UNIWIDE SALES REALTY AND RESOURCES CORP v.
TITAN- [Uniwide] is held liable for the unpaid balance in the
IKEDA CONSTRUCTION
G.R. No. 126619; December 20, 2006
FACTS:
The case originated from an action for a sum of money filed
by Titan-Ikeda Construction and Development Corporation
(Titan) against Uniwide Sales Realty and Resources
Corporation (Uniwide) with the Regional Trial Court (RTC),
Branch 119, Pasay City arising from Uniwide’s non-payment
of certain claims billed by Titan after completion of three
projects covered by agreements they entered into with each
other.
Upon Uniwide’s motion to dismiss/suspend proceedings and
Titan’s open court manifestation agreeing to the suspension,
Civil Case No. 98-0814 was suspended for it to undergo
arbitration. Titan’s complaint was thus re-filed with the CIAC.
Before the CIAC, Uniwide filed an answer which was later
amended and re-amended, denying the material allegations
of the complaint, with counterclaims for refund of
overpayments, actual and exemplary damages, and
attorney’s fees.
An Arbitral Tribunal consisting of a chairman and two
members was created in accordance with the CIAC Rules of
Procedure Governing Construction Arbitration. It conducted
a preliminary conference with the parties and thereafter
issued a Terms of Reference (TOR) which was signed by the
parties. The tribunal also conducted an ocular inspection,
hearings, and received the evidence of the parties consisting
of affidavits which were subject to cross-examination.
On 17 April 1995, the Arbitral Tribunal promulgated a
Decision, the decretal portion of which is as follows:
“WHEREFORE, judgment is hereby rendered as follows:
On Project 1 – Libis:
[Uniwide] is absolved of any liability for the claims
made by [Titan] on this Project.
Project 2 – Edsa Central:
[Uniwide] is absolved of any liability for VAT payment
on this project, the same being for the account of the [Titan].
On the other hand, [Titan] is absolved of any liability on the
counterclaim for defective construction of this project.
[Uniwide] is held liable for the unpaid balance in the
amount of P6,301,075.77 which is ordered to be paid to the
[Titan] with 12% interest per annum commencing from 19
December 1992 until the date of payment.
On Project 3 – Kalookan:
amount of P5,158,364.63 which is ordered to be paid to the
[Titan] with 12% interest per annum commencing from 08
September 1993 until the date of payment.
[Uniwide] is held liable to pay in full the VAT on this
project, in such amount as may be computed by the Bureau
of Internal Revenue to be paid directly thereto. The BIR is
hereby notified that [Uniwide] Sales Realty and Resources
Corporation has assumed responsibility and is held liable for
VAT payment on this project. This accordingly exempts
Claimant Titan-Ikeda Construction and Development
Corporation from this obligation.
ISSUE:
Whether the award given by CIAC is final
HELD:
As a rule, findings of fact of administrative agencies and
quasi-judicial bodies, which have acquired expertise because
their jurisdiction is confined to specific matters, are generally
accorded not only respect, but also finality, especially when
affirmed by the Court of Appeals. In particular, factual
findings of construction arbitrators are final and conclusive
and not reviewable by this Court on appeal. This rule,
however admits of certain exceptions.
In David v. Construction Industry and Arbitration
Commission, we ruled that, as exceptions, factual findings of
construction arbitrators may be reviewed by this Court when
the petitioner proves affirmatively that:
(1) the award was procured by corruption, fraud or other
undue means;
(2) there was evident partiality or corruption of the
arbitrators or of any of them; (3) the arbitrators were guilty
of misconduct in refusing to hear evidence pertinent and
material to the controversy;
(4) one or more of the arbitrators were disqualified to act as
such under Section nine of Republic Act No. 876 and willfully
refrained from disclosing such disqualifications or of any
other misbehavior by which the rights of any party have been
materially prejudiced; or
(5) 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.
Other recognized exceptions are as follows:
(1) when there is a very clear showing of grave abuse of
discretion resulting in lack or loss of jurisdiction as when a
party was deprived of a fair opportunity to present its
position before the Arbitral Tribunal or when an award is
obtained through fraud or the corruption of arbitrators,
(2) when the findings of the Court of Appeals are contrary to
those of the CIAC, and
(3) when a party is deprived of administrative due process.
UNIWIDE HOLDINGS, INC., v. ALEXANDER M. CRUZ
529 SCRA 664 (2007)
Where there is a joinder of causes of action between the
same parties one of which does not arise out of the contract
where the exclusive venue was stipulated upon, the complain
may be brought before other venues.
Uniwide Holdings, Inc. entered into a franchise agreement
with Alexander M. Cruz granting the latter a five-year
franchise to adopt and use the ―Uniwide Family Store
System‖ for the establishment and operation of a ―Uniwide
Family Store‖ in Marikina City.
The contract stipulated that Cruz will pay a monthly service
fee of P50,000.00 or three percent of gross monthly
purchases, whichever is higher to UHI, payable within five
days after the end of each month without need of formal
billing or demand from UHI. In case of any delay in the
payment of the monthly service fee, Cruz would, under
Article 10.3 of the agreement, be liable to pay an interest
charge of three percent per month. Cruz thereafter
purchased goods from UHI’s affiliated companies First
Paragon Corporation (FPC) and Uniwide Sales Warehouse
Club, Inc. (USWCI).
