ADR Digested Case for Finals

Daigle, Jerrymie ADR- CASES Third Parties to Arbitration Agreement 1. Gilat Satellite Networks, Ltd. v. United Coconut Planters Bank General Insurance Co., Inc., G.R. No. 189563, April 7, 2014 Facts: On September 15, 1999, One Virtual placed with GILAT a purchase order for various telecommunications equipment (sic), accessories, spares, services and software, at a total purchase price of Two Million One Hundred Twenty Eight Thousand Two Hundred Fifty Dollars (US$2,128,250.00). Of the said purchase price for the goods delivered, One Virtual promised to pay a portion thereof totaling US$1.2 Million in accordance with the payment schedule dated 22 November 1999. To ensure the prompt payment of this amount, it obtained defendant UCPB General Insurance Co., Inc. 's surety bond dated 3 December 1999, in favor of GILAT. During the period between September 1999 and June 2000, GILAT shipped and delivered to One Virtual the purchased products and equipment, as evidenced by airway bills/Bill of Lading. All of the equipment (including the software components for which payment was secured by the surety bond, was shipped by GILAT and duly received by One Virtual. One Virtual failed to pay GILAT the amount of (US$400,000.00) on the due date of May 30, 2000 in accordance with the payment scheduled prompting GILA T to write the surety defendant UCPB on June 5, 2000, a demand letter for payment of the said amount of US$400,000.00. No part of the amount set forth in this demand has been paid to date by either One Virtual or defendant UCPB. One Virtual likewise failed to pay on the succeeding payment installment date of 30 November 2000 prompting GILAT to send a second demand letter dated January 24, 2001, for the payment of the full amount of US$1,200,000.00 guaranteed under the surety bond, plus interests and expenses and which letter was received by the defendant surety on January 25, 2001. However, defendant UCPB failed to settle the amount of US$1,200,000.00 or a part thereof, hence, the instant complaint. RTC- rendered decision in favor of plaintiff and against the defendant SC- Plaintiff-appellant Gilat Satellite Networks Ltd., and One Virtual are ordered to proceed to arbitration, the outcome of which shall necessary bind the parties, including the surety, defendant-appellant United Coconut Planters Bank General Insurance Co., Inc. ISSUE: Whether or not the CA erred in dismissing the case and ordering petitioner and One Virtual to arbitrate. RULLING: YES, The assailed Decision and REVERSED The decision of RTC is reinstated.

Resolution

of

the Court

of Appeals are

The existence of a suretyship agreement does not give the suretyship the right to intervene in the principal
 contract, nor can an arbitration cl
ause between the buyer and the sel
l
er be invoked by a non-party such as the surety. Section 24 of Republic Act No. 928542 is clear in stating that a referral to arbitration may only take place "if at least one party so requests not later than the pre-trial conference, or upon the request of both parties thereafter." Respondent has not presented even an iota of evidence to show that either petitioner or One Virtual submitted its contesting claim for arbitration.

2. Del Monte Corporation-USA, et al. v. Court of Appeals, et al., 351 SCRA 373, G.R. No. 136154, February 7, 2001 Facts: In October 1994 the appointment of private respondent MMI as the sole and exclusive distributor of Del Monte products in the Philippines was published in several newspapers in the country. Immediately after its appointment, private respondent MMI appointed Sabrosa Foods, Inc. (SFI), with the approval of petitioner DMC-USA, as MMI’s marketing arm to concentrate on its marketing and selling function as well as to manage its critical relationship with the trade. On 3 October 1996 private respondents MMI, SFI and MMI’s Managing Director Liong Liong C. Sy (LILY SY) filed a Complaint against petitioners DMC-USA, Paul E. Derby, Jr., Daniel Collins and Luis Hidalgo, and Dewey Ltd. before the RTC of Malabon, Metro Manila. Private respondents predicated their complaint on the alleged violations by petitioners of Arts. 20, 21, and 23 of the Civil Code. According to private respondents, DMC-USA products continued to be brought into the country by parallel importers despite the appointment of private respondent MMI as the sole and exclusive distributor of Del Monte products thereby causing them great embarrassment and substantial damage. They alleged that the products brought into the country by these importers were aged, damaged, fake or counterfeit, so that in March 1995 they had to cause, after prior consultation with Antonio Ongpin, Market Director for Special Markets of Del Monte Philippines, Inc., the publication of a "warning to the trade" paid advertisement in leading newspapers. Petitioners filed a Motion to Suspend Proceedings invoking the arbitration clause in their Agreement with private respondents where in it states that the law 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. RTC denied the motion on the ground that it "will not serve the ends of justice and to allow said suspension will only delay the determination of the issues, frustrate the quest of the parties for a judicious determination of their respective claims, and/or deprive and delay their rights to seek redress." CA affirmed the decision of the trial court. Issue: whether or not the dispute between the parties warrants an order compelling them to submit to arbitration. Rulings: No The Agreement between petitioner DMC-USA and private respondent MMI is a contract. The provision to submit to arbitration any dispute arising therefrom and the relationship of the parties is part of that contract and is itself a contract. As a rule, contracts are respected as the law between the contracting parties and produce effect as between them, their assigns and heirs. Clearly, only parties to the Agreement, i.e., petitioners DMC-USA and its Managing Director for Export Sales Paul E. Derby, Jr., and private respondents MMI and its Managing Director LILY SY are bound by the Agreement and its arbitration clause as they are the only signatories thereto. Petitioners Daniel Collins and Luis Hidalgo, and private respondent SFI, not parties to the Agreement and cannot even be considered assigns or heirs of the parties, are not bound by the Agreement and the arbitration clause therein. Consequently, referral to arbitration in the State of California pursuant to the arbitration clause and the suspension of the

