LM POWER vs.

CAPITOL INDUSTRIAL SC ruled that in the case at hand it involves technical

discrepancies that are better left to an arbitral body
that has expertise in the subject matter.
Facts:
Moreover, the agreement between the parties
LM Power Engineering Corporation and Capitol contains arbitral clause that “any dispute or conflict
Industrial Construction Groups Inc. entered into a as regards to interpretation and implementation of
Subcontract Agreement involving electrical work at this agreement which cannot be settled between
the Third Port of Zamboanga. respondent and petitioner amicably shall be settled
by means of arbitration”.
Due to the inability of LM to procure materials,
Capitol Industial took over some of the work The resolution of the dispute between the parties
contracted to the former. herein requires a referral to the provisions of their
agreement.
After the completion of the contract, LM billed Capitol
in the amount of P6, 711,813.90 but the Capitol Within the scope of the arbitration clause are
refused to pay. discrepancies as to the amount of advances and
billable accomplishments, the application of the
LM filed with the RTC of Makati a Complaint for the
provision on termination, and the consequent set-off
collection of the amount representing the alleged
of expenses.
balance due it under the subcontract.
With respect to the disputes on the take-
Capitol filed a Motion to Dismiss, alleging that the
over/termination and the expenses incurred by
Complaint was premature, due to the absence
respondent in the take-over, the SC ruled that the
of prior recourse to arbitration.
agreement provides specific provisions that any
Because the agreement between the parties delay, expenses and any other acts in violation to
contained this clause: such agreement, the respondent can terminate and
can set off the amount it incurred in the completion
“any dispute or conflict as regards to of the contract.
interpretation and implementation of this
SC tackled also that there’s no need for the prior
agreement which cannot be settled between
request for arbitration by the parties with the
respondent and petitioner amicably shall be
Construction Industry Arbitration Commission
settled by means of arbitration”.
(CIAC) in order for it to acquire jurisdiction.
RTC denied the Motion on the ground that the
Because pursuant to Section 1 of Article III of the
dispute did not involve the interpretation or the
new Rules of Procedure Governing Construction
implementation of the Agreement and was not
Arbitration, when a contract contains a clause for
covered by the arbitral clause and ruled in favor of
the submission of a future controversy to arbitration,
the petitioner.
it is not necessary for the parties to enter into a
Respondent appealed to the CA, the latter reversed submission agreement before the claimant may
the decision of the RTC and ordered the referral of invoke the jurisdiction of CIAC.
the case to arbitration.
Furthermore, the arbitral clause in the agreement is
ISSUE: a commitment on the part of the parties to submit to
arbitration the disputes covered therein. Because
WON there is a need for the prior arbitration before that clause is binding, they are expected to abide by
filing of the complaint with the court. it in good faith.

HELD: Since a complaint with the RTC has been filed

without prior recourse to arbitration, under RA 876
YES (Arbitration Law) the proper procedure is to request
the stay or suspension of such action in order to
settle the dispute with the CIAC.

Koppel, Inc. Vs. Makati Rotary Club Foundation located in Paranaque City which housed buildings
G.R. No. 198075 and improvements dedicated to the business of FKI.
September 4, 2013
Perez, J.: In 1975 – FKI left the land to Makati Rotary Club
Foundation (MRCF) by way of a conditional
donation; MRCF accepted all the conditions.
FACTS:
On May 26, 1975, FKI and MRCF executed a deed of
Fedders Koppel. Incorporated (FKI), an air- donation evidencing their consensus.
conditioning manufacturer, owned a parcel of land
Conditions of the donation: - Board of 3 arbitrators in accordance of
the arbitration laws of the Philippines.
Respondent would lease the land back to FKI under
- Governed by laws of the Philippines
the terms of donation

- Period of lease is for 25 years or until The Assignment and Koppel’s Refusal to Pay
May 25, 2000; renewable for another - FKI faithfully complied and paid rentals
25 years upon mutual agreement and the donations for 3 years in the
- Rent paid by FKI for the 1 st 25 years is 2005 lease contract, but in June 2008
P 40, 126 per annum. FKI sold its rights and properties to
- Rental for the 2nd 25 years shall be the Koppel, Inc. (Koppel).
subject of mutual agreement; if cannot - FKI and MRCF executed an assignment
agree , then it be submitted to a panel and assumption of lease and donation
of 3 arbitrators in accordance to where FKI formally assigned all of it
arbitration law in the Philippines. interest and obligations in favor of
- Fair market value should not Koppel.
exceed beyond 25% of the original - The following year Koppel refused to
value pay rent and donation under the 2005
- Rental for the 2nd 25 years shall lease contract because it violated the
not exceed 3% of the fair market
material conditions of the donation of
value of the land the land in the deed of donation and
amended deed of donation; clearly the
In October 1976, FKI and MRCF executed an
rents in 2000 & 2005 lease contract
amended deed of donation that reiterated the
were exhorbitant
provisions of the deed of donation.
o The two 25 years were the
By virtue of the lease agreement as stipulated in the only material conditions of the
deed of donation and the amended one, FKI donation of the subject land
continued to possess and use the land. o While the lease for the 2nd 25
years was not fixed in the
2000 Lease Contract
deed of donation and the
2 days prior to the expiration of the deed of donation amended one, both deeds
and the amended one, FKI and MRCF executed nevertheless prescribed rules
another contract of lease. and limitations which should
be complied with- what is
Parties agreed with conditions of this contract referred here is the 3%
- A new 5 year contract maximum increase of rental
- Annual rents ranging from P 4 million based on the fair market value
(1st year) to P 4.9 million (5th year) of the land
- Contained arbitration clause in
Demand Letters
case of disagreement about the
interpretation, application and - June 1, 2009 MRCF sent the 1 st demand
execution of the lease. letter notifying petitioner of its default
- Board of 3 arbitrators in accordance of and the demand for its settlement
the arbitration laws of the Philippines. (8.394 million), failure to comply would
- Governed by laws of the Philippines mean the termination of the 2005
contract; the letter was received on the
2005 Lease Contract next day.
- Sept 22, 2009 Koppel sent a reply
Created after expiration of the 2000 lease contract
expressing disagreement over the
- Fixed rent of P 4.2 million annually for rental stipulations since they were
5 years excessive and against the mandated
- FKI must make an annual donation of deed of donation and the amended
money to MRCF P3million (1st Year to P one; they offered to pay
3.9 million (5th year) onlyP80,502.79
- Contained arbitration clause in case of - September 25, 2009 MRCF sent the 2 nd
disagreement about the interpretation, demand letter which reiterated the
application and execution of the lease. demand to pay obligations, added that
the failure to do so within 7 days,
 Koppel is demanded to vacate the - Found merit on the issues by Koppel – insufficiency
premises less MRCF take legal steps. in demand, and the nullity of the 2005 lease contract
- September 30, 2009, Koppel refused
to comply with the demand and instead
RTC – MRCF appealed to this court
filed a case before the RTC of
Paranaque a complaint for the -Reversed the decisions of the MeTC and ordered the
rescission or cancellation of the eviction of Koppel from the land, pay P9,362,436,
deed of donation and amended penalties and net of 5% withholding tax, atty’s fees
deed of donation against the and costs of suit-
respondent.
Ratio:
The Ejectment Suit  Respondent has complied with the
requirement of demand, in essence the 1 st
- October 5, 2009, MRCF filed an
demand also deemed that they had to
unlawful detainer case against
vacate since failure to comply would mean
Koppel before the MeTC of
the termination of the 2005 lease contract
Paranaque.
which meant they had to lease; either way
- November 4, 2009, Koppel filed an
the 2nd demand letter has complied with the
answer with compulsory
requirement of demand.
counterclaim and reiterated its
 Petitioner cannot invoke the arbitration
objection to the stipulations in the 2005
clause and at the same time question the
contract for being violative of material
validity of the contract.
conditions of the deed of donation and
 2005 lease contract must be sustained since
amended deed of donation
there was no evidence submitted to prove
 Used the defense that
its invalidity.
MeTC had no jurisdiction
because the 1st demand
CA - Koppel appealed here –
letter had no demand to
vacate the premises and - Affirmed the decision of the RTC.
therefore refusal to
comply does not give rise SC – Appeal by Koppel
to an action for unlawful
- Sept. 25, 2011 SC issued a TRO staying the
detainer immediate implementation of the decision of the CA.
 Even if the MeTC was
able to acquire ISSUE:
jurisdiction, it may not
Whether the 2005 Lease Contract is arbitrable?
exercise the same until
the disagreement RESOLUTION:
between the parties is
1st referred to Yes, all of the arguments are bereft of merit for they
arbitration have erred in overlooking the significance of the
 Furthermore, there can arbitration clause incorporated in the 2005 lease
be no ejectment since the contract.
2005 lease contract is
The arbitration clause of the 2005 Lease Contract
void. The donations as stipulates that “any disagreement as to the
part of rentals were interpretation, application or execution of the 2005
simulated as donations Lease Contract ought to be submitted to arbitration.”
contemplated to evade
taxes for being a non- To the mind of this Court, such stipulation is clear
stock and non-profit and is comprehensive enough so as to include
corporation. virtually any kind of conflict or dispute that may
arise from the 2005 Lease Contract including the one
Rulings of MeTC, RTC, and CA that presently besets petitioner and respondent.

