Adr Cases.docx

UNIWIDE SALES REALTY AND RESOURCES CORP v. TITANIKEDA CONSTRUCTION G.R. No. 126619; December 20, 2006 FACTS: The case originated from an action for a sum of money filed by Titan-Ikeda Construction and Development Corporation (Titan) against Uniwide Sales Realty and Resources Corporation (Uniwide) with the Regional Trial Court (RTC), Branch 119, Pasay City arising from Uniwide’s non-payment of certain claims billed by Titan after completion of three projects covered by agreements they entered into with each other. Upon Uniwide’s motion to dismiss/suspend proceedings and Titan’s open court manifestation agreeing to the suspension, Civil Case No. 98-0814 was suspended for it to undergo arbitration. Titan’s complaint was thus re-filed with the CIAC. Before the CIAC, Uniwide filed an answer which was later amended and re-amended, denying the material allegations of the complaint, with counterclaims for refund of overpayments, actual and exemplary damages, and attorney’s fees. An Arbitral Tribunal consisting of a chairman and two members was created in accordance with the CIAC Rules of Procedure Governing Construction Arbitration. It conducted a preliminary conference with the parties and thereafter issued a Terms of Reference (TOR) which was signed by the parties. The tribunal also conducted an ocular inspection, hearings, and received the evidence of the parties consisting of affidavits which were subject to cross-examination. On 17 April 1995, the Arbitral Tribunal promulgated a Decision, the decretal portion of which is as follows: “WHEREFORE, judgment is hereby rendered as follows: On Project 1 – Libis: [Uniwide] is absolved of any liability for the claims made by [Titan] on this Project. Project 2 – Edsa Central: [Uniwide] is absolved of any liability for VAT payment on this project, the same being for the account of the [Titan]. On the other hand, [Titan] is absolved of any liability on the counterclaim for defective construction of this project. [Uniwide] is held liable for the unpaid balance in the amount of P6,301,075.77 which is ordered to be paid to the [Titan] with 12% interest per annum commencing from 19 December 1992 until the date of payment. On Project 3 – Kalookan:

[Uniwide] is held liable for the unpaid balance in the amount of P5,158,364.63 which is ordered to be paid to the [Titan] with 12% interest per annum commencing from 08 September 1993 until the date of payment. [Uniwide] is held liable to pay in full the VAT on this project, in such amount as may be computed by the Bureau of Internal Revenue to be paid directly thereto. The BIR is hereby notified that [Uniwide] Sales Realty and Resources Corporation has assumed responsibility and is held liable for VAT payment on this project. This accordingly exempts Claimant Titan-Ikeda Construction and Development Corporation from this obligation. ISSUE: Whether the award given by CIAC is final HELD: As a rule, findings of fact of administrative agencies and quasi-judicial bodies, which have acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not only respect, but also finality, especially when affirmed by the Court of Appeals. In particular, factual findings of construction arbitrators are final and conclusive and not reviewable by this Court on appeal. This rule, however admits of certain exceptions. In David v. Construction Industry and Arbitration Commission, we ruled that, as exceptions, factual findings of construction arbitrators may be reviewed by this Court when the petitioner proves affirmatively that: (1) the award was procured by corruption, fraud or other undue means; (2) there was evident partiality or corruption of the arbitrators or of any of them; (3) the arbitrators were guilty of misconduct in refusing to hear evidence pertinent and material to the controversy; (4) one or more of the arbitrators were disqualified to act as such under Section nine of Republic Act No. 876 and willfully refrained from disclosing such disqualifications or of any other misbehavior by which the rights of any party have been materially prejudiced; or (5) the arbitrators exceeded their powers, or so imperfectly executed them, that a mutual, final and definite award upon the subject matter submitted to them was not made.

Other recognized exceptions are as follows: (1) when there is a very clear showing of grave abuse of discretion resulting in lack or loss of jurisdiction as when a

party was deprived of a fair opportunity to present its position before the Arbitral Tribunal or when an award is obtained through fraud or the corruption of arbitrators, (2) when the findings of the Court of Appeals are contrary to those of the CIAC, and (3) when a party is deprived of administrative due process. UNIWIDE HOLDINGS, INC., v. ALEXANDER M. CRUZ 529 SCRA 664 (2007) Where there is a joinder of causes of action between the same parties one of which does not arise out of the contract where the exclusive venue was stipulated upon, the complain may be brought before other venues. Uniwide Holdings, Inc. entered into a franchise agreement with Alexander M. Cruz granting the latter a five-year franchise to adopt and use the ―Uniwide Family Store System‖ for the establishment and operation of a ―Uniwide Family Store‖ in Marikina City. The contract stipulated that Cruz will pay a monthly service fee of P50,000.00 or three percent of gross monthly purchases, whichever is higher to UHI, payable within five days after the end of each month without need of formal billing or demand from UHI. In case of any delay in the payment of the monthly service fee, Cruz would, under Article 10.3 of the agreement, be liable to pay an interest charge of three percent per month. Cruz thereafter purchased goods from UHI’s affiliated companies First Paragon Corporation (FPC) and Uniwide Sales Warehouse Club, Inc. (USWCI). FPC and USWCI subsequently executed Deeds of Assignment in favor of UHI assigning all their rights and interests over Cruz‘s accounts payable to them. Cruz had outstanding obligations with UHI, FPC and USWCI in the amount of P1, 358, 531.89.00. UHI sent a letter demanding for the payment of such amount but it was not settled. Thus, UHI filed a complaint for collection of sum of money before the Regional Trial Court of Parañaque against Cruz praying for payment of service fee, accountspayable to FPC and USWCI and attorney‘s fees and litigation expenses. Cruz filed a Motion to Dismiss on the ground of improper venue. He invokes Article 27.5 of the agreement which provides that exclusive jurisdiction is vested with the courts f Quezon City. The trial court granted the Motion to Dismiss. ISSUE:

Whether or not a case based on several causes of action is dismissible on the ground of improper venue where only one of the causes of action arises from a contract with exclusive venue stipulation HELD: In this case, UHI contended that nowhere in the agreement is there a mention of FPC and USWCI, and neither are the two parties thereto, hence, they cannot be bound to the stipulation on ―exclusive venue.‖ The Courtfound merit in this contention. The Supreme Court cited Section 2, Rule 4 of the Rules of Court which provides that all other actions may be commenced and tried where the plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the principal defendants resides, or in the case of a nonresident defendant, where he may be found, at the election of the plaintiff. The forging of a written agreement on an exclusive venueof an action does not, however, exclude parties from bringing a case to other venues. Where there is a joinder of causes of action between the same parties one of which does not arise out of the contract where the exclusive venue was stipulated upon, the complaint, as in the one at bar, may be brought before other venues provided that such other cause of action falls within the jurisdiction of the court and the venue lies therein. It bears emphasis that the causes of action on the assigned accounts are not based on a breach of the agreement between UHI and Cruz. They are based on separate, distinct and independent contracts-deeds of assignment in which UHI is the assignee of Cruz‘s obligations to the assignors FPC and USWCI. Thus, any action arising from the deeds of assignment cannot be subjected to the exclusive venue stipulation embodied in the agreement.

BENGUET CORPORATION v DENR-MAB

11.01 Arbitration

G.R. No. 163101

Any disputes, differences or disagreements between BENGUET and the OWNER with reference to anything whatsoever pertaining to this Agreement that cannot be amicably settled by them shall not be cause of any action of any kind whatsoever in any court or administrative agency but shall, upon notice of one party to the other, be referred to a Board of Arbitrators consisting of three (3) members, one to be selected by BENGUET, another to be selected by the OWNER and the third to be selected by the aforementioned two arbitrators so appointed.

February 13, 2008 FACTS: On June 1, 1987, Benguet and J.G. Realty entered into a RAWOP, wherein J.G. Realty was acknowledged as the owner of four mining claims respectively named as Bonito-I, BonitoII, Bonito-III, and Bonito-IV, with a total area of 288.8656 hectares, situated in Barangay Luklukam, Sitio Bagong Bayan, Municipality of Jose Panganiban, Camarines Norte. Thus, on August 9, 1989, the Executive Vice-President of Benguet, Antonio N. Tachuling, issued a letter informing J.G. Realty of its intention to develop the mining claims. However, on February 9, 1999, J.G. Realty, through its President, Johnny L. Tan, then sent a letter to the President of Benguet informing the latter that it was terminating the RAWOP on the following grounds: a. The fact that your company has failed to perform the obligations set forth in the RAWOP, i.e., to undertake development works within 2 years from the execution of the Agreement; b. Violation of the Contract by allowing high graders to operate on our claim. c. No stipulation was provided with respect to the term limit of the RAWOP. d. Non-payment of the royalties thereon as provided in the RAWOP. On June 7, 2000, J.G. Realty filed a Petition for Declaration of Nullity/Cancellation of the RAWOP with the Legaspi City POA, Region V, docketed as DENR Case No. 2000-01 and entitled J.G. Realty v. Benguet. DECISION OF LOWER COURTS: *POA: declared the RAWOP cancelled. *MAB: affirmed POA. ISSUES: (1) Should the controversy have first been submitted to arbitration before the POA took cognizance of the case?; (2) Was the cancellation of the RAWOP supported by evidence?; and (3) Did the cancellation of the RAWOP amount to unjust enrichment of J.G. Realty at the expense of Benguet? HELD: On correctness of appeal: Petitioner having failed to properly appeal to the CA under Rule 43, the decision of the MAB has become final and executory. On this ground alone, the instant petition must be denied. (1) YES, the case should have first been brought to voluntary arbitration before the POA. Secs. 11.01 and 11.02 of the RAWOP pertinently provide:

xxxx 11.02 Court Action No action shall be instituted in court as to any matter in dispute as hereinabove stated, except to enforce the decision of the majority of the Arbitrators A contractual stipulation that requires prior resort to voluntary arbitration before the parties can go directly to court is not illegal and is in fact promoted by the State. To reiterate, availment of voluntary arbitration before resort is made to the courts or quasi-judicial agencies of the government is a valid contractual stipulation that must be adhered to by the parties. In other words, in the event a case that should properly be the subject of voluntary arbitration is erroneously filed with the courts or quasi-judicial agencies, on motion of the defendant, the court or quasi-judicial agency shall determine whether such contractual provision for arbitration is sufficient and effective. If in affirmative, the court or quasijudicial agency shall then order the enforcement of said provision. In sum, on the issue of whether POA should have referred the case to voluntary arbitration, we find that, indeed, POA has no jurisdiction over the dispute which is governed by RA 876, the arbitration law. HOWEVER, ESTOPPEL APPLIES. the Court rules that the jurisdiction of POA and that of MAB can no longer be questioned by Benguet at this late hour. What Benguet should have done was to immediately challenge the POA's jurisdiction by a special civil action for certiorari when POA ruled that it has jurisdiction over the dispute. To redo the proceedings fully participated in by the parties after the lapse of seven years from date of institution of the original action with the POA would be anathema to the speedy and efficient administration of justice.

