ADR Cases 1

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ADR Cases 1-Atty. Capellan

1.)Heirs of Augusto Salas vs. Laperal Realty Corporation, et al, G.R. No. 13536, 13

!e"e#$er 1%%%

.)& 'lus Asia !evelop#ent Corporation vs. (tility Assuran"e Corporation, G.R. No.

1%%65, 6 &une 13

3.) *oppel, +n". vs. a-ati Rotary Clu$ oun/ation, +n"., G.R. No. 1%05, 2

Septe#$er 13

2.) L 'oer 4ngineering Corp. vs. Capitol +n/ustrial Constru"tion Groups, G.R. No.

121033, 6 ar" 3

5.) National +rrigation A/#inistration vs. CA, G.R. No. 1%16%, 1 Nove#$er 1%%%

6.) una 'ro"essing, +n". vs. 'ilippine *ingfor/, +n"., G.R. No. 10550, % e$ruary

1

G.R. No. 135362 December 13, 1999

HER! "# A$G$!%" &. !A&A!, 'R., namely( %ERE!%A D. !A&A! )or *ersel)an+ as leal ar+an o) t*e mnor #A/RCE C0R&& D. !A&A!, A. CR!%NA

!. &E!ACA, an+ ARNA %ERE!A D. !A&A!,petitioners,

vs.

&AERA& REA&%0 C"R"RA%"N, R"C4A0 REA& E!%A%E C"R"RA%"N,

!"$%H RDGE &&AGE, NC., AHARA DEE&"EN% C"R"RA%"N,

!poses %HE&A D. A/RA'AN" an+ GREG"R" A/RA'AN", "!CAR

DAC&&", !poses RGNA D. &AA an+ R"DE& &AA, ED$ARD" A.

AC$NA, #&"RAN%E DE &A CR$, 'E!$! CEN%E /. CAE&&AN, an+ t*e

REG!%ER "# DEED! #"R &A C%0,respon/ents.

DE &E"N, 'R., J.:

7efore us is a petition for revie on certiorari of te 8r/er 1 of 7ran" 05 of te

Regional rial Court of Lipa City 2/is#issing petitioners9 "o#plaint 3 for res"ission of

several sale transa"tions involving lan/ one/ $y Augusto L. Salas, &r., teir

pre/e"essor:in:interest, on te groun/ tat tey faile/ to first resort to ar$itration.

Salas, &r. as te registere/ oner of a vast tra"t of lan/ in Lipa City, 7atangas

spanning 1,202,352 s;uare #eters.

8n ay 15, 1%0, e entere/ into an 8ner:Contra"tor Agree#ent 7 <ereinafter

referre/ to as te Agree#ent) it respon/ent Laperal Realty Corporation

<ereinafter referre/ to as Laperal Realty) to ren/er an/ provi/e "o#plete <ori=ontal)

"onstru"tion servi"es on is lan/.

8n Septe#$er 3, 1%00, Salas, &r. e>e"ute/ a Spe"ial 'oer of Attorney in favor of

respon/ent Laperal Realty to e>er"ise general "ontrol, supervision an/ #anage#ent

of te sale of is lan/, for "as or on install#ent $asis.

8n &une 1, 1%0%, Salas, &r. left is o#e in te #orning for a $usiness trip to Nueva

4"i?a. He never returne/.

8n August 6, 1%%6, eresita !ia= Salas file/ it te Regional rial Court of a-ati

City a verifie/ petition for te /e"laration of presu#ptive /eat of er us$an/, Salas,

&r., o a/ ten $een #issing for #ore tan seven <) years. +t as grante/ on

!e"e#$er 1, 1%%6. 5

eanti#e, respon/ent Laperal Realty su$/ivi/e/ te lan/ of Salas, &r. an/ sol/

su$/ivi/e/ portions tereof to respon/ents Ro"-ay Real 4state Corporation an/

Sout Ri/ge @illage, +n". on e$ruary , 1%% to respon/ent spouses A$ra?ano an/Lava an/ 8s"ar !a"illo on &une , 1%%1 an/ to respon/ents 4/uar/o @a"una,

lorante /e la Cru= an/ &esus @i"ente Capalan on &une 2, 1%%6 <all of o# are

ereinafter referre/ to as respon/ent lot $uyers).

8n e$ruary 3, 1%%0, petitioners as eirs of Salas, &r. file/ in te Regional rial Court

of Lipa City a Co#plaint 6for /e"laration of nullity of sale, re"onveyan"e, "an"ellation

of "ontra"t, a""ounting an/ /a#ages against erein respon/ents i" as /o"-ete/

as Civil Case No. %0:2.

8n April 2, 1%%0, respon/ent Laperal Realty file/ a otion to

!is#iss 8 on te groun/ tat petitioners faile/ to su$#it teir grievan"e to ar$itration

as re;uire/ un/er Arti"le @+ of te Agree#ent i" provi/esB

Art. @+. AR7+RA+8N.

All "ases of /ispute $eteen C8NRAC8R an/ 8N4R9S

representative sall $e referre/ to te "o##ittee represente/ $yB

a. 8ne representative of te

8N4R

$. 8ne representative of te

C8NRAC8R

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". 8ne representative

a""epta$le to $ot 8N4R

an/ C8NRAC8R.

8n ay 5, 1%%0, respon/ent spouses A$ra?ano an/ Lava an/ respon/ent !a"illo file/

a &oint Anser it Counter"lai# an/ Cross"lai# 9 praying for /is#issal of

petitioners9 Co#plaint for te sa#e reason.

8n August %, 1%%0, te trial "ourt issue/ te erein assaile/ 8r/er /is#issingpetitioners9 Co#plaint for non:"o#plian"e it te foregoing ar$itration "lause.

Hen"e tis petition.

'etitioners argue, tusB

e petitioners9 "auses of a"tion /i/ not e#anate fro# te 8ner:

Contra"tor Agree#ent.

e petitioners9 "auses of a"tion for "an"ellation of "ontra"t an/

a""ounting are "overe/ $y te e>"eption un/er te Ar$itration La.

ailure to ar$itrate is not a groun/ for /is#issal. 1:

+n a "atena of "ases 11 inspire/ $y &usti"e al"ol#9s provo"ative /issent in Vega

v . San Carlos Milling Co. 12, tis Court as re"ogni=e/ ar$itration agree#ents as

vali/, $in/ing, enfor"ea$le an/ not "ontrary to pu$li" poli"y so #u" so tat en

tere o$tains a ritten provision for ar$itration i" is not "o#plie/ it, te trial

"ourt soul/ suspen/ te pro"ee/ings an/ or/er te parties to pro"ee/ to ar$itration

in a""or/an"e it te ter#s of teir

agree#ent 13. Ar$itration is te Dave of te futureD in /ispute resolution. 17 o $rus

asi/e a "ontra"tual agree#ent "alling for ar$itration in "ase of /isagree#ent $eteenparties oul/ $e a step $a"-ar/. 15

Noneteless, e grant te petition.

A su$#ission to ar$itration is a "ontra"t. 16 As su", te Agree#ent, "ontaining te

stipulation on ar$itration, $in/s te parties tereto, as ell as teir assigns an/

eirs. 18 7ut only tey. 'etitioners, as eirs of Salas, &r., an/ respon/ent Laperal

Realty are "ertainly $oun/ $y te Agree#ent. +f respon/ent Laperal Realty a/

assigne/ its rigts un/er te Agree#ent to a tir/ party, #a-ing te for#er, te

assignor, an/ te latter, te assignee, su" assignee oul/ also $e $oun/ $y te

ar$itration provision sin"e assign#ent involves su" transfer of rigts as to vest in te

assignee te poer to enfor"e te# to te sa#e e>tent as te assignor "oul/ ave

enfor"e/ te# against te /e$tor 1 or in tis "ase, against te eirs of te original

party to te Agree#ent. Hoever, respon/ents Ro"-ay Real 4state Corporation,

Sout Ri/ge @illage, +n"., aara#i !evelop#ent Corporation, spouses A$ra?ano,

spouses Lava, 8s"ar !a"illo, 4/uar/o @a"una, lorante /e la Cru= an/ &esus

@i"ente Capellan are not assignees of te rigts of respon/ent Laperal Realty un/er

te Agree#ent to /evelop Salas, &r.9s lan/ an/ sell te sa#e. ey are, rater, $uyers

of te lan/ tat respon/ent Laperal Realty as given te autority to /evelop an/ sell

un/er te Agree#ent. As su", tey are not DassignsD "onte#plate/ in Art. 1311 of te

Ne Civil Co/e i" provi/es tat D"ontra"ts ta-e effe"t only $eteen te parties,teir assigns an/ eirsD.

'etitioners "lai# tat tey suffere/ lesion of #ore tan one:fourt <1E2) of te value of

Salas, &r.9s lan/ en respon/ent Laperal Realty su$/ivi/e/ it an/ sol/ portions

tereof to respon/ent lot $uyers. us, tey institute/ a"tion 19 against $ot

respon/ent Laperal Realty an/ respon/ent lot $uyers for res"ission of te sale

transa"tions an/ re"onveyan"e to te# of te su$/ivi/e/ lots. ey argue tat

res"ission, $eing teir "ause of a"tion, falls un/er te e>"eption "lause in Se". of

Repu$li" A"t No. 06 i" provi/es tat Dsu" su$#ission Fto or "ontra"t Fof

ar$itration sall $e vali/, enfor"ea$le an/ irrevo"a$le, save upon su" groun/s as

e>ist at la for te revo"ation of any "ontra"tD.

e petitioners9 "ontention is itout #erit. or ile res"ission, as a general rule, is

an ar$itra$le issue, 2: tey i#plea/e/ in te suit for res"ission te respon/ent lot

$uyers o are neiter parties to te Agree#ent nor te latter9s assigns or eirs.

Conse;uently, te rigt to ar$itrate as provi/e/ in Arti"le @+ of te Agree#ent as

never veste/ in respon/ent lot $uyers.

Respon/ent Laperal Realty, as a "ontra"ting party to te Agree#ent, as te rigt to

"o#pel petitioners to first ar$itrate $efore see-ing ?u/i"ial relief. Hoever, to split te

pro"ee/ings into ar$itration for respon/ent Laperal Realty an/ trial for te respon/ent

lot $uyers, or to ol/ tr ial in a$eyan"e pen/ing ar$itration $eteen petitioners an/

respon/ent Laperal Realty, oul/ in effe"t result in #ultipli"ity of suits, /upli"itouspro"e/ure an/ unne"essary /elay. 8n te oter an/, it oul/ $e in te interest of

?usti"e if te trial "ourt ears te "o#plaint against all erein respon/ents an/

a/?u/i"ates petitioners9 rigts as against teirs in a single an/ "o#plete pro"ee/ing.

H4R48R4, te instant petition is ere$y GRAN4!. e 8r/er /ate/ August 1%,

1%%0 of 7ran" 05 of te Regional rial Court of Lipa City is ere$y N(LL++4! an/

S4 AS+!4. Sai/ "ourt is ere$y or/ere/ to pro"ee/ it te earing of Civil Case

No. %0:2.

Costs against private respon/ents.

S8 8R!4R4!

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G.R. No. 19965: 'ne 26, 2:13

' &$! A!A DEE&"EN% C"R"RA%"N, 'etitioner,vs.$%&%0 A!!$RANCE C"R"RA%"N, Respon/ent.

! 4 C + S + 8 N

&&ARAA, 'R., J.:

7efore te Court is a petition for revie on "ertiorari un/er Rule 25 of te 1%% Rulesof Civil 'ro"e/ure, as a#en/e/, assailing te !e"ision1 /ate/ &anuary ,11 an/Resolution /ate/ !e"e#$er 0, 11 of te Court of Appeals <CA) in CA:G.R. S' No.1100.

e a"ts

8n !e"e#$er 2, , petitioner & 'lus Asia !evelop#ent Corporation represente/$y its Cair#an, &oo Han Lee, an/ artin 4. a$unay, /oing $usiness un/er tena#e an/ style of Seven Sa/es of 7lue ra/ing an/ Servi"es, entere/ into aConstru"tion Agree#ent3 ere$y te latter un/ertoo- to $uil/ te for#er9s :roo#

"on/o#iniu#Eotel <Con/otel 7uil/ing 5) lo"ate/ at te airays 7lueaters Golf Resort in 7ora"ay +slan/, alay, A-lan. e pro?e"t, "osting '2,,., asto $e "o#plete/ itin one year or 365 /ays re"-one/ fro# te first "alen/ar /ayafter signing of te Noti"e of Aar/ an/ Noti"e to 'ro"ee/ an/ re"eipt of /onpay#ent <I of "ontra"t pri"e). e '

0,2,. /on pay#ent as fully pai/ on&anuary 12, 0.2'ay#ent of te $alan"e of te "ontra"t pri"e ill $e $ase/ ona"tual or- finise/ itin 15 /ays fro# re"eipt of te #ontly progress $illings. 'erte agree/ or- s"e/ule, te "o#pletion /ate of te pro?e"t as !e"e#$er0.5 a$uay also su$#itte/ te re;uire/ 'erfor#an"e 7on/6 issue/ $yrespon/ent (tility Assuran"e Corporation <(ASSC8) in te a#ount e;uivalent toI /on pay#ent or '

0.2 #illion.

a$unay "o##en"e/ or- at te pro?e"t site on &anuary , 0. 'etitioner pai/ up

to te t #ontly progress $illing sent $y a$unay. As of Septe#$er 16, 0,petitioner a/ pai/ te total a#ount of '15,%%,2.3 in"lusive of te I /onpay#ent. Hoever, as of sai/ /ate, a$unay a/ a""o#plise/ only .5I of tepro?e"t.

+n te &oint Constru"tion 4valuation Result an/ Status Report0 signe/ $y a$unayassiste/ $y Ar". 4lin 8lavario, an/ &oo Han Lee assiste/ $y Roy @. ovi/o, tefolloing fin/ings ere a""epte/ as true, a""urate an/ "orre"tB

+++ SA(S 8 'R8&4C AS 8 12 N8@474R 0

1) After "on/u"ting a ?oint inspe"tion an/ evaluation of te pro?e"t to

/eter#ine te a"tual per"entage of a""o#plis#ent, te "ontra"ting parties,assiste/ $y teir respe"tive te"ni"al groups, SS7 assiste/ $y Ar". 4lin

8lavario an/ &'L(S assiste/ $y 4ngrs. &oey Ro?as an/ Siela 7otar/o,"on"lu/e/ an/ agree/ tat as of 12 Nove#$er 0, te pro?e"t is onlyirty 8ne point irty Nine 'er"ent <31.3%I) "o#plete.

) urter#ore, te value of "onstru"tion #aterials allo"ate/ for te"o#pletion of te pro?e"t an/ "urrently on site as $een /eter#ine/ an/agree/ to $e 8N4 +LL+8N 8RJ N+N4 H8(SAN! HR44 H(N!R4!S+KJ 8(R '4S8S AN! 8RJ +@4 C4NA@8S <'1,2%,362.25)

3) e a//itional a""o#plis#ent of SS7, refle"te/ in its re"on"ile/ an/"onsoli/ate/ 0t an/ %t $illings, is ree point 4igty ive 'er"ent <3.05I)it a gross value of '1,563,553.32 a#ount "re/ita$le to SS7 after/e/u"ting te itol/ing ta> is '1,530,22.02

2) e unre"oupe/ a#ount of te /on pay#ent is ',3%,221.53 after/e/u"ting te "ost of #aterials on site an/ te net $illa$le a#ount refle"te/in te re"on"ile/ an/ "onsoli/ate/ 0t an/ %t $illings. e un"o#plete/portion of te pro?e"t is 60.61I it an esti#ate/ value per "onstru"tionagree#ent signe/ is',00,21%.5.% <4#pasis supplie/.)

8n Nove#$er 1%, 0, petitioner ter#inate/ te "ontra"t an/ sent /e#an/ letters to

a$unay an/ respon/ent surety. As its /e#an/s ent unee/e/, petitioner file/ aRe;uest for Ar$itration1 $efore te Constru"tion +n/ustry Ar$itration Co##ission<C+AC). 'etitioner praye/ tat a$unay an/ respon/ent $e or/ere/ to pay te su#sof '

0,%0,55.0% as li;ui/ate/ /a#ages an/ ',3%,221.53 "orrespon/ing to teunre"oupe/ /on pay#ent or overpay#ent petitioner #a/e to a$unay.11

+n is Anser ,1 a$unay "lai#e/ tat te /elay as "ause/ $y retrofitting an/ oterrevision or-s or/ere/ $y &oo Han Lee. He asserte/ tat e a"tually a/ until April3, % to finis te pro?e"t sin"e te 365 /ays perio/ of "o#pletion starte/ only onay , 0 after "learing te retrofitte/ ol/ stru"ture. Hen"e, te ter#ination of te"ontra"t $y petitioner as pre#ature an/ te filing of te "o#plaint against i# as$aseless, #ali"ious an/ in $a/ fait.

Respon/ent, on te oter an/, file/ a #otion to /is#iss on te groun/ tat petitioner as no "ause of a"tion an/ te "o#plaint states no "ause of a"tion against it. eC+AC /enie/ te #otion to /is#iss. Respon/ents #otion for re"onsi/eration asli-eise /enie/.13

+n its Anser 4> A$un/ante A/ Cautela# it Co#pulsory Counter"lai#s an/ Cross:"lai#s,12 respon/ent argue/ tat te perfor#an"e $on/ #erely guarantee/ te I/on pay#ent an/ not te entire o$ligation of a$unay un/er te Constru"tion Agree#ent. Sin"e te value of te pro?e"ts a""o#plis#ent alrea/y e>"ee/e/ tesai/ a#ount, respon/ents o$ligation un/er te perfor#an"e $on/ a/ $een fullye>tinguise/. As to te "lai# for allege/ overpay#ent to a$unay, respon/ent"onten/e/ tat it soul/ not $e "re/ite/ against te I /on pay#ent i" asalrea/y e>auste/ an/ su" appli"ation $y petitioner is tanta#ount to reviving an

o$ligation tat a/ $een legally e>tinguise/ $y pay#ent. Respon/ent also set up a"ross:"lai# against a$unay o e>e"ute/ in its favor an +n/e#nity Agree#ent

3

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ere$y a$unay un/ertoo- to in/e#nify respon/ent for atever a#ounts it #ay$e a/?u/ge/ lia$le to pay petitioner un/er te surety $on/.

7ot petitioner an/ respon/ent su$#itte/ teir respe"tive /o"u#entary an/testi#onial evi/en"e. a$unay faile/ to appear in te s"e/ule/ earings an/ topresent is evi/en"e /espite /ue noti"e to is "ounsel of re"or/. e C+AC tus/e"lare/ tat a$unay is /ee#e/ to ave aive/ is rigt to present evi/en"e.15

8n e$ruary , 1, te C+AC ren/ere/ its !e"ision16 an/ #a/e te folloing

aar/B

A""or/ingly, in vie of our foregoing /is"ussions an/ /ispositions, te ri$unalere$y a/?u/ges, or/ers an/ /ire"tsB

1. Respon/ents a$unay an/ (tass"o to ?ointly an/ severally pay "lai#antte folloingB

a) '2,26%,%6%.%, as li;ui/ate/ /a#ages, plus legal interesttereon at te rate of 6I per annu# "o#pute/ fro# te /ate of tis/e"ision up to te ti#e tis /e"ision $e"o#es final, an/ 1I perannu# "o#pute/ fro# te /ate tis /e"ision $e"o#es final until

fully pai/, an/

$) ',3%,221.53 as unre"oupe/ /on pay#ent plus interesttereon at te rate of 6I per annu# "o#pute/ fro# te /ate of tis/e"ision up to te ti#e tis /e"ision $e"o#es final, an/ 1I perannu# "o#pute/ fro# te /ate tis /e"ision $e"o#es final untilfully pai/.

+t $eing un/erstoo/ tat respon/ent (tass"os lia$ility sall in no "asee>"ee/ '

0.2 #illion.

. Respon/ent a$unay to pay to "lai#ant te a#ount of '%0,235.0%, i"is respon/ent a$unays sare in te ar$itration "ost "lai#ant a/a/van"e/, it legal interest tereon fro# &anuary 0, 1 until fully pai/.

3. Respon/ent a$unay to in/e#nify respon/ent (tass"o of te a#ountsrespon/ent (tass"o ill ave pai/ to "lai#ant un/er tis /e"ision, plusinterest tereon at te rate of 1I per annu# "o#pute/ fro# te /ate e isnotifie/ of su" pay#ent #a/e $y respon/ent (tass"o to "lai#ant until fullypai/, an/ to pay (tass"o '1,. as attorneys fees.

