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TITAN- [Uniwide] is held liable for the unpaid balance in the

IKEDA CONSTRUCTION amount of P5,158,364.63 which is ordered to be paid to the
[Titan] with 12% interest per annum commencing from 08
G.R. No. 126619; December 20, 2006
September 1993 until the date of payment.
[Uniwide] is held liable to pay in full the VAT on this
The case originated from an action for a sum of money filed project, in such amount as may be computed by the Bureau
by Titan-Ikeda Construction and Development Corporation of Internal Revenue to be paid directly thereto. The BIR is
(Titan) against Uniwide Sales Realty and Resources hereby notified that [Uniwide] Sales Realty and Resources
Corporation (Uniwide) with the Regional Trial Court (RTC), Corporation has assumed responsibility and is held liable for
Branch 119, Pasay City arising from Uniwide’s non-payment VAT payment on this project. This accordingly exempts
of certain claims billed by Titan after completion of three Claimant Titan-Ikeda Construction and Development
projects covered by agreements they entered into with each Corporation from this obligation.
Upon Uniwide’s motion to dismiss/suspend proceedings and
Whether the award given by CIAC is final
Titan’s open court manifestation agreeing to the suspension,
Civil Case No. 98-0814 was suspended for it to undergo HELD:
arbitration. Titan’s complaint was thus re-filed with the CIAC.
As a rule, findings of fact of administrative agencies and
Before the CIAC, Uniwide filed an answer which was later
quasi-judicial bodies, which have acquired expertise because
amended and re-amended, denying the material allegations
their jurisdiction is confined to specific matters, are generally
of the complaint, with counterclaims for refund of
accorded not only respect, but also finality, especially when
overpayments, actual and exemplary damages, and
affirmed by the Court of Appeals. In particular, factual
attorney’s fees.
findings of construction arbitrators are final and conclusive
An Arbitral Tribunal consisting of a chairman and two and not reviewable by this Court on appeal. This rule,
members was created in accordance with the CIAC Rules of however admits of certain exceptions.
Procedure Governing Construction Arbitration. It conducted
In David v. Construction Industry and Arbitration
a preliminary conference with the parties and thereafter
Commission, we ruled that, as exceptions, factual findings of
issued a Terms of Reference (TOR) which was signed by the
construction arbitrators may be reviewed by this Court when
parties. The tribunal also conducted an ocular inspection,
the petitioner proves affirmatively that:
hearings, and received the evidence of the parties consisting
of affidavits which were subject to cross-examination. (1) the award was procured by corruption, fraud or other
undue means;
On 17 April 1995, the Arbitral Tribunal promulgated a
Decision, the decretal portion of which is as follows: (2) there was evident partiality or corruption of the
arbitrators or of any of them; (3) the arbitrators were guilty
“WHEREFORE, judgment is hereby rendered as follows:
of misconduct in refusing to hear evidence pertinent and
On Project 1 – Libis: material to the controversy;

[Uniwide] is absolved of any liability for the claims (4) one or more of the arbitrators were disqualified to act as
made by [Titan] on this Project. such under Section nine of Republic Act No. 876 and willfully
refrained from disclosing such disqualifications or of any
Project 2 – Edsa Central:
other misbehavior by which the rights of any party have been
[Uniwide] is absolved of any liability for VAT payment materially prejudiced; or
on this project, the same being for the account of the [Titan].
(5) the arbitrators exceeded their powers, or so imperfectly
On the other hand, [Titan] is absolved of any liability on the
executed them, that a mutual, final and definite award upon
counterclaim for defective construction of this project.
the subject matter submitted to them was not made.
[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 Other recognized exceptions are as follows:
December 1992 until the date of payment.
