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Republic of the Philippines original and four copies of this letter?

l and four copies of this letter? A formal copy 'Re Yours sixth release bladings against full payment
SUPREME COURT of the Charter Party document will be forwarded to of freight and by Irving Trust New York fifteen
Manila you within a few days. Atkins, Kroll & Co., Inc., thousand dollars covering possible demurrage to be
Manila, acting solely as agents for and in behalf of the settled in accordance with the ruling of arbitration
EN BANC owners of the S/S Eastwater by cable or letter to all board New York please have Ysmael immediately
G.R. No. L-9090 September 10, 1957 parties concerned and that the cargo will go forward their arbitrator'
as scheduled in a satisfactory manner,' Defendant
EASTBOARD NAVIGATION, LTD., plaintiff- signed said letter thus, 'For Charter Party: Juan "In order to facilitate your negotiations of your
appellant, Ysmael & Co., Inc., K. H. Hemady, President.' On the document with the Bank of America we shall
vs. same date, July 25, 1949, charter party agreement appreciate very much your putting up a guarantee by
JUAN YSMAEL and COMPANY, INC., defendant- (Exhibit A) was executed containing, besides the Irving Trust New York for the sum of US $15,000.00
appellant. regular charter party printed from a typewritten clause and to nominate the name of your arbitrator
reading: 'Clauses Nos. 16 to 31 inclusive and U.S.A. immediately."
Ross, Selph, Carrascoso & Janda and Delfin L.
Clause Paramount, war Risks Clauses 1 and 2, Now On October 1, 1949, the Bank of America, Manila
Gonzales for the plaintiff and appellant.
Jason Clause and Both-to-Blame Collision Clauses, Office wrote defendant company (letter Exhibit 3-A)
Claro M. Recto for the defendant and appellant.
as attached, to be considered as fully incorporated as follows:
BAUTISTA ANGELO, J.: herein and to form part of this Charter Party.' Clause
No. 29 reads as follows: "In accordance with verbal instructions of your
This is an appeal from a decision of the Court of First President, Mr. K. H. Hemady your draft for
Instance of Manila ordering defendant to pay to "It is mutually agreed that should any dispute arise $76,354.55 and attached documents were airmailed
plaintiff the sum of $53,037.89 as awarded by board between Owners and Charterers, the matter in this morning to the above bank together with the
of arbitrators on June 20, 1950 and confirmed by the dispute shall be referred to three persons at New relative bills of lading which were surrendered to us
District Court of New York, U.S.A. on August 15, York for arbitration, one to be appointed by each of by Atkins Kroll & Co., Inc., for account and by order
1950, with the legal interest thereon from December the parties hereto, and the third by the two so chosen; of Eastboard Navigation, Ltd. of Toronto.
5, 1950 until its payment, and the costs of suit. their decision or that of any two of them, shall be final,
and for the purpose of enforcing any award, this "The documents, which were sent for collection,
The facts involved in this case which are necessary agreement may be made a rule of the Court. The covered the third and last under the assignment
to be considered in this appeal are stated by the trial arbitrators shall be commercial men. should the two made to you by Mr. Hector Corvera under the terms
court in its decision which we find to be substantially so chosen not be able to agree who the third of the subject credit and cover:"1âwphïl.nêt
correct. They are: "On July 25, 1949, Atkins, Kroll & arbitrator should be, then the New York Produce
Co., Inc., Manila, wrote defendant Juan Ysmael & xxx xxx xxx
Exchange is to appoint such third arbiter, The amount
Co., Inc., (letter of Toronto, Canada, owners of the in dispute shall be placed in escrow at New York 'Deposit account Demurrage under Arbitration -
S/S Eastwater, 'have accepted your terms of subject to the decision of the arbitrators." $15,000.1âwphïl.nêt
payment and are agreed to charter the S/S Eastwater
to Juan Ysmael & Co., Inc., Manila, (to load cargo of On September 8, 1949, Atkins, Kroll & Co., Inc., xxx xxx xxx
scrap iron in the Philippines for Buenos Aires)under Manila again wrote defendant company as follows
the following terms and conditions: . . (10) Clause (letter Exhibit 3): "We have requested the Irving Trust Company to
Paramount: Terms and conditions for this Charter advise us by cable when the above amounts have
"We are today in receipt of the following cable been paid. In the event of non-payment, we have
Party not explicitly or otherwise stated in this letter of
instructions from our principals the Eastboard requested that they deliver the bills of lading to the
confirmation are to be as per general conditions of
Navigation Ltd., regarding the release of your scrap Eastboard Navigation Ltd., under advice.
