CASE DIGEST NO. 1
Meanwhile, Chung Fu moved to remand the case for
CHUNG FU INDUSTRIES V. CA (G.R. NO. 96283)
Facts:
Petitioner Chung Fu Industries (Philippines) and private
respondent Roblecor Philippines, Inc. forged a
construction agreement whereby respondent contractor
committed to construct and finish petitioner corporation’s
industrial/factory complex. In the event of disputes arising
from the performance of subject contract, it was
stipulated therein that the issue(s) shall be submitted for
resolution before a single arbitrator chosen by both
parties. Roblecor filed a petition for Compulsory
Arbitration with prayer for Temporary Restraining Order
before respondent RTC to claim the unsatisfied account
and unpaid progress billings. Chung Fu moved to dismiss
the petition and further prayed for the quashing of the
restraining order. Subsequent negotiations between the
parties eventually led to the formulation of an arbitration
agreement which, among others, provides: The parties
mutually agree that the decision of the arbitrator shall be
final and unappealable. Therefore, there shall be no
further judicial recourse if either party disagrees with the
whole or any part of the arbitrator’s award. Respondent
RTC approved the arbitration agreement and thereafter,
Engr. Willardo Asuncion was appointed as the sole
arbitrator. Arbitrator Asuncion ordered petitioner to
immediately pay respondent contractor and further
declared the award as final and unappealable. Roblecor
then moved for the confirmation of said award which was
accordingly confirmed and a writ of execution granted to
it.
further hearing and asked for a reconsideration of the
judgment award claiming that Arbitrator Asuncion
committed twelve (12) instances of grave error by
disregarding the provisions of the parties’ contract.
Chung Fu’s Motion was denied and similarly its motion
for reconsiderationn. Chung Fu elevated the case via a
petition for certiorari to respondent CA. The respondent
appellate court concurred with the findings and
conclusions of respondent trial court. A motion for
reconsideration of said resolution was filed by petitioner,
but was similarly denied.
Issue:
Whether or not petitioners are estopped from questioning
the arbitration award allegedly in view of the stipulations
in the parties’ arbitration agreement that “the decision of
the arbitrator shall be final and unappealable” and that
“there shall be no further judicial recourse if either party
disagrees with the whole or any part of the arbitrator’s
award.”
Ruling:
We rule in the negative. It is stated explicitly under Art.
2044 of the Civil Code that the finality of the arbitrators’
award is not absolute and without exceptions. Where the
conditions described in Articles 2038, 2039 and 2040
applicable to both compromises and arbitrations are
obtaining, the arbitrators’ award may be annulled or
rescinded. Additionally, under Sections 24 and 25 of the
Arbitration Law, there are grounds for vacating, modifying
or rescinding an arbitrator’s award. Thus, if and when the
factual circumstances referred to in the above-cited
provisions are present, judicial review of the award is
properly warranted.
This is where the proper remedy is certiorari under Rule ante until such time as the trial court shall have passed
65 of the Revised Rules of Court. It is to be borne in upon the merits of this case.
mind, however, that this action will lie only where a grave
abuse of discretion or an act without or in excess of
jurisdiction on the part of the voluntary arbitrator is clearly
shown. It should be stressed, too, that voluntary
arbitrators, by the nature of their functions, act in a quasi-
judicial capacity. It stands to reason, therefore, that their
decisions should not be beyond the scope of the power
of judicial review of this Court.
In the case at bar, petitioners assailed the arbitral award
on the following grounds, most of which allege error on
the part of the arbitrator in granting compensation for
various items which apparently are disputed by said
petitioners. After closely studying the list of errors, as well
as petitioners’ discussion of the same in their Motion to
Remand Case For Further Hearing and Reconsideration
and Opposition to Motion for Confirmation of Award, we
find that petitioners have amply made out a case where
