KOPPEL, INC., PETITIONER VS. MAKATI ROTARY CLUB FOUNDATION, INC.

, RESPONDENT

(G.R. NO. 198075, SEPTEMBER 04, 2013; PEREZ)

Facts

Fedders Koppel, Inc. was a registered owner of a parcel of land located at Km. 16, South
Superhighway, South Superhighway, Paranaque City, where some of their buildings dedicated to
business are located. FKI bequeathed the subject land to respondent Makati Rotary Club Foundation,
Incorporated by way of conditional donations. One of the conditions of the donation required the
respondent to lease the subject land back to FKI for a period a period of 25 years of until 25 th May
2000, and renewable for another 25 years upon mutual agreement of the parties. In which case, the
amount of rent shall be determined in accordance with item 2(g) of the Deed of Donation, where in
case disagreement the matter shall be referred to a Board of 3 Arbitrators in accordance with the
Arbitration Law of the Philippines (RA 878).

2 days before the expiration of the contract, FKI and respondents executed another contract
of lease (2000 Lease Contract) covering the subject land. They agreed on a new 5-year lease with
annual rents ranging from 4,000,000 Php for the 1st year up to P4,900,000 for the 5th year. It also
contained an arbitration clause enforceable in the event the parties come into disagreement about
the “interpretation, application, and execution” of the lease.

After the expiration of 2000 Lease Contract, another contract was agreed between the parties
where it required FKI to pay a fixed annual rent of P4.2M. It also obligated the FKI to make a yearly
donation to the respondent ranging from P3.0M for the 1st year up to 3.9M for the 5th year. It also
contained the arbitration clause similar to the previous contract.

On June 2008, FKI sold all its rights and properties relative to its business in favor of petitioner
Koppel, Inc. FKI and petitioner executed an Assignment and Assumption of Lease and Donation –
wherein FKI, with the conformity of the respondent, formally assigned all of its interests and
obligations under the Amended Deed of Donation and the 2005 Lease Contract in favor of petitioner.
Petitioner discontinued the payment of the rent and donation under the 2005 Lease Contract.
Petitioner’s refusal to pay such rent and donation emanated from its belief that the rental stipulation
under the 2005 Lease Contracts cannot be given effect because they violated one the of the “material
conditions” of the donation of the subject land.

Respondent sent demand letters to the petitioner notifying the latter of its default and
demanding for the settlement of the rent and donation due for 2019. Petitioner sent a reply to
respondent expressing its disagreement over the rental stipulations of the 2005 Lease Contract it
being severely disproportionate, unconscionable, and in clear violation to the nominal rentals
mandated by the Amended Deed of Donation. Petitioner refused to comply with the demands of the
respondents and filed with the RTC of Paranaque City a complaint for the rescission or cancellation of
the Deed of Donation and Amended Deed of Donation against the respondent. Respondent also filed
with the MeTC of Paranaque City an unlawful detainer case against the petitioner. Petitioner filed an
answer with a compulsory counterclaims, and interposed defenses such as the lack of court
jurisdiction because of insufficiency of the respondent’s demand, and the contract having arbitration
clause must be submitted for arbitration.

MeTC refused to dismiss the action on the ground that the dispite is subject to arbitration and
rendered judgment in favor of the petitioner with respect to the issues regarding the insufficiency of
the respondent’s demand. On its appeal to RTC, it was reversed and ordered the eviction of the
petitioner from the subject land. The CA affirmed the decision of the RTC.

Issue/s

Whether or not MeTC, RTC and CA rendered a valid judgment of dispute despite having an
arbitration clause the contract between the parties.

Ruling

Independently of the merits of the case, the MeTC, RTC, and CA all erred in overlooking the
significance of the arbitration clause incorporated in the 2005 Lease Contracts. As the Court sees it,
that is a fatal mistake

The arbitration clause of the 2005 Lease Contract stipulates that “any disagreement” as to the
“interpretation, application or execution” of the 2005 Lease Contract ought to be submitted to
arbitration. Such stipulation is clear and comprehensive enough so as to include virtually any kind of
conflict or dispute that may arise from the 2005 Lease Contract including the one that presently besets
petitioner and respondent.

