Sie sind auf Seite 1von 11

[G.R. No. 129916.

March 26, 2001] Corporation except the right to receive within thirty (30) days from November 19,
1995, the amounts stated in Section 8 (a) (i) (ii) of the Agreement.[8]
MAGELLAN CAPITAL MANAGEMENT CORPORATION and MAGELLAN CAPITAL
HOLDINGS CORPORATION, petitioners, vs. ROLANDO M. ZOSA and HON. JOSE P. Disagreeing with the position taken by petitioners, respondent Zosa invoked the
SOBERANO, JR., in his capacity as Presiding Judge of Branch 58 of the Regional Arbitration Clause of the Employment Agreement, to wit:
Trial Court Of Cebu, 7th Judicial Region, respondents.
23. Arbitration. In the event that any dispute, controversy or claim arises out of or
DECISION under any provisions of this Agreement, then the parties hereto agree to submit
such dispute, controversy or claim to arbitration as set forth in this Section and the
BUENA, J.: determination to be made in such arbitration shall be final and binding. Arbitration
shall be effected by a panel of three arbitrators. The Manager, Employee and
Under a management agreement entered into on March 18, 1994, Magellan Capital Corporation shall designate one (1) arbitrator who shall, in turn, nominate and elect
Holdings Corporation [MCHC] appointed Magellan Capital Management who among them shall be the chairman of the committee. Any such arbitration,
Corporation [MCMC] as manager for the operation of its business and affairs.[1] including the rendering of an arbitration award, shall take place in Metro Manila.
Pursuant thereto, on the same month, MCHC, MCMC, and private respondent The arbitrators shall interpret this Agreement in accordance with the substantive
Rolando M. Zosa entered into an "Employment Agreement" designating Zosa as laws of the Republic of the Philippines. The arbitrators shall have no power to add
President and Chief Executive Officer of MCHC. to, subtract from or otherwise modify the terms of Agreement or to grant injunctive
relief of any nature. Any judgment upon the award of the arbitrators may be
Under the "Employment Agreement", the term of respondent Zosa's employment entered in any court having jurisdiction thereof, with costs of the arbitration to be
shall be co-terminous with the management agreement, or until March 1996,[2] borne equally by the parties, except that each party shall pay the fees and expenses
unless sooner terminated pursuant to the provisions of the Employment of its own counsel in the arbitration.
Agreement.[3] The grounds for termination of employment are also provided in the
Employment Agreement. On November 10, 1995, respondent Zosa designated his brother, Atty. Francis Zosa,
as his representative in the arbitration panel[9] while MCHC designated Atty. Inigo
On May 10, 1995, the majority of MCHCs Board of Directors decided not to re-elect S. Fojas[10] and MCMC nominated Atty. Enrique I. Quiason[11] as their respective
respondent Zosa as President and Chief Executive Officer of MCHC on account of representatives in the arbitration panel. However, instead of submitting the dispute
loss of trust and confidence[4] arising from alleged violation of the resolution issued to arbitration, respondent Zosa, on April 17, 1996, filed an action for damages
by MCHC's board of directors and of the non-competition clause of the Employment against petitioners before the Regional Trial Court of Cebu[12] to enforce his
Agreement.[5] Nevertheless, respondent Zosa was elected to a new position as benefits under the Employment Agreement.
MCHC's Vice-Chairman/Chairman for New Ventures Development.[6]
On July 3, 1996, petitioners filed a motion to dismiss[13] arguing that (1) the trial
On September 26, 1995, respondent Zosa communicated his resignation for good court has no jurisdiction over the instant case since respondent Zosa's claims should
reason from the position of Vice-Chairman under paragraph 7 of the Employment be resolved through arbitration pursuant to Section 23 of the Employment
Agreement on the ground that said position had less responsibility and scope than Agreement with petitioners; and (2) the venue is improperly laid since respondent
President and Chief Executive Officer. He demanded that he be given termination Zosa, like the petitioners, is a resident of Pasig City and thus, the venue of this case,
benefits as provided for in Section 8 (c) (i) (ii) and (iii) of the Employment granting without admitting that the respondent has a cause of action against the
Agreement.[7] petitioners cognizable by the RTC, should be limited only to RTC-Pasig City.[14]

In a letter dated October 20, 1995, MCHC communicated its non-acceptance of Meanwhile, respondent Zosa filed an amended complaint dated July 5, 1996.
respondent Zosa's resignation for good reason, but instead informed him that the
Employment Agreement is terminated for cause, effective November 19, 1995, in On August 1, 1996, the RTC Branch 58 of Cebu City issued an Order denying
accordance with Section 7 (a) (v) of the said agreement, on account of his breach of petitioners motion to dismiss upon the findings that (1) the validity and legality of
Section 12 thereof. Respondent Zosa was further advised that he shall have no the arbitration provision can only be determined after trial on the merits; and (2)
further rights under the said Agreement or any claims against the Manager or the the amount of damages claimed, which is over P100,000.00, falls within the
jurisdiction of the RTC.[15] Petitioners filed a motion for reconsideration which was WHEREFORE, the petition is GIVEN DUE COURSE. The respondent court is directed
denied by the RTC in an order dated September 5, 1996.[16] to resolve the issue on the validity or effectivity of the arbitration clause in the
Employment Agreement, and to suspend further proceedings in the trial on the
In the interim, on August 22, 1996, in compliance with the earlier order of the court merits until the said issue is resolved. The questioned orders are set aside insofar as
directing petitioners to file responsive pleading to the amended complaint, they contravene this Courts resolution of the issues raised as herein pronounced.
petitioners filed their Answer Ad Cautelam with counterclaim reiterating their
position that the dispute should be settled through arbitration and the court had no The petitioner is required to remit to this Court the sum of P81.80 for cost within
jurisdiction over the nature of the action.[17] five (5) days from notice.

