1. ChungFu Industries vs.

CA (100 PHIL 1008)

Facts:
It appears that on May 17, 1989, petitioner Chung Fu Industries (Philippines) (Chung Fu
for brevity) and private respondent Roblecor Philippines, Inc. (Roblecor for short) forged
a construction agreement 1 whereby respondent contractor committed to construct and
finish on December 31, 1989, petitioner corporation's industrial/factory complex in Tanawan,
Tanza, Cavite for and in consideration of P42,000,000.00. In the event of disputes arising
from the performance of subject contract, it was stipulated therein that the issue(s) shall be
submitted for resolution before a single arbitrator chosen by both parties.
Apart from the aforesaid construction agreement, Chung Fu and Roblecor entered into
two (2) other ancillary contracts, to wit: one dated June 23, 1989, for the construction of
a dormitory and support facilities with a contract price of P3,875,285.00, to be
completed on or before October 31, 1989; 2 and the other dated August 12, 1989, for the
installation of electrical, water and hydrant systems at the plant site, commanding a price of
P12.1 million and requiring completion thereof one month after civil works have been
finished. 3
However, respondent Roblecor failed to complete the work despite the extension of time
allowed it by Chung Fu. Subsequently, the latter had to take over the construction when
it had become evident that Roblecor was not in a position to fulfill its obligation.
Claiming an unsatisfied account of P10,500,000.00 and unpaid progress billings of
P2,370,179.23, Roblecor on May 18, 1990, filed a petition for Compulsory Arbitration
with prayer for Temporary Restraining Order before respondent Regional Trial Court,
pursuant to the arbitration clause in the construction agreement. Chung Fu moved to
dismiss the petition and further prayed for the quashing of the restraining order. There
were subsequent negotiations which the Respondent Regional Trial Court approved the
arbitration agreement thru its Order of May 30, 1990. Thereafter, Engr. Willardo
Asuncion was appointed as the sole arbitrator.
On June 30, 1990, Arbitrator Asuncion ordered petitioners to immediately pay
respondent contractor, the sum of P16,108,801.00. He further declared the award as
final and unappealable, pursuant to the Arbitration Agreement precluding judicial review
of the award.
Chung Fu elevated the case via a petition for certiorari to respondent Court of Appeals
but it only concurred such decision thus they filed a motion for reconsideration of said
resolution was filed by petitioner.
Issue:

1. Whether the arbitral award could not be subject to judicial review?

Ruling:

In practice nowadays, absent an agreement of the parties to resolve their disputes via a
particular mode, it is the regular courts that remain the fora to resolve such matters.
However, the parties may opt for recourse to third parties, exercising their basic
freedom to "establish such stipulation, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good customs, public order
or public policy." 12 In such a case, resort to the arbitration process may be spelled out by
them in a contract in anticipation of disputes that may arise between them. Or this may be
stipulated in a submission agreement when they are actually confronted by a dispute.
Whatever be the case, such recourse to an extrajudicial means of settlement is not intended
to completely deprive the courts of jurisdiction. In fact, the early cases on arbitration
carefully spelled out the prevailing doctrine at the time, thus: ". . . a clause in a contract
providing that all matters in dispute between the parties shall be referred to arbitrators and
to them alone is contrary to public policy and cannot oust the courts of Jurisdiction."
Under present law, may the parties who agree to submit their disputes to arbitration
further provide that the arbitrators' award shall be final, unappealable and executory?
Article 2044 of the Civil Code recognizes the validity of such stipulation, thus:
Any stipulation that the arbitrators' award or decision shall be final is valid,
without prejudice to Articles 2038, 2039 and 2040.
Similarly, the Construction Industry Arbitration Law provides that the arbitral award
"shall be final and inappealable except on questions of law which shall be appealable to
the Supreme Court." 16
Where the parties agree that the decision of the arbitrator shall be final and
unappealable as in the instant case, the pivotal inquiry is whether subject arbitration
award is indeed beyond the ambit of the court's power of judicial review.
We rule in the negative. It is stated explicitly under Art. 2044 of the Civil Code that the
finality of the arbitrators' award is not absolute and without exceptions. Where the
conditions described in Articles 2038, 2039 and 2040 applicable to both compromises
and arbitrations are obtaining, the arbitrators' award may be annulled or
rescinded. 19 Additionally, under Sections 24 and 25 of the Arbitration Law, there are
grounds for vacating, modifying or rescinding an arbitrator's award. 20 Thus, if and when the
factual circumstances referred to in the above-cited provisions are present, judicial review of
the award is properly warranted.
discretion or an exces de pouvoir on the part of the arbitrator."

