1. Heirs of Augusto L. Salas, Jr. vs.

Laperal Realty Corporation

G.R. No. 135362. December 13, 1999.
DE LEON, JR., J.:

Only parties to the Agreement, their assigns or heirs have the right to arbitrate or could
be compelled to arbitrate. The Court went further by declaring that in recognizing the right of
the contracting parties to arbitrate or to compel arbitration, the splitting of the proceedings to
arbitration as to some of the parties on one hand and trial for the others on the other hand, or
the suspension of trial pending arbitration between some of the parties, should not be allowed as
it would, in effect, result in multiplicity of suits, duplicitous procedure and unnecessary delay.

Facts:
Agusto Salas, Jr. entered into an Owner-Contractor Agreement with Laperal Realty
Corporation (Corp) to render and provide complete (horizontal) construction services on his
land.

Salas, Jr. executed a Special Power of Attorney in favor of respondent Laperal Realty to
exercise general control, supervision and management of the sale of his land, for cash or on
installment basis.

On June 10, 1989, Salas, Jr. left his home in the morning for a business trip to Nueva
Ecija. He never returned.

On August 6, 1996, Teresita Diaz Salas filed a petition for declaration of presumptive
death of her husband who had been missing for more than 7 yrs. RTC granted.

Meantime, respondent Laperal Realty subdivided the land of Salas, Jr. and sold
subdivided portions thereof to respondents Rockway Real Estate Corporation and South Ridge
Village, Inc. Abrajano and Lava and Oscar Dacillo on June 27, 1991; and to respondents Eduardo
Vacuna, Florante de la Cruz and Jesus Vicente Capalan (LOT BUYERS)

petitioners as heirs of Salas, Jr. filed in the Regional Trial Court of Lipa City a Complaint
for declaration of nullity of sale, reconveyance, cancellation of contract

Corp filed a Motion to Dismiss on the ground that petitioners failed to submit their grievance to
arbitration as provided in their agreement.

RTC dismissed the petitioner's complaint for non compliance with the arbitration

Petitioner's argument:
1. They are not parties to the contract, hence, not bound by the same.
2. Lesion of more than 1/4
Ruling:
Petitioners are bound by the agreement. In a catena of cases inspired by Justice
Malcolm's provocative dissent in Vega v. San Carlos Milling Co., this Court has recognized
arbitration agreements as valid, binding, enforceable and not contrary to public policy so much
so that when there obtains a written provision for arbitration which is not complied with, the trial
court should suspend the proceedings and order the parties to proceed to arbitration in
accordance with the terms of their agreement. Arbitration is the „wave of the future in dispute
resolution. To brush aside a contractual agreement calling for arbitration in case of disagreement
between parties would be a step backward.

Nonetheless, we grant the petition.

A submission to arbitration is a contract. As such, the Agreement, containing the

stipulation on arbitration, binds the parties thereto, as well as their assigns and heirs. But only
they.

With respect to the LOT BUYERS they are not bound by the agreement since they are not
assignees of the of the rights of the Corp under the Agreement to develop Salas, Jr.'s land and sell
the same. Thus, there is no need to undergo arbitration with respect to them. They are, rather,
buyers of the land that respondent Laperal Realty was given the authority to develop and sell
under the Agreement. As such, they are not „assigns contemplated in Art. 1311 of the New Civil
Code which provides that „contracts take effect only between the parties, their assigns and heirs.

Laperal Realty, as a contracting party to the Agreement, has the right to compel
petitioners to first arbitrate before seeking judicial relief. However, to split the proceedings into
arbitration for respondent Laperal Realty and trial for the respondent lot buyers, or to hold trial in
abeyance pending arbitration between petitioners and respondent Laperal Realty, would in effect
result in multiplicity of suits, duplicitous procedure and unnecessary delay. On the other hand, it
would be in the interest of justice if the trial court hears the complaint against all herein
respondents and adjudicates petitioner's rights as against theirs in a single and complete
proceeding.

WHEREFORE, the instant petition is hereby GRANTED.

2. Del Monte Corporation-USA vs. Court of Appeals
G.R. No. 136154. February 7, 2001.
BELLOSILLO, J.:

The object of arbitration is to allow the expeditious determination of a dispute.

Facts:

DelMonte USA(DMC-USA) and Montebueno Marketing, Inc. (MMI) entered into a

Distributorship agreement wherein the latter shall be the sole and exclusive distributor of
DelMonte Products in the Philippines for 5 yrs.

The Agreement provided, among others, for an arbitration clause which states·
12. GOVERNING LAW AND ARBITRATION This Agreement shall be
governed by the laws of the State of California and/or, if applicable, the United
States of America. All disputes arising out of or relating to this Agreement or
the parties' relationship, including the termination thereof, shall be resolved by
arbitration in the City of San Francisco, State of California, under the Rules of
the American Arbitration Association.

DMC-USA products continued to be brought into the country by parallel importers

(Daniel Collins and Luis Hidalgo) despite the appointment of private respondent MMI as the sole
and exclusive distributor of Del Monte products thereby causing them great embarrassment and
substantial damag.

MMI filed a case for damages against DMC-USA claiming that they had exhausted all
possible avenues for an amicable resolution and settlement of their grievances; that as a result of
the fraud, bad faith, malice and wanton attitude of DMC-USA, they should be held responsible
for all the actual expenses incurred by MMI.

DMC-USA:
1. Motion to Suspend the Proceedings - invoking arbitration clause.

RTC denied Motion to Susped the proceedings, Hence, this petition

Ruling:
There is no doubt that arbitration is valid and constitutional in our jurisdiction. Even
before the enactment of RA 876, this Court has countenanced the settlement of disputes through
arbitration. Unless the agreement is such as absolutely to close the doors of the courts against the
parties, which agreement would be void, the courts will look with favor upon such amicable
arrangement and will only interfere with great reluctance to anticipate or nullify the action of the
arbitrator.
 Moreover, as RA 876 expressly authorizes arbitration of domestic disputes, foreign
arbitration as a system of settling commercial disputes was likewise recognized when the
Philippines adhered to the United Nations "Convention on the Recognition and the Enforcement
of Foreign Arbitral Awards of 1958" under the 10 May 1965 Resolution No. 71 of the Philippine
Senate, giving reciprocal recognition and allowing enforcement of international arbitration
agreements between 23 parties of different nationalities within a contracting state.

A careful examination of the instant case shows that the arbitration clause in the Distributorship
Agreement between petitioner DMC-USA and private respondent MMI is valid and the dispute
between the parties is arbitrable. However, this Court must deny the petition.

The Agreement between petitioner DMC-USA and private respondent MMI is a contract.

However, in Salas, Jr., only parties to the Agreement, their assigns or heirs have the right
to arbitrate or could be compelled to arbitrate. The Court went further by declaring that in
recognizing the right of the contracting parties to arbitrate or to compel arbitration, the splitting
of the proceedings to arbitration as to some of the parties on one hand and trial for the others on
the other hand, or the suspension of trial pending arbitration between some of the parties, should
not be allowed as it would, in effect, result in multiplicity of suits, duplicitous procedure and
unnecessary delay.

The object of arbitration is to allow the expeditious determination of a dispute. Clearly,

the issue before us could not be speedily and efficiently resolved in its entirety if we allow
simultaneous arbitration proceedings and trial, or suspension of trial pending arbitration.
Accordingly, the interest of justice would only be served if the trial court hears and adjudicates
the case in a single and complete proceeding.

PETITION DENIED. RTC's denial = affirmed.