 The disagreement between the petitioner and respondent falls within the all-encompassing
terms of the arbitration clause of the 2005 Lease Contracts. While it may be conceded that in
the arbitration of such disagreement, the validity of the 2005 Lease Contracts, or at least, of
such contract’s rental stipulations would have to be determined, the same would not render
such disagreement non-arbitrable.
 Petitioner may still invoke the arbitration clause of the 2005 Lease Contracts notwithstanding
the fact that it assails the validity of such contract due to the doctrine of separability. Under
this doctrine, an arbitration agreement is considered as independent of the main contract.
Being a separate contract in itself, the arbitration agreement may thus be invoked regardless
of the possible nullity or invalidity of the main contract.
 The operation of the arbitration clause in this case is not at all defeated by the failure of the
petitioner to file formal “request” or application therefor with the MeTC. The filing of a
request pursuant to Sec 24 of RA 9285 is not the sole means by which an arbitration clause
may be validly invoked in a pending suit. It is conceded that petitioner was not able to file a
separate request of arbitration before the MeTC. However, it is equally conceded that the
petitioner, as early as n its Answer with Counterclaim, had already approsed the MeTC of the
existence of the arbitration clause in the 2005 Lease Contract and, more significantly, of its
desire to have the same enforced in this case. The act of petitioner is enough valid invocation
of his right to arbitrate.
 The fact that the petitioner and respondent already underwent through JDR proceedings
before the RTC, will not make the subsequent conduct of arbitration between the parties
unnecessary or circuitous. The JDR system is substantially different from arbitration
proceedings. The JDR judge lacks the authority to render a resolution of the dispute that is
binding upon the parties in conflict. In arbitration, on the other hand, the dispute is submitted
to an arbitrator/s – neutral third person or a group of thereof – who shall have the authority
to render a resolution binding upon the parties. The failure of the parties in conflict to reach
 an amicable settlement before the JDR may, in fact, be supplemented by their resort to
arbitration where a binding resolution to the dispute could finally be achieved.

Since there really are no legal impediments to the application of the arbitration clause of the
2005 Lease Contract, the instant unlawful detainer action was instituted in violation of such
clause. The petitioner and the respondent should have been referred to arbitration pursuant to
the arbitration clause of the 2005 Lease Contract. The MeTC, did not do so in violation of the law
– which violation was, in turn, affirmed by the RTC and CA. The violation by the MeTC of the clear
directives under RA 876 and 9285 renders invalid all proceedings it undertook in the ejectment
case after the filing by petitioner of its Answer with Counterclaim – the point when the petitioner
and respondent should have been referred to arbitration.

The decisions of the CA, RTC and MeTC were set aside, and the case was referred for
arbitration pursuant to the arbitration clause of the 2005 Lease Contract, repeatedly included in
the 2000 Lease Contracts and in the 1976 Amended Deed of Donation.
 J PLUS ASIA DEVELOPMENT CORPORATION, PETITIONER, VS. UTILITY ASSURANCE
CORPORATION, RESPONDENT

(G.R. NO. 199650, JUNE 26, 2013; VILLARAMA, JR.)

Facts

Petitioner J Plus Asia Development Corporation represented by its Chairman Joo Han Lee
entered into Construction Agreement with Seven Shades of Blue Trading and Services to build their
72-room condominium/hotel located in Boracay Island costing P42.0M to be completed within 1 year
or 365 days reckoned from the first calendar day after signing of the Notice of Award and Notice to
proceed and receipt of the down payment which is 20% of the contract price. The P8.4M down
payment was fully paid on January 14, 2008 and the payment of the balance will be based on actual
work finished within 15 days from the receipt of the monthly progress billings, and to be completed
on December 2008. Mabunay also submitted the required Performance Bond issued by the
respondent Utility Assurance Corporation equivalent to 20% down payment.

Based from inspection and evaluation, the project was 31.39% complete as of 14 November
2008. The unrecouped amount of the down payment is around P2.4M after deducting the cost of
materials on site and the net billable amount reflected on the reconciled and consolidated 8th and 9th
billings. The uncompleted portion of the project is 68.61% with an estimated value per construction
agreement signed is P27.9M

Petitioner terminated the contract and sent demand letters to Mabunay and respondent
surety. As its demands went unheeded, petitioner filed a Request of Arbitration before Construction
Industry Arbitration Commission (CIAC). In Answer, Mabunay claimed that termination of the contract
by the petitioner was premature and the filing of the complaint against him was baseless, malicious
and in bad faith. Respondent filed a motion to dismiss on the ground that petitioner has no cause of
action and the complaint states no cause of action against it. The CIAC denied the motion to dismiss,
and its motion for reconsideration was likewise denied.