FPC and USWCI subsequently executed Deeds of Assignment
in favor of UHI assigning all their rights and interests over
Cruz‘s accounts payable to them. Cruz had outstanding
obligations with UHI, FPC and USWCI in the amount of P1,
358, 531.89.00. UHI sent a letter demanding for the payment
of such amount but it was not settled.
Thus, UHI filed a complaint for collection of sum of money
before the Regional Trial Court of Parañaque against Cruz
praying for payment of service fee, accountspayable to FPC
and USWCI and attorney‘s fees and litigation expenses.
Cruz filed a Motion to Dismiss on the ground of
improper venue. He invokes Article 27.5 of the agreement
which provides that exclusive jurisdiction is vested with the
courts f Quezon City. The trial court granted the Motion to
Dismiss.
ISSUE:
Whether or not a case based on several causes of action is
dismissible on the ground of improper venue where only one
of the causes of action arises from a contract with
exclusive venue stipulation
HELD:
In this case, UHI contended that nowhere in the agreement
is there a mention of FPC and USWCI, and neither are the two
parties thereto, hence, they cannot be bound to the
stipulation on ―exclusive venue.‖ The Courtfound merit in
this contention.
The Supreme Court cited Section 2, Rule 4 of the Rules
of Court which provides that all other actions may be
commenced and tried where the plaintiff or any of the
principal plaintiffs resides, or where the defendant or any of
the principal defendants resides, or in the case of a
nonresident defendant, where he may be found, at the
election of the plaintiff.
The forging of a written agreement on an exclusive venueof
an action does not, however, exclude parties from bringing a
case to other venues.
Where there is a joinder of causes of action between the
same parties one of which does not arise out of the contract
where the exclusive venue was stipulated upon, the
complaint, as in the one at bar, may be brought before other
venues provided that such other cause of action falls within
the jurisdiction of the court and the venue lies therein.
It bears emphasis that the causes of action on the
assigned accounts are not based on a breach of the
agreement between UHI and Cruz. They are based on
separate, distinct and independent contracts-deeds of
assignment in which UHI is the assignee of Cruz‘s obligations
to the assignors FPC and USWCI. Thus, any action arising from
the deeds of assignment cannot be subjected to the
exclusive venue stipulation embodied in the agreement.
BENGUET CORPORATION v DENR-MAB
G.R. No. 163101
February 13, 2008
FACTS:
On June 1, 1987, Benguet and J.G. Realty entered into a
RAWOP, wherein J.G. Realty was acknowledged as the owner
of four mining claims respectively named as Bonito-I, Bonito-
II, Bonito-III, and Bonito-IV, with a total area
of 288.8656 hectares, situated in Barangay Luklukam, Sitio
Bagong Bayan, Municipality of Jose Panganiban, Camarines
Norte.
Thus, on August 9, 1989, the Executive Vice-President of
Benguet, Antonio N. Tachuling, issued a letter informing J.G.
Realty of its intention to develop the mining claims. However,
on February 9, 1999, J.G. Realty, through its President,
Johnny L. Tan, then sent a letter to the President of Benguet
informing the latter that it was terminating the RAWOP on
the following grounds:
a. The fact that your company has failed to perform the
obligations set forth in the RAWOP, i.e., to
undertake development works within 2 years from the
execution of the Agreement; b. Violation of the Contract
by allowing high graders to operate on our claim. c. No
stipulation was provided with respect to the term limit of the
RAWOP. d. Non-payment of the royalties thereon as
provided in the RAWOP.
On June 7, 2000, J.G. Realty filed a Petition for Declaration of
Nullity/Cancellation of the RAWOP with the Legaspi City POA,
Region V, docketed as DENR Case No. 2000-01 and entitled
J.G. Realty v. Benguet.
DECISION OF LOWER COURTS: *POA: declared the RAWOP
cancelled. *MAB: affirmed POA.
ISSUES: (1) Should the controversy have first been submitted
to arbitration before the POA took cognizance of the
case?; (2) Was the cancellation of the RAWOP supported by
evidence?; and (3) Did the cancellation of the RAWOP
amount to unjust enrichment of J.G. Realty at the expense of
Benguet?
HELD: On correctness of appeal: Petitioner having failed to
properly appeal to the CA under Rule 43, the decision of the
MAB has become final and executory. On this ground alone,
the instant petition must be denied.
(1) YES, the case should have first been brought to voluntary
arbitration before the POA.
Secs. 11.01 and 11.02 of the RAWOP pertinently provide:
11.01 Arbitration
Any disputes, differences or disagreements between
BENGUET and the OWNER with reference to anything
whatsoever pertaining to this Agreement that cannot be
amicably settled by them shall not be cause of any action of
any kind whatsoever in any court or administrative agency
but shall, upon notice of one party to the other, be referred
to a Board of Arbitrators consisting of three (3) members,
one to be selected by BENGUET, another to be selected by
the OWNER and the third to be selected by the
aforementioned two arbitrators so appointed.
xxxx
11.02 Court Action
No action shall be instituted in court as to any matter in
dispute as hereinabove stated, except to enforce the
decision of the majority of the Arbitrators
A contractual stipulation that requires prior resort to
voluntary arbitration before the parties can go directly to
court is not illegal and is in fact promoted by the State.