3. National Steel Corporation vs. Regional Trial Court of Lanao del Norte, Br. 2, Iligan City
G.R. No. 127004. March 11, 1999.
PURISIMA, J.:

Facts:
Edward Wilkom Enterprises, Inc. (EWEI) together with Ramiro Construction and
National Steel Corporation (NSC) executed a contract whereby the former jointly undertook the
Contract for Site Development for the latter's Integrated Iron and Steel Mills Complex to be
established at Iligan City.

Sometime, thereafter, the services of Ramiro Construction was terminated and EWEI
took over the former's contractual obligation. The project was not completed on the desired date,
thus, a dispute arose.

After series of hearings, the Arbitrators rendered the decision is the subject matter of
these present causes of action, held NSC liable for :
1. 458k - representing EWEI's last billing)
2. 1.3M - price escalation adjustment
3. 50k ED
4. 350k Attorneys fees
5. 35k cost of arbitration.

RTC - affirmed in toto

Hence, this Petition by NSC

Issue: whether or not the lower court acted with grave abuse of discretion in not vacating the
arbitrator's award.

Ruling:
No. A stipulation to refer all future disputes or to submit an ongoing dispute to an
arbitrator is valid.

It should be stressed that voluntary arbitrators, by the nature of their functions, act in a
quasi-judicial capacity. As a rule, findings of facts by quasi-judicial bodies, which have acquired
expertise because their jurisdiction is confined to specific matters, are accorded not only respect
but even finality if they are supported by substantial evidence, even if not overwhelming or
preponderant.

Regularity in the performance of official functions is presumed and the complaining party
has the burden of proving the existence of any of the grounds for vacating the award.
 Sec. 24. GROUNDS FOR VACATING THE AWARD.·In any one of the following
cases, the court must make an order vacating the award upon the petition of any party to
the controversy when such party proves affirmatively that in the arbitration proceedings:

(a) The award was procured by corruption, fraud or other undue means;
(b) That there was evident partiality or corruption in the arbitrators of any of
them; or
(c) That the arbitrators were guilty of misconduct in refusing to postpone the
hearing upon sufficient cause shown, or in refusing to hear evidence pertinent and
material to the controversy; that one or more of the arbitrators was disqualified to
act as such under section nine hereof, and willfully refrained from disclosing such
disqualification or of any other misbehavior by which the rights of any party have
been materially prejudiced; or
(d) That the arbitrators exceeded their powers, or so imperfectly executed them,
that a mutual, final and definite award upon the subject matter submitted to them
was not made. xxx

However, in this case, the claim of the petitioner that there was evident partiality and
mistake on the appreciation of facts on the part of the Arbitrator is unsubstantiated. It merely
alleged the same.

The fact that a party was disadvantaged by the decision of the Arbitration Committee
does not prove evident partiality.·

ED and Attorney's fee - deleted by SC

WHEREFORE, the awards made by the Board of Arbitrators which the trial court adopted in
its decision of July 31, 1996, are modified, thus:
(1) The award of P474,780.23 for Billing No. 16-Final and P1,335,514.20 for price
adjustment shall be paid with legal interest of six (6%) percent per annum, from January
1, 1985 until this decision shall have become final and executory;
(2) The award of P50,000 for exemplary damages and attorneyÊs fees of P350,000 are
deleted; and
(3) The cost of arbitration of P35,000 to supplement arbitration agreement has to be
paid.
No pronouncement as to costs.
SO ORDERED.
4. Asset Privatization Trust vs. Court of Appeals
G.R. No. 121171. December 29, 1998.
Kapunan, J.

Facts:
Pursuant to a Mortgage Trust Agreement, the Development Bank of the Philippines and
the Philippine National Bank foreclosed the assets of the Marinduque Mining and Industrial
Corporation. The assets were sold to Philippine National Bank and later transferred to the Asset
Privatization Trust (APT).

In February 1985, Jesus Cabarrus, Sr., together with other stockholders of Marinduque
Mining and Industrial Corporation, filed a derivative suit against Development Bank of the
Philippines and Philippine National Bank before the Regional Trial Court of Makati for
Annulment of Foreclosures, Specific Performance and Damages. In the course of the trial,
Marinduque Mining and Industrial Corporation and Asset Privatization Trust as successor in
interest of Development Bank of the Philippines and Philippine National Bank, agreed to submit
the case to arbitration by entering into a Compromise and Arbitration Agreement. This agreement
was approved by the trial court and the complaint was corollarily dismissed.

Thereafter, the Arbitration Committee rendered a decision ordering Asset Privatization

Trust to pay Marinduque Mining and Industrial Corporation damages and arbitration costs in the
amount of P2.5 Billion, P13,000,000.00 of which is for moral and exemplary damages.

On motion of Cabarrus and the other stockholders of Marinduque Mining and Industrial
Corporation, the trial court confirmed the Arbitration Committee’s award. Its motion for
reconsideration having been denied, Asset Privatization Trust filed a special civil action for
certiorari with the Court of Appeals. It was likewise denied.

Hence, this petition for review on certiorari.

Issue: WHETHER THE RESPONDENT JUDGE COMMITTED GRAVE ABUSE OF

DISCRETION AND ACTED WITHOUT OR IN EXCESS OF JURISDICTION, IN ISSUING
THE QUESTIONED ORDERS CONFIRMING THE ARBITRAL AWARD AND DENYING
THE MOTION FOR RECONSIDERATION OF ORDER OF AWARD.

Ruling:
As a rule, the award of an arbitrator cannot be set aside for mere errors of judgment either as
to the law or as to the facts. Errors of law and fact, or an erroneous decision of matters submitted
to the judgment of the arbitrators, are insufficient to invalidate an award fairly and honestly
made. Judicial review of an arbitration is, thus, more limited than judicial review of a trial.

Nonetheless, the arbitrators awards is not absolute and without exceptions. The arbitrators
cannot resolve issues beyond the scope of the submission agreement.
 While a court is precluded from overturning an award for errors in determination of
factual issues, nevertheless, if an examination of the record reveals no support whatever for the
arbitrators determinations, their award must be vacated. In the same manner, an award must be
vacated if it was made in manifest disregard of the law.

WHEREFORE, the Decision of CA is hereby REVERSED.

Other discussion
- the arbitrator's award is not absolute and without exceptions. The arbitrators cannot resolve
issues beyond the scope of the submission agreement. The parties to such an agreement are
bound by the arbitra-torsÊ award only to the extent and in the manner prescribed by the
contract and only if the award is rendered in conformity thereto. Thus, Sections 24 and 25 of
the Arbitration Law provide grounds for vacating, rescinding or modifying an arbitration
award. Where the conditions described in Articles 2038, 2039, and 2040 of the Civil Code
applicable to compromises and arbitration are attendant, the arbitration award may also be
annulled.
- An award of damages to one who is not a party before the Arbitration Committee is a
complete nullity.
- MMIC should have been impleaded as a party. It was not joined as a party plaintiff or party
defendant at any stage of the proceedings. As it is, the award of damages to MMIC, which
was not a party before the Arbitration Committee, is a complete nullity.
5. National Irrigation Administration vs. Court of Appeals
G.R. No. 129169. November 17, 1999.
DAVIDE, JR., C.J.:

Facts:
Records show that in a competitive bidding held by NIA in August 1978, Hydro
Resources Contractors Corporation (hereafter HYDRO) was awarded Contract MPI-C-2 for the
construction of the main civil works of the Magat River MultiPurpose Project.

HYDRO substantially completed the works under the contract in 1982 and final
acceptance by NIA was made in 1984. HYDRO thereafter determined that it still had an account
receivable from NIA representing the dollar rate differential of the price escalation for 2 the
contract.