regular Charter Party form. Will you kindly signify
iron loaded at Manila;
confirmation of the above terms by signing the
"We expect to be able to report to you on the above- purposes. Should you, however, need further Southern District of New York, for confirmation,
described collection sometime next week." information regarding the matters, or should you (Admiralty No. A165-362) and said Court confirmed
need our assistance at this end, please fee to ask us." the said arbitration decision in its Order and Final
On December 3, 1949, defendant Company wrote Decree of August 15, 1950, (Exhibit D) ordering that
the Bank of America (Manila)(letter Exhibit 3-B) as On May 23, 1959, Messrs, Manning, Harnisch, and the aforesaid award of arbitrators be and the same
follows: Holinger, acting as attorneys for defendant Juan hereby is in all respects confirmed', and "that the said
Ismael & Co., Inc., executed for plaintiff Eastboard movant, Eastboard Navigation, Ltd., recover of and
"Please transmit by telegraphic transfer to Irving Navigation Ltd., arbitration agreement (Exhibit B)
Trust Company, New York, the amount of Ten from the said respondent Juan Ysmael & Company,
which reads: Inc., the sum of $53,037.89, with interest thereon
Thousand Dollars ($10,000), for the account of
Eastboard Navigation Ltd., Toronto, Canada, to be "We, the undersigned, hereby mutually covenant and from the 20th day of June, 1950, amounting to
held as deposit for demurrage due the SS Eastwater, agree to submit, and hereby do submit to Charles L. $488.24, together the movant's cost taxed in the sum
together with the $15,000 previously remitted to Lambert, Richard Nathan and Donald E. Simmons, of $40.00 and amounting in all to the sum of
them. The amount shall be held pending result of the as Arbitrators, for their adjudication and award, a $53,566.13 with interest thereon until paid.'
arbitration of the dispute between this Company and controversy existing between us relating to the Plaintiff brought this action to enforce the aforesaid
Eastboard Navigation." liability if any, of the undersigned, Juan Ysmael & Co., "Order and Final Decree" pursuant to Section 48,
Inc., charterers to the undersigned, Eastboard Rule 39 of the Rules of Court which, among others,
The dispute mentioned in its preceding letter having Navigation, Ltd., owners of the S/S Eastwater , for
arisen, under date of April 5, 1950, the defendant provides "In case of a judgment is presumptive
demurrage, discharging expenses, wharfage, extra evidence of a right as between the parties and their
cabled Attys. Manning, Harnish and Holinger of New meals agency fees, crew overtime and miscellaneous
York City as follows: 'Through recommendation of Mr. successors in interest by a subsequent title; but the
expenses under charter party of the S/S Eastwater judgment may be repelled by evidence of a want of
Morris Lipsett we request you kindly present our case dated July 25th, 1949.
before Arbitration Board re charter vessel jurisdiction, want of notice to the party, collusion,
S/S EastwaterWriting" (Exhibit 2). And in its letter "And we mutually covenant and promise that the fraud or clear mistake of law or fact."
Exhibit 2-B of the same date to said attorneys, award to be made by said Arbitrators or by a majority Defendant, in its answer, set up the defense that said
defendant confirmed its request as follows: of them, shall be well and faithfully kept and observed judgment cannot been forced in this jurisdiction
by us, and by each of us. because.