On October 21, 1996, the trial court issued its pre-trial order declaring the pre-trial SO ORDERED.[22]
stage terminated and setting the case for hearing. The order states:
Petitioners filed a motion for partial reconsideration of the CA decision praying (1)
ISSUES: for the dismissal of the case in the trial court, on the ground of lack of jurisdiction,
and (2) that the parties be directed to submit their dispute to arbitration in
The Court will only resolve one issue in so far as this case is concerned, to wit: accordance with the Employment Agreement dated March 1994. The CA, in a
resolution promulgated on June 20, 1997, denied the motion for partial
Whether or not the Arbitration Clause contained in Sec.23 of the Employment reconsideration for lack of merit.
Agreement is void and of no effect: and, if it is void and of no effect, whether or not
the plaintiff is entitled to damages in accordance with his complaint and the In compliance with the CA decision, the trial court, on July 18, 1997, rendered a
defendants in accordance with their counterclaim. decision declaring the arbitration clause in the Employment Agreement partially
void and of no effect. The dispositive portion of the decision reads:
It is understood, that in the event the arbitration clause is valid and binding
between the parties, the parties shall submit their respective claim to the WHEREFORE, premises considered, judgment is hereby rendered partially declaring
Arbitration Committee in accordance with the said arbitration clause, in which the arbitration clause of the Employment Agreement void and of no effect, only
event, this case shall be deemed dismissed.[18] insofar as it concerns the composition of the panel of arbitrators, and directing the
parties to proceed to arbitration in accordance with the Employment Agreement
On November 18, 1996, petitioners filed their Motion Ad Cautelam for the under the panel of three (3) arbitrators, one for the plaintiff, one for the
Correction, Addition and Clarification of the Pre-trial Order dated November 15 defendants, and the third to be chosen by both the plaintiff and defendants. The
1996,[19] which was denied by the court in an order dated November 28, 1996.[20] other terms, conditions and stipulations in the arbitration clause remain in force
and effect."[23]
Thereafter, petitioners MCMC and MCHC filed a Motion Ad Cautelam for the parties
to file their Memoranda to support their respective stand on the issue of the In view of the trial courts decision, petitioners filed this petition for review on
validity of the arbitration clause contained in the Employment Agreement. In an certiorari, under Rule 45 of the Rules of Court, assigning the following errors for the
order dated December 13, 1996, the trial court denied the motion of petitioners Courts resolution:
MCMC and MCHC.
I. The trial court gravely erred when it ruled that the arbitration clause under the
On January 17, 1997, petitioners MCMC and MCHC filed a petition for certiorari and employment agreement is partially void and of no effect, considering that:
prohibition under Rule 65 of the Rules of Court with the Court of Appeals,
questioning the trial court orders dated August 1, 1996, September 5, 1996, and A. The arbitration clause in the employment agreement dated March 1994 between
December 13, 1996.[21] respondent Zosa and defendants MCHC and MCMC is valid and binding upon the
parties thereto.
On March 21, 1997, the Court of Appeals rendered a decision, giving due course to
the petition, the decretal portion of which reads: B. In view of the fact that there are three parties to the employment agreement, it
is but proper that each party be represented in the arbitration panel.
action concerns the validity of the termination of the service of a corporate officer,
C. The trial court grievously erred in its conclusion that petitioners MCMC and the issue on the validity and effectivity of the arbitration clause is determinable by
MCHC represent the same interest. the regular courts, and do not fall within the exclusive and original jurisdiction of
the SEC.
D. Respondent Zosa is estopped from questioning the validity of the arbitration
clause, including the right of petitioner MCMC to nominate its own arbitrator, The determination and validity of the agreement is not a matter intrinsically
which he himself has invoked. connected with the regulation and internal affairs of corporations (see Pereyra vs.
IAC, 181 SCRA 244; Sales vs. SEC, 169 SCRA 121); it is rather an ordinary case to be
II. In any event, the trial court acted without jurisdiction in hearing the case below, decided in accordance with the general laws, and do not require any particular
considering that it has no jurisdiction over the nature of the action or suit since expertise or training to interpret and apply (Viray vs. CA, 191 SCRA 308).[26]
controversies in the election or appointment of officers or managers of a
corporation, such as the action brought by respondent Zosa, fall within the original Furthermore, the decision of the Court of Appeals in CA-G.R. SP No. 43059 affirming
and exclusive jurisdiction of the Securities and Exchange Commission. the trial courts assumption of jurisdiction over the case has become the law of the
case which now binds the petitioners. The law of the case doctrine has been
III. Contrary to respondent Zosas allegation, the issue of the trial courts jurisdiction defined as a term applied to an established rule that when an appellate court
over the case below has not yet been resolved with finality considering that passes on a question and remands the cause to the lower court for further
petitioners have expressly reserved their right to raise said issue in the instant proceedings, the question there settled becomes the law of the case upon
petition. Moreover, the principle of the law of the case is not applicable in the subsequent appeal.[27] To note, the CAs decision in CA-G.R. SP No. 43059 has
instant case. already attained finality as evidenced by a Resolution of this Court ordering entry of
judgment of said case, to wit:
IV. Contrary to respondent Zosas allegation, petitioners MCMC and MCHC are not
guilty of forum shopping. ENTRY OF JUDGMENT