After unsuccessfully pursuing its case with NIA, HYDRO, on 7 December 1994, filed
with the CIAC a Request for Adjudication of the aforesaid claim.

CIAC held NIA liable to Hydro. Hence, this petition

NIA's defense:
1. CIAC has no jurisdiction - contract was executed in 1978 , EO 1008 became effect on 1985
2. it had not voluntarily submitted itself to arbitration by CIAC

Issue: WON has jurisdiction over the dispute

Ruling:
Yes. Contrary to the claim of NIA, the CIAC has jurisdiction over the controversy.
Executive Order No.1008, otherwise known as the "Construction Industry Arbitration Law"
which was promulgated on 4 February 1985, vests upon CIAC original and exclusive jurisdiction
over disputes arising from, or connected with contracts entered into by parties involved in
construction in the Philippines, whether the dispute arises before or after the completion of the
contract, or after the abandonment or breach thereof. The disputes may involve government or
private contracts. For the Board to acquire jurisdiction, the parties to a dispute must agree to
submit the same to voluntary arbitration.

The complaint of HYDRO against NIA on the basis of the contract executed between
them was filed on 7 December 1994, during the effectivity of E.O. No. 1008. Hence, it is well
within the jurisdiction of CIAC. The jurisdiction of a court is determined by the law in force at
the time of the commencement of the action.

Under the present Rules of Procedure, for a particular construction contract to fall within
the jurisdiction of CIAC, it is merely required that the parties agree to submit the same to
voluntary arbitration. Unlike in the original version of Section 1, as applied in the Tesco case, the
law as it now stands does not provide that the parties should agree to submit disputes arising
from their agreement specifically to the CIAC for the latter to acquire jurisdiction over the same.
Rather, it is plain and clear that as long as the parties agree to submit to voluntary arbitration,
regardless of what forum they may choose, their agreement will fall within the jurisdiction of the
CIAC, such that, even if they specifically choose another forum, the parties will not be precluded
from electing to submit their dispute before the CIAC because this right has been vested upon
each party by law, i.e., E.O. No. 1008.

WHEREFORE, the instant petition is DISMISSED for lack of merit. The Court of Appeals is
hereby DIRECTED to proceed with reasonable dispatch in the disposition of C.A. G.R. No.
44527 and include in the resolution thereof the issue of laches and prescription.
6. Agan, Jr. vs. Philippine International Air Terminals Co., Inc.
G.R. No. 155001. May 5, 2003.
PUNO, J.:

Facts:
In 1989, The DOTC conducted studies on NAIA’s capability to cope with the traffic
development up to 2010. In 1993, business tycoons Gokongwei, Gotianun, Sy, Tan, Ty, and
Yuchengco formed the Asia’s Emerging Dragon Group (AEDC) and submitted an unsolicited
proposal to the Government through the DOTC/MIAA for the development of NAIA Terminal
III under a Build-Operate-Transfer Agreement (BOT) under BOT Law (RA6957, amended by
RA 7718).

DOTC began the bidding process for the NAIA Terminal III project by forming the
PBAC (Prequalification Bids and Awards Committee). AEDC’s primary competitor was the
PAIRCARGO consortium (composed of Pair Cargo, PAGS, and Security Bank) filed their bid,
which AEDC questioned since the former allegedly lacked financial capability.

PAIRCARGO Consortium was awarded the Contract because it offered a higher

guaranteed payment to the government. Later on, PAIRCARGO changed its name to PIATCO
(Phil. Int’l Airport Terminals Co. Inc. Post- bidding, the government and PIATCO signed the
1997 Concession Agreement for the NAIA Terminal III project, and a subsequent Amended &
Revised Concession Agreement + supplements of the said 1997 Concession Agreement were
entered into.

The Government, through then DOTC Secretary Arturo T. Enrile, and PIATCO, through
its President, Henry T. Go, signed the “Concession Agreement for the Build-Operate-and-
Transfer Arrangement of the Ninoy Aquino International Airport Passenger Terminal III” (1997
Concession Agreement).

The Government and PIATCO signed an Amended and Restated Concession Agreement
(ARCA). Subsequently, the Government and PIATCO signed three Supplements to the ARCA.
The First Supplement was signed on August 27, 1999; the Second Supplement on September 4,
2000; and the Third Supplement on June 22, 2001.

Meanwhile, the MIAA which is charged with the maintenance and operation of the NAIA
Terminals I and II, had existing concession contracts with various service providers to offer
international airline airport services, such as in-flight catering, passenger handling, ramp and
ground support, aircraft maintenance and provisions, cargo handling and warehousing, and other
services, to several international airlines at the NAIA.

Consequently, the workers of the international airline service providers, claiming that
they stand to lose their employment upon the implementation of the questioned agreements, filed
before this Court a petition for prohibition to enjoin the enforcement of said agreements.
 During the pendency of the case before this Court, President Gloria Macapagal Arroyo,
on November 29, 2002, in her speech at the 2002 Golden Shell Export Awards at Malacañang
Palace, stated that she will not “honor (PIATCO) contracts which the Executive Branch’s legal
offices have concluded (as) null and void.”

Respondent PIATCO filed its Comments to the present petitions.

Several petitions of prohibition filed by NAIA Terminal I & II’s int’l service providers,
their employees, and congressmen alleging that the 1997 Concession Agreement, the ARCA, &
its supplements are contrary to the Constitution, BOT Law, & its IRR

PIATCO - there must first be arbitration

Issue: WON the court has jurisdiction

Ruling:
Yes. While it is true that In Del Monte Corporation-USA v. Court of Appeals, even after
finding that the arbitration clause in the Distributorship Agreement in question is valid and the
dispute between the parties is arbitrable, this Court affirmed the trial courts decision denying
petitioners Motion to Suspend Proceedings pursuant to the arbitration clause under the contract.
In so ruling, this Court held that as contracts produce legal effect between the parties, their
assigns and heirs, only the parties to the Distributorship Agreement are bound by its terms,
including the arbitration clause stipulated therein. This Court ruled that arbitration proceedings
could be called for but only with respect to the parties to the contract in question. Considering
that there are parties to the case who are neither parties to the Distributorship Agreement nor
heirs or assigns of the parties thereto, this Court, citing its previous ruling in Salas, Jr. v. Laperal
Realty Corporation, held that to tolerate the splitting of proceedings by allowing arbitration as to
some of the parties on the one hand and trial for the others on the other hand would, in effect,
result in multiplicity of suits, duplicitous procedure and unnecessary delay.Thus, we ruled that
the interest of justice would best be served if the trial court hears and adjudicates the case in
a single and complete proceeding.

It is established that petitioners in the present cases who have presented legitimate
interests in the resolution of the controversy are not parties to the PIATCO Contracts.

Accordingly, they cannot be bound by the arbitration clause provided for in the ARCA
and hence, cannot be compelled to submit to arbitration proceedings. A speedy and decisive
resolution of all the critical issues in the present controversy, including those raised by
petitioners, cannot be made before an arbitral tribunal. The object of arbitration is precisely to
allow an expeditious determination of a dispute. This objective would not be met if this Court
were to allow the parties to settle the cases by arbitration as there are certain issues involving
non-parties to the PIATCO Contracts which the arbitral tribunal will not be equipped to resolve.
 PIATCO cannot, by mere contractual stipulation, contravene the Constitutional provision
on temporary government takeover and obligate the government to pay “reasonable cost for the
use of the Terminal and/or Terminal Complex.”

Article XII, Section 17 of the 1987 Constitution provides:


Section 17. In times of national emergency, when the public interest so requires, the
State may, during the emergency and under reasonable terms prescribed by it,
temporarily take over or direct the operation of any privately owned public utility or
business affected with public interest.