"Our good friend, Mr. Morris E. Lipsett Pacific
Corporation, 80 Wall Street New York, has highly "And it is hereby further mutually agreed that a (a) when the New York District Court acted on the
recommended your law firm to us to present our case judgment the United States District Court for the case it did not have jurisdiction over the person of
to arbitration in a case we have with the Eastboard Southern District of New York shall be rendered upon defendant; and (b) the proceeding where said
Navigation Co., Inc., in connection with our charter of the award made pursuant to this judgment was rendered was summary, there was no
their vessel the S/S Eastwater. May we, therefore, submission.1âwphïl.nêt trial on the merits and defendant did not give its
request you to act as such attorney for us, and you consent thereto. Defendant contends that judgment
may bill us accordingly for your services in matter. "WITNESS, our hands this 23rd day of May,
1950."1âwphïl.nêt does come with the purview of Section 48, of the
"We have already spent a considerable sum of this Rules of Court.
case, not to mention the inconvenience it has caused Pursuant to said arbitration agreement, the three
arbitrators in New York City passed upon the During the hearing, the parties agreed as to the
us, and we are most anxious to the matter be following facts. That defendant is a corporation the
terminated as soon as possible. difference between the plaintiff and the defendant
after having heard and received evidence submitted stock of which is held as follows: Magdalena
"Pertinent papers and documents regarding the by both sides,' ands rendered their arbitration Hemady, 8,459 shares; K. H. Hemady, 6,939 shares;
matter have been turned over to Mr. Lipsett, and we decision (Exhibit C). This arbitration decision was Felipe Ysmael, 770 shares; Carlos Komel Ysmael,
have requested him to turn those over to you for your presented by plaintiff to the U.S District Court, 830 shares; Juan Ysmael y Cortes, 1 share; and
Gabriel Ysmael, 1 share or a total of 17,000 shares; It is plaintiff-appellant's contention that, if the decision The next issue raised by plaintiff-appellant refers to
that plaintiff, during that time material to this case, of the lower court is affirmed, it will have to pay the the failure of the lower court to award to it the fees
was not licensed to transact business in the foreign exchange tax on the amount awarded therein which agreed to pay to its counsel in connection with
Philippines; that this is the first business transaction if the same is to be remitted to its home office at the present litigation under Article 2208, sub-
made locally by plaintiff although previously plaintiff's Ontario, Canada; that it should have been exempted paragraph 5, of the new Civil Code. The alleged sub-
vessel was chartered by the National Rice and Corn from said tax had defendant paid the award paragraph allows a winning party to recover
Corporation to carry rice Cargo to the Philippines, the immediately after it had been confirmed by the U.S. attorney's fees "where the defendant acted in gross
charter party thereto being dated April 5, 1949; that New York District Court because at that time Republic and evident bad faith in refusing to satisfy the
the charter party Exhibit A is on approved by the Act No. 601 had not yet been acted; and that because plaintiff's plainly valid, just and demandable claim."
Documentary Council of the Baltic and White Sea defendant's undue refusal to pay the same which From this it would appear that to the entitle plaintiff to
Conference and that one of its standard stipulation is gave risk to said tax liability, plaintiff will have to Attorney's fee on this ground, it is necessary that it be
a clause regarding arbitration: that K. H. Hemady, shoulder the same. This is a loss which defendant proven that defendant acted "in gross and evident
now deceased, as president and general manager of shall pay, plaintiff contends, under Article 1107 of the bad faith" in refusing plaintiff's claim. Since, as we
defendant, for 25, years had entered into numerous Old Civil Code. have already stated, plaintiff did not present any
other contracts with third parties in representation of evidence on this point, the lower court did not err in
defendant all of which where ratified by its Board of In the first place, there is no clear proof on record that denying plaintiff's claim on this score.
