Case Digest

Case Digest ALTERNATIVE DISPUTE RESOLUTION January 9, 2014

Ruby Claire S. Lackias

Judge Jennifer Humiding

G.R. No. 126619 December 20, 2006 UNIWIDE SALES REALTY AND RESOURCES CORPORATION, petitioner, vs. TITAN-IKEDA CONSTRUCTION AND DEVELOPMENT CORPORATION, respondent. FACTS: This case involved Titan-Ikeda who entered into 3 construction agreement/ contract /project with Uniwide. Later Titan-Ikeda filed an action for sum of money against Uniwide with the RTC because Uniwide allegedly failed to pay certain claims billed by Titan after the completion of the 3 projects. Uniwide moved for the dismissal/suspension of the proceeding for them to first undergo arbitration. The Arbitrators issued terms of reference which was signed by the parties, (Uniwide did not attempt to modify the TOR to accommodate its belated counterclaim on deadlines for liquidated damages.)Titan then refiled the case with CIAC. CIAC Decision: Project 1: Uniwide is absolved of any liability. Project 2: Uniwide is absolved of any liability for VAT payment and for the account of Titan, and Titan is absolved from liability for defective construction. Project 3: Uniwide id held liable for unpaid balance (5,158,364.63) plus 12% interest/annum and to pay the full VAT for the additional work where no written authorization was presented. CIAC likewise rejected the claim on liquidated damages. After Uniwide’s motion for reconsideration was denied by CIAC, it filed a petition for review with CA but same was denied, thus, Uniwide filed a petition for review under rule 45 to seek partial reversal of the decision of CA which modified the decision of CIAC. Uniwide claims that CIAC should have applied procedural rules such as section 5, Rule 10 with more liberality because it was an administrative tribubal free from all rigid technicalities of regular courts because CA held that the issue on liquidated damages should be left for determination in future proceedings. ISSUE: Whether or not CIAC should have applied the Rules of Court in the arbitration proceeding. RULING: Rule of Procedure Governing Construction Arbitration promulgated by the CIAC contains no provision on the application of the Rules of Court to arbitration proceedings, even in a suppletory capacity. Such importation of the Rules of Court provision on amendment to conform to evidence would contravene the spirit, if not the letter of the CIAC rules. This is for the reason that the formulation of the Terms of Reference is done with the active participation of the parties and their counsel themselves. The TOR is further required to be signed by all the parties, their respective counsel and all the members of the Arbitral Tribunal. Unless the issues thus carefully formulated in the Terms of Reference were expressly showed to be amended, issues outside thereof may not be resolved. As already noted in the Decision, "no attempt was ever made by the [Uniwide] to modify the TOR in order to accommodate the issues related to its belated counterclaim" on this issue. Arbitration has been defined as "an arrangement for taking and abiding by the judgment of selected persons in some disputed matter, instead of carrying it to established tribunals of justice, and is intended to avoid the formalities, the delay, the expense and vexation of ordinary litigation.