proceedings in Civil Case No. 2637-MN pending the return of the arbitral award could be called for but only as to petitioners DMC-USA and Paul E. Derby, Jr., and private respondents MMI and LILY SY, and not as to the other parties in this case 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. The petition is DENIED. The Decision of the Court of Appeals affirming the Order of the Regional Trial Court of Malabon, Metro Manila, in which denied petitioners’ Motion to Suspend Proceedings, is AFFIRMED 3 Heirs of Augusto L. Salas, Jr. vs. Laperal Realty Corporation, et al., 320 SCRA 610, G.R. No. 135362, December 13, 1999 Facts: Salas Jr. was the registered owner of a vast tract of land in Lipa City, Batangas spanning 1,484,354 square meters. On May 15, 1987, he entered into an Owner-Contractor Agreement with respondent Laperal Realty Corporation to render and provide complete (horizontal) construction services on his land. On September 23, 1988, 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. After 7 years, Teresita Diaz Salas filed with the Regional Trial Court of Makati City a verified petition for the declaration of presumptive death of her husband, Salas, Jr., who had then been missing for more than seven (7) years. It was granted on December 12, 1996. 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.; to respondent spouses Abrajano and Lava and Oscar Dacillo; and to respondents Eduardo Vacuna, Florante de la Cruz and Jesus Vicente Capalan (all of whom are hereinafter referred to as respondent lot buyers). On February 3, 1998, petitioners as heirs of Salas, Jr. filed in the Regional Trial Court of Lipa City a Complaint 6 for declaration of nullity of sale, reconveyance, cancellation of contract, accounting and damages against herein respondents which was docketed as Civil Case No. 98-0047. On April 24, 1998, respondent Laperal Realty filed a Motion toDismiss on the ground that petitioners failed to submit their grievance to arbitration as required under Article VI of the Agreement of their arbitration clause. Issue: Whether or not rescission is an arbitrable? Rulings: Yes The petitioners' contention is without merit. For while rescission, as a general rule, is an arbitrable issue, they impleaded in the suit for rescission the respondent lot buyers who are neither parties to the Agreement nor the latter's assigns or heirs. Consequently, the right to arbitrate as provided in Article VI of the Agreement was never vested in respondent lot buyers. Respondent 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 petitioners' rights as against theirs in a single and complete proceeding. 4. Demosthenes P. Agan, Jr., et al. v. Philippine International Air Terminals Co., Inc. (PIATCO), et al., G.R. No. 155001; Salacnib F. Baterina, et al. v. PIATCO, et al., G.R. No. 155547; Cefernio C. Lopez, et al. v. PIATCO, et al., G.R. No. 155661, May 5, 2003 Facts: The cases at bar are special civil actions for certiorari and prohibition, they contend that the principle of hierarchy of courts precludes this Court from taking primary jurisdiction over them. Briefly, On October 5, 1994, Asia’s Emerging Dragon Corp. (AEDC) submitted an unsolicited proposal to the Philippine Government through the Department of Transportation and Communication (DOTC) and Manila International Airport Authority (MIAA) for the construction and development of the NAIA IPT III under a build-operate-and-transfer arrangement pursuant to R.A. No. 6957, as amended by R.A. No. 7718 (BOT Law). In accordance with the BOT Law and its Implementing Rules and Regulations, the DOTC/MIAA invited the public for submission of competitive and comparative proposals to the unsolicited proposal of AEDC. On September 20, 1996 a consortium composed of the People’s Air Cargo and Warehousing Co., Inc. (Paircargo), Phil. Air and Grounds Services, Inc. (PAGS) and Security Bank Corp. (Security Bank) (collectively, Paircargo Consortium), submitted their competitive proposal to the Prequalification Bids and Awards Committee (PBAC) The DOTC issued the notice of award for the NAIA IPT III project to the Paircargo Consortium, which later organized into herein respondent PIATCO. On July 12, 1997, the Government, through its duly government officers signed the “Concession Agreement for the Build-Operate-and-Transfer Arrangement of the Ninoy Aquino International Airport Passenger Terminal III” (1997 Concession Agreement). On November 26, 1998, the 1997 Concession Agreement was superseded by the Amended and Restated Concession Agreement (ARCA) containing certain revisions and modifications from the original contract . A series of supplemental agreements was entered into by the Government and PIATCO. Various petition was filed to to annul the 1997 Concesion Agreement, the Arca and the supplements and to prohibit DOTC and MIAA from implementing them. The court granted the said petitions and declared the 1987 Concession Agreement, the Arca and the supplements null and void. Thus, this petition was filed seeking for the reversal of the decision of the Courtand pray that the petition be dismissed. PIATCO prays that the court should not strike down the entire 1997 Concession Agreement, the ARCA and its supplements in light of seperability clause. Respondent Congresman and NMTAI also pray that in alternative, the cases at bar should be refers to arbitration pursuant to the provision of ARCA. Issue: Whether or not the case can go in arbitration? Rulings:

5. Contra Toyota Motor Philippines Corporation v. The Court of Appeals, et al., 216 SCRA 236, G.R. No. 102881, December 7, 1992

Order to Arbitrate; Special Jurisdiction of Courts; Sec. 6, The Arbitration Law 6. La Naval Drug Corporation vs. The Honorable Court of Appeals, et al., 236 SCRA 78, G.R. No. 103200, August 31, 1994