V. Contrary to respondent Zosas allegation, the instant petition for review involves This is to certify that on September 8, 1997 a decision/resolution rendered in the
only questions of law and not of fact.[24] above-entitled case was filed in this Office, the dispositive part of which reads as
follows:
We rule against the petitioners.
G.R. No. 129615 (Magellan Capital Management Corporation, et al. vs. Court of
It is error for the petitioners to claim that the case should fall under the jurisdiction Appeals, Rolando Zosa, et al.).- Considering the petitioners manifestation dated
of the Securities and Exchange Commission [SEC, for brevity]. The controversy does August 11, 1997 and withdrawal of intention to file petition for review on certiorari,
not in anyway involve the election/appointment of officers of petitioner MCHC, as the Court Resolved to DECLARE THIS CASE TERMINATED and DIRECT the Clerk of
claimed by petitioners in their assignment of errors. Respondent Zosas amended Court to INFORM the parties that the judgment sought to be reviewed has become
complaint focuses heavily on the illegality of the Employment Agreements final and executory, no appeal therefore having been timely perfected.
Arbitration Clause initially invoked by him in seeking his termination benefits under
Section 8 of the employment contract. And under Republic Act No. 876, otherwise and that the same has, on September 17, 1997, become final and executory and is
known as the Arbitration Law, it is the regional trial court which exercises hereby recorded in the Book of Entries of Judgments. [28]
jurisdiction over questions relating to arbitration. We thus advert to the following
discussions made by the Court of Appeals, speaking thru Justice Minerva P. Petitioners, therefore, are barred from challenging anew, through another remedial
Gonzaga-Reyes,[25] in C.A.-G.R. S.P. No. 43059, viz: measure and in any other forum, the authority of the regional trial court to resolve
the validity of the arbitration clause, lest they be truly guilty of forum-shopping
As regards the fourth assigned error, asserting that jurisdiction lies with the SEC, which the courts consistently consider as a contumacious practice that derails the
which is raised for the first time in this petition, suffice it to state that the Amended orderly administration of justice.
Complaint squarely put in issue the question whether the Arbitration Clause is valid
and effective between the parties. Although the controversy which spawned the
Equally unavailing for the petitioners is the review by this Court, via the instant be borne equally by the parties, except that each party shall pay the fees and
petition, of the factual findings made by the trial court that the composition of the expenses of its own counsel in the arbitration. (Emphasis supplied).
panel of arbitrators would, in all probability, work injustice to respondent Zosa. We
have repeatedly stressed that the jurisdiction of this Court in a petition for review From the foregoing arbitration clause, it appears that the two (2) defendants
on certiorari under Rule 45 of the Revised Rules of Court is limited to reviewing only [petitioners] (MCMC and MCHC) have one (1) arbitrator each to compose the panel
errors of law, not of fact, unless the factual findings complained of are devoid of of three (3) arbitrators. As the defendant MCMC is the Manager of defendant
support by the evidence on record, or the assailed judgment is based on MCHC, its decision or vote in the arbitration proceeding would naturally and
misapprehension of facts.[29] certainly be in favor of its employer and the defendant MCHC would have to
protect and preserve its own interest; hence, the two (2) votes of both defendants
Even if procedural rules are disregarded, and a scrutiny of the merits of the case is (MCMC and MCHC) would certainly be against the lone arbitrator for the plaintiff
undertaken, this Court finds the trial courts observations on why the composition of [herein defendant]. Hence, apparently, plaintiff [defendant] would never get or
the panel of arbitrators should be voided, incisively correct so as to merit our receive justice and fairness in the arbitration proceedings from the panel of
approval. Thus, arbitrators as provided in the aforequoted arbitration clause. In fairness and justice
to the plaintiff [defendant], the two defendants (MCMC and MCHC)[herein
From the memoranda of both sides, the Court is of the view that the defendants petitioners] which represent the same interest should be considered as one and
[petitioner] MCMC and MCHC represent the same interest. There is no quarrel that should be entitled to only one arbitrator to represent them in the arbitration
both defendants are entirely two different corporations with personalities distinct proceedings. Accordingly, the arbitration clause, insofar as the composition of the
and separate from each other and that a corporation has a personality distinct and panel of arbitrators is concerned should be declared void and of no effect, because
separate from those persons composing the corporation as well as from that of any the law says, Any clause giving one of the parties power to choose more
other legal entity to which it may be related. arbitrators than the other is void and of no effect (Article 2045, Civil Code).