Respondent argued that the performance bond merely guaranteed the 20% down payment
and not the entire obligation of Mabunay under the Construction Agreement. Since the value of the
project’s accomplishment already exceeded the said amount, respondent’s obligation under the
performance bond had been fully extinguished. As to the claim for alleged overpayment to Mabunay,
respondent contended that it should not be credited against the 20% down payment which was
already exhausted and such application by petitioner is tantamount to reviving an obligation that had
been legally extinguished by payment.

CIAC rendered a decision directing respondents Mabunay and Utassco to jointly and severally
pay the claimant P4.5M as liquidated damages and P2.4M as unrecouped down payment plus the legal
interests thereon. Dissatisfied, respondent file in the CA a petition for review under Rule 43 of the
1997 Rules of Civil Procedure. The CA agreed with the CIAC that the specific condition in the
Performance Bond did not clearly state the limitation of the surety’s liability. Further, the appellate
court stated that respondent could not possibly guarantee the down payment because it is not
Mabunay who owed the down payment to petitioner but the other way around. Consequently, the
completion by Mabunay of 31.39% of the construction would not lead to the extinguishment of
respondent’s liability. The 8.4M was a limit on the amount of respondent’s liability and not a limitation
as to the obligation or undertaking it guaranteed. However, the CA reversed the CIAC’s ruling that
Mabunay had incurred delay which entitled petitioner to the stipulated liquidated damages and
unrecouped down payment, petitioner’s termination of the contract was premature since the delay
was merely speculative, the obligation was not yet demandable.

Issue/s

1. WON CA erred in not holding that the ADR Act and the special rules on ADR have stripped the
CA of jurisdiction to review arbitral awards.
2. WON CA erred in reversing the arbitral award on an issue that was not raised in the answer,
not identified in the terms of reference, not assigned as an error, and not argued in any of the
pleadings filed before the court.
3. WON CA erred in relying on the case which has nothing to do with construction agreements

Ruling

On the procedural issues raised, petitioner’s contention has no merit that with the
institutionalization of ADR under RA 9285, the CA was divested of jurisdiction to review the decisions
or awards of the CIAC. RA 9285 did not confer on RTC jurisdiction to review awards and decisions of
the CIA in construction disputes. On the contrary, Section 40 thereof expressly declares that
confirmation by the RTC is not required. Since RA 9285 explicitly excluded CIAC awards from domestic
arbitration awards that need to be confirmed to be executory, said awards are therefore not covered
by Rule 11 of the Special ADR Rules, as they continue to be governed by EO 1008.

As to the alleged error committed by the CA in deciding the case upon an issue not raised or
litigated before the CIAC, this assertion has no basis. Whether or not Mabunay had incurred delay in
the performance of his obligations under the Construction Agreement was the very first issue
stipulated in the Terms of Reference, which is distinct form the issue of the extent of respondent’s
liability under the Performance Bond. Default or mora on the part of the debtor is the delay in the
fulfillment of the prestation by reason of a cause imputable to the former, it is the non-fulfillment of
an obligation with respect to time.

Records showed that as early as April 2008, or withing four months after Mabunay commence
work activities, the project was already behind schedule for reasons not attributable to petitioner. In
the succeeding months, Mabunay was still unable to catch up with his accomplishment even as
petitioner constantly advised him of the delays, as can be gleaned from the notices of delay sent by
the petitioner’s engineer and construction manager. Mabunay was clearly in default considering the
dismak percentage of accomplishment of the work he contracted on the account of delays in executing
the scheduled work of activities and repeated failure to provide sufficient manpower to expedite
construction works. The plain and unambiguous terms of the Construction Agreement authorize
petitioner to confiscate the Performance Bond to answer for all kinds of damages it may suffer as a
result of the contractor’s failure to complete the building.

The appellate court correctly rejected the theory of respondent when it ruled that the
Performance Bond guaranteed the full and faithful compliance of Mabunay’s oblications under the
Construction Agreement, and that nowhere in law or jurisprudence does it state that the obligation
or undertaking by a surety may be apportioned. The recitals in the bond unequivocally declare that it
secures the full and faithful performance of Mabunay’s obligations under the Construction Agreement
with petitioner.

