ADR Case Digests (2nd Batch) Atty.

Fajarito

of hydraulic press from that agreed upon but it had not delivered several equipment
parts already paid for.

1. KOREA TECHNOLOGIES CO. LTD,

., vs.HON. ALBERTO A. LERMA
andPACIFIC GENERAL STEEL MANUFACTURING CORPORATION, G.R. No. 143581
Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean corporation
which is engaged in the supply and installation of Liquefied Petroleum Gas (LPG)
Cylinder manufacturing plants, while private respondent Pacific General Steel
Manufacturing Corp. (PGSMC) is a domestic corporation.
On March 5, 1997, PGSMC and KOGIES executed a Contract [1] 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[2] 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 plants production of the 11-kg. LPG cylinder samples. Thus, the total
contract price amounted to USD 1,530,000.
On October 14, 1997, PGSMC entered into a Contract of Lease [3] with
Worth Properties, Inc. (Worth) for use of Worths 5,079-square meter property with
a 4,032-square meter warehouse building to house the LPG manufacturing plant.
Subsequently, the machineries, equipment, and facilities for the manufacture of LPG
cylinders were shipped, delivered, and installed in the Carmona plant. PGSMC paid
KOGIES USD 1,224,000.
However, gleaned from the Certificate [4] executed by the parties on January
22, 1998, 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.
For the remaining balance of USD306, PGSMC issued two postdated
checks. When KOGIES deposited the checks, these were dishonored for the
reason PAYMENT STOPPED. Thus, KOGIES sent a demand letter[6] to PGSMC
threatening criminal action for violation of Batas Pambansa Blg. 22 in case of
nonpayment. On the same date, the wife of PGSMCs President faxed a letter to
KOGIES President. She complained that not only did KOGIES deliver a different brand

On May 14, 1998, PGSMC replied that the two checks it issued KOGIES
were fully funded but the payments were stopped for reasons previously made
known to KOGIES.[7]
On June 1, 1998, 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.
On June 15, 1998, KOGIES wrote PGSMC informing the latter that PGSMC
could not unilaterally rescind their contract nor dismantle and transfer the
machineries and equipment on mere imagined violations by KOGIES. It also insisted
that their disputes should be settled by arbitration as agreed upon in Article 15, the
arbitration clause of their contract.
Thus, on July 1, 1998, KOGIES instituted an Application for Arbitration
before the Korean Commercial Arbitration Board (KCAB) in Seoul, Korea pursuant to
Art. 15 of the Contract as amended.
On July 3, 1998, KOGIES filed a Complaint for Specific Performance, against
PGSMC before the Muntinlupa City Regional Trial Court (RTC). The RTC granted a
temporary restraining order (TRO) on July 4, 1998, which was subsequently
extended until July 22, 1998.
In its complaint, KOGIES alleged that PGSMC had initially admitted that the
checks that were stopped were not funded but later on claimed that it stopped
payment of the checks for the reason that their value was not received as the
former allegedly breached their contract by altering the quantity and lowering the
quality of the machinery and equipment installed in the plant and failed to make the
plant operational although it earlier certified to the contrary as shown in a January
22, 1998 Certificate. Likewise, KOGIES averred that PGSMC violated Art. 15 of their
Contract, as amended, by unilaterally rescinding the contract without resorting to
arbitration. KOGIES also asked that PGSMC be restrained from dismantling and
transferring the machinery and equipment installed in the plant which the latter
threatened to do on July 4, 1998.
On July 9, 1998, PGSMC filed an opposition to the TRO arguing that
KOGIES was not entitled to the TRO since Art. 15, the arbitration clause, was null
and void for being against public policy as it ousts the local courts of jurisdiction
over the instant controversy.
On July 17, 1998, PGSMC filed its Answer with Compulsory
Counterclaim[9] asserting that it had the full right to dismantle and transfer the