the voluntary arbitrator failed to apply the terms and
provisions of the Construction Agreement which forms
part of the law applicable as between the parties, thus
committing a grave abuse of discretion. Furthermore, in
granting unjustified extra compensation to respondent for
several items, he exceeded his powers — all of which
would have constituted ground for vacating the award
under Section 24 (d) of the Arbitration Law.
Wherefore, the petition is granted. The Resolutions of the
CA as well as the Orders of respondent RTC are hereby
SET ASIDE. Accordingly, this case is REMANDED to the
court of origin for further hearing on this matter. All
incidents arising therefrom are reverted to the status quo
CASE DIGEST NO. 2
GONZALES VS CLIMAX MINING LTD 512 SCRA 148
Gonzales vs Climax Mining Ltd
512 SCRA 148 [GR No. 161957 January 22, 2007]
Facts: This is a consolidation of two petitions rooted in
the same disputed Addendum Contract entered into by
the parties. In G.R. No. 161957, the Court in its Decision
of 28 February 2005 denied the Rule 45 petition of
petitioner Jorge Gonzales (Gonzales). It held that the
DENR Panel of Arbitrators had no jurisdiction over the
complaint for the annulment of the Addendum Contract
on grounds of fraud and violation of the Constitution and
that the action should have been brought before the
regular courts as it involved judicial issues. Both parties
filed separate motions for reconsideration. Gonzales
avers in his Motion for Reconsideration that the Court
erred in holding that the DENR Panel of Arbitrators was
bereft of jurisdiction, reiterating its argument that the case
involves a mining dispute that properly falls within the
ambit of the Panels authority. Gonzales adds that the
Court failed to rule on other issues he raised relating to
the sufficiency of his complaint before the DENR Panel of
Arbitrators and the timeliness of its filing. Respondents
Climax Mining Ltd., et al., (respondents) filed their Motion
for Partial Reconsideration and/or Clarification seeking
reconsideration of that part of the Decision holding that
the case should not be brought for arbitration under
Republic Act (R.A.) No. 876, also known as the
Arbitration Law. Respondents, citing American
jurisprudence and the UNCITRAL Model Law, argue that
the arbitration clause in the Addendum Contract should
be treated as an agreement independent of the other
terms of the contract, and that a claimed rescission of the
main contract does not avoid the duty to arbitrate.
Respondents add that Gonzales argument relating to the
alleged invalidity of the Addendum Contract still has to be
proven and adjudicated on in a proper proceeding; that
is, an action separate from the motion to compel
arbitration. Pending judgment in such separate action,
the Addendum Contract remains valid and binding and so
does the arbitration clause therein. Respondents add that
the holding in the Decision that the case should not be
brought under the ambit of the Arbitration Law appears to
be premised on Gonzales having impugn[ed] the
existence or validity of the addendum contract. If so, it
supposedly conveys the idea that Gonzales unilateral
repudiation of the contract or mere allegation of its
invalidity is all it takes to avoid arbitration. Hence,
respondents submit that the courts holding that the case
should not be brought under the ambit of the Arbitration
Law be understood or clarified as operative only where
the challenge to the arbitration agreement has been
sustained by final judgment.
Issue: Whether or not it was proper for the RTC, in the
proceeding to compel arbitration under R.A. No. 876, to
order the parties to arbitrate even though the defendant
therein has raised the twin issues of validity and nullity of
the Addendum Contract and, consequently, of the
arbitration clause therein as well
Held: Yes. Disputes do not go to arbitration unless and
until the parties have agreed to abide by the arbitrators
decision. Necessarily, a contract is required for arbitration
to take place and to be binding. R.A. No. 876 recognizes
the contractual nature of the arbitration agreement.
The doctrine of separability, or severability as other
writers call it, enunciates that an arbitration agreement is
independent of the main contract. The arbitration
agreement is to be treated as a separate agreement and