The above provision pertains to the right of the State in times of national emergency, and
in the exercise of its police power, to temporarily take over the operation of any business affected
with public interest. The duration of the emergency itself is the determining factor as to how long
the temporary takeover by the government would last. The temporary takeover by the
government extends only to the operation of the business and not to the ownership thereof. As
such the government is not required to compensate the private entity-owner of the said
business as there is no transfer of ownership, whether permanent or temporary. The private
entity-owner affected by the temporary takeover cannot, likewise, claim just compensation for
the use of the said business and its properties as the temporary takeover by the government is in
exercise of its police power and not of its power of eminent domain.

Article XII, section 17 of the 1987 Constitution envisions a situation wherein the
exigencies of the times necessitate the government to “temporarily take over or direct the
operation of any privately owned public utility or business affected with public interest.” It is the
welfare and interest of the public which is the paramount consideration in determining whether
or not to temporarily take over a particular business. Clearly, the State in effecting the temporary
takeover is exercising its police power. Police power is the “most essential, insistent, and
illimitable of powers.” Its exercise therefore must not be unreasonably hampered nor its exercise
be a source of obligation by the government in the absence of damage due to arbitrariness of its
exercise. Thus, requiring the government to pay reasonable compensation for the reasonable use
of the property pursuant to the operation of the business contravenes the Constitution.

WHEREFORE, the 1997 Concession Agreement, the Amended and Restated Concession
Agreement and the Supplements thereto are set aside for being null and void.

SO ORDERED.
7. LM POWER ENGINEERING CORPORATION, petitioner, vs. CAPITOL INDUSTRIAL
CONSTRUCTION GROUPS, INC., respondent., G.R. No. 141833. March 26, 2003

Facts:
LM Power Engineering Corporation (Corporation) and Capitol Industrial Construction
Groups, Inc. (Capitol) entered into a Subcontract agreement involving electrical work at the
Third Port of Zamboanga.

Capitol took over some of the work contracted to Corporation. Allegedly, the latter had
failed to finish it because of its inability to procure materials.

Upon completing its task under the Contract, Corporation billed respondent in the amount
of P6,711,813.90. Contesting the accuracy of the amount of advances and billable
accomplishments listed by the former, the latter refused to pay. Capitol also took refuge in the
termination clause of the Agreement.

Thus Corporation filed a case for the collection of the said amount under the Subcontract
against Capitol. The latter filed a MTD alleging that the Complaint was premature, because there
was no prior recourse to arbitration.

RTC denied the Motion. CA reversed Hence this petition by Corporation

Issue: WON the dispute is subject to arbitration

Ruling:
Yes. Section 1 of Article III of the new Rules of Procedure Governing Construction
Arbitration provides that An arbitration clause in a construction contract or a submission to
arbitration of a construction dispute shall be deemed an agreement to submit an existing or future
controversy to CIAC jurisdiction, notwithstanding the reference to a different arbitration
institution or arbitral body in such contract or submission. When a contract contains a clause for
the submission of a future controversy to arbitration, it is not necessary for the parties to enter
into a submission agreement before the claimant may invoke the jurisdiction of CIAC.

In this case, it is provided under the Subcontract that '"The Parties hereto agree that any
dispute or conflict as regards to interpretation and implementation of this Agreement which
cannot be settled between [respondent] and [petitioner] amicably shall be 19 settled by means of
arbitration x x x.

Therefore, the dispute is subject to arbitration.

Moreover, contrary to Petitioner's contention, a formal request for arbitration with the
Construction Industry Arbitration Commission (CIAC) is no longer necessary in order for the
latter to acquire jurisdiction over Construction Dispute.
 Section 1 of Article III of the new Rules of Procedure Governing Construction
Arbitration has dispensed with this requirement and recourse to the CIAC may now be availed of
whenever a contract "contains a clause for the submission of a future controversy to arbitration"

Clearly, there is no more need to file a request with the CIAC in order to vest it with
jurisdiction to decide a construction dispute.
8. Reyes vs. Balde II - KUPAL CASE
G.R. No. 168384. August 7, 2006.
YNARES-SANTIAGO, J.:

Facts:
Respondents Cesar and Carmelita Esquig entered into a Design-Build Construction
Agreement with petitioner Charles Bernard H. Reyes, doing business under the name and style of
CBH Reyes Architects, for the architectural design and construction of a 2-storey residence in
Tahanan Village, Parañaque City.

The relationship between petitioner and respondent spouses went on smoothly until
sometime in January 2003 when the latter left for the United States and designated their co-
respondent, Rosemarie Papas, as their representative. According to petitioner, Papas meddled
with the construction works by demanding changes and additional works which entailed
additional cost. Papas also refused to pay petitionerÊs progress billing and the salary of the
laborers.

Petitioner thereafter prepared an accounting report of all the additional works and their
corresponding costs, however, Papas denied all the items in the list and refused to pay the same.
Worse, on May 8, 2003, Papas wrote the Board of Directors of Tahanan Village HomeownerÊs
Association requesting for the cancellation of the contractorÊs work permit.

Thus, on May 26, 2003, petitioner filed a complaint for Accounting, Collection of Sum of
Money, Rescission of Contract with Damages against spouses Esquig and Rosemarie Papas with
the Regional Trial Court of Muntinlupa.

In this case, Respondents filed a motion to dismiss on the ground that the Court
has no jurisdiction over the matter because the same should have been brought
before CIAC since the agreement of the parties contained an arbitration clause.

Thereafter, Respondents filed a case before the CIAC against the petitioner because the
latter petitioner unreasonably delayed the construction and refused to finish the project. Thus,
they prayed that petitioner be ordered to finish the project or, in the alternative, to pay the cost to
finish the same.

In this case before the CIAC, petitioner filed a motion to dismiss on the ground of lack
of jurisdiction hear and decide the case as well as the pendency of the case before the
trial court involving the same subject matter which was DENIED since the Design-Build
Construction Agreement contained an arbitration clause, any dispute arising from said
contract is within CIACÊs jurisdiction.

However, going back to the case before the RTC, it ruled denying respondents' motion to dismiss
and took cognizance of the case.
 Petitioner then filed with the CIAC a motion to terminate proceedings but the same was
denied. Thus, petitioner filed a petition for certiorari and prohibition before the Court of Appeals

CA - dismissed Petitioner's petition for certiorari. t held that CIAC properly acquired jurisdiction
over the subject property. MR - DENIED.

Hence, this petition.

Argument of Petitioner:
1. Petitioner contends that the CIAC has no jurisdiction to entertain the case because it is purely
civil in nature and does not involve construction dispute nor require the resolution of highly
technical issues
2. petitioner alleges that the trial court acquired jurisdiction prior to the CIAC since petitioner's
complaint was filed earlier thus, rendering the arbitration clause moot, unenforceable and
revocable.

Ruling:
Petition LACKS MERIT.

Section 1, Article III of the CIAC Rules of Procedure Governing Construction Arbitration
likewise provides that recourse to the CIAC may be availed of whenever a contract contains a
clause for the submission of a future controversy to arbitration, thus:

SECTION 1. Submission to CIAC Jurisdiction.·An arbitration clause in a construction

contract or a submission to arbitration of a construction dispute shall be deemed an
agreement to submit an existing or future controversy to CIAC jurisdiction, notwithstanding
the reference to a different arbitration institution or arbitral body in such contract or
submission. When a contract contains a clause for the submission of a future controversy to
arbitration, it is not necessary for the parties to enter into a submission agreement before the
claimant may invoke the jurisdiction of CIAC.