Anchoriz, Mariano, & Modesto

machineries and equipment because it had paid for them in full as stipulated in the
contract; that KOGIES was not entitled to the PhP 9,000,000 covered by the checks
for failing to completely install and make the plant operational; and that KOGIES was
liable for damages amounting to PhP 4,500,000 for altering the quantity and
lowering the quality of the machineries and equipment.
RTC (July 23, 1998): The RTC issued an Order denying the application for a
writ of preliminary injunction, reasoning that PGSMC had paid KOGIES USD
1,224,000, the value of the machineries and equipment as shown in the contract
such that KOGIES no longer had proprietary rights over them. That Art. 15 of the
Contract as amended was invalid as it tended to oust the trial court or any other
court jurisdiction over any dispute that may arise between the parties. KOGIES
prayer for an injunctive writ was denied.
On July 29, 1998, KOGIES filed its Reply to Answer and Answer to
Counterclaim. KOGIES denied it had altered the quantity and lowered the quality of
the machinery, equipment, and facilities it delivered to the plant. It averred that
whatever was unfinished was PGSMCs fault since it failed to procure raw materials
due to lack of funds.
KOGIES, on August 4, 1998, filed its Motion for Reconsideration of the July
23, 1998 Order denying its application for an injunctive writ.
In the meantime, PGSMC filed a Motion for Inspection of Things to
determine whether there was indeed alteration of the quantity and lowering of
quality of the machineries and equipment, and whether these were properly
installed. KOGIES opposed the motion positing that the queries and issues raised in
the motion for inspection fell under the coverage of the arbitration clause in their
contract.
RTC (On September 21, 1998) issued an Order:
(1) granting PGSMCs motion for inspection;
(2) denying KOGIES motion for reconsideration of the July 23, 1998 RTC
Order; and
(3) denying KOGIES motion to dismiss PGSMCs compulsory counterclaims
as these counterclaims fell within the requisites of compulsory counterclaims.
On October 2, 1998, KOGIES filed an Urgent Motion for
Reconsideration[17] of the September 21, 1998 RTC Order granting inspection of the
plant and denying dismissal of PGSMCs compulsory counterclaims.
Ten days after, on October 12, 1998, without waiting for the resolution of
its October 2, 1998 urgent motion for reconsideration, KOGIES filed before the Court
of Appeals (CA) a petition for certiorari seeking annulment of the July 23, 1998 and

September 21, 1998 RTC Orders and praying for the issuance of writs of prohibition,
mandamus, and preliminary injunction to enjoin the RTC and PGSMC from
inspecting, dismantling, and transferring the machineries and equipment in the
Carmona plant, and to direct the RTC to enforce the specific agreement on
arbitration to resolve the dispute.
The RTC denied KOGIES urgent motion for reconsideration and directed the
Branch Sheriff to proceed with the inspection of the machineries and equipment in
the plant on October 28, 1998.[19]
CA: rendered the assailed Decision 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.
On the issue of nonpayment of docket fees and non-attachment of a
certificate of non-forum shopping by PGSMC, the CA held that the counterclaims of
PGSMC were compulsory ones and payment of docket fees was not required since
the Answer with counterclaim was not an initiatory pleading. For the same reason,
the CA said a certificate of non-forum shopping was also not required. (hindi ko
nakita sa facts na may ganitong issue)
That the petition for certiorari had been filed prematurely since KOGIES
did not wait for the resolution of its urgent motion for reconsideration of the
September 21, 1998 RTC Order which was the plain, speedy, and adequate remedy
available.According to the CA, the RTC must be given the opportunity to correct any
alleged error it has committed, and that since the assailed orders were
interlocutory, these cannot be the subject of a petition for certiorari.
Issues:
1) WON the ownership of machinery and facilities as a question of fact is
beyond petition for certiorari;

Anchoriz, Mariano, & Modesto

2) WON arbitration clause in Article 15 of the contract is null and void for
being contrary to public policy and for ousting the courts of jurisdiction;
3) WON counterclaims do not need payment of docket fees and certification
of non-forum shopping;
4) WON the petition was filed prematurely without waiting for the
resolution of the motion for reconsideration;
5) WON the two orders dated July 23 and September 21 1998 not proper
subjects of certiorari and prohibition for being interlocutory in nature;
The rules on the payment of docket fees for counterclaims
and cross claims were amended effective August 16, 2004
On July 17, 1998, at the time PGSMC filed its Answer incorporating its
counterclaims against KOGIES, it was not liable to pay filing fees for said
counterclaims being compulsory in nature. We stress, however, that effective August
16, 2004 under Sec. 7, Rule 141, as amended by A.M. No. 04-2-04-SC, docket fees
are now required to be paid in compulsory counterclaim or cross-claims.
As to the failure to submit a certificate of forum shopping, PGSMCs Answer
is not an initiatory pleading which requires a certification against forum shopping
under Sec. 5[24] of Rule 7, 1997 Revised Rules of Civil Procedure. It is a responsive
pleading, hence, the courts a quo did not commit reversible error in denying KOGIES
motion to dismiss PGSMCs compulsory counterclaims.
Interlocutory orders proper subject of certiorari
The general rule is that interlocutory orders cannot be challenged by an
appeal. . However, where the assailed interlocutory order was issued with grave
abuse of discretion or patently erroneous and the remedy of appeal would not
afford adequate and expeditious relief, the Court allows certiorari as a mode of
redress.
Prematurity of the petition before the CA
Neither do we think that KOGIES was guilty of forum shopping in filing the
petition for certiorari. Note that KOGIES motion for reconsideration of the July 23,
1998 RTC Order which denied the issuance of the injunctive writ had already been
denied. Thus, KOGIES only remedy was to assail the RTCs interlocutory order via a
petition for certiorari under Rule 65.