But as the defendants [herein petitioner] represent the same interest, it could The dispute or controversy between the defendants (MCMC and MCHC) [herein
never be expected, in the arbitration proceedings, that they would not protect and petitioners] and the plaintiff [herein defendant] should be settled in the arbitration
preserve their own interest, much less, would both or either favor the interest of proceeding in accordance with the Employment Agreement, but under the panel of
the plaintiff. The arbitration law, as all other laws, is intended for the good and three (3) arbitrators, one (1) arbitrator to represent the plaintiff, one (1) arbitrator
welfare of everybody. In fact, what is being challenged by the plaintiff herein is not to represent both defendants (MCMC and MCHC)[herein petitioners] and the third
the law itself but the provision of the Employment Agreement based on the said arbitrator to be chosen by the plaintiff [defendant Zosa] and defendants
law, which is the arbitration clause but only as regards the composition of the panel [petitioners].
of arbitrators. The arbitration clause in question provides, thus:
x x x x x x x x x[30]
In the event that any dispute, controversy or claim arise out of or under any
provisions of this Agreement, then the parties hereto agree to submit such dispute, In this connection, petitioners attempt to put respondent in estoppel in assailing
controversy or claim to arbitration as set forth in this Section and the determination the arbitration clause must be struck down. For one, this issue of estoppel, as
to be made in such arbitration shall be final and binding. Arbitration shall be likewise noted by the Court of Appeals, found its way for the first time only on
effected by a panel of three arbitrators. The Manager, Employee, and Corporation appeal. Well-settled is the rule that issues not raised below cannot be resolved on
shall designate one (1) arbitrator who shall, in turn, nominate and elect as who review in higher courts.[31] Secondly, employment agreements such as the one at
among them shall be the chairman of the committee. Any such arbitration, bar are usually contracts of adhesion. Any ambiguity in its provisions is generally
including the rendering of an arbitration award, shall take place in Metro Manila. resolved against the party who drafted the document. Thus, in the relatively recent
The arbitrators shall interpret this Agreement in accordance with the substantive case of Phil. Federation of Credit Cooperatives, Inc. (PFCCI) and Fr. Benedicto
laws of the Republic of the Philippines. The arbitrators shall have no power to add Jayoma vs. NLRC and Victoria Abril,[32] we had the occasion to stress that where a
to, subtract from or otherwise modify the terms of this Agreement or to grant contract of employment, being a contract of adhesion, is ambiguous, any ambiguity
injunctive relief of any nature. Any judgment upon the award of the arbitrators may therein should be construed strictly against the party who prepared it. And, finally,
be entered in any court having jurisdiction thereof, with costs of the arbitration to respondent Zosa never submitted himself to arbitration proceedings (as there was
none yet) before bewailing the composition of the panel of arbitrators. He in fact,
lost no time in assailing the arbitration clause upon realizing the inequities that may held up in Bangkok and did not reach its point of destination. Notwithstanding the
mar the arbitration proceedings if the existing line-up of arbitrators remained fact that the private respondent had already received payment and despite several
unchecked. demands made by the petitioner, the private respondent failed to deliver the oil
well cement. Thereafter, negotiations ensued between the parties and they agreed
We need only to emphasize in closing that arbitration proceedings are designed to that the private respondent will replace the entire 4,300 metric tons of oil well
level the playing field among the parties in pursuit of a mutually acceptable solution cement with Class G cement cost free at the petitioners designated port. However,
to their conflicting claims. Any arrangement or scheme that would give undue upon inspection, the Class G cement did not conform to the petitioners
advantage to a party in the negotiating table is anathema to the very purpose of specifications. The petitioner then informed the private respondent that it was
arbitration and should, therefore, be resisted. referring its claim to an arbitrator pursuant to Clause 16 of their contract which
stipulates:
WHEREFORE, premises considered, the petition is hereby DISMISSED and the
decision of the trial court dated July 18, 1997 is AFFIRMED. Except where otherwise provided in the supply order/contract all questions and
disputes, relating to the meaning of the specification designs, drawings and
SO ORDERED. instructions herein before mentioned and as to quality of workmanship of the items
Bellosillo, (Chairman), Mendoza, and De Leon, Jr., JJ., concur. ordered or as to any other question, claim, right or thing whatsoever, in any way
Quisumbing, J., on leave arising out of or relating to the supply order/contract design, drawing, specification,
instruction or these conditions or otherwise concerning the materials or the
[G.R. No. 114323. July 23, 1998] execution or failure to execute the same during stipulated/extended period or after
the completion/abandonment thereof shall be referred to the sole arbitration of
OIL AND NATURAL GAS COMMISSION, petitioner, vs. COURT OF APPEALS and the persons appointed by Member of the Commission at the time of dispute. It will
PACIFIC CEMENT COMPANY, INC. respondents. be no objection to any such appointment that the arbitrator so appointed is a
Commission employer (sic) that he had to deal with the matter to which the supply
DECISION or contract relates and that in the course of his duties as Commissions employee he
had expressed views on all or any of the matter in dispute or difference.
MARTINEZ, J.:
The arbitrator to whom the matter is originally referred being transferred or
This proceeding involves the enforcement of a foreign judgment rendered by the vacating his office or being unable to act for any reason the Member of the
Civil Judge of Dehra Dun, India in favor of the petitioner, OIL AND NATURAL GAS Commission shall appoint another person to act as arbitrator in acordance with the
COMMISSION and against the private respondent, PACIFIC CEMENT COMPANY, terms of the contract/supply order. Such person shall be entitled to proceed with
INCORPORATED. reference from the stage at which it was left by his predecessor. Subject as
aforesaid the provisions of the Arbitration Act, 1940, or any Statutary modification
The petitioner is a foreign corporation owned and controlled by the Government of or re-enactment thereof and the rules made there under and for the time being in
India while the private respondent is a private corporation duly organized and force shall apply to the arbitration proceedings under this clause.
existing under the laws of the Philippines. The present conflict between the
petitioner and the private respondent has its roots in a contract entered into by and The arbitrator may with the consent of parties enlarge the time, from time to time,
between both parties on February 26, 1983 whereby the private respondent to make and publish the award.
undertook to supply the petitioner FOUR THOUSAND THREE HUNDRED (4,300)
metric tons of oil well cement. In consideration therefor, the petitioner bound itself The venue for arbitration shall be at Dehra dun.[1]
to pay the private respondent the amount of FOUR HUNDRED SEVENTY-SEVEN
THOUSAND THREE HUNDRED U.S. DOLLARS ($477,300.00) by opening an On July 23, 1988, the chosen arbitrator, one Shri N.N. Malhotra, resolved the
irrevocable, divisible, and confirmed letter of credit in favor of the latter. The oil dispute in petitioners favor setting forth the arbitral award as follows:
well cement was loaded on board the ship MV SURUTANA NAVA at the port of
Surigao City, Philippines for delivery at Bombay and Calcutta, India. However, due NOW THEREFORE after considering all facts of the case, the evidence, oral and
to a dispute between the shipowner and the private respondent, the cargo was documentarys adduced by the claimant and carefully examining the various written
statements, submissions, letters, telexes, etc. sent by the respondent, and the oral
arguments addressed by the counsel for the claimants, I, N.N. Malhotra, Sole Dehra Dun (U.P.) India
Arbitrator, appointed under clause 16 of the supply order dated 26.2.1983,
according to which the parties, i.e. M/S Oil and Natural Gas Commission and the Re: Misc. Case No. 5 of 1989
Pacific Cement Co., Inc. can refer the dispute to the sole arbitration under the
provision of the Arbitration Act. 1940, do hereby award and direct as follows:- M/S Pacific Cement Co.,

The Respondent will pay the following to the claimant :- Inc. vs. ONGC Case

1. Amount received by the Respondent against the letter of credit No. 11/19 dated Sir:
28.2.1983 - - - US $ 477,300.00
1. We received your letter dated 28 April 1989 only last 18 May 1989.
2. Re-imbursement of expenditure incurred by the claimant on the inspection
teams visit to Philippines in August 1985 - - - US$ 3,881.00 2. Please inform us how much is the court fee to be paid. Your letter did not
mention the amount to be paid.
3. L. C. Establishment charges incurred by the claimant - - - US $ 1,252.82
3. Kindly give us 15 days from receipt of your letter advising us how much to pay to
4. Loss of interest suffered by claimant from 21.6.83 to 23.7.88 - - - US $ 417,169.95 comply with the same.