S8 8R!4R4!.1

!issatisfie/, respon/ent file/ in te CA a petition for revie un/er Rule 23 of te 1%%Rules of Civil 'ro"e/ure, as a#en/e/.

+n te assaile/ /e"ision, te CA agree/ it te C+AC tat te spe"ifi" "on/ition in te'erfor#an"e 7on/ /i/ not "learly state te li#itation of te suretys lia$ility. 'ursuantto Arti"le 1310 of te Civil Co/e, te CA sai/ tat te provision soul/ $e "onstrue/in favor of petitioner "onsi/ering tat te o$s"urely prase/ provision as /ran up$y respon/ent an/ a$unay. urter, te appellate "ourt state/ tat respon/ent"oul/ not possi$ly guarantee te /on pay#ent $e"ause it is not a$unay o oe/te /on pay#ent to petitioner $ut te oter ay aroun/. Conse;uently, te"o#pletion $y a$unay of 31.3%I of te "onstru"tion oul/ not lea/ to tee>tinguis#ent of respon/ents lia$ility. e '

0.2 #illion as a li#it on te a#ount of

respon/ents lia$ility an/ not a li#itation as to te o$ligation or un/erta-ing itguarantee/.

Hoever, te CA reverse/ te C+ACs ruling tat a$unay a/ in"urre/ /elay i"entitle/ petitioner to te stipulate/ li;ui/ate/ /a#ages an/ unre"oupe/ /onpay#ent. Citing Aerospa"e Ce#i"al +n/ustries, +n". v. Court of Appeals,1% teappellate "ourt sai/ tat not all re;uisites in or/er to "onsi/er te o$ligor or /e$tor in/efault ere present in tis "ase. +t el/ tat it is only fro# !e"e#$er 2, 0<"o#pletion /ate) tat e soul/ re"-on /efault $e"ause te Constru"tion Agree#entprovi/e/ only for /elay in te "o#pletion of te pro?e"t an/ not /elay on a #ontly$asis using te or- s"e/ule approve/ $y petitioner as te referen"e point. Hen"e,petitioners ter#ination of te "ontra"t as pre#ature sin"e te /elay in tis "ase as#erely spe"ulative te o$ligation as not yet /e#an/a$le.

e /ispositive portion of te CA !e"ision rea/sB

H4R48R4, pre#ises "onsi/ere/, te instant petition for revie is GRAN4!.e assaile/ !e"ision /ate/ 13 &anuary 1 ren/ere/ $y te C+AC Ar$itral ri$unalin C+AC Case No. 3:% is ere$y R4@4RS4! an/ S4 AS+!4. A""or/ingly, terit of 4>e"ution /ate/ 2 Nove#$er 1 issue/ $y te sa#e tri$unal is ere$y ANN(LL4! an/ S4 AS+!4.

S8 8R!4R4!.

'etitioner #ove/ for re"onsi/eration of te CA /e"ision ile respon/ent file/ a#otion for partial re"onsi/eration. 7ot #otions ere /enie/.

e +ssues

7efore tis Court petitioner see-s to reverse te CA insofar as it /enie/ petitioners"lai#s un/er te 'erfor#an"e 7on/ an/ to reinstate in its entirety te e$ruary ,1 C+AC !e"ision. Spe"ifi"ally, petitioner allege/ tat M

A. H4 C8(R 8 A''4ALS S4R+8(SLJ 4RR4! +N N8 H8L!+NGHA H4 AL4RNA+@4 !+S'(4 R4S8L(+8N AC AN! H4S'4C+AL R(L4S 8N AL4RNA+@4 !+S'(4 R4S8L(+8N HA@4SR+''4! H4 C8(R 8 A''4ALS 8 &(R+S!+C+8N 8 R4@+4 AR7+RAL AAR!S.

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7/23/2019 ADR Cases 1


7. H4 C8(R 8 A''4ALS S4R+8(SLJ 4RR4! +N R4@4RS+NG H4 AR7+RAL AAR! 8N AN +SS(4 HA AS N8 RA+S4! +N H4 ANS4R. N8 +!4N++4! +N H4 4RS 8 R44R4NC4, N8 ASS+GN4! AS AN4RR8R, AN! N8 ARG(4! +N ANJ 8 H4'L4A!+NGS +L4! 748R4 H4 C8(R.

C. H4 C8(R 8 A''4ALS S4R+8(SLJ 4RR4! +N R4LJ+NG 8N H4CAS4 8 A4R8S'AC4 CH4+CAL +N!(SR+4S, +NC. v. C8(R 8 A''4ALS, 315 SCRA %2, H+CH HAS N8H+NG 8 !8 +H

C8NSR(C+8N AGR444NS.1

8ur Ruling

8n te pro"e/ural issues raise/, e fin/ no #erit in petitioners "ontention tat itte institutionali=ation of alternative /ispute resolution un/er Repu$li" A"t <R.A.) No.%05, oterise -non as te Alternative !ispute Resolution A"t of 2, te CAas /iveste/ of ?uris/i"tion to revie te /e"isions or aar/s of te C+AC. 'etitionererroneously relie/ on te provision in sai/ la alloing any party to a /o#esti"ar$itration to file in te Regional rial Court <RC) a petition eiter to "onfir#, "orre"tor va"ate a /o#esti" ar$itral aar/.

e ol/ tat R.A. No. %05 /i/ not "onfer on regional trial "ourts ?uris/i"tion to revieaar/s or /e"isions of te C+AC in "onstru"tion /isputes. 8n te "ontrary, Se"tion 2tereof e>pressly /e"lares tat "onfir#ation $y te RC is not re;uire/, tusB

S4C. 2. Confir#ation of Aar/. M e "onfir#ation of a /o#esti" ar$itral aar/ sall$e governe/ $y Se"tion 3 of R.A. 06.

A /o#esti" ar$itral aar/ en "onfir#e/ sall $e enfor"e/ in te sa#e #anner asfinal an/ e>e"utory /e"isions of te Regional rial Court.

e "onfir#ation of a /o#esti" aar/ sall $e #a/e $y te regional trial "ourt ina""or/an"e it te Rules of 'ro"e/ure to $e pro#ulgate/ $y te Supre#e Court.

A C+AC ar$itral aar/ nee/ not $e "onfir#e/ $y te regional trial "ourt to $ee>e"utory as provi/e/ un/er 4.8. No. 10. <4#pasis supplie/.)

4>e"utive 8r/er <48) No. 10 vests upon te C+AC original an/ e>"lusive ?uris/i"tion over /isputes arising fro#, or "onne"te/ it, "ontra"ts entere/ into $yparties involve/ in "onstru"tion in te 'ilippines, eter te /ispute arises $eforeor after te "o#pletion of te "ontra"t, or after te a$an/on#ent or $rea" tereof. 7ye>press provision of Se"tion 1% tereof, te ar$itral aar/ of te C+AC is final an/unappeala$le, e>"ept on ;uestions of la, i" are appeala$le to te Supre#eCourt. it te a#en/#ents intro/u"e/ $y R.A. No. % an/ pro#ulgation of te1%% Rules of Civil 'ro"e/ure, as a#en/e/, te C+AC as in"lu/e/ in teenu#eration of ;uasi?u/i"ial agen"ies ose /e"isions or aar/s #ay $e appeale/to te CA in a petition for revie un/er Rule 23. Su" revie of te C+AC aar/ #ayinvolve eiter ;uestions of fa"t, of la, or of fa"t an/ la.3

'etitioner #isrea/ te provisions of A.. No. :11:0:SC <Spe"ial A!R Rules)pro#ulgate/ $y tis Court an/ i" too- effe"t on 8"to$er 3, %. Sin"e R.A. No.%05 e>pli"itly e>"lu/e/ C+AC aar/s fro# /o#esti" ar$itration aar/s tat nee/ to$e "onfir#e/ to $e e>e"utory, sai/ aar/s are terefore not "overe/ $y Rule 11 of teSpe"ial A!R Rules,2 as tey "ontinue to $e governe/ $y 48 No. 10, as a#en/e/an/ te rules of pro"e/ure of te C+AC. e C+AC Revise/ Rules of 'ro"e/ureGoverning Constru"tion Ar$itration5 provi/e for te #anner an/ #o/e of appeal fro#C+AC /e"isions or aar/s in Se"tion 10 tereof, i" rea/sB

S4C+8N 10. 'etition for revie. M A petition for revie fro# a final aar/ #ay $eta-en $y any of te parties itin fifteen <15) /ays fro# re"eipt tereof in a""or/an"eit te provisions of Rule 23 of te Rules of Court.

As to te allege/ error "o##itte/ $y te CA in /e"i/ing te "ase upon an issue notraise/ or litigate/ $efore te C+AC, tis assertion as no $asis. eter or nota$unay a/ in"urre/ /elay in te perfor#an"e of is o$ligations un/er teConstru"tion Agree#ent as te very first issue stipulate/ in te er#s ofReferen"e6<8R), i" is /istin"t fro# te issue of te e>tent of respon/entslia$ility un/er te 'erfor#an"e 7on/.

+n/ee/, resolution of te issue of /elay as "ru"ial upon i" /epen/s petitionersrigt to te li;ui/ate/ /a#ages pursuant to te Constru"tion Agree#ent. Contrary to

te C+ACs fin/ings, te CA opine/ tat /elay soul/ $e re"-one/ only after te lapseof te one:year "ontra"t perio/, an/ "onse;uently a$unays lia$ility for li;ui/ate//a#ages arises only upon te appening of su" "on/ition.

e reverse te CA.

!efault or #ora on te part of te /e$tor is te /elay in te fulfill#ent of te prestation$y reason of a "ause i#puta$le to te for#er. +t is te non:fulfill#ent of an o$ligationit respe"t to ti#e.

Arti"le 116% of te Civil Co/e provi/esB

AR. 116%. ose o$lige/ to /eliver or to /o so#eting in"ur in /elay fro# te ti#ete o$ligee ?u/i"ially or e>tra?u/i"ially /e#an/s fro# te# te fulfill#ent of teiro$ligation.

> > > >

+t is a general rule tat one o "ontra"ts to "o#plete "ertain or- itin a "ertainti#e is lia$le for te /a#age for not "o#pleting it itin su" ti#e, unless te /elay ise>"use/ or aive/.0

e Constru"tion Agree#ent provi/es in Arti"le 1 tereof te folloing "on/itions asto "o#pletion ti#e for te pro?e"t

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1. e C8NRAC8R sall "o#plete te or-s "alle/ for un/er tis Agree#ent itin 8N4 <1) J4AR or 365 !ays re"-one/ fro# te 1st"alen/ar /ay after signing of te Noti"e of Aar/ an/ Noti"e to 'ro"ee/ an/re"eipt of /on pay#ent.

. +n tis regar/ te C8NRAC8R sall su$#it a /etaile/ or- s"e/ulefor approval $y 8N4R itin Seven <) /ays after signing of tis Agree#ent an/ full pay#ent of I of te agree/ "ontra"t pri"e. Sai//etaile/ or- s"e/ule sall follo te general s"e/ule of a"tivities an/

sall serve as $asis for te evaluation of te progress of or- $yC8NRAC8R.%

+n tis ?uris/i"tion, te folloing re;uisites #ust $e present in or/er tat te /e$tor#ay $e in /efaultB <1) tat te o$ligation $e /e#an/a$le an/ alrea/y li;ui/ate/ <)tat te /e$tor /elays perfor#an"e an/ <3) tat te "re/itor re;uires te perfor#an"e ?u/i"ially or e>tra?u/i"ially.3

+n ol/ing tat a$unay as not at all in"urre/ /elay, te CA pointe/ out tat teo$ligation to perfor# or "o#plete te pro?e"t as not yet /e#an/a$le as ofNove#$er 1%, 0 en petitioner ter#inate/ te "ontra"t, $e"ause te agree/"o#pletion /ate as still #ore tan one #ont aay <!e"e#$er 2, 0). Sin"e teparties "onte#plate/ /elay in te "o#pletion of te entire pro?e"t, te CA "on"lu/e/

tat te failure of te "ontra"tor to "at" up it s"e/ule of or- a"tivities /i/ not"onstitute /elay giving rise to te "ontra"tors lia$ility for /a#ages.

e "annot sustain te appellate "ourts interpretation as it is in"onsistent it teter#s of te Constru"tion Agree#ent. Arti"le 132 of te Civil Co/e re;uires tat tevarious stipulations of a "ontra"t sall $e interprete/ togeter, attri$uting to te/ou$tful ones tat sense i" #ay result fro# all of te# ta-en ?ointly. Here, teor- s"e/ule approve/ $y petitioner as inten/e/, not only to serve as its $asis forte pay#ent of #ontly progress $illings, $ut also for evaluation of te progress ofor- $y te "ontra"tor. Arti"le 13.1 <g) <iii) of te Constru"tion Agree#ent provi/estat te "ontra"tor sall $e /ee#e/ in /efault if, a#ong oters, it a/ /elaye/ itout ?ustifia$le "ause te "o#pletion of te pro?e"t D$y #ore tan tirty <3) "alen/ar /ays$ase/ on offi"ial or- s"e/ule /uly approve/ $y te 8N4R.D31

Re"or/s soe/ tat as early as April 0, or itin four #onts after a$unay"o##en"e/ or- a"tivities, te pro?e"t as alrea/y $ein/ s"e/ule for reasons notattri$uta$le to petitioner. +n te su""ee/ing #onts, a$unay as still una$le to "at"up it is a""o#plis#ent even as petitioner "onstantly a/vise/ i# of te /elays,as "an $e gleane/ fro# te folloing noti"es of /elay sent $y petitioners engineeran/ "onstru"tion #anager, 4ngr. Seila N. 7otar/oB

April 3, 0

Seven Sa/es of 7lue7ora"ay +slan/

alay, A-lan

1âwphi1

Attention B r. artin a$unayGeneral anager

ru B 4ngr. Reynal/o Gapasin

'ro?e"t B @illa 7eatri=

Su$?e"t B Noti"e of !elay

!ear r. a$unayB

is is to for#ali=e our /is"ussion it your 4ngineers /uring our #eeting last April3, 0 regar/ing te /elay in te i#ple#entation of #a?or a"tivities $ase/ on yoursu$#itte/ "onstru"tion s"e/ule. Su$stantial /elay as note/ in "on"reting or-stat affe"ts your roof fra#ing tat soul/ ave $een 2I "o#plete/ as of tis /ate.is /elay ill "reate #a?or i#pa"t on your over:all s"e/ule as te finising or-sill all $e /epen/ent on te en"losure of te $uil/ing.

+n tis regar/, e re"o##en/ tat you prepare a "at":up s"e/ule an/ e>pe/ite te/elivery of "riti"al #aterials on site. e oul/ igly appre"iate if you "oul/ atten/our ne>t regular #eeting so e "oul/ i##e/iately a//ress tis #atter. an- you.

@ery truly yours,

4ngr. Seila N. 7otar/oConstru"tion anager M L+E4'+3

8"to$er 15, 0

> > > >

!ear r. a$unay,

e ave noti"e/ "ontinuous a$sen"e of all te 4ngineers tat you ave assigne/ on:site to a/#inister an/ supervise your "ontra"te/ or-. or te past to <) ee-s,your "o#pany /oes not ave a e"ni"al Representative #anning te ?o$site"onsi/ering te "riti"al a"tivities tat are in progress an/ te /elays in s"e/ule tatyou ave alrea/y in"urre/. +n tis regar/, e oul/ igly re"o##en/ te i##e/iaterepla"e#ent of your 'ro?e"t 4ngineer itin te ee-.

e oul/ igly appre"iate your usual attention on tis #atter.

> > > >33

Nove#$er 5, 0

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> > > >

!ear r. a$unay,

is is in referen"e to your /is"ussion /uring te #eeting it r. &ooan Lee last8"to$er 3, 0 regar/ing te "onstru"tion of te iel/ 8ffi"e an/ Sto"- Roo# foraterials inten/e/ for @illa 7eatri= use only. e un/erstan/ tat you ave "o##itte/to "o#plete it Nove#$er 5, 0 $ut as of tis /ate tere is no i#prove#ent or anyongoing "onstru"tion a"tivity on te sai/ fiel/ offi"e an/ sto"-roo#.

e are e>pe"ting /eliveries of 8ner Supplie/ aterials very soon, terefore, tissto"-roo# is $a/ly nee/e/. e ill igly appre"iate if tis #atter ill $e given youri##e/iate attention.

an- you.

> > > >32

Nove#$er 6, 0

> > > >

!ear r. a$unay,

e oul/ li-e to "all your attention regar/ing te /e"rease in your #anpoerassigne/ on site. e ave o$serve/ tat for te past tree <3) ee-s instea/ ofin"reasing your #anpoer to "at" up it te /elay it as re/u"e/ to only 0 or-ersto/ay fro# an average of 35 or-ers in te previous #onts.

'lease note tat $ase/ on your su$#itte/ revise/ s"e/ule you are alrea/y /elaye/$y appro>i#ately 5I an/ tis ill orsen soul/ you not a//ress tis #atterproperly.

e are loo-ing forar/ for Fsi" your "ooperation an/ "ontinuous "o##it#ent in/elivering tis pro?e"t as per "ontra"t agree#ent.

> > > >35

Su$se;uently, a ?oint inspe"tion an/ evaluation as "on/u"te/ it te assistan"e ofte ar"ite"ts an/ engineers of petitioner an/ a$unay an/ it as foun/ tat as ofNove#$er 12, 0, te pro?e"t as only 31.3%I "o#plete an/ tat te un"o#plete/portion as 60.61I it an esti#ate/ value per Constru"tion Agree#entas',00,21%.5. +nstea/ of /ou$ling is efforts as te s"e/ule/ "o#pletion /ateapproa"e/, a$unay /i/ noting to re#e/y te /elays an/ even re/u"e/ te/eploy#ent of or-ers at te pro?e"t site. Neiter /i/ a$unay, at anyti#e, as- for an

e>tension to "o#plete te pro?e"t. us, on Nove#$er 1%, 0, petitioner a/vise/a$unay of its /e"ision to ter#inate te "ontra"t on a""ount of te tre#en/ous /elay

te latter in"urre/. is as folloe/ $y te "lai# against te 'erfor#an"e 7on/upon te respon/ent on !e"e#$er 10, 0.

'etitioners "lai# against te 'erfor#an"e 7on/ in"lu/e/ te li;ui/ate/ /a#agesprovi/e/ in te Constru"tion Agree#ent, as follosB

AR+CL4 1 M L+(+!A4! !AAG4SB

1.1 i#e is of te essen"e in tis Agree#ent. Soul/ te C8NRAC8R fail to"o#plete te 'R8&4C itin te perio/ stipulate/ erein or itin te perio/ ofe>tension grante/ $y te 8N4R, plus 8ne <1) ee- gra"e perio/, itout any ?ustifia$le reason, te C8NRAC8R ere$y agrees M

a. e C8NRAC8R sall pay te 8N4R li;ui/ate/ /a#ages e;uivalentto 8ne ent of 8ne 'er"ent <1E1 of 1I) of te Contra"t A#ount for ea"/ay of /elay after any an/ all e>tensions an/ te 8ne <1) ee- Gra"e 'erio/until "o#plete/ $y te C8NRAC8R.

$. e C8NRAC8R, even after paying for te li;ui/ate/ /a#ages /ue toune>e"ute/ or-s an/Eor /elays sall not relieve it of te o$ligation to"o#plete an/ finis te "onstru"tion.

Any su# i" #ay$e paya$le to te 8N4R for su" loss #ay $e /e/u"te/ fro#te a#ounts retaine/ un/er Arti"le % or retaine/ $y te 8N4R en te or-s"alle/ for un/er tis Agree#ent ave $een finise/ an/ "o#plete/.

Li;ui/ate/ !a#ageFs paya$le to te 8N4R sall $e auto#ati"ally /e/u"te/ fro#te "ontra"tors "olle"ti$les itout prior "onsent an/ "on"urren"e $y teC8NRAC8R.

1. o give full for"e an/ effe"t to te foregoing, te C8NRAC8R ere$y,itout ne"essity of any furter a"t an/ /ee/, autori=es te 8N4R to /e/u"t anya#ount tat #ay $e /ue un/er +te# <a) a$ove, fro# any an/ all #oney or a#ounts/ue or i" ill $e"o#e /ue to te C8NRAC8R $y virtue of tis Agree#entan/Eor to "olle"t su" a#ounts fro# te 'erfor#an"e 7on/ file/ $y teC8NRAC8R in tis Agree#ent.36 <4#pasis supplie/.)