To reiterate, availment of voluntary arbitration before resort
is made to the courts or quasi-judicial agencies of the
government is a valid contractual stipulation that must be
adhered to by the parties.
In other words, in the event a case that should properly be
the subject of voluntary arbitration is erroneously filed with
the courts or quasi-judicial agencies, on motion of the
defendant, the court or quasi-judicial agency shall determine
whether such contractual provision for arbitration is
sufficient and effective. If in affirmative, the court or quasi-
judicial agency shall then order the enforcement of said
provision.
In sum, on the issue of whether POA should have referred the
case to voluntary arbitration, we find that, indeed, POA has
no jurisdiction over the dispute which is governed by RA 876,
the arbitration law.
HOWEVER, ESTOPPEL APPLIES. the Court rules that the
jurisdiction of POA and that of MAB can no longer be
questioned by Benguet at this late hour. What Benguet
should have done was to immediately challenge the POA's
jurisdiction by a special civil action for certiorari when POA
ruled that it has jurisdiction over the dispute. To redo the
proceedings fully participated in by the parties after the lapse
of seven years from date of institution of the original action
with the POA would be anathema to the speedy and efficient
administration of justice.
(2) The cancellation of the RAWOP was supported by CONFLICT OF LAWS KOREA TECHNOLOGIES vs. LERMA
evidence.
KOREA TECHNOLOGIES vs. LERMA
(3) There is no unjust enrichment in the instant case. There is
FACTS
no unjust enrichment when the person who will benefit has
a valid claim to such benefit. Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean
corporation which is engaged in the supply and installation
The principle of unjust enrichment under Article 22 requires
of Liquefied Petroleum Gas (LPG) Cylinder manufacturing
two conditions: (1) that a person is benefited without a valid
plants, while private respondent Pacific General Steel
basis or justification, and (2) that such benefit is derived at
Manufacturing Corp. (PGSMC) is a domestic corporation.
another's expense or damage.
On March 5, 1997, PGSMC and KOGIES executed a contract
Clearly, there is no unjust enrichment in the instant case as
in the Philippines whereby KOGIES would set up an LPG
the cancellation of the RAWOP, which left Benguet without
Cylinder Manufacturing Plant in Carmona, Cavite. On April
any legal right to participate in further developing the mining
7, 1997, in Korea, the parties executed Contract No. KLP-
claims, was brought about by its violation of the RAWOP.
970301 dated March 5, 1997 amending the terms of
Hence, Benguet has no one to blame but itself for its
payment. On October 14, 1997, PGSMC entered into a
predicament.
Contract of Lease with Worth Properties, Inc. (Worth) for use
OBITER DICTA: of Worth’s 5,079-square meter property with a 4,032-square
meter warehouse building to house the LPG manufacturing
(1) Difference between compulsory & voluntary arbitration -
plant.
-
On January 22, 1998, it was shown in the Certificate that,
In Reformist Union of R.B. Liner, Inc. vs. NLRC, compulsory
after the installation of the plant, the initial operation could
arbitration has been defined both as “the process of
not be conducted as PGSMC encountered financial
settlement of labor disputes by a government agency which
difficulties affecting the supply of materials, thus forcing the
has the authority to investigate and to make an award which
parties to agree that KOGIES would be deemed to have
is binding on all the parties, and as a mode of arbitration
completely complied with the terms and conditions of the
where the parties are compelled to accept the resolution of
March 5, 1997 contract.
their dispute through arbitration by a third party.” While a
voluntary arbitrator is not part of the governmental unit or For the remaining balance of USD306,000 for the installation
labor department's personnel, said arbitrator renders and initial operation of the plant, PGSMC issued two post
arbitration services provided for under labor laws. dated checks. When KOGIES deposited the checks, these
were dishonored for the reason "PAYMENT STOPPED." Thus,
There is a clear distinction between compulsory and
on May 8, 1998, KOGIES sent a demand letter to PGSMC
voluntary arbitration. The arbitration provided by the POA is
threatening criminal action for violation of Batas Pambansa
compulsory, while the nature of the arbitration provision in
Blg. 22 in case of non payment. On the same date, the wife
the RAWOP is voluntary, not involving any government
of PGSMC’s President faxed a letter dated May 7, 1998 to
agency.
KOGIES’ President who was then staying at a Makati City
hotel. She complained that not only did KOGIES deliver a
different brand of hydraulic press from that agreed upon but
it had not delivered several equipment parts already paid for.

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.

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. Five days later, PGSMC filed before the Office
of the Public Prosecutor an Affidavit-Complaint
for Estafadocketed as I.S. No. 98-03813 against Mr. Dae Hyun
Kang, President of KOGIES.
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.
On June 23, 1998, PGSMC again wrote KOGIES reiterating the
contents of its June 1, 1998 letter threatening that the
machineries, equipment, and facilities installed in the plant
would be dismantled and transferred on July 4, 1998. 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. 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 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. And
finally, the RTC held 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.