The SC reversed the ruling of the CA and reinstated and upheld the decision of the CIAC.
 PUROMINES, INC., PETITIONER, VS. COURT OF APPELS AND PHILIPP BROTHERS OCEANIC, INC.,
RESPONDENTS

(G.R. NO. 91228, MARCH 22, 1993)

Facts:

Petitioner, Puromines, Inc and Makadi Agro Trading, Inc. entered into a contract with private
respondents Philipp Brothers Oceanic, Inc, for the sale of prilled Urea in bulk. Sales Contract included
an arbitration clause. On or about May 22, 1988, the vessel M/V Liliana Dimitrova loaded on board at
USSR a shipment of 15500MT of prilled Urea in bulk and in good condition for transport to Iloilo and
Manila, to be delivered to petitioner. 3 bills of lading were issued by the ship-agent in the Philippines,
Maritime Factors, Inc. The shipment covered by Bill of Lading No. 2 was discharged in Iloilo City
complete and in good order and condition. However, the shipments covered by Bill of Lading Nos. 1
and 3 were discharged in Manila in bad order and condition, caked, hardened and lumpy, discolored
and contaminated with rust and dirt.

Consequently, petitioner filed a complaint with the trial court for breach of contract of
carriage against Maritime Factors, Inc as ship-agent in the Philippines for the owners of the vessel MV
Dimitrova, while private respondent, Philipp Brothers Oceanic Inc., was impleaded as chartere of the
sail vessel and proper party to accord petitioner of complete relief. Maritime factors, Inc file its Answer
to the complaint, while private respondent filed a motion to dismiss on the grounds that the complaint
states no cause of action; that it was prematurely filed; and that petitioner should comply with the
arbitration clause in the sales contract. The motion to dismiss was opposed by petitioner contending
the inapplicability of the arbitration clause is as much as the cause of action did not arise from a
violation of the terms of the sales contract but rather for claims of cargo damages where there is no
arbitration agreement. The trial court denied the respondent’s motion to dismiss saying that the
arbitration clause cannot apply to the dispute in the present action which concerns plaintiff’s claim
for cargo loss/damage arising from the breach of contract of carriage. That the defendant is not the
ship owner or common carrier and therefore plaintiff does not have legal right against it since every
action must be brought against the real party in interest has no merit either for by allegations in the
complaint the defendant herein has been impleaded as charterer of the vessel, hence, a proper party.

Elevating the matter to the CA, petitioner’s complaints was dismissed. The appellate court
found that the arbitration provision in the sales contract and/or the bills of lading is applicable in the
present case. An examination of the sales contract shows that it is broad enough to include the claim
for damages arising from the carriage and delivery of the good subject-matter thereof.

Issue/s

Whether the phrase “any dispute arising under this contract” is the arbitration clause of the
sales contract covers a cargo claim against the vessel for breach of contract of carriage.

Ruling

The sales contract is comprehensive enough to include claims for damages arising from the
carriage and delivery of the goods. As a general rule. The seller has the obligation to transmit the
goods to the buyer, and concomitant thereto, the contracting parties of a carrier to deliver the same.
The charter party is a demise of bareboat charter, then Philipp Brothers is liable to Puromines, Inc.,
subject to the terms and conditions of the sales contract. In any case, whether the liability of
respondents should be based on the same contracts or that of the bill of lading, the parties are
nevertheless obligated to respect the arbitration provisions on the sales contract and/or bill of lading.
Petitioner being a signatory and party to the sales contract cannot escape from his obligation under
the arbitration clause stated therein.

Arbitration has been held valid and constitutional. Even before the enactment of RA 876, the
court has countenanced the settlement of disputes through arbitration. The rule now is that 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 arrangements and will
only interfere with great reluctance to anticipate or nullify the action of the arbitrator.
 CHUNG FU INDUSTRIES (PHILIPPINES) INC VS. COURT OF APPEALS

(G.R. NO. 96283, FEBRUARY 25, 1992)

Facts

Petitioner Chung Fu Industries and private respondent Roblecor Philippines, Inc. forged a
construction agreement whereby respondent contractor committed to construct and finish on
December 31, 1989, petitioner corporation’s industrial/factory complex in Cavite for and in
consideration of P42.0M. In the event of disputes arising from the performance of subject contract, it
was stipulated therein that the issue/s shall be submitted for resolution before a single arbitrator
chosen by both parties. Apart from the construction agreement, Chung Fu and Roblecor entered into
two other ancillary contracts, for the construction of a dormitory and support facilities; and the other
for the installation of electrical, water and hydrants systems at the plants site.