Lia$ility for li;ui/ate/ /a#ages is governe/ $y Arti"les 6 to 0 of te CivilCo/e, i" provi/eB

AR. 6. Li;ui/ate/ /a#ages are tose agree/ upon $y te parties to a "ontra"t,to $e pai/ in "ase of $rea" tereof.

AR. . Li;ui/ate/ /a#ages, eter inten/e/ as an in/e#nity or a penalty, sall$e e;uita$ly re/u"e/ if tey are ini;uitous or un"ons"iona$le.

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AR. 0. en te $rea" of te "ontra"t "o##itte/ $y te /efen/ant is not teone "onte#plate/ $y te parties in agreeing upon te li;ui/ate/ /a#ages, te lasall /eter#ine te #easure of /a#ages, an/ not te stipulation.

A stipulation for li;ui/ate/ /a#ages is atta"e/ to an o$ligation in or/er to ensureperfor#an"e an/ as a /ou$le fun"tionB <1) to provi/e for li;ui/ate/ /a#ages, an/ <)to strengten te "oer"ive for"e of te o$ligation $y te treat of greater responsi$ilityin te event of $rea".3 e a#ount agree/ upon ansers for /a#ages suffere/ $yte oner /ue to /elays in te "o#pletion of te pro?e"t.30 As a pre"on/ition to su"

aar/, oever, tere #ust $e proof of te fa"t of /elay in te perfor#an"e of teo$ligation.3%

Con"e/e/ly, Arti"le 1.1 of te Constru"tion Agree#ent #entione/ only te failure of te "ontra"tor to "o#plete te pro?e"t itin te stipulate/ perio/ or te e>tensiongrante/ $y te oner. Hoever, tis ill not /efeat petitioners "lai# for /a#ages norrespon/ents lia$ility un/er te 'erfor#an"e 7on/. a$unay as "learly in /efault"onsi/ering te /is#al per"entage of is a""o#plis#ent <3.30I) of te or- e"ontra"te/ on a""ount of /elays in e>e"uting te s"e/ule/ or- a"tivities an/repeate/ failure to provi/e suffi"ient #anpoer to e>pe/ite "onstru"tion or-s. eevents of /efault an/ re#e/ies of te 8ner are set fort in Arti"le 13, i" rea/sB

AR+CL4 13 M !4A(L 8 C8NRAC8RB

13.1 Any of te folloing sall "onstitute an 4vent of !efault on te part of teC8NRAC8R.

> > > >

g. +n "ase te C8NRAC8R as /one any of te folloingB

<i.) as a$an/one/ te 'ro?e"t

<ii.) itout reasona$le "ause, as faile/ to "o##en"e te "onstru"tion oras suspen/e/ te progress of te 'ro?e"t for tenty:eigt /ays

<iii.) itout ?ustifia$le "ause, as /elaye/ te "o#pletion of te 'ro?e"t $y#ore tan tirty <3) "alen/ar /ays $ase/ on offi"ial or- s"e/ule /ulyapprove/ $y te 8N4R

<iv.) /espite previous ritten arning $y te 8N4R, is not e>e"uting te"onstru"tion or-s in a""or/an"e it te Agree#ent or is persistently orflagrantly negle"ting to "arry out its o$ligations un/er te Agree#ent.

<v.) as, to te /etri#ent of goo/ or-#ansip or in /efian"e of te 8nersinstru"tions to te "ontrary, su$let any part of te Agree#ent.

13. +f te C8NRAC8R as "o##itte/ any of te a$ove reasons "ite/ in +te#13.1, te 8N4R #ay after giving fourteen <12) "alen/ar /ays noti"e in riting tote C8NRAC8R, enter upon te site an/ e>pel te C8NRAC8R terefro#itout voi/ing tis Agree#ent, or releasing te C8NRAC8R fro# any of itso$ligations, an/ lia$ilities un/er tis Agree#ent. Also itout /i#inising or affe"tingte rigts an/ poers "onferre/ on te 8N4R $y tis Agree#ent an/ te 8N4R#ay i#self "o#plete te or- or #ay e#ploy any oter "ontra"tor to "o#plete teor-. +f te 8N4R sall enter an/ e>pel te C8NRAC8R un/er tis "lause, te8N4R sall $e entitle/ to "onfis"ate te perfor#an"e $on/ of te C8NRAC8Rto "o#pensate for all -in/s of /a#ages te 8N4R #ay suffer. All e>pensesin"urre/ to finis te 'ro?e"t sall $e "arge/ to te C8NRAC8R an/Eor is $on/.urter, te 8N4R sall not $e lia$le to pay te C8NRAC8R until te "ost ofe>e"ution, /a#ages for te /elay in te "o#pletion, if any, an/ all oter e>pensesin"urre/ $y te 8N4R ave $een as"ertaine/ i" a#ount sall $e /e/u"te/ fro#any #oney /ue to te C8NRAC8R on a""ount of tis Agree#ent. eC8NRAC8R ill not $e "o#pensate/ for any loss of profit, loss of goo/ill, loss of use of any e;uip#ent or property, loss of $usiness opportunity, a//itional finan"ing"ost or overea/ or opportunity losses relate/ to te una""o#plise/ portions of teor-.2 <4#pasis supplie/.)

As alrea/y /e#onstrate/, te "ontra"tors /efault in tis "ase pertains to is failure tosu$stantially perfor# te or- on a""ount of tre#en/ous /elays in e>e"uting tes"e/ule/ or- a"tivities. ere a party to a $uil/ing "onstru"tion "ontra"t fails to"o#ply it te /uty i#pose/ $y te ter#s of te "ontra"t, a $rea" results for i"an a"tion #ay $e #aintaine/ to re"over te /a#ages sustaine/ tere$y, an/ of"ourse, a $rea" o""urs ere te "ontra"tor ine>"usa$ly fails to perfor#su$stantially in a""or/an"e it te ter#s of te "ontra"t.21

e plain an/ una#$iguous ter#s of te Constru"tion Agree#ent autori=e petitionerto "onfis"ate te 'erfor#an"e 7on/ to anser for all -in/s of /a#ages it #ay sufferas a result of te "ontra"tors failure to "o#plete te $uil/ing. Having ele"te/ toter#inate te "ontra"t an/ e>pel te "ontra"tor fro# te pro?e"t site un/er Arti"le 13of te sai/ Agree#ent, petitioner is "learly entitle/ to te pro"ee/s of te $on/ asin/e#nifi"ation for /a#ages it sustaine/ /ue to te $rea" "o##itte/ $y a$unay.Su" stipulation alloing te "onfis"ation of te "ontra"tors perfor#an"e $on/parta-es of te nature of a penalty "lause. A penalty "lause, e>pressly re"ogni=e/ $yla, is an a""essory un/erta-ing to assu#e greater lia$ility on te part of te o$ligorin "ase of $rea" of an o$ligation. +t fun"tions to strengten te "oer"ive for"e ofo$ligation an/ to provi/e, in effe"t, for at "oul/ $e te li;ui/ate/ /a#ages resultingfro# su" a $rea". e o$ligor oul/ ten $e $oun/ to pay te stipulate/ in/e#nityitout te ne"essity of proof on te e>isten"e an/ on te #easure of /a#ages"ause/ $y te $rea". +t is ell:settle/ tat so long as su" stipulation /oes not"ontravene la, #orals, or pu$li" or/er, it is stri"tly $in/ing upon te o$ligor .2

Respon/ent, oever, insists tat it is not lia$le for te $rea" "o##itte/ $ya$unay $e"ause $y te ter#s of te surety $on/ it issue/, its lia$ility is li#ite/ to teperfor#an"e $y sai/ "ontra"tor to te e>tent e;uivalent to I of te /on pay#ent.+t stresses tat it te 3.30I "o#pletion of te pro?e"t $y a$unay, its lia$ility ase>tinguise/ $e"ause te value of su" a""o#plis#ent alrea/y e>"ee/e/ te su#

e;uivalent to I /on pay#ent <'0.2 #illion).

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e appellate "ourt "orre"tly re?e"te/ tis teory of respon/ent en it rule/ tat te'erfor#an"e 7on/ guarantee/ te full an/ faitful "o#plian"e of a$unayso$ligations un/er te Constru"tion Agree#ent, an/ tat noere in la or ?urispru/en"e /oes it state tat te o$ligation or un/erta-ing $y a surety #ay $eapportione/.

e pertinent portions of te 'erfor#an"e 7on/ provi/eB

e "on/itions of tis o$ligation are as follosB

ereas te &'L(S AS+A, re;uires te prin"ipal S4@4N SHA!4S 8 7L(4C8NSR(C+8N AN! !4@4L8'4N, +NC. to post a $on/ of te a$ovestate/ su#to guarantee I /on pay#ent for te "onstru"tion of 7uil/ing 5 <@illa 7eatri=) :Roo# Con/otel, e Lo/gings insi/e airays an/ 7lueater, 7ora"ay +slan/, alay, A-lan.

ereas, sai/ "ontra"t re;uire/ sai/ 'rin"ipal to give a goo/ an/ suffi"ient $on/ inte a$ove:state/ su# to se"ure te full an/ faitful perfor#an"e on is part of sai/"ontra"t.

+t is a spe"ial provision of tis un/erta-ing tat te lia$ility of te surety un/er tis

$on/ sall in no "ase e>"ee/ te su# of '0,2,. 'ilippine Curren"y.

No, erefore, if te 'rin"ipal sall ell an/ truly perfor# an/ fulfill all teun/erta-ings, "ovenants, ter#s, "on/itions an/ agree#ents stipulate/ in sai/"ontra"t, ten tis o$ligation sall $e null an/ voi/ oterise to re#ain in full for"ean/ effe"t.23 <4#pasis supplie/.)

ile te a$ove "on/ition or spe"ifi" guarantee is un"lear, te rest of te re"itals inte $on/ une;uivo"ally /e"lare tat it se"ures te full an/ faitful perfor#an"e ofa$unays o$ligations un/er te Constru"tion Agree#ent it petitioner. 7y itsnature, a perfor#an"e $on/ guarantees tat te "ontra"tor ill perfor# te "ontra"t,an/ usually provi/es tat if te "ontra"tor /efaults an/ fails to "o#plete te "ontra"t,te surety "an itself "o#plete te "ontra"t or pay /a#ages up to te li#it of te

$on/.22 oreover, te rule is tat if te language of te $on/ is a#$iguous orun"ertain, it ill $e "onstrue/ #ost strongly against a "o#pensate/ surety an/ infavor of te o$ligees or $enefi"iaries un/er te $on/, in tis "ase petitioner as te'ro?e"t 8ner, for ose $enefit it as ostensi$ly e>e"ute/.25

e i#position of interest on te "lai#s of petitioner is li-eise in or/er. As e el/ inCo##onealt +nsuran"e Corporation v. Court of Appeals26

'etitioner argues tat it soul/ not $e #a/e to pay interest $e"ause its issuan"e ofte surety $on/s as #a/e on te "on/ition tat its lia$ility sall in no "ase e>"ee/te a#ount of te sai/ $on/s.

e are not persua/e/. 'etitioners argu#ent is #ispla"e/.

&urispru/en"e is "lear on tis #atter. As early as agaa vs. Al/anese an/ (nionGurantee Co. an/ reiterate/ in 'lari/el Surety +nsuran"e Co., +n". vs. '.L. Galanga"inery Co., +n"., an/ #ore re"ently, in Repu$li" vs. Court of Appeals an/ R 7Surety an/ +nsuran"e Co#pany, +n"., e ave sustaine/ te prin"iple tat if a suretyupon /e#an/ fails to pay, e "an $e el/ lia$le for interest, even if in tus paying, itslia$ility $e"o#es #ore tan te prin"ipal o$ligation. e in"rease/ lia$ility is not$e"ause of te "ontra"t $ut $e"ause of te /efault an/ te ne"essity of ?u/i"ial"olle"tion.

'etitioners lia$ility un/er te suretysip "ontra"t is /ifferent fro# its lia$ility un/er tela.1âwphi1 ere is no ;uestion tat as a surety, petitioner soul/ not $e #a/e topay #ore tan its assu#e/ o$ligation un/er te surety $on/s. Hoever, it is "learfro# te a$ove:"ite/ ?urispru/en"e tat petitioners lia$ility for te pay#ent of interestis not $y reason of te suretysip agree#ent itself $ut $e"ause of te /elay in tepay#ent of its o$ligation un/er te sai/ agree#ent.2 <4#pasis supplie/ "itationso#itte/.)

H4R48R4, te petition for revie on "ertiorari is GRAN4!. e !e"ision /ate/&anuary , 11 an/ Resolution /ate/ !e"e#$er 0, 11 of te Court of Appeals inCA:G.R. S' No. 1100 are ere$y R4@4RS4! an/ S4 AS+!4.

e Aar/ #a/e in te !e"ision /ate/ e$ruary , 1 of te Constru"tion +n/ustry

Ar$itration Co##ission +s ere$y R4+NSA4! it te folloing 8!++CA+8NSB

DA""or/ingly, in vie of our foregoing /is"ussions an/ /ispositions, te ri$unalere$y a/?u/ges, or/ers an/ /ire"tsB

1) Respon/ent (tass"o to pay to petitioner & 'lus Asia !evelop#entCorporation te full a#ount of te 'erfor#an"e 7on/, '0,2,.,pursuant to Art. 13 of te Constru"tion Agree#ent /ate/ !e"e#$er 2,, it interest at te rate of 6I per annu# "o#pute/ fro# te /ate ofte filing of te "o#plaint until te finality of tis /e"ision, an/ 1I perannu# "o#pute/ fro# te /ate tis /e"ision $e"o#es final until fully pai/an/

) Respon/ent a$unay to in/e#nify respon/ent (tass"o of te a#ountsrespon/ent (tass"o ill ave pai/ to "lai#ant un/er tis /e"ision, plusinterest tereon at te rate of 1I per annu# "o#pute/ fro# te /ate e isnotifie/ of su" pay#ent #a/e $y respon/ent (tass"o to "lai#ant until fullypai/, an/ to pay (tass"o '1,. as attorney9s fees.

S8 8R!4R4!.

it te a$ove #o/ifi"ations, te rit of 4>e"ution /ate/ Nove#$er 2, 1 issue/$y te C+AC Ar$itral ri$unal in C+AC Case No. 3:% is ere$y R4+NSA4! an/('H4L!.

No pronoun"e#ent as to "osts.

9














7/23/2019 ADR Cases 1


S8 8R!4R4!.

G.R. No. 19:85 !eptember 7, 2:13

"E&, NC. ;)ormerly <no=n as & ARC"N, NC.>, 'etitioner,

vs.

AA% R"%AR0 C&$/ #"$NDA%"N, NC., Respon/ent.

! 4 C + S + 8 N

ERE, J.:

is "ase is an appeal1 fro# te !e"ision /ate/ 1% August 11 of te Court of

Appeals in C.A.:G.R. S' No. 116065.

e fa"tsB

e !onation

e//ers *oppel, +n"orporate/ <*+), a #anufa"turer of air:"on/itioning pro/u"ts, as

te registere/ oner of a par"el of lan/ lo"ate/ at *#. 16, Sout Superigay,

'araOa;ue City <su$?e"t lan/).3 itin te su$?e"t lan/ are $uil/ings an/ oter

i#prove#ents /e/i"ate/ to te $usiness of *+.2

+n 1%5, *+5 $e;ueate/ te su$?e"t lan/ <e>"lusive of te i#prove#ents tereon) in

favor of erein respon/ent a-ati Rotary Clu$ oun/ation, +n"orporate/ $y ay of a

"on/itional /onation.6 e respon/ent a""epte/ te /onation it all of its

"on/itions. 8n 6 ay1%5, *+ an/ te respon/ent e>e"ute/ a !ee/ of

!onation0evi/en"ing teir "onsensus.

e Lease an/ te A#en/e/ !ee/ of !onation

8ne of te "on/itions of te /onation re;uire/ te respon/ent to lease te su$?e"t

lan/ $a"- to *+ un/er ter#s spe"ifie/ in teir !ee/ of !onation.% it te

respon/ents a""eptan"e of te /onation, a lease agree#ent $eteen *+ an/ te

respon/ent as, terefore, effe"tively in"orporate/ in te !ee/ of !onation.

'ertinent ter#s of su" lease agree#ent, as provi/e/ in te !ee/ of !onation , ere

as follosB

1. e perio/ of te lease is for tenty:five <5) years,1 or until te 5t of

ay

. e a#ount of rent to $e pai/ $y *+ for te first tenty:five <5) years

is '2,16. per annu# .11

e !ee/ of !onation also stipulate/ tat te lease over te su$?e"t property is

renea$le for anoter perio/ of tenty:five <5) years D upon #utual agree#entD of

*+ an/ te respon/ent.1 +n i" "ase, te a#ount of rent sall $e /eter#ine/ in

a""or/an"e it ite# <g) of te !ee/ of !onation, vi=B

g. e rental for te se"on/ 5 years sall $e te su$?e"t of #utual agree#ent an/ in"ase of /isagree#ent te #atter sall $e referre/ to a 7oar/ of tree Ar$itrators

appointe/ an/ it poers in a""or/an"e it te Ar$itration La of te 'ilippines,

Repu$li" A"t 00, ose fun"tion sall $e to /e"i/e te "urrent fair #ar-et value of

te lan/ e>"lu/ing te i#prove#ents, provi/e/, tat, any in"rease in te fair #ar-et

value of te lan/ sall not e>"ee/ tenty five per"ent <5I) of te original value of

te lan/ /onate/ as state/ in paragrap <") of tis !ee/. e rental for te se"on/

5 years sall not e>"ee/ tree per"ent <3I) of te fair #ar-et value of te lan/

e>"lu/ing te i#prove#ents as /eter#ine/ $y te 7oar/ of Ar$itrators.13

+n 8"to$er 1%6, *+ an/ te respon/ent e>e"ute/ an A#en/e/ !ee/ of

!onation12 tat reiterate/ te provisions of te !ee/ of !onation , in"lu/ing tose

relating to te lease of te su$?e"t lan/.

@erily, $y virtue of te lease agree#ent "ontaine/ in te !ee/ of !onation an/

A#en/e/ !ee/ of !onation , *+ as a$le to "ontinue in its possession an/ use of

te su$?e"t lan/.

Lease Contra"t

o <) /ays $efore te lease in"orporate/ in te !ee/ of !onation an/ A#en/e/

!ee/ of !onation as set to e>pire, or on 3 ay , *+ an/ respon/ent

e>e"ute/ anoter "ontra"t of lease < Lease Contra"t )15"overing te su$?e"t

lan/. +n tis Lease Contra"t, *+ an/ respon/ent agree/ on a ne five:year

lease to ta-e effe"t on te 6t of ay , it annual rents ranging

fro# '2,, for te first year up to '2,%, for te fift year.16 e

Lease Contra"t also "ontaine/ an ar$itration "lause enfor"ea$le in te event te

parties "o#e to /isagree#ent a$out teD interpretation, appli"ation an/ e>e"utionD of

te lease, vi= B

1%. Governing La M e provisions of tis Lease Contra"t sall $e governe/,

interprete/ an/ "onstrue/ in all aspe"ts in a""or/an"e it te las of te Repu$li"

of te 'ilippines.

Any /isagree#ent as to te interpretation, appli"ation or e>e"ution of tis LeaseContra"t sall $e su$#itte/ to a $oar/ of tree <3) ar$itrators "onstitute/ in

10

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7/23/2019 ADR Cases 1


a""or/an"e it te ar$itration la of te 'ilippines. e /e"ision of te #a?ority of

te ar$itrators sall $e $in/ing upon *+ an/ respon/ent.1 <4#pasis supplie/)

5 Lease Contra"t

After te Lease Contra"t e>pire/, *+ an/ respon/ent agree/ to rene teir

lease for anoter five <5) years. is ne lease <5 Lease Contra"t )10 re;uire/ *+

to pay a fi>e/ annual rent of '2,,.1% +n a//ition to paying te f i>e/ rent,

oever, te 5 Lease Contra"t also o$ligate/ *+ to #a-e a yearly D /onation D of#oney to te respon/ent. Su" /onations range/ fro# '3,, for te first year

up to '3,%,for te fift year .1 Nota$ly, te 5 Lease Contra"t "ontaine/ an

ar$itration "lause si#ilar to tat in te Lease Contra"t, to itB

1%. Governing La M e provisions of tis 5 Lease Contra"t sall $e governe/,


of te 'ilippines.