G.R. No. 163101 BENGUET CORPORATION, Petitioner v. DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCE -MINES ADJUDICATION BOARD and J.G. REALTY AND MINING CORPORATION, Respondents. FACTS: J.G Realty, the owner of 4 mining claims entered into a Royalty Agreement with Option to Purchase (RAWOP) with Benguet and a supplemental agreement. The RAWOP contains that Benguet will perfect the rights with the mining claim within 24 months and cause examination of said moining claims. Later Benguet informed J.G Realty of its intention to develop the mining claim however, J.G Realty informed Benguet that it is terminating the RAWOP allegedly for Benguet’s failure to perform its obligation to develop within 2 years and violating the contract by allowing high graders to operate on the claim and nonpayment of royalties. Benguet on the other hand alleged that J.G Realty should have submitted the disagreement to arbitration rather than unilaterally terminating the RAWOP. J.G Realty later filed a Petition for Declaration of Nullity/Cancellation of the RAWOP with the Legaspi City POA. POA decided that the RAWOP and its Supplemental Agreement is cancelled and without effect Benguet filed Notice of appeal with MAB. MAB ruled that the contractual provision on arbitration merely provides for an additional forum or venue and does not divest the POA of the jurisdiction to hear the case. ISSUE: Whether or not POA should have referred the case to voluntary arbitration, we find that, indeed, POA has no jurisdiction over the dispute which is governed by RA 876, the arbitration law. RULING: Petitioner having failed to properly appeal to the CA under Rule 43, the decision of the MAB has become final and executory. On this ground alone, the instant petition must be denied. Benguet is already estopped from questioning the POA’s jurisdiction. As it were, when J.G. Realty filed DENR Case No. 2000-01, Benguet filed its answer and participated in the proceedings before the POA, Region V. Secondly, when the adverse March 19, 2001 POA Decision was rendered, it filed an appeal with the MAB in Mines Administrative Case No. R-M-2000-01 and again participated in the MAB proceedings. When the adverse December 2, 2002 MAB Decision was promulgated, it filed a motion for reconsideration with the MAB. When the adverse March 17, 2004 MAB Resolution was issued, Benguet filed a petition with this Court pursuant to Sec. 79 of RA 7942 impliedly recognizing MAB’s jurisdiction. In this factual milieu, the Court rules that the jurisdiction of POA and that of MAB can no longer be questioned by Benguet at this late hour. What Benguet should have done was to immediately challenge the POA’s jurisdiction by a special civil action for certiorari when POA ruled that it has jurisdiction over the dispute. To redo the proceedings fully participated in by the parties after the lapse of seven years from date of institution of the original action with the POA would be anathema to the speedy and efficient administration of justice.

G.R. No. 143581 KOREA TECHNOLOGIES CO., LTD., Petitioner v. HON. ALBERTO A. LERMA, inhis capacity as Presiding Judge of Branch 256 of Regional Trial Court of Muntinlupa City, and PACIFIC GENERAL STEEL MANUFACTURING CORPORATION, Respondents. FACTS: PGSMC and KOGIES executed a Contracti whereby KOGIES would set up an LPG Cylinder Manufacturing Plant in Carmona, Cavite. The contract was executed in the Philippines. On April 7, 1997, the parties executed, in Korea, an Amendment for Contract No. KLP-970301 dated March 5, 1997 amending the terms of payment. The contract and its amendment stipulated that KOGIES will ship the machinery and facilities necessary for manufacturing LPG cylinders for which PGSMC would pay USD 1,224,000. KOGIES would install and initiate the operation of the plant for which PGSMC bound itself to pay USD 306,000 upon the plant’s production of the 11-kg. Later PGSMC entered into a Contract of Lease with Worth Properties, Inc. (Worth) for use of Worth’s 5,079-square meter property with a 4,032-square meter warehouse building to house the LPG manufacturing plant. after the installation of the plant, the initial operation could not be conducted as PGSMC encountered financial difficulties affecting the supply of materials, thus forcing the parties to agree that KOGIES would be deemed to have completely complied with the terms and conditions of the March 5, 1997 contract. PGSMC informed KOGIES that PGSMC was canceling their Contract dated March 5, 1997 on the ground that KOGIES had altered the quantity and lowered the quality of the machineries and equipment it delivered to PGSMC, and that PGSMC would dismantle and transfer the machineries, equipment, and facilities installed in the Carmona plant. KOGIES filed a Complaint for Specific Performance against PGSMC before the Muntinlupa City Regional Trial Court (RTC). On May 30, 2000, the CA rendered the assailed Decisionii affirming the RTC Orders and dismissing the petition for certiorari filed by KOGIES. The CA found that the RTC did not gravely abuse its discretion in issuing the assailed July 23, 1998 and September 21, 1998 Orders. Moreover, the CA reasoned that KOGIES’ contention that the total contract price for USD 1,530,000 was for the whole plant and had not been fully paid was contrary to the finding of the RTC that PGSMC fully paid the price of USD 1,224,000, which was for all the machineries and equipment. According to the CA, this determination by the RTC was a factual finding beyond the ambit of a petition for certiorari. On the issue of the validity of the arbitration clause, the CA agreed with the lower court 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. ISSUE: W/N the Arbitration clause is contrary to public policy. RULING: The arbitration clause which stipulates that the arbitration must be done in Seoul, Korea in accordance with the Commercial Arbitration Rules of the KCAB, and that the arbitral award is final and binding, is not contrary to public policy. This Court has sanctioned the validity of arbitration clauses in a catena of cases. In the 1957 case of Eastboard Navigation Ltd. v. Juan Ysmael and Co., Inc.,iii this Court had occasion to rule that an arbitration clause to resolve differences and breaches of mutually agreed contractual terms is valid. In BF Corporation v. Court of Appeals, we held that ―[i]n this jurisdiction, arbitration has been held valid and constitutional. Even before the approval on June 19, 1953 of Republic Act No. 876, this Court has countenanced the settlement of disputes through arbitration. Republic Act No. 876 was adopted to supplement the New Civil Code’s provisions on arbitration.‖ And in LM Power Engineering Corporation v. Capitol Industrial Construction Groups, Inc., we declared that: Being an inexpensive, speedy and amicable method of settling disputes, arbitration––along with mediation, conciliation and negotiation––is encouraged by the Supreme Court. Aside from unclogging judicial dockets, arbitration also hastens the resolution of disputes, especially of the commercial kind. It is thus regarded as the ―wave of the future‖ in international civil and commercial disputes. Brushing aside a contractual agreement calling for arbitration between the parties would be a step backward.