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. KOGIES asserted that the
Branch Sheriff did not have the technical expertise to
ascertain whether or not the machineries and equipment
conformed to the specifications in the contract and were
properly installed. The trial court granted the motion. On
November 11, 1998, the Branch Sheriff filed his Sheriff’s
Report finding that the enumerated machineries and
equipment were not fully and properly installed.
Court of Appeals affirmed the trial court and declared the
arbitration clause against public policy.
ISSUE
W/N the arbitration clause is against public policy – NO.
RULING
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.)
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, and that the arbitral award is
final and binding, is not contrary to public policy.
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 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 entitled An Act to Institutionalize the Use of an
Alternative Dispute Resolution System in the Philippines and
to Establish the Office for Alternative Dispute Resolution, and
for Other Purposes, promulgated on April 2, 2004. And 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.
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
(2) Foreign arbitral awards must be confirmed by the RTC
(3) The RTC has jurisdiction to review foreign arbitral awards
(4) Grounds for judicial review different in domestic and
foreign arbitral awards
(5) RTC decision of assailed foreign arbitral award appealable
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 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: Having ruled that
the arbitration clause of the subject contract is valid and
binding on the parties, and not contrary to public policy;
consequently, being bound to the contract of arbitration, a
party may not unilaterally rescind or terminate the contract
for whatever cause without first resorting to arbitration.
In addition, whatever findings and conclusions made by the
RTC Branch Sheriff from the inspection made on October 28,
1998, as ordered by the trial court on October 19, 1998, is of
no worth as said Sheriff is not technically competent to
ascertain the actual status of the equipment and machineries
as installed in the plant.
RTC has interim jurisdiction to protect the rights of the
parties: While the issue of the proper installation of the
equipment and machineries might well be under the primary
jurisdiction of the arbitral body to decide, yet the RTC under
Sec. 28 of RA 9285 has jurisdiction to hear and grant interim
measures to protect vested rights of the parties
While the KCAB can rule on motions or petitions relating to
the preservation or transfer of the equipment and
machineries as an interim measure, yet on hindsight, the July
23, 1998 Order of the RTC allowing the transfer of the
equipment and machineries given the non-recognition by the
lower courts of the arbitral clause, has accorded an interim
measure of protection to PGSMC which would otherwise
been irreparably damaged. KOGIES is not unjustly prejudiced
as it has already been paid a substantial amount based on the
contract. Moreover, KOGIES is amply protected by the
arbitral action it has instituted before the KCAB, the award of
which can be enforced in our jurisdiction through the RTC.
Besides, by our decision, PGSMC is compelled to submit to
arbitration pursuant to the valid arbitration clause of its
contract with KOGIES.
PGSMC to preserve the subject equipment and
machineries: 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
until final resolution of the arbitral proceedings and
enforcement of the award, if any.
ORMOC SUGARCANE PLANTERS' ASSOCIATION v. CA, GR NO.
156660, 2009-08-24
Facts:
Petitioners are associations organized by and whose
members are individual sugar planters (Planters).
Respondents Hideco Sugar Milling Co., Inc. (Hideco) and
Ormoc Sugar Milling Co, Inc. (OSCO) are sugar centrals
Article VII of the milling contracts provides that 34% of the
sugar and molasses produced from milling the Planter's
sugarcane shall belong to the centrals (respondents) as
compensation, 65% thereof shall go to the Planter and the
remaining 1% shall go the association... to which the Planter
concerned belongs, as aid to the said association.
If the Planter was not a member of any association, then the
said 1% shall... revert to the centrals.
Article XIV, paragraph B... states that the centrals may not,
during the life of the milling contract, sign or execute any
contract or agreement that will provide better or more
benefits to a Planter, without the written consent of... the
existing and recognized associations except to Planters
whose plantations are situated in areas beyond thirty (30)
kilometers from the mill. Article XX provides that all
differences and controversies which may arise between the
parties concerning the agreement shall be... submitted for
discussion to a Board of Arbitration, consisting of five (5)
members--two (2) of which shall be appointed by the
centrals, two (2) by the Planter and the fifth to be appointed
by the four appointed by the parties... petitioners... filed twin
petitions with the RTC for Arbitration under R.A. 876,
Recovery of Equal Additional Benefits, Attorney's Fees and
Damages, against HIDECO and OSCO
Petitioners claimed that respondents violated the Milling
Contract when they gave to independent planters who do
not belong to any association the 1% share, instead of
reverting said share to the centrals
Petitioners contended that respondents unduly accorded the
independent
Planters more benefits
Respondents filed a motion to dismiss on ground of lack of
cause of action because petitioners had no milling contract
with respondents.
Respondents and these 80 Planters were the signatories of
the milling contracts. Thus, it was the individual Planters, and
not petitioners, who had legal standing to invoke the
arbitration clause in the milling contracts. Petitioners, not
being privy to the milling contracts,... had no legal standing
whatsoever to demand or sue for arbitration.
the RTC issued a Joint Order... denying the motion to dismiss,
declaring the existence of a milling contract between the
parties, and directing respondents to nominate two
arbitrators to the Board of Arbitrators... motion for
reconsideration having been denied by the RTC
CA concluded that petitioners had no legal personality to
bring the action against respondents or to demand for
arbitration.