Directors; that one of the arbitrators Richard Nathan defendant's refusal to pay the award is due to fraud
was appointed by defendant corporation, another one or bad faith. Plaintiff failed to present any evidence in Coming now to the appeal of defendant, we may
Donald E. Simmons was appointed by plaintiff, and this regard. On the contrary, the stand of defendant restate the main issues raised in its assignment of
these two appointed a third one Charles P. Lambert; does not seem to be entirely groundless as evidence errors as follows: (a) whether or not defendant agreed
and that the defense that K. H. Hemady was not by the several defenses it set up in its answer which to submit to compulsory arbitration its dispute with
authorized by the Board of Directors of defendant give a clear perspective of the reasons why it plaintiff in the charter party agreement executed
corporation to enter into the arbitration agreement declined to pay the award which plaintiff demands. In between them, and, in the affirmative, whether such
was raised for the first time in these proceedings, the second place, it would appear that, if there is any agreement is valid in the jurisdiction; (b) whether or
which means that it was not raised in the arbitration agreement to pay the instant obligation in a currency not the arbitration agreement Exhibit B, is binding on
proceedings in New York, nor in the proceedings held other than the Philippine currency, the same is null defendant and, in the affirmative, whether or not the
to confirm the award in the U.S. District Court of the policy (Republic Act No. 529), and the most it could arbitration proceedings as well as the arbitrators'
Southern District of New York. In addition this be demanded is to pay said obligation in Philippine decision, are valid and binding on defendant; (c)
stipulation of facts, plaintiff and defendant submitted currency to be measured in the prevailing rate of whether or not, on the assumption that said
documentary evidence. exchange at the time the obligation was incurred proceedings and decisions are valid, the decree of
(section 1, Idem.) Finally in as much as the decree of the U.S. District Court, Southern District of New York,
The lower court rendered judgment affirming the New York District Court which now sought to be sitting as Admiralty Court, is valid and enforceable in
decree of the New York District Court and ordering enforced does not specify the place where the this jurisdiction; and (d) whether or not plaintiff, being
that it be enforced from which defendant appealed. obligation should be paid, the judgment debtor, a foreign corporation without license to transact
Plaintiff likewise appealed but only on the score that herein defendant, may discharge the same here in business in the Philippines, has capacity to sue in this
the court did not declare defendant liable for the Manila which is its domicile. We find therefore no jurisdiction.
amount of the foreign exchange tax due on the valid reason for upholding the claim that defendant,
judgment and for the fees it agreed to pay to its should it be ordered to pay the award, pay the foreign (a) it should be recalled that as a confirmation of the
counsel for this litigation. We will discuss separately exchange tax required by law at the time the correspondence had between plaintiff's agents in the
the issues involved in this joint appeal. obligation fell due. At any rate, this question would Philippines and defendant, prescribed by its
appear now to be moot for the reason that said tax President K. H. Hemady, the former sent a letter
has already been abolished (Republic Act No. 1394). advising the letter that plaintiff had accepted its offer
to charter plaintiff's vessel S/S Eastwater to load at the end of the document, as well as the typewritten signature to the document involving a very important
cargo of scrap iron in the Philippines for Buenos Aires sheets attached thereto, wherein is embodied Clause transaction without knowing its contents and would
under certain terms and conditions therein 29 which refers to the arbitration agreement, the fact do only on the assumption that it contained mere
enumerated (Exhibit 1). In this letter it is stated that however is that Hemady signed said papers without formalized statements of the terms and conditions of
the terms and conditions for this charter of reading the same and solely on the assumption that the letter of confirmation Exhibit 1. Moreover, if
confirmation are to be as per general conditions of they merely formalized the terms and conditions Hemady did not intend to submit his dispute with
regular charter party form", a formal copy of which already agreed upon in the letter of confirmation plaintiff to arbitration Messrs. Manning, Harnisch and
would be forwarded to defendant. This was done, and Exhibit 1. It is emphasized that Hemady never Holinger as lawyer to represent defendant