21

Even decisions of administrative agencies which are declared "final" by law are not
exempt from judicial review when so warranted. Thus, in the case of Oceanic Bic
Division (FFW), et al. v. Flerida Ruth P. Romero, et al., 22this Court had occasion to rule
that:

. . . Inspite of statutory provisions making "final" the decisions of certain

administrative agencies, we have taken cognizance of petitions
questioning these decisions where want of jurisdiction, grave abuse of
discretion, violation of due process, denial of substantial justice or
erroneous interpretation of the law were brought to our
attention . . . 23 (Emphasis ours).
It should be stressed, too, that voluntary arbitrators, by the nature of their functions, act
in a quasi-judicial capacity. 24 It stands to reason, therefore, that their decisions should not
be beyond the scope of the power of judicial review of this Court.

2. Del Monte Corporation USA vs. CA

Facts:
On 1 July 1994, in a Distributorship Agreement, petitioner Del Monte Corporation-USA
(DMC-USA) appointed private respondent Montebueno Marketing, Inc. (MMI) as the sole and
exclusive distributor of its Del Monte products in the Philippines for a period of five (5) years,
renewable for two (2) consecutive five (5) year periods with the consent of the parties. The
Agreement provided, among others, for an arbitration clause.
In October 1994 the appointment of private respondent MMI as the sole and exclusive
distributor of Del Monte products in the Philippines was published in several newspapers in
the country. Immediately after its appointment, private respondent MMI appointed Sabrosa
Foods, Inc. (SFI), with the approval of petitioner DMC-USA, as MMIs marketing arm to
concentrate on its marketing and selling function as well as to manage its critical
relationship with the trade.
On 3 October 1996 private respondents MMI, SFI and MMIs Managing Director Liong
Liong C. Sy (LILY SY) filed a Complaint [5] against petitioners DMC-USA, Paul E. Derby,
Jr., Daniel Collins and Luis Hidalgo, and Dewey Ltd.[9] before the Regional Trial Court of
Malabon, Metro Manila. Private respondents predicated their complaint on the alleged
violations by petitioners of Arts. 20, 21 and 23 of the Civil Code. According to private
respondents, DMC-USA products continued to be brought into the country by parallel
importers despite the appointment of private respondent MMI as the sole and exclusive
distributor of Del Monte products thereby causing them great embarrassment and
substantial damage.
Private respondents further averred that petitioners knowingly and surreptitiously
continued to deal with the former in bad faith by involving disinterested third parties and by
proposing solutions which were entirely out of their control. On 21 October 1996 petitioners
filed a Motion to Suspend Proceedings invoking the arbitration clause in their Agreement