(2) The cancellation of the RAWOP was supported by evidence. (3) There is no unjust enrichment in the instant case. There is no unjust enrichment when the person who will benefit has a valid claim to such benefit. The principle of unjust enrichment under Article 22 requires two conditions: (1) that a person is benefited without a valid basis or justification, and (2) that such benefit is derived at another's expense or damage. Clearly, there is no unjust enrichment in the instant case as the cancellation of the RAWOP, which left Benguet without any legal right to participate in further developing the mining claims, was brought about by its violation of the RAWOP. Hence, Benguet has no one to blame but itself for its predicament. OBITER DICTA: (1) Difference between compulsory & voluntary arbitration In Reformist Union of R.B. Liner, Inc. vs. NLRC, compulsory arbitration has been defined both as “the process of settlement of labor disputes by a government agency which has the authority to investigate and to make an award which is binding on all the parties, and as a mode of arbitration where the parties are compelled to accept the resolution of their dispute through arbitration by a third party.” While a voluntary arbitrator is not part of the governmental unit or labor department's personnel, said arbitrator renders arbitration services provided for under labor laws. There is a clear distinction between compulsory and voluntary arbitration. The arbitration provided by the POA is compulsory, while the nature of the arbitration provision in the RAWOP is voluntary, not involving any government agency.

CONFLICT OF LAWS KOREA TECHNOLOGIES vs. LERMA KOREA TECHNOLOGIES vs. LERMA FACTS Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean corporation which is engaged in the supply and installation of Liquefied Petroleum Gas (LPG) Cylinder manufacturing plants, while private respondent Pacific General Steel Manufacturing Corp. (PGSMC) is a domestic corporation. On March 5, 1997, PGSMC and KOGIES executed a contract in the Philippines whereby KOGIES would set up an LPG Cylinder Manufacturing Plant in Carmona, Cavite. On April 7, 1997, in Korea, the parties executed Contract No. KLP970301 dated March 5, 1997 amending the terms of payment. On October 14, 1997, PGSMC entered into a Contract of Lease with Worth Properties, Inc. (Worth) for use of Worth’s 5,079-square meter property with a 4,032-square meter warehouse building to house the LPG manufacturing plant. On January 22, 1998, it was shown in the Certificate that, after the installation of the plant, the initial operation could not be conducted as PGSMC encountered financial difficulties affecting the supply of materials, thus forcing the parties to agree that KOGIES would be deemed to have completely complied with the terms and conditions of the March 5, 1997 contract. For the remaining balance of USD306,000 for the installation and initial operation of the plant, PGSMC issued two post dated checks. When KOGIES deposited the checks, these were dishonored for the reason "PAYMENT STOPPED." Thus, on May 8, 1998, KOGIES sent a demand letter to PGSMC threatening criminal action for violation of Batas Pambansa Blg. 22 in case of non payment. On the same date, the wife of PGSMC’s President faxed a letter dated May 7, 1998 to KOGIES’ President who was then staying at a Makati City hotel. She complained that not only did KOGIES deliver a different brand of hydraulic press from that agreed upon but it had not delivered several equipment parts already paid for. On May 14, 1998, PGSMC replied that the two checks it issued KOGIES were fully funded but the payments were stopped for reasons previously made known to KOGIES. On June 1, 1998, PGSMC informed KOGIES that PGSMC was canceling their Contract dated March 5, 1997 on the ground that KOGIES had altered the quantity and lowered the quality of the machineries and equipment it delivered to PGSMC, and that PGSMC would dismantle and transfer the machineries, equipment, and facilities installed in the Carmona plant. Five days later, PGSMC filed before the Office

of the Public Prosecutor an Affidavit-Complaint for Estafadocketed as I.S. No. 98-03813 against Mr. Dae Hyun Kang, President of KOGIES. On June 15, 1998, KOGIES wrote PGSMC informing the latter that PGSMC could not unilaterally rescind their contract nor dismantle and transfer the machineries and equipment on mere imagined violations by KOGIES. It also insisted that their disputes should be settled by arbitration as agreed upon in Article 15, the arbitration clause of their contract. On June 23, 1998, PGSMC again wrote KOGIES reiterating the contents of its June 1, 1998 letter threatening that the machineries, equipment, and facilities installed in the plant would be dismantled and transferred on July 4, 1998. Thus, on July 1, 1998, KOGIES instituted an Application for Arbitration before the Korean Commercial Arbitration Board (KCAB) in Seoul, Korea pursuant to Art. 15 of the Contract as amended. On July 3, 1998, KOGIES filed a Complaint for Specific Performance, against PGSMC before the Muntinlupa City Regional Trial Court (RTC). The RTC granted a temporary restraining order. In its complaint, KOGIES alleged that PGSMC had initially admitted that the checks that were stopped were not funded but later on claimed that it stopped payment of the checks for the reason that "their value was not received" as the former allegedly breached their contract by "altering the quantity and lowering the quality of the machinery and equipment" installed in the plant and failed to make the plant operational although it earlier certified to the contrary as shown in a January 22, 1998 Certificate. Likewise, KOGIES averred that PGSMC violated Art. 15 of their Contract, as amended, by unilaterally rescinding the contract without resorting to arbitration. KOGIES also asked that PGSMC be restrained from dismantling and transferring the machinery and equipment installed in the plant which the latter threatened to do on July 4, 1998. On July 9, 1998, PGSMC filed an opposition to the TRO arguing that KOGIES was not entitled to the TRO since Art. 15, the arbitration clause, was null and void for being against public policy as it ousts the local courts of jurisdiction over the instant controversy. On July 23, 1998, the RTC issued an Order denying the application for a writ of preliminary injunction, reasoning that PGSMC had paid KOGIES USD 1,224,000, the value of the machineries and equipment as shown in the contract such that KOGIES no longer had proprietary rights over them. And finally, the RTC held that Art. 15 of the Contract as amended was invalid as it tended to oust the trial court or any other court jurisdiction over any dispute that may arise between the parties. KOGIES’ prayer for an injunctive writ was denied.