(1) when there is a very clear showing of grave abuse of
On Project 3 – Kalookan: discretion resulting in lack or loss of jurisdiction as when a
party was deprived of a fair opportunity to present its Whether or not a case based on several causes of action is
position before the Arbitral Tribunal or when an award is dismissible on the ground of improper venue where only one
obtained through fraud or the corruption of arbitrators, of the causes of action arises from a contract with
exclusive venue stipulation
(2) when the findings of the Court of Appeals are contrary to
those of the CIAC, and HELD:

(3) when a party is deprived of administrative due process. 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
529 SCRA 664 (2007) stipulation on ―exclusive venue.‖ The Courtfound merit in
this contention.
Where there is a joinder of causes of action between the
same parties one of which does not arise out of the contract The Supreme Court cited Section 2, Rule 4 of the Rules
where the exclusive venue was stipulated upon, the complain of Court which provides that all other actions may be
may be brought before other venues. commenced and tried where the plaintiff or any of the
principal plaintiffs resides, or where the defendant or any of
Uniwide Holdings, Inc. entered into a franchise agreement the principal defendants resides, or in the case of a
with Alexander M. Cruz granting the latter a five-year nonresident defendant, where he may be found, at the
franchise to adopt and use the ―Uniwide Family Store election of the plaintiff.
System‖ for the establishment and operation of a ―Uniwide
Family Store‖ in Marikina City. The forging of a written agreement on an exclusive venueof
an action does not, however, exclude parties from bringing a
The contract stipulated that Cruz will pay a monthly service case to other venues.
fee of P50,000.00 or three percent of gross monthly
purchases, whichever is higher to UHI, payable within five Where there is a joinder of causes of action between the
days after the end of each month without need of formal same parties one of which does not arise out of the contract
billing or demand from UHI. In case of any delay in the where the exclusive venue was stipulated upon, the
payment of the monthly service fee, Cruz would, under complaint, as in the one at bar, may be brought before other
Article 10.3 of the agreement, be liable to pay an interest venues provided that such other cause of action falls within
charge of three percent per month. Cruz thereafter the jurisdiction of the court and the venue lies therein.
purchased goods from UHI’s affiliated companies First
It bears emphasis that the causes of action on the
Paragon Corporation (FPC) and Uniwide Sales Warehouse
assigned accounts are not based on a breach of the
Club, Inc. (USWCI).
agreement between UHI and Cruz. They are based on
FPC and USWCI subsequently executed Deeds of Assignment separate, distinct and independent contracts-deeds of
in favor of UHI assigning all their rights and interests over assignment in which UHI is the assignee of Cruz‘s obligations
Cruz‘s accounts payable to them. Cruz had outstanding to the assignors FPC and USWCI. Thus, any action arising from
obligations with UHI, FPC and USWCI in the amount of P1, the deeds of assignment cannot be subjected to the
358, 531.89.00. UHI sent a letter demanding for the payment exclusive venue stipulation embodied in the agreement.
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


G.R. No. 163101 Any disputes, differences or disagreements between

BENGUET and the OWNER with reference to anything
February 13, 2008
whatsoever pertaining to this Agreement that cannot be
FACTS: amicably settled by them shall not be cause of any action of
any kind whatsoever in any court or administrative agency
On June 1, 1987, Benguet and J.G. Realty entered into a but shall, upon notice of one party to the other, be referred
RAWOP, wherein J.G. Realty was acknowledged as the owner to a Board of Arbitrators consisting of three (3) members,
of four mining claims respectively named as Bonito-I, Bonito- one to be selected by BENGUET, another to be selected by
II, Bonito-III, and Bonito-IV, with a total area the OWNER and the third to be selected by the
of 288.8656 hectares, situated in Barangay Luklukam, Sitio aforementioned two arbitrators so appointed.
Bagong Bayan, Municipality of Jose Panganiban, Camarines
Norte. xxxx

Thus, on August 9, 1989, the Executive Vice-President of 11.02 Court Action

Benguet, Antonio N. Tachuling, issued a letter informing J.G.