The September 21, 1998 RTC Order directing the branch sheriff to inspect
the plant, equipment, and facilities when he is not competent and knowledgeable
on said matters is evidently flawed and devoid of any legal support. Indeed, there is
real and imminent threat of irreparable destruction or substantial damage to
KOGIES equipment and machineries. We find the resort to certiorari based on the
gravely abusive orders of the trial court sans the ruling on the October 2,
1998 motion for reconsideration to be proper.
The Core Issue: Article 15 of the Contract
Article 15. Arbitration.All disputes, controversies, or differences which may
arise between the parties, out of or in relation to or in connection with this
Contract or for the breach thereof, shall finally be settled by arbitration in
Seoul, Korea in accordance with the Commercial Arbitration Rules of the
Korean Commercial Arbitration Board. The award rendered by the
arbitration(s) shall be final and binding upon both parties concerned.
Petitioner claims the RTC and the CA erred in ruling that the arbitration clause is null
and void.
Petitioner is correct.
Established in this jurisdiction is the rule that the law of the place where the
contract is made governs. Lex loci contractus. The contract in this case was
perfected here in the Philippines. Therefore, our laws ought to govern. Nonetheless,
Art. 2044 of the Civil Code sanctions the validity of mutually agreed arbitral clause
or the finality and binding effect of an arbitral award. Art. 2044 provides, Any
stipulation that the arbitrators award or decision shall be final, is valid, without
prejudice to Articles 2038, 2039 and 2040. (Emphasis supplied.)
Arts. 2038,[31] 2039,[32] and 2040[33] abovecited refer to instances where a
compromise or an arbitral award, as applied to Art. 2044 pursuant to Art. 2043,
[34]
may be voided, rescinded, or annulled, but these would not denigrate the finality
of the arbitral award.
The arbitration clause was mutually and voluntarily agreed upon by the
parties. It has not been shown to be contrary to any law, or against morals, good
customs, public order, or public policy. There has been no showing that the parties
have not dealt with each other on equal footing. We find no reason why the
arbitration clause should not be respected and complied with by both parties.
Arbitration clause not contrary to public policy
The arbitration clause which stipulates that the arbitration must be done
in Seoul, Korea in accordance with the Commercial Arbitration Rules of the KCAB,

Anchoriz, Mariano, & Modesto

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. Having
said that the instant arbitration clause is not against public policy, we come to the
question on what governs an arbitration clause specifying that in case of any dispute
arising from the contract, an arbitral panel will be constituted in a foreign country
and the arbitration rules of the foreign country would govern and its award shall be
final and binding.
RA 9285 incorporated the UNCITRAL Model law
to which we are a signatory
For domestic arbitration proceedings, we have particular agencies to
arbitrate disputes arising from contractual relations. In case a foreign arbitral body is
chosen by the parties, the arbitration rules of our domestic arbitration bodies would
not be applied. As signatory to the Arbitration Rules of the UNCITRAL Model Law on
International Commercial Arbitration[41] of the United Nations Commission on
International Trade Law (UNCITRAL) in the New York Convention on June 21, 1985,
the Philippines committed itself to be bound by the Model Law. We have even
incorporated the Model Law in Republic Act No. (RA) 9285, otherwise known as
the Alternative Dispute Resolution Act of 2004 . While RA 9285 was passed only in
2004, it nonetheless applies in the instant case since it is a procedural law which has
a retroactive effect. Likewise, KOGIES filed its application for arbitration before the
KCAB on July 1, 1998 and it is still pending because no arbitral award has yet been
rendered. Thus, RA 9285 is applicable to the instant case. Well-settled is the rule
that procedural laws are construed to be applicable to actions pending and
undetermined at the time of their passage, and are deemed retroactive in that
sense and to that extent. As a general rule, the retroactive application of procedural
laws does not violate any personal rights because no vested right has yet attached
nor arisen from them.[42]
Among the pertinent features of RA 9285 applying and incorporating the
UNCITRAL Model Law are the following:
(1) The RTC must refer to arbitration in proper cases
Under Sec. 24, the RTC does not have jurisdiction over disputes that are
properly the subject of arbitration pursuant to an arbitration clause, and mandates
the referral to arbitration in such cases.
(2) Foreign arbitral awards must be confirmed by the RTC
The recognition and enforcement of such arbitral awards shall be filed with
the Regional Trial Court in accordance with the rules of procedure to be
promulgated by the Supreme Court. that foreign arbitral awards when confirmed by
the RTC are deemed not as a judgment of a foreign court but as a foreign arbitral