the arbitration agreement does not automatically
terminate when the contract of which it is part comes to
an end.
The separability of the arbitration agreement is especially
significant to the determination of whether the invalidity of
the main contract also nullifies the arbitration clause.
Indeed, the doctrine denotes that the invalidity of the
main contract, also referred to as the container contract,
does not affect the validity of the arbitration agreement.
Irrespective of the fact that the main contract is invalid,
the arbitration clause/agreement still remains valid and
enforceable.
The separability of the arbitration clause is confirmed in
Art. 16(1) of the UNCITRAL Model Law and Art. 21(2) of
the UNCITRAL Arbitration Rules.
The proceeding in a petition for arbitration under R.A. No.
876 is limited only to the resolution of the question of
whether the arbitration agreement exists. Second, the
separability of the arbitration clause from the Addendum
Contract means that validity or invalidity of the
Addendum Contract will not affect the enforceability of
the agreement to arbitrate. Thus, Gonzales petition
for certiorari should be dismissed.
This brings us back to G.R. No. 161957. The adjudication
of the petition in G.R. No. 167994 effectively modifies
part of the Decision dated 28 February 2005 in G.R. No.
161957. Hence, we now hold that the validity of the
contract containing the agreement to submit to arbitration
does not affect the applicability of the arbitration clause
itself. A contrary ruling would suggest that a parties mere
repudiation of the main contract is sufficient to avoid
arbitration. That is exactly the situation that the
separability doctrine, as well as jurisprudence applying it,
seeks to avoid. We add that when it was declared in G.R.
No. 161957 that the case should not be brought for
arbitration, it should be clarified that the case referred to
is the case actually filed by Gonzales before the DENR
Panel of Arbitrators, which was for the nullification of the
main contract on the ground of fraud, as it had already
been determined that the case should have been brought
before the regular courts involving as it did judicial
issues.
CASE DIGEST NO. 3 other person or corporation, now or hereafter in
existence, over portions of the lines and tracks of the
Meralco v Pasay Trans Co; GR No. L-37878; 25 Nov 1932; 57 grantee herein, the terms on which said other person
Phil 600 or corporation shall use such right of way, and the
Claudine | 15 September 2017 | Comments (0) compensation to be paid to the grantee herein by such
other person or corporation for said use, shall be fixed by
FACTS: the members of the Supreme Court, sitting as a board
The Manila Electric Company filed a petition requesting of arbitrators, the decision of a majority of whom shall be
the members of the Supreme Court to fix the terms upon final."
which certain transportation companies shall be
permitted to use the Pasig bridge of the Manila Electric Pursuant to said Act, Meralco filed a petition requesting
Company and the compensation paid to the latter. This the members of the Supreme Court, sitting as a board
relates to the validity of Section 11 of Act No. 1446 and to of arbitrators, to fix the terms upon which certain
the legal right of the members of the Supreme Court, transportation companies shall be permitted to use the
sitting as a board of arbitrators, to act on the petition. Pasig bridge of the Manila Electric Company and the
compensation to be paid to the Manila Electric Company
ISSUE(S): by such transportation companies.
Whether or not the Supreme Court can sit as board of
arbitrators. Copies of the petition were directed to be sent to
transportation companies affected by the
HELD: petition. Opposition was entered to the petition by a
NO. The Supreme Court of the Philippines represents number of public utility operators.
one of the three divisions of power in the government.
The Supreme court and its members should not and
cannot be required to exercise any power, to perform any Issue:
task, or to assume any duty pertaining to or connected
with the administration of judicial functions. Can the members of the Supreme Court sit
as arbitrators and fix the terms and compensation as is
Share this: asked of them in this case?

