
In his Answer, Mabunay claimed that the delay was caused by
The project, costing P42M, was to be completed within one retrofitting and other revision works ordered by Petitioner.
year or 365 days reckoned from the first calendar day after He asserted that he actually had until April 30, 2009 to finish
signing of the Notice of Award and Notice to Proceed and the project since the 365 days period of completion started
receipt of down payment (20% of contract price). The P8.4M only on May 2, 2008 after clearing the retrofitted old
down payment was fully paid on January 14, 2008. Payment of structure. Hence, the termination of the contract by
the balance of the contract price will be based on actual work Petitioner was premature and the filing of the Complaint
finished within 15 days from receipt of the monthly progress against him was baseless, malicious and in bad faith.
billings. Per the agreed work schedule, the completion date of
the project was December 2008. Mabunay also submitted the Respondent, on the other hand, filed a Motion to Dismiss on
required Performance Bond issued by Respondent Utility the ground that Petitioner has no cause of action and the
Assurance Corporation in the amount equivalent to 20% down complaint states no cause of action against it. The CIAC denied
payment or P8.4M. the Motion to Dismiss.

Mabunay commenced work at the project site on January 7, In its Answer Ex Abundante Ad Cautelam with Compulsory
2008. Petitioner paid up to the 7th monthly progress billing Counterclaims and Cross-claims, Respondent argued that the
sent by Mabunay. As of September 16, 2008, Petitioner had Performance Bond merely guaranteed the 20% down payment
paid the total amount of P15.98M inclusive of the 20% down and not the entire obligation of Mabunay under the
payment. However, as of said date, Mabunay had Construction Agreement. Since the value of the project’s
accomplished only 27.5% of the project. It was later found out accomplishment already exceeded the said amount,
Respondent’s obligation under the Performance Bond had
been fully extinguished. As to the claim for alleged ARGUMENT:
overpayment to Mabunay, Respondent contended that it
should not be credited against the 20% down payment which Petitioner contends that that with the institutionalization of
was already exhausted and such application by Petitioner is alternative dispute resolution under RA No. 9285, otherwise
tantamount to reviving an obligation that had been legally known as the Alternative Dispute Resolution Act of 2004, the
extinguished by payment. Respondent also set up a cross- CA was divested of jurisdiction to review the decisions or
claim against Mabunay who executed in its favor an Indemnity awards of the CIAC.
Agreement whereby Mabunay undertook to indemnify
Respondent for whatever amounts it may be adjudged liable RULING:
to pay Petitioner under the surety bond.
NO. The Petitioner’s contention is without merit. Petitioner
On February 2, 2010, CIAC rendered its Decision and made erroneously relied on the provision in RA No. 9285 allowing
Awards in favor of Petitioner. CIAC ruled that Mabunay had any party to a domestic arbitration to file in the RTC a petition
incurred delay which entitled Petitioner to the stipulated either to confirm, correct or vacate a domestic arbitral award.
liquidated damages and unrecouped down payment.
The Petition is GRANTED. The assailed decision of the CA is
Dissatisfied, Respondent filed in the CA a Petition for Review REVERSED and SET ASIDE. The Award made in the Decision
under Rule 43 of the 1997 Rules of Civil Procedure, as rendered by CIAC dated February 2, 2010 is REINSTATED with
amended, which reversed the CIAC’s ruling. MODIFICATIONS.

Hence, the present Petition for Review on Certiorari under RATIO DECIDENDI:
Rule 45 seeking to reverse the CA insofar as it denied its
claims under the Performance Bond and to reinstate in its SC holds that RA No. 9285 did not confer on RTCs jurisdiction
entirety the February 2, 2010 CIAC Decision. to review awards or decisions of the CIAC in construction
disputes. On the contrary, Section 40 thereof expressly
ISSUE: declares that confirmation by the RTC is NOT required, thus:

Whether or not the Alternative Dispute Resolution Act of 2004 SEC. 40. Confirmation of Award. – The confirmation of a
and the Special ADR Rules have stripped the CA of jurisdiction domestic arbitral award shall be governed by Section 23 of
to review arbitral awards? R.A. 876.
effect on October 30, 2009. Since RA No. 9285 explicitly
A domestic arbitral award when confirmed shall be enforced excluded CIAC awards from domestic arbitration awards that
in the same manner as final and executory decisions of the need to be confirmed to be executory, said awards are
Regional Trial Court. therefore not covered by Rule 11 of the Special ADR Rules, as
they continue to be governed by EO No. 1008, as amended
The confirmation of a domestic award shall be made by the and the rules of procedure of the CIAC. The CIAC Revised
regional trial court in accordance with the Rules of Procedure Rules of Procedure Governing Construction Arbitration
to be promulgated by the Supreme Court. provide for the manner and mode of appeal from CIAC
decisions or awards in Section 18 thereof, which reads:
A CIAC arbitral award need not be confirmed by the regional
trial court to be executory as provided under E.O. No. 1008. SECTION 18.2 Petition for review. – A petition for review from
(Emphasis supplied.) a final award may be taken by any of the parties within fifteen
(15) days from receipt thereof in accordance with the
EO No. 1008 vests upon the CIAC original and exclusive provisions of Rule 43 of the Rules of Court.
jurisdiction over disputes arising from, or connected with,
contracts entered into by parties involved in construction in
the Philippines, whether the dispute arises before or after the
completion of the contract, or after the abandonment or
breach thereof. By express provision of Section 19 thereof,
the arbitral award of the CIAC is final and unappealable,
except on questions of law, which are appealable to the
Supreme Court. With the amendments introduced by RA No.
7902 and promulgation of the 1997 Rules of Civil Procedure,
as amended, the CIAC was included in the enumeration of
quasi- judicial agencies whose decisions or awards may be
appealed to the CA in a Petition for Review under Rule 43.
Such review of the CIAC award may involve either questions of
fact, of law, or of fact and law.

Petitioner misread the provisions of A.M. No. 07-11-08-SC


(Special ADR Rules) promulgated by the SC and which took

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