award, and when confirmed, are enforced as final and executory decisions of our
courts of law.
Thus, it can be gleaned that the concept of a final and binding arbitral
award is similar to judgments or awards given by some of our quasi-judicial bodies,
like the National Labor Relations Commission and Mines Adjudication Board, whose
final judgments are stipulated to be final and binding, but not immediately
executory in the sense that they may still be judicially reviewed, upon the instance
of any party.Therefore, the final foreign arbitral awards are similarly situated in that
they need first to be confirmed by the RTC.
(3) The RTC has jurisdiction to review foreign arbitral awards
The recognition and enforcement of such arbitral awards shall be filed with
the Regional Trial Court in accordance with the rules of procedure to be
promulgated by the Supreme Court.
(4) Grounds for judicial review different in domestic and foreign arbitral awards
The differences between a final arbitral award from an international or
foreign arbitral tribunal and an award given by a local arbitral tribunal are the
specific grounds or conditions that vest jurisdiction over our courts to review the
awards.
For foreign or international arbitral awards which must first be confirmed
by the RTC, the grounds for setting aside, rejecting or vacating the award by the RTC
are provided under Art. 34(2) of the UNCITRAL Model Law.
For final domestic arbitral awards, which also need confirmation by the RTC
pursuant to Sec. 23 of RA 876[44] and shall be recognized as final and executory
decisions of the RTC, [45] they may only be assailed before the RTC and vacated on the
grounds provided under Sec. 25 of RA 876.[46]
(5) RTC decision of assailed foreign arbitral award appealable
Sec. 46 of RA 9285 provides for an appeal before the CA as the remedy of
an aggrieved party in cases where the RTC sets aside, rejects, vacates, modifies, or
corrects an arbitral award. Thereafter, the CA decision may further be appealed or
reviewed before this Court through a petition for review under Rule 45 of the Rules
of Court.
PGSMC has remedies to protect its interests
Thus, based on the foregoing features of RA 9285, PGSMC must submit to
the foreign arbitration as it bound itself through the subject contract. While it may
have misgivings on the foreign arbitration done in Korea by the KCAB, it has
available remedies under RA 9285. Its interests are duly protected by the law which

Anchoriz, Mariano, & Modesto

requires that the arbitral award that may be rendered by KCAB must be confirmed
here by the RTC before it can be enforced.
With our disquisition above, petitioner is correct in its contention that an
arbitration clause, stipulating that the arbitral award is final and binding, does not
oust our courts of jurisdiction as the international arbitral award, the award of
which is not absolute and without exceptions, is still judicially reviewable under
certain conditions provided for by the UNCITRAL Model Law on ICA as applied and
incorporated in RA 9285.
Finally, it must be noted that there is nothing in the subject Contract which
provides that the parties may dispense with the arbitration clause.
Unilateral rescission improper and illegal
A party may not unilaterally rescind or terminate the contract for whatever
cause without first resorting to arbitration. The act of treating a contract as
rescinded on account of infractions by the other contracting party is valid albeit
provisional as it can be judicially assailed, is not applicable to the instant case on
account of a valid stipulation on arbitration. Where an arbitration clause in a
contract is availing, neither of the parties can unilaterally treat the contract as
rescinded since whatever infractions or breaches by a party or differences arising
from the contract must be brought first and resolved by arbitration, and not through
an extrajudicial rescission or judicial action.
Corollarily, the trial court gravely abused its discretion in granting PGSMCs
Motion for Inspection of Things on September 21, 1998, as the subject matter of the
motion is under the primary jurisdiction of the mutually agreed arbitral body, the
KCAB in Korea.
Issue on ownership of plant proper for arbitration
It is settled that questions of fact cannot be raised in an original action for certiorari.
[49]
Whether or not there was full payment for the machineries and equipment and
installation is indeed a factual issue prohibited by Rule 65.
However, what appears to constitute a grave abuse of discretion is the order of the
RTC in resolving the issue on the ownership of the plant when it is the arbitral body
(KCAB) and not the RTC which has jurisdiction and authority over the said issue. The
RTCs determination of such factual issue constitutes grave abuse of discretion and
must be reversed and set aside.
PGSMC to preserve the subject equipment and machineries