Petitioners filed a motion for reconsideration, but it too was
denied
The main cause of action of petitioners in their request for
arbitration with the RTC is the alleged violation of the clause
in the milling contracts involving the proportionate sharing in
the proceeds of the harvest. Petitioners essentially demand
that respondents increase the... share of the member
Planters to 66% to equalize their situation with those of the
non-member Planters.
Issues:
whether or not petitioners... are clothed with legal
personality to file a suit against, or demand arbitration from,
respondents in their own name without impleading the
individual Planters.
Ruling:
Section 2 of R.A. No. 876 (the Arbitration Law)... pertinently
provides:
Two or more persons or parties may submit to the arbitration
of one or more arbitrators any controversy existing between
them at the time of the submission and which may be the
subject of an action,... or the parties to any contract may in
such contract agree to settle by arbitration a controversy
thereafter arising between them.
The foregoing provision speaks of two modes of arbitration:
(a) an agreement to submit to arbitration some future
dispute, usually stipulated upon in a civil contract between
the parties, and known as an agreement to submit to
arbitration, and (b) an agreement submitting... an existing
matter of difference to arbitrators, termed the submission
agreement. Article XX of the milling contract is an agreement
to submit to arbitration because it was made in anticipation
of a dispute that might arise between the parties after the
contract's... execution.
petitioners are associations duly existing and organized
under Philippine law, i.e. they have juridical personalities
separate and distinct from that of their member Planters. It
is likewise undisputed that the eighty (80) milling contracts
that... were presented were signed only by the member
Planter concerned and one of the Centrals as parties. In other
words, none of the petitioners were parties or signatories to
the milling contracts.
This circumstance is fatal to petitioners' cause since they
anchor their right to... demand arbitration from the
respondent sugar centrals upon the arbitration clause found
in the milling contracts. There is no legal basis for petitioners'
purported right to demand arbitration when they are not
parties to the milling contracts, especially when the language
of... the arbitration clause expressly grants the right to
demand arbitration only to the parties to the contract.
Even assuming that all the petitioners were able to present
milling contracts in favor of their members, it is undeniable
that under the arbitration clause in these contracts it is the
parties thereto who have the right to submit a controversy
or dispute to arbitration.
Petitioners would argue that they could sue respondents,
notwithstanding the fact that they were not signatories in the
milling contracts because they are the recognized
representatives of the Planters.
This claim has no leg to stand on since petitioners did not sign
the milling contracts... whether as a party or as a
representative of their member Planters.
no... provision in the milling contracts that the individual
Planter is authorizing the association to represent him/her in
a legal action
Moreover, even assuming that petitioners are indeed
representatives of the member Planters who have milling
contracts with the respondents and assuming further that
petitioners signed the milling contracts as representatives of
their members, petitioners could not... initiate arbitration
proceedings in their own name as they had done in the
present case. As mere agents, they should have brought the
suit in the name of the principals that they purportedly
represent.
the principal is still the one who has the right to demand
arbitration.
Indeed, Rule 3, Section 2 of the Rules of Court requires suits
to be brought in the name of the real party in interest... from
petitioners' own allegations, the party who would be injured
or benefited by a decision in the arbitration proceedings will
be the member Planters involved and... not petitioners. In
sum, petitioners are not the real parties in interest in the
present case.
Assuming petitioners had properly brought the case in the
name of their members who had existing milling contracts
with respondents, petitioners must still prove that they were
indeed authorized by the said members to institute an action
for and on the members' behalf.
As we see it, petitioners had no intention to litigate the case
in a representative capacity, as they contend. All the
pleadings from the RTC to this Court belie this claim.
he individual Planters were not even impleaded as parties to
this case. In addition, petitioners need a power-of-attorney
to represent... the Planters whether in the lawsuit or to
demand arbitration.[16] None was ever presented here.
Lastly, petitioners theorize that they could demand and sue
for arbitration independently of the Planters because the
milling contract is a contract pour autrui under Article 1311
of the Civil Code.
If a contract should contain some stipulation in favor of a
third person, he may demand its fulfillment provided he
communicated his acceptance to the obligor before its
revocation. A mere incidental benefit or interest of a person
is not sufficient. The contracting parties must... have clearly
and deliberately conferred a favor upon a third person.
To summarize, the requisites of a stipulation pour autrui or a
stipulation in favor of a third person are the following: (1)
there must be a stipulation in favor of a third person, (2) the
stipulation must be a part, not the whole, of the contract, (3)
the contracting... parties must have clearly and deliberately
conferred a favor upon a third person, not a mere incidental
benefit or interest, (4) the third person must have
communicated his acceptance to the obligor before its
revocation, and (5) neither of the contracting parties bears
the... legal representation or authorization of the third
party.[17] These requisites are not present in this case
Article VI of the Milling Contract is the solitary provision that
mentions some benefit in favor of the association of which
the planter is a member
The foregoing provision cannot, by any stretch of the
imagination, be considered as a stiputation pour autrui or for
the benefit of the petitioners. The primary rationale for the
said stipulation is to ensure a just share in the proceeds of
the harvest to the Planters. In... other words, it is a stipulation
meant to benefit the Planters. Even the 1% share to be given
to the association as aid does not redound to the benefit of
the association but is intended to be used for its member
Planters. Not only that, it is explicit that said share reverts...
back to respondent sugar centrals if the contracting Planter
is not affiliated with any recognized association.