Any /isagree#ent as to te interpretation, appli"ation or e>e"ution of tis 5 Lease

Contra"t sall $e su$#itte/ to a $oar/ of tree <3) ar$itrators "onstitute/ in

a""or/an"e it te ar$itration la of te 'ilippines. e /e"ision of te #a?ority ofte ar$itrators sall $e $in/ing upon *+ an/ respon/ent. <4#pasis supplie/)

e Assign#ent an/ 'etitioners Refusal to 'ay

ro# 5 to 0, *+ faitfully pai/ te rentals an/ D /onations D/ue it per te 5

Lease Contra"t.3 7ut in &une of 0, *+ sol/ all its rigts an/ properties relative to

its $usiness in favor of erein petitioner *oppel, +n"orporate/.2 8n % August 0,

*+ an/ petitioner e>e"ute/ an Assign#ent an/ Assu#ption of Lease an/

!onation5 Perein *+, it te "onfor#ity of te respon/ent, for#ally assigne/ all

of its interests an/ o$ligations un/er te A#en/e/ !ee/ of !onation an/ te 5

Lease Contra"t in favor of petitioner.

e folloing year, petitioner /is"ontinue/ te pay#ent of te rent an/ D /onation D

un/er te 5 Lease Contra"t.

'etitioners refusal to pay su" rent an/ D/onation D e#anate/ fro# its $elief tat te

rental stipulations of te 5 Lease Contra"t, an/ even of te Lease Contra"t,

"annot $e given effe"t $e"ause tey violate/ one of teD #aterial "on/itions D of te

/onation of te su$?e"t lan/, as state/ in te !ee/ of !onation an/ A#en/e/ !ee/ of

!onation.6

A""or/ing to petitioner, te !ee/ of !onation an/ A#en/e/ !ee/ of !onation

a"tually esta$lise/ not only one $ut to <) lease agree#ents $eteen *+ an/

respon/ent, i.e. , one lease for te first tenty:five <5)years or fro# 1%5 to ,

an/ anoter lease for te ne>t tenty:five <5)years tereafter or fro# to 5.

7ot leases are #aterial "on/itions of te /onation of te su$?e"t lan/.

'etitioner points out tat ile a /efinite a#ount of rent for te se"on/ tenty:five

<5) year lease as not fi>e/ in te !ee/ of !onation an/ A#en/e/ !ee/ of

!onation , $ot /ee/s neverteless pres"ri$e/ rules an/ li#itations $y i" te

sa#e #ay $e /eter#ine/. Su" rules an/ li#itations ougt to $e o$serve/ in any

su""ee/ing lease agree#ents $eteen petitioner an/ respon/ent for tey are, inte#selves, #aterial "on/itions of te /onation of te su$?e"t lan/.0

+n tis "onne"tion, petitioner "ites ite# <g) of te !ee/ of !onation an/ A#en/e/

!ee/ of !onation tat suppose/ly li#its te a#ount of rent for te lease over te

se"on/ tenty:five <5) years to only D tree per"ent <3I) of te fair #ar-et value of

te su$?e"t lan/ e>"lu/ing te i#prove#ents.%

or petitioner ten, te rental stipulations of $ot te Lease Contra"t an/ 5

Lease Contra"t "annot $e enfor"e/ as tey are "learly, in vie of teir e>or$itant

e>a"tions, in violation of te afore#entione/ tresol/ in ite# <g) of te !ee/ of

!onation an/ A#en/e/ !ee/ of !onation . Conse;uently, petitioner insists tat te

a#ount of rent it as to pay tereon is an/ #ust still $e governe/ $y te li#itations

pres"ri$e/ in te !ee/ of !onation an/ A#en/e/ !ee/ of !onation .3

e !e#an/ Letters

8n 1 &une %, respon/ent sent a letter <irst !e#an/ Letter)31 to petitioner

notifying te latter of its /efault D per Se"tion 1 of te 5 Lease Contra"t D an/

/e#an/ing for te settle#ent of te rent an/ D /onation D /ue for te year %.

Respon/ent, in te sa#e letter, furter inti#ate/ of "an"eling te 5 Lease

Contra"t soul/ petitioner fail to settle te sai/ o$ligations.3 'etitioner re"eive/ te

irst !e#an/ Letter on &une %.33

8n Septe#$er %, petitioner sent a reply32 to respon/ent e>pressing its

/isagree#ent over te rental stipulations of te 5 Lease Contra"t P "alling te# D

severely /isproportionate,D Dun"ons"iona$leD an/ Din "lear violation to te no#inal

rentals #an/ate/ $y te A#en/e/ !ee/ of !onation.D +n lieu of te a#ount

/e#an/e/ $y te respon/ent, i" purporte/ly totale/ to '0,3%2,., e>"lusive

of interests, petitioner offere/ to pay only '0,5.%,35 in a""or/an"e it te rental

provisions of te !ee/ of !onation an/ A#en/e/ !ee/ of !onation.36 Respon/ent

refuse/ tis offer .3

8n 5 Septe#$er %, respon/ent sent anoter letter <Se"on/ !e#an/ Letter)30 to

petitioner, reiterating its /e#an/ for te pay#ent of te o$ligations alrea/y /ue un/erte 5 Lease Contra"t. e Se"on/ !e#an/ Letter also "ontaine/ a /e#an/ for

11






























































7/23/2019 ADR Cases 1


petitioner to D i##e/iately va"ate te lease/ pre#ises D soul/ it fail to pay su"

o$ligations itin seven <) /ays fro# its re"eipt of te letter .3% e respon/ent

arne/ of ta-ing D legal steps D in te event tat petitioner faile/ to "o#ply it any of

te sai/ /e#an/s.2 'etitioner re"eive/ te Se"on/ !e#an/ Letter on 6Septe#$er

%.21

'etitioner refuse/ to "o#ply it te /e#an/s of te respon/ent. +nstea/, on 3

Septe#$er %, petitioner file/ it te Regional rial Court <RC) of 'araOa;ue

City a "o#plaint2

for te res"ission or "an"ellation of te !ee/ of !onation an/ A#en/e/ !ee/ of !onation against te respon/ent. is "ase is "urrently pen/ing

$efore 7ran" 5 of te RC, /o"-ete/ as Civil Case No. C@ %:326.

e 4?e"t#ent Suit

8n 5 8"to$er %, respon/ent file/ an unlaful /etainer "ase23 against te

petitioner $efore te etropolitan rial Court <eC) of 'araOa;ue City. e

e?e"t#ent "ase as raffle/ to 7ran" an/ as /o"-ete/ as Civil Case No. %:

3.

8n 2 Nove#$er %, petitioner file/ an Anser it Co#pulsory Counter"lai#.

22

+nit, petitioner reiterate/ its o$?e"tion over te rental stipulations of te 5 Lease

Contra"t for $eing violative of te #aterial "on/itions of te !ee/ of !onation an/

A#en/e/ !ee/ of !onation.25 +n a//ition to te foregoing, oever, petitioner also

interpose/ te folloing /efensesB

1. e eC as not a$le to vali/ly a";uire ?uris/i"tion over te instant

unlaful /etainer "ase in vie of te insuffi"ien"y of respon/ents

/e#an/.26 e irst !e#an/ Letter /i/ not "ontain an a"tual /e#an/ to

va"ate te pre#ises an/, terefore, te refusal to "o#ply tere it /oes not

give rise to an a"tion for unlaful /etainer .2

. Assu#ing tat te eC as a$le to a";uire ?uris/i"tion, it #ay not

e>er"ise te sa#e until te /isagree#ent $eteen te parties is first referre/

to ar$itration pursuant to te ar$itration "lause of te 5 Lease Contra"t.20

3. Assu#ing furter tat te eC as ?uris/i"tion tat it "an e>er"ise,

e?e"t#ent still oul/ not lie as te 5 Lease Contra"t is voi/ a$initio.2% e

stipulation in te 5 Lease Contra"t re;uiring petitioner to give yearly D

/onations D to respon/ent is a si#ulation, for tey are, in fa"t, parts of te

rent. 5 Su" grants ere only /eno#inate/ as D /onations D in te "ontra"t

so tat te respon/entPanon:sto"- an/ non:profit "orporationP"oul/ eva/e

pay#ent of te ta>es oterise /ue tereon.51

+n /ue "ourse, petitioner an/ respon/ent $ot su$#itte/ teir position papers,

togeter it teir oter /o"u#entary evi/en"e.5 Re#ar-a$ly, oever, respon/ent

faile/ to su$#it te Se"on/ !e#an/ Letter as part of its /o"u#entary evi/en"e.

Rulings of te eC, RC an/ Court of Appeals

8n April 1, te eC ren/ere/ ?u/g#ent53 in favor of te petitioner. ile te

eC refuse/ to /is#iss te a"tion on te groun/ tat te /ispute is su$?e"t to

ar$itration, it noneteless si/e/ it te petitioner it respe"t to te issues regar/ingte insuffi"ien"y of te respon/ents /e#an/ an/ te nullity of te 5 Lease

Contra"t.52 e eC tus /ispose/B

H4R48R4, ?u/g#ent is ere$y ren/ere/ /is#issing te "ase > > >, itout

pronoun"e#ent as to "osts.

S8 8R!4R4!.55

e respon/ent appeale/ to te Regional rial Court <RC). is appeal as

assigne/ to 7ran" 2 of te RC of 'araOa;ue City an/ as /o"-ete/ as Civil

Case No. 1:55.

8n % 8"to$er 1, te RC reverse/56 te eC an/ or/ere/ te evi"tion of te

petitioner fro# te su$?e"t lan/B

H4R48R4, all te foregoing /uly "onsi/ere/, te appeale/ !e"ision of te

etropolitan rial Court, 7ran" , 'araOa;ue City, is ere$y reverse/, ?u/g#ent is

tus ren/ere/ in favor of te plaintiff:appellant an/ against te /efen/ant:appellee,

an/ or/ering te latter M

<1) to va"ate te leaseF/ pre#ises #a/e su$?e"t of te "ase an/ to restore

te possession tereof to te plaintiff:appellant

<) to pay to te plaintiff:appellant te a#ount of Nine illion ree Hun/re/

Si>ty o ousan/ our Hun/re/ irty Si> 'esos <'%,36,236.),

penalties an/ net of 5I itol/ing ta>, for te lease perio/ fro# ay 5,

% to ay 5, 1 an/ su" #ontly rental as ill a""rue /uring te

pen/en"y of tis "ase

<3) to pay attorneys fees in te su# of '1,. plus appearan"e fee

of '3,.

<2) an/ "osts of suit.

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7/23/2019 ADR Cases 1


As to te e>isting i#prove#ents $elonging to te /efen/ant:appellee, as tese ere

$uilt in goo/ fait, te provisions of Art. 160of te Civil Co/e sall apply.

S8 8R!4R4!.5

e ruling of te RC is pre#ise/ on te folloing ratio"inationsB

1. e respon/ent a/ a/e;uately "o#plie/ it te re;uire#ent of /e#an/

as a ?uris/i"tional pre"ursor to an unlaful /etainer a"tion.50 e irst!e#an/ Letter, in su$stan"e, "ontains a /e#an/ for petitioner to va"ate

en it #entione/ tat it as a noti"e D per Se"tion1 of te 5 Lease

Contra"t.D5% oreover, te issue of suffi"ien"y of te respon/ents /e#an/

ougt to ave $een lai/ to rest $y te Se"on/ !e#an/ Letter i", toug

not su$#itte/ in evi/en"e, as noneteless a/#itte/ $y petitioner as

"ontaining aD /e#an/ to e?e"t D in its Anser it Co#pulsory

Counter"lai#.6

. e petitioner "annot vali/ly invo-e te ar$itration "lause of te 5

Lease Contra"t ile, at te sa#e ti#e, i#pugn su" "ontra"ts

vali/ity.

61

4ven assu#ing tat it "an, petitioner still /i/ not file a for#alappli"ation $efore te eC so as to ren/er su" ar$itration "lause

operational.6 At any rate, te eC oul/ not $e pre"lu/e/ fro# e>er"ising

its ?uris/i"tion over an a"tion for unlaful /etainer, over i", it as

e>"lusive original ?uris/i"tion.63

3. e 5 Lease Contra"t #ust $e sustaine/ as a vali/ "ontra"t sin"e

petitioner as not a$le to a//u"e any evi/en"e to support its allegation tat

te sa#e is voi/.62 ere as, in tis "ase, no evi/en"e tat respon/ent is

guilty of any ta> evasion.65

Aggrieve/, te petitioner appeale/ to te Court of Appeals.

8n 1% August 11, te Court of Appeals affir#e/66 te /e"ision of te RCB

H4R48R4 , te petition is !4N+4! . e assaile/ !e"ision of te Regional rial

Court of 'araOa;ue City, 7ran" 2, in Civil Case No. 1:55 is A+R4!.

> > > >

S8 8R!4R4!.6

Hen"e, tis appeal.

8n 5 Septe#$er 11, tis Court grante/ petitioners prayer for te issuan"e of a

e#porary Restraining 8r/er 60staying te i##e/iate i#ple#entation of te /e"isions

a/verse to it.

8(R R(L+NG

+n/epen/ently of te #erits of te "ase, te eC, RC an/ Court of Appeals all

erre/ in overloo-ing te signifi"an"e of te ar$itration "lause in"orporate/ in te 5

Lease Contra"t . As te Court sees it, tat is a fatal #ista-e.

or tis reason, e grant te petition.

'resent !ispute is Ar$itra$le (n/er te

Ar$itration Clause of te 5 Lease

Agree#ent Contra"t

Going $a"- to te re"or/s of tis "ase, it is /is"erna$le tat te /ispute $eteen te

petitioner an/ respon/ent e#anates fro# te rental stipulations of te 5 Lease

Contra"t. e respon/ent insists upon te enfor"e a$ility an/ vali/ity of su"

stipulations, ereas, petitioner, in su$stan"e, repu/iates te#. +t is fro# petitionersapparent $rea" of te 5 Lease Contra"t tat respon/ent file/ te instant unlaful

/etainer a"tion.

8ne "annot es"ape te "on"lusion tat, un/er te foregoing pre#ises, te /ispute

$eteen te petitioner an/ respon/ent arose fro# te appli"ation or e>e"ution of te

5 Lease Contra"t . (n/ou$te/ly, su" -in/s of /ispute are "overe/ $y te

ar$itration "lause of te 5 Lease Contra"t to itB

1%. Governing La M e provisions of tis 5 Lease Contra"t sall $e governe/,


of te 'ilippines.

Any /isagree#ent as to te interpretation, appli"ation or e>e"ution of tis 5 Lease

Contra"t sall $e su$#itte/ to a $oar/ of tree <3) ar$itrators "onstitute/ in

a""or/an"e it te ar$itration la of te 'ilippines. e /e"ision of te #a?ority of

te ar$itrators sall $e $in/ing upon *+ an/ respon/ent.6% <4#pasis supplie/)

e ar$itration "lause of te 5 Lease Contra"t stipulates tat Dany /isagree#entD

as to te D interpretation, appli"ation or e>e"ution D of te 5 Lease Contra"t ougt

to $e su$#itte/ to ar$itration. o te #in/ of tis Court, su" stipulation is "lear an/

is "o#preensive enoug so as to in"lu/e virtually any -in/ of "onfli"t or /ispute tat

#ay arise fro# te 5 Lease Contra"t in"lu/ing te one tat presently $esets

petitioner an/ respon/ent.

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7/23/2019 ADR Cases 1


e appli"ation of te ar$itration "lause of te 5 Lease Contra"t in tis "ase

"arries it it "ertain legal effe"ts. Hoever, $efore /is"ussing at tese legal

effe"ts are, e sall first /eal it te "allenges pose/ against te appli"ation of

su" ar$itration "lause.

Callenges Against te Appli"ation of te

Ar$itration Clause of te 5 Lease

Contra"t

Curiously, /espite te lu"i/ity of te ar$itration "lause of te 5 Lease Contra"t, te

petitioner, as ell as te eC, RC an/ te Court of Appeals, vou"e/ for te non:

appli"ation of te sa#e in te instant "ase. A pletora of argu#ents as urle/ in

favor of $ypassing ar$itration. e no a//ress te#.

At /ifferent points in te pro"ee/ings of tis "ase, te folloing argu#ents ere

offere/ against te appli"ation of te ar$itration "lause of te 5 Lease Contra"tB

1. e /isagree#ent $eteen te petitioner an/ respon/ent is non:ar$itra$le

as it ill inevita$ly tou" upon te issue of te vali/ity of te 5 Lease

Contra"t.

1

+t as su$#itte/ tat one of te reasons offere/ $y te petitionerin ?ustifying its failure to pay un/er te 5 Lease Contra"t as te nullity of

su" "ontra"t for $eing "ontrary to la an/ pu$li" poli"y. e Supre#e

Court, in Gon=ales v. Cli#a> ining, Lt/.,3el/ tat D te vali/ity of "ontra"t

"annot $e su$?e"t of ar$itration pro"ee/ings D as su" ;uestions are D legal

in nature an/ re;uire te appli"ation an/ interpretation of las an/

?urispru/en"e i" is ne"essarily a ?u/i"ial fun"tion .D 2

. e petitioner "annot vali/ly invo-e te ar$itration "lause of te 5

Lease Contra"t ile, at te sa#e ti#e, i#pugn su" "ontra"ts vali/ity.5

3. 4ven assu#ing tat it "an invo-e te ar$itration "lause ilst /enying te

vali/ity of te 5 Lease Contra"t , petitioner still /i/ not file a for#al

appli"ation $efore te eC so as to ren/er su" ar$itration "lause

operational.6 Se"tion 2 of Repu$li" A"t No. %05 re;uires te party see-ing

ar$itration to first file a D re;uest D or an appli"ation terefor it te "ourt not

later tan te preli#inary "onferen"e.

2. 'etitioner an/ respon/ent alrea/y un/erent &u/i"ial !ispute Resolution

<&!R) pro"ee/ings $efore te RC.0 Hen"e, a furter referral of te /ispute

to ar$itration oul/ only $e "ir"uitous.% oreover, an e?e"t#ent "ase, in

vie of its su##ary nature, alrea/y fulfills te pri#e purpose of ar$itration,

i.e. , to provi/e parties in "onfli"t it an e>pe/ient #eto/ for te resolution

of teir /ispute.0

Ar$itration ten oul/ no longer $e ne"essary in tis"ase.01

None of te argu#ents ave any #erit.

irst. As igligte/ in te previous /is"ussion, te /isagree#ent $eteen te

petitioner an/ respon/ent falls itin te all:en"o#passing ter#s of te ar$itration

"lause of te 5 Lease Contra"t. ile it #ay $e "on"e/e/ tat in te ar$itration of

su" /isagree#ent, te vali/ity of te 5 Lease Contra"t, or at least, of su"

"ontra"ts rental stipulations oul/ ave to $e /eter#ine/, te sa#e oul/ not ren/er

su" /isagree#ent non:ar$itra$le. e ;uotation fro# Gon=ales tat as use/ to

?ustify te "ontrary position as ta-en out of "onte>t. A rerea/ing of Gon=ales oul/fi> its relevan"e to tis "ase.

+n Gon=ales, a "o#plaint for ar$itration as file/ $efore te 'anel of Ar$itrators of te

ines an/ Geos"ien"es 7ureau <'A:G7) see-ing te nullifi"ation of a inan"ial

e"ni"al Assistan"e Agree#ent an/ oter #ining relate/ agree#ents entere/ into $y

private parties.0

Groun/s invo-e/ for te nullifi"ation of su" agree#ents in"lu/e frau/ an/

un"onstitutionality.03 e pivotal issue tat "onfronte/ te Court ten as eter te

'A:G7 as ?uris/i"tion over tat parti"ular ar$itration "o#plaint. State/ oterise,

te ;uestion as eter te "o#plaint for ar$itration raises ar$itra$le issues tat te

'A:G7 "an ta-e "ogni=an"e of.