Facts:
Held:
Act No. 1446 was passed. Section 11 of the Act provides:
"Whenever any franchise or right of way is granted to any
The Supreme Court of the Philippine Islands represents
one of the three divisions of power in our government. It
is judicial power and judicial power only which is
exercised by the Supreme Court. Just as the Supreme
Court, as the guardian of constitutional rights, should not
sanction usurpations by any other department of the
government, so should it as strictly confine its own
sphere of influence to the powers expressly or
by implication conferred on it. The Supreme Court and its
members should not and cannot be required
to exercise any power or to perform any trust or to
assume any duty not pertaining to or connected with the
administering of judicial functions.

Section 11 of Act No. 1446 contravenes

the maxims which guide the operation of a democratic
government constitutionally established, and that it would
be improper and illegal for the members of the Supreme
Court, sitting as a board of arbitrators, the decision of a
majority of whom shall be final, to act on the petition of
the Manila Electric Company. (Meralco vs. Pasay
Transportation Company, G.R. No. L-37878, November
25, 1932)
CASE DIGEST NO. 5 the covenant between the parties was included by
reference in the Articles of Agreement.

CASE DIGEST: BF CORPORATION VS. The Court also noted the attempt of respondent in
CA pursuing arbitration through the July 12-conference and
8:45 AM that the lapse of time from said conference to the day the
respondent’s invoked the ‘arbitration clause’ was
G.R. No. 120105 March 27, 1998 ‘reasonable’.
BF CORPORATION vs. COURT OF APPEALS,
SHANGRI-LA PROPERTIES, INC., RUFO B. COLAYCO,
ALFREDO C. RAMOS, MAXIMO G. LICAUCO III and The Court therefore denied the petition for certiorari by
BENJAMIN C. RAMOS BF Corporation.

RULING:

The court sustained the Court of Appeals decision

against petitioner, BF Corporation. The court upheld the
propriety of the filing of the special civil action of certiorari
by respondent, reasoning that what was in question was
the alleged premature assumption of jurisdiction by the
trial court. In settling the issue, another had to be first
determined: the existence of an ‘arbitration clause’.

As opposed to petitioner’s contention that there was no

valid ‘Arbitration Clause’ in the contract with respondent
because said contract only contained initials of the
former’s representatives and none of the latter’s, the
court held that failure of the respondents to affix their
initial in the “Conditions of Contract” containing the
arbitration clause did not affect the compliance with the
formal requirements (RA 876, Sec4) for arbitration
agreements. The Court held that the subject portion of
CASE DIGEST NO.7
Transfield Philippines vs Luzon Hydro Electric Corp. GR
No 146717, Nov 22, 2004
The independent nature of the letter of credit may be: (a)
independence in toto where the credit is independent
from the justification aspect and is a separate obligation
from the underlying agreement like for instance a typical
standby; or (b) independence may be only as to the
justification aspect like in a commercial letter of credit or
repayment standby, which is identical with the same
obligations under the underlying agreement. In both
cases the payment may be enjoined if in the light of the
purpose of the credit the payment of the credit would
constitute fraudulent abuse of the credit.
Facts: Transfield Philippines (Transfield) entered into a
turn-key contract with Luzon Hydro Corp. (LHC).Under
the contract, Transfield were to construct a hydro-electric
plants in Benguet and Ilocos. Transfield was given the
sole responsibility for the design, construction,
commissioning, testing and completion of the Project.
The contract provides for a period for which the project is
to be completed and also allows for the extension of the
period provided that the extension is based on justifiable
grounds such as fortuitous event. In order to guarantee
performance by Transfield, two stand-by letters of credit
were required to be opened. During the construction of
the plant, Transfield requested for extension of time citing
typhoon and various disputes delaying the construction.
LHC did not give due course to the extension of the
period prayed for but referred the matter to arbitration
committee. Because of the delay in the construction of
the plant, LHC called on the stand-by letters of credit
because of default. However, the demand was objected
by Transfield on the ground that there is still pending
arbitration on their request for extension of time.
Issue: Whether or not LHC can collect from the letters of
credit despite the pending arbitration case
Held: Transfield’s argument that any dispute must first be
resolved by the parties, whether through negotiations or
arbitration, before the beneficiary is entitled to call on the
letter of credit in essence would convert the letter of
credit into a mere guarantee.
The independent nature of the letter of credit may be: (a)
independence in toto where the credit is independent
from the justification aspect and is a separate obligation
from the underlying agreement like for instance a typical
standby; or (b) independence may be only as to the
justification aspect like in a commercial letter of credit or
repayment standby, which is identical with the same
obligations under the underlying agreement. In both
cases the payment may be enjoined if in the light of the
purpose of the credit the payment of the credit would
constitute fraudulent abuse of the credit.
Jurisprudence has laid down a clear distinction between
a letter of credit and a guarantee in that the settlement of
a dispute between the parties is not a pre-requisite for
the release of funds under a letter of credit. In other
words, the argument is incompatible with the very nature
of the letter of credit. If a letter of credit is drawable only
after settlement of the dispute on the contract entered
into by the applicant and the beneficiary, there would be
no practical and beneficial use for letters of credit in
commercial transactions.