the form above referred to is Exhibit A which was duly intended to submit any dispute that may arise out of corporation in the arbitration proceedings to be held
signed by plaintiff, through its president, and by its charter party to compulsory arbitration, much less in New York? (Exhibits 2 and 2-B) Why did he instruct
defendant, through its president and general to recognize the findings or award of the arbitrators the Bank of America on two different occasions to
manager, K. H. Hemady. This document is in printed that may be appointed by the parties as final and not transmit to the Irving Trust Company of New York the
in form with the blanks properly filled out, at the subject to review by our courts. It is further contended total sum of $25,000 to be "held pending result of the
bottom of which appears a typewritten clause which that Hemady signed the document Exhibit A that the arbitration of the dispute between this company
states, "Clauses Nos. 16 to 31 inclusive and U. S. A. same would merely with its "general conditions" the (Ysmael) and Eastboard Navigation, Ltd.?" (Exhibit 3-
Clause Paramount, War Risks Clauses 1 and 2, Now terms and conditions stated in the letter of B) If defendant corporation did not really intend to
Jason Clause and Both-to-Blame Collision confirmation Exhibit 1, and the typewritten clause submit its dispute with the plaintiff to arbitration the
Clauses, as attached, to be considered as fully attached to the document Exhibit A, specially that logical step it should have taken would be to
incorporated herein and to form part of this Charter which provides for foreign arbitration, refers to special repudiate the act of its President Hemady, but far
Party." (Emphasis supplied) Both the printed form conditions which were not intended by the parties nor from doing so, it approved and ratified it by
and the typewritten sheet containing Clauses Nos. 16 included in the preliminary negotiation conducted subsequent that it was agreeable to said arbitration.
to 31 inclusive, were signed by the contracting between them. This stand of Hemady corroborated
parties. Clause 29 in the typewritten form refers to the by the fact that when he received from his lawyers the b) The claim that the arbitration proceedings
arbitration agreement, and reads as follows: arbitration agreement Exhibit B, he refused to sign it conducted in New York as well as the award of the
because it was never dispute with plaintiff to arbitrators cannot bind defendant corporation for the
29. It is mutually agreed that should any dispute arise compulsory arbitration. reason that the same were without its authority or
between Owners and the Charterers, the matter in contrary to its instructions is also untenable. It is true
dispute shall be referred to three persons at New There are many circumstances on record which that when defendant's counsel sent the document
York for arbitration, one to be appointed by each of discredit this claim Of defendant-appellant. To begin Exhibit B to its President K. H. Hemady for his
the parties hereto, and the third by the two so chosen; with, it appears that the charter party agreement signature, the latter returned it but that defendant's
their decision or that of any two of them shall be final, Exhibit A is one the original of which was approved counsel nevertheless signed the document in behalf
and for the purpose of enforcing any award, this by the Documentary Council of the Baltic Whit Sea of defendant and submitted it to the Board of
agreement may be a rule of the Court. The Arbitrators Conference in 1922 and one of its standard clauses Arbitrators, and this act is now alleged as one would
shall be commercial men. Should the two so chosen is the arbitration clause and as much as the latter, indicate that defendant did not agree to submit the
not be able to agree who the third Arbitrator should though in typewritten form, is considered as integral dispute to arbitrations. But there is one circumstance
be, then the New York Produce Exchange is to part of the agreement. This fact was admitted by which justifies the action taken by defendants
appoint such third Arbiter. The amount in dispute defendant's counsel. In the second place, Hemady as counsel in New York. Note that said document Exhibit
shall be placed in escrow New York, subject to the it would appear, signed not only the printed portion of B is mistakenly termed "arbitration agreement", for it
decision of the arbitrators.1âwphïl.nêt the charter party agreement, but the typewritten is not so. A perusal thereof would show that it is a
portions as well, which contains the arbitration mere agreement to submit the dispute to the
It is now contended that while K. H. Hemady had clause, and it cannot be believed that a businessman arbitrators for arbitration and award. Such is