PGSMC filed a Motion for Inspection of Things to determine whether there was indeed alteration of the quantity and lowering of quality of the machineries and equipment, and whether these were properly installed. KOGIES opposed the motion positing that the queries and issues raised in the motion for inspection fell under the coverage of the arbitration clause in their contract. KOGIES asserted that the Branch Sheriff did not have the technical expertise to ascertain whether or not the machineries and equipment conformed to the specifications in the contract and were properly installed. The trial court granted the motion. On November 11, 1998, the Branch Sheriff filed his Sheriff’s Report finding that the enumerated machineries and equipment were not fully and properly installed. Court of Appeals affirmed the trial court and declared the arbitration clause against public policy. ISSUE W/N the arbitration clause is against public policy – NO. RULING Established in this jurisdiction is the rule that the law of the place where the contract is made governs. Lex loci contractus. The contract in this case was perfected here in the Philippines. Therefore, our laws ought to govern. Nonetheless, Art. 2044 of the Civil Code sanctions the validity of mutually agreed arbitral clause or the finality and binding effect of an arbitral award. Art. 2044 provides, "Any stipulation that the arbitrators’ award or decision shall be final, is valid, without prejudice to Articles 2038, 2039 and 2040." (Emphasis supplied.) Arbitration clause not contrary to public policy: The arbitration clause which stipulates that the arbitration must be done in Seoul, Korea in accordance with the Commercial Arbitration Rules of the KCAB, and that the arbitral award is final and binding, is not contrary to public policy. Having said that the instant arbitration clause is not against public policy, we come to the question on what governs an arbitration clause specifying that in case of any dispute arising from the contract, an arbitral panel will be constituted in a foreign country and the arbitration rules of the foreign country would govern and its award shall be final and binding. RA 9285 incorporated the UNCITRAL Model law to which we are a signatory: For domestic arbitration proceedings, we have particular agencies to arbitrate disputes arising from contractual relations. In case a foreign arbitral body is chosen by the parties, the arbitration rules of our domestic arbitration bodies would not be applied. As signatory to the

Arbitration Rules of the UNCITRAL Model Law on International Commercial Arbitration of the United Nations Commission on International Trade Law (UNCITRAL) in the New York Convention on June 21, 1985, the Philippines committed itself to be bound by the Model Law. We have even incorporated the Model Law in Republic Act No. (RA) 9285, otherwise known as the Alternative Dispute Resolution Act of 2004 entitled An Act to Institutionalize the Use of an Alternative Dispute Resolution System in the Philippines and to Establish the Office for Alternative Dispute Resolution, and for Other Purposes, promulgated on April 2, 2004. And while RA 9285 was passed only in 2004, it nonetheless applies in the instant case since it is a procedural law which has a retroactive effect. Among the pertinent features of RA 9285 applying and incorporating the UNCITRAL Model Law are the following: (1) The RTC must refer to arbitration in proper cases (2) Foreign arbitral awards must be confirmed by the RTC (3) The RTC has jurisdiction to review foreign arbitral awards (4) Grounds for judicial review different in domestic and foreign arbitral awards (5) RTC decision of assailed foreign arbitral award appealable PGSMC has remedies to protect its interests: Thus, based on the foregoing features of RA 9285, PGSMC must submit to the foreign arbitration as it bound itself through the subject contract. While it may have misgivings on the foreign arbitration done in Korea by the KCAB, it has available remedies under RA 9285. Its interests are duly protected by the law which requires that the arbitral award that may be rendered by KCAB must be confirmed here by the RTC before it can be enforced. With our disquisition above, petitioner is correct in its contention that an arbitration clause, stipulating that the arbitral award is final and binding, does not oust our courts of jurisdiction as the international arbitral award, the award of which is not absolute and without exceptions, is still judicially reviewable under certain conditions provided for by the UNCITRAL Model Law on ICA as applied and incorporated in RA 9285. Finally, it must be noted that there is nothing in the subject Contract which provides that the parties may dispense with the arbitration clause. Unilateral rescission improper and illegal: Having ruled that the arbitration clause of the subject contract is valid and binding on the parties, and not contrary to public policy; consequently, being bound to the contract of arbitration, a

party may not unilaterally rescind or terminate the contract for whatever cause without first resorting to arbitration.

In addition, whatever findings and conclusions made by the RTC Branch Sheriff from the inspection made on October 28, 1998, as ordered by the trial court on October 19, 1998, is of no worth as said Sheriff is not technically competent to ascertain the actual status of the equipment and machineries as installed in the plant. RTC has interim jurisdiction to protect the rights of the parties: While the issue of the proper installation of the equipment and machineries might well be under the primary jurisdiction of the arbitral body to decide, yet the RTC under Sec. 28 of RA 9285 has jurisdiction to hear and grant interim measures to protect vested rights of the parties While the KCAB can rule on motions or petitions relating to the preservation or transfer of the equipment and machineries as an interim measure, yet on hindsight, the July 23, 1998 Order of the RTC allowing the transfer of the equipment and machineries given the non-recognition by the lower courts of the arbitral clause, has accorded an interim measure of protection to PGSMC which would otherwise been irreparably damaged. KOGIES is not unjustly prejudiced as it has already been paid a substantial amount based on the contract. Moreover, KOGIES is amply protected by the arbitral action it has instituted before the KCAB, the award of which can be enforced in our jurisdiction through the RTC. Besides, by our decision, PGSMC is compelled to submit to arbitration pursuant to the valid arbitration clause of its contract with KOGIES. PGSMC to preserve the subject equipment and machineries: While PGSMC may have been granted the right to dismantle and transfer the subject equipment and machineries, it does not have the right to convey or dispose of the same considering the pending arbitral proceedings to settle the differences of the parties. PGSMC therefore must preserve and maintain the subject equipment and machineries with the diligence of a good father of a family until final resolution of the arbitral proceedings and enforcement of the award, if any.