Total amount of award - - - US $ 899,603.77 Thank you for your kind consideration.

In addition to the above, the respondent would also be liable to pay to the claimant Pacific Cement Co., Inc.
the interest at the rate of 6% on the above amount, with effect from 24.7.1988
upto the actual date of payment by the Respondent in full settlement of the claim By:
as awarded or the date of the decree, whichever is earlier.
Jose Cortes, Jr.
I determine the cost at Rs. 70,000/- equivalent to US $5,000 towards the expenses
on Arbitration, legal expenses, stamps duly incurred by the claimant. The cost will President"[3]
be shared by the parties in equal proportion.
Without responding to the above communication, the foreign court refused to
Pronounced at Dehra Dun to-day, the 23rd of July 1988.[2] admit the private respondents objections for failure to pay the required filing fees,
and thereafter issued an Order on February 7, 1990, to wit:
To enable the petitioner to execute the above award in its favor, it filed a Petition
before the Court of the Civil Judge in Dehra Dun, India (hereinafter referred to as ORDER
the foreign court for brevity), praying that the decision of the arbitrator be made
the Rule of Court in India. The foreign court issued notices to the private Since objections filed by defendant have been rejected through Misc. Suit No. 5 on
respondent for filing objections to the petition. The private respondent complied 7.2.90, therefore, award should be made Rule of the Court.
and sent its objections dated January 16, 1989. Subsequently, the said court
directed the private respondent to pay the filing fees in order that the latters ORDER
objections could be given consideration. Instead of paying the required filing fees,
the private respondent sent the following communication addressed to the Civil Award dated 23.7.88, Paper No. 3/B-1 is made Rule of the Court. On the basis of
Judge of Dehra Dun: conditions of award decree is passed. Award Paper No. 3/B-1 shall be a part of the
decree. The plaintiff shall also be entitled to get from defendant (US$ 899, 603.77
The Civil Judge
(US$ Eight Lakhs ninety nine thousand six hundred and three point seventy seven The RTC characterized the erroneous submission of the dispute to the arbitrator as
only) alongwith 9% interest per annum till the last date of realisation.[4] a mistake of law or fact amounting to want of jurisdiction. Consequently, the
proceedings had before the arbitrator were null and void and the foreign court had
Despite notice sent to the private respondent of the foregoing order and several therefore, adopted no legal award which could be the source of an enforceable
demands by the petitioner for compliance therewith, the private respondent right.[7]
refused to pay the amount adjudged by the foreign court as owing to the petitioner.
Accordingly, the petitioner filed a complaint with Branch 30 of the Regional Trial The petitioner then appealed to the respondent Court of Appeals which affirmed
Court (RTC) of Surigao City for the enforcement of the aforementioned judgment of the dismissal of the complaint. In its decision, the appellate court concurred with
the foreign court. The private respondent moved to dismiss the complaint on the the RTCs ruling that the arbitrator did not have jurisdiction over the dispute
following grounds: (1) plaintiffs lack of legal capacity to sue; (2) lack of cause of between the parties, thus, the foreign court could not validly adopt the arbitrators
action; and (3) plaintiffs claim or demand has been waived, abandoned, or award. In addition, the appellate court observed that the full text of the judgment
otherwise extinguished. The petitioner filed its opposition to the said motion to of the foreign court contains the dispositive portion only and indicates no findings
dismiss, and the private respondent, its rejoinder thereto. On January 3, 1992, the of fact and law as basis for the award. Hence, the said judgment cannot be enforced
RTC issued an order upholding the petitioners legal capacity to sue, albeit by any Philippine court as it would violate the constitutional provision that no
dismissing the complaint for lack of a valid cause of action. The RTC held that the decision shall be rendered by any court without expressing therein clearly and
rule prohibiting foreign corporations transacting business in the Philippines without distinctly the facts and the law on which it is based.[8] The appellate court ruled
a license from maintaining a suit in Philippine courts admits of an exception, that is, further that the dismissal of the private respondents objections for non-payment of
when the foreign corporation is suing on an isolated transaction as in this case.[5] the required legal fees, without the foreign court first replying to the private
Anent the issue of the sufficiency of the petitioners cause of action, however, the respondents query as to the amount of legal fees to be paid, constituted want of
RTC found the referral of the dispute between the parties to the arbitrator under notice or violation of due process. Lastly, it pointed out that the arbitration
Clause 16 of their contract erroneous. According to the RTC, proceeding was defective because the arbitrator was appointed solely by the
petitioner, and the fact that the arbitrator was a former employee of the latter
[a] perusal of the above-quoted clause (Clause 16) readily shows that the matter gives rise to a presumed bias on his part in favor of the petitioner.[9]
covered by its terms is limited to ALL QUESTIONS AND DISPUTES, RELATING TO THE
MEANING OF THE SPECIFICATION, DESIGNS, DRAWINGS AND INSTRUCTIONS A subsequent motion for reconsideration by the petitioner of the appellate courts
HEREIN BEFORE MENTIONED and as to the QUALITY OF WORKMANSHIP OF THE decision was denied, thus, this petition for review on certiorari citing the following
ITEMS ORDERED or as to any other questions, claim, right or thing whatsoever, but as grounds in support thereof:
qualified to IN ANY WAY ARISING OR RELATING TO THE SUPPLY ORDER/CONTRACT,
DESIGN, DRAWING, SPECIFICATION, etc., repeating the enumeration in the opening RESPONDENT COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE LOWER
sentence of the clause. COURTS ORDER OF DISMISSAL SINCE:

The court is inclined to go along with the observation of the defendant that the A. THE NON-DELIVERY OF THE CARGO WAS A MATTER PROPERLY COGNIZABLE BY
breach, consisting of the non-delivery of the purchased materials, should have been THE PROVISIONS OF CLAUSE 16 OF THE CONTRACT;
properly litigated before a court of law, pursuant to Clause No. 15 of the
Contract/Supply Order, herein quoted, to wit: B. THE JUDGMENT OF THE CIVIL COURT OF DEHRADUN, INDIA WAS AN
AFFIRMATION OF THE FACTUAL AND LEGAL FINDINGS OF THE ARBITRATOR AND
JURISDICTION THEREFORE ENFORCEABLE IN THIS JURISDICTION;

All questions, disputes and differences, arising under out of or in connection with C. EVIDENCE MUST BE RECEIVED TO REPEL THE EFFECT OF A PRESUMPTIVE RIGHT
this supply order, shall be subject to the EXCLUSIVE JURISDICTION OF THE COURT, UNDER A FOREIGN JUDGMENT.[10]
within the local limits of whose jurisdiction and the place from which this supply
order is situated.[6] The threshold issue is whether or not the arbitrator had jurisdiction over the
dispute between the petitioner and the private respondent under Clause 16 of the
contract. To reiterate, Clause 16 provides as follows:
maxim noscitur a sociis, where a particular word or phrase is ambiguous in itself or
Except where otherwise provided in the supply order/contract all questions and is equally susceptible of various meanings, its correct construction may be made
disputes, relating to the meaning of the specification designs, drawings and clear and specific by considering the company of the words in which it is found or
instructions herein before mentioned and as to quality of workmanship of the items with which it is associated, or stated differently, its obscurity or doubt may be
ordered or as to any other question, claim, right or thing whatsoever, in any way reviewed by reference to associated words.[13] A close examination of Clause 16
arising out of or relating to the supply order/contract design, drawing, specification, reveals that it covers three matters which may be submitted to arbitration namely,
instruction or these conditions or otherwise concerning the materials or the
execution or failure to execute the same during stipulated/extended period or after (1) all questions and disputes, relating to the meaning of the specification designs,
the completion/abandonment thereof shall be referred to the sole arbitration of drawings and instructions herein before mentioned and as to quality of
the persons appointed by Member of the Commission at the time of dispute. It will workmanship of the items ordered; or
be no objection to any such appointment that the arbitrator so appointed is a
Commission employer (sic) that he had to deal with the matter to which the supply (2) any other question, claim, right or thing whatsoever, in any way arising out of or
or contract relates and that in the course of his duties as Commissions employee he relating to the supply order/contract design, drawing, specification, instruction or
had expressed views on all or any of the matter in dispute or difference.[11] these conditions; or