In the case of Philrock, Inc. v. Construction Industry Arbitration Commission, the Court
has ruled that CIAC has original and exclusive jurisdiction over disputes arising from or
connected with construction contracts entered into by parties that have agreed to submit their
dispute to voluntary arbitration.

In this case, DesignBuild Construction Agreement contains an arbitration clause as found

in Article 10 of the said agreement. Thus, the presence of the arbitration clause in the partiesÊ
contract vests jurisdiction on the CIAC on all controversies arising from such contract.
 With respect to petitioner's contention that the action is purely civil in nature hence,
jurisdiction rests with the Regional Trial Court, the same must fail. Since the action is rooted on
alleged violations of the agreement, it is embraced by the term "construction dispute".

PETITION DENIED.
9. Maria Luisa Park Association, Inc. vs. Almendras
G.R. No. 171763. June 5, 2009.
QUISUMBING, J.

Facts:
Respondents Samantha Marie ALmendras and Pia Angela Almendras purchased from
MRO Development Corporation a residential lot located in Maria Luisa Estate Park, Banilad,
Cebu City.

After some time, respondents filed with petitioner Maria Luisa Park Association,
Incorporated (MLPAI) an application to construct a residential house, which was approved.

Upon ocular inspection of the house, MLPAI found out that respondents violated the
prohibition against multi-dwelling stated in MLPAI's Deed of Restriction. Thereafter, MLPAI
sent a letter to the respondents, demanding that they rectify the structure; otherwise, it will be
constrained to forfeit respondentsÊ construction bond and impose stiffer penalties.

Respondents denied having violated the same. MLPAI warned them to comply with its
demand will result in its exercise of more stringent measures.

Respondents filed with the RTC Injunction, declaratory relief, annulment of provisions of
Articles and by-laws.

MLPAI Moved for the dismissal of the complaint on the ground that:
1. RTC has no jurisdiction
2. Alure to comply with arbitration clause provided in the by-laws.

RTC- dismissed
CA - set aside and ordered RTC to take jurisdiction

Hence this petition by MLPAI

Argument of Respondents:
1. the case they filed against MLPAI is one for declaratory relief and annulment of the
provisions of the by-laws; hence, it is outside the competence of the HLURB to resolve

Issue: WON RTC may take cognizance of the Case

Ruling:
No. For a number of reasons:

1. instant controversy falls squarely within the exclusive and original jurisdiction of the Home
Insurance and Guaranty Corporation (HIGC), now HLURB.
2. It is apparent that although the complaint was denominated as one for declaratory relief/
annulment of contracts, the allegations therein reveal otherwise. It should be stressed that
respondents neither asked for the interpretation of the questioned by-laws nor did they allege
that the same is doubtful or ambiguous and require judicial construction. In fact, what
respondents really seek to accomplish is to have a particular provision of the MLPAI's by-
laws nullified and thereafter absolve them from any violations of the same.

they did not, however, raise any legal ground to support its nullification. The legality of
the by-laws in its entirety was never an issue in the instant controversy but merely the
provision prohibiting multi-dwelling which respondents assert they did not violate

3. Moreover, under the doctrine of primary administrative jurisdiction, courts cannot or will not
determine a controversy where the issues for resolution demand the exercise of sound
administrative discretion requiring the special knowledge, experience, and services of the
administrative tribunal to determine technical and intricate matters of fact.

4. the parties failed to abide by the arbitration agreement in the MLPAI by-laws. Article
XII of the MLPAI by-laws entered into by the parties provide that any dispute or claim
against the Association or any of its officers and governors shall first be settled amicably. If
amicable settlement fails, such dispute shall be brought by the member to an arbitration
panel for final settlement. The arbitral award shall be valid and binding between the parties
unless repudiated on grounds that the same was procured through fraud or violence, or that
there are patent or gross errors in the tribunalÊs findings of facts upon which the decision
was based.

The terms of Article XII of the MLPAI by-laws clearly express the intention of the parties
to bring first to the arbitration process all disputes between them before a party can file the
appropriate action. The agreement to submit all disputes to arbitration is a contract. As such,
the arbitration agreement binds the parties thereto, as well as their assigns and heirs. 32
Respondents, being members of MLPAI, are bound by its by-laws, and are expected to abide
by it in good faith.

In the instant case, we observed that while both parties exchanged correspondence
pertaining to the alleged violation of the Deed of Restriction, they, however, made no earnest
effort to resolve their differences in accordance with the arbitration clause provided for in their
by-laws. Mere exchange of correspondence will not suffice much less satisfy the requirement
of arbitration. Arbitration being the mode of settlement between the parties expressly provided
for in their by-laws, the same should be respected. Unless an arbitration agreement is such as
absolutely to close the doors of the courts against the parties, the courts should look with favor
upon such amicable arrangements.

WHEREFORE, the instant petition is GRANTED


10. Fort Bonifacio Development Corporation vs. Domingo
G.R. No. 180765. February 27, 2009.
CHICO-NAZARIO, J.

Facts:
Fort Bonifacio Development Corporation (petitioner) entered into a trade contract with L
& M Maxco Specialist Construction (Maxco) wherein Maxco would undertake the structural and
partial architectural package of the BRCP. Maxco incurred delay in completion of its work, thus,
Petitioner decided to terminate their agreement and instructed Maxco to perform remedial
measures prior to contract termination.

Maxco was sued by several creditors which including Respondent Domingo for (804K).

Maxco told Domingo that it had receivables from Petitioner and assigned the same to the
latter.

Thereafter, Domingo tried to demand for the receivables from Petitioner but the same
was denied because according to petitioner, the claim is not yet liquidated. After that, Petitioner
notified Domingo that Maxco is no longer entitled to the receivables because it had had
performed rectification of defect as well as satisfaction of notices of garnishment in favor of
other creditors. (Contention - arbitrary exercise of discretion by the petitioner in giving
preference to the claims of the other creditors of LMM Construction over the receivables of the
latter.)

Domingo filed a complaint for a sum of money against petitioner and Maxco in RTC

Petitioner filed a MTD on the ground of lack of jurisdiction over the subject matter. Petitioner
argued that since respondent merely stepped into the shoes of Maxco as its assignee, it was the
CIAC and not the regular courts that had jurisdiction over the dispute

Issue: WON RTC has jurisdiction

Ruling:
Yes. It is true that Sec 4 of EO 1008 priovides that The CIAC shall have original and
exclusive jurisdiction over disputes arising from, or connected with, contracts entered into by
parties involved in construction in the Philippines, whether the dispute arises before or after the
completion of the contract, or after the abandonment or breach thereof. These disputes may
involve government or private contracts. For the Board to acquire jurisdiction, the parties to a
dispute must agree to submit the same to voluntary arbitration.

However, The claim could not be construed as related to the construction industry as it is
for enforcement of Maxco's deed of assignment over its retention money.
 Construction is defined as referring to all on-site works on buildings or altering
structures, from land clearance through completion including excavation, erection and assembly
and installation of components and equipment

An examination of the allegations in Fong's complaint reveals that his cause of action
springs not from a violation of the provisions of the Trade Contract, but from the assignment of
Maxco's retention money to him and failure of petitioner to turn over the retention money.
(Jurisdiction is determined by the allegation in the pleadings)

While it is true that respondent, as the assignee of the receivables of Maxco from
petitioner under the Trade Contract, merely stepped into the shoes of Maxco. However, the right
of Maxco to the retention money from petitioner under the trade contract is not even in dispute.
Respondent raises as an issue before the RTC is the petitioner's alleged unjustified preference to
the claims of the other creditors of Maxco over the retention money. (because it paid other
creditors first because of garnishment without first honoring the assignment)

PETITION DENIED.
11. Fort Bonifacio Development Corporation vs. Sorongon
G.R. No. 176709. May 8, 2009.
Tinga, J.