The engagement of the issuing bank is to pay the seller

or beneficiary of the credit once the draft and the required
documents are presented to it. The so-called
“independence principle” assures the seller or the
beneficiary of prompt payment independent of any
breach of the main contract and precludes the issuing
bank from determining whether the main contract is
actually accomplished or not. Under this principle, banks
assume no liability or responsibility for the form,
sufficiency, accuracy, genuineness, falsification or legal
effect of any documents, or for the general and/or
particular conditions stipulated in the documents or
superimposed thereon, nor do they assume any liability
or responsibility for the description, quantity, weight,
quality, condition, packing, delivery, value or existence of
the goods represented by any documents, or for the good
faith or acts and/or omissions, solvency, performance or
standing of the consignor, the carriers, or the insurers of
the goods, or any other person whomsoever.
CASE DIGEST NO. 8 catsup bottle configuration, for which it was granted

DEL MONTE VS. CA Certificate of Trademark Registration by the Philippine

G.R. No. 78325, January 25, 1990
Patent Office under the Supplemental Register. In 1969,
Facts:
Del Monte granted Philpack the right to manufacture,
Petitioner Del Monte Corporation is a foreign company
distribute and sell in the Philippines various agricultural
organized under the laws of the United States and not
products, including catsup, under the Del Monte
engaged in business in the Philippines. Both the
trademark and logo. In 1972, Del Monte also obtained
Philippines and the United States are signatories to the
two registration certificates for its trademark “DEL
Convention of Paris, a treaty which grants to the
MONTE” and its logo.
nationals of the parties rights and advantages which their

own nationals enjoy for the repression of acts of Respondent Sunshine Sauce Manufacturing Industries

infringement and unfair competition. On the other hand, was issued a Certificate of Registration by the Bureau of

petitioner Philippine Packing Corporation (Philpack) is a Domestic Trade in 1980 to engage in the manufacture,

domestic corporation duly organized under the laws of packing, distribution and sale of various kinds of sauce,

the Philippines. identified by the logo Sunshine Fruit Catsup. The logo

was registered in the Supplemental Register in 1983.

Sometime in 1965, Del Monte authorized Philpack to
Sunshine Sauce’s product itself was contained in various
register with the Philippine Patent Office the Del Monte
kinds of bottles, including the Del Monte bottle, which it  its logo was substantially different from the Del

bought from the junk shops for recycling. Monte logo and would not confuse the buying

public to the detriment of the petitioners.

Philpack received reports that Sunshine Sauce was using
The RTC dismissed the complaint on the following
its exclusively designed bottles and a logo confusingly
grounds:
similar to Del Monte’s. Philpack warned Sunshine Sauce

to desist from doing so on pain of legal action.  there were substantial differences between the

Thereafter, claiming that the demand had been ignored, logos or trademarks of the parties

Philpack and Del Monte filed a complaint against the  Sunshine Sauce became the owner of the said

Sunshine Sauce for infringement of trademark and unfair bottles upon its purchase thereof from the junk

competition. yards

 Del Monte and Philpack had failed to establish the

Sunshine alleged that:
its malice or bad faith, which is an essential

element of infringement of trademark or unfair

 it had long ceased to use the Del Monte bottle and
competition
that
The CA affirmed RTC’s decision in toto. Hence, the

appeal.
Issue(s): does he usually have the time to do so. The average

 Whether or not Sunshine Sauce is guilty of unfair shopper is usually in a hurry and does not inspect every

competition. product on the shelf as if he were browsing in a library.

 Whether or not Sunshine Sauce is guilty of

The question is not whether the two articles are
infringement for having used the Del Monte bottle.
distinguishable by their label when set side by side but
Held:
whether the general confusion made by the article upon
 Yes, it is guilty of unfair competition.
the eye of the casual purchaser who is unsuspicious and
The SC compared the Del Monte and Sunshine Sauce’s
off his guard, is such as to likely result in his confounding
packaging. While it recognized several distinctions, it
it with the original.
does not agree with the conclusion that there was no

infringement or unfair competition.