MeTC The application of the arbitration clause of the 2005

Lease Contract in this case carries with it certain
- Ruled in favour of Koppel legal effects. However, before discussing what these
- Refused to dismiss the action on the ground that legal effects are, we shall first deal with the
dispute was still subject to arbitration challenges posed against the application of such
arbitration clause.
FIRST. While the validity of the contract may still be THIRD. The operation of the arbitration clause in
in question, the 2005 lease agreement would not be this case is not at all defeated by the failure of the
rendered non-arbitrable. Petitioner to file a formal request or application
therefor with the MeTC. SC finds that the filing of a
The quotation from Gonzales vs. Climax Mining, Ltd. request pursuant to section 24 of RA NO. 9285 is not
that was used to justify the contrary position was the sole means by which an arbitration clause may
taken out of context. SC held that "the validity of be validly invoked in a pending suit.
contract cannot be subject of arbitration
proceedings "as such questions are" legal in Section 24 of RA No. 9285 reads:
nature and require the application and
interpretation of laws and jurisprudence which SEC. 24. Referral to Arbitration. - A
is necessarily a judicial function." court before which an action is brought in a
matter which is the subject matter of an
The question was whether the complaint for arbitration agreement shall, if at least one
arbitration raises arbitrable issues that the Panel of party so requests not later that the pre-trial
Arbitrators of the Mines and Geosciences Bureau conference, or upon the request of both
(PA-MGB) can take cognizance of under the Mining parties thereafter, refer the parties to
Act of 1995 (R.A. No. 7942). This Court pointed out arbitration unless it finds that the
to the provisions of the Mining Act of 1995 which arbitration agreement is null and void,
granted the PA-MGB with exclusive original inoperative or incapable of being performed.
jurisdiction only over mining disputes, i.e., disputes
involving " rights to mining areas," "mineral The request referred to in the above provisions is, in
agreements or permits," and " surface owners, turn, implemented by Rules 4.1 to 4.3 A.M. No. 07-
occupants, claim holders or concessionaires" 11-08-SC or the Special Rules of Court on
requiring the technical knowledge and experience of Alternative Dispute Resolution (Special ADR Rules):
mining authorities in order to be resolved.
RULE 4: Referral to ADR
Accordingly, since the complaint for arbitration in
Gonzales did not raise mining disputes as Rule 4.1. Who makes the request. - A party
contemplated under R.A. No. 7942 but only issues to a pending action filed in violation of the
relating to the validity of certain mining related arbitration agreement, whether contained in
agreements, this Court held that such complaint an arbitration clause or in a submission
could not be arbitrated before the PA-MGB. It is in agreement, may request the court to refer
this context that we made the pronouncement now the parties to arbitration in accordance with
in discussion: such agreement.
Arbitration before the Panel of Arbitrators is proper Rule 4.2. When to make request. –
only when there is a disagreement between the
parties as to some provisions of the contract (A) Where the arbitration agreement exists
between them, which needs the interpretation and before the action is filed. – The request
the application of that particular knowledge and for referral shall be made not later than
expertise possessed by members of that Panel. It is the pre-trial conference. After the pre-
not proper when one of the parties repudiates the trial conference, the court will only act
existence or validity of such contract or agreement upon the request for referral if it is
on the ground of fraud or oppression as in this case.
made with the agreement of all parties
The validity of the contract cannot be subject of
to the case.
arbitration proceedings. Allegations of fraud and
(B) Submission agreement. – If there is no
duress in the execution of a contract are matters
within the jurisdiction of the ordinary courts of law. existing arbitration agreement at the
time the case is filed but the parties
These questions are legal in nature and require subsequently enter into an arbitration
the application and interpretation of laws and agreement, they may request the court
and jurisprudence which is necessarily a to refer their dispute to arbitration at
judicial function. any time during the proceedings.

SECOND. Petitioner may still invoke the arbitration

Rule 4.3. Contents of request. – The
clause of the 2005 Lease Contract notwithstanding
request for referral shall be in the form of a
the fact that it assails the validity of such contract.
motion, which shall state that the dispute is
This is due to the doctrine of separability. Under covered by an arbitration agreement.
the doctrine of separability, an arbitration agreement
Apart from other submissions, the movant
is considered as independent of the main contract.
shall attach to his motion an authentic copy
Being a separate contract in itself, the arbitration
of the arbitration agreement.
agreement may thus be invoked regardless of the
possible nullity or invalidity of the main contract.
 The request shall contain a notice of hearing surplusage. The failure of the parties in conflict to
addressed to all parties specifying the date reach an amicable settlement before the JDR may, in
and time when it would be heard. The party fact, be supplemented by their resort to arbitration
making the request shall serve it upon the where a binding resolution to the dispute could
respondent to give him the opportunity to finally be achieved. This situation precisely finds
file a comment or opposition as provided in application to the case at bench.
the immediately succeeding Rule before the
hearing. FIFTH. Neither would the summary nature of
ejectment cases be a valid reason to disregard the
Attention must be paid, however, to the salient enforcement of the arbitration clause of the 2005
wordings of Rule 4.1. It reads: “(a) party to a Lease Contract. Notwithstanding the summary
pending action filed in violation of the arbitration nature of ejectment cases, arbitration still remains
agreement xxx May request the court to refer the relevant as it aims not only to afford the parties an
parties to arbitration in accordance with such expeditious method of resolving their dispute.
agreement.”
A pivotal feature of arbitration as an alternative
In using the word may to qualify the act of filing a mode of dispute resolution is that it is, first and
“request” under section 24 of RA No. 9285, the foremost, a product of party autonomy or the
special ADR Rules clearly did not intend to limit the freedom of the parties to “make their own
invocation of an arbitration agreement in a pending arrangements to resolve their own disputes.”
suit solely via such request. After all, non- Arbitration agreements manifest not only the desire
compliance with an arbitration agreement is a of the parties in conflict for an expeditious resolution
valid defense to any offending suit and, as of their dispute. They also represent, if not more so,
such, may even be raised in an answer as the parties mutual aspiration to achieve such
provided in our ordinary rules of procedure. resolution outside of judicial auspices, in a more
informal and less antagonistic environment under the
In this case, it is conceded that petitioner was not terms of their choosing. Needless to state, this
able to file a separate request of arbitration before critical feature can never be satisfied in an ejectment
the MeTC. However, it is equally conceded that the case no matter how summary it may be.
Petitioner, as early as in its Answer with
Counterclaim, had already apprised the MeTC of Legal Effect of the Application of the Arbitration
the existence of the arbitration clause in the 2005 Clause
Lease Contract and, more significantly, of its desire
to have the same enforced in this case. This act of Since there really are no legal impediments to the
petitioner is enough valid invocation of his application of the arbitration clause of the 2005
right to arbitrate. Contract of Lease in this case, we find that the
instant unlawful detainer action was instituted in
FOURTH. The fact that the Petitioner and violation of such clause. The Law, therefore, should
Respondent already underwent through Judicial have governed the fate of the parties and this suit:
Dispute Resolution (JDR) proceedings before the
RTC, will not make the subsequent conduct of RA No 876
arbitration between the parties unnecessary or
Section 7. Stay of civil action. - If any suit
circuitous. The JDR system is substantially
or proceeding be brought upon an issue
different from arbitration proceedings.
arising out of an agreement providing for
The JDR framework is based on the processes of the arbitration thereof, the court in which
mediation, conciliation or early neutral evaluation such suit or proceeding is pending, upon
which entails the submission of a dispute before a being satisfied that the issue involved in
JDR judge who shall merely “facilitate settlement” such suit or proceeding is referable to
between the parties in conflict or make a “non- arbitration, shall stay the action or
binding evaluation or assessment of the proceeding until an arbitration has been had
chances of each party’s case.” in accordance with the terms of the
agreement: Provided, that the applicant for
Thus in JDR, the JDR judge lacks the authority to the stay is not in default in proceeding with
render a resolution of the dispute that is binding such arbitration.
upon the parties in conflict. In arbitration, on the
other hand, the dispute is submitted to an RA No. 9285
arbitrator/s – a neutral third person or a group of
SEC. 24. Referral to Arbitration. - A
thereof - who shall have the authority to render
court before which an action is brought in a
a resolution binding upon the parties.
matter which is the subject matter of an
Clearly, the mere submission of a dispute to JDR arbitration agreement shall, if at least one
proceedings would not necessarily render the party so requests not later that the pre-trial
subsequent conduct of arbitration a mere conference, or upon the request of both
 parties thereafter, refer the parties to The violation by the MeTC of the clear directives
arbitration unless it finds that the under RA No. 876 and 9285 renders invalid all
arbitration agreement is null and void, proceedings it undertook in the ejectment case
inoperative or incapable of being performed. after the filing by Petitioner of its Answer with
Counterclaim – the point when the petitioner and
It is clear that under the law, the instant unlawful the Respondent should have been referred to
detainer action should have been stayed: the arbitration. This case must, therefore, be remanded
Petitioner and the Respondent should have been to the MeTC and be suspended at said point.
referred to arbitration pursuant to the arbitration Inevitably, the decisions of the MeTC , RTC, and the
clause of the 2005 Lease Contract. The MeTC, Court of Appeals must all be vacated and set aside.
however, did not do so in violation of the law - which
violation was, in turn, affirmed by the RTC and Court The petitioner and the Respondent must then be
of Appeals on appeal. referred to arbitration pursuant to the arbitration
clause of the 2005 Lease Contract.