Finally, while PGSMC may have been granted the right to dismantle and
transfer the subject equipment and machineries, it does not have the right to
convey or dispose of the same considering the pending arbitral proceedings to settle
the differences of the parties. PGSMC therefore must preserve and maintain the
subject equipment and machineries with the diligence of a good father of a
family[51] until final resolution of the arbitral proceedings and enforcement of the
award, if any.
2. ABS-CBN v World Interactive Network Systems Japan Co., Ltd.
GR 169332

February 11, 2008

Corona, J.
Facts: Petitioner ABS-CBN Broadcasting Corporation entered into a licensing
agreement with respondent World Interactive Network Systems (WINS) Japan Co.,
Ltd., a foreign corporation licensed under the laws of Japan. Under the agreement,
WINS was granted the exclusive license to distribute and sublicense the distribution
of the television service known as "The Filipino Channel" (TFC) in Japan. By virtue
thereof, 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, a weekly 35-minute community news program for
Filipinos in Japan, into the TFC programming for two months. ABS-CBN claimed that
these were "unauthorized insertions" constituting a material breach of their
agreement. Consequently, ABS-CBN notified WINS of its intention to terminate the
agreement.
Thereafter, 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 ABS-CBNs prior approval.
ARBITRATOR: The parties appointed a sole arbitrator. The arbitrator found in favor
of WINS. He held that ABS-CBN gave its approval to WINS for the airing of WINS
WEEKLY as shown by a series of written exchanges between the parties. He also
ruled that, had there really been a material breach of the agreement, ABS-CBN
should have terminated the same instead of sending a mere notice to terminate

Anchoriz, Mariano, & Modesto

said agreement. The arbitrator found that ABS-CBN threatened to terminate the
agreement due to its desire to compel WINS to re-negotiate the terms thereof for
higher fees. He further stated that even if WINS committed a breach of the
agreement, the same was seasonably cured.

material to the controversy; that one or more of the arbitrators was disqualified to
act as such under section nine hereof, and willfully refrained from disclosing such
disqualifications or of any other misbehavior by which the rights of any party have
been materially prejudiced; or

COURT OF APPEALS: 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. It alleged serious errors of fact and law and/or grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of the arbitrator.

(d) That the arbitrators exceeded their powers, or so imperfectly executed them,
that a mutual, final and definite award upon the subject matter submitted to them
was not made.

WINS, on the other hand, filed a petition for confirmation of arbitral award before
the RTC of Quezon City. The case in RTC was held in abeyance after ABS-CBN filed a
supplemental petition in CA to enjoin the RTC from further proceeding with the
hearing.
CA dismissed the ABS-CBNs petition for lack of jurisdiction. 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: WON the aggrieved party may avail of a petition for review under Rule 43 or a
petition for certiorari under Rule 65 instead of filing with the RTC a petition to
vacate the award.
Held: Section 24 of RA 876 provides for the specific grounds for a petition to vacate
an award made by an arbitrator:

In cases not falling under any of the aforementioned grounds to vacate an award,
the Court has already made several pronouncements that a petition for review
under Rule 43 or a petition for certiorari under Rule 65 may be availed of in the CA.
Which one would depend on the grounds relied upon by petitioner. In several cases
has the Court pronounced that the proper remedy from the adverse decision of a
voluntary arbitrator, if errors of fact and/or law are raised, is a petition for review
under Rule 43 of the Rules of Court. Thus, ABS-CBNs contention that it may avail of
a petition for review under Rule 43 under the circumstances of this case is correct.
The argument that a petition for certiorari under Rule 65 may also be resorted to is
also correct.

Nevertheless, although ABS-CBNs position on the judicial remedies available to it

was correct, SC sustained the dismissal of its petition by the CA. The remedy ABSCBN availed of, entitled "alternative petition for review under Rule 43 or petition for
certiorari under Rule 65," was wrong. Time and again, it has been ruled that the
remedies of appeal and certiorari are mutually exclusive and not alternative or
successive.

Sec. 24. Grounds for vacating award:

(a) The award was procured by corruption, fraud, or other undue means; or
(b) That there was evident partiality or corruption in the arbitrators or any of them;
or
(c) That the arbitrators were guilty of misconduct in refusing to postpone the
hearing upon sufficient cause shown, or in refusing to hear evidence pertinent and

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.21 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.22 Moreover, it
cannot be availed of where appeal is the proper remedy or as a substitute for a
lapsed appeal.