No action shall be instituted in court as to any matter in
Realty of its intention to develop the mining claims. However,
dispute as hereinabove stated, except to enforce the
on February 9, 1999, J.G. Realty, through its President,
decision of the majority of the Arbitrators
Johnny L. Tan, then sent a letter to the President of Benguet
informing the latter that it was terminating the RAWOP on A contractual stipulation that requires prior resort to
the following grounds: voluntary arbitration before the parties can go directly to
court is not illegal and is in fact promoted by the State.
a. The fact that your company has failed to perform the
obligations set forth in the RAWOP, i.e., to To reiterate, availment of voluntary arbitration before resort
undertake development works within 2 years from the is made to the courts or quasi-judicial agencies of the
execution of the Agreement; b. Violation of the Contract government is a valid contractual stipulation that must be
by allowing high graders to operate on our claim. c. No adhered to by the parties.
stipulation was provided with respect to the term limit of the
In other words, in the event a case that should properly be
RAWOP. d. Non-payment of the royalties thereon as
the subject of voluntary arbitration is erroneously filed with
provided in the RAWOP.
the courts or quasi-judicial agencies, on motion of the
On June 7, 2000, J.G. Realty filed a Petition for Declaration of defendant, the court or quasi-judicial agency shall determine
Nullity/Cancellation of the RAWOP with the Legaspi City POA, whether such contractual provision for arbitration is
Region V, docketed as DENR Case No. 2000-01 and entitled sufficient and effective. If in affirmative, the court or quasi-
J.G. Realty v. Benguet. judicial agency shall then order the enforcement of said
cancelled. *MAB: affirmed POA. In sum, on the issue of whether POA should have referred the
case to voluntary arbitration, we find that, indeed, POA has
ISSUES: (1) Should the controversy have first been submitted
no jurisdiction over the dispute which is governed by RA 876,
to arbitration before the POA took cognizance of the
the arbitration law.
case?; (2) Was the cancellation of the RAWOP supported by
evidence?; and (3) Did the cancellation of the RAWOP HOWEVER, ESTOPPEL APPLIES. the Court rules that the
amount to unjust enrichment of J.G. Realty at the expense of jurisdiction of POA and that of MAB can no longer be
Benguet? questioned by Benguet at this late hour. What Benguet
should have done was to immediately challenge the POA's
HELD: On correctness of appeal: Petitioner having failed to
jurisdiction by a special civil action for certiorari when POA
properly appeal to the CA under Rule 43, the decision of the
ruled that it has jurisdiction over the dispute. To redo the
MAB has become final and executory. On this ground alone,
proceedings fully participated in by the parties after the lapse
the instant petition must be denied.
of seven years from date of institution of the original action
(1) YES, the case should have first been brought to voluntary with the POA would be anathema to the speedy and efficient
arbitration before the POA. administration of justice.

Secs. 11.01 and 11.02 of the RAWOP pertinently provide:

(2) The cancellation of the RAWOP was supported by CONFLICT OF LAWS KOREA TECHNOLOGIES vs. LERMA
(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. Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean
corporation which is engaged in the supply and installation
The principle of unjust enrichment under Article 22 requires
of Liquefied Petroleum Gas (LPG) Cylinder manufacturing
two conditions: (1) that a person is benefited without a valid
plants, while private respondent Pacific General Steel
basis or justification, and (2) that such benefit is derived at
Manufacturing Corp. (PGSMC) is a domestic corporation.
another's expense or damage.
On March 5, 1997, PGSMC and KOGIES executed a contract
Clearly, there is no unjust enrichment in the instant case as
in the Philippines whereby KOGIES would set up an LPG
the cancellation of the RAWOP, which left Benguet without
Cylinder Manufacturing Plant in Carmona, Cavite. On April
any legal right to participate in further developing the mining
7, 1997, in Korea, the parties executed Contract No. KLP-
claims, was brought about by its violation of the RAWOP.