MARIA LUISA PARK ASSOCIATION, INC., vs. moved for reconsideration but their motion was
SAMANTHA MARIE T. ALMENDRAS and PIA ANGELA denied.
T. ALMENDRAS
G.R. NO. 171763: June 5, 2009 Aggrieved, the respondents questioned the dismissal
of their complaint in a petition for certiorari and
FACTS: prohibition before the Court of Appeals. The Court of
Appeals granted the petition.
On February 6, 2002, respondents Samantha Marie
T. Almendras and Pia Angela T. Almendras ISSUE:
purchased from MRO Development Corporation a
Whether there is no other relief and remedy
residential lot located in Maria Luisa Estate Park,
available to petitioner to avert the conduct of a void
Banilad, Cebu City. After some time, respondents
proceeding than the present recourse.
filed with petitioner Maria Luisa Park Association,
Incorporated (MLPAI) an application to construct a RULING:
residential house which was approved.
No. The terms of Article XII of the MLPAI by-laws
Upon ocular inspection of the house, MLPAI found clearly express the intention of the parties to bring
out that respondents violated the prohibition against first to the arbitration process all disputes between
multi-dwelling stated in MLPAI's Deed of Restriction. them before a party can file the appropriate action.
Consequently, MLPAI sent a letter to the The agreement to submit all disputes to arbitration is
respondents, demanding that they rectify the a contract. As such, the arbitration agreement binds
structure; otherwise, it will be constrained to forfeit the parties thereto, as well as their assigns and
respondents' construction bond and impose stiffer heirs. Respondents, being members of MLPAI, are
penalties. bound by its by-laws, and are expected to abide by it
in good faith.
Respondents filed with the Regional Trial Court of
Cebu City a complaint for Injunction, Declaratory IN THE INSTANT CASE, we observed that while
Relief, Annulment of Provisions of Articles and By- both parties exchanged correspondence pertaining to
Laws with Prayer for Issuance of a Temporary the alleged violation of the Deed of Restriction, they,
Restraining Order (TRO)/Preliminary Injunction. however, made no earnest effort to resolve their
differences in accordance with the arbitration clause
MLPAI moved for the dismissal of the complaint on
provided for in their by-laws. Mere exchange of
the ground of lack of jurisdiction and failure to
correspondence will not suffice much less satisfy the
comply with the arbitration clause provided for in
requirement of arbitration.
MLPAI's by-laws.
Arbitration being the mode of settlement between
The trial court dismissed the complaint for lack of
the parties expressly provided for in their by-laws,
jurisdiction, holding that it was the Housing and Land
the same should be respected. Unless an arbitration
Use Regulatory Board (HLURB) that has original and
agreement is such as absolutely to close the doors of
exclusive jurisdiction over the case. Respondents
the courts against the parties, the courts should look
with favor upon such amicable arrangements.

PUROMINES, INC., petitioner, vs. COURT OF APPEAL Facts: Puromines, Inc. and Makati Agro
and PHILIPP BROTHERS OCEANIC, INC., Trading, Inc. entered into a contract with private
respondents. respondents Philipp Brothers Oceanic, Inc. for the
G.R. No. 91228. March 22, 1993 sale of prilled Urea in bulk. The Sales Contract
provided, among others an arbitration clause
which states, thus:
"9. Arbitration - Any disputes arising under this Consequently, it is bound by the provisions and
contract shall be settled by arbitration in London in terms of the said bill of lading and of the arbitration
accordance with the Arbitration Act 1950 and any clause incorporated in the sales contract.
statutory amendment or modification thereof. XXXX"
Responsibility to third persons for goods shipped on
The shipment covered by 3 bills of lading was loaded board a vessel follows the vessel's possession and
on MV Liliana Dimitrova with Philipp Brothers as employment. Assuming the cause of action is based
charterer of said vessel. When the shipment covered on contract of carriage, it must be first determined
by Bill of Lading 1 and 3 were discharged in Manila, what kind of charter party had with the ship owner
it was found to be in bad order and condition, caked, to determine liability.
hardened and lumpy, discoloured and contaminated
with rust and dirt. If it is a contract of affreightment, the charterer is
not liable as possession is still with owner. If it is a
Puromines filed a complaint with the Trial charter of demise or bareboat, then the charterer is
Court for breach of contract of carriage against liable as it is considered the owner and therefore
Maritime, as ship-agent and Philipp Brothers, would be liable for damage or loss.
as charterer.
In any case, whether the liability of respondent
Philipp filed a motion to dismiss on the ground that should be based on the same contract or that of the
Petitioner should comply with the arbitration clause bill of lading, the parties are nevertheless obligated
in the sales contract. Puromines opposed contending to respect the arbitration provisions on the sales
that the sales contract does not include contract of contract and/or the bill of lading. Petitioner being a
carriage, therefore, the latter is not covered by the signatory and party to the sales contract cannot
agreement on arbitration. escape from his obligation under the arbitration
clause as stated therein.
Issue: Whether or not the arbitration clause in the
sales contract covers claims for violations of contract Arbitration has been held valid and constitutional.
of carriage. The rule now is that unless the agreement is such as
absolutely to close the doors of the courts against
Ruling: the parties, which agreement would be void, the
courts will look with favor upon such amicable
YES. The sales contract is comprehensive enough to
arrangements and will only interfere with great
include claims for damages arising from carriage and
reluctance to anticipate or nullify the action of the
delivery of the goods. Puromines deries its right to
arbitrator.
the cargo from the bill of lading which is the contract
of affreightment together with the sales contract. WHEREFORE, petition is hereby DISMISSED and
decision of the court a quo is AFFIRMED.

DEPARTMENT OF ENVIRONMENT AND NATURAL UPCI instituted a complaint against DENR before the
RESOURCES (DENR) v . UNITED PLANNERS Regional Trial Court (RTC).
CONSULTANTS, INC. (UPCI)
G.R. No. 212081, 23 February 2015, FIRST Upon motion of UPCI, the case was subsequently
DIVISION, (Perlas-Bernabe, J .) referred to arbitration pursuant to the arbitration
clause of the Consultancy Agreement. The parties
The Special ADR Rules, as far as practicable, should agreed to adopt the CIAC Revised Rules Governing
be made to apply not only to the proceedings on Construction Arbitration (CIAC Rules) to govern the
confirmation but also to the confirmed award’s arbitration proceedings. They further agreed to
execution. submit their respective draft decisions in lieu of
memoranda of arguments on or before April 21,
FACTS: 2010, among others.