Gon=ales /e"i/e/ te issue in te negative. +n ol/ing tat te 'A:G7 as /evoi/

of any ?uris/i"tion to ta-e "ogni=an"e of te "o#plaint for ar$itration, tis Court

pointe/ out to te provisions of R.A. No. %2, or te ining A"t of 1%%5, i"

grante/ te 'A:G7 it e>"lusive original ?uris/i"tion only over #ining /isputes, i.e.,

/isputes involving D rigts to #ining areas,D D#ineral agree#ents or per#its,D an/ D

surfa"e oners, o""upants, "lai# ol/ers or "on"essionairesD re;uiring te te"ni"al

-nole/ge an/ e>perien"e of #ining autorities in or/er to $e resolve/.02 A""or/ingly,

sin"e te "o#plaint for ar$itration in Gon=ales /i/ not raise #ining /isputes as

"onte#plate/ un/er R.A. No. %2 $ut only issues relating to te vali/ity of "ertain

#ining relate/ agree#ents, tis Court el/ tat su" "o#plaint "oul/ not $e ar$itrate/$efore te 'A:G7.05 +t is in tis "onte>t tat e #a/e te pronoun"e#ent no in

/is"ussionB

Ar$itration $efore te 'anel of Ar$itrators is proper only en tere is a /isagree#ent

$eteen te parties as to so#e provisions of te "ontra"t $eteen te#, i" nee/s

te interpretation an/ te appli"ation of tat parti"ular -nole/ge an/ e>pertise

possesse/ $y #e#$ers of tat 'anel. +t is not proper en one of te parties

repu/iates te e>isten"e or vali/ity of su" "ontra"t or agree#ent on te groun/ of

frau/ or oppression as in tis "ase. e vali/ity of te "ontra"t "annot $e su$?e"t of

ar$itration pro"ee/ings. Allegations of frau/ an/ /uress in te e>e"ution of a "ontra"t

are #atters itin te ?uris/i"tion of te or/inary "ourts of la. ese ;uestions are

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legal in nature an/ re;uire te appli"ation an/ interpretation of las an/

?urispru/en"e i" is ne"essarily a ?u/i"ial fun"tion.06 <4#pasis supplie/)

e Court in Gon=ales /i/ not si#ply $ase its re?e"tion of te "o#plaint for ar$itration

on te groun/ tat te issue raise/ terein, i.e. , te vali/ity of "ontra"ts, is per se

non:ar$itra$le. e real "onsi/eration $ein/ te ruling as te li#itation tat as

pla"e/ $y R.A. No. %2 upon te ?uris/i"tion of te 'A:G7 as an ar$itral $o/y .

Gon=ales re?e"te/ te "o#plaint for ar$itration $e"ause te issue raise/ terein is not

a #ining /ispute per R.A. No. %2 an/ it is for tis reason, an/ only for tis reason,tat su" issue is ren/ere/ non:ar$itra$le $efore te 'A:G7. As state/ $eforean/,

R.A. No. %2 "learly li#ite/ te ?uris/i"tion of te 'A:G7 only to #ining /isputes.0

u" #ore instru"tive for our purposes, on te oter an/, is te re"ent "ase of

Cargill 'ilippines, +n". v. San ernan/o Regal ra/ing, +n".00 +n Cargill , tis Court

ansere/ te ;uestion of eter issues involving te res"ission of a "ontra"t are

ar$itra$le. e respon/ent in Cargill argue/ against ar$itra$ility, also "iting terein

Gon=ales . After /isse"ting Gon=ales , tis Court rule/ in favor of ar$itra$ility.0% us,

e el/B

Respon/ent "onten/s tat assu#ing tat te e>isten"e of te "ontra"t an/ te

ar$itration "lause is "on"e/e/, te CA9s /e"ision /e"lining referral of te parties9

/ispute to ar$itration is still "orre"t. +t "lai#s tat its "o#plaint in te RC presents te

issue of eter un/er te fa"ts allege/, it is entitle/ to res"in/ te "ontra"t it

/a#ages an/ tat issue "onstitutes a ?u/i"ial ;uestion or one tat re;uires te

e>er"ise of ?u/i"ial fun"tion an/ "annot $e te su$?e"t of an ar$itration pro"ee/ing.

Respon/ent "ites our ruling in Gon=ales, erein e el/ tat a panel of ar$itrator is

$ereft of ?uris/i"tion over te "o#plaint for /e"laration of nullityEor ter#ination of te

su$?e"t "ontra"ts on te groun/s of frau/ an/ oppression atten/ant to te e>e"ution

of te a//en/u# "ontra"t an/ te oter "ontra"ts e#anating fro# it, an/ tat te

"o#plaint soul/ ave $een file/ it te regular "ourts as it involve/ issues i"

are ?u/i"ial in nature.

Su" argu#ent is #ispla"e/ an/ respon/ent "annot rely on te Gon=ales "ase to

support its argu#ent.%<4#pasis ours)

Se"on/. 'etitioner #ay still invo-e te ar$itration "lause of te 5 Lease Contra"t

notitstan/ing te fa"t tat it assails te vali/ity of su" "ontra"t. is is /ue to te

/o"trine of separa$ility.%1

(n/er te /o"trine of separa$ility, an ar$itration agree#ent is "onsi/ere/ as

in/epen/ent of te #ain "ontra"t.%7eing a separate "ontra"t in itself, te ar$itration

agree#ent #ay tus $e invo-e/ regar/less of te possi$le nullity or invali/ity of te

#ain "ontra"t.

%3

8n"e again instru"tive is Cargill, erein tis Court el/ tat, as a furter

"onse;uen"e of te /o"trine of separa$ility, even te very party o repu/iates te

#ain "ontra"t #ay invo-e its ar$itration "lause.%2

ir/ . e operation of te ar$itration "lause in tis "ase is not at all /efeate/ $y te

failure of te petitioner to file a for#al Dre;uestD or appli"ation terefor it te eC.

e fin/ tat te filing of a Dre;uestD pursuant to Se"tion 2 of R.A. No. %05 is not te

sole #eans $y i" an ar$itration "lause #ay $e vali/ly invo-e/ in a pen/ing suit.

Se"tion 2 of R.A. No. %05 rea/sB

S4C. 2. Referral to Ar$itration . : A "ourt $efore i" an a"tion is $rougt in a

#atter i" is te su$?e"t #atter of an ar$itration agree#ent sall, if at least one

party so re;uests not later tat te pre:trial "onferen"e, or upon te re;uest of $ot

parties tereafter, refer te parties to ar$itration unless it fin/s tat te ar$itration

agree#ent is null an/ voi/, inoperative or in"apa$le of $eing perfor#e/. F4#pasis

ours itali"s original

e D re;uest D referre/ to in te a$ove provision is, in turn, i#ple#ente/ $y Rules 2.1

to 2.3 of A.. No. :11:0:SC or te Spe"ial Rules of Court on Alternative !isputeResolution <Spe"ial A!R Rules)B

R(L4 2B R44RRAL 8 A!R

Rule 2.1. o #a-es te re;uest. : A party to a pen/ing a"tion file/ in violation of te

ar$itration agree#ent, eter "ontaine/ in an ar$itration "lause or in a su$#ission

agree#ent, #ay re;uest te "ourt to refer te parties to ar$itration in a""or/an"e it

su" agree#ent.

Rule 2.. en to #a-e re;uest. : <A) ere te ar$itration agree#ent e>ists $efore

te a"tion is file/ . : e re;uest for referral sall $e #a/e not later tan te pre:trial

"onferen"e. After te pre:trial "onferen"e, te "ourt ill only a"t upon te re;uest for

referral if it is #a/e it te agree#ent of all parties to te "ase.

<7) Su$#ission agree#ent . : +f tere is no e>isting ar$itration agree#ent at te ti#e

te "ase is file/ $ut te parties su$se;uently enter into an ar$itration agree#ent, tey

#ay re;uest te "ourt to refer teir /ispute to ar$itration at any ti#e /uring te

pro"ee/ings.

Rule 2.3. Contents of re;uest. : e re;uest for referral sall $e in te for# of a

#otion, i" sall state tat te /ispute is "overe/ $y an ar$itration agree#ent.

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7/23/2019 ADR Cases 1


A part fro# oter su$#issions, te #ovant sall atta" to is #otion an autenti"

"opy of te ar$itration agree#ent.

e re;uest sall "ontain a noti"e of earing a//resse/ to all parties spe"ifying te

/ate an/ ti#e en it oul/ $e ear/. e party #a-ing te re;uest sall serve it

upon te respon/ent to give i# te opportunity to file a "o##ent or opposition as

provi/e/ in te i##e/iately su""ee/ing Rule $efore te earing. F4#pasis ours

itali"s original

Attention #ust $e pai/, oever, to te salient or/ings of Rule 2.1.+t rea/sB Da party

to a pen/ing a"tion file/ in violation of te ar$itration agree#ent > > > #ay re;uest te

"ourt to refer te parties to ar$itration in a""or/an"e it su" agree#ent.D

+n using te or/ D #ay D to ;ualify te a"t of filing a D re;uest D un/er Se"tion 2 of

R.A. No. %05, te Spe"ial A!R Rules "learly /i/ not inten/ to li#it te invo"ation of

an ar$itration agree#ent in a pen/ing suit solely via su" Dre;uest.D After all, non:

"o#plian"e it an ar$itration agree#ent is a vali/ /efense to any offen/ing suit an/,

as su", #ay even $e raise/ in an anser as provi/e/ in our or/inary rules of

pro"e/ure.%5

+n tis "ase, it is "on"e/e/ tat petitioner as not a$le to file a separate D re;uest D of

ar$itration $efore te eC. Hoever, it is e;ually "on"e/e/ tat te petitioner, as

early as in its Anser it Counter"lai# ,a/ alrea/y apprise/ te eC of te

e>isten"e of te ar$itration "lause in te 5 Lease Contra"t%6 an/, #ore

signifi"antly, of its /esire to ave te sa#e enfor"e/ in tis "ase.% is a"t of

petitioner is enoug vali/ invo"ation of is rigt to ar$itrate. ourt . e fa"t tat te

petitioner an/ respon/ent alrea/y un/er ent troug &!R pro"ee/ings $efore te

RC, ill not #a-e te su$se;uent "on/u"t of ar$itration $eteen te parties

unne"essary or "ir"uitous. e &!R syste# is su$stantially /ifferent fro# ar$itration

pro"ee/ings.

e &!R fra#eor- is $ase/ on te pro"esses of #e/iation, "on"iliation or earlyneutral evaluation i" entails te su$#ission of a /ispute $efore a D &!R ?u/ge D

o sall #erely D fa"ilitate settle#ent D $eteen te parties in "onfli"t or #a-e a D

non:$in/ing evaluation or assess#ent of te "an"es of ea" partys "ase.D%0 us in

&!R, te &!R ?u/ge la"-s te autority to ren/er a resolution of te /ispute tat is

$in/ing upon te parties in "onfli"t. +n ar$itration, on te oter an/, te /ispute is

su$#itte/ to an ar$itratorEs Pa neutral tir/ person or a group of tereofP o sall

ave te autority to ren/er a resolution $in/ing upon te parties.%%

Clearly, te #ere su$#ission of a /ispute to &!R pro"ee/ings oul/ not ne"essarily

ren/er te su$se;uent "on/u"t of ar$itration a #ere surplusage. e failure of te

parties in "onfli"t to rea" an a#i"a$le settle#ent $efore te &!R #ay, in fa"t, $esupple#ente/ $y teir resort to ar$itration ere a $in/ing resolution to te /ispute

"oul/ finally $e a"ieve/. is situation pre"isely fin/s appli"ation to te "ase at

$en".

Neiter oul/ te su##ary nature of e?e"t#ent "ases $e a vali/ reason to /isregar/

te enfor"e#ent of te ar$itration "lause of te 5 Lease Contra"t .

Notitstan/ing te su##ary nature of e?e"t#ent "ases, ar$itration still re#ains

relevant as it ai#s not only to affor/ te parties an e>pe/itious #eto/ of resolving

teir /ispute.

A pivotal feature of ar$itration as an alternative #o/e of /ispute resolution is tat it is,

first an/ fore#ost, a pro/u"t of party autono#y or te free/o# of te parties to D

#a-e teir on arrange#ents to resolve teir on /isputes.D1 Ar$itration

agree#ents #anifest not only te /esire of te parties in "onfli"t for an e>pe/itious

resolution of teir /ispute. ey also represent, if not #ore so, te parties #utual

aspiration to a"ieve su" resolution outsi/e of ?u/i"ial auspi"es, in a #ore infor#al

an/ less antagonisti" environ#ent un/er te ter#s of teir "oosing. Nee/less to

state, tis "riti"al feature "an never $e satisfie/ in an e?e"t#ent "ase no #atter o

su##ary it #ay $e.

Having ur/le/ all te "allenges against te appli"ation of te ar$itration "lause of

te 5 Lease Agree#ent in tis "ase, e sall no pro"ee/ it te /is"ussion of

its legal effe"ts.

Legal 4ffe"t of te Appli"ation of te

Ar$itration Clause

Sin"e tere really are no legal i#pe/i#ents to te appli"ation of te ar$itration "lause

of te 5 Contra"t of Lease in tis "ase, e fin/ tat te instant unlaful /etainer

a"tion as institute/ in violation of su" "lause. e La, terefore, soul/ ave

governe/ te fate of te parties an/ tis suitB

R.A. No. 06 Se"tion . Stay of "ivil a"tion. : +f any suit or pro"ee/ing $e $rougt

upon an issue arising out of an agree#ent provi/ing for te ar$itration tereof, te

"ourt in i" su" suit or pro"ee/ing is pen/ing, upon $eing satisfie/ tat te issue

involve/ in su" suit or pro"ee/ing is refera$le to ar$itration, sall stay te a"tion or

pro"ee/ing until an ar$itration as $een a/ in a""or/an"e it te ter#s of te

agree#entB 'rovi/e/, at te appli"ant for te stay is not in /efault in pro"ee/ing

it su" ar$itration.F4#pasis supplie/

R.A. No. %05

Se"tion 2. Referral to Ar$itration. : A "ourt $efore i" an a"tion is $rougt in a

#atter i" is te su$?e"t #atter of an ar$itration agree#ent sall, if at least oneparty so re;uests not later tat te pre:trial "onferen"e, or upon te re;uest of $ot

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parties tereafter, refer te parties to ar$itration unless it fin/s tat te ar$itration

agree#ent is null an/ voi/, in operative or in"apa$le of $eing perfor#e/. F4#pasis

supplie/

+t is "lear tat un/er te la, te instant unlaful /etainer a"tion soul/ ave $een

staye/11 te petitioner an/ te respon/ent soul/ ave $een referre/ to ar$itration

pursuant to te ar$itration "lause of te 5 Lease Contra"t . e eC, oever,

/i/ not /o so in violation of te laPi" violation as, in turn, affir#e/ $y te RC

an/ Court of Appeals on appeal.

e violation $y te eC of te "lear /ire"tives un/er R.A. Nos.06 an/ %05

ren/ers invali/ all pro"ee/ings it un/ertoo- in te e?e"t#ent "ase after te filing $y

petitioner of its Anser it Counter"lai# Pte point en te petitioner an/ te

respon/ent soul/ ave $een referre/ to ar$itration. is "ase #ust, terefore, $e

re#an/e/ to te eC an/ $e suspen/e/ at sai/ point. +nevita$ly, te /e"isions of

te eC, RC an/ te Court of Appeals #ust all $e va"ate/ an/ set asi/e.

e petitioner an/ te respon/ent #ust ten $e referre/ to ar$itration pursuant to te

ar$itration "lause of te 5 Lease Contra"t.

is Court is not unaare of te apparent arsness of te !e"ision tat it is a$out to

#a-e. Noneteless, tis Court #ust #a-e te sa#e if only to stress te point tat, in

our ?uris/i"tion, $ona fi/e ar$itration agree#ents are re"ogni=e/ as vali/1 an/ tat

las,13 rules an/ regulations12 /o e>ist prote"ting an/ ensuring teir enfor"e#ent as

a #atter of state poli"y. Gone soul/ $e te /ays en "ourts treat oterise vali/

ar$itration agree#ents it /is/ain an/ ostility, if not outrigt D ?ealousy,D15 an/ ten

get aay it it. Courts soul/ instea/ learn to treat alternative #eans of /ispute

resolution as effe"tive partners in te a/#inistration of ?usti"e an/, in te "ase of

ar$itration agree#ents, to affor/ te# ?u/i"ial restraint.16 o/ay, tis Court only

perfor#s its part in upol/ing a on"e /isregar/e/ state poli"y.

Civil Case No. C@ %:326

is Court notes tat, on 3 Septe#$er %, petitioner file/ it te RC of

'araOa;ue City, a "o#plaint1 for te res"ission or "an"ellation of te !ee/ of

!onation an/ A#en/e/ !ee/ of !onation against te respon/ent. e "ase is

"urrently pen/ing $efore 7ran" 5 of te RC, /o"-ete/ as Civil Case No. C@ %:

326.

is Court re"ogni=es te great possi$ility tat issues raise/ in Civil Case No. C@ %:

326 #ay involve #atters tat are rigtfully ar$itra$le per te ar$itration "lause of te

5 Lease Contra"t. Hoever, sin"e te re"or/s of Civil Case No. C@ %:326 are

not $efore tis Court, e "an never -no it true "ertainty an/ only spe"ulate. +ntis ligt, let a "opy of tis !e"ision $e also serve/ to 7ran" 5of te RC of

'araOa;ue for its "onsi/eration an/, possi$le, appli"ation to Civil Case No. C@ %:

326.

H4R48R4, pre#ises "onsi/ere/, te petition is ere$y GRAN4! . A""or/ingly,

e ere$y ren/er a !e"isionB

1. S4+NG AS+!4 all te pro"ee/ings un/erta-en $y te etropolitan rial

Court, 7ran" , of 'araOa;ue City in relation to Civil Case No. %:3

after te filing $y petitioner of its Anser it Counter"lai#

. R4AN!+NG te instant "ase to te eC, S(S'4N!4! at te point

after te filing $y petitioner of its Anser it Counter"lai#

3. S4+NG AS+!4 te folloingB

a. !e"ision /ate/ 1% August 11 of te Court of Appeals in C.A.:

G.R. S' No. 116065,

$. !e"ision /ate/ % 8"to$er 1 of te Regional rial Court,

7ran" 2, of 'araOa;ue City in Civil Case No. 1:55,

". !e"ision /ate/ April 1 of te etropolitan rial Court,

7ran" , of 'araOa;ue City in Civil Case No. %:3 an/

2. R44RR+NG te petitioner an/ te respon/ent to ar$itration pursuant to

te ar$itration "lause of te 5 Lease Contra"t, repeate/ly in"lu/e/ in te

Lease Contra"t an/ in te 1%6 A#en/e/ !ee/ of !onation.

Let a "opy of tis !e"ision $e serve/ to 7ran" 5 of te RC of 'araOa;ue for its

"onsi/eration an/, possi$le, appli"ation to Civil Case No. C@ %:326.

No "osts.

S8 8R!4R4!.

?G.R. No. 17133. arc* 26, 2::3@

& "4ER ENGNEERNG C"R"RA%"N, petitioner, vs. CA%"& ND$!%RA&

C"N!%R$C%"N GR"$!, NC.,respondent .

D E C ! " N

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ANGAN/AN, J .(

Alternative /ispute resolution #eto/s or A!Rs :: li-e ar$itration, #e/iation,

negotiation an/ "on"iliation :: are en"ourage/ $y te Supre#e Court. 7y ena$ling

parties to resolve teir /isputes a#i"a$ly, tey provi/e solutions tat are less ti#e:

"onsu#ing, less te/ious, less "onfrontational, an/ #ore pro/u"tive of goo/ill an/

lasting relationsips.F1

%*e Case

7efore us is a 'etition for Revie on Certiorari F un/er Rule 25 of te Rules of

Court, see-ing to set asi/e te &anuary 0, !e"ision of te Court of

AppealsF3 <CA) in CA:GR C@ No. 523. e /ispositive portion of te !e"ision rea/s

as follosB

WHEREFORE, the judgment appealed from is REVERSED and SET ASIDE The parties are

ORDERED to present their dispute to ar!itration in a""ordan"e #ith their Su!$"ontra"t

Agreement The suret% !ond posted !% &respondent' is &d'is"harged&('

%*e #acts

8n e$ruary , 1%03, 'etitioner L 'oer 4ngineering Corporation an/

Respon/ent Capitol +n/ustrial Constru"tion Groups +n". entere/ into a Su$"ontra"t

Agree#ent involving ele"tri"al or- at te ir/ 'ort of Qa#$oanga.F5

8n April 5, 1%05, respon/ent too- over so#e of te or- "ontra"te/ to

petitioner .F6 Allege/ly, te latter a/ faile/ to finis it $e"ause of its ina$ility to pro"ure

#aterials.F

(pon "o#pleting its tas- un/er te Contra"t, petitioner $ille/ respon/ent in te

a#ount of '6,11,013.%.