signed Exhibit A which contains a typewritten clause of long experience as he was, would affix his necessary for there could be no valid arbitration and
award if the arbitrators would not know what to signed by the defendant corporation empowering one "would be conducted solely for the purpose of friendly
arbitrate and decide. The arbitration agreement is Morris E, Lipsett to appoint a substitute arbitrator in adjustment of disputes limited to and not exceeding
Clause 29 of the charter Party Exhibit A. The fact that its behalf, (2) copy of a letter of said Morris E. Lipsett the amount of $25,000." Moreover, the aforesaid
Hemady returned said document Exhibit B is of no designating Richard Nathan as arbitrator, and (3) deposit merely represents an estimate of the
significance for such is previously given by defendant copy of the letter of Richard Nathan accepting his amounts that may accrue to plaintiff for demurrage
to its counsel Messrs. Manning, Harnisch and appointment as arbitrator (Exhibit D). Note that Mr. pursuant to the charter agreement while the vessel
Holinger "to present our case to the arbitrators in a Morris E. Lipsett is the same person who, according was in transit from Manila to Buenos Aires and does
case we have the Eastboard Navigation Co., Ltd., in to K. H. Hemady, recommended Messrs. Manning, not include any additional demurrage that may be
connection with our charter of their vessel the S/S Harnisch and Holinger to be his lawyers in the incurred while the vessel is docked in Buenos Aires
Eastwater." contained in its letter dated April 5, 1950 arbitration casein New York and that because he was waiting for the unloading of the cargo. To sustain
(Exhibit 2-B). The signing of said document Exhibit B his good friend Hemady accepted his defendant's contention would be to defeat the
by defendant's counsel is therefore perfectly within recommendation (Exhibit 2-B). On the strength of this purpose of the arbitration which is to settle all
the scope of the authority given them by defendant evidence, we cannot therefore take seriously that disputes that may arise out of the contract in
corporation. contention that the person, Richard Nathan, who connection with the voyage. It cannot therefore be
acted as arbitrator in behalf of respondent, did so pretended that the arbitrators acted beyond the
But defendant insists that the decision of the without the authority of the latter. scope of their authority.
arbitrators is not binding upon it because (1) none of
the arbitrators who acted thereon in accordance with Of course, defendant now contends that the decision As a corollary to the question regarding to the
the arbitration agreement had been appointed by of the arbitrators can have no binding effect on it existence of an arbitration agreement, defendant
defendant, and (2) even if the appointment of Attys. because it was rendered without first obtaining its raises the issue that, even if it be granted that it
Manning, Harnisch and Holinger to represent written conformity of approval, or without its lawyer agreed to submit its dispute with plaintiff to arbitration,
defendant before the arbitration boar would be having first submitted to the matter to it for said agreement is void and without effect for it
considered as an authority to submit their dispute to consultation, in accordance with the instruction it has amounts of removing said dispute from the
arbitration board is nevertheless void because it was given in its letter dated April 20, 1950 (Exhibit 2-C), jurisdiction of the courts in which the parties are
not in accordance with the condition of said but certainly, such instruction, if any, is preposterous domiciled or where the dispute occurred. It is true that
submission — that the arbitrators consider only under the circumstances, for to allow that to prevail there are authorities which hold that "a clause in
claims or awards not in excess of $25,000. would be to defeat the very purpose of the arbitration. contract providing that all maters in dispute between
The proceeding would be purposeless for no award the parties shall be referred to arbitrators and to them
The claim that none of the three arbitrators who acted can be obtained if the same should be made alone, is contrary to public policy and cannot oust the
on the dispute was appointed by defendant, or under dependent upon the instruction or approval of any of courts of jurisdiction" (Manila Electric Co. vs. Pasay
its authority, is untenable, for the same is disproved the parties. Transportation Co., 57 Phil., 600, 603), however,
by the evidence. Thus during the trial of this case and there are authorities which favor "the more intelligent
parties agreed say to certain facts which appear to be The contention that defendant corporation has limited view that arbitration, as an expensive, speedy and
not disputed among them being that one of the its agreement to arbitrate to an amount not exceeding amicable method of settling disputes, and as a means