G.R. No. 156660 ORMOC SUGARCANE PLANTERS’ ASSOCIATION, INC. (OSPA),OCCIDENTAL LEYTE FARMERS MULTI-PURPOSE COOPERATIVE, INC. (OLFAMCA), UNIFARM MULTIPURPOSE COOPERATIVE, INC. (UNIFARM) and ORMOC NORTH DISTRICT IRRIGATION MULTI-PURPOSE COOPERATIVE, INC. (ONDIMCO), Petitioners, v. THE COURT OF APPEALS (Special Former Sixth Division), HIDECO SUGAR MILLING CO., INC., and ORMOC SUGAR MILLING CO., INC., Respondents. FACTS: The relationship between respondents and the individual sugar planters is governed by milling contracts. Article VII of the milling contracts provides that 34% of the sugar and molasses produced from milling the Planter’s sugarcane shall belong to the centrals (respondents) as compensation, 65% thereof shall go to the Planter and the remaining 1% shall go the association to which the Planter concerned belongs, as aid to the said association. The 1% aid shall be used by the association for any purpose that it may deem fit for its members, laborers and their dependents. If the Planter was not a member of any association, then the said 1% shall revert to the centrals. Petitioners claimed that respondents violated the Milling Contract when they gave to independent planters who do not belong to any association the 1% share, instead of reverting said share to the centrals. Petitioners contended that respondents unduly accorded the independent Planters more benefits and thus prayed that an order be issued directing the parties to commence with arbitration in accordance with the terms of the milling contracts. Petitioners, without impleading any of their individual members, filed twin petitions with the RTC for Arbitration under R.A. 87. Respondents filed a motion to dismiss on ground of lack of cause of action because petitioners had no milling contract with respondents. RTC denying the motion to dismiss, declaring the existence of a milling contract between the parties, and directing respondents to nominate two arbitrators to the Board of Arbitrators ISSUE: Whether or not petitioners ― sugar planters’ associations ― are clothed with legal personality to file a suit against, or demand arbitration from, respondents in their own name without impleading the individual Planters. RULING: Section 2 of R.A. No. 876 provides: Sec. 2. Persons and matters subject to arbitration. – Two or more persons or parties may submit to the arbitration of one or more arbitrators any controversy existing between them at the time of the submission and which may be the subject of an action, or the parties to any contract may in such contract agree to settle by arbitration a controversy thereafter arising between them. Such submission or contract shall be valid, enforceable and irrevocable, save upon such grounds as exist at law for the revocation of any contract. The first step toward the settlement of a difference by arbitration is the entry by the parties into a valid agreement to arbitrate. An agreement to arbitrate is a contract – the relation of the parties is contractual- and the rights and liabilities of the parties are controlled by the law of contracts. In an agreement for arbitration, the ordinary elements of a valid contract must appear – including an agreement to arbitrate some specific thing and an agreement to abide by the award either in express language or by implication. It was decreed in B.F. Corporation v. CA that an arbitration agreement must be written and subscribed by the parties thereto. None of the petitioners were parties or signatories to the milling contracts. This is fatal to their cause since they anchor their right to demand arbitration upon the arbitration clause on the milling contracts. There is no legal basis for petitioners’ purported right to demand arbitration when they are not parties to the milling contracts, especially when the language of the arbitration clause expressly grants the right to demand arbitration only to the parties of the contract.