Principles:
Except where a compulsory arbitration is provided by
statute, the first step toward the settlement of a difference
by arbitration is the entry by the parties into a valid
agreement to arbitrate. An agreement to arbitrate is a
contract, the relation of the parties is contractual,... and the
rights and liabilities of the parties are controlled by the law
of contracts.[11] In an agreement for arbitration, the
ordinary elements of a valid contract must appear, including
an agreement to arbitrate some specific thing, and an
agreement to... abide by the award, either in express
language or by implication.
The requirements that an arbitration agreement must be
written and subscribed by the parties thereto
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.
To subscribe means to write underneath, as one's name; to
sign at the end of a... document. That word may sometimes
be construed to mean to give consent to or to attest
As applied to the present case, this provision has two
requirements: 1) to institute an action, the plaintiff must be
the real party in interest; and 2) the action must be
prosecuted in the name of the real party in interest.
Necessarily, the purposes of this... provision are 1) to prevent
the prosecution of actions by persons without any right, title
or interest in the case; 2) to require that the actual party
entitled to legal relief be the one to prosecute the action; 3)
to avoid a multiplicity of suits; and 4) to discourage...
litigation and keep it within certain bounds, pursuant to
sound public policy.
When the plaintiff is not the real party in interest, the case is
dismissible on the ground of lack of cause of action.
The mere fact that petitioners were organized for the
purpose of advancing the interests and welfare of their
members does not necessarily mean that petitioners have
the authority to represent their members in legal...
proceedings, including the present arbitration proceedings.
To be considered a pour autrui provision, an incidental
benefit or interest, which another person gains, is not
sufficient. The contracting parties must have clearly and
deliberately conferred a favor upon a third person.[18] Even
the clause stating... that respondents must secure the
consent of the association if respondents grant better
benefits to a Planter has for its rationale the protection of the
member Planter. The only interest of the association therein
is that its member Planter will not be put at a disadvantage...
vis a vis other Planters. Thus, the associations' interest in
these milling contracts is only incidental to their avowed
purpose of advancing the welfare and rights of their member
Planters.
In Cargill Phils Inc v San Fernando Regala Trading, Inc the
Supreme Court ruled that while actions for rescission and
damages are ordinarily judicial matters, the dispute at hand
was to be referred to arbitration because the contract which
the plaintiff sought to have rescinded included an arbitration
agreement.(1)
Facts
San Fernando Regala Trading filed before the trial court a
complaint for rescission of contract with damages against
Cargill Philippines, Inc. In its complaint, San Fernando Regala
Trading alleged that it was engaged in buying and selling
molasses and that Cargill was one of its suppliers. San
Fernando Regala Trading alleged that it purchased from
Cargill, and the latter had agreed to sell, 12,000 tons of cane
blackstrap molasses originating from Thailand at the price of
$192 per metric ton, and that delivery would be made in April
or May 1997. After San Fernando Regala Trading delivered
the letter of credit, it claimed that Cargill failed to comply
with its obligations under the contract, which included an
arbitration clause as follows:
"Any dispute which the Buyer and Seller may not be able to
settle by mutual agreement shall be settled by arbitration in
the City of New York before the American Arbitration
Association. The Arbitration Award shall be final and binding
on both parties."
Cargill moved to dismiss and/or suspend the court
proceedings citing the arbitration clause. San Fernando
Regala Trading argued that since it was seeking rescission of
the contract, it was in effect repudiating the contract which
included the arbitration clause. Further, it argued that
rescission constitutes a judicial issue, which requires the
exercise of judicial function and cannot be the subject of
arbitration.
Decision
The Supreme Court held that the provision to submit to
arbitration any dispute arising between the parties is part of
the contract and is itself a contract. The arbitration
agreement is to be treated as a separate agreement and does
not automatically terminate when the contract of which it is
a part comes to an end. To reiterate a contrary ruling would
suggest that a party's mere repudiation of the main contract
is sufficient to avoid arbitration; that is exactly the situation
that the separability doctrine seeks to avoid.
San Fernando Regala Trading filed a complaint for rescission
of contract and damages with the trial court. In so doing, it
alleged that a contract existed. It was that contract which
provided for an arbitration clause which expressed the
parties' intention that any dispute to arise between them, as
buyer and seller, should be referred to arbitration. It is for
the arbitrator and not the court to decide whether a contract
between the parties exists or is valid. Under the
circumstances, the argument that rescission is judicial in
nature is misplaced.
JORGE GONZALES and PANEL OF ARBITRATORS, vs.CLIMAX
MINING LTD., CLIMAX-ARIMCO MINING CORP., and
AUSTRALASIAN PHILIPPINES MINING INC.,
G.R. No. 161957 February 28, 2005
Petitioner Jorge Gonzales, as claimowner of mineral deposits
located within the Addendum Area of Influence in Didipio, in
the provinces of Quirino and Nueva Vizcaya, entered into a
co-production, joint venture and/or production-sharing
letter-agreement designated as the May 14, 1987 Letter of
Intent with Geophilippines, Inc, and Inmex Ltd. Under the
agreement, petitioner, as claimowner, granted to
Geophilippines, Inc. and Inmex Ltd. collectively, the exclusive
right to explore and survey the mining claims for a period of
thirty-six (36) months within which the latter could decide to
take an operating agreement on the mining claims and/or
develop, operate, mine and otherwise exploit the mining
claims and market any and all minerals that may be derived
therefrom.