arbitrators who acted in New York on the case, $25,000 cannot also be sustained. Such claims is not of avoiding litigation, should receive every
Richard Nathan, was appointed by authority of borne out by the evidence for neither the cable nor encouragement from the courts which may be
defendant corporation, and his appears to be the letter which defendant sent to its lawyers in New extended without contravening sound public policy or
supported by the decision of the New York District York contains any statement limiting their authority to settled law"(3 Am. Jur., p. 835). Congress has
Court. Thus, in said decision it appears that when the represent it to disputes not exceeding $25,000. In officially adopted the modern view when it
case was called for hearing both parties were other words, there is no evidence whatsoever in the reproduced in the new Civil Code the provisions of
represented by counsel who submitted documentary record showing that Mr. Hemady understood, or was the old Code on Arbitration. And only recently it
evidence among which (1) copy of the authorization made to understand, that the arbitration proceeding approved republic Act No. 876 expressly authorizing
arbitration of future disputes. Thus section 2 of said 1925 under which the New York District Court Wherefore, the decision appealed from its affirmed,
Act provides: confirmed the arbitrators' award. But we find that the without pronouncement as to costs.
law thus invoked does not sustain defendant's
SEC. 2. Persons and matters subject to arbitration. pretense, for the same, in case of a non-resident,
— Two or more Persons or Parties may submit to the does not necessarily require that service of notice of
arbitration of one or more arbitrators any controversy the application for confirmation be made on the
existing between them at the time of the submission adverse party himself, it being sufficient that it be
and which may be the subject of an action, or the made upon his attorney (July 30, 1947, c. 392,
parties to any contract may in such contract agree to section 1, 61 Stat. 669, p. 4 Exhibit E). This is
settle by arbitration a controversy thereafter arising precisely what was done in this case. Copy of the
between them. Such submission or contract shall be notice of submission of the award to the District Court
valid, enforceable and irrevocable, save upon such of New York was served upon defendant's counsel
grounds as exist at law for the revocation of any who in due time of appearance and actually appeared
contract.". when the case was heard. This is clearly stated in the
Considering this declared policy of Congress in favor decision of said Court (Exhibit D). It is significant that
of arbitration of all kinds of arbitration of all kinds of respondent's counsel never impugned the jurisdiction
disputes, and the fact that, according to the of the defendant nor did ever plead before it that they
explanatory note of Republic Act No. 876, "to afford were bereft of authority to represent defendant.
the public a cheap and expeditious procedure of Defendant cannot therefore in this instance defeat
setting not only commercial but other kinds the effect of this decision by alleging want of
of controversies most of the states of the American jurisdiction, or want of notice, as provided for in
Union have adopted statutes providing for arbitration, section 48, Rule 39 of our Rules of Court.
and American businessman are reported to have (d) While plaintiff is a foreign corporation without
enthusiastically accepted the innovation of its license to transact business in the Philippines, it does
obvious advantages over the ordinary court not follow that it has no capacity to bring the present
procedure", we find no plausible reason for holding action. Such license is not necessary because it is in
that the arbitration agreement in question, simply business in the Philippines. In fact, the transaction
because it refers to a future dispute, is null and void herein involved is the first business undertaken by
as being against public policy. (Emphasis supplied.) plaintiff in the Philippines, although on a previous
(c) It is contended that the decision rendered by the occasion plaintiff's vessel was chartered by the
U. S. District Court of New York sitting as an National Rice and Corn Corporation to carry rice
Admiralty Court, which ratified the award made by the cargo from abroad to the Philippines. These two
arbitrators, has no binding effect on defendant isolated transactions do not constitute engaging in
corporation, nor can it be enforced in this jurisdiction, business in the Philippines within the purview of
for the reason that when said court acted on the case Sections 68 and 69 of the Corporation Law so as to
it did not acquire jurisdiction over said defendant. And bar plaintiff from seeking redress in our courts.