970301 dated March 5, 1997 amending the terms of
Hence, Benguet has no one to blame but itself for its
payment. On October 14, 1997, PGSMC entered into a
Contract of Lease with Worth Properties, Inc. (Worth) for use
OBITER DICTA: of Worth’s 5,079-square meter property with a 4,032-square
meter warehouse building to house the LPG manufacturing
(1) Difference between compulsory & voluntary arbitration -
On January 22, 1998, it was shown in the Certificate that,
In Reformist Union of R.B. Liner, Inc. vs. NLRC, compulsory
after the installation of the plant, the initial operation could
arbitration has been defined both as “the process of
not be conducted as PGSMC encountered financial
settlement of labor disputes by a government agency which
difficulties affecting the supply of materials, thus forcing the
has the authority to investigate and to make an award which
parties to agree that KOGIES would be deemed to have
is binding on all the parties, and as a mode of arbitration
completely complied with the terms and conditions of the
where the parties are compelled to accept the resolution of
March 5, 1997 contract.
their dispute through arbitration by a third party.” While a
voluntary arbitrator is not part of the governmental unit or For the remaining balance of USD306,000 for the installation
labor department's personnel, said arbitrator renders and initial operation of the plant, PGSMC issued two post
arbitration services provided for under labor laws. dated checks. When KOGIES deposited the checks, these
were dishonored for the reason "PAYMENT STOPPED." Thus,
There is a clear distinction between compulsory and
on May 8, 1998, KOGIES sent a demand letter to PGSMC
voluntary arbitration. The arbitration provided by the POA is
threatening criminal action for violation of Batas Pambansa
compulsory, while the nature of the arbitration provision in
Blg. 22 in case of non payment. On the same date, the wife
the RAWOP is voluntary, not involving any government
of PGSMC’s President faxed a letter dated May 7, 1998 to
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 PGSMC filed a Motion for Inspection of Things to determine
for Estafadocketed as I.S. No. 98-03813 against Mr. Dae Hyun whether there was indeed alteration of the quantity and
Kang, President of KOGIES. lowering of quality of the machineries and equipment, and
whether these were properly installed. KOGIES opposed the
On June 15, 1998, KOGIES wrote PGSMC informing the latter
motion positing that the queries and issues raised in the
that PGSMC could not unilaterally rescind their contract nor
motion for inspection fell under the coverage of the
dismantle and transfer the machineries and equipment on
arbitration clause in their contract. KOGIES asserted that the
mere imagined violations by KOGIES. It also insisted that their
Branch Sheriff did not have the technical expertise to
disputes should be settled by arbitration as agreed upon in
ascertain whether or not the machineries and equipment
Article 15, the arbitration clause of their contract.
conformed to the specifications in the contract and were
On June 23, 1998, PGSMC again wrote KOGIES reiterating the properly installed. The trial court granted the motion. On
contents of its June 1, 1998 letter threatening that the November 11, 1998, the Branch Sheriff filed his Sheriff’s
machineries, equipment, and facilities installed in the plant Report finding that the enumerated machineries and
would be dismantled and transferred on July 4, 1998. Thus, equipment were not fully and properly installed.
on July 1, 1998, KOGIES instituted an Application for
Court of Appeals affirmed the trial court and declared the
Arbitration before the Korean Commercial Arbitration Board
arbitration clause against public policy.
(KCAB) in Seoul, Korea pursuant to Art. 15 of the Contract as
amended. ISSUE

On July 3, 1998, KOGIES filed a Complaint for Specific W/N the arbitration clause is against public policy – NO.
Performance, against PGSMC before the Muntinlupa City
Regional Trial Court (RTC). The RTC granted a temporary
restraining order. In its complaint, KOGIES alleged that Established in this jurisdiction is the rule that the law of the
PGSMC had initially admitted that the checks that were place where the contract is made governs. Lex loci
stopped were not funded but later on claimed that it stopped contractus. The contract in this case was perfected here in
payment of the checks for the reason that "their value was the Philippines. Therefore, our laws ought to govern.
not received" as the former allegedly breached their contract Nonetheless, Art. 2044 of the Civil Code sanctions the validity
by "altering the quantity and lowering the quality of the of mutually agreed arbitral clause or the finality and binding
machinery and equipment" installed in the plant and failed effect of an arbitral award. Art. 2044 provides, "Any
to make the plant operational although it earlier certified to stipulation that the arbitrators’ award or decision shall be
the contrary as shown in a January 22, 1998 Certificate. final, is valid, without prejudice to Articles 2038, 2039 and
Likewise, KOGIES averred that PGSMC violated Art. 15 of 2040." (Emphasis supplied.)