ORMOC SUGARCANE PLANTERS' ASSOCIATION v. CA, GR NO. 156660, 2009-08-24

being privy to the milling contracts,... had no legal standing whatsoever to demand or sue for arbitration.

Facts:

the RTC issued a Joint Order... denying the motion to dismiss, declaring the existence of a milling contract between the parties, and directing respondents to nominate two arbitrators to the Board of Arbitrators... motion for reconsideration having been denied by the RTC

Petitioners are associations organized by and whose members are individual sugar planters (Planters). Respondents Hideco Sugar Milling Co., Inc. (Hideco) and Ormoc Sugar Milling Co, Inc. (OSCO) are sugar centrals Article VII of the milling contracts provides that 34% of the sugar and molasses produced from milling the Planter's sugarcane shall belong to the centrals (respondents) as compensation, 65% thereof shall go to the Planter and the remaining 1% shall go the association... to which the Planter concerned belongs, as aid to the said association. If the Planter was not a member of any association, then the said 1% shall... revert to the centrals. Article XIV, paragraph B... states that the centrals may not, during the life of the milling contract, sign or execute any contract or agreement that will provide better or more benefits to a Planter, without the written consent of... the existing and recognized associations except to Planters whose plantations are situated in areas beyond thirty (30) kilometers from the mill. Article XX provides that all differences and controversies which may arise between the parties concerning the agreement shall be... submitted for discussion to a Board of Arbitration, consisting of five (5) members--two (2) of which shall be appointed by the centrals, two (2) by the Planter and the fifth to be appointed by the four appointed by the parties... petitioners... filed twin petitions with the RTC for Arbitration under R.A. 876, Recovery of Equal Additional Benefits, Attorney's Fees and Damages, against HIDECO and OSCO Petitioners claimed that respondents violated the Milling Contract when they gave to independent planters who do not belong to any association the 1% share, instead of reverting said share to the centrals Petitioners contended that respondents unduly accorded the independent Planters more benefits Respondents filed a motion to dismiss on ground of lack of cause of action because petitioners had no milling contract with respondents. Respondents and these 80 Planters were the signatories of the milling contracts. Thus, it was the individual Planters, and not petitioners, who had legal standing to invoke the arbitration clause in the milling contracts. Petitioners, not

CA concluded that petitioners had no legal personality to bring the action against respondents or to demand for arbitration. Petitioners filed a motion for reconsideration, but it too was denied The main cause of action of petitioners in their request for arbitration with the RTC is the alleged violation of the clause in the milling contracts involving the proportionate sharing in the proceeds of the harvest. Petitioners essentially demand that respondents increase the... share of the member Planters to 66% to equalize their situation with those of the non-member Planters. Issues: whether or not petitioners... are clothed with legal personality to file a suit against, or demand arbitration from, respondents in their own name without impleading the individual Planters. Ruling: Section 2 of R.A. No. 876 (the Arbitration Law)... pertinently provides: Two or more persons or parties may submit to the arbitration of one or more arbitrators any controversy existing between them at the time of the submission and which may be the subject of an action,... or the parties to any contract may in such contract agree to settle by arbitration a controversy thereafter arising between them. The foregoing provision speaks of two modes of arbitration: (a) an agreement to submit to arbitration some future dispute, usually stipulated upon in a civil contract between the parties, and known as an agreement to submit to arbitration, and (b) an agreement submitting... an existing matter of difference to arbitrators, termed the submission agreement. Article XX of the milling contract is an agreement to submit to arbitration because it was made in anticipation of a dispute that might arise between the parties after the contract's... execution. petitioners are associations duly existing and organized under Philippine law, i.e. they have juridical personalities separate and distinct from that of their member Planters. It

is likewise undisputed that the eighty (80) milling contracts that... were presented were signed only by the member Planter concerned and one of the Centrals as parties. In other words, none of the petitioners were parties or signatories to the milling contracts.

Assuming petitioners had properly brought the case in the name of their members who had existing milling contracts with respondents, petitioners must still prove that they were indeed authorized by the said members to institute an action for and on the members' behalf.

This circumstance is fatal to petitioners' cause since they anchor their right to... demand arbitration from the respondent sugar centrals upon the arbitration clause found in the milling contracts. There is no legal basis for petitioners' purported right to demand arbitration when they are not parties to the milling contracts, especially when the language of... the arbitration clause expressly grants the right to demand arbitration only to the parties to the contract.

As we see it, petitioners had no intention to litigate the case in a representative capacity, as they contend. All the pleadings from the RTC to this Court belie this claim.