G.R. No. 175404 CARGILL PHILIPPINES, INC., Petitioner, v. SAN FERNANDO REGALA TRADING, INC., Respondent.

FACTS: Cargill Philippines, Inc. and Regala Trading, Inc. entered into a contract and agreed upon that San Fernando Regala Trading, Inc. would purchase from Cargill a Thailand origin cane blackstrap molasses and the delivery was to be made in January or February however, the delivery was moved to April or May and the payment would be by an Irrevocable Letter of Credit Payable at Sight. Cargill failed to comply with the obligation and Regala Trading filed a complaint with the RTC for the Rescission of the Contract with Damages against Cargill. Cargill filed a Motion to Dismiss / Suspend Proceedings and refer controversy to Voluntary Arbitration, it argued that the contract between the parties was never consummated because Regala Trading did not return the proposed agreement bearing its written acceptance. ISSUE: Whether or not the validity and enforceability of the contract containing the arbitration agreement violate any provision of the Arbitration Law. HELD: Applying the Gonzales ruling, an arbitration agreement which forms part of the main contract shall not be regarded as invalid or non-existent just because the main contract is invalid or did not come into existence, since the arbitration agreement shall be treated as a separate agreement independent of the main contract. A contrary ruling would suggest that a party's mere repudiation of the main contract is sufficient to avoid arbitration and that is exactly the situation that the separability doctrine sought to avoid. Thus, we find that even the party who has repudiated the main contract is not prevented from enforcing its arbitration clause. The separability of the arbitration agreement is especially significant to the determination of whether the invalidity of the main contract also nullifies the arbitration clause. Indeed, the doctrine denotes that the invalidity of the main contract, also referred to as the "container" contract, does not affect the validity of the arbitration agreement. Irrespective of the fact that the main contract is invalid, the arbitration clause/agreement still remains valid and enforceable.

G.R. No. 161957. February 28, 2005 JORGE GONZALES and PANEL OF ARBITRATORS, petitioners, vs. CLIMAX MINING LTD., CLIMAX-ARIMCO MINING CORP., and AUSTRALASIAN PHILIPPINES MINING INC., respondents.