with private respondents. On 11 November 1997 the Motion to Suspend Proceedings was
denied by the trial court on the ground that it "will not serve the ends of justice and to allow
said suspension will only delay the determination of the issues, frustrate the quest of the
parties for a judicious determination of their respective claims, and/or deprive and delay
their rights to seek redress."
On appeal, the Court of Appeals affirmed the decision of the trial court hence this
petition.
Issue:
whether the dispute between the parties warrants an order compelling them to submit
to arbitration.
Ruling:
There is no doubt that arbitration is valid and constitutional in our jurisdiction. Even
before the enactment of RA 876, this Court has countenanced the settlement of disputes
through arbitration. Unless the agreement is such as absolutely to close the doors of the
courts against the parties, which agreement would be void, the courts will look with favor
upon such amicable arrangement and will only interfere with great reluctance to anticipate
or nullify the action of the arbitrator. Moreover, as RA 876 expressly authorizes arbitration of
domestic disputes, foreign arbitration as a system of settling commercial disputes was
likewise recognized when the Philippines adhered to the United Nations "Convention on the
Recognition and the Enforcement of Foreign Arbitral Awards of 1958" under the 10 May
1965 Resolution No. 71 of the Philippine Senate, giving reciprocal recognition and allowing
enforcement of international arbitration agreements between parties of different
nationalities within a contracting state.
A careful examination of the instant case shows that the arbitration clause in the
Distributorship Agreement between petitioner DMC-USA and private respondent MMI is valid
and the dispute between the parties is arbitrable. However, this Court must deny the
petition.
The Agreement between petitioner DMC-USA and private respondent MMI is a contract. The
provision to submit to arbitration any dispute arising therefrom and the relationship of the
parties is part of that contract and is itself a contract. As a rule, contracts are respected as
the law between the contracting parties and produce effect as between them, their assigns
and heirs. Clearly, only parties to the Agreement, i.e., petitioners DMC-USA and its Managing
Director for Export Sales Paul E. Derby, Jr., and private respondents MMI and its Managing
Director LILY SY are bound by the Agreement and its arbitration clause as they are the only
signatories thereto. Petitioners Daniel Collins and Luis Hidalgo, and private respondent SFI,
not parties to the Agreement and cannot even be considered assigns or heirs of the parties,
are not bound by the Agreement and the arbitration clause therein. Consequently, referral to
arbitration in the State of California pursuant to the arbitration clause and the suspension of
the proceedings in Civil Case No. 2637-MN pending the return of the arbitral award could be
called for but only as to petitioners DMC-USA and Paul E. Derby, Jr., and private respondents
MMI and LILY SY, and not as to the other parties in this case, in accordance with the recent

case of Heirs of Augusto L. Salas, Jr. v. Laperal Realty Corporation, which superseded that
of Toyota Motor Philippines Corp. v. Court of Appeals.

3. La Naval Drug Corporation vs. CA

Facts:

From the petition below of respondent Yao, it appears that he is the present owner of a
commercial building a portion of which is leased to petitioner under a contract of lease
executed on December 23, 1993 with the former owner thereof, La Proveedora, Inc.,
which contract expired on April 30, 1989. However, petitioner exercised its option to
lease the same building for another five years. But petitioner and respondent Yao
disagreed on the rental rate, and to resolve the controversy, the latter, thru written
notices to the former, expressed his intention to submit their disagreement to
arbitration, in accordance with Republic Act 876, otherwise known as the Arbitration
Law, and paragraph 7 of their lease contract. Thus, on May 6, 1989, respondent Yao
appointed Domingo Alamarez, Jr. as his arbitrator, while on June 5, 1989, petitioner
chose Atty. Casiano Sabile as its arbitrator. The confirmation of the appointment of
Aurelio Tupang, as third arbitrator, was held in abeyance because petitioner instructed
Atty. Sabile to defer the same until its Board of Directors could convene and approve
Tupang's appointment. Respondent Yao theorizes that this was petitioner's design to
delay the arbitration proceedings, in violation of the Arbitration Law, and the governing
stipulation of their contract of lease.
On the basis of the aforesaid allegations, respondent Yao prayed that after summary
hearing pursuant to Section 6 of the Arbitration Law, Atty. Casiano Sabile and Domingo
Alamarez be directed to proceed with the arbitration in accordance with Section 7 of
subject Contract of Lease and the applicable provisions of the Arbitration law, by
appointing and confirming the appointment of the Third Arbitrator; and that the Board of
Three Arbitrators be ordered to immediately convene and resolve the controversy
before it, pursuant to Section 12 and the succeeding sections of the Arbitration Law. On
April 26, 1990, the aforequoted assailed Order issued. In moving for reconsideration of
the said Order, petitioner argued that in Special Case No. 6024, the respondent court
sits as a special court exercising limited jurisdiction and is not competent to act on
respondent Yao's claim for damages, which poses an issue litigable in an ordinary civil
action. But the respondent court was not persuaded by petitioner's submission. On June
22, 1990, it denied the motion for reconsideration. (Rollo, pp. 89-93).