Anchoriz, Mariano, & Modesto

3. ADAMSON MANAGEMENT CORPORATION vs. CA, APAC HOLDINGS

106879 May 27, 1994

G.R. No.

FACTS: Adamson Management and Lucas Adamson entered into a contract with
APAC Holdings whereby the Adamson sold 99.97% of outstanding common shares
of stocks of Adamson and Adamson, Inc. to the latter for P24,384,600.00 plus the
Net Asset Value (NAV) of Adamson and Adamson, Inc. But the parties failed to agree
on a reasonable Net Asset Value. This prompted them to submit the case for
arbitration in accordance with Republic Act No. 876, otherwise known as the
Arbitration Law. Arbitration Committee rendered a decision finding the NAV of the
Company to be P167,118.00. According to the Committee, the amount of
P5,146,000.00 which was claimed as initial NAV by petitioners, was merely an
estimate of the Company's NAV which was still subject to financial developments.
The basis for this ruling was Clause 3(B) of the Agreement which fixed the said
amount; Clause 1(A) which defined NAV and provided that it should be computed in
accordance with Clause 7(A); Clause 7(A) which directed the auditors to prepare in
accordance with good accounting principles a balance sheet as of cut-off date which
would include the goodwill and intangible assets, the adjustment agreed upon by
the parties, and the cost of redeeming preferred shares; and Clause 5(E). The
Committee also held that any ambiguity in the contract should not necessarily be
interpreted against herein private respondents because the parties themselves had
stipulated that the draft of the agreement was submitted to petitioners for approval
and that the latter even proposed changes which were eventually incorporated in
the final form of the Agreement. APAC Holdings Ltd. filed a petition for confirmation
of the arbitration award before the RTC Makati. Herein petitioners opposed the
petition and prayed for the nullification, modification and/or correction of the same,
alleging that the arbitrators committed evident partiality and grave abuse of
discretion.
RTCs Decision: Award vacated. and APAC is hereby ordered to pay ADAMSON the
final NAV P47,121,468.00,plus 12% interest which ADAMSON should have earned
had the balance of the final NAV been paid to the Escrow Agent.
CA: Reversed on appeal. Filed a petition for review before the SC.
ISSUE: WON the order to vacate the award is proper.

HELD: YES. CAs decision was affirmed. Section 24 of the Arbitration Law provides as
follows:
Sec. 24. Grounds for vacating award. In any one of the following cases, the court
must make an order vacating the award upon the petition of any party to the
controversy when such party proves affirmatively that in the arbitration
proceedings:
(a) The award was procured by corruption, fraud or other undue means; or
(b) That there was evident partiality or corruption in the arbitrators or any of them;
or
(c) That the arbitrators were guilty of misconduct in refusing to postpone the
hearing upon sufficient cause shown, or in refusing to hear evidence pertinent and
material to the controversy; that one or more of the arbitrators was disqualified to
act as such under section nine hereof, and willfully refrained from disclosing such
disqualifications or any other misbehavior by which the rights of any party have
been materially prejudiced; or
(d) That the arbitrators exceeded their powers, or so imperfectly executed them,
that a mutual, final and definite award upon the subject matter submitted to them
was not made...
Petitioners failed to prove their allegation of partiality on the part of the arbitrators.
Proofs other than mere inferences are needed to establish evident partiality. That
they were disadvantaged by the decision of the Arbitration Committee does not
prove evident partiality.
The award was vacated not because of evident partiality of the arbitrators but
because the latter interpreted the contract in a way which was not favorable to
herein petitioners and because it considered that herein private respondents, by
submitting the controversy to arbitration, was seeking to renege on its obligations
under the contract.
That the arbitrators resorted to contract interpretation neither constituted a ground
for vacating the award because under the circumstances, the same was necessary to
settle the controversy between the parties regarding the amount of the NAV. In any
case, this Court finds that the interpretation made by the arbitrators did not create

Anchoriz, Mariano, & Modesto

a new contract, as alleged by herein petitioners but was a faithful application of the
provisions of the Agreement. Neither was the award arbitrary for it was based on
the statements prepared by the SGV which was chosen by both parties to be the
"auditors."

Respondent filed with CIAC a Request for

Adjudication accompanied by a Complaint.
Petitioner, in turn filed a "Reply/
Manifestation" informing the CIAC that it was
abandoning the submission to CIAC and
pursuing the case before the RTC. In
respondent's Comment on petitioner's
Manifestation, it prayed for CIAC to declare
petitioner in default.

