G.R. No. 204197 November 23, 2016 premises on March 5, 2005.

In the meantime, the

master lease between TEAM and Fruehauf expired
FRUEHAUF ELECTRONICS PHILIPPINES on June 9, 2003.
CORPORATION, Petitioner,
vs. On March 9, 2004, Fruehauf instituted SPProc.
TECHNOLOGY ELECTRONICS ASSEMBLY AND No.11449 before the RTC for "Submission of an
MANAGEMENT PACIFIC CORPORATION, Existing Controversy for Arbitration." 7 It alleged: (1)
Respondent. that when the lease expired, the property suffered
from damage that required extensive renovation; (2)
BRION, J.: that when the lease expired, TEAM failed to turn over
the premises and pay rent; and (3) that TEAM did not
In 1978, Fruehauf Electronics Philippines restore the property to its original condition as
Corp. (Fruehauf) leased several parcels of land in required in the contract. Accordingly, the parties are
Pasig City to Signetics Filipinas obliged to submit the dispute to arbitration pursuant to
Corporation (Signetics) for a period of 25 years (until the stipulation in the lease contract.
May 28, 2003). Signetics constructed a
semiconductor assembly factory on the land on its The RTC granted the petition and directed the parties
own account. to comply with the arbitration clause of the contract. 8

In 1983, Signetics ceased its operations after the ARBITRAL TRIBUNAL - awarded Fruehauf: (1) 8.2
Board of Investments (BOI) withdrew the investment million pesos as (the balance of) unpaid rent from
incentives granted to electronic industries based in June 9, 2003 until March 5, 2005; and (2) 46.8 million
Metro Manila. pesos as damages. For failing to return the property'
to Fruehauf, TEAM remained liable for the payment of
In 1986, Team Holdings Limited (THL) bought rents. However, if it can prove that Fruehauf received
Signetics. THL later changed its name to Technology rentals from Capitol, TEAM can deduct these from its
Electronics Assembly and Management Pacific liability. 16 Nevertheless, the award of rent and
Corp. (TEAM). damages was without prejudice to TEAM's right to
seek redress from its sub-lessee, Capitol. 17
In March 1987, Fruehauf filed an unlawful detainer
case against TEAM. In an effort to amicably settle the RTC - found insufficient legal grounds under
dispute, both parties executed a MOA on June 9, Sections 24 and 25 of the Arbitration Law to modify or
1988.3 Under the MOA, TEAM undertook to pay vacate the award.32 It denied the petition and
Fruehauf 14.7 million pesos as unpaid rent (for the CONFIRMED, the arbitral award. 33 TEAM filed a
period of December 1986 to June 1988). Notice of Appeal.

They also entered a 15-year lease contract4 (expiring CA - REVERSED AND SET ASIDE the arbitral award
on June 9, 2003) that was renewable for another 25 and DISMISSED the arbitral complaint for lack of
years upon mutual agreement. The contract included merit.60
an arbitration agreement: “the dispute or
disagreement shall be referred to arbitration by a This CA action prompted Fruehauf to file the present
three (3) member arbitration committee, one member petition for review.
to be appointed by the LESSOR, another member to
be appointed by the LESSEE, and the third member ISSUES:
to be appointed by these two members. The
arbitration shall be conducted in accordance with the 1. What are the remedies or the modes of appeal
Arbitration Law (R.A. No. 876).” against an unfavorable arbitral award?

The contract also authorized TEAM to sublease the 2. What are the available remedies from an RTC
property. TEAM subleased the property to Capitol decision confirming, vacating, modifying, or correcting
Publishing House (Capitol) on December 2, 1996 an arbitral award?
after notifying Fruehauf.
3. Did the arbitral tribunal err in awarding Fruehauf
On May 2003, TEAM informed Fruehauf that it would damages for the repairs of the building and rental fees
not be renewing the lease. 6 from the expiration of the lease?

On May 31, 2003, the sublease between TEAM and HELD:

Capitol expired. However, Capitol only vacated the
1. The right to an appeal is neither' a natural right nor "certiorari proceedings," the mode of appeal can be
an indispensable component of due process; it is a interpreted as an Appeal By Certiorari to this Court
mere statutory privilege that cannot be invoked in the under Rule 45.
absence of an enabling statute. Neither the Arbitration
Law nor the ADR Law allows a losing party to appeal When the ADR Law was enacted in 2004, it
from the arbitral award. The statutory absence of an specified that the appeal shall be made to the CA in
appeal mechanism reflects the State's policy of accordance with the rules of procedure to be
upholding the autonomy of arbitration proceedings promulgated by this Court. 131 The Special ADR Rules
and their corresponding arbitral awards. provided that the mode of appeal from the RTC's
order confirming, vacating, or correcting/modifying a
A losing party is likewise precluded from resorting domestic arbitral award was through a petition for
to certiorari under Rule 65 of the Rules of review with the CA. 132 However, the Special ADR
Court. 124 Certiorari is a prerogative writ designed to Rules only took effect on October 30, 2009.
correct errors of jurisdiction committed by a judicial or
quasi-judicial body. 125 Because an arbitral tribunal In the present case, the R TC disallowed TEAM' s
is not a government organ exercising judicial or notice of appeal from the former's decision confirming
quasi-judicial powers, it is removed from the ambit of the arbitral award on July 3, 2009. TEAM moved for
Rule 65. reconsideration which was likewise denied on
November 15, 2009. In the interim, the Special ADR
Not even the Court's expanded certiorari jurisdiction Rules became effective. Notably, the Special ADR
under the Constitution 126 can justify judicial intrusion Rules apply retroactively in light of its procedural
into the merits of arbitral awards. While the character. 133 TEAM filed its petition for certiorari soon
Constitution expanded the scope after.
of certiorari proceedings, this power remains limited to
a review' of the acts of "any branch or instrumentality Nevertheless, whether we apply, Section 29 of the
of the Government." As a purely private creature of Arbitration Law, Section 46 of the ADR Law, or Rule
contract, an arbitral tribunal remains outside the 19.12 of the Special ADR Rules, there is no legal
scope of certiorari. basis that an ordinary appeal (via notice of appeal) is
the correct remedy from an order confirming,
Contrary to TEAM's position, the Special ADR Rules vacating, or correcting an arbitral award. Thus, there
actually forecloses against other remedies outside of is no merit in the CA's ruling that the RTC gravely
itself. Thus, a losing party cannot assail an arbitral abused its discretion when it refused to give due
award through; a petition for review under Rule 43 or course to the notice of appeal.
a petition for certiorari under Rule 65 because these
remedies are not specifically permitted in the Special 3. NO. We have deliberately refrained from passing
ADR Rules. upon the merits of the arbitral award - not because
the award was erroneous - but because it would be
In sum, the only remedy against; a final domestic improper. None of the grounds to vacate an arbitral
arbitral award is to file petition to vacate or to award are present in this case and as already
modify/correct the award not later than thirty (30) days established, the merits of the award cannot be
from the receipt of the award. 128 Unless a ground to reviewed by the courts.
vacate has been established, the RTC must confirm
the arbitral award as a matter of course. Our refusal to review the award is not a simple matter
of putting procedural technicalities over the
2. Once the RTC orders the confirmation, vacation, or substantive merits of a case; it goes into the very
correction/modification of a domestic arbitral award, legal substance of the issues. There is no law
the aggrieved party may move for reconsideration granting the judiciary authority to review the merits of
within a non-extendible period of fifteen (15) days an arbitral award. If we were to insist on reviewing the
from receipt of the order. 129 The losing party may correctness of the award: (or consent to the CA's
also opt to appeal from the RTC's ruling instead. doing so), it would be tantamount to expanding our
jurisdiction without the benefit of legislation. This
Under the Arbitration Law, the mode of appeal was translates to judicial legislation - a breach of the
via petition for review on certiorari. fundamental principle of separation of powers.

The Arbitration Law did not specify which Court had The CA reversed the arbitral award - an action that it
jurisdiction to entertain the appeal but left the matter has no power to do - because it disagreed with the
to be governed by the Rules of Court. As the appeal tribunal's factual findings and application of the law.
was limited to questions of law and was described as However, the alleged incorrectness of the award is
insufficient cause to vacate the award, given the
State's policy of upholding the autonomy of arbitral
awards.

Assuming arguendo that the tribunal's interpretation of

the contract was incorrect, the errors would
have been simple errors of law. It was the tribunal -
1âwphi1

not the RTC or the CA - that had jurisdiction and

authority over the issue by virtue of the parties'
submissions; the CA's substitution of its own
judgment for the arbitral award cannot be more
compelling than the overriding public policy to uphold
the autonomy of arbitral awards. Courts are precluded
from disturbing an arbitral tribunal's factual findings
and interpretations of law. 136 The CA's ruling is an
unjustified judicial intrusion in excess of its jurisdiction
- a judicial overreach. 137

Upholding the CA's ruling would weaken our

alternative dispute resolution mechanisms by allowing
the courts to "throw their weight around" whenever
they disagree with the results. It erodes the obligatory
force of arbitration agreements by allowing the losing
parties to "forum shop" for a more favorable ruling
from the judiciary.

Whether or not the arbitral tribunal correctly passed

upon the issues is irrelevant. Regardless of the
amount, of the sum involved in a case, a simple error
of law remains a simple error of law. Courts are
precluded from revising the award in a particular way,
revisiting the tribunal's findings of fact or conclusions
of law, or otherwise encroaching upon the
independence of an arbitral tribunal. 138At the risk of
redundancy, we emphasize Rule 19.10 of the Special
ADR Rules promulgated by this Court en
banc.(CHECK NIYO RULE 19.10)

In other words, simple errors of fact, of law, or of fact

and law committed by the arbitral tribunal are not
justiciable errors in this jurisdiction. 139

TEAM agreed to submit their disputes to an arbitral

tribunal. It understood all the risks - including the
absence of an appeal mechanism - and found that its
benefits (both legal and economic) outweighed the
disadvantages. Without a showing that any of the
grounds to vacate the award exists or that the same
amounts to a violation of an overriding public policy,
the award is subject to confirmation as a matter of
course.