Even assuming that all the petitioners were able to present milling contracts in favor of their members, it is undeniable that under the arbitration clause in these contracts it is the parties thereto who have the right to submit a controversy or dispute to arbitration. Petitioners would argue that they could sue respondents, notwithstanding the fact that they were not signatories in the milling contracts because they are the recognized representatives of the Planters. This claim has no leg to stand on since petitioners did not sign the milling contracts... whether as a party or as a representative of their member Planters. no... provision in the milling contracts that the individual Planter is authorizing the association to represent him/her in a legal action Moreover, even assuming that petitioners are indeed representatives of the member Planters who have milling contracts with the respondents and assuming further that petitioners signed the milling contracts as representatives of their members, petitioners could not... initiate arbitration proceedings in their own name as they had done in the present case. As mere agents, they should have brought the suit in the name of the principals that they purportedly represent. the principal is still the one who has the right to demand arbitration. Indeed, Rule 3, Section 2 of the Rules of Court requires suits to be brought in the name of the real party in interest... from petitioners' own allegations, the party who would be injured or benefited by a decision in the arbitration proceedings will be the member Planters involved and... not petitioners. In sum, petitioners are not the real parties in interest in the present case.

he individual Planters were not even impleaded as parties to this case. In addition, petitioners need a power-of-attorney to represent... the Planters whether in the lawsuit or to demand arbitration.[16] None was ever presented here. Lastly, petitioners theorize that they could demand and sue for arbitration independently of the Planters because the milling contract is a contract pour autrui under Article 1311 of the Civil Code. If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must... have clearly and deliberately conferred a favor upon a third person. To summarize, the requisites of a stipulation pour autrui or a stipulation in favor of a third person are the following: (1) there must be a stipulation in favor of a third person, (2) the stipulation must be a part, not the whole, of the contract, (3) the contracting... parties must have clearly and deliberately conferred a favor upon a third person, not a mere incidental benefit or interest, (4) the third person must have communicated his acceptance to the obligor before its revocation, and (5) neither of the contracting parties bears the... legal representation or authorization of the third party.[17] These requisites are not present in this case Article VI of the Milling Contract is the solitary provision that mentions some benefit in favor of the association of which the planter is a member The foregoing provision cannot, by any stretch of the imagination, be considered as a stiputation pour autrui or for the benefit of the petitioners. The primary rationale for the said stipulation is to ensure a just share in the proceeds of the harvest to the Planters. In... other words, it is a stipulation meant to benefit the Planters. Even the 1% share to be given to the association as aid does not redound to the benefit of the association but is intended to be used for its member Planters. Not only that, it is explicit that said share reverts... back to respondent sugar centrals if the contracting Planter is not affiliated with any recognized association.

Principles: Except where a compulsory arbitration is provided by statute, the first step toward the settlement of a difference by arbitration is the entry by the parties into a valid agreement to arbitrate. An agreement to arbitrate is a contract, the relation of the parties is contractual,... and the rights and liabilities of the parties are controlled by the law of contracts.[11] In an agreement for arbitration, the ordinary elements of a valid contract must appear, including an agreement to arbitrate some specific thing, and an agreement to... abide by the award, either in express language or by implication. The requirements that an arbitration agreement must be written and subscribed by the parties thereto The formal requirements of an agreement to arbitrate are therefore the following: (a) it must be in writing and (b) it must be subscribed by the parties or their representatives. To subscribe means to write underneath, as one's name; to sign at the end of a... document. That word may sometimes be construed to mean to give consent to or to attest As applied to the present case, this provision has two requirements: 1) to institute an action, the plaintiff must be the real party in interest; and 2) the action must be prosecuted in the name of the real party in interest. Necessarily, the purposes of this... provision are 1) to prevent the prosecution of actions by persons without any right, title or interest in the case; 2) to require that the actual party entitled to legal relief be the one to prosecute the action; 3) to avoid a multiplicity of suits; and 4) to discourage... litigation and keep it within certain bounds, pursuant to sound public policy. When the plaintiff is not the real party in interest, the case is dismissible on the ground of lack of cause of action. The mere fact that petitioners were organized for the purpose of advancing the interests and welfare of their members does not necessarily mean that petitioners have the authority to represent their members in legal... proceedings, including the present arbitration proceedings. To be considered a pour autrui provision, an incidental benefit or interest, which another person gains, is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person.[18] Even the clause stating... that respondents must secure the consent of the association if respondents grant better benefits to a Planter has for its rationale the protection of the member Planter. The only interest of the association therein is that its member Planter will not be put at a disadvantage... vis a vis other Planters. Thus, the associations' interest in

these milling contracts is only incidental to their avowed purpose of advancing the welfare and rights of their member Planters. In Cargill Phils Inc v San Fernando Regala Trading, Inc the Supreme Court ruled that while actions for rescission and damages are ordinarily judicial matters, the dispute at hand was to be referred to arbitration because the contract which the plaintiff sought to have rescinded included an arbitration agreement.(1) Facts San Fernando Regala Trading filed before the trial court a complaint for rescission of contract with damages against Cargill Philippines, Inc. In its complaint, San Fernando Regala Trading alleged that it was engaged in buying and selling molasses and that Cargill was one of its suppliers. San Fernando Regala Trading alleged that it purchased from Cargill, and the latter had agreed to sell, 12,000 tons of cane blackstrap molasses originating from Thailand at the price of $192 per metric ton, and that delivery would be made in April or May 1997. After San Fernando Regala Trading delivered the letter of credit, it claimed that Cargill failed to comply with its obligations under the contract, which included an arbitration clause as follows: "Any dispute which the Buyer and Seller may not be able to settle by mutual agreement shall be settled by arbitration in the City of New York before the American Arbitration Association. The Arbitration Award shall be final and binding on both parties." Cargill moved to dismiss and/or suspend the court proceedings citing the arbitration clause. San Fernando Regala Trading argued that since it was seeking rescission of the contract, it was in effect repudiating the contract which included the arbitration clause. Further, it argued that rescission constitutes a judicial issue, which requires the exercise of judicial function and cannot be the subject of arbitration. Decision The Supreme Court held that the provision to submit to arbitration any dispute arising between the parties is part of the contract and is itself a contract. The arbitration agreement is to be treated as a separate agreement and does not automatically terminate when the contract of which it is a part comes to an end. To reiterate a contrary ruling would suggest that a party's mere repudiation of the main contract is sufficient to avoid arbitration; that is exactly the situation that the separability doctrine seeks to avoid.