Respondent Roblecor failed to complete the work despite the extension of time allowed it by
Chung Fu. Subsequently, the latter had to take over the construction when it had become evidents
that Roblecor was not in a position to fulfill its obligation. Claiming an unsatisfied account of P10.5M
and unpaid progress billings of P2.4M, Roblecor filed a petition for Compulsory Arbitration with prayer
for TRO before respondent RTC, pursuant to the arbitration clause in the construction agreement.
Chung Fu moved to dimiss the petition and further prayed for the quashing of the restraining order.
Subsequent negotiations between the parties eventually led to the formulation of an arbitration
agreement, where the parties mutually agree that they will abide by the decision of the arbitrator
including any amount that may be awarded to either party as compensation, consequential damage
and/or interest thereon, and that the decision of the arbitrator shall be final and unappleable; and as
exception, the parties mutually agree that either party is entitled to seek judicial assistance for
purposes of enforcing the arbitrator’s award.

RTC approved the arbitration agreement and thereafter appointed a sole arbitrator, where he
ordered petitioners to immediately pay respondent contractor the sum of P16.1M and further
declared the award as final and unappaelable. Roblecor moved for the confirmation of the said award.
On the other hand, Chung Fu moved to remand the case for further hearing and asked for a
reconsideration of the judgment award claiming that the Arbitrator committed 12 instances of grave
error by disregarding the provisions of the parties’ contract. Respondent lower court denied Chung
Fu’s Motion to Remand thus compelling it to seek reconsideration therefrom but to no avail. The trial
court granted Roblecor’s Motion for Confirmation of Award and accordingly, entered judgment in
conformity therewith.

Chung Fu elevated the case via a petition for certiorari to respondent CA. the respondent
appellate court concurred with the finding and conclusions of respondent trial court resolving that
Chung Fu and its officers, as signatories to the Arbitration Agreement are bound to observe the
stipulations thereof providing for the finality of the award and precluding any appeal therefrom. A
Motion of Reconsideration was similarly denied by the CA

Issue:

1. WON respondents CA and trial Judge gravely abused their discretion and/or exceeded their
jurisdiction, as well as denied due process and substantial justice to petitioners, by refusing to
 exercise their judicial authority and legal duty to review the arbitration award, and by
declaring that petitioners are estopped from questioning the arbitration award.
2. WON respondents CA and trial Judge gravely abused their discretion and/or exceeded their
jurisdiction, as well as denied due process and substantial justice to petitioner by not vacating
and annulling the award if the Arbitrator.

Ruling

Where the parties agree that the decision of the arbitrator shall be final an unappealable as
in the in instant case, the pivotal inquiry is whether subject arbitration award is indeed beyond the
ambit of the court’s power of judicial review. The court rules in the negative. It is stated explicitly
under Art 2044 of the Civil Code that the finality of the arbitrator’s award is not absolute and without
exceptions. Where the conditions described in Arts 2038, 2039 and 2040 applicable to both
compromises and arbitrators are obtaining, the arbitrators’ award may be annulled of rescinded.
Under sections 24 and 25 of the Arbitration Law, there are grounds for vacating, modifying, or
rescinding an arbitrator’s award.

Based from the list of errors submitted by the petitioners, the court find that petitioners have
amply made out a case where voluntary arbitrator failed to apply the terms and provisions of the
Construction Agreement which forms part of the law applicable between the parties, thus committing
a grave abuse of discretion. Furthermore, in granting unjustified extra compensation to respondent
for several items, he exceeded his powers – all of which would have constituted ground for vacating
the award under section 24(d) of the Arbitration Law.

The respondent trial court’s refusal to look into the merits of the case, despite prima facie
showing of the existence of grounds warranting judicial review, effectively deprived petitioners of ther
opportunity to prove or substantiate their allegations. In doing so, the trial court itself committed
grave abuse of discretion. Likewise, the appellate court, in not giving due course to the petition,
committed grave abuse of discretion.