FACTS: Gonzales filed a complaint before the Panel of Arbitrators, Region II, Mines and Geosciences Bureau, of the Department of Environment and Natural Resources (DENR) against respondents Climax- Mining Ltd, Climax-Arimco and Australasian Philippines Mining Inc, seeking the declaration of nullity or termination of the addendum contract and the other contracts emanating from it on the grounds of fraud and oppression. The Panel dismissed the complaint for lack of jurisdiction. However, the Panel, upon petitioner's motion for reconsideration, ruled that it had jurisdiction over the dispute maintaining that it was a mining dispute, since the subject complaint arose from a contract between the parties which involved the exploration and exploitation of minerals over the disputed area. Respondents assailed the order of the Panel of Arbitrators via a petition for certiorari before the CA. The CA granted the petition and declared that the Panel of Arbitrators did not have jurisdiction over the complaint, since its jurisdiction was limited to the resolution of mining disputes, such as those which raised a question of fact or matter requiring the technical knowledge and experience of mining authorities and not when the complaint alleged fraud and oppression which called for the interpretation and application of laws. The CA further ruled that the petition should have been settled through arbitration under R.A. No. 876 − the Arbitration Law − as provided under the addendum contract. ISSUE: Whether or not an agreement to arbitrate is a separate and distinct contract from the main contract and whether POA has exclusive and original jurisdiction to hear and decide mining disputes. HELD: Panel of Arbitrators who, under R.A. No. 7942 of the Philippine Mining Act of 1995, has exclusive and original jurisdiction to hear and decide mining disputes, such as mining areas, mineral agreements, FTAAs or permits and surface owners, occupants and claimholders/concessionaires, is bereft of jurisdiction over the complaint for declaration of nullity of the addendum contract; thus, the Panels' jurisdiction is limited only to those mining disputes which raised question of facts or matters requiring the technical knowledge and experience of mining authorities. An agreement to arbitrate is a separate and distinct contract from the main contract. Further a submission to arbitration is a contract. A clause in a contract providing that all matters in dispute between the parties shall be referred to arbitration is a contract. The provision to submit to arbitration any dispute arising therefrom and the relationship of the parties is a part of that contract and is itself a contract. The doctrine of separability, or severability as other writers call it, enunciates that an arbitration agreement is independent of the main contract. The arbitration agreement is to be treated as a separate agreement and the arbitration agreement does not automatically terminate when the contract of which it is part comes to an end. The separability of the arbitration agreement is especially significant to the determination of whether the invalidity of the main contract also nullifies the arbitration clause. Indeed, the doctrine denotes that the invalidity of the main contract, also referred to as the "container" contract, does not affect the validity of the arbitration agreement. Irrespective of the fact that the main contract is invalid, the arbitration clause/agreement still remains valid and enforceable.

G.R. No. 169332 February 11, 2008 ABS-CBN BROADCASTING CORPORATION, petitioner, vs. WORLD INTERACTIVE NETWORK SYSTEMS (WINS) JAPAN CO., LTD., respondent.

FACTS: ABS-CBN Broadcasting Corporation (ABS-CBN) entered into a licensing agreement with World Interactive Network Systems (WINS) to distribute and sublicense the distribution of the television service known as "The Filipino Channel" (TFC) in Japan. ABS-CBN undertook to transmit the TFC programming signals to WINS which the latter received through its decoders and distributed to its subscribers. A dispute arose between the parties when ABS-CBN accused WINS of inserting nine episodes of WINS WEEKLY into the TFC programming. ABS-CBN claimed that these were "unauthorized insertions" constituting a material breach of their agreement. WINS filed an arbitration suit pursuant to the arbitration clause of its agreement with ABS-CBN. It contended that the airing of WINS WEEKLY was made with petitioner's prior approval. It also alleged that petitioner only threatened to terminate their agreement because it wanted to renegotiate the terms thereof to allow it to demand higher fees. It also prayed for damages for petitioner's alleged grant of an exclusive distribution license to another entity, NHK (Japan Broadcasting Corporation). The parties appointed Professor Alfredo F. Tadiar to act as sole arbitrator. The arbitrator found in favor of World Interactive Network Systems. ABS-CBN filed in the CA a petition for review under Rule 43 of the Rules of Court or, in the alternative, a petition for certiorari under Rule 65 of the same Rules, with application for temporary restraining order and writ of preliminary injunction. WINS, on the other hand, filed a petition for confirmation of arbitral award before the RTC of Quezon City. The CA dismissed ABS-CBN’s petition for lack of jurisdiction. It stated that as the terms or reference (TOR) itself provided that the arbitrator's decision shall be final and unappealable and that no motion for reconsideration shall be filed, then the petition for review must fail. It ruled that it is the RTC which has jurisdiction over questions relating to arbitration. It held that the only instance it can exercise jurisdiction over an arbitral award is an appeal from the trial court's decision confirming, vacating or modifying the arbitral award. It further stated that a petition for certiorari under Rule 65 of the Rules of Court is proper in arbitration cases only if the courts refuse or neglect to inquire into the facts of an arbitrator's award. ISSUE: Whether or not a 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 arbitrator’s decision are other than those for a petition to vacate an arbitral award enumerated under RA 876. HELD: The assigned errors reveals that the real issues calling for the CA's resolution were less the alleged grave abuse of discretion exercised by the arbitrator and more about the arbitrator’s appreciation of the issues and evidence presented by the parties. Therefore, the issues clearly fall under the classification of errors of fact and law — questions which may be passed upon by the CA via a petition for review under Rule 43. Petitioner 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). Section 24 of RA 876 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. Proper issues that may be raised in a petition for review under Rule 43 pertain to errors of fact, law or mixed questions of fact and law. While a petition for certiorari under