A number of courts have held that to determine whether

a trademark has been infringed, we must consider the

According to the SC, side-by-side comparison is not the
mark as a whole and not as dissected. If the buyer is
final test of similarity. Such comparison requires a careful
deceived, it is attributable to the marks as a totality, not
scrutiny to determine in what points the labels of the
usually to any part of it. The court therefore should be
products differ, as was done by the trial judge. The
guided by its first impression, for a buyer acts quickly and
ordinary buyer does not usually make such scrutiny nor
is governed by a casual glance, the value of which may
be dissipated as soon as the court assumes to analyze Del Monte label are green and red-orange, the same with

carefully the respective features of the mark. Sunshine. The word “catsup” in both bottles is printed in

white and the style of the print/letter is the same.

It has also been held that it is not the function of the court
Although the logo of Sunshine is not a tomato, the figure
in cases of infringement and unfair competition to
nevertheless approximates that of a tomato.
educate purchasers but rather to take their carelessness

for granted, and to be ever conscious of the fact that  No, it is not guilty of infringement.

marks need not be identical. A confusing similarity will Sunshine Sauce is not guilty of infringement for having

justify the intervention of equity. The judge must also be used the Del Monte bottle. The reason is that the

aware of the fact that usually a defendant in cases of configuration of the said bottle was merely registered in

infringement does not normally copy but makes only the Supplemental Register. Registration only in the

colorable changes. Well has it been said that the most Supplemental Register means absence of the following

successful form of copying is to employ enough points of presumptions: validity of the trademark, the registrant’s

similarity to confuse the public with enough points of ownership of the mark and his right to its exclusive use.

difference to confuse the courts.

It can be inferred from the foregoing that although Del

The Sunshine label is a colorable imitation of the Del Monte has actual use of the bottle’s configuration, the

Monte trademark. The predominant colors used in the petitioners cannot claim exclusive use thereof because it
 Philpac
Registration in the Principal Register Registration in the Supplemental Register
k also
 gives rise to a presumption of the validity of the
produce
registration, the registrant’s ownership of the  no such presumption
mark and his right to the exclusive use thereof
s. This
 limited to the actual owner of the trademark  not limited to the actual owner of the trademark
clearly
 merely proof of actual use of the trademark and
 constructive notice of the registrant’s claim of
notice that the registrant has used or shows
ownership
appropriated it
the
 the issue of ownership may be contested
through opposition or interference proceedings  not subject to opposition although it may be
private
or, after registration, in a petition for cancelled after the issuance
cancellation
respond
 basis for an action for infringement  not a basis
ent’s
 in applications for registration in the Principal
 not so in applications for registrations in the
Register, publication of the application is bad
Supplemental Register
necessary
has not been registered in the Principal Register. faith

However, we find that Sunshine, despite the many and its intention to capitalize on the latter’s reputation

choices available to it and notwithstanding that the and goodwill and pass off its own product as that of Del

caution “Del Monte Corporation, Not to be Refilled” was Monte.

embossed on the bottle, still opted to use the petitioners’