The dispute between the parties had its origin in the non-delivery of the 4,300 (3) otherwise concerning the materials or the execution or failure to execute the
metric tons of oil well cement to the petitioner. The primary question that may be same during stipulated/extended period or after the completion/abandonment
posed, therefore, is whether or not the non-delivery of the said cargo is a proper thereof.
subject for arbitration under the above-quoted Clause 16. The petitioner contends
that the same was a matter within the purview of Clause 16, particularly the phrase, The first and second categories unmistakably refer to questions and disputes
x x x or as to any other questions, claim, right or thing whatsoever, in any way relating to the design, drawing, instructions, specifications or quality of the
arising or relating to the supply order/contract, design, drawing, specification, materials of the supply/order contract. In the third category, the clause, execution
instruction x x x.[12] It is argued that the foregoing phrase allows considerable or failure to execute the same, may be read as execution or failure to execute the
latitude so as to include non-delivery of the cargo which was a claim, right or thing supply order/contract. But in accordance with the doctrine of noscitur a sociis, this
relating to the supply order/contract. The contention is bereft of merit. First of all, reference to the supply order/contract must be construed in the light of the
the petitioner has misquoted the said phrase, shrewdly inserting a comma between preceding words with which it is associated, meaning to say, as being limited only to
the words supply order/contract and design where none actually exists. An accurate the design, drawing, instructions, specifications or quality of the materials of the
reproduction of the phrase reads, x x x or as to any other question, claim, right or supply order/contract. The non-delivery of the oil well cement is definitely not in
thing whatsoever, in any way arising out of or relating to the supply order/contract the nature of a dispute arising from the failure to execute the supply order/contract
design, drawing, specification, instruction or these conditions x x x. The absence of design, drawing, instructions, specifications or quality of the materials. That Clause
a comma between the words supply order/contract and design indicates that the 16 should pertain only to matters involving the technical aspects of the contract is
former cannot be taken separately but should be viewed in conjunction with the but a logical inference considering that the underlying purpose of a referral to
words design, drawing, specification, instruction or these conditions. It is thus clear arbitration is for such technical matters to be deliberated upon by a person
that to fall within the purview of this phrase, the claim, right or thing whatsoever possessed with the required skill and expertise which may be otherwise absent in
must arise out of or relate to the design, drawing, specification, or instruction of the the regular courts.
supply order/contract. The petitioner also insists that the non-delivery of the cargo
is not only covered by the foregoing phrase but also by the phrase, x x x or This Court agrees with the appellate court in its ruling that the non-delivery of the
otherwise concerning the materials or the execution or failure to execute the same oil well cement is a matter properly cognizable by the regular courts as stipulated
during the stipulated/extended period or after completion/abandonment thereof x by the parties in Clause 15 of their contract:
x x.
All questions, disputes and differences, arising under out of or in connection with
The doctrine of noscitur a sociis, although a rule in the construction of statutes, is this supply order, shall be subject to the exclusive jurisdiction of the court, within
equally applicable in the ascertainment of the meaning and scope of vague the local limits of whose jurisdiction and the place from which this supply order is
contractual stipulations, such as the aforementioned phrase. According to the situated.[14]
matter clearly falling within the ambit of Clause 16. In this contention, we find
The following fundamental principles in the interpretation of contracts and other merit. When the 4,300 metric tons of oil well cement were not delivered to the
instruments served as our guide in arriving at the foregoing conclusion: petitioner, an agreement was forged between the latter and the private respondent
that Class G cement would be delivered to the petitioner as replacement. Upon
"ART. 1373. If some stipulation of any contract should admit of several meanings, it inspection, however, the replacement cement was rejected as it did not conform to
shall be understood as bearing that import which is most adequate to render it the specifications of the contract. Only after this latter circumstance was the matter
effectual."[15] brought before the arbitrator. Undoubtedly, what was referred to arbitration was
no longer the mere non-delivery of the cargo at the first instance but also the
ART. 1374. The various stipulations of a contract shall be interpreted together, failure of the replacement cargo to conform to the specifications of the contract, a
attributing to the doubtful ones that sense which may result from all of them taken matter clearly within the coverage of Clause 16.
jointly.[16]
The private respondent posits that it was under no legal obligation to make
Sec. 11. Instrument construed so as to give effect to all provisions. In the replacement and that it undertook the latter only in the spirit of liberality and to
construction of an instrument, where there are several provisions or particulars, foster good business relationship.[20] Hence, the undertaking to deliver the
such a construction is, if possible, to be adopted as will give effect to all.[17] replacement cement and its subsequent failure to conform to specifications are not
anymore subject of the supply order/contract or any of the provisions thereof. We
Thus, this Court has held that as in statutes, the provisions of a contract should not disagree.
be read in isolation from the rest of the instrument but, on the contrary,
interpreted in the light of the other related provisions.[18] The whole and every As per Clause 7 of the supply order/contract, the private respondent undertook to
part of a contract must be considered in fixing the meaning of any of its parts and in deliver the 4,300 metric tons of oil well cement at BOMBAY (INDIA) 2181 MT and
order to produce a harmonious whole. Equally applicable is the canon of CALCUTTA 2119 MT.[21] The failure of the private respondent to deliver the cargo
construction that in interpreting a statute (or a contract as in this case), care should to the designated places remains undisputed. Likewise, the fact that the petitioner
be taken that every part thereof be given effect, on the theory that it was enacted had already paid for the cost of the cement is not contested by the private
as an integrated measure and not as a hodge-podge of conflicting provisions. The respondent. The private respondent claims, however, that it never benefited from
rule is that a construction that would render a provision inoperative should be the transaction as it was not able to recover the cargo that was unloaded at the
avoided; instead, apparently inconsistent provisions should be reconciled whenever port of Bangkok.[22] First of all, whether or not the private respondent was able to
possible as parts of a coordinated and harmonious whole.[19] recover the cargo is immaterial to its subsisting duty to make good its promise to
deliver the cargo at the stipulated place of delivery. Secondly, we find it difficult to
The petitioners interpretation that Clause 16 is of such latitude as to contemplate believe this representation. In its Memorandum filed before this Court, the private
even the non-delivery of the oil well cement would in effect render Clause 15 a respondent asserted that the Civil Court of Bangkok had already ruled that the non-
mere superfluity. A perusal of Clause 16 shows that the parties did not intend delivery of the cargo was due solely to the fault of the carrier.[23] It is, therefore,
arbitration to be the sole means of settling disputes. This is manifest from Clause 16 but logical to assume that the necessary consequence of this finding is the eventual
itself which is prefixed with the proviso, Except where otherwise provided in the recovery by the private respondent of the cargo or the value thereof. What inspires
supply order/contract x x x, thus indicating that the jurisdiction of the arbitrator is credulity is not that the replacement was done in the spirit of liberality but that it
not all encompassing, and admits of exceptions as may be provided elsewhere in was undertaken precisely because of the private respondents recognition of its duty
the supply order/contract. We believe that the correct interpretation to give effect to do so under the supply order/contract, Clause 16 of which remains in force and
to both stipulations in the contract is for Clause 16 to be confined to all claims or effect until the full execution thereof.
disputes arising from or relating to the design, drawing, instructions, specifications
or quality of the materials of the supply order/contract, and for Clause 15 to cover We now go to the issue of whether or not the judgment of the foreign court is
all other claims or disputes. enforceable in this jurisdiction in view of the private respondents allegation that it
is bereft of any statement of facts and law upon which the award in favor of the
The petitioner then asseverates that granting, for the sake of argument, that the petitioner was based. The pertinent portion of the judgment of the foreign court
non-delivery of the oil well cement is not a proper subject for arbitration, the failure reads:
of the replacement cement to conform to the specifications of the contract is a
ORDER findings of facts and conclusions of the court a quo spread in its decision, as integral
part of this Our decision.[29] (Underscoring supplied)
Award dated 23.7.88, Paper No. 3/B-1 is made Rule of the Court. On the basis of
conditions of award decree is passed. Award Paper No. 3/B-1 shall be a part of the Hence, even in this jurisdiction, incorporation by reference is allowed if only to
decree. The plaintiff shall also be entitled to get from defendant ( US$ 899, 603.77 avoid the cumbersome reproduction of the decision of the lower courts, or portions
(US$ Eight Lakhs ninety nine thousand six hundred and three point seventy seven thereof, in the decision of the higher court.[30] This is particularly true when the
only) alongwith 9% interest per annum till the last date of realisation.[24] decision sought to be incorporated is a lengthy and thorough discussion of the facts
and conclusions arrived at, as in this case, where Award Paper No. 3/B-1 consists of
As specified in the order of the Civil Judge of Dehra Dun, Award Paper No. 3/B-1 eighteen (18) single spaced pages.
shall be a part of the decree. This is a categorical declaration that the foreign court
adopted the findings of facts and law of the arbitrator as contained in the latters Furthermore, the recognition to be accorded a foreign judgment is not necessarily
Award Paper. Award Paper No. 3/B-1, contains an exhaustive discussion of the affected by the fact that the procedure in the courts of the country in which such
respective claims and defenses of the parties, and the arbitrators evaluation of the judgment was rendered differs from that of the courts of the country in which the
same. Inasmuch as the foregoing is deemed to have been incorporated into the judgment is relied on.[31] This Court has held that matters of remedy and
foreign courts judgment the appellate court was in error when it described the procedure are governed by the lex fori or the internal law of the forum.[32] Thus, if
latter to be a simplistic decision containing literally, only the dispositive portion.[25] under the procedural rules of the Civil Court of Dehra Dun, India, a valid judgment
may be rendered by adopting the arbitrators findings, then the same must be
The constitutional mandate that no decision shall be rendered by any court without accorded respect. In the same vein, if the procedure in the foreign court mandates
expressing therein clearly and distinctly the facts and the law on which it is based that an Order of the Court becomes final and executory upon failure to pay the
does not preclude the validity of memorandum decisions which adopt by reference necessary docket fees, then the courts in this jurisdiction cannot invalidate the
the findings of fact and conclusions of law contained in the decisions of inferior order of the foreign court simply because our rules provide otherwise.
tribunals. In Francisco v. Permskul,[26] this Court held that the following
memorandum decision of the Regional Trial Court of Makati did not transgress the The private respondent claims that its right to due process had been blatantly
requirements of Section 14, Article VIII of the Constitution: violated, first by reason of the fact that the foreign court never answered its queries
as to the amount of docket fees to be paid then refused to admit its objections for
MEMORANDUM DECISION failure to pay the same, and second, because of the presumed bias on the part of
the arbitrator who was a former employee of the petitioner.
After a careful perusal, evaluation and study of the records of this case, this Court
hereby adopts by reference the findings of fact and conclusions of law contained in Time and again this Court has held that the essence of due process is to be found in
the decision of the Metropolitan Trial Court of Makati, Metro Manila, Branch 63 the reasonable opportunity to be heard and submit any evidence one may have in
and finds that there is no cogent reason to disturb the same. support of ones defense[33] or stated otherwise, what is repugnant to due process
is the denial of opportunity to be heard.[34] Thus, there is no violation of due
WHEREFORE, judgment appealed from is hereby affirmed in toto.[27] (Underscoring process even if no hearing was conducted, where the party was given a chance to
supplied.) explain his side of the controversy and he waived his right to do so.[35]