San Fernando Regala Trading filed a complaint for rescission of contract and damages with the trial court. In so doing, it alleged that a contract existed. It was that contract which provided for an arbitration clause which expressed the parties' intention that any dispute to arise between them, as buyer and seller, should be referred to arbitration. It is for the arbitrator and not the court to decide whether a contract between the parties exists or is valid. Under the circumstances, the argument that rescission is judicial in nature is misplaced.

JORGE GONZALES and PANEL OF ARBITRATORS, vs.CLIMAX MINING LTD., CLIMAX-ARIMCO MINING CORP., and AUSTRALASIAN PHILIPPINES MINING INC., G.R. No. 161957

February 28, 2005

Petitioner Jorge Gonzales, as claimowner of mineral deposits located within the Addendum Area of Influence in Didipio, in the provinces of Quirino and Nueva Vizcaya, entered into a co-production, joint venture and/or production-sharing letter-agreement designated as the May 14, 1987 Letter of Intent with Geophilippines, Inc, and Inmex Ltd. Under the agreement, petitioner, as claimowner, granted to Geophilippines, Inc. and Inmex Ltd. collectively, the exclusive right to explore and survey the mining claims for a period of thirty-six (36) months within which the latter could decide to take an operating agreement on the mining claims and/or develop, operate, mine and otherwise exploit the mining claims and market any and all minerals that may be derived therefrom. On 28 February 1989, the parties to the May 14, 1987 Letter of Intent renegotiated the same into the February 28, 1989 Agreement whereby the exploration of the mining claims was extended for another period of three years. On 9 March 1991, petitioner Gonzales, Arimco Mining Corporation, Geophilippines Inc., Inmex Ltd., and Aumex Philippines, Inc. signed a document designated as the Addendum to the May 14, 1987 Letter of Intent and February 28, 1989 Agreement with Express Adhesion Thereto (hereafter, the Addendum Contract).1 Under the Addendum Contract, Arimco Mining Corporation would apply to the Government of the Philippines for permission to mine the claims as the Government’s contractor under a Financial and Technical Assistance Agreement (FTAA). On 20 June 1994, Arimco Mining Corporation obtained the FTAA2 and carried out work under the FTAA. Respondents executed the Operating and Financial Accommodation Contract3 (between Climax-Arimco Mining Corporation and Climax Mining Ltd., as first parties, and Australasian Philippines Mining Inc., as second party) dated 23 December 1996 and Assignment, Accession 4 Agreement (between Climax-Arimco Mining Corporation and Australasian Philippines Mining Inc.) dated 3 December 1996. Respondent Climax Mining Corporation (Climax) and respondent Australasian Philippines Mining Inc. (APMI) entered into a Memorandum of Agreement5 dated 1 June 1991 whereby the former transferred its FTAA to the latter. On 8 November 1999, petitioner Gonzales filed before the Panel of Arbitrators, Region II, Mines and Geosciences Bureau of the Department of Environment and Natural

Resources, against respondents Climax-Arimco Mining Corporation (Climax-Arimco), Climax, and 6 7 APMI, a Complaint seeking the declaration of nullity or termination of the Addendum Contract, the FTAA, the Operating and Financial Accommodation Contract, the Assignment, Accession Agreement, and the Memorandum of Agreement. Petitioner Gonzales prayed for an unspecified amount of actual and exemplary damages plus attorney’s fees and for the issuance of a temporary restraining order and/or writ of preliminary injunction to restrain or enjoin respondents from further implementing the questioned agreements. He sought said releifs on the grounds of "FRAUD, OPPRESSION and/or VIOLATION of Section 2, Article XII of the CONSTITUTION perpetrated by these foreign RESPONDENTS, conspiring and confederating with one another and with each other…."8 Issues: (c) Whether the complaint filed by petitioner raises a mining dispute over which the Panel of Arbitrators has jurisdiction, or a judicial question which should properly be brought before the regular courts. (d) Whether the dispute between the parties should be brought for arbitration under Rep. Act No. 876.

Ruling: A judicial question is a question that is proper for determination by the courts, as opposed to a moot question or one properly decided by the executive or legislative branch.18 A judicial question is raised when the determination of the question involves the exercise of a judicial function; that is, the question involves the determination of what the law is and what the legal rights of the parties are with respect to the matter in controversy.19 On the other hand, a mining dispute is a dispute involving (a) rights to mining areas, (b) mineral agreements, FTAAs, or permits, and (c) surface owners, occupants and claimholders/concessionaires.20 Under Republic Act No. 7942 (otherwise known as the Philippine Mining Act of 1995), the Panel of Arbitrators has exclusive and original jurisdiction to hear and decide these mining disputes.21 The Court of Appeals, in its questioned decision, correctly stated that the Panel’s jurisdiction is limited only to those mining disputes which raise questions of fact or matters requiring the application of technological knowledge and experience.22 In Pearson v. Intermediate Appellate Court,23 this Court observed that the trend has been to make the adjudication of mining cases a purely administrative