Facts:
Fort Bonifacio Development Corporation (petitioner) entered into a trade contract with L
& M Maxco Specialist Construction (Maxco) wherein Maxco would undertake the structural and
partial architectural package of the BRCP. Maxco incurred delay in completion of its work, thus,
Petitioner decided to terminate their agreement and instructed Maxco to perform remedial
measures prior to contract termination.

Maxco was sued by several creditors which including Respondent Fong under the name
of VF industrial Sales.

Maxco told Fong that it had receivables from Petitioner in the amount of P1.5M and
assigned the same to the latter.

Thereafter, Fong tried to demand for the receivables from Petitioner but the same was
denied because according to petitioner, the claim is not yet liquidated. After that, Petitioner
notified Fong that Maxco is no longer entitled to the receivables because it had had performed
rectification of defect as well as satisfaction of notices of garnishment.

Fong filed a complaint for a sum of money against petitioner and Maxco in RTC

Petitioner filed a MTD on the ground of lack of jurisdiction over the subject matter. Petitioner
argued that since respondent merely stepped into the shoes of Maxco as its assignee, it was the
CIAC and not the regular courts that had jurisdiction over the dispute

RTC denied, CA affirmed,. Hence this Petition

Issue: RTC jurisdiction

Ruling:
Yes. It is true that Sec 4 of EO 1008 priovides that The CIAC shall have original and
exclusive jurisdiction over disputes arising from, or connected with, contracts entered into by
parties involved in construction in the Philippines, whether the dispute arises before or after the
completion of the contract, or after the abandonment or breach thereof. These disputes may
involve government or private contracts. For the Board to acquire jurisdiction, the parties to a
dispute must agree to submit the same to voluntary arbitration.

However, The claim could not be construed as related to the construction industry as it is
for enforcement of Maxco's deed of assignment over its retention money.
 Construction is defined as referring to all on-site works on buildings or altering
structures, from land clearance through completion including excavation, erection and assembly
and installation of components and equipment

An examination of the allegations in Fong's complaint reveals that his cause of action
springs not from a violation of the provisions of the Trade Contract, but from the assignment of
Maxco's retention money to him and failure of petitioner to turn over the retention money.
(Jurisdiction is determined by the allegation in the pleadings)

While it is true that respondent, as the assignee of the receivables of Maxco from
petitioner under the Trade Contract, merely stepped into the shoes of Maxco. However, the right
of Maxco to the retention money from petitioner under the trade contract is not even in dispute.
Respondent raises as an issue before the RTC is the petitioner's alleged unjustified preference to
the claims of the other creditors of Maxco over the retention money. (because it paid other
creditors first because of garnishment without first honoring the assignment)

PETITION DENIED.
12. HUTAMA-RSEA Joint Operations, Inc. vs. Citra Metro Manila Tollways Corporation
G.R. No. 180640. April 24, 2009.
CHICO-NAZARIO, J.:

Facts:
Petitioner HUTAMA-RSEA Joint Operations Incorporation and respondent Citra Metro
Manila Tollways Corporation are corporations organized and existing under Philippine laws.

Petitioner and respondent entered into an Engineering Procurement Construction

Contract (EPCC) whereby petitioner would undertake the construction of Stage 1 of the Skyway
Project, which stretched from the junction of Buendia Avenue, Makati City, up to Bicutan
Interchange, Taguig City. As consideration for petitioner's undertaking, respondent obliged itself
under the EPCC to pay the former a total amount of US$369,510,304.00.

During the construction project, petitioner requested payment but respondent only
partially paid the said interim billings. Petitioner made formal demand but the respondent failed
to do so.

petitioner and respondent, through their respective officers and representatives, held
several meetings to discuss the possibility of amicably settling the dispute. Despite several
meetings and continuous negotiations, lasting for a period of almost one year, petitioner and
respondent failed to reach an amicable settlement.

Petitioner finally filed with the Construction Industry Arbitration Commission (CIAC) a
Request for Arbitration, seeking to enforce its money claims against respondent.

Respondent moved to dismiss the case before CIAC on the ground that it had no jurisdiction over
the case. Because under the EPCC Clause 20.4, it provided that controversy arising therefrom
should first be referred to Dispute Adjudication Board.

CIAC ruled that it had jurisdiction

CA reversed - pursuant to Clause 20.4 of the EPCC. The appellate court, thus, found that the
CIAC exceeded its jurisdiction in taking cognizance of petitionerÊs Request for Arbitration

Hence this petition

Issue: WON CIAC may take cognizance of Petitioner's request for Arbitration despite the fact
that it is provided in their agreement that the matter should first be referred to DAB.

Ruling:
Yes. Under Section 1, Article III of the CIAC Rules, an arbitration clause in a
construction contract shall be deemed as an agreement to submit an existing or future
controversy to CIAC jurisdiction, notwithstanding the reference to a different arbitration
institution or arbitral body in such contract.

In this case, it is undisputed that the EPCC contains an arbitration clause in which the
petitioner and respondent explicitly agree to submit to arbitration any dispute between them
arising from or connected with the EPCC.

Hence, the bare fact that the parties herein incorporated an arbitration clause in the EPCC
is sufficient to vest the CIAC with jurisdiction over any construction controversy or claim
between the parties. The arbitration clause in the construction contract ipso facto vested the
CIAC with jurisdiction. This rule applies, regardless of whether the parties specifically choose
another forum or make reference to another arbitral body. Since the jurisdiction of CIAC is
conferred by law, it cannot be subjected to any condition; nor can it be waived or diminished by
the stipulation, act or omission of the parties, as long as the parties agreed to submit their
construction contract dispute to arbitration, or if there is an arbitration clause in the construction
contract. The parties will not be precluded from electing to submit their dispute to CIAC,
because this right has been vested in each party by law.

What the law merely requires for a particular construction contract to fall within the
jurisdiction of CIAC is for the parties to agree to submit the same to voluntary arbitration

Other discussion:
The jurisdiction of the CIAC may include but is not limited to violation of specifications
for materials and workmanship; violation of the terms of agreement; interpretation and/or
application of contractual provisions; amount of damages and penalties; commencement time
and delays; maintenance and defects; payment default of employer or contractor and changes in
contract cost.
Excluded from the coverage of this law are disputes arising from employer-employee
relationships which shall continue to be covered by the Labor Code of the Philippines

An arbitration agreement or a submission to arbitration shall be in writing, but it need not

be signed by the parties, as long as the intent is clear that the parties agree to submit a present or
future controversy arising from a construction contract to arbitration.
It may be in the form of exchange of letters sent by post or by telefax, telexes, telegrams
or any other modes of communication.

PETITION GRANTED.
13. EQUITABLE PCI BANKING CORPORATION (EPCIB) v. RCBC CAPITAL
CORPORATION
G.R. No. 182248, December 18, 2008,
VELASCO, JR., J.

RTC decision of an assailed arbitral award is appealable to the CA.

Facts:
EPCIB and the individual shareholders of Bankard, Inc., as sellers, and RCBC, as buyer,
executed a Share Purchase Agreement (SPA) for the purchase of petitioner’s interests in Bankard.