The Department of Environment and Natural The Arbitral Award ruled in favor of UPCI. When
Resources (DENR), through the Land Management DENR filed a Motion for Reconsideration before the
Bureau (LMB), entered into an Agreement for RTC, the Arbitral Award was confirmed by the RTC.
Consultancy Services with United Planners The RTC also denied DENR’s motion to quash the
Consultants, Inc. (UPCI) in connection with an LMB's writ of execution of the Arbitral Award. The Court of
project. Under the Consultancy Agreement, DENR Appeals denied DENR’s petition for certiorari,
committed to pay a total contract price of applying the Special Alternative Dispute Resolution
P4,337,141.00. (ADR) Rules.

UPCI completed the work required, however, DENR ISSUE:

was able to pay only 47% of the total contract price.
For failure to pay its obligation under the May the Special ADR Rules be applied even until the
Consultancy Agreement despite repeated demands, execution of the Arbitral Award, even if the Special
Rules are silent as to execution of a confirmed Rules in its confirmation of the arbitral award would
arbitral award? later shift to the regular Rules of Procedure come
execution. Irrefragably, a court’s power to confirm a
RULING: judgment award under the Special ADR Rules should
be deemed to include the power to order its
Yes. While it appears that the Special ADR Rules
execution for such is but a collateral and subsidiary
remain silent on the procedure for the execution of a
consequence that may be fairly and logically inferred
confirmed arbitral award, it is the Court’s considered
from the statutory grant to regional trial courts of
view that the Rules’ procedural mechanisms cover
the power to confirm domestic arbitral awards.
not only aspects of confirmation but necessarily
extend to a confirmed award’s execution in light of All the more is such interpretation warranted under
the doctrine of necessary implication which states the principle of ratio legis est anima which provides
that every statutory grant of power, right or privilege that a statute must be read according to its spirit or
is deemed to include all incidental power, right or intent, for what is within the spirit is within the
privilege. statute although it is not within its letter, and that
which is within the letter but not within the spirit is
As the Court sees it, execution is but a necessary
not within the statute. Accordingly, since the Special
incident to the Court’s confirmation of an arbitral
ADR Rules are intended to achieve speedy and
award. To construe it otherwise would result in an
efficient resolution of disputes and curb a litigious
absurd situation whereby the confirming court
culture, every interpretation thereof should be made
previously applying the Special ADR
consistent with these objectives.

PHILROCK, INC., petitioner, vs. to include the issue of damages therein,' whereas
CONSTRUCTION INDUSTRY ARBITRATION the true reason for the withdrawal of the case from
COMMISSION and Spouses VICENTE and NELIA the CIAC was due to Philrock's opposition to the
CID, respondents. inclusion of its seven officers and engineers, who did
not give their consent to arbitration, as party
FACTS: Private respondents, filed a Complaint for defendants
damages against Philrock and seven of its officers
and engineers with the Regional Trial Court of Respondent : manifested that she was willing to
Quezon City, Branch 82. The trial court issued an exclude the seven officers and engineers of Philrock
Order dismissing the case and referring the same to as parties to the case so as to facilitate or expedite
the CIAC because the Cid spouses and Philrock had the proceedings.
filed an Agreement to Arbitrate with the CIAC.
Preliminary conferences were held among the parties The Arbitral Tribunal denied Philrock's request for the
and their appointed arbitrators. At these suspension of the proceedings. The parties then
conferences, disagreements arose as to: proceeded to finalize, approve and sign the Terms of
Reference. Philrock's counsel and representative,
1) whether moral and exemplary damages and tort Atty. Pericles C. Consunji affixed his signature to said
should be included as an issue along with breach of Terms of Reference which stated that 'the parties
contract, and agree that their differences be settled by an Arbitral
Tribunal
2) whether the seven officers and engineers of
Philrock who are not parties to the Agreement to
Arbitrate should be included in the arbitration
proceedings. On September 12, 1995, [P]etitioner Philrock filed its
Motion to Dismiss, alleging therein that the CIAC had
No common ground could be reached by the parties, lost jurisdiction to hear the arbitration case due to
hence, on April 2, 1994, both the Cid spouses and the parties' withdrawal of their consent to arbitrate.
Philrock requested that the case be remanded to the The motion was denied. public respondent ordered
trial court. the parties to appear before it on November 28,
1995 for the continuation of the arbitral proceedings,
On June 13, 1995, The trial court declared that it no and on February 7, 1996, public respondent directed
longer had jurisdiction over the case and ordered the [P]etitioner Philrock to set two hearing dates in the
records of the case to be remanded anew to the month of February to present its evidence and to pay
CIAC for arbitral proceedings. the CIAC resumed all fees assessed by it, otherwise Philrock would be
conducting preliminary conferences. On August 21, deemed to have waived its right to present evidence
1995, herein [P]etitioner Philrock requested to
suspend the proceedings until the court clarified its Judgment is rendered in favor of the Claimant,
ruling in the Order dated June 13, 1995 directing Respondent to pay.

Petioner : Philrock argued that said Order was based Before the CA, petitioner filed a Petition for Review,
on a mistaken premise that 'the proceedings in the docketed as CA-GR SP No. 42443, contesting the
CIAC fell through because of the refusal of Philrock jurisdiction of the CIAC and assailing the propriety of
the monetary awards in favor of respondent spouses. Petitioner claims, on the other hand, that this
This Petition was consolidated by the CA with CA-GR Agreement was withdrawn by respondents on April
SP No. 39781, a Petition for Certiorari earlier 8, 1994, because of the exclusion of the seven
elevated by petitioner questioning the jurisdiction of engineers of petitioners in the arbitration case. This
the CIAC. contention is untenable. First, private respondents
removed the obstacle to the continuation of the
ISSUE: Whether or not the CIAC could take arbitration, precisely by withdrawing their objection
jurisdiction over the case of Respondent Cid spouses to the exclusion of the seven engineers. Second,
against Petitioner Philrock after the case had been petitioner continued participating in the arbitration
dismissed by both the RTC and the CIAC. even after the CIAC Order had been issued.

HELD: Section 4 of Executive Order 1008 expressly Finally, as pointed out by the solicitor general,
vests in the CIAC original and exclusive jurisdiction petitioner maneuvered to avoid the RTC’s final
over disputes arising from or connected with resolution of the dispute by arguing that the regular
construction contracts entered into by parties that court also lost jurisdiction after the arbitral tribunal’s
have agreed to submit their dispute to voluntary April 13, 1994 Order referring the case back to the
arbitration. It is undisputed that the parties RTC. After submitting itself to arbitration proceedings
submitted themselves to the jurisdiction of the and actively participating therein, petitioner is
Commission by virtue of their Agreement to Arbitrate estopped from assailing the jurisdiction of the CIAC,
dated November 24, 1993. Signatories to the merely because the latter rendered an adverse
Agreement were Atty. Ismael J. Andres and Perry Y. decision.
Uy (president of Philippine Rock Products, Inc.) for
petitioner, and Nelia G. Cid and Atty. Esteban A.
Bautista for respondent spouses

Fruehauf Electronic Philippines Corportion vs The contract also authorized TEAM to sublease the
Technology Electronics Assembly and property. TEAM subleased the property to Capitol
Management Pacific Corporation Publishing House (Capitol). TEAM informed Fruehauf
that it would not be renewing the lease. However,
Capitol only vacated the premises on March 5, 2005.

Facts: Fruehauf Electronics Philippines Corp. Fruehauf instituted SP Proc. No. 11449 before the
(Fruehauf) leased several parcels of land in Pasig Regional Trial Court (RTC) for "Submission of an
City to Signetics Filipinas Corporation (Signetics) for Existing Controversy for Arbitration." Accordingly,
a period of 25 years in which Signetics constructed a the parties are obliged to submit the
factory. Eventually, Signetics ceased its operation. dispute to arbitration pursuant to the stipulation in
Team Holdings Limited (THL) bought Signetics. THL the lease contract. The arbitral tribunal awarded
Fruehauf: (1) 8.2 million pesos as (the balance of)
later changed its name to Technology Electronics
unpaid rent from June 9, 2003 until March 5, 2005;
Assembly and Management Pacific Corp. (TEAM).
and (2) 46.8 million pesos as damages.
Fruehauf fied an unlawful detainer case against Nevertheless, the award of rent and damages was
TEAM. In an effort to amicably settle the dispute, without prejudice to TEAM's right to seek redress
both parties executed a Memorandum of Agreement from its sub-lessee, Capitol. TEAM moved for
(MOA) on June 9, 1988. reconsideration which the tribunal denied.