matter.24 Decisions25 of the Supreme Court on mining disputes have recognized a distinction between (1) the primary powers granted by pertinent provisions of law to the then Secretary of Agriculture and Natural Resources (and the bureau directors) of an executive or administrative nature, such as granting of license, permits, lease and contracts, or approving, rejecting, reinstating or canceling applications, or deciding conflicting applications, and (2) controversies or disagreements of civil or contractual nature between litigants which are questions of a judicial nature that may be adjudicated only by the courts of justice. This distinction is carried on even in Rep. Act No. 7942. The Complaint charged respondents with disregarding and ignoring the provisions of the Addendum Contract, violating the purpose and spirit of the May 14, 1987 Letter of Intent and February 28, 1989 Agreement, and acting in a fraudulent and oppressive manner against petitioner and practicing fraud and deception against the 26 Government. Petitioner alleged in his Complaint that under the original agreements (the May 14, 1987 Letter of Intent and February 28, 1989 Agreement) respondent Climax-Arimco had committed to complete the Bankable Feasibility Study by 28 February 1992, but the same was not accomplished. Instead, respondent Climax-Arimco, through false and insidious representations and machinations by alleging technical and financial capacity, induced petitioner to enter into the Addendum Contract and the FTAA in order to repeatedly extend the option period within which to conduct the feasibility study. In essence, petitioner alleges that respondents, conspiring and confederating with one another, misrepresented under the Addendum Contract and FTAA that respondent Climax-Arimco possessed financial and technical capacity to put the project into commercial production, when in truth it had no such qualification whatsoever to do so. By so doing, respondents have allegedly caused damage not only to petitioner but also to the Republic of the Philippines.27 It is apparent that the Panel of Arbitrators is bereft of jurisdiction over the Complaint filed by petitioner. The basic issue in petitioner’s Complaint is the presence of fraud or misrepresentation allegedly attendant to the execution of the Addendum Contract and the other contracts emanating from it, such that the contracts are rendered invalid and not binding upon the parties. It avers that petitioner was misled by respondents into agreeing to the Addendum Contract. This constitutes fraud which vitiated petitioner’s consent, and under Article 1390 of the Civil Code, is one of the grounds for the annulment of a voidable contract. Voidable or annullable contracts, before they are set aside, are existent, valid, and binding, and are effective and obligatory between the parties.28 They can be ratified.29

-whether the case involves void or voidable contracts is still a judicial question. It may, in some instances, involve questions of fact especially with regard to the determination of the circumstances of the execution of the contracts. But the resolution of the validity or voidness of the contracts remains a legal or judicial question as it requires the exercise of judicial function. It requires the ascertainment of what laws are applicable to the dispute, the interpretation and application of those laws, and the rendering of a judgment based thereon. Clearly, the dispute is not a mining conflict. It is essentially judicial. The complaint was not merely for the determination of rights under the mining contracts since the very validity of those contracts is put in issue. The Complaint is not about a dispute involving rights to mining areas, nor is it a dispute involving claimholders or concessionaires. The main question raised was the validity of the Addendum Contract, the FTAA and the subsequent contracts. The question as to the rights of petitioner or respondents to the mining area pursuant to these contracts, as well as the question of whether or not petitioner had ceded his mining claims in favor of respondents by way of execution of the questioned contracts, is merely corollary to the main issue, and may not be resolved without first determining the main issue. The Complaint is also not what is contemplated by Rep. Act No. 7942 when it says the dispute should involve FTAAs. The Complaint is not exclusively within the jurisdiction of the Panel of Arbitrators just because, or for as long as, the dispute involves an FTAA. The Complaint raised the issue of the constitutionality of the FTAA, which is definitely a judicial question. The question of constitutionality is exclusively within the jurisdiction of the courts to resolve as this would clearly involve the exercise of judicial power. The Panel of Arbitrators does not have jurisdiction over such an issue since it does not involve the application of technical knowledge and expertise relating to mining. This the Panel of Arbitrators has even conceded in its Orders dated 18 October 2001 and 25 June 2002. At this juncture, it is worthy of note that in a case,31 which was resolved only on 1 December 2004, this Court upheld the validity of the FTAA entered into by the Republic of the Philippines and WMC (Philippines), Inc. and constitutionality of Rep. Act No. 7942 and DENR Administrative Order 96-40.32 In fact, the Court took the case on an original petition, recognizing "the exceptional character of the situation and the paramount public interest involved, as well as the necessity for a ruling to put an end to the uncertainties plaguing the mining industry and the affected communities as a result of doubts case upon the constitutionality and validity of the Mining Act, the subject

FTAA and future FTAAs, and the need to avert a multiplicity of suits."33 Arbitration before the Panel of Arbitrators is proper only when there is a disagreement between the parties as to some provisions of the contract between them, which needs the interpretation and the application of that particular knowledge and expertise possessed by members of that Panel. It is not proper when one of the parties repudiates the existence or validity of such contract or agreement on the ground of fraud or oppression as in this case. The validity of the contract cannot be subject of arbitration proceedings. Allegations of fraud and duress in the execution of a contract are matters within the jurisdiction of the ordinary courts of law. These questions are legal in nature and require the application and interpretation of laws and jurisprudence which is necessarily a judicial function. -We agree that the case should not be brought under the ambit of the Arbitration Law, but for a different reason. The question of validity of the contract containing the agreement to submit to arbitration will affect the applicability of the arbitration clause itself. A party cannot rely on the contract and claim rights or obligations under it and at the same time impugn its existence or validity. Indeed, litigants are enjoined from taking inconsistent positions. As previously discussed, the complaint should have been filed before the regular courts as it involved issues which are judicial in nature. WHEREFORE, in view of the foregoing, the Petition for Review on Certiorari Under Rule 45 is DENIED. The Orders dated 18 October 2001 and 25 June 2002 of the Panel of Arbitrators are SET ASIDE. Costs against petitioner Jorge Gonzales.