Under the SPA, EPCIB jointly and severally represent and warrant Financial Condition of
Bankard. RCBC paid the balance of the contract price. Thereafter, RCBC informed petitioners of
its having overpaid the purchase price of the subject shares, claiming that there was an
overstatement of valuation of accounts amounting to P478 million, resulting in the overpayment
of over P616 million. Thus, RCBC claimed that EPCIB violated their warranty, as sellers,
embodied in the SPA and prayed for the rescission of the SPA, restitution of the purchase price,
payment of actual damages and legal interest.

RCBC, in accordance with the SPA, filed a Request for Arbitration.

The tribunal ruled in favor of RCBC which later on filed with the RTC a Motion to Confirm
Partial Award. EPCIB countered with a Motion to Vacate the Partial Award. RTC issued the first
assailed order confirming the Partial Award and denying the adverted separate motions to vacate
and to suspend and inhibit. From the assailed orders, EPCIB came directly to this Court through
this petition for review.

Issue: Whether EPCIB erroneously filed an appeal before the SC instead of CA.

Ruling:
Yes. The proper mode of appeal assailing the decision of the RTC confirming as arbitral
award is an appeal before the CA pursuant to Sec. 46 of Republic Act No. (RA) 9285, otherwise
known as the Alternative Dispute Resolution Act of 2004.

As a rule, the award of an arbitrator cannot be set aside for mere errors of judgment either
as to the law or as to the facts since any other rule would make an award the commencement, not
the end, of litigation. Errors of law and fact, or an erroneous decision of matters submitted to the
judgment of the arbitrators, are insufficient to invalidate an award fairly and honestly made.

Nonetheless, arbitrators cannot resolve issues beyond the scope of the submission
agreement. The parties to such an agreement are bound by the arbitrators award only to the
extent and in the manner prescribed by the contract and only if the award is rendered in
conformity thereto.
 Finally, while a court is precluded from overturning an award for errors in determination
of factual issues, nevertheless, if an examination of the record reveals no support whatever for
the arbitrator’s determinations, their award must be vacated. In the same manner, an award must
be vacated if it was made in manifest disregard of the law.

Other discussion:
To justify the vacation of an arbitral award on account of „manifest disregard of the law,
the arbiter's findings must clearly and unequivocally violate an established legal precedent.

In administrative proceedings, the essence of due process is simply an opportunity to be

heard, or an opportunity to explain oneÊs side or opportunity to seek a reconsideration of the
action or ruling complained of. This constitutional mandate is deemed satisfied if a person is
granted an opportunity to seek reconsideration of an action or a ruling.

PETITION DENIED.
14. Luzon Hydro Corporation v. Hon. Rommel O. Baybay, etc and Transfield Philippines,
Inc., CA-G.R. Sp. No. 94318, November 29, 2005

In this case, the Court vacated an ICC award made in SIngapore. The said that it made a
"paintstaking review of the records", after which is concluded that the case 'cannot and should
not prosper because the arbitral award is null and void for manifestly disregarding Philippine law
and for being contrary to public policy' and that 'compelling reasons exist to justify (its) action'.

The FInal Award, the court said, must not be given effect because to do so would result in
supplanting our own laws and public policies with a judgement that is based on foreign law
despite the clear obligation of the arbitral tribunal to apply Philippine law in resolving the
commercial dispute between the petitioner and the respondent TPI. The said dispute arose from a
Turnkey Contract between the said parties wherein they categorically stipulated that it shall be
governed by Philippine Law.

15. Empire East Land Holdings, Inc. vs. Capitol Industrial Construction Groups, Inc.
G.R. No. 168074. September 26, 2008. See full text
NACHURA, J.:

Facts:
Empire East Land Holdings, Inc. [Empire] and Capitol Industrial Corporation Groups,
Inc. [Capitol] entered into a Construction Agreement whereby the latter bound itself to undertake
the complete supply and installation of "the building shell wet construction".

The contract provides for the scope of work of Capitol which later became the subject of
controversy.

So in this case, Capitol agreed that the construction work would be completed within 330
calendar days from Day 1 upon the Construction Manager's confirmation. However, when
Capitol entered the project site, it could not start work due to the on-going bulk excavation by
another contractor. Capitol thus asked Empire to move Day 1 to a later date, when the bulk
excavation contractor would have completely turned over the site.

Before the completion of the project, circumstances changed. Capitol was directed by
Empire to perform side trimmings and that Masonry and other related works be deleted from the
scope of work. As a result of that, contract price was reduced (62M)

After completion of side trimmings and excavation, Capitol demanded payment from
Empire for 2.2m and 1.8m, respectively. Instead of paying the amount, petitioner agreed with the
respondent on a negotiated amount of P900,000.00 for side trimmings. Capitol submitted its final
billing (4.4m) less all deductions. Empire refused to issue certificate of completion.

Thus, Capitol was costrained to file a request for adjudication With CIAC.

CIAC ordered Empire to pay Capitol 7M. this includes retention money and additional
works performed by Capitol. CA affirmed but reduced the amount to 6.8m. (deleted labor cost
escalation and reduced the work for excavation to 980).

Hence, Empire filed this Petition

Ruling:
On release of Retention Money
In the construction industry, the ten percent (10%) retention money is a portion of the
contract price automatically deducted from the contractorÊs billings, as security for the
execution of corrective work·if any becomes necessary.

respondent complied fully with its obligations, save only those items of work which were
mutually deleted by the parties from its scope of work. However, apart from the completion and
acceptance of all works, the following requisites were set as pre-condition for the release of the
retention money:
a) Contractor's Sworn Statement showing that all taxes due from the CONTRACTOR,
and all obligations on materials used and labor employed in connection with this
contract have been duly paid;
b) Guarantee Bond to answer for faulty and/or defective materials or workmanship as
stated in Article IX Section 9.3 of this Contract;
c) Original and signed and sealed Three (3) sets of prints of "As Built drawings:

The record of the case is bereft of any evidence to show that conditions (a) and (c) were
complied with

On Respondent's Right to Additional Overhead Costs

It is undisputed that the only piece of evidence presented by respondent in support of its
claim for additional overhead cost was its own computation of the said expenses. It failed to
adduce actual receipts, invoices, contracts and similar documents. To be sure, respondentÊs
claim for overhead cost may be classified as a claim for actual damages.

On Respondent's Right to the Cost of Foundation Excavation???

16. ABS-CBN Broadcasting Corporation v.World Interactive Network Systems [WINS]

Japan Co., Ltd., G.R. No. 169332, February 11, 2008
Facts:
ABS CBN entered into a licensing agreement with World Interactive Network
Systems(WINS) Japan. The latter was granted the exclusive license to distribute and sublicense
the distribution of the television service known as "The Filipino Channel" (TFC) in Japan.

A dispute arose between the parties when ABS accused WINS of inserting nine episodes of
WINS WEEKLY, a weekly 35-minute community news program for Filipinos in Japan. ABS
claimed that these were „unauthorized insertions‰ constituting a material breach of their
agreement. ABS notified WINS of its intention to terminate the agreement.
WINS filed an arbitration suit pursuant to the arbitration clause in their agreement.

The arbitrator found in favor of respondent. He held that petitioner gave its approval to
respondent for the airing of WINS WEEKLY as shown by a series of written exchanges between
the parties.

Here, ABS filed in the CA a petition for review under Rule 43 or in the alternative a
petition for certiorari under RUle 65.

Issue: whether or not an aggrieved party in a voluntary arbitration dispute may avail of, directly
in the CA, a petition for review under Rule 43 or a petition for certiorari under Rule 65 of the
Rules of Court, instead of filing a petition to vacate the award in the RTC when the grounds
invoked to overturn the arbitratorÊs decision are other than those for a petition to vacate an
arbitral award enumerated under RA 876.