their Contract, as amended, by unilaterally rescinding the
contract without resorting to arbitration. KOGIES also asked Arbitration clause not contrary to public policy: The
that PGSMC be restrained from dismantling and transferring arbitration clause which stipulates that the arbitration must
the machinery and equipment installed in the plant which be done in Seoul, Korea in accordance with the Commercial
the latter threatened to do on July 4, 1998. Arbitration Rules of the KCAB, and that the arbitral award is
final and binding, is not contrary to public policy.
On July 9, 1998, PGSMC filed an opposition to the TRO
arguing that KOGIES was not entitled to the TRO since Art. Having said that the instant arbitration clause is not against
15, the arbitration clause, was null and void for being against public policy, we come to the question on what governs an
public policy as it ousts the local courts of jurisdiction over arbitration clause specifying that in case of any dispute
the instant controversy. arising from the contract, an arbitral panel will be constituted
in a foreign country and the arbitration rules of the foreign
On July 23, 1998, the RTC issued an Order denying the country would govern and its award shall be final and
application for a writ of preliminary injunction, reasoning binding.
that PGSMC had paid KOGIES USD 1,224,000, the value of the
machineries and equipment as shown in the contract such RA 9285 incorporated the UNCITRAL Model law to which we
that KOGIES no longer had proprietary rights over them. And are a signatory: For domestic arbitration proceedings, we
finally, the RTC held that Art. 15 of the Contract as amended have particular agencies to arbitrate disputes arising from
was invalid as it tended to oust the trial court or any other contractual relations. In case a foreign arbitral body is chosen
court jurisdiction over any dispute that may arise between by the parties, the arbitration rules of our domestic
the parties. KOGIES’ prayer for an injunctive writ was denied. arbitration bodies would not be applied. As signatory to the
Arbitration Rules of the UNCITRAL Model Law on party may not unilaterally rescind or terminate the contract
International Commercial Arbitration of the United Nations for whatever cause without first resorting to arbitration.
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 In addition, whatever findings and conclusions made by the
even incorporated the Model Law in Republic Act No. (RA) RTC Branch Sheriff from the inspection made on October 28,
9285, otherwise known as the Alternative Dispute Resolution 1998, as ordered by the trial court on October 19, 1998, is of
Act of 2004 entitled An Act to Institutionalize the Use of an no worth as said Sheriff is not technically competent to
Alternative Dispute Resolution System in the Philippines and ascertain the actual status of the equipment and machineries
to Establish the Office for Alternative Dispute Resolution, and as installed in the plant.
for Other Purposes, promulgated on April 2, 2004. And while
RA 9285 was passed only in 2004, it nonetheless applies in RTC has interim jurisdiction to protect the rights of the
the instant case since it is a procedural law which has a parties: While the issue of the proper installation of the
retroactive effect. equipment and machineries might well be under the primary
jurisdiction of the arbitral body to decide, yet the RTC under
Among the pertinent features of RA 9285 applying and Sec. 28 of RA 9285 has jurisdiction to hear and grant interim
incorporating the UNCITRAL Model Law are the following: measures to protect vested rights of the parties
(1) The RTC must refer to arbitration in proper cases While the KCAB can rule on motions or petitions relating to
the preservation or transfer of the equipment and
(2) Foreign arbitral awards must be confirmed by the RTC
machineries as an interim measure, yet on hindsight, the July
(3) The RTC has jurisdiction to review foreign arbitral awards 23, 1998 Order of the RTC allowing the transfer of the
equipment and machineries given the non-recognition by the
(4) Grounds for judicial review different in domestic and
lower courts of the arbitral clause, has accorded an interim
foreign arbitral awards
measure of protection to PGSMC which would otherwise
(5) RTC decision of assailed foreign arbitral award appealable been irreparably damaged. KOGIES is not unjustly prejudiced
as it has already been paid a substantial amount based on the
PGSMC has remedies to protect its interests: Thus, based contract. Moreover, KOGIES is amply protected by the
on the foregoing features of RA 9285, PGSMC must submit to arbitral action it has instituted before the KCAB, the award of
the foreign arbitration as it bound itself through the subject which can be enforced in our jurisdiction through the RTC.