bottle to market a product which

CASE DIGEST NO. 9
KOREA TECHNOLOGIES CO. LTD VS LERMA (GR NO.
143581 JANUARY 7, 2008)
Korea Technologies Co. Ltd vs Lerma
GR No. 143581 January 7, 2008
Facts: Petitioner Korea Technologies Co., Ltd. (KOGIES)
is a Korean corporation which is engaged in the supply
and installation of Liquefied Petroleum Gas (LPG)
Cylinder manufacturing plants, while private respondent
Pacific General Steel Manufacturing Corp. (PGSMC) is a
domestic corporation. On March 5, 1997, PGSMC and
KOGIES executed a Contract whereby KOGIES would
set up an LPG Cylinder Manufacturing Plant in Carmona,
Cavite. The contract was executed in the Philippines. On
April 7, 1997, the parties executed, in Korea, an
Amendment for Contract No. KLP-970301 dated March
5, 1997 amending the terms of payment. The contract
and its amendment stipulated that KOGIES will ship the
machinery and facilities necessary for manufacturing
LPG cylinders for which PGSMC would pay USD
1,224,000. KOGIES would install and initiate the
operation of the plant for which PGSMC bound itself to
pay USD 306,000 upon the plants production of the 11-
kg. LPG cylinder samples. Thus, the total contract price
amounted to USD 1,530,000. On October 14, 1997,
PGSMC entered into a Contract of Lease with Worth
Properties, Inc. (Worth) for use of Worths 5,079-square
meter property with a 4,032-square meter warehouse
building to house the LPG manufacturing plant. The
monthly rental was PhP 322,560 commencing on
January 1, 1998 with a 10% annual increment clause.
Subsequently, the machineries, equipment, and facilities
for the manufacture of LPG cylinders were shipped,
delivered, and installed in the Carmona plant. PGSMC
paid KOGIES USD 1,224,000. However, gleaned from
the Certificate executed by the parties on January 22,
1998, after the installation of the plant, the initial
operation could not be conducted as PGSMC
encountered financial difficulties affecting the supply of
materials, thus forcing the parties to agree that KOGIES
would be deemed to have completely complied with the
terms and conditions of the March 5, 1997 contract. For
the remaining balance of USD306,000 for the installation
and initial operation of the plant, PGSMC issued two
postdated checks: (1) BPI Check No. 0316412 dated
January 30, 1998 for PhP 4,500,000; and (2) BPI Check
No. 0316413 dated March 30, 1998 for PhP 4,500,000.
When KOGIES deposited the checks, these were
dishonored for the reason PAYMENT STOPPED. Thus,
on May 8, 1998, KOGIES sent a demand letter to
PGSMC threatening criminal action for violation of Batas
Pambansa Blg. 22 in case of nonpayment. On the same
date, the wife of PGSMCs President faxed a letter dated
May 7, 1998 to KOGIES President who was then staying
at a Makati City hotel. She complained that not only did
KOGIES deliver a different brand of hydraulic press from
that agreed upon but it had not delivered several
equipment parts already paid for.
Issue: Whether or not the arbitration clause in the
contract of the parties should govern.
Held: Yes. Established in this jurisdiction is the rule that
the law of the place where the contract is made
governs. Lex loci contractus. The contract in this case Thus, it can be gleaned that the concept of a final and
was perfected here in the Philippines. Therefore, our binding arbitral award is similar to judgments or awards
laws ought to govern. Nonetheless, Art. 2044 of the Civil given by some of our quasi-judicial bodies, like the
Code sanctions the validity of mutually agreed arbitral National Labor Relations Commission and Mines
clause or the finality and binding effect of an arbitral Adjudication Board, whose final judgments are stipulated
award. Art. 2044 provides, Any stipulation that the to be final and binding, but not immediately executory in
arbitrators award or decision shall be final, is valid, the sense that they may still be judicially reviewed, upon
without prejudice to Articles 2038, 2039 and 2040. the instance of any party. Therefore, the final foreign
arbitral awards are similarly situated in that they need
The arbitration clause was mutually and voluntarily first to be confirmed by the RTC.
agreed upon by the parties. It has not been shown to be
contrary to any law, or against morals, good customs,
public order, or public policy. There has been no showing
that the parties have not dealt with each other on equal
footing. We find no reason why the arbitration clause
should not be respected and complied with by both
parties. In Gonzales v. Climax Mining Ltd., we held that
submission to arbitration is a contract and that a clause in
a contract providing that all matters in dispute between
the parties shall be referred to arbitration is a contract.
Again in Del Monte Corporation-USA v. Court of Appeals,
we likewise ruled that [t]he provision to submit to
arbitration any dispute arising therefrom and the
relationship of the parties is part of that contract and is
itself a contract.

Having said that the instant arbitration clause is not

against public policy, we come to the question on what
governs an arbitration clause specifying that in case of
any dispute arising from the contract, an arbitral panel
will be constituted in a foreign country and the arbitration
rules of the foreign country would govern and its award
shall be final and binding.