Ruling:
RA 876 itself mandates that it is the Court of First Instance, now the RTC, which 9 has
jurisdiction over questions relating to arbitration, such as a petition to vacate an arbitral award.

Section 24 of RA 876 provides for the specific grounds for a petition to vacate an award
made by an arbitrator:
Sec. 24. Grounds for vacating award.·In any one of the following cases, the court must
make an order vacating the award upon the petition of any party to the controversy when such
party proves affirmatively that in the arbitration proceedings:
(a) The award was procured by corruption, fraud, or other undue means; or
(b) That there was evident partiality or corruption in the arbitrators or any of them; or
(c) That the arbitrators were guilty of misconduct in refusing to postpone the hearing upon
sufficient cause shown, or in refusing to hear evidence pertinent and material to the
controversy; that one or more of the arbitrators was disqualified to act as such under
section nine hereof, and willfully refrained from disclosing such disqualifications or
of any other misbehavior by which the rights of any party have been materially
prejudiced; or
(d) That the arbitrators exceeded their powers, or so imperfectly executed them, that a
mutual, final and definite award upon the subject matter submitted to them was not
made.

Based on the foregoing provisions, the law itself clearly provides that the RTC must
issue an order vacating an arbitral award only „in any one of the . . . cases‰ enumerated
therein. Under the legal maxim in statutory construction expressio unius est exclusio
alterius, the explicit mention of one thing in a statute means the elimination of others not
specifically mentioned.

As RA 876 did not expressly provide for errors of fact and/or law and grave abuse of
discretion (proper grounds for a petition for review under Rule 43 and a petition for
certiorari under Rule 65, respectively) as grounds for maintaining a petition to vacate an
arbitral award in the RTC, it necessarily follows that a party may not avail of the latter
remedy on the grounds of errors of fact and/or law or grave abuse of discretion to overturn
an arbitral award.

However, in this case, ABS cleverly crafted its assignment of errors in such a way as
to straddle both judicial remedies, that is, by alleging serious errors of fact and law (in
which case a petition for review under Rule 43 would be proper) and grave abuse of
discretion (because of which a petition for certiorari under Rule 65 would be permissible).

the alternative petition filed in the CA, being an inappropriate mode of appeal,
should have been dismissed outright by the CA.

WHEREFORE, the petition is hereby DENIED.

17. Diesel Construction Co., Inc. v.UPSI Property Holdings, Inc.G.R. No. 154885; UPSI
Property Holdings, Inc. v. Diesel Construction Co.,Inc. and FGU Insurance Corp.,

G.R. No. 154937, March 24, 2008
18. Korea Technologies Co., Ltd. v. Hon. Alberto A. Lerma and Pacific General

Steel Manufacturing Corporation, G.R. No. 143581, Jan. 7, 2008.

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

The plant, after completion of installation, could not be operated by Pacific General due
to its financial difficulties affecting the supply of materials. The last payments made by Pacific
General to Korea Tech consisted of postdated checks which were dishonored upon presentment.

According to Pacific General, it stopped payment because Korea Tech had delivered a
hydraulic press which was different in kind and of lower quality than that agreed upon. Korea
Tech also failed to deliver equipment parts already paid for by it. It threatened to cancel the
contract with Korea Tech and dismantle the Carmona plant.

Finally, Pacific General filed before the Office of the Prosecutor a Complaint-Affidavit
for estafa against Mr. Dae Hyun Kang, President of Korea Tech. Korea Tech informed PGSMC
that it could not unilaterally rescind the contract. Of greater importance to the present article,
KOGIES also insisted that their dispute be settled by arbitration as provided by Article 15 of
their contract — the arbitration clause.

Korea Tech initiated arbitration before the Korea Commercial Arbitration Board [KCAB]
in Seoul, Korea and, at the same time, commenced a civil action before the Regional Trial Court
[the “trial court”] where it prayed that Pacific General be restrained from dismantling the plant
and equipment. Pacific General opposed the application and argued that the arbitration clause
was null and void, being contrary to public policy as it ousts the local court of jurisdiction.

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

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

Ruling: The Supreme Court (the “Court”) held:

1. Re: The validity of the arbitration clause.
 “The arbitration clause is valid. It has not been shown to be contrary to any law, or
against morals, good customs, public order or public policy. The arbitration clause stipulates that
the arbitration must be done in Seoul, Korea in accordance with the Commercial Arbitration
Rules of the KCAB, and that the award is final and binding. This is not contrary to public policy.
We find no reason why the arbitration clause should not be respected and complied with by
both parties.”

This ruling, the Court said, is consonant with the declared policy in Section 2 of the ADR
Act that “the State (shall) actively promote party autonomy in the resolution of disputes or the
freedom of the parties to make their own arrangements to resolve their disputes.” Citing Section
24 of the ADR Act, the Court said the trial court does not have jurisdiction over disputes that are
properly the subject of arbitration pursuant to an arbitration clause. In the earlier case of BF
Corporation v. Court of Appeals and Shangri-la Properties, Inc., where the trial court refused to
refer the parties to arbitration notwithstanding the existence of an arbitration agreement between
them, the Supreme Court said the trial court had prematurely exercised its jurisdiction over the
case.

The Court further emphasized that a submission to arbitration is a contract. As a rule,

contracts are respected as the law between the contracting parties and produce effect between
them, their assigns and heirs.8 Courts should liberally review arbitration clauses. Any doubt
should be resolved in favor of arbitration.

2. Re: Enforcement of award in a domestic or international arbitration

An arbitral award in a domestic or international arbitration is subject to enforcement by a
court upon application of the prevailing party for the confirmation or recognition and
enforcement of an award. Under Section 42 of the ADR Act, “The recognition and enforcement
of such (foreign) arbitral awards shall be filed with the Regional Trial Court in accordance with
the rules of procedure to be promulgated by the Supreme Court.” An arbitral award is
immediately executory upon the lapse of the period provided by law.

For an award rendered in domestic or non-international arbitration, unless a petition to

vacate the award is filed within thirty (30) days from the date of serve upon the latter, the award
is subject to confirmation by the court.
For an award rendered in a domestic, international arbitration, the period for filing an application
to set it aside is not later than three (3) months from the date the applicant received the award,
otherwise the court shall recognize and enforce it.

3. Re: Enforcement of foreign arbitral award

In an attempt to allay the fear by Pacific General of submitting its dispute to arbitration in
Seoul, South Korea under the rules of the Korea Commercial Arbitration Board, the Supreme
Court said in obiter dictum:
 In case a foreign arbitral body is chosen by the parties, the arbitral rules of our domestic
arbitration bodies would not be applied. As signatory to the Arbitration Rules of the UNCITRAL
Model Law on International Commercial Arbitration of the United Nations Commission on
International Trade Law [UNCITRAL] in the New York Convention on June 21, 1985, the
Philippine committed itself to be bound by the Model Law. We have even incorporated the Model
Law in Republic Act No. 9285, otherwise known as the Alternative Dispute Resolution Act of
2004.”
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“Thus, while the RTC does not have jurisdiction over disputes governed by arbitration
mutually agreed upon by the parties, still the foreign arbitral award is subject to judicial review
by the RTC which can set aside, reject or vacate it.”…. Chapter 7 of RA 9285 has made it clear
that all arbitral awards, whether domestic or foreign, are subject to judicial review on specific
grounds provided for.”

The Supreme Court finally held:

“While it (Pacific General) may have misgivings on the foreign arbitration done in Korea
by the KCAB, it has available remedies under RA 9285. Its interests are duly protected by the law
which requires that the arbitral award that may be rendered by KCAB must be confirmed here by
the RTC before it can be enforced.”