this claim is predicated on the alleged fact that (Marshall-Wells Co. vs. Henry W. Elser & Co. 49
defendant was never served with notice, summons, Phil., 70; Pacific Vegetable Oil Corporation vs. Angel
or process relative to the submission of the award of 0. Singson, G. R. No. L-7917, April 29,
the arbitrators to said court, invoking in support of this 1955.)1âwphïl.nêt
contention the U. S. Arbitration Act of February 12,
EASTBOARD NAVIGATION v. JUAN YSMAEL business undertaken by Eastboard Navigation in the impugned the jurisdiction of the court over defendant
CO., INC. Philippines. nor did they ever plead before it that they were bereft
of authority to represent Ysmael Co. It cannot
G.R. No. L-9090 | September 1, 1957 Issues: (1) Whether Eastboard has capacity therefore defeat the effect of this decision by alleging
to sue in the Philippines? - YES want of jurisdiction, or want of notice.
(2) Whether the court may enforce the Decree issued
Doctrine: The law of the forum governs procedural by the New York District Court. - YES
matters (such as notice requirements). The law of the
state where a foreign judgment is sought to be Held: (1) While Eastboard is a foreign corporation
enforced cannot be invoked to impugn the validity of without license to transact business in the
the proceedings where the foreign judgment was Philippines, it does not follow that it has no capacity
made. Also, a foreign corporation has capacity to sue to bring the present action. Such license is not
even without a license to transact business if it is not necessary because it is not engaged in business in
engaged in business in the Philippines. the Philippines. In fact, the transaction herein
involved is the first business undertaken by
Eastboard in the Philippines, although on a previous
Facts: Juan Ysmael Co., Inc (Philippine corporation), occasion Eastboard's vessel was chartered by the
through K. H. Hemady (its president and general National Rice and Corn Corporation to carry rice
manager), chartered Eastboard Navigation’s cargo from abroad to the Philippines. These 2
(Canadian corporation) vessel to load a cargo of isolated transactions do not constitute engaging in
scrap iron in the Philippines for Buenos Aires. The business in the Philippines within the purview of
charter party agreement contained a typewritten Sections 68 and 69 of the Corporation Law so as to
clause providing for compulsory arbitration in the bar Eastboard from seeking redress in our courts.
state of New York, in case of any disputes that may
arise based on their agreement.
(2) The defense of Ysmael Co. that the Decree may
A dispute arose regarding the liability of Ysmael Co., not be enforced in the Philippines is predicated on the
Inc. for the payment of freight and demurrage. An alleged fact that it was never served with notice,
arbitration agreement was eventually executed in summons, or process relative to the submission of
New York between the 2 parties. The arbitration the award of the arbitrators to New York court,
agreement was then presented by Eastboard = to the invoking the U.S. Arbitration Act. The law invoked,
U.S. District Court in New York for confirmation where however, does not sustain Ysmael Co. pretense
said Court confirmed and issued an Order and Final since the Arbitration Act does not necessarily require
Decree. that service of notice of the application for
Eastboard then brought this action in the Philippines confirmation be made on the adverse party himself
to enforce the “Order and Final Decree”. Ysmael Co. (in case of a non-resident), it being sufficient that it be
however argues that since Eastboard Navigation is a made upon his attorney. In this case, a copy of notice
foreign corporation without a license to do business of submission of the award to the District Court of
in the Philippines, it has no capacity to sue in this New York was served upon Ysmael Co.’s counsel
jurisdiction. Note that the stipulation of facts of the who in due time made of record their appearance and
parties stated that this transaction was the first actually appeared when the case was heard. It is also
significant that Ysmael Co.’s counsel never