Lastly, in assailing the decision of the Court of Appeals, petitioners would have this
Court believe that the respondent court held that the decision of the arbitrators was
not subject to review by the courts. This was not the position taken by the
respondent court.It is clear then that the Court of Appeals reversed the trial court
not because the latter reviewed the arbitration award involved herein, but because
the respondent appellate court found that the trial court had no legal basis for
vacating the award.

Nov. 27, 27, 2000, CIAC then issued an Order

ordering respondent to move for the
dismissal of Civil Case No. 3421 pending
before the RTC of Palawan and directing
petitioner to file anew its answer.

Petition dismissed.
4. HEUNGHWA INDUSTRY CO., LTD., v. DJ BUILDERS CORPORATION,.

Respondent filed a Motion for Partial

Reconsideration of the November 27, 2000
Order while petitioner moved to suspend the
proceeding before the CIAC until the RTC had
dismissed

G.R. NO. 169095 : December 8, 2008

FACTS: Heunghwa Industry Co., Ltd. was able to secure a contract with the DPWH to
construct the Roxas-Langogan Road in Palawan. Heunghwa entered into a
subcontract agreement with DJ Builders to do earthwork, sub base course and box
culvert of said project in the amount of Php113, 228, 918.00. The agreement
contained an arbitration clause. The agreed price was not fully paid; hence, DJ
Builders filed before the RTC of Puerto Princesa a Complaint for "Breach of
Contract, Collection of Sum of Money with Application for Preliminary Injunction,
Preliminary Attachment, and Prayer for TRO and Damages" Heunghwa averred that
it was not obliged to pay respondent because the latter caused the stoppage of
work and that it failed to collect from the DPWH due to DJ Builders poor
equipment performance. Parties through their respective counsels, filed a "Joint
Motion to Submit specific issues to The Construction Industry Arbitration
Commission" (CIAC). The submitted issues were as follows:
A. Manpower and equipment standby time;
b. Unrecouped mobilization expenses;
c. Retention;
d. Discrepancy of billings; andcralawlibrary
e. Price escalation for fuel and oil usage.

RTC

CIAC

CIAC setting aside its Order by directing the

dismissal of Civil Case No. 3421 only insofar as
the five issues referred to it were concerned.
It also directed respondent to file a request
for adjudication. In compliance, respondent
filed anew a "Revised Complaint" which
increased the amount of the claim from
Php23,391,654.22 to Php65,393,773.42.

Petitioner, through its new

counsel, filed with the RTC a
motion to withdraw the Order
which referred the case to the
CIAC, claiming it never authorized
the referral. Respondent opposed

Anchoriz, Mariano, & Modesto

the motion contending that

petitioner was already estopped
from asking for the recall of the
Order.

Petitioner filed in the CIAC motion to dismiss

informing the CIAC that it was abandoning the
submission of the case to it and asserting that
the RTC had original and exclusive jurisdiction
over Civil Case No. 3421, including the five
issues referred to the CIAC.
The CIAC denied petitioner's motion to
dismiss on the ground that the November 27,
2000 Order had already been superseded by
its order directing the dismissal of Civil Case
No. 3421 only insofar as the five issues
referred to it were concerned.
The CIAC issued an Order setting the
preliminary conference on April 10, 2001.
Petitioner filed with the CIAC a motion for
reconsideration of the March 5, 2001 Order.

reconsideration and also prayed

for the dismissal of the case but
with prejudice.
July 6, 2001 - The RTC denied
respondent's motion for
reconsideration but stated that
respondent may file a formal
motion to dismiss if it so desired.
July 16, 2001 - Respondent filed
with the RTC a Motion to Dismiss
Civil Case No. 3421 praying for the
dismissal of the complaint without
prejudice to the filing of the
proper complaint with the CIAC.
On the same day, the RTC granted
the motion without prejudice to
petitioner's counterclaim.
August 1, 2001 - Petitioner moved
for a reconsideration of the July
16, 2001 Order claiming it was
denied due process.
August 7, 2001 - Respondent filed with the
CIAC a motion for the resumption of the
proceedings claiming that the dismissal of
Civil Case No. 3421 became final on August 3,
2001.
August 15, 2001 - Petitioner filed a countermanifestation asserting that the RTC Order
dated July 16, 2001 was not yet final.
Petitioner reiterated the prayer to dismiss the
case.
August 27, 2001 - CIAC issued an Order
maintaining the suspension but did not rule
on petitioner's Motion to Dismiss.
January 22, 2002 - CIAC issued an Order
setting the case for Preliminary Conference on
February 7, 2002.
February 1, 2002 - Petitioner filed a Motion
for Reconsideration of the January 22, 2002