On 28 February 1989, the parties to the May 14, 1987 Letter
of Intent renegotiated the same into the February 28, 1989
Agreement whereby the exploration of the mining claims
was extended for another period of three years.
On 9 March 1991, petitioner Gonzales, Arimco Mining
Corporation, Geophilippines Inc., Inmex Ltd., and Aumex
Philippines, Inc. signed a document designated as
the Addendum to the May 14, 1987 Letter of Intent and
February 28, 1989 Agreement with Express Adhesion
Thereto (hereafter, the Addendum Contract).1 Under
the Addendum Contract, Arimco Mining Corporation would
apply to the Government of the Philippines for permission to
mine the claims as the Government’s contractor under
a Financial and Technical Assistance Agreement (FTAA). On
20 June 1994, Arimco Mining Corporation obtained the
FTAA2 and carried out work under the FTAA.
Respondents executed the Operating and Financial
Accommodation Contract3 (between Climax-Arimco Mining
Corporation and Climax Mining Ltd., as first parties, and
Australasian Philippines Mining Inc., as second party) dated
23 December 1996 and Assignment, Accession
4
Agreement (between Climax-Arimco Mining Corporation
and Australasian Philippines Mining Inc.) dated 3 December
1996. Respondent Climax Mining Corporation (Climax) and
respondent Australasian Philippines Mining Inc. (APMI)
entered into a Memorandum of Agreement5 dated 1 June
1991 whereby the former transferred its FTAA to the latter.
On 8 November 1999, petitioner Gonzales filed before the
Panel of Arbitrators, Region II, Mines and Geosciences
Bureau of the Department of Environment and Natural
Resources, against respondents Climax-Arimco Mining
Corporation (Climax-Arimco), Climax, and
6 7
APMI, a Complaint seeking the declaration of nullity or
termination of the Addendum Contract, the FTAA,
the Operating and Financial Accommodation
Contract, the Assignment, Accession Agreement, and
the Memorandum of Agreement. Petitioner Gonzales prayed
for an unspecified amount of actual and exemplary damages
plus attorney’s fees and for the issuance of a temporary
restraining order and/or writ of preliminary injunction to
restrain or enjoin respondents from further implementing
the questioned agreements. He sought said releifs on the
grounds of "FRAUD, OPPRESSION and/or VIOLATION of
Section 2, Article XII of the CONSTITUTION perpetrated by
these foreign RESPONDENTS, conspiring and confederating
with one another and with each other…."8
Issues:
(c) Whether the complaint filed by petitioner raises a mining
dispute over which the Panel of Arbitrators has jurisdiction,
or a judicial question which should properly be brought
before the regular courts.
(d) Whether the dispute between the parties should be
brought for arbitration under Rep. Act No. 876.
Ruling:
A judicial question is a question that is proper for
determination by the courts, as opposed to a moot question
or one properly decided by the executive or legislative
branch.18 A judicial question is raised when the
determination of the question involves the exercise of a
judicial function; that is, the question involves the
determination of what the law is and what the legal rights of
the parties are with respect to the matter in controversy.19
On the other hand, a mining dispute is a dispute involving (a)
rights to mining areas, (b) mineral agreements, FTAAs, or
permits, and (c) surface owners, occupants and
claimholders/concessionaires.20 Under Republic Act No. 7942
(otherwise known as the Philippine Mining Act of 1995), the
Panel of Arbitrators has exclusive and original jurisdiction to
hear and decide these mining disputes.21 The Court of
Appeals, in its questioned decision, correctly stated that the
Panel’s jurisdiction is limited only to those mining disputes
which raise questions of fact or matters requiring the
application of technological knowledge and experience.22
In Pearson v. Intermediate Appellate Court,23 this Court
observed that the trend has been to make the adjudication
of mining cases a purely administrative
matter.24 Decisions25 of the Supreme Court on mining
disputes have recognized a distinction between (1) the
primary powers granted by pertinent provisions of law to the
then Secretary of Agriculture and Natural Resources (and the
bureau directors) of an executive or administrative nature,
such as granting of license, permits, lease and contracts, or
approving, rejecting, reinstating or canceling applications, or
deciding conflicting applications, and (2) controversies or
disagreements of civil or contractual nature between
litigants which are questions of a judicial nature that may be
adjudicated only by the courts of justice. This distinction is
carried on even in Rep. Act No. 7942.