This Court had occasion to make a similar pronouncement in the earlier case of In the instant case, the private respondent does not deny the fact that it was
Romero v. Court of Appeals,[28] where the assailed decision of the Court of Appeals notified by the foreign court to file its objections to the petition, and subsequently,
adopted the findings and disposition of the Court of Agrarian Relations in this wise: to pay legal fees in order for its objections to be given consideration. Instead of
paying the legal fees, however, the private respondent sent a communication to the
We have, therefore, carefully reviewed the evidence and made a re-assessment of foreign court inquiring about the correct amount of fees to be paid. On the pretext
the same, and We are persuaded, nay compelled, to affirm the correctness of the that it was yet awaiting the foreign courts reply, almost a year passed without the
trial courts factual findings and the soundness of its conclusion. For judicial private respondent paying the legal fees. Thus, on February 2, 1990, the foreign
convenience and expediency, therefore, We hereby adopt by way of reference, the court rejected the objections of the private respondent and proceeded to
adjudicate upon the petitioners claims. We cannot subscribe to the private
respondents claim that the foreign court violated its right to due process when it the case to the RTC for further proceedings. As this Court has ruled on the validity
failed to reply to its queries nor when the latter rejected its objections for a clearly and enforceability of the said foreign judgment in this jurisdiction, further
meritorious ground. The private respondent was afforded sufficient opportunity to proceedings in the RTC for the reception of evidence to prove otherwise are no
be heard. It was not incumbent upon the foreign court to reply to the private longer necessary.
respondents written communication. On the contrary, a genuine concern for its
cause should have prompted the private respondent to ascertain with all due WHEREFORE, the instant petition is GRANTED, and the assailed decision of the
diligence the correct amount of legal fees to be paid. The private respondent did Court of Appeals sustaining the trial courts dismissal of the OIL AND NATURAL GAS
not act with prudence and diligence thus its plea that they were not accorded the COMMISSIONs complaint in Civil Case No. 4006 before Branch 30 of the RTC of
right to procedural due process cannot elicit either approval or sympathy from this Surigao City is REVERSED, and another in its stead is hereby rendered ORDERING
Court.[36] private respondent PACIFIC CEMENT COMPANY, INC. to pay to petitioner the
amounts adjudged in the foreign judgment subject of said case.
The private respondent bewails the presumed bias on the part of the arbitrator who
was a former employee of the petitioner. This point deserves scant consideration in SO ORDERED.
view of the following stipulation in the contract:
Regalado, (Chairman), Melo, and Puno, JJ., concur.
x x x. It will be no objection to any such appointment that the arbitrator so Mendoza, J., no part, having taken part in the consideration of this case below.
appointed is a Commission employer (sic) that he had to deal with the matter to
which the supply or contract relates and that in the course of his duties as
Commissions employee he had expressed views on all or any of the matter in
dispute or difference.[37] (Underscoring supplied.)

Finally, we reiterate hereunder our pronouncement in the case of Northwest Orient


Airlines, Inc. v. Court of Appeals[38] that:

A foreign judgment is presumed to be valid and binding in the country from which it
comes, until the contrary is shown. It is also proper to presume the regularity of the
proceedings and the giving of due notice therein.

Under Section 50, Rule 39 of the Rules of Court, a judgment in an action in


personam of a tribunal of a foreign country having jurisdiction to pronounce the
same is presumptive evidence of a right as between the parties and their
successors-in-interest by a subsequent title. The judgment may, however, be
assailed by evidence of want of jurisdiction, want of notice to the party, collusion,
fraud, or clear mistake of law or fact. Also, under Section 3 of Rule 131, a court,
whether of the Philippines or elsewhere, enjoys the presumption that it was acting
in the lawful exercise of jurisdiction and has regularly performed its official
duty.[39]

Consequently, the party attacking a foreign judgment, the private respondent


herein, had the burden of overcoming the presumption of its validity which it failed
to do in the instant case.

The foreign judgment being valid, there is nothing else left to be done than to order
its enforcement, despite the fact that the petitioner merely prays for the remand of

Das könnte Ihnen auch gefallen