While the appellate court has agreed with petitioner that, under Section 6 of Republic
Act No. 876, a court, acting within the limits of its special jurisdiction, may in this case
solely determine the issue of whether the litigants should proceed or not to arbitration,
it, however, considered petitioner in estoppel from questioning the competence of the
court to additionally hear and decide in the summary proceedings private respondent's
claim for damages, it (petitioner) having itself filed similarly its own counterclaim with
the court a quo.
It is hardly disputable that when a court is called upon to exercise limited and special
jurisdiction, that court cannot stray to matters outside the area of its declared authority
or beyond what has been expressly invested by law (Elumbaring vs. Elumbaring, 12 Phil.
384, 387), particularly, such as in this instance, where the proceedings are summary in
nature
Issue:
Whether the court has jurisdiction?
Ruling:

waived either expressly or impliedly. When a defendant voluntarily appears, he is

deemed to have submitted himself to the jurisdiction of the court. If he so wishes not to
waive this defense, he must do so seasonably by motion for the purpose of objecting to
the jurisdiction of the court; otherwise, he shall be deemed to have submitted himself to
that jurisdiction. The decisions promulgated heretofore by this Court would likewise
seemingly apply estoppel to bar the defendant from pursuing that defense by alleging
in his answer any other issue for dismissing the action.
A citation of a few of our decisions might be apropos.
In Wang Laboratories, Inc., vs. Mendoza (156 SCRA 44), this Court has ruled that if the
defendant, besides setting up in a motion to dismiss his objection to the jurisdiction of
the court, alleges at the same time any other ground for dismissing the action, he is
deemed to have submitted himself to the jurisdiction of the court. In the process, it has
equated the matter to a situation where, such as in Immaculata vs. Judge Navarro, et
al. (146 SCRA 5), the defendant invokes an affirmative relief against his opponent.
In summary, it is our considered view, as we now so hereby express,
that
(1) Jurisdiction over the person must be seasonably raised, i.e., that it is pleaded in a
motion to dismiss or by way of an affirmative defense in an answer. Voluntary
appearance shall be deemed a waiver of this defense. The assertion, however, of
affirmative defenses shall not be constructed as an estoppel or as a waiver of such
defense.

(2) Where the court itself clearly has no jurisdiction over the subject matter or the
nature of the action, the invocation of this defense may be done at any time. It is
neither for the courts nor the parties to violate or disregard that rule, let alone to confer
that jurisdiction, this matter being legislative in character. Barring highly meritorious
and exceptional circumstances, such as hereinbefore exemplified, neither estoppel nor
waiver shall apply.
In the case at bench, the want of jurisdiction by the court is indisputable, given the
nature of the controversy. The arbitration law explicitly confines the court's authority
only to pass upon the issue of whether there is or there is no agreement in writing
providing for arbitration. In the affirmative, the statute ordains that the court shall issue
an order "summarily directing the parties to proceed with the arbitration in accordance
with the terms thereof." If the court, upon the other hand, finds that no such agreement
exists, "the proceeding shall be dismissed." The proceedings are summary in nature.

4. Insular Savings Bank vs. Far East Bank and Trust Company (492 SCRA
145)
Facts:

On December 11, 1991, Far East Bank and Trust Company (Respondent) filed a
complaint against Home Bankers Trust and Company (HBTC) with the Philippine
Clearing House Corporations (PCHC) Arbitration Committee docketed as Arbicom
Case No. 91-069. Respondent sought to recover from the petitioner, the sum of
P25,200,000.00 representing the total amount of the three checks drawn and
debited against its clearing account. HBTC sent these checks to respondent for
clearing by operation of the PCHC clearing system. Thereafter, respondent
dishonored the checks for insufficiency of funds and returned the checks to