April 5, 2001 - Petitioner filed a Motion to

Suspend proceedings because of the Motion
to Recall it filed with the RTC.
April 6, 2001 - CIAC granted petitioner's
motion and suspended the hearings dated
April 10 and 17, 2001.
May 16, 2001 - the RTC issued a
Resolution granting petitioner's
Motion to Recall.
June 1, 2001 - Respondent moved
for a reconsideration of the May
16, 2001 Resolution and prayed for
the dismissal of the case without
prejudice to the filing of a
complaint with the CIAC.
June 11, 2001 - Petitioner opposed
respondent's motion for

Anchoriz, Mariano, & Modesto

Order which also included a prayer to resolve

the Motion for Reconsideration of the July 16,
2001 Order.
February 5, 2002 - CIAC denied petitioner's
Motion for Reconsideration.
February 7, 2002 - CIAC conducted a
preliminary conference.
March 13, 2002 - the RTC issued a
Resolution declaring the July 16,
2001 Order which dismissed the
case "without force and effect"
and set the case for hearing on
May 30, 2002.
March 15, 2002 - Petitioner filed a
Manifestation before the CIAC that the CIAC
had no authority to hear the case.
March 18, 2002 - CIAC issued an Order setting
the hearing on April 2, 2002.
March 21, 2002 - Petitioner filed a
Manifestation/Motion that the RTC had
recalled the July 16, 2001 Order and had
asserted jurisdiction over the entire case and
praying for the dismissal of the pending case.
March 22, 2002 - CIAC issued an Order
denying the Motion to Dismiss filed by
petitioner and holding that the CIAC had
jurisdiction over the case.
March 25, 2002 - Respondent
March 26, 2002 - CIAC ordered respondent to
moved for a reconsideration of the file a reply to petitioner's March 21, 2002
March 13, 2002 Order recalling the Manifestation.
July 16, 2001 Order which
petitioner opposed.
June 17, 2002 - RTC denied
respondent's Motion for
Reconsideration.
The parties, without waiting for the reply required by the CIAC, filed two separate
petitions for certiorari: petitioner, on April 5, 2002, docketed as CA-G.R. SP No.
70001; and respondent, on July 5, 2002, docketed as CA-G.R. SP No. 71621 with the

CA. Petitioner is questioning the jurisdiction of the CIAC; while respondent is

questioning the jurisdiction of the RTC over the case.
CA ruled against the petitioner. MR denied.
ISSUE: WON the CA is correct holding that CIAC has jurisdictiion over the case.
HELD: YES. CA was affirmed.Based on the foregoing, there are two acts which may
vest the CIAC with jurisdiction over a construction dispute. One is the presence of
an arbitration clause in a construction contract, and the other is the agreement by
the parties to submit the dispute to the CIAC.The first act is applicable to the case at
bar. The bare fact that the parties incorporated an arbitration clause in their
contract is sufficient to vest the CIAC with jurisdiction over any construction
controversy or claim between the parties. The rule is explicit that the CIAC has
jurisdiction notwithstanding any reference made to another arbitral body. It is wellsettled that jurisdiction is conferred by law and cannot be waived by agreement or
acts of the parties. Thus, the contention of petitioner that it never authorized its
lawyer to submit the case for arbitration must likewise fail. It must be noted
however that the reliance of the CIAC in it's assailed Order on Philrock is inaccurate.
In Philrock, the Court ruled that the CIAC had jurisdiction over the case because of
the agreement of the parties to refer the case to arbitration. In the case at bar, the
agreement to refer specific issues to the CIAC is disputed by petitioner on the
ground that such agreement was entered into by its counsel who was not
authorized to do so. In addition, in Philrock, the petitioner therein had actively
participated in the arbitration proceedings, while in the case at bar there where
only two instances wherein petitioner participated, to wit: 1) the referral of five
specific issues to the CIAC; and 2) the subsequent manifestation that additional
matters be referred to the CIAC.
The foregoing notwithstanding, CIAC has jurisdiction over the construction dispute
because of the mere presence of the arbitration clause in the subcontract
agreement.
Thus, the CIAC did not commit any patent grave abuse of discretion, nor did it act
without jurisdiction when it issued the assailed Order denying petitioner's motion to
dismiss. Accordingly, there is no compelling reason for this Court to deviate from the
rule that a denial of a motion to dismiss, absent a showing of lack of jurisdiction or

Anchoriz, Mariano, & Modesto

10

grave abuse of discretion amounting to lack of or excess jurisdiction, being an

interlocutory order, is not the proper subject of a Petition for Certiorari.

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11