F0

Contesting te a""ura"y of te a#ount of a/van"es an/$illa$le a""o#plis#ents liste/ $y te for#er, te latter refuse/ to pay. Respon/ent

also too- refuge in te ter#ination "lause of te Agree#ent. F% at "lause alloe/ it

to set off te "ost of te or- tat petitioner a/ faile/ to un/erta-e :: /ue to

ter#ination or ta-e:over :: against te a#ount it oe/ te latter.

7e"ause of te /ispute, petitioner file/ it te Regional rial Court <RC) of

a-ati <7ran" 121) a Co#plaint F1 for te "olle"tion of te a#ount representing te

allege/ $alan"e /ue it un/er te Su$"ontra"t. +nstea/ of su$#itting an Anser,

respon/ent file/ a otion to !is#iss, F11 alleging tat te Co#plaint as pre#ature,

$e"ause tere as no prior re"ourse to ar$itration.

+n its 8r/er F1 /ate/ Septe#$er 15, 1%0, te RC /enie/ te otion on te

groun/ tat te /ispute /i/ not involve te interpretation or te i#ple#entation of te

Agree#ent an/ as, terefore, not "overe/ $y te ar$itral "lause.F13

After trial on te #erits, te RCF12 rule/ tat te ta-e:over of so#e or- ite#s

$y respon/ent as not e;uivalent to a ter#ination, $ut a #ere #o/ifi"ation, of te

Su$"ontra"t. e latter as or/ere/ to give full pay#ent for te or- "o#plete/ $y

petitioner.

Rln o) t*e Cort o) Appeals

8n appeal, te CA reverse/ te RC an/ or/ere/ te referral of te "ase to

ar$itration. e appellate "ourt el/ as ar$itra$le te issue of eter respon/ents

ta-e:over of so#e or- ite#s a/ $een inten/e/ to $e a ter#ination of te original

"ontra"t un/er Letter * of te Su$"ontra"t. +t rule/ li-eise on to oter issuesB

eter petitioner as lia$le un/er te arranty "lause of te Agree#ent, an/

eter it soul/ rei#$urse respon/ent for te or- te latter a/ ta-en over .F15

Hen"e, tis 'etition.F16

%*e sses

+n its e#oran/u#, petitioner raises te folloing issues for te Courts

"onsi/erationB

A

Whether or not there e)ist&s' a "ontro*ers%+dispute !et#een petitioner and respondent

regarding the interpretation and implementation of the Su!$ontra"t Agreement dated

Fe!ruar% --, ./01 that re2uires prior re"ourse to *oluntar% ar!itration3

/

In the affirmati*e, #hether or not the re2uirements pro*ided in Arti"le III &.' of IA

Ar!itration Rules regarding re2uest for ar!itration ha&*e' !een "omplied #ith&'&.4'

%*e Corts Rln

e 'etition is un#eritorious.

#rst sse(

Whether Dispute Is Arbitrable

18

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'etitioner "lai#s tat tere is no "onfli"t regar/ing te interpretation or te

i#ple#entation of te Agree#ent. us, itout aving to resort to prior ar$itration, it

is entitle/ to "olle"t te value of te servi"es it ren/ere/ troug an or/inary a"tion for

te "olle"tion of a su# of #oney fro# respon/ent. 8n te oter an/, te latter

"onten/s tat tere is a nee/ for prior ar$itration as provi/e/ in te Agree#ent. is

is $e"ause tere are so#e /isparities $eteen te parties positions regar/ing te

e>tent of te or- /one, te a#ount of a/van"es an/ $illa$le a""o#plis#ents, an/

te set off of e>penses in"urre/ $y respon/ent in its ta-e:over of petitioners or-.

e si/e it respon/ent. 4ssentially, te /ispute arose fro# te parties

n"ongruent positions on eter "ertain provisions of teir Agree#ent "oul/ $e

applie/ to te fa"ts. e instant "ase involves te"ni"al /is"repan"ies tat are $etter

left to an ar$itral $o/y tat as e>pertise in tose areas. +n any event, te in"lusion of

an ar$itration "lause in a "ontra"t /oes not ipso facto /ivest te "ourts of ?uris/i"tion

to pass upon te fin/ings of ar$itral $o/ies, $e"ause te aar/s are still ?u/i"ially

reviea$le un/er "ertain "on/itions.F10

+n te "ase $efore us, te Su$"ontra"t as te folloing ar$itral "lauseB

5 The 6arties hereto agree that an% dispute or "onfli"t as regards to interpretation

and implementation of this Agreement #hi"h "annot !e settled !et#een

&respondent' and &petitioner' ami"a!l% shall !e settled !% means of ar!itration ) )

)&./'

Clearly, te resolution of te /ispute $eteen te parties erein re;uires a

referral to te provisions of teir Agree#ent. itin te s"ope of te ar$itration "lause

are /is"repan"ies as to te a#ount of a/van"es an/ $illa$le a""o#plis#ents, te

appli"ation of te provision on ter#ination, an/ te "onse;uent set:off of e>penses.

A revie of te fa"tual allegations of te parties reveals tat tey /iffer on te

folloing ;uestionsB <1) !i/ a ta-e:overEter#ination o""ur <) ay te e>penses

in"urre/ $y respon/ent in te ta-e:over $e set off against te a#ounts it oe/petitioner <3) Ho #u" ere te a/van"es an/ $illa$le a""o#plis#ents

e resolution of te foregoing issues lies in te interpretation of te provisions

of te Agree#ent. A""or/ing to respon/ent, te ta-e:over as "ause/ $y petitioners

/elay in "o#pleting te or-. Su" /elay as in violation of te provision in te

Agree#ent as to ti#e s"e/uleB

7 TI8E SHED9:E

&6etitioner' shall adhere stri"tl% to the s"hedule related to the WOR; and

"omplete the WOR; #ithin the period set forth in Anne) hereof <O timee)tension shall !e granted !% &respondent' to &petitioner' unless a "orresponding

time e)tension is granted !% & the 8inistr% of 6u!li" Wor=s and High#a%s' to the

O<SORTI98&->'

7e"ause of te /elay, respon/ent alleges tat it too- over so#e of te or-

"ontra"te/ to petitioner, pursuant to te folloing provision in te Agree#entB

; TER8I<ATIO< OF A7REE8E<T

&Respondent' has the right to terminate and/or take over this Agreement for an% of the follo#ing "auses?

> > > > > > > > >

5 If despite pre*ious #arnings !% & respondent', &petitioner' does not

e)e"ute the WOR; in a""ordan"e #ith this Agreement, or persistently or

flagrantly neglects to carry out [its] obligations under this Agreement.&-.'

Suppose/ly, as a result of te ta-e:over, respon/ent in"urre/ e>penses in

e>"ess of te "ontra"te/ pri"e. +t sougt to set off tose e>penses against te a#ount

"lai#e/ $y petitioner for te or- te latter a""o#plise/, pursuant to te folloingprovisionB

If the total dire"t and indire"t "ost of "ompleting the remaining part of the WOR; e)"eed the

sum #hi"h #ould ha*e !een pa%a!le to &petitioner' had it "ompleted the WOR;, the amount

of su"h e)"ess &ma% !e' "laimed !% &respondent' from either of the follo#ing?

. An% amount due &petitioner' from &respondent' at the time of the termination of this

Agreement&--'

e issue as to te "orre"t a#ount of petitioners a/van"es an/ $illa$le

a""o#plis#ents involves an evaluation of te #anner in i" te parties"o#plete/ te or-, te e>tent to i" tey /i/ it, an/ te e>penses ea" of te#

in"urre/ in "onne"tion tereit. Ar$itrators also nee/ to loo- into te "o#putation of

foreign an/ lo"al "osts of #aterials, foreign an/ lo"al a/van"es, retention fees an/

letters of "re/it, an/ ta>es an/ /uties as set fort in te Agree#ent. ese /ata "an

$e gatere/ fro# a revie of te Agree#ent, pertinent portions of i" are

repro/u"e/ ereun/erB

O<TRAT 6RIE A<D TER8S OF 6A@8E<T

> > > > > > > > >

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All progress pa%ments to !e made !% &respondent' to &petitioner' shall !e su!je"t

to a retention sum of ten per"ent .>BC of the *alue of the appro*ed

2uantities An% "laims !% &respondent' on &petitioner' ma% !e dedu"ted !%

&respondent' from the progress pa%ments and+or retained amount An% e)"ess from

the retained amount after dedu"ting &respondents' "laims shall !e released !%

&respondent' to &petitioner' after the issuan"e of &the 8inistr% of 6u!li" Wor=s and

High#a%s' of the ertifi"ate of ompletion and final a""eptan"e of the WOR; !%

&the 8inistr% of 6u!li" Wor=s and High#a%s'

> > > > > > > > >

D I86ORTED 8ATERIA:S A<D E9I68E<T

&Respondent shall open the letters of "redit for the importation of e2uipment and

materials listed in Anne) E hereof after the dra#ings, !ro"hures, and other

te"hni"al data of ea"h items in the list ha*e !een formall% appro*ed !% &the

8inistr% of 6u!li" Wor=s and High#a%s' Ho#e*er, petitioner #ill still !e full%

responsi!le for all imported materials and e2uipment

All e)penses in"urred !% &respondent', !oth in foreign and lo"al "urren"ies in"onne"tion #ith the opening of the letters of "redit shall !e dedu"ted from the

ontra"t 6ri"es

> > > > > > > > >

< OTHER O<DITIO<S

> > > > > > > > >

- All "ustoms duties, import duties, "ontra"tors ta)es, in"ome ta)es, and other

ta)es that ma% !e re2uired !% an% go*ernment agen"ies in "onne"tion #ith thisAgreement shall !e for the sole a""ount of &petitioner'&-1'

7eing an ine>pensive, spee/y an/ a#i"a$le #eto/ of settling /isputes,F2 ar$itration :: along it #e/iation, "on"iliation an/ negotiation :: is en"ourage/ $y

te Supre#e Court. Asi/e fro# un"logging ?u/i"ial /o"-ets, ar$itration also astens

te resolution of /isputes, espe"ially of te "o##er"ial -in/. F5 +t is tus regar/e/ as

te ave of te future in international "ivil an/ "o##er"ial /isputes.F6 7rusing asi/e

a "ontra"tual agree#ent "alling for ar$itration $eteen te parties oul/ $e a step

$a"-ar/.F

Consistent it te a$ove:#entione/ poli"y of en"ouraging alternative /ispute

resolution #eto/s, "ourts soul/ li$erally "onstrue ar$itration "lauses. 'rovi/e/

su" "lause is sus"epti$le of an interpretation tat "overs te asserte/ /ispute, an

or/er to ar$itrate soul/ $e grante/. F0 Any /ou$t soul/ $e resolve/ in favor of

ar$itration.F%

!econ+ sse(

Prior Request for Arbitration

A""or/ing to petitioner, assu#ing arguendo tat te /ispute is ar$itra$le, tefailure to file a for#al re;uest for ar$itration it te Constru"tion +n/ustry Ar$itration

Co##ission <C+AC) pre"lu/e/ te latter fro# a";uiring ?uris/i"tion over te

;uestion. o $olster its position, petitioner even "ites our ruling in Tesco Services

Incorporated v. Vera.F3 e are not persua/e/.

Se"tion 1 of Arti"le ++ of te old Rules of 'ro"e/ure Governing Constru"tion

Ar$itration in/ee/ re;uire/ te su$#ission of a re;uest for ar$itration, as follosB

SETIO< . Su!mission to Ar!itration $$ An% part% to a "onstru"tion "ontra"t #ishing to

ha*e re"ourse to ar!itration !% the onstru"tion Industr% Ar!itration ommission IAC

shall su!mit its Re2uest for Ar!itration in suffi"ient "opies to the Se"retariat of the IA36ROVIDED, that in the "ase of go*ernment "onstru"tion "ontra"ts, all administrati*e

remedies a*aila!le to the parties must ha*e !een e)hausted #ithin /> da%s from the time the

dispute arose

Tesco as pro#ulgate/ $y tis Court, using te foregoing provision as

referen"e.

8n te oter an/, Se"tion 1 of Arti"le +++ of te new Rules of 'ro"e/ure

Governing Constru"tion Ar$itration as /ispense/ it tis re;uire#ent an/ re"ourse

to te C+AC #ay no $e availe/ of enever a "ontra"t "ontains a "lause for te

su$#ission of a future "ontroversy to ar$itration, in tis iseB

SETIO< . Submission to CIAC Jurisdiction An ar!itration "lause in a "onstru"tion "ontra"t

or a su!mission to ar!itration of a "onstru"tion dispute shall !e deemed an agreement to

su!mit an e)isting or future "ontro*ers% to IA jurisdi"tion, not#ithstanding the referen"e to

a different ar!itration institution or ar!itral !od% in su"h "ontra"t or su!mission When a

"ontra"t "ontains a "lause for the su!mission of a future "ontro*ers% to ar!itration, it is not

ne"essar% for the parties to enter into a su!mission agreement !efore the "laimant ma% in*o=e

the jurisdi"tion of IA

e foregoing a#en/#ents in te Rules ere for#ali=e/ $y C+AC Resolution

Nos. :%1 an/ 3:%3.F31

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e /ifferen"e in te to provisions as "learly e>plaine/ in China Chang Jiang

Energy Corporation !hilippines" v. #osal Infrastructure $uilders et al.F3 <an e>ten/e/

unsigne/ Resolution) an/ reiterate/ in%ational Irrigation &d'inistration v. Court of

&ppeals(F33 fro# i" e ;uote tusB

9nder the present Rules of 6ro"edure, for a parti"ular "onstru"tion "ontra"t to fall #ithin the

jurisdi"tion of IA, it is merel% re2uired that the parties agree to su!mit the same to

*oluntar% ar!itration 9nli=e in the original *ersion of Se"tion ., as applied in the esco "ase,

the la# as it no# stands does not pro*ide that the parties should agree to su!mit disputesarising from their agreement spe"ifi"all% to the IA for the latter to a"2uire jurisdi"tion o*er

the same Rather, it is plain and "lear that as long as the parties agree to su!mit to *oluntar%

ar!itration, regardless of #hat forum the% ma% "hoose, their agreement #ill fall #ithin the

jurisdi"tion of the IA, su"h that, e*en if the% spe"ifi"all% "hoose another forum, the parties

#ill not !e pre"luded from ele"ting to su!mit their dispute !efore the IA !e"ause this right

has !een *ested upon ea"h part% !% la#, i.e, EO <o .>>0&1('

Clearly, tere is no #ore nee/ to file a re;uest it te C+AC in or/er to vest it

it ?uris/i"tion to /e"i/e a "onstru"tion /ispute.

e ar$itral "lause in te Agree#ent is a "o##it#ent on te part of te parties

to su$#it to ar$itration te /isputes "overe/ terein. 7e"ause tat "lause is $in/ing,

tey are e>pe"te/ to a$i/e $y it in goo/ fait. F35 An/ $e"ause it "overs te /ispute

$eteen te parties in te present "ase, eiter of te# #ay "o#pel te oter to

ar$itrate.F36

Sin"e petitioner as alrea/y file/ a Co#plaint it te RC itout prior re"ourse to

ar$itration, te proper pro"e/ure to ena$le te C+AC to /e"i/e on te /ispute is to re;uest

te stay or suspension of su" a"tion, as provi/e/ un/er RA 06 Fte Ar$itration La. F3

4HERE#"RE, te 'etition is )E%IE) an/ te assaile/

!e"ision &**I#ME). Costs against petitioner.

!" "RDERED.

[G.R. No. 129169. November 17, 1999]

NATIONAL IRRIGATION ADMINISTRATION (NIA), petitioner, vs. HONORABL

!O"RT O# A$$ALS (%&' Dvo*), !ONSTR"!TION IND"STR+

ARBITRATION !OMMISSION, *- H+DRO RSO"R!S

!ONTRA!TORS !OR$ORATION, respondents.

D ! I S I O N

DAID, /R., C.J .0

In this spe"ial "i*il a"tion for certiorari under Rule 5 of the Rules of ourt, the

<ational Irrigation Administration hereafter <IAC, see=s to annul and set aside the

Resolutions&.'of the ourt of Appeals in A$7R S6 <o 14.0> dated -0 une .//5 and -(

Fe!ruar% .//4, #hi"h dismissed respe"ti*el% <IAs petition

for certiorari and prohibition against the onstru"tion Industr% Ar!itration ommission

hereafter IAC, and the motion for re"onsideration thereafter filed

Re"ords sho# that in a "ompetiti*e !idding held !% <IA in August ./40, H%dro

Resour"es ontra"tors orporation hereafter H@DROC #as a#arded ontra"t 86I$$- for

the "onstru"tion of the main "i*il #or=s of the 8agat Ri*er 8ulti$6urpose 6roje"t The

"ontra"t pro*ided that H@DRO #ould !e paid partl% in 6hilippine pesos and partl% in 9S

dollars H@DRO su!stantiall% "ompleted the #or=s under the "ontra"t in ./0- and final

a""eptan"e !% <IA #as made in ./0( H@DRO thereafter determined that it still had an

a""ount re"ei*a!le from <IA representing the dollar rate differential of the pri"e es"alation for

the "ontra"t&-'

After unsu""essfull% pursuing its "ase #ith <IA, H@DRO, on 4 De"em!er .//(, filed

#ith the IA a Re2uest for Adjudi"ation of the aforesaid "laim H@DRO nominated si)

ar!itrators for the ar!itration panel, from among #hom IA appointed Engr :auro 8

ruG On 5 anuar% .//, <IA filed its Ans#er #herein it 2uestioned the jurisdi"tion of the

IA alleging la"= of "ause of a"tion, la"hes and estoppel in *ie# of H@DROs alleged failure

to a*ail of its right to su!mit the dispute to ar!itration #ithin the pres"ri!ed period as pro*ided

in the "ontra"t On the same date, <IA filed a omplian"e #herein it nominated si) ar!itrators,

from among #hom IA appointed Att% ustodio O 6arlade, and made a "ounter"laim

for 6.,>>>,>>> as moral damages3 at least 6.>>,>>> as e)emplar% damages3 6.>>,>>> as

attorne%s fees3 and the "osts of the ar!itration&1'

The t#o designated ar!itrators appointed ertified 6u!li" A""ountant o*en oa2uin

as hairman of the Ar!itration 6anel The parties #ere re2uired to su!mit "opies of the

e*iden"e the% intended to present during the pro"eedings and #ere pro*ided the draft Terms of Referen"e&('

At the preliminar% "onferen"e, <IA through its "ounsel Att% o% :egaspi of the

Offi"e of the 7o*ernment orporate ounsel, manifested that it "ould not admit the

genuineness of H@DROs e*iden"e sin"e <IAs re"ords had alread% !een destro%ed <IA

re2uested an opportunit% to e)amine the originals of the do"uments #hi"h H@DRO agreed to

pro*ide&'

After rea"hing an a""ord on the issues to !e "onsidered !% the ar!itration panel, the

parties s"heduled the dates of hearings and of su!mission of simultaneous memoranda&5'

21


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On .1 8ar"h .//, <IA filed a 8otion to Dismiss&4'alleging la"= of jurisdi"tion o*er the

disputes <IA "ontended that there #as no agreement #ith H@DRO to su!mit the dispute to

IA for ar!itration "onsidering that the "onstru"tion "ontra"t #as e)e"uted in ./40 and the

proje"t "ompleted in ./0-, #hereas the onstru"tion Industr% Ar!itration :a# "reating IA

#as signed onl% in ./03 and that #hile the% ha*e agreed to ar!itration as a mode of

settlement of disputes, the% "ould not ha*e "ontemplated su!mission of their disputes to

IA <IA further argued that re"ords sho# that it had not *oluntaril% su!mitted itself to

ar!itration !% IA "iting TESO Ser*i"es, In" * Hon A!raham Vera, et al, &0' #herein it

#as ruled?