Under the MOA, TEAM undertook to pay Fruehauf Thus, TEAM petitioned the RTC to partially vacate or
14.7 million pesos as unpaid rent they also entered a modify the arbitral award. It argued that the tribunal
15-year lease contract (expiring on June 9, 2003) failed to properly appreciate the facts and the terms
that was renewable for another 25 years upon of the lease contract.
mutual agreement. The contract included an
arbitration agreement: RTC:

“In the event of any dispute or disagreement TC found insufficient legal grounds under Sections 24
between the parties hereto involving the and 25 of the Arbitration Law to modify or vacate the
interpretation or implementation of any provision of award. It denied the petition and CONFIRMED the
this Contract of Lease, the dispute or disagreement arbitral award.
shall be referred to arbitration by a three (3)
member arbitration committee, one member to be TEAM filed a Notice of Appeal however, RTC refused
appointed by the LESSOR, another member to be to give due course to the Notice of Appeal because
appointed by the LESSEE, and the third member to according to Section 29 of the Arbitration Law, an
be appointed by these two members. The arbitration ordinary appeal under Rule 41 is not the proper
shall be conducted in accordance with the Arbitration mode of appeal against an order confirming an
Law (R.A. No. 876)” arbitral award. TEAM moved for reconsideration but
the RTC denied. Thus, TEAM filed a petition for
certiorari before the CA.
CA: The CA initially dismissed the petition. It vacating, correcting or modifying an arbitral award
concluded that the appeal contemplated under the but a petition for review on certiorari under Rule 45.
law is an appeal by certiorari limited only to Fruehauf inconsistently argues that the remedies
questions of law. against an arbitral award are (1) a petition to vacate
the award, (2) a petition for review under Rule 43
The CA continued that TEAM failed to substantiate its raising questions of fact, of law, or mixed questions
claim as to the "evident miscalculation of figures." It of fact and law, or (3) a petition for certiorari under
further held that disagreement with the arbitrators' Rule 65.
factual determinations and legal conclusions does not
empower courts to amend or overrule arbitral Issues:
judgments.
However, the CA amended its decision on 1.Whether or not Arbitral Tribunals are quasi-judcial
reconsideration. The CA REVERSED AND SET ASIDE bodies.
the arbitral award and DISMISSED the arbitral 2. Whether or not a losing party is allowed to appeal
complaint for lack of merit. from the arbitral award.
3. Whether or not a losing party can resort to
TEAM’s arguments: TEAM maintained that it was certiorari under Rule 65.
appealing the RTC's order denying its petition to
partially vacate/modify the award, not the arbitral Ruling: 1. No, an Arbitral Tribunal does not exercise
award itself.
quasi-judicial powers. Quasi-judicial bodies can only
exercise such powers and jurisdiction as are
Citing Rule 41, Section 13 of the Rules of Court, the
expressly or by necessary implication conferred upon
RTC's authority to dismiss the appeal is limited to
them by their enabling statutes.
instances when it was filed out of time or when the
appellant fails to pay the docket fees within the
Like courts, a quasi-judicial body's jurisdiction
reglementary period. TEAM further maintained that
over a subject matter is conferred by law and
the RTC gravely abused its discretion by confirming
exists independently from the will of the
the Arbitral Tribunal's award when it evidently had
parties. Quasi-judicial bodies are creatures of
legal and factual errors,
law. The arbitral tribunal acquires jurisdiction
miscalculations, and ambiguities.
over the parties and the subject matter
through stipulation and so they are creatures of
TEAM argued that an ordinary appeal under Rule 41 contract.
was the proper remedy against the RTC's order
confirming, modifying, correcting, or vacating an The Court in ABS-CBN vs World Interactive Network
arbitral award. Systems Case opined that a voluntary arbitrator is a
"quasi-judicial instrumentality" of the government.
It argued that Rule 42 was not available because the The ABS-CBN Case pronounced that the losing party
order denying its motion to vacate was not rendered in an arbitration proceeding may avail of three
in the exercise of the RTC's appellate jurisdiction. alternative remedies: (1) a petition to vacate the
Further, Rule 43 only applies to decisions of quasi- arbitral award before the RTC; (2) a petition for
judicial bodies. Finally, an appeal under Rule 45 to review with the CA under Rule 43 of the Rules of
the Supreme Court would preclude it from raising Court raising questions of fact, of law, or of both;
questions of fact or mixed questions of fact and law. and (3) a petition for certiorari under Rule 65 should
TEAM reiterates that it "disagreed with the arbitral the arbitrator act beyond its jurisdiction or with
award mainly on questions of fact and not only on grave abuse of discretion.
questions of law," specifically, "on factual matters
relating to specific provisions in the contract on However, such is only an obiter dicta because the
ownership of structures and improvements thereon, pronouncements as to the remedies against an
and the improper award of rentals and penalties. arbitral award were unnecessary for their resolution.
Even assuming that it availed of the wrong mode of The lis mota of the case being the RTC's jurisdiction
appeal, TEAM posits that its appeal should still have over an appeal from an arbitral award.
been given due course in the interest of substantial
justice. The ABS-CBN Case committed the classic
However, it maintains that Section 29 of the fallacy of equivocation . It equated the term
Arbitration Law does not foreclose other legal "voluntary arbitrator" used in Rule 43, Section 1 with
remedies (aside from an appeal by certiorari) against the term "arbitrator/arbitration tribunal." Notably, all
the RTC's order confiming or vacating an arbitral of the cases cited in the ABS-CBN Case involved
award labor disputes.
The term " Voluntary Arbitrator " does not refer to an
ordinary " arbitrator " who voluntarily agreed to
Fruehauf’s arguments: Fruehauf argues that resolve a dispute. It is a technical term with a
courts do not have the power to substitute their specific definition under the Labor Code
judgment for that of the arbitrators.

It also insists that an ordinary appeal is not the Rule 43, Section 1 enumerates quasi-judicial
proper remedy against an RTC's order confirming, tribunals whose decisions are appealable to the CA
instead of the RTC. But where legislation provides for The Special ADR Rules allow the RTC to correct or
an appeal from decisions of certain Administrative modify an arbitral award pursuant to Section 25 of
bodies to the CA, it means that such bodies are co- the Arbitration Law. However, this authority cannot
equal with the RTC in terms of rank and stature, be interpreted as jurisdiction to review the merits of
logically placing them beyond the control of the the award.
latter. However, arbitral tribunals and the RTC are
not 3. No, a losing party is likewise precluded from
co-equal bodies because the RTC is authorized to resorting to certiorari under Rule 65 of the Rules of
conCrm or to vacate (but not reverse) arbitral Court. Certiorari is a prerogative writ designed to
awards. correct errors of jurisdiction committed by a judicial
or quasi-judicial body.
If we were to deem arbitrators as included in the
scope of Rule 43, we would effectively place it on Because an arbitral tribunal is not a government
equal footing with the RTC and remove arbitral organ exercising judicial or quasi-judicial powers, it
awards from the scope of RTC review. is removed from the ambit of Rule 65.