Rule 65 should only limit itself to errors of jurisdiction, that is, grave abuse of discretion amounting to a lack or excess of jurisdiction. Moreover, it cannot be availed of where appeal is the proper remedy or as a substitute for a lapsed appeal. The remedy ABS-CBN Broadcasting Corporation availed of, entitled "alternative petition for review under Rule 43 or petition for certiorari under Rule 65," was wrong. The petition is DENIED.

G.R. No. 146717. November 22, 2004 TRANSFIELD PHILIPPINES, INC., petitioner, vs. LUZON HYDRO CORPORATION, AUSTRALIA and NEW ZEALAND BANKING GROUP LIMITED and SECURITY BANK CORPORATION, respondents.

FACTS: Transfield and Luzon Hydro Corp. (LHC) entered into a turn-key contract where Transfield were to construct a hydro-electric plants in Benguet and Ilocos. The contract provides for a period for which the project is to be completed and also allows for the extension of the period provided that the extension is based on justifiable grounds such as fortuitous event. In order to guarantee performance by Transfield, two stand-by letters of credit were required to be opened. During the construction of the plant, Transfield requested for extension of time citing fortuitous events brought about by typhoon Zeb, barricades and demonstration. LHC did not give due course to the extension of the period prayed for but referred the matter to arbitration committee. In the meanwhile, because of the delay in the construction of the plant, LHC called on the stand-by letters of credit because of default. However, the demand was objected by Transfield on the ground that there is still pending arbitration on their request for extension of time. LHC invoked the ―independence principle‖. On the other hand, Transfield claims fraud on the part of LHC on calling the stand-by letters of credit. The trial court held for the LHC. Following the independence principle, even granting that there is still issue to be resolved arising from the turn-key project. This issue is not supposed to affect the obligation of the bank to pay the letter of credit in question. The court stressed that a LC accommodation is intended to benefit not only the beneficiary therein but the applicant thereon. Dissatisfied with the trial court’s denial of its application for a writ of preliminary injunction, petitioner elevated the case to the Court of Appeals via a Petition for Certiorari under Rule 65, with prayer for the issuance of a temporary restraining order and writ of preliminary injunction. Petitioner submitted to the appellate court that LHC’s call on the Securities was premature considering that the issue of its default had not yet been resolved with finality by the CIAC and/or the ICC. It asserted that until the fact of delay could be established, LHC had no right to draw on the Securities for liquidated damages. ISSUE: Whether or not the drawing on the letters of credit during the pendency of the arbitral proceeding proper. RULING: As a fundamental point, the pendency of arbitral proceedings does not foreclose resort to the courts for provisional reliefs. The Rules of the ICC, which governs the parties’ arbitral dispute, allows the application of a party to a judicial authority for interim or conservatory measures. Likewise, Section 14 of Republic Act (R.A.) No. 876 (The Arbitration Law) recognizes the rights of any party to petition the court to take measures to safeguard and/or conserve any matter which is the subject of the dispute in arbitration. In addition, R.A. 9285, otherwise known as the ―Alternative Dispute Resolution Act of 2004,‖ allows the filing of provisional or interim measures with the regular courts whenever the arbitral tribunal has no power to act or to act effectively.