HBTC. However, the latter refused to accept them since the checks were returned
by respondent after the reglementary regional clearing period.
Meanwhile, on January 17, 1992, before the termination of the arbitration
proceedings, respondent filed another complaint but this time with the Regional Trial
Court (RTC) in MakatiCity docketed as Civil Case No. 92-145 for Sum of Money and
Damages with Preliminary Attachment. The complaint was filed not only against
HBTC but also against Robert Young, Eugene Arriesgado and Victor Tancuan
(collectively known as Defendants), who were the president and depositors of HBTC
respectively. Aware of the arbitration proceedings between respondent and
petitioner, the RTC, in an Omnibus Order dated April 30, 1992, suspended the
proceedings in the case against all the defendants pending the decision of the
Arbitration Committee wherein it stated about the arbitration proceedings but it was
amended by an omnibus order wherein it deleted the arbitration proceedings. The
motion for reconsideration filed by petitioner was denied by the Arbitration
Committee. Consequently, to appeal the decision of the Arbitration Committee in
Arbicom Case No. 91-069, petitioner filed a petition for review in the earlier case
filed by respondent in Branch 135 of the RTC of Makati and docketed as
Civil Case No. 92-145.
Both parties filed several pleadings. On February 8, 1999, respondent filed a Motion
to Dismiss Petition for Review for Lack of Jurisdiction, which was opposed by the
petitioner.
Issue:
Whether THE REGIONAL TRIAL COURT ERRED IN DISMISSING THE PETITION OF
PETITIONER FOR LACK OF JURISDICTION ON THE GROUND THAT IT SHOULD HAVE
BEEN DOCKETED AS A SEPARATE CASE?
Ruling:

As provided in the PCHC Rules, the findings of facts of the decision or award
rendered by the Arbitration Committee shall be final and conclusive upon all the
parties in said arbitration dispute. Under Article 2044 of the New Civil Code, the
validity of any stipulation on the finality of the arbitrators award or decision is
recognized. However, where the conditions described in Articles 2038, 2039 and
2040applicable to both compromises and arbitrations are obtaining, the arbitrators

award may be annulled or rescinded. Consequently, the decision of the Arbitration

Committee is subject to judicial review. Furthermore, petitioner had several judicial
remedies available at its disposal after the Arbitration Committee denied its Motion
for Reconsideration. In this instance, petitioner did not avail of any of the
abovementioned remedies available to it. Instead it filed a petition for review with
the RTC where Civil Case No. 92-145 is pending pursuant to Section 13 of the PCHC
Rules to sustain its action. Clearly, it erred in the procedure it chose for judicial
review of the arbitral award. Having established that petitioner failed to avail of the
abovementioned remedies, we now discuss the issue of the jurisdiction of the trial
court with respect to the petition for review filed by petitioner.
Jurisdiction is the authority to hear and determine a cause - the right to act in
a case. Jurisdiction over the subject matter is the power to hear and determine the
general class to which the proceedings in question belong. Jurisdiction over the
subject matter is conferred by law and not by the consent or acquiescence of any or
all of the parties or by erroneous belief of the court that it exists. Consequently, the
proper recourse of petitioner from the denial of its motion for reconsideration by the
Arbitration Committee is to file either a motion to vacate the arbitral award with the
RTC, a petition for review with the Court of Appeals under Rule 43 of the Rules of
Court, or a petition for certiorari under Rule 65 of the Rules of Court. In the case at
bar, petitioner filed a petition for review with the RTC when the same should have
been filed with the Court of Appeals under Rule 43 of the Rules of Court. Thus, the
RTC of Makati did not err in dismissing the petition for review for lack of jurisdiction
but not on the ground that petitioner should have filed a separate case from Civil
Case No. 92-145 but on the necessity of filing the correct petition in the proper
court. It is immaterial whether petitioner filed the petition for review in Civil Case
No. 92-145 as an appeal of the arbitral award or whether it filed a separate case in
the RTC, considering that the RTC will only have jurisdiction over an arbitral award in
cases of motions to vacate the same. Otherwise, as elucidated herein, the Court of
Appeals

retains

jurisdiction

in

petitions

for

review

or

in

petitions

for

certiorari. Consequently, petitioners arguments, with respect to the filing of

separate action from Civil Case No. 92-145 resulting in a multiplicity of suits, cannot
be given due course.