2. The right to an appeal is neither a natural right Lastly, the Special ADR Rules are a self-contained
nor an indispensable component of due process; it is body of rules. The parties cannot invoke remedies
a mere statutory privilege that cannot be invoked in and other provisions from the Rules of Court unless
the absence of an enabling statute. Neither the they were incorporated in the Special ADR Rules.
Arbitration Law nor the ADR Law allows a losing Contrary to TEAM'S position, the Special ADR Rules
party to appeal from the arbitral award. The actually forecloses against other remedies outside of
statutory absence of an appeal mechanism reflects itself. Thus, a losing party cannot assail an arbitral
the State's policy of upholding the autonomy of award through a petition for review under Rule 43 or
arbitration proceedings and their corresponding a petition for certiorari under Rule 65 because these
arbitral awards. remedies are not specifically permitted in the Special
ADR Rules.
Nonetheless, an arbitral award is not absolute. Rule In sum, the only remedy against a Cnal
19.10 of the Special ADR Rules — by referring to domestic arbitral award is to Cle petition to
Section 24 of the Arbitration Law and Article 34 of vacate or to modify/correct the award not later
the 1985 Model Law — The grounds for than thirty (30) days from the receipt of the
Vacating a domestic arbitral award under Section 24 award.
of the Arbitration Law contemplate the following
scenarios: Unless a ground to vacate has been
(a) when the award is procured by corruption, fraud, established, the RTC must confirm the arbitral
or other undue means; or award as a matter of course. The remedies
(b) there was evident partiality or corruption in the against an order confirming, vacating, correcting, or
arbitrators or any of them; or modifying an arbitral award. Once the RTC orders
(c) the arbitrators were guilty of misconduct that the confirmation, vacation, or correction/modification
materially prejudiced the rights of any party; or of a domestic arbitral award, the aggrieved party
may move for reconsideration within a non-
(d) the arbitrators exceeded their powers, or so extendible period of fifteen (15) days from receipt of
imperfectly executed them, that a mutual, final and the order.
definite award upon the subject matter submitted to
them was not made. The losing party may also opt to appeal from
the RTC's ruling instead. Under the Arbitration
The award may also be vacated if an arbitrator who Law, the mode of appeal was via petition for
was disqualified to act willfully refrained from review on certiorari. The Arbitration Law did
disclosing his disqualification to the parties. not specify which Court had jurisdiction to
entertain the appeal but left the matter to be
Notably, none of these grounds pertain to the governed by the Rules of Court. As the appeal
correctness of the award but relate to the was limited to questions of law and was
misconduct of arbitrators. described as " certiorari proceedings," the
These grounds for vacating an arbitral award are mode of appeal can be interpreted as an Appeal
exclusive. Under the ADR Law, courts are obliged to by Certiorari to this Court under Rule 45
disregard any other grounds invoked to set aside an
award. As established earlier, an arbitral award is The correctness or incorrectness of the arbitral
not appealable via Rule 43 because: award We have deliberately refrained from passing
(1) there is no statutory basis for an appeal from the upon the merits of the arbitral award — not because
Cnal award of arbitrators; (2) arbitrators are not the award was erroneous — but because it would be
quasi-judicial bodies; and (3) the Special ADR Rules improper. None of the grounds to vacate an arbitral
specifically prohibit the filing of an appeal to question award are present in this case and as already
the merits of an arbitral award. established, the merits of the award cannot be
reviewed by the courts.
Chung Fu Industries (Phils) v. Court of Appeals May 17, 1989: petitioner Chung Fu Industries and
private respondents Roblecor Philippines forged a
FACTS: construction agreement wherein Roblecor committed
to construct and finish on Dec. 31, 1989, Chung Fu’s Hence, this petition to the Supreme Court
industrial/factory complex in Tanawan, Cavite in
consideration of P42M ISSUES:
1. WON the subject arbitration award is
It was stipulated also that in the event of disputes, beyond the ambit of the court’s power of judicial
the parties will be subjected to an arbitration review
resolution, wherein the arbitrator will be chosen by 2. WON respondent court committed grave
both parties abuse of discretion

Apart from the construction agreement, the parties HELD/RATIO:

also entered into ancillary contracts for the No
construction of a dormitory and support facilities with
a contract price of 3, 875, 285.00 to be completed It’s stated explicitly under Art. 2044 of the Civil Code
on or before October 31, 1989 and the other dated that the finality of the arbitrator’s award is not
Aug. 12, 1989 for the installation of electrical, water absolute and without exceptions
and hydrant systems at the plant site, priced at
12.1M and requiring completion thereof one month Where the conditions described in Arts. 2038, 2039
after civil works have been finished and 2040 applicable to both compromises and
arbitrations are obtaining, the arbitrators’ award may
However, Roblecor failed to complete the work be annulled or rescinded.
despite the extension allowed by Chung Fu
Additionally, Sections 24 and 25 of the Arbitration
Subsequently, Chung Fu had to take over the Law provide grounds for vacating, Modifying or
construction when it had become evident that rescinding an arbitrator’s award.
Roblecor was not in a position to fulfill the obligation
Even decisions of administrative agencies which are
Claiming an unsatisfied account of P10, 500, 000 and declared “final” by law are not exempt from judicial
unpaid progress billings of P 2, 370, 179.23, review when so warranted
Roblecor filed a petition for Compulsory Arbitration
with prayer for TRO before respondent RTC , SC finds that Chung Fu has amply made out a case
pursuant to the arbitration clause in the construction where the voluntary arbitrator failed to apply the
agreement terms and provisions of the Construction Agreement
which forms part of the law applicable as between
Chung Fu moved to dismiss the petition and further the parties, thus committing a grave abuse of
prayed for the quashing of the restraining order discretion.

Subsequent negotiations between the parties Furthermore, in granting unjustified extra

eventually led to the formulation of an arbitration compensation to responded for several items, he
agreement which includes that the “decision of the exceeded his powers – all of which would have
arbitrator shall be final and unappealable, therefore, constituted ground for vacating the award under
there shall be no further judicial recourse if either Section 24(d) of the Arbitration Law
party disagrees with the whole or any part of the - Yes
arbitrator’s award”
The refusal to look into the merits of the case,
RTC approved the arbitration agreement and despite prima facie showing of the existence of
Asuncion was appointed as the sole arbitrator grounds warranting judicial review effectively
deprived Chung Fu of their opportunity to prove or
Arbitrator ruled in favor of the contractor Roblecor substantiate their allegations. Such constitutes grave
abuse of discretion.
Chung Fu moved to remand the case for further
hearing and asked for a reconsideration of the Likewise, the Court of Appeals in not giving due
judgment award claiming that Asuncion committed course to the petition, committed grave abuse of
12 instances of grave error by disregarding the discretion.
provisions of the parties’ contract
Respondent courts should not shirk from exercising
RTC denied Chung Fu’s Motion to Remand and their power to review, where under the applicable
approved Roblecor’s Motion for Confirmation of laws and jurisprudence, such power may be rightfully
Award exercised

Chung Fu elevated the case to CA which denied the DECISION: petition granted. Case remanded to the
petition court of origin for further hearing

JORGE GONZALES vs. The case is a consolidation of two petitions rooted in

HON. OSCAR B. PIMENTEL and CLIMAX-ARIMCO the same disputed Addendum Contract entered into
MINING CORPORATION by the parties.