IA did not a"2uire jurisdi"tion o*er the dispute arising from the su!$"ontra"t agreement

!et#een petitioner TESO and pri*ate respondent :AROSA The re"ords do not sho# that

the parties agreed to su!mit the disputes to ar!itration !% the IA )))) While !oth parties

in the su!$"ontra"t had agreed to su!mit the matter to ar!itration, this #as onl% !et#een

themsel*es, no re2uest ha*ing !een made !% !oth #ith the IA Hen"e, as alread% stated, the

IA, has no jurisdi"tion o*er the dispute )))) <o#here in the said arti"le su!$"ontra"tC

does it mention the IA, mu"h less, *est jurisdi"tion #ith the IA

On .. April .//, the ar!itral !od% issued an order &/' #hi"h deferred the determination

of the motion to dismiss and resol*ed to pro"eed #ith the hearing of the "ase on the merits as

the grounds "ited !% <IA did not seem to !e indu!ita!le <IA filed a motion for

re"onsideration of the aforesaid Order IA in den%ing the motion for re"onsideration ruled

that it has jurisdi"tion o*er the H@DROs "laim o*er <IA pursuant to EO .>>0 and that the

hearing should pro"eed as s"heduled&.>'

On -5 8a% .//5, <IA filed #ith the ourt of Appeals an original a"tion

of certiorari and prohi!ition #ith pra%er for restraining order and+or injun"tion, see=ing to

annul the Orders of the IA for ha*ing !een issued #ithout or in e)"ess of jurisdi"tion In

support of its petition <IA alleged that?

A

RES6O<DE<T IA HAS <O A9THORIT@ OR 9RIDITIO< TO HEAR A<D TR@

THIS DIS69TE ETWEE< THE HEREI< 6ARTIES AS EO <O .>>0 HAD <O

RETROATIVE EFFET

B

THE DIS69TE ETWEE< THE 6ARTIES SHO9:D E SETT:ED I< AORDA<E

WITH 7 <O -, ART ->(5 OF THE IVI: ODE A<D RA <O 045 THE

7OVER<I<7 :AWS AT THE TI8E O<TRAT WAS EE9TED A<D TER8I<ATED

!

EO <O .>>0 IS A S9STA<TIVE :AW, <OT 8ERE:@ 6ROED9RA: AS R9:ED @

THE IA

D

A< I<DORSE8E<T OF THE A9DITOR 7E<ERA: DEIDI<7 A O<TROVERS@ IS A

DEISIO< EA9SE A:: THE E:E8E<TS FOR 9D78E<T ARE THERE3 THE

O<TROVERS@, THE A9THORIT@ TO DEIDE A<D THE DEISIO< IF IT IS <OT

A66EA:ED SEASO<A:@, THE SA8E EO8ES FI<A:

<IA HAS TI8E:@ RAISED THE ISS9E OF 9RISDITIO< IT DID <OT WAIVE <OR

IS IT ESTO66ED FRO8 ASSAI:I<7 THE SA8E

#

THE :E7A: DOTRI<E THAT 9RISDITIO< IS DETER8I<ED @ THE STAT9TE

I< FORE AT THE TI8E OF THE O88E<E8E<T OF THE ATIO< DOES <OT

O<:@ A66:@ TO THE I<STA<T ASE&..'

The ourt of Appeals, after finding that there #as no gra*e a!use of dis"retion on the

part of the IA in issuing the aforesaid Orders, dismissed the petition in its Resolution dated

-0 une .//5 <IAs motion for re"onsideration of the said de"ision #as li=e#ise denied !% the

ourt of Appeals on -5 Fe!ruar% .//4

On - une .//4, <IA filed !efore us an original a"tion for certiorari and prohi!ition

#ith urgent pra%er for temporar% restraining order and #rit of preliminar% injun"tion, pra%ing

for the annulment of the Resolutions of the ourt of Appeals dated -0 une .//5 and -(

Fe!ruar% .//4 In the said spe"ial "i*il a"tion, <IA merel% reiterates the issues it raised !efore

the ourt of Appeals

&.-'

We ta=e judi"ial noti"e that on .> une .//4, IA rendered a de"ision in the main "ase

in fa*or of H@DRO&.1' <IA assailed the said de"ision #ith the ourt of Appeals In *ie# of

the penden"% of the present petitions !efore us the appellate "ourt issued a resolution dated -5

8ar"h .//0 holding in a!e%an"e the resolution of the same until after the instant petitions

ha*e !een finall% de"ided&.('

At the outset, #e note that the petition suffers from a pro"edural defe"t that #arrants its

outright dismissal The 2uestioned resolutions of the ourt of Appeals ha*e alread% !e"ome

final and e)e"utor% !% reason of the failure of <IA to appeal therefrom Instead of filing this

petition for certiorari under Rule 5 of the Rules of ourt, <IA should ha*e filed a timel%

petition for re*ie# under Rule (

22





















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There is no dou!t that the ourt of Appeals has jurisdi"tion o*er the spe"ial "i*il a"tion

for certiorari under Rule 5 filed !efore it !% <IA The original jurisdi"tion of the ourt of

Appeals o*er spe"ial "i*il a"tions for certiorari is *ested upon it under Se"tion /.C of 6

.-/ This jurisdi"tion is "on"urrent #ith the Supreme ourt &.' and #ith the Regional Trial

ourt&.5'

Thus, sin"e the ourt of Appeals had jurisdi"tion o*er the petition under Rule 5, an%

alleged errors "ommitted !% it in the e)er"ise of its jurisdi"tion #ould !e errors of judgment

#hi"h are re*ie#a!le !% timel% appeal and not !% a spe"ial "i*il a"tion of certiorari

&.4'

If theaggrie*ed part% fails to do so #ithin the reglementar% period, and the de"ision a""ordingl%

!e"omes final and e)e"utor%, he "annot a*ail himself of the #rit of certiorari, his predi"ament

!eing the effe"t of his deli!erate ina"tion&.0'

The appeal from a final disposition of the ourt of Appeals is a petition for re*ie# under

Rule ( and not a spe"ial "i*il a"tion under Rule 5 of the Rules of ourt, no# Rule ( and

Rule 5, respe"ti*el%, of the .//4 Rules of i*il 6ro"edure&./' Rule ( is "lear that de"isions,

final orders or resolutions of the ourt of Appeals in an% "ase, i.e., regardless of the nature of

the a"tion or pro"eedings in*ol*ed, ma% !e appealed to this ourt !% filing a petition for

re*ie#, #hi"h #ould !e !ut a "ontinuation of the appellate pro"ess o*er the original "ase&->' 9nder Rule ( the reglementar% period to appeal is fifteen .C da%s from noti"e of

judgment or denial of motion for re"onsideration&-.'

In the instant "ase the Resolution of the ourt of Appeals dated -( Fe!ruar% .//4

den%ing the motion for re"onsideration of its Resolution dated -0 une .//4 #as re"ei*ed !%

<IA on ( 8ar"h.//4 Thus, it had until ./ 8ar"h .//4 #ithin #hi"h to perfe"t its

appeal <IA did not appeal What it did #as to file an original a"tion for certiorari !efore this

ourt, reiterating the issues and arguments it raised !efore the ourt of Appeals

For the #rit of certiorari under Rule 5 of the Rules of ourt to issue, a petitioner must

sho# that he has no plain, speed% and ade2uate remed% in the ordinar% "ourse of la# against

its per"ei*ed grie*an"e&--' A remed% is "onsidered plain, speed% and ade2uate if it #ill

promptl% relie*e the petitioner from the injurious effe"ts o f the judgment and the a"ts of thelo#er "ourt or agen"%&-1' In this "ase, appeal #as not onl% a*aila!le !ut also a speed% and

ade2uate remed%

O!*iousl%, <IA interposed the present spe"ial "i*il a"tion of certiorari not !e"ause it is

the speed% and ade2uate remed% !ut to ma=e up for the loss, through omission or o*ersight, of

the right of ordinar% appeal It is elementar% that the spe"ial "i*il a"tion of certiorari is not and

"annot !e a su!stitute for an appeal, #here the latter remed% is a*aila!le, as it #as in this

"ase A spe"ial "i*il a"tion under Rule 5 of the Rules of ourt #ill not !e a "ure for failure to

timel% file a petition for re*ie# on certiorari under Rule ( of the Rules of ourt &-(' Rule 5

is an independent a"tion that "annot !e a*ailed of as a su!stitute for the lost remed% of an

ordinar% appeal, in"luding that under Rule (, &-' espe"iall% if su"h loss or lapse #as

o""asioned !% ones o#n negle"t or error in the "hoi"e of remedies &-5'

For o!*ious reasons the rules for!id re"ourse to a spe"ial "i*il a"tion for certiorari if

appeal is a*aila!le, as the remedies of appeal and certiorari are mutuall% e)"lusi*e and not

alternati*e or su""essi*e &-4' Although there are e)"eptions to the rules, none is present in the

"ase at !ar <IA failed to sho# "ir"umstan"es that #ill justif% a de*iation from the general rule

as to ma=e a*aila!le a petition for certiorari in lieu of ta=ing an appropriate appeal

ased on the foregoing, the instant petition should !e dismissed

In an% "ase, e*en if the issue of te"hni"alit% is disregarded and re"ourse under Rule 5 isallo#ed, the same result #ould !e rea"hed sin"e a re*ie# of the 2uestioned resolutions of the

IA sho#s that it "ommitted no gra*e a!use of dis"retion

ontrar% to the "laim of <IA, the IA has jurisdi"tion o*er the "ontro*ers% E)e"uti*e

Order <o.>>0, other#ise =no#n as the onstru"tion Industr% Ar!itration :a# #hi"h #as

promulgated on ( Fe!ruar% ./0, *ests upon IA original and e)"lusi*e jurisdi"tion o*er

disputes arising from, or "onne"ted #ith "ontra"ts entered into !% parties in*ol*ed in

"onstru"tion in the 6hilippines, #hether the dispute arises !efore or after the "ompletion of the

"ontra"t, or after the a!andonment or !rea"h thereof The disputes ma% in*ol*e go*ernment or

pri*ate "ontra"ts For the oard to a"2uire jurisdi"tion, the parties to a dispute must agree to

su!mit the same to *oluntar% ar!itration&-0'

The "omplaint of H@DRO against <IA on the !asis of the "ontra"t e)e"uted !et#een

them #as filed on 4 De"em!er .//(, during the effe"ti*it% of EO <o .>>0 Hen"e, it is #ell

#ithin the jurisdi"tion of IA The jurisdi"tion of a "ourt is determined !% the la# in for"e at

the time of the "ommen"ement of the a"tion&-/'

<IAs argument that IA had no jurisdi"tion to ar!itrate on "ontra"t #hi"h pre"eded its

e)isten"e is untena!le EO .>>0 is "lear that the IA has jurisdi"tion o*er all disputes

arising from or "onne"ted #ith "onstru"tion "ontra"t #hether the dispute arises !efore or after

the "ompletion of the "ontra"t Thus, the date the parties entered into a "ontra"t and the date o f

"ompletion of the same, e*en if these o""urred !efore the "onstitution of the IA, did not

automati"all% di*est the IA of jurisdi"tion as long as the dispute su!mitted for ar!itrationarose after the "onstitution of the IA Stated differentl%, the jurisdi"tion of IA is o*er the

dispute, not the "ontra"t3 and the instant dispute ha*ing arisen #hen IA #as alread%

"onstituted, the ar!itral !oard #as a"tuall% e)er"ising "urrent, not retroa"ti*e, jurisdi"tion As

su"h, there is no need to pass upon the issue of #hether EO <o .>>0 is a su!stanti*e or

pro"edural statute

<IA also "ontended that the IA did not a"2uire jurisdi"tion o*er the dispute sin"e it

#as onl% H@DRO that re2uested for ar!itration It asserts that to a"2uire jurisdi"tion o*er a

"ase, as pro*ided under EO .>>0, the re2uest for ar!itration filed #ith IA should !e made

!% !oth parties, and hen"e the re2uest !% one part% is not enough

23










































7/23/2019 ADR Cases 1


It is undisputed that the "ontra"ts !et#een H@DRO and <IA "ontained an ar!itration

"lause #herein the% agreed to su!mit to ar!itration an% dispute !et#een them that ma% arise

!efore or after the termination of the agreementonse2uentl%, the "laim of H@DRO ha*ing

arisen from the "ontra"t is ar!itra!le <IAs relian"e #ith the ruling on the "ase of Tes"o

Ser*i"es In"orporated * Vera,&1>' is mispla"ed

The ./00 IA Rules of 6ro"edure #hi"h #ere applied !% this ourt in Tes"o "ase had

!een dul% amended !% IA Resolutions <o -$/. and 1$/1, Se"tion . of Arti"le III of #hi"h

read as follo#s?

Submission to CIAC Jurisdiction $ An ar!itration "lause in a "onstru"tion "ontra"t or a

su!mission to ar!itration of a "onstru"tion "ontra"t or a su!mission to ar!itration of a

"onstru"tion dispute shall !e deemed an agreement to su!mit an e)isting or future "ontro*ers%

to IA jurisdi"tion, not#ithstanding the referen"e to a different ar!itration institution or

ar!itral !od% in su"h "ontra"t or su!mission When a "ontra"t "ontains a "lause for the

su!mission of a future "ontro*ers% to ar!itration, it is not ne"essar% for the parties to enter into

a su!mission agreement !efore the "laimant ma% in*o=e the jurisdi"tion of IA

9nder the present Rules of 6ro"edure, for a parti"ular "onstru"tion "ontra"t to fall #ithin

the jurisdi"tion of IA, it is merel% re2uired that the parties agree to su!mit the same to

*oluntar% ar!itration 9nli=e in the original *ersion of Se"tion ., as applied in the esco "ase,

the la# as it no# stands does not pro*ide that the parties should agree to su!mit disputes

arising from their agreement spe"ifi"all% to the IA for the latter to a"2uire jurisdi"tion o*er

the same Rather, it is plain and "lear that as long as the parties agree to su!mit to *oluntar%

ar!itration, regardless of #hat forum the% ma% "hoose, their agreement #ill fall #ithin the

jurisdi"tion of the IA, su"h that, e*en if the% spe"ifi"all% "hoose another forum, the parties

#ill not !e pre"luded from ele"ting to su!mit their dispute !efore the IA !e"ause this right

has !een *ested upon ea"h part% !% la#, i.e., EO <o .>>0&1.'

8oreo*er, it is undenia!le that <IA agreed to su!mit the dispute for ar!itration to the

IA <IA through its "ounsel a"ti*el% parti"ipated in the ar!itration pro"eedings !% filing an

ans#er #ith "ounter"laim, as #ell as its "omplian"e #herein it nominated ar!itrators to the proposed panel, parti"ipating in the deli!erations on, and the formulation of, the Terms of

Referen"e of the ar!itration pro"eeding, and e)amining the do"uments su!mitted !% H@DRO

after <IA as=ed for the originals of the said do"uments&1-'

As to the defenses of la"hes and pres"ription, the% are e*identiar% in nature #hi"h "ould

not !e esta!lished !% mere allegations in the pleadings and must not !e resol*ed in a motion to

dismiss Those issues must !e resol*ed at the trial of the "ase on the merits #herein !oth

parties #ill !e gi*en ample opportunit% to pro*e their respe"ti*e "laims and defenses&11' 9nder

the rule&1(' the deferment of the resolution of the said issues #as, thus, in order An allegation

of pres"ription "an effe"ti*el% !e used in a motion to dismiss onl% #hen the "omplaint on its

fa"e sho#s that indeed the a"tion has alread% pres"ri!ed &1' In the instant "ase, the issue of

pres"ription and la"hes "annot !e resol*ed on the !asis solel% of the "omplaint It must,

ho#e*er, !e pointed that under the ne# rules, &15' deferment of the resolution is no longer

permitted The "ourt ma% either grant the motion to dismiss, den% it, or order the amendment

of the pleading

HR#OR, the instant petition is DIS8ISSED for la"= of merit The ourt of

Appeals is here!% DIRETED to pro"eed #ith reasona!le dispat"h in the disposition of A

7R <o ((-4 and in"lude in the resolution thereof the issue of la"hes and pres"ription

SO ORDRD.

T"NA $RO!SSING, IN!.,

6etitioner,

$*ersus$

$HILI$$IN ING#ORD, IN!.,

Respondent

G.R. No. 134432

$ree*&0

AR6IO, J ,

hairperson,

RIO<,

6EREJ,

SERE<O, and

RE@ES, JJ.

6romulgated?

Fe!ruar% -/, ->.-

)$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$)

D ! I S I O N

$R5, J .?

an a foreign "orporation not li"ensed to do !usiness in the 6hilippines, !ut #hi"h

"olle"ts ro%alties from entities in the 6hilippines, sue here to enfor"e a foreign ar!itral a#ardK

24




















7/23/2019 ADR Cases 1


In this !etition for "evie# on Certiorari under "ule $%,&.' petitioner Tuna

6ro"essing, In" T6IC, a foreign "orporation not li"ensed to do !usiness in the 6hilippines,

pra%s that the Resolution&-' dated -. <o*em!er ->>0 of the Regional Trial ourt RTC of

8a=ati it% !e de"lared *oid and the "ase !e remanded to the RT for further pro"eedings In

the assailed Resolution, the RT dismissed petitioners !etition for Confirmation& "ecognition&

and 'nforcement of (oreign Arbitral A#ard &1' against respondent 6hilippine ;ingford, In"

;ingfordC, a "orporation dul% organiGed and e)isting under the la#s of the 6hilippines, &(' on

the ground that petitioner la"=ed legal "apa"it% to sue&'

The Antecedents

On .( anuar% ->>1, ;anemitsu @amao=a hereinafter referred to as the li"ensorC,

"o$patentee of 9S 6atent <o ,(0(,5./, 6hilippine :etters 6atent <o 1..10, and Indonesian

6atent <o ID>>>1/.. "olle"ti*el% referred to as the @amao=a 6atentC, &5' and fi*e C

6hilippine tuna pro"essors, namel%, Angel Seafood orporation, East Asia Fish o, In",

8omm% 7ina Tuna Resour"es, Santa ruG Seafoods, In", and respondent ;ingford

"olle"ti*el% referred to as the sponsors+li"enseesC &4' entered into a 8emorandum of Agreement

8OAC,&0' pertinent pro*isions of #hi"h read?

. B8ro*- *- ob:e&ve. The :i"ensor, "o$o#ner of 9S6atent <o

,(0(,5./, 6hilippine 6atent <o 1..10, and Indonesian 6atent <o

ID>>>1/.. ))) #ishes to form an allian"e #ith Sponsors for purposes of enfor"ing his three aforementioned patents, granting li"enses under those

patents, and "olle"ting ro%alties

The Sponsors #ish to !e li"ensed under the aforementioned patents in

order to pra"ti"e the pro"esses "laimed in those patents in the 9nited

States, the 6hilippines, and Indonesia, enfor"e those patents and "olle"t

ro%alties in "onjun"tion #ith :i"ensor

)))

( &b;'me*& o< T* $roeor, I*. The parties hereto agree to the

esta!lishment of Tuna 6ro"essors, In" T6IC, a "orporation esta!lished

in the State of alifornia, in order to implement the o!je"ti*es of thisAgreement

B* o*&. T6I shall open and maintain !an= a""ounts in the 9nited

States, #hi"h #ill !e used e)"lusi*el% to deposit funds that it #ill

"olle"t and to dis!urse "ash it #ill !e o!ligated to spend in "onne"tion

#ith the implementation of this Agreement

5 O=*er'> o< T$I. T6I shall !e o#ned !% the Sponsors and

:i"ensor :i"ensor shall !e assigned one share of T6I for the purpose of

!eing ele"ted as mem!er of the !oard of dire"tors The remaining shares

of T6I shall !e held !% the Sponsors a""ording to their respe"ti*e e2uit%

shares &/'

)))

The parties li=e#ise e)e"uted a Supplemental 8emorandum of Agreement&.>' dated . anuar%

->>1 and an Agreement to Amend 8emorandum of Agreement&..' dated .( ul% ->>1

Due to a series of e*ents not mentioned in the petition, the li"ensees, in"luding

respondent ;ingford, #ithdre# from petitioner T6I and "orrespondingl% reneged on their

o!ligations&.-'6etitioner su!mitted the dispute for ar!itration !efore the International entre

for Dispute Resolution in the State of alifornia, 9nited States and #on the "ase against

respondent&.1' 6ertinent portions of the a#ard read?

.1. Within thirt% 1>C da%s from the date of transmittal of this A#ard to the

6arties, pursuant to the terms of this a#ard, the total sum to !e paid

!% RS$ONDNT ING#ORD to !LAIMANT T$I, is the sum of ON

MILLION SN H"NDRD #I#T+ THO"SAND IGHT

H"NDRD #ORT+ SI? DOLLARS AND TN !NTS

(@1,74,3%6.1).