contract. While it may have misgivings on the foreign Besides, by our decision, PGSMC is compelled to submit to
arbitration done in Korea by the KCAB, it has available arbitration pursuant to the valid arbitration clause of its
remedies under RA 9285. Its interests are duly protected by contract with KOGIES.
the law which requires that the arbitral award that may be
rendered by KCAB must be confirmed here by the RTC before PGSMC to preserve the subject equipment and
it can be enforced. machineries: While PGSMC may have been granted the right
to dismantle and transfer the subject equipment and
With our disquisition above, petitioner is correct in its machineries, it does not have the right to convey or dispose
contention that an arbitration clause, stipulating that the of the same considering the pending arbitral proceedings to
arbitral award is final and binding, does not oust our courts settle the differences of the parties. PGSMC therefore must
of jurisdiction as the international arbitral award, the award preserve and maintain the subject equipment and
of which is not absolute and without exceptions, is still machineries with the diligence of a good father of a family
judicially reviewable under certain conditions provided for by until final resolution of the arbitral proceedings and
the UNCITRAL Model Law on ICA as applied and incorporated enforcement of the award, if any.
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
ORMOC SUGARCANE PLANTERS' ASSOCIATION v. CA, GR NO. being privy to the milling contracts,... had no legal standing
156660, 2009-08-24 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
Petitioners are associations organized by and whose
parties, and directing respondents to nominate two
members are individual sugar planters (Planters).
arbitrators to the Board of Arbitrators... motion for
Respondents Hideco Sugar Milling Co., Inc. (Hideco) and reconsideration having been denied by the RTC
Ormoc Sugar Milling Co, Inc. (OSCO) are sugar centrals
CA concluded that petitioners had no legal personality to
Article VII of the milling contracts provides that 34% of the bring the action against respondents or to demand for
sugar and molasses produced from milling the Planter's arbitration.
sugarcane shall belong to the centrals (respondents) as
Petitioners filed a motion for reconsideration, but it too was
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. The main cause of action of petitioners in their request for
arbitration with the RTC is the alleged violation of the clause
If the Planter was not a member of any association, then the
in the milling contracts involving the proportionate sharing in
said 1% shall... revert to the centrals.
the proceeds of the harvest. Petitioners essentially demand
Article XIV, paragraph B... states that the centrals may not, that respondents increase the... share of the member
during the life of the milling contract, sign or execute any Planters to 66% to equalize their situation with those of the
contract or agreement that will provide better or more non-member Planters.
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) whether or not petitioners... are clothed with legal
kilometers from the mill. Article XX provides that all personality to file a suit against, or demand arbitration from,
differences and controversies which may arise between the respondents in their own name without impleading the
parties concerning the agreement shall be... submitted for individual Planters.
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 Section 2 of R.A. No. 876 (the Arbitration Law)... pertinently
by the four appointed by the parties... petitioners... filed twin provides:
petitions with the RTC for Arbitration under R.A. 876,
Recovery of Equal Additional Benefits, Attorney's Fees and Two or more persons or parties may submit to the arbitration
Damages, against HIDECO and OSCO of one or more arbitrators any controversy existing between
them at the time of the submission and which may be the
Petitioners claimed that respondents violated the Milling subject of an action,... or the parties to any contract may in
Contract when they gave to independent planters who do such contract agree to settle by arbitration a controversy
not belong to any association the 1% share, instead of thereafter arising between them.