FACTS
In GR No. 161957, the Court had held that the DENR Arbitration may even be ordered in the same suit
Panel of Arbitrators had no jurisdiction over the brought upon a matter covered by an arbitration
complaint for the annulment of the Addendum agreement even without waiting for the outcome of
Contract on grounds of fraud and violation of the the issue of the validity of the arbitration agreement.
Constitution and that the action should have been
brought before the regular courts as it involved Art. 8 of the UNCITRAL Model Law states that where
judicial issues. a court before which an action is brought in a matter
which is subject of an arbitration agreement refers
Both parties filed separate motions for the parties to arbitration, the arbitral proceedings
reconsideration. Gonzales averred that the DENR may proceed even while the action is pending.
Panel of Arbitrators has jurisdiction because the case
involves a mining dispute that properly falls within ISSUE
the ambit of the Panel’s authority. On the other Whether the question of validity of the Addendum
hand, Climax Mining Ltd., et al., citing American Contract affects the applicability or enforceability of
jurisprudence and the UNCITRAL Model Law, argued the arbitration clause contained therein
that the arbitration clause in the Addendum Contract
should be treated as an agreement independent of HELD
the other terms of the contract, and that a claimed NO. The doctrine of separability, or severability as
rescission of the main contract does not avoid the other writers call it, enunciates that an arbitration
duty to arbitrate. agreement is independent of the main contract. The
arbitration agreement is to be treated as a separate
In GR No. 167994, Gonzales challenged the order of agreement and the arbitration agreement does not
the RTC requiring him to proceed with the arbitration automatically terminate when the contract of which it
proceedings which was sought by Climax-Arimco is part comes to an end.
while the complaint for the nullification of the
Addendum Contract was pending before the DENR The separability of the arbitration agreement is
Panel of Arbitrators. Gonzales argued that the especially significant to the determination of whether
Addendum Contract was void, thus the arbitration the invalidity of the main contract also nullifies the
clause contained therein was likewise void ab initio. arbitration clause. Indeed, the doctrine denotes that
He contended that any issue as to the nullity, the invalidity of the main contract, also referred to
inoperativeness, or incapability of performance of the as the container contract, does not affect the validity
arbitration clause/agreement raised by one of the of the arbitration agreement. Irrespective of the fact
parties to the alleged arbitration agreement must be that the main contract is invalid, the arbitration
determined by the court prior to referring them to clause/agreement still remains valid and enforceable.
arbitration.
The separability of the arbitration clause is confirmed
However, Climax-Arimco countered that Gonzales’s in Art. 16(1) of the UNCITRAL Model Law and Art.
attack on or repudiation of the Addendum Contract is 21(2) of the UNCITRAL Arbitration Rules.
not a ground to deny effect to the arbitration clause
in the Contract. Section 2, par. 1 of RA 876 itself The SC held in Manila Electric Co. v. Pasay
considers the arbitration stipulation an independent Transportation Co. that a submission to arbitration is
contract in its own right whose enforcement may be a contract. A clause in a contract providing that all
prevented only on grounds which legally make the matters in dispute between the parties shall be
arbitration agreement itself revocable. referred to arbitration is a contract, and in Del Monte
Corporation-USA v. Court of Appeals, that “[t]he
Likewise, Climax-Arimco emphasized that in Sec. 24 provision to submit to arbitration any dispute arising
of RA 9285, the court, instead of trying the case, therefrom and the relationship of the parties is part
may, on request of either or both parties, refer the of that contract and is itself a contract.
parties to arbitration, unless it finds that the
arbitration agreement is null and void, inoperative or As a rule, contracts are respected as the law
incapable of being performed. between the contracting parties and produce effect
as between them, their assigns and heirs.”
Fiesta World Mall vs Lindberg “energy fees” to be computed in accordance with the
the Contract,
Fiesta World Mall Corporation, petitioner, owns and
operates Fiesta World Mall respondent, is a
corporation that builds and operates power plants.
The complaint further alleges that respondent
constructed the power plant in Lipa City at a cost of
respondent filed with the Regional Trial Court (RTC), about P130,000,000.00. the power plant became
a Complaint against petitioner,. The complaint operational and started supplying power/electricity to
alleges , petitioner and respondent executed a petitioner’s shopping mall in LipaCity. respondent
contract, Under this Contract, respondent will started billing petitionerpetitioner’s unpaid obligation
construct, at its own cost, and operate as owner a amounted to P15,241,747.58, exclusive of interest.
power plant,and to supply petitioner However, petitioner questioned the said amount and
power/electricity at its shopping mall in Lipa City. refused to pay despite respondent’s repeated
Petitioner, on the other hand, will pay respondent demands.
 the appellate court rendered its Decision dismissing
petitioner specifically denied the allegations in the the petition and affirming the challenged Orders of
complaint, claiming that respondent failed to fulfill its the trial court.
obligations under the Contract by failing to supply all
its power/fuel needs. From November 10, 1998until Petitioner’s Motion for Reconsideration of the above
May 21, 1999, petitioner personally shouldered the Decision was likewise denied by the appellate court .
cost of fuel. Petitioner also disputed the amount of
energy fees specified in the billings made by Hence, the instant Petition for Review on Certiorari.
respondent because the latter failed to monitor,
measure, and record the quantities of electricity
deliveredby taking photographs of the electricity The sole issue for our resolution is whether the filing
meter reading prior to the issuance of its invoices with the trial court of respondent’s complaint is
and billings, also in violation of the Contract.[5] premature.
Moreover, in the computation of the electrical
billings, the minimum off-take of energy (E2) was Paragraph 7.4 of the Contract, quoted earlier,
based solely on theprojected consumption as mandates that should petitioner dispute any amount
computedby respondent. However, based on of energy fees in the invoice and billings made by
petitioner’s actual experience, it could not consume respondent, the same “shall be resolved by
the energy pursuant to the minimum off-take even if arbitration of three (3) persons, one (1) by mutual
it kept open all its lights and operated all its choice, while the other two (2) to be each chosen by
machinery and equipment for twenty-four hours a the parties themselves.” The parties, in
day for a month. This fact was admitted by incorporating such agreement in their Contract,
respondent. While both parties had discussions on expressly intended that the said matter in dispute
the questioned billings, however, “there were no must first be resolved by an arbitration panel before
earnest efforts to resolve the differences in it reaches the court. They made such arbitration
accordance with the arbitration clause provided for in mandatory.
the Contract.”
It is clear from the records that petitioner disputed
the amount of energy fees demanded by respondent.
Finally, as a special affirmative defense in its answer, However, respondent, without prior recourse to
petitioner alleged that respondent’s filing of the arbitration as required in the Contract, filed directly
complaint ispremature and should be dismissed on with the trial court its complaint, thus violating the
the ground of non-compliance with paragraph 7.4 of arbitration clause in the Contract.
the Contract which provides:
It bears stressing that such arbitration agreement is
the disputed amount shall be resolved by arbitration the law between the parties. Since that agreement
of three (3) persons, one (1) by mutual choice, while is binding between them, they are expected to abide
the other two (2) to be each chosen by the parties by it in good faith Thus, it is well within petitioner’s
themselves right to demand recourse to arbitration.

Thereafter, petitioner filed a Motion to Set Case for respondent cannot directly seek judicial recourse by
Preliminary Hearing on the ground that respondent filing an action against petitioner simply because
violated the arbitration clause , thereby rendering its both failed to settle their differences amicably.
cause of action premature. Suffice it to state that there is nothing in the
Contract providing that the parties may dispense
with the arbitration clause. Article XXI on
This was opposed by respondent, claiming that jurisdiction cited by respondent, i.e., that “the
paragraph 7.4 of the Contract on arbitration is not parties hereto submit to the exclusive jurisdiction of
the provision applicable to this case; and that since the proper courts of Pasig City” merely provides for
the parties failed to settle their dispute, then the venue of any action arising out of or in
respondent may resort to court action pursuant to connection with the stipulations of the parties in the
paragraph17.2 of the same Contract which provides: Contract.