(A) For !rea"h of the MOA !% not pa%ing past due

assessments, RS$ONDNT ING#ORD shall pa% !LAIMANT thetotal sum of TO H"NDRD TNT+ NIN THO"SAND THR

H"NDRD AND #I#T+ #I DOLLARS AND NINT+ !NTS

(@229,44.9) #hi"h is ->B of MOA assessments sin"e Septem!er .,

->>&3'

(B) For !rea"h of the MOA in failing to "ooperate #ith !LAIMANT

T$I in fulfilling the o!je"ti*es of the MOA, RS$ONDNT

ING#ORD shall pa% !LAIMANT the total sum of TO H"NDRD

SNT+ ON THO"SAND #O"R H"NDRD NINT+

DOLLARS AND TNT+ !NTS (@271,%9.2)&3'&.(' *-

(!) For *iolation of TH LANHAM A!T and infringement of

the +AMAOA 619 $ATNT, RS$ONDNT ING#ORD shall

25

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7/23/2019 ADR Cases 1


pa% !LAIMANT the total sum of ON MILLION TO H"NDRD

#I#T+ THO"SAND DOLLARS AND NO !NTS (@1,24,.) )))

)))&.'

To enfor"e the a#ard, petitioner T6I filed on .> O"to!er ->>4 a !etition for

Confirmation& "ecognition& and 'nforcement of (oreign Arbitral A#ard !efore the RT of

8a=ati it% The petition #as raffled to ran"h .> presided !% udge Elmo 8 Alameda

At ran"h .>, respondent ;ingford filed a 8otion to Dismiss &.5' After the "ourt

denied the motion for la"= of merit ,&.4' respondent sought for the inhi!ition of udge Alameda

and mo*ed for the re"onsideration of the order den%ing the motion&.0' udge Alameda

inhi!ited himself not#ithstanding &t'he unfounded allegations and unsu!stantiated assertions

in the motion&./' udge edri"= O RuiG of ran"h 5., to #hi"h the "ase #as re$raffled, in turn,

granted respondents 8otion for Re"onsideration and dismissed the petition on the ground that

the petitioner la"=ed legal "apa"it% to sue in the 6hilippines&->'

6etitioner T6I no# see=s to nullif%, in this instant !etition for "evie# on Certiorari

under "ule $%, the order of the trial "ourt dismissing its !etition for Confirmation&

"ecognition& and 'nforcement of (oreign Arbitral A#ard

Issue

The "ore issue in this "ase is #hether or not the "ourt a )uo #as "orre"t in so

dismissing the petition on the ground of petitioners la"= of legal "apa"it% to sue

Our Ruling

The petition is impressed #ith merit

The Corporation Code of the !hilippines e)pressl% pro*ides?

Se. 1. Doing business without a license. $ <o foreign

"orporation transa"ting !usiness in the 6hilippines #ithout a li"ense, or its

su""essors or assigns, shall !e permitted to maintain or inter*ene in an%

a"tion, suit or pro"eeding in an% "ourt or administrati*e agen"% of the

6hilippines3 !ut su"h "orporation ma% !e sued or pro"eeded against !efore

6hilippine "ourts or administrati*e tri!unals on an% *alid "ause of a"tion

re"ogniGed under 6hilippine la#s

It is pursuant to the afore2uoted pro*ision that the "ourt a )uo dismissed the petition. Thus?

Herein plaintiff T6Is 6etition, et" a"=no#ledges that it is a foreign

"orporation esta!lished in the State of alifornia and #as gi*en the e)"lusi*e

right to li"ense or su!li"ense the @amao=a 6atent and #as assigned the

e)"lusi*e right to enfor"e the said patent and "olle"t "orresponding ro%alties

in the 6hilippines T6I li=e#ise admits that it does not ha*e a li"ense to do

!usiness in the 6hilippines

There is no dou!t, therefore, in the mind of this ourt that T6I has

!een doing !usiness in the 6hilippines, !ut sans a li"ense to do so issued !%

the "on"erned go*ernment agen"% of the Repu!li" of the 6hilippines, #hen it

"olle"ted ro%alties from fi*e C 6hilippine tuna pro"essors&,' namel%&,'

Angel Seafood orporation, East Asia Fish o, In", 8omm% 7ina Tuna

Resour"es, Santa ruG Seafoods, In" and respondent 6hilippine ;ingford,

In" This !eing the real situation, T6I "annot !e permitted to maintain or

inter*ene in an% a"tion, suit or pro"eedings in an% "ourt or administrati*e

agen"% of the 6hilippines A priori, the 6etition, et" e)tant of the plaintiff

T6I should !e dismissed for it does not ha*e the legal personalit% to sue in

the 6hilippines&-.'

The petitioner "ounters, ho#e*er, that it is entitled to see= for the re"ognition and

enfor"ement of the su!je"t foreign ar!itral a#ard in a""ordan"e #ith Repu!li" A"t <o /-0

Alternative *ispute "esolution Act of +,,$C,&--' the on*ention on the Re"ognition and

Enfor"ement of Foreign Ar!itral A#ards drafted during the 9nited <ations onferen"e on

International ommer"ial Ar!itration in ./0 -e# ork ConventionC, and the 9<ITRA:

8odel :a# on International ommer"ial Ar!itration odel 0a#C,&-1' as none of these

spe"ifi"all% re2uires that the part% see=ing for the enfor"ement should ha*e legal "apa"it% to

sue It an"hors its argument on the follo#ing?

In the present "ase, enfor"ement has !een effe"ti*el% refused on a ground not

found in the & Alternative *ispute "esolution Act of ->>(', -e# ork

Convention& or odel 0a#. It is for this reason that T6I has !rought this

matter !efore this most Honora!le ourt, as it &i's imperati*e to "larif%#hether the 6hilippines international o!ligations and State poli"% to

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strengthen ar!itration as a means of dispute resolution ma% !e defeated !%

mispla"ed te"hni"al "onsiderations not found in the rele*ant la#s &-('

Simpl% put, ho# do #e re"on"ile the pro*isions of the Corporation Code of the

!hilippines on one hand, and the Alternative *ispute "esolution Act of +,,$, the -e# ork

Convention and the odel 0a# on the otherK

In se*eral "ases, this ourt had the o""asion to dis"uss the nature and appli"a!ilit%

of the Corporation Code of the !hilippines, a general la#, *iG$a$*iG other spe"ial la#s Thus,

in 1oruga v. Arcenas& Jr. &&-' this ourt reje"ted the appli"ation of the orporation ode and

applied the <e# entral an= A"t It ratio"inated?

;orugas in*o"ation of the pro*isions of the orporation ode is

mispla"ed In an earlier "ase #ith similar ante"edents, #e ruled that?

The orporation ode, ho#e*er, is a general la#

appl%ing to all t%pes of "orporations, #hile the <e# entral

an= A"t regulates spe"ifi"all% !an=s and other finan"ial

institutions, in"luding the dissolution and li2uidation

thereof As !et#een a general and spe"ial la#, the latter

shal l pre*ail generalia specialibus non

derogant Emphasis suppliedC&-5'

Further, in the re"ent "ase of 2acienda 0uisita& Incorporated v. !residential Agrarian "eform

Council&&-4' this ourt held?

Without dou!t, the orporation ode is the general la# pro*iding

for the formation, organiGation and regulation of pri*ate "orporations On the

other hand, RA 554 is the spe"ial la# on agrarian reform As !et#een a

general and spe"ial la#, the latter shall pre*ail generalia specialibus non

derogant &-0'

Follo#ing the same prin"iple, the Alternative *ispute "esolution Act of +,,$ shall

appl% in this "ase as the Act& as its title 3 An Act to Institutionali4e the 5se of an Alternative

*ispute "esolution System in the !hilippines and to 'stablish the 6ffice for Alternative

*ispute "esolution& and for 6ther !urposes 3 #ould suggest, is a la# espe"iall% ena"ted to

a"ti*el% promote part% autonom% in the resolution of disputes or the freedom of the part% to

ma=e their o#n arrangements to resol*e their disputes&-/'

It spe"ifi"all% pro*ides e)"lusi*e

grounds a*aila!le to the part% opposing an appli"ation for re"ognition and enfor"ement of the

ar!itral a#ard&1>'

Inasmu"h as the Alternative *ispute "esolution Act of +,,$, a muni"ipal

la#, applies in the instant petition, #e do not see the need to dis"uss "omplian"e #ith

international o!ligations under the -e# ork Convention and the odel 0a#. After all, !oth

alread% form part of the la#

In parti"ular, the Alternative *ispute "esolution Act of +,,$ in"orporated the -e#

ork Convention in the A"t !% spe"ifi"all% pro*iding?

SE (- Application of the -e# ork Convention. $ The <e# @or=

on*ention shall go*ern the re"ognition and enfor"ement of ar!itral a#ards

"o*ered !% the said on*ention

)))SE ( "e7ection of a (oreign Arbitral A#ard. $ A part% to a

foreign ar!itration pro"eeding ma% oppose an appli"ation for re"ognition and

enfor"ement of the ar!itral a#ard in a""ordan"e #ith the pro"edural rules to

!e promulgated !% the Supreme ourt onl% on those grounds enumerated

under Arti"le V of the <e# @or= on*ention An% other ground raised shall

!e disregarded !% the regional trial "ourt

It also e)pressl% adopted the odel 0a#, to #it?

Se" ./ Adoption of the odel 0a# on International Commercial

Arbitration. International "ommer"ial ar!itration shall !e go*erned !% the8odel :a# on International ommer"ial Ar!itration the 8odel :a#C

adopted !% the 9nited <ations ommission on International Trade :a# on

une -., ./0 )))

<o#, does a foreign "orporation not li"ensed to do !usiness in the 6hilippines ha*e

legal "apa"it% to sue under the pro*isions of the Alternative *ispute "esolution Act of

+,,$K We ans#er in the affirmati*e

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Se" ( of the Alternative *ispute "esolution Act of +,,$ pro*ides that the opposing

part% in an appli"ation for re"ognition and enfor"ement of the ar!itral a#ard ma% raise onl%

those grounds that #ere enumerated under Arti"le V of the -e# ork Convention, to #it?

Article 8

. Re"ognition and enfor"ement of the a#ard ma% !e refused, at the re2uest

of the part% against #hom it is in*o=ed, onl% if that part% furnishes to the"ompetent authorit% #here the re"ognition and enfor"ement is sought, proof

that?

aC The parties to the agreement referred to in arti"le II #ere, under the la#

appli"a!le to them, under some in"apa"it%, or the said agreement is not

*alid under the la# to #hi"h the parties ha*e su!je"ted it or, failing an%

indi"ation thereon, under the la# of the "ountr% #here the a#ard #as made3

or

!C The part% against #hom the a#ard is in*o=ed #as not gi*en proper

noti"e of the appointment of the ar!itrator or of the ar!itration pro"eedings

or #as other#ise una!le to present his "ase3 or

"C The a#ard deals #ith a differen"e not "ontemplated !% or not falling

#ithin the terms of the su!mission to ar!itration, or it "ontains de"isions on

matters !e%ond the s"ope of the su!mission to ar!itration, pro*ided that, if the de"isions on matters su!mitted to ar!itration "an !e separated from

those not so su!mitted, that part of the a#ard #hi"h "ontains de"isions on

matters su!mitted to ar!itration ma% !e re"ogniGed and enfor"ed3 or

dC The "omposition of the ar!itral authorit% or the ar!itral pro"edure #as

not in a""ordan"e #ith the agreement of the parties, or, failing su"h

agreement, #as not in a""ordan"e #ith the la# of the "ountr% #here the

ar!itration too= pla"e3 or

eC The a#ard has not %et !e"ome !inding on the parties, or has !een set

aside or suspended !% a "ompetent authorit% of the "ountr% in #hi"h, or

under the la# of #hi"h, that a#ard #as made

- Re"ognition and enfor"ement of an ar!itral a#ard ma% also !e refused if

the "ompetent authorit% in the "ountr% #here re"ognition and enfor"ement

is sought finds that?

aC The su!je"t matter of the differen"e is not "apa!le of settlement !%

ar!itration under the la# of that "ountr%3 or

!C The re"ognition or enfor"ement of the a#ard #ould !e "ontrar% to the

pu!li" poli"% of that "ountr%

learl%, not one of these e)"lusi*e grounds tou"hed on the "apa"it% to sue of the part% see=ing

the re"ognition and enfor"ement of the a#ard

6ertinent pro*isions of the Special "ules of Court on Alternative *ispute "esolution,

&1.' #hi"h #as promulgated !% the Supreme ourt, li=e#ise support this position

Rule .1. of the Spe"ial Rules pro*ides that &a'n% part% to a foreign ar!itration ma%

petition the "ourt to re"ogniGe and enfor"e a foreign ar!itral a#ard The "ontents of su"h

petition are enumerated in Rule .1&1-' apa"it% to sue is not in"luded Oppositel%, in the

Rule on lo"al ar!itral a#ards or ar!itrations in instan"es #here the pla"e of ar!itration is in the

6hilippines,

&11'

it is spe"ifi"all% re2uired that a petition to determine an% 2uestion "on"erning

the e)isten"e, *alidit% and enfor"ea!ilit% of su"h ar!itration agreement&1(' a*aila!le to the

parties !efore the "ommen"ement of ar!itration and+or a petition for judi"ial relief from the

ruling of the ar!itral tri!unal on a preliminar% 2uestion upholding or de"lining its

jurisdi"tion&1' after ar!itration has alread% "ommen"ed should state &t'he fa"ts sho#ing that

the persons named as petitioner or respondent ha*e legal "apa"it% to sue or !e sued&15'

Indeed, it is in the !est interest of justi"e that in the enfore"ement of a

foreign ar!itral a#ard, #e den% a*ailment !% the losing part% of the rule that !ars foreign

"orporations not li"ensed to do !usiness in the 6hilippines from maintaining a suit in our

"ourts When a part% enters into a "ontra"t "ontaining a foreign ar!itration "lause and, as in

this "ase, in fa"t su!mits itself to ar!itration, it!e"omes !ound !% the "ontra"t, !% the

ar!itration and !% the result of ar!itration, "on"eding there!% the "apa"it% of the other part% to

enter into the "ontra"t, parti"ipate in the ar!itration and "ause the implementation of the

result Although not on all fours #ith the instant "ase, also #orth% to "onsider is the

#isdom of then Asso"iate usti"e Flerida Ruth 6 Romero in her Dissenting Opinion

in Asset !rivati4ation rust v. Court of Appeals,&14' to #it?

))) Ar!itration, as an alternati*e mode of settlement, is gaining

adherents in legal and judi"ial "ir"les here and a!road If its tested

me"hanism "an simpl% !e ignored !% an aggrie*ed part%, one #ho, it must

!e stressed, *oluntaril% and a"ti*el% parti"ipated in the ar!itration

pro"eedings from the *er% !eginning, it #ill destro% the *er% essen"e of

mutualit% inherent in "onsensual "ontra"ts&10'

learl%, on the matter of "apa"it% to sue, a foreign ar!itral a#ard should !e respe"ted

not !e"ause it is fa*ored o*er domesti" la#s and pro"edures, !ut !e"ause Repu!li" A"t <o

/-0 has "ertainl% erased an% "onfli"t of la# 2uestion

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Finall%, e*en assuming, onl% for the sa=e of argument, that the "ourt a )uo "orre"tl%

o!ser*ed that the odel 0a#, not the -e# ork Convention, go*erns the su!je"t ar!itral

a#ard,&1/' petitioner ma% still see= re"ognition and enfor"ement of the a#ard in 6hilippine

"ourt, sin"e the odel 0a# pres"ri!es su!stantiall% identi"al e)"lusi*e grounds for refusing

re"ognition or enfor"ement

&(>'

6remises "onsidered, petitioner T6I, although not li"ensed to do !usiness in the

6hilippines, ma% see= re"ognition and enfor"ement of the foreign ar!itral a#ard in a""ordan"e

#ith the pro*isions of the Alternative *ispute "esolution Act of +,,$

II

The remaining arguments of respondent ;ingford are li=e#ise unmeritorious

(irst. There is no need to "onsider respondents "ontention that petitioner T6I

improperl% raised a 2uestion of fa"t #hen it posited that its a"t of entering into a 8OA should

not !e "onsidered doing !usiness in the 6hilippines for the purpose of determining "apa"it% to

sue We reiterate that the foreign "orporations "apa"it% to sue in the 6hilippines is not material

insofar as the re"ognition and enfor"ement of a foreign ar!itral a#ard is "on"erned

Second. Respondent "annot fault petitioner for not filing a motion for

re"onsideration of the assailed Resolution dated -. <o*em!er ->>0 dismissing the "ase We

ha*e, time and again, ruled that the prior filing of a motion for re"onsideration is not re2uired

in certiorari under Rule (&(.'

hird. While #e agree that petitioner failed to o!ser*e the prin"iple of hierar"h% of

"ourts, #hi"h, under ordinar% "ir"umstan"es, #arrants the outright dismissal of the "ase, &(-' #e

opt to rela) the rules follo#ing the pronoun"ement in Chua v. Ang &&(1' to #it?

&I't must !e remem!ered that &the prin"iple of hierar"h% of

"ourts' generall% applies to "ases in*ol*ing "onfli"ting fa"tual

allegations ases #hi"h depend on disputed fa"ts for de"ision "annot !e

!rought immediatel% !efore us as #e are not triers of fa"ts&((' A strict

application of this rule ma% !e e)"used #hen the reason !ehind the rule is

not present in a "ase, as in the present "ase, #here the issues are not fa"tual

!ut purel% legal In these t%pes of 2uestions, this ourt has the ultimate sa%

so that #e merel% a!!re*iate the re*ie# pro"ess if #e, !e"ause of the

uni2ue "ir"umstan"es of a "ase, "hoose to hear and de"ide the legal issues

outright&('

8oreo*er, the no*elt% and the paramount importan"e of the issue herein raised should !e

seriousl% "onsidered&(5' Surel%, there is a need to ta=e "ogniGan"e of the "ase not onl% to guide

the !en"h and the !ar, !ut if onl% to strengthen ar!itration as a means of dispute resolution,

and uphold the poli"% of the State em!odied in the Alternative *ispute "esolution Act of +,,$,

to #it?

Se" - *eclaration of !olicy. 3 It is here!% de"lared the poli"% of

the State to a"ti*el% promote part% autonom% in the resolution of disputes or the freedom of the part% to ma=e their o#n arrangements to resol*e their

disputes To#ards this end, the State shall en"ourage and a"ti*el% promote

the use of Alternati*e Dispute Resolution ADRC as an important means to

a"hie*e speed% and impartial justi"e and de"log "ourt do"=ets )))

(ourth. As regards the issue on the *alidit% and enfor"ea!ilit% of the foreign ar!itral

a#ard, #e lea*e its determination to the "ourt a )uo #here its re"ognition and enfor"ement is

!eing sought

(ifth. Respondent "laims that petitioner failed to furnish the "ourt of origin a "op% of

the motion for time to file petition for re*ie# on certiorari !efore the petition #as filed #ith

this ourt&(4' We, ho#e*er, find petitioners repl% in order Thus?

-5 Admittedl%, referen"e to ran"h 54 in petitioner T6Is 8otion

for Time to File a 6etition for Re*ie# on ertiorari under Rule ( is a

t%pographi"al error As "orre"tl% pointed out !% respondent ;ingford, the

order sought to !e assailed originated from Regional Trial ourt, 8a=ati

it%, ran"h 5.

-4 ))) 9pon "onfirmation #ith the Regional Trial ourt, 8a=atiit%, ran"h 5., a "op% of petitioner T6Is motion #as re"ei*ed !% the

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8etropolitan Trial ourt, 8a=ati it%, ran"h 54 On 0 anuar% ->>/, the

motion #as for#arded to the Regional Trial ourt, 8a=ati it %, ran"h 5.&(0'

All "onsidered, petitioner T6I, although a foreign "orporation not li"ensed to do

!usiness in the 6hilippines, is not, for that reason alone, pre"luded from filing the !etition for

Confirmation& "ecognition& and 'nforcement of (oreign Arbitral A#ard !efore a 6hilippine

"ourt

HR#OR, the Resolution dated -. <o*em!er ->>0 of the Regional Trial

ourt , ran"h 5., 8a=ati it% in Spe"ial 6ro"eedings <o 8$511 is

here!% RRSD and ST ASIDThe "ase is RMANDD to ran"h 5. for further

pro"eedings

SO ORDRD.

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