The case is remanded to the court of origin for further hearing on the matter.
 CALIFORNIA AND HAWAIIAN SUGAR COMPANY, ET. AL., PETITIONERS, VS. PIONEER INSURANCE
AND SURETY CORPORATION, RESPONDENT.

(G.R. NO. 139273, NOVEMBER 28, 2000; PANGANIBAN)

Facts:

On November 27, 1990. The vessel MV Sugar Islander arrived at the port of Manila carrying a
cargo of soybean meal n bulk consigned to several consignees, one of which was the Metro Manila
Feed Millers Association. Discharging of cargo from vessel to barges commenced on November 30,
1990. From the barges, the cargo was allegedly offloaded, rebagged and reloaded on consignee’s
delivery trucks. Respondent, however, claims that when the cargo was weighed on a licensed truck
scale a shortage shortage of 255.051MT valued at P1.6M was discovered. The abovementioned
shipment was insured with private respondent against all risk in the amount around P20.0M. Due to
the alleged refusal of petitioners to settle their respective liabilities, respondent, as insurer, paid the
consignee Metro Manila Feed Miller’s Association. On March 26, 1992, as alleged subrogee of Metro,
private respondent filed a complaint for damages against herein petitioners. Within the reglementary
period to file an Answer, petitioners filed a Motion to Dismiss the complaint on the ground that
respondent’s claim is premature, the same being arbitrable. Private respondent filed its opposition
thereto and petitioners file their Reply to Opposition.

RTC issued an order deferiing the hearing on the Motion to Dismiss until the trial and directing
petitioners for file their Answers. Petitioner filed their Answer with Counterclaim and Crossclaim
alleging therein that plaintiff, herein respondent, did not comply with the arbitration clause of the
charter party. Petitioners filed a Motion to Defer Pre-Trian and Motion to Set Preliminary Hearing the
Affirmative Defense of Lack of Cause of Action for Failure to comply with Arbitration Clause,
respectively. RTC then issued Order denying the Motion to Set for Preliminary Hearing. A motion of
reconsideration was filed but the same was denied.

On appeal to the CA, the CA held that petitioners cannot rely on Sec 5, Rule 16 of the pre-1997
Rules of Court, because a Motion to Dismiss had been previously been filed. Further, it ruled that the
arbitration clause provided in the charter party did not bind respondent.

Issue/s

Two principal matters are raised for resolution: (1) the denial of petitioners’ Motion for
Preliminary Hearing and (2) the propriety of the CA ruling regarding the arbitration clause.

Ruling

First Issue: Preliminary Hearing of Affirmative Defense

Respondent relies on the amendments introduced in the 1997 Rules on Civil Procedure, but
ignores equally relevant provisions thereof, as well as the clear intendment of the pre-1997 Rules.
True, Sec 6, Rule 16 of the 1997 Rules, specifically provides that a preliminary hearing on affirmative
defenses may be allowed only when no motion to dismiss has been filed. Sec 6, however, must be
viewed in light of Sec 3 of the same Rule, which requires courts to resolve a motion to dismiss and
prohibits them from deferring its resolution on the ground of indubitability. Clearly then, Sec 6
disallows a preliminary hearing of affirmative defenses once a motion to dismiss has been filed
because such defense should have already been resolved. In the present case, however, the trial court
did not categorically resolve petitioners’ Motion to Dismiss, but merely deferred resolution thereof.

The trial court deferred the resolution of petitioner’s Motion to Dismiss because of a single
issue. It was apparently unsure whether the charter party that the bill of lading referred to was indeed
the Baltimore Berth Grain Charter Party submitted by petitioners. Considering that there was only one
question, which may even be deemed to be the very touchstone of the whole case, the trial court had
no cogent reason to deny the Motion for Preliminary Hearing. Indeed, it committed grave abuse of
discretion when it denied a preliminary hearing on a simple issue of fact that could have possibly
settled the entire case.

Second Issue: The Arbitration Clause

The CA also erred when it held that the arbitration clause was not binding on respondent. The
crux of this case is whether the trial court committed grave abuse of discretion on denying the
aforecited Motion. There was neither need nor reason to rule on the applicability of the arbitration
clause.

The case is remanded to the trial court for preliminary hearing on petitioner’s affirmative
defense.