17.2 Amicable Settlement Moreover, the computation of the energy fees

in the event that a settlement of any such dispute or disputed by petitioner also involves technical matters
difference is not reached, then the provisions of that are better left to an arbitration panel who has
Article XXI shall apply which submits the action expertise in those areas. Alternative dispute
arising from the agreement to court resolution methods or ADRs – like arbitration,
mediation, negotiation and conciliation – are
the trial court denied petitioner’s motion for lack of encouraged by this Court. By enabling the parties
merit. to resolve their disputes amicably, they provide
solutions that are less time-consuming, less tedious,
less confrontational, and more productive of goodwill
and lasting relationships.[9] To brush aside such
agreement providing for arbitration in case of
disputes between the parties would be a step arbitration proceeding has been pursued and
backward. completed, then the trial court may confirm the
award made by the arbitration panel.[12]
In this connection, since respondent has
already filed a complaint with the trial court without
prior recourse to arbitration, the proper procedure to In sum, we hold that the Court of Appeals
enable an arbitration panel to resolve the parties’ erred in disregarding the arbitration clause in the
dispute pursuant to their Contract is for the trial parties’ Contract.
court to stay the proceedings.[11] After the
G.R. No. 211504
FEDERAL BUILDERS, INC., Petitioner Federal appealed the award to the CA insisting that
vs POWER FACTORS, INC., Respondent the CIAC had no jurisdiction to hear and decide the
case; and that the amounts thereby awarded to
Facts Power lacked legal and factual bases.
Federal was the general contractor of the Bullion Mall
under a construction agreement with Bullion The CA affirmed the CIAC's decision with
Investment and Development Corporation (BIDC). In modification. As modified, FEDERAL BUILDERS, INC.
2004, Federal engaged respondent Power Factors is ordered to pay POWER FACTORS, an amount of
Inc. (Power) as its subcontractor for the electric P.7, 140,728.07.
works at the Bullion Mall and the Precinct Building for
₱l8,000,000.00. Issue
The issues to be resolved are:
On February 19, 2008, Power sent a demand letter (a) whether the CA erred in upholding CIAC's
to Federal claiming the unpaid amount of jurisdiction over the present case; and
₱ll,444,658.97 for work done by Power for the (b) whether the CA erred in holding that Federal was
Bullion Mall and the Precinct Building. Federal replied liable to pay Power the amount of ₱7,140,728.07.
that its outstanding balance under the original
contract only amounted to ₱1,641,513.94, and that
the demand for payment for work done by Power
after June 21, 2005 should be addressed directly to Ruling of the Court
BIDC. Nonetheless, Power made several demands on a. The parties had an effective agreement to
Federal to no avail. submit to voluntary arbitration; hence, the CIAC had
jurisdiction
On October 29, 2009, Power filed a request for The need to establish a proper arbitral machinery to
arbitration in the CIAC invoking the arbitration settle disputes expeditiously was recognized by the
clause of the Contract of Service which states that Government in order to promote and maintain the
all disputes, controversies or differences, which may development of the country's construction industry.
arise between the parties herein, out of or in relation With such recognition came the creation of the CIAC
to or in connection with this Agreement, or for through Executive Order No. 1008 (E.O. No. 1008),
breach thereof shall be settled by the Construction also known as The Construction Industry Arbitration
Industry Arbitration Commission (CIAC) which shall Law. Section 4 of E.O. No. 1008 provides:
have original and exclusive jurisdiction over the
aforementioned disputes. Sec. 4. Jurisdiction. - The CIAC shall have original
and exclusive jurisdiction over disputes arising from,
Federal, counsel (Domingo, Dizon, Leonardo and or connected with, contracts entered into by parties
Rodillas Law Office), moved to dismiss the case on involved in construction in the Philippines, whether
the ground that CIAC had no jurisdiction over the the dispute arises before or after the completion of
case inasmuch as the Contract of Service between the contract, or after the abandonment or breach
Federal and Power had been a mere draft that was thereof. These disputes may involve government or
never finalized or signed by the parties. Federal private contracts. For the Board to acquire
contended that in the absence of the agreement for jurisdiction, the parties to a dispute must agree to
arbitration, the CIAC had no jurisdiction to hear and submit the same to voluntary arbitration.
decide the case.
b. Amounts as modified by the CA are correct
On February 8, 2010, the CIAC issued an order The amounts as modified by the CA. Power did not
setting the case for hearing, and directing that sufficiently establish that the change or increase of
Federal's motion to dismiss be resolved after the the cost of materials and labor was to be separately
reception of evidence of the parties. determined and approved by both parties as
provided under Article 1724 of the Civil Code. As
Federal did not thereafter participate in the such, Federal should not be held liable for the labor
proceedings until the CIAC rendered the Final Award cost escalation. The Court AFFIRMS the decision
dated May 12, 2010, disposing to pay claimant promulgated on August 12, 2013; and ORDERS the
Power Factors an amount of ₱9 ,369,238.87 petitioner to pay the costs of suit.
BF Corporation v. Court of Appeals et.al. ROMERO, J.:
G.R. No. 120105
March 27, 1998 FACTS:
BF Corporation (BF) and respondent Shangri-La In its sur-rejoinder, Shang pointed out the
Properties, Inc. (Shang) entered into the 1st significance of the petitioners admission of the due
agreement whereby Shang engaged BF to construct execution of the Articles of Agreement. It was shown
the main structure of the EDSA Plaza Project – the that the Signature of Colayco (Shang President) and
EDSA Shangri-La Mall – in Mandaluyong City. Bayani Fernando (BF President) was in such
agreement and was even duly notarized.
While the construction work was in progress Shang
once again hired BF for the expansion of the project, The RTC found that the arbitration clause did exist,
the 2nd agreement. however the lower court denied motion to suspend
proceedings and ruled in favor of BF (see reasons
BF incurred delay in the construction work that SPI below)
considered as serious and substantial. BF contended
that they had faithfully complied with the first This was because despite the fact there was an
agreement until a fire broke out on [Nov 30, 1990] arbitration agreement, the Conditions of Contract
damaging phase 1 of the project, Hence SPI only the initials of Bayani Fernando was present,
proposed the renegotiation of the agreement while no signature on the part of Shang.
between them.
There were no singed documents to prove Shang’s
[May 30, 1991] – Parties entered into another claims thus there is serious doubt to the validity of
agreement named “Agreement for the Execution of the arbitration clause found in the Conditions of
Builders Work for the EDSA Plaza Project” (3rd Contract
agreement) that would cover the construction work
on said project as of [May 1, 1991] until its eventual Assuming that the arbitration clause was valid and
completion. binding, it was too late for Shang to invoke
arbitration because:
[July 14, 1993] BF filed with the RTC of Pasig a  the demand should have been made before
complaint for the collection of the balance due under the time of final payment except as
the construction agreement. Named Defendants otherwise expressly stipulated in the
therein were Shang and members of its board of contract
directors – A. Ramos, Colayco, Obles, Lanuza Jr.,  the court found that the project was to be
Licauco & B.Ramos. completed on [Oct 31, 1991] and any
delays would incur 80K for each day of
[Aug 3, 1993] Shang and its co-defendants filed a delay from [Nov 1,1991] with liquefied
motion to suspend proceedings instead of filing an damages up to a maximum of 5% of the
answer. total contract price
 the court found out that the project was
Motion was anchored on the defendants allegation completed in accordance with the
that the formal trade contract of the the construction agreement and Shang had took possession
project provided for a clause requiring prior resort to and started operations thereof by opening
arbitration before judicial intervention. the same to the public in [Nov, 1911].
 BF billed Shang the total amount of
[Aug 4, 1993] Shang submitted a copy of the P110,883,101.52 contained in a demand
condition of the contract containing arbitration clause letter sent on Feb 17, 1993. Instead of
that it failed to attach its motion to suspend paying the amound demanded, SPI set up
proceedings. its own claim of P220,000,000.00 and
scheduled a conference on that claim for
BF opposed said motion stating that there was no July 12, 1993. The conference took place
formal contract between the parties although they but was futile.
entered into an agreement. They emphasized that
the agreement did not provide for an arbitration thus Shang filed a motion for reconsideration but was
cannot deprive the court of its jurisdiction. denied because of lack of merit and directed the
other defendants to file their responsive pleading
Shang insisted that there was an arbitration clause in within the reglementary period.
the existing contract between them. It alleged that
the suspension would not deprive the court of its Instead of filing an answer to the complaint, SPI filed
jurisdiction and would expedite the settlement a petition for Certiorari under Rule 65 before the
proceedings rather than delay it. Court of appeals.

In a rejoinder, BF reiterated that there was no The Court of Appeals granted the petition and
arbitration clause in the contract bewtween the annulled and set aside the orders and stayed the
parties. It averred that if there was an arbitration proceedings in the lower court.
clause, suspension of the proceedings was no longer
proper and that defendants should be declared in According to the contract the project manager and
default for failure to answer within the reglementary the contractor should coordinate with the owner,
period. should there be failure to resolve differences, dispute
shall be submitted for arbitration.
Although it was only the initials of Bayani Fernando from several different writings which do not conflict
and De La Cruz present and none from Shang, it with each other and which, when connected, show
does not affect its effectivity. BF categorically the parties, subject matter, terms and consideration,
admitted that the document is the agreement as in contracts entered into by correspondence.
bewtween the parties, the initial signature of BF
representative to signify conformity to arbitration is A contract may be encompassed in several
no longer necessary. The parties should be allowed instruments even though every instrument is not
to submit their dispute to arbitration in accordance signed by the parties, since it is sufficient if the
with their agreement. unsigned instruments are clearly identified or
Demand for arbitration was made within a referred to and made part of the signed instrument
reasonable time after the dispute has arisen and or instruments. Similarly, a written agreement of
attempts to settle amicably has failed. This was which there are two copies, one signed by each of
evidenced by the fact that such demands were acted the parties, is binding on both to the same extent as
upon only months. Jul 12 conference > Jul 14 Shang though there had been only one copy of the
complaint against BF > Aug 13 Request for agreement and both had signed it.
arbitration.

Hence the petition before the Supreme Court.

ISSUE:
WON the parties entered into an arbitrary agreement

HELD:
Yes, according to Sec 4 of R.A. 876 a
contract to arbitrate a controversy thereafter arising
between the parties, as well as a submission to
arbitrate an existing controversy, shall be in writing
and subscribed by the party sought to be charged, or
by his lawful agent.
The making of a contract or submission for
arbitration described in section two hereof, providing
for arbitration of any controversy, shall be deemed a
consent of the parties of the province or city where
any of the parties resides, to enforce such contract
of submission. (Underscoring supplied.)

The formal requirements of an agreement to

arbitrate are therefore the following: (a) it must be
in writing and (b) it must be subscribed by the
parties or their representatives. There is no denying
that the parties entered into a written contract that
was submitted in evidence before the lower court. To
subscribe means to write underneath, as ones name;
to sign at the end of a document. That word may
sometimes be construed to mean to give consent to
or to attest.

The Court finds that, upon a scrutiny of the records

of this case, these requisites were complied with in
the contract in question. The Articles of Agreement,
which incorporates all the other contracts and
agreements between the parties, was signed by
representatives of both parties and duly notarized.
The failure of the private respondents representative
to initial the `Conditions of Contract would therefore
not affect compliance with the formal requirements
for arbitration agreements because that particular
portion of the covenants between the parties was
included by reference in the Articles of Agreement.

Petitioners contention that there was no arbitration

clause because the contract incorporating said
provision is part of a hodge-podge document, is
therefore untenable. A contract need not be
contained in a single writing. It may be collected