5. Reyes vs. Balde II (498 SCRA 186)

Facts:
It appears from the records that petitioner filed a complaint against
respondents with the Regional Trial Court of Muntinlupa City which was docketed as
Civil Case No. 03-110 praying that an accounting be rendered to determine the cost
of the materials purchased by respondent Papas; that respondents be ordered to
pay the cost of the additional works done on the property; that the Design-Build
Construction Agreement be ordered rescinded because respondents breach the
same;

and

that

respondents

be

ordered

to

pay

moral

and

exemplary

damages.Based on the same Design-Build Construction Agreement, respondents

filed with the Construction Industry Arbitration Commission (CIAC) a complaint
praying that petitioner be ordered to finish the project or, in the alternative, to pay
the cost to finish the same; to reimburse the overpayments made by respondents;
and to pay liquidated damages, attorneys fees and costs of the suit.
On June 8, 2005, the CIAC rendered a decision on the merits of the case
awarding in favor of respondents the sum of P4,419,094.98. The case is presently
on appeal with the Court of Appeals docketed as CA-G.R. SP No. 90136.
Meanwhile, on July 29, 2005, the trial court rendered judgment in Civil Case No. 03110 in favor of petitioner ordering the respondents to pay P840,300.00 representing
the cost of the additional works; P296,658.95 representing the balance of the
contract price; P500,000.00 by way of moral damages; P500,000.00 as exemplary
damages; P500,000.00 as attorneys fees and costs of the suit.
Issue:
Who has jurisdiction
Ruling:

It is important to mention that in both cases, the parties insist that the other
breached their obligation under the Design-Build Construction Agreement. Petitioner
however argues that the Regional Trial Court properly took cognizance of the case
while respondents claim that CIAC has the exclusive and original jurisdiction on the
subject matter. Otherwise stated, if we rule in the instant case that CIAC has
jurisdiction over the controversy, then it would necessarily follow that the Regional
Trial Court does not have jurisdiction. Since it did not acquire jurisdiction over the
controversy, then the writ of execution that it issued was void. If we allow the RTC
Judge and the Sheriff to continue with the proceedings in Civil Case No. 03-110,
then, whatever judgment that would be rendered in the instant case would be
rendered nugatory. In view of the above circumstances, respondents clearly
established that they are entitled to the issuance of a TRO. (4) A petition review
under Rule 45 of the Rules of Court is not a matter of right but of sound judicial
discretion. For purposes of determining whether the petition should be dismissed or
denied, or where the petition is given due course, the Supreme Court may require or
allow the filing of such pleadings, briefs, memoranda or documents as it may
deem necessary within such periods and under such conditions as it may consider
appropriate, and impose the corresponding sanctions in case of non-filing or
unauthorized filing of such pleadings and documents or non-compliance with the
conditions therefor. This Court exercised its discretion when it did not require
petitioner to file comment on respondents Manifestation with Urgent Motion to
Resolve with Prayer for Injunction, Second Manifestation with Prayer for Issuance of
a

Temporary

Restraining

Order/Injunction,

Urgent

Motion

for

Clarification, andCompliance.
(5) The Court did not exceed its jurisdiction; neither did it encroach on the
jurisdiction of the Court of Appeals or of the lower court when it issued the
Resolution dated July 12, 2006.As discussed, there is compelling reason to issue a
TRO as the respondents satisfactorily established they are entitled to the relief
demanded. It may further be said that the issuance of a TRO on July 12, 2006 is not
a final determination of the matter. It was a remedy intended to avoid any
irreparable injury that might be caused to the parties. It may be recalled that the
CIAC and the trial court each asserted its jurisdiction over the controversy to the
exclusion of the other.