The Complaint charged respondents with disregarding and
ignoring the provisions of the Addendum Contract, violating
the purpose and spirit of the May 14, 1987 Letter of
Intent and February 28, 1989 Agreement, and acting in a
fraudulent and oppressive manner against petitioner and
practicing fraud and deception against the
26
Government. Petitioner alleged in his Complaint that under
the original agreements (the May 14, 1987 Letter of
Intent and February 28, 1989 Agreement) respondent
Climax-Arimco had committed to complete the Bankable
Feasibility Study by 28 February 1992, but the same was not
accomplished. Instead, respondent Climax-Arimco, through
false and insidious representations and machinations by
alleging technical and financial capacity, induced petitioner
to enter into the Addendum Contract and the FTAA in order
to repeatedly extend the option period within which to
conduct the feasibility study. In essence, petitioner alleges
that respondents, conspiring and confederating with one
another, misrepresented under the Addendum Contract and
FTAA that respondent Climax-Arimco possessed financial and
technical capacity to put the project into commercial
production, when in truth it had no such qualification
whatsoever to do so. By so doing, respondents have allegedly
caused damage not only to petitioner but also to the Republic
of the Philippines.27
It is apparent that the Panel of Arbitrators is bereft of
jurisdiction over the Complaint filed by petitioner. The basic
issue in petitioner’s Complaint is the presence of fraud or
misrepresentation allegedly attendant to the execution of
the Addendum Contract and the other contracts emanating
from it, such that the contracts are rendered invalid and not
binding upon the parties. It avers that petitioner was misled
by respondents into agreeing to the Addendum
Contract. This constitutes fraud which vitiated petitioner’s
consent, and under Article 1390 of the Civil Code, is one of
the grounds for the annulment of a voidable contract.
Voidable or annullable contracts, before they are set aside,
are existent, valid, and binding, and are effective and
obligatory between the parties.28 They can be ratified.29
-whether the case involves void or voidable contracts is still FTAA and future FTAAs, and the need to avert a multiplicity
a judicial question. It may, in some instances, involve of suits."33
questions of fact especially with regard to the
Arbitration before the Panel of Arbitrators is proper only
determination of the circumstances of the execution of the
when there is a disagreement between the parties as to some
contracts. But the resolution of the validity or voidness of
provisions of the contract between them, which needs the
the contracts remains a legal or judicial question as it
interpretation and the application of that particular
requires the exercise of judicial function. It requires the
knowledge and expertise possessed by members of that
ascertainment of what laws are applicable to the dispute,
Panel. It is not proper when one of the parties repudiates the
the interpretation and application of those laws, and the
existence or validity of such contract or agreement on the
rendering of a judgment based thereon. Clearly, the dispute
ground of fraud or oppression as in this case. The validity of
is not a mining conflict. It is essentially judicial. The
the contract cannot be subject of arbitration proceedings.
complaint was not merely for the determination of rights
Allegations of fraud and duress in the execution of a contract
under the mining contracts since the very validity of those
are matters within the jurisdiction of the ordinary courts of
contracts is put in issue.
law. These questions are legal in nature and require the
The Complaint is not about a dispute involving rights to application and interpretation of laws and jurisprudence
mining areas, nor is it a dispute involving claimholders or which is necessarily a judicial function.
concessionaires. The main question raised was the validity of
-We agree that the case should not be brought under the
the Addendum Contract, the FTAA and the subsequent
ambit of the Arbitration Law, but for a different reason. The
contracts. The question as to the rights of petitioner or
question of validity of the contract containing the agreement
respondents to the mining area pursuant to these contracts,
to submit to arbitration will affect the applicability of the
as well as the question of whether or not petitioner had
arbitration clause itself. A party cannot rely on the contract
ceded his mining claims in favor of respondents by way of
and claim rights or obligations under it and at the same time
execution of the questioned contracts, is merely corollary to
impugn its existence or validity. Indeed, litigants are enjoined
the main issue, and may not be resolved without first
from taking inconsistent positions. As previously discussed,
determining the main issue.
the complaint should have been filed before the regular
The Complaint is also not what is contemplated by Rep. Act courts as it involved issues which are judicial in nature.
No. 7942 when it says the dispute should involve FTAAs.
WHEREFORE, in view of the foregoing, the Petition for
The Complaint is not exclusively within the jurisdiction of the
Review on Certiorari Under Rule 45 is DENIED. The Orders
Panel of Arbitrators just because, or for as long as, the
dated 18 October 2001 and 25 June 2002 of the Panel of
dispute involves an FTAA. The Complaint raised the issue of
Arbitrators are SET ASIDE. Costs against petitioner Jorge
the constitutionality of the FTAA, which is definitely a judicial
Gonzales.
question. The question of constitutionality is exclusively
within the jurisdiction of the courts to resolve as this would
clearly involve the exercise of judicial power. The Panel of
Arbitrators does not have jurisdiction over such an issue
since it does not involve the application of technical
knowledge and expertise relating to mining. This the Panel of
Arbitrators has even conceded in its Orders dated 18 October
2001 and 25 June 2002. At this juncture, it is worthy of note
that in a case,31 which was resolved only on 1 December
2004, this Court upheld the validity of the FTAA entered into
by the Republic of the Philippines and WMC (Philippines), Inc.
and constitutionality of Rep. Act No. 7942 and DENR
Administrative Order 96-40.32 In fact, the Court took the case
on an original petition, recognizing "the exceptional
character of the situation and the paramount public interest
involved, as well as the necessity for a ruling to put an end to
the uncertainties plaguing the mining industry and the
affected communities as a result of doubts case upon the
constitutionality and validity of the Mining Act, the subject