reverting said share to the centrals
The foregoing provision speaks of two modes of arbitration:
Petitioners contended that respondents unduly accorded the (a) an agreement to submit to arbitration some future
independent dispute, usually stipulated upon in a civil contract between
the parties, and known as an agreement to submit to
Planters more benefits
arbitration, and (b) an agreement submitting... an existing
Respondents filed a motion to dismiss on ground of lack of matter of difference to arbitrators, termed the submission
cause of action because petitioners had no milling contract agreement. Article XX of the milling contract is an agreement
with respondents. to submit to arbitration because it was made in anticipation
of a dispute that might arise between the parties after the
Respondents and these 80 Planters were the signatories of
contract's... execution.
the milling contracts. Thus, it was the individual Planters, and
not petitioners, who had legal standing to invoke the petitioners are associations duly existing and organized
arbitration clause in the milling contracts. Petitioners, not 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 Assuming petitioners had properly brought the case in the
that... were presented were signed only by the member name of their members who had existing milling contracts
Planter concerned and one of the Centrals as parties. In other with respondents, petitioners must still prove that they were
words, none of the petitioners were parties or signatories to indeed authorized by the said members to institute an action
the milling contracts. for and on the members' behalf.

This circumstance is fatal to petitioners' cause since they As we see it, petitioners had no intention to litigate the case
anchor their right to... demand arbitration from the in a representative capacity, as they contend. All the
respondent sugar centrals upon the arbitration clause found pleadings from the RTC to this Court belie this claim.
in the milling contracts. There is no legal basis for petitioners'
he individual Planters were not even impleaded as parties to
purported right to demand arbitration when they are not
this case. In addition, petitioners need a power-of-attorney
parties to the milling contracts, especially when the language
to represent... the Planters whether in the lawsuit or to
of... the arbitration clause expressly grants the right to
demand arbitration.[16] None was ever presented here.
demand arbitration only to the parties to the contract.
Lastly, petitioners theorize that they could demand and sue
Even assuming that all the petitioners were able to present
for arbitration independently of the Planters because the
milling contracts in favor of their members, it is undeniable
milling contract is a contract pour autrui under Article 1311
that under the arbitration clause in these contracts it is the
of the Civil Code.
parties thereto who have the right to submit a controversy
or dispute to arbitration. If a contract should contain some stipulation in favor of a
third person, he may demand its fulfillment provided he
Petitioners would argue that they could sue respondents,
communicated his acceptance to the obligor before its
notwithstanding the fact that they were not signatories in the
revocation. A mere incidental benefit or interest of a person
milling contracts because they are the recognized
is not sufficient. The contracting parties must... have clearly
representatives of the Planters.
and deliberately conferred a favor upon a third person.
This claim has no leg to stand on since petitioners did not sign
To summarize, the requisites of a stipulation pour autrui or a
the milling contracts... whether as a party or as a
stipulation in favor of a third person are the following: (1)
representative of their member Planters.
there must be a stipulation in favor of a third person, (2) the
no... provision in the milling contracts that the individual stipulation must be a part, not the whole, of the contract, (3)
Planter is authorizing the association to represent him/her in the contracting... parties must have clearly and deliberately
a legal action conferred a favor upon a third person, not a mere incidental
benefit or interest, (4) the third person must have
Moreover, even assuming that petitioners are indeed
communicated his acceptance to the obligor before its
representatives of the member Planters who have milling
revocation, and (5) neither of the contracting parties bears
contracts with the respondents and assuming further that
the... legal representation or authorization of the third
petitioners signed the milling contracts as representatives of
party.[17] These requisites are not present in this case
their members, petitioners could not... initiate arbitration
proceedings in their own name as they had done in the Article VI of the Milling Contract is the solitary provision that
present case. As mere agents, they should have brought the mentions some benefit in favor of the association of which
suit in the name of the principals that they purportedly the planter is a member
The foregoing provision cannot, by any stretch of the
the principal is still the one who has the right to demand imagination, be considered as a stiputation pour autrui or for
arbitration. the benefit of the petitioners. The primary rationale for the
said stipulation is to ensure a just share in the proceeds of
Indeed, Rule 3, Section 2 of the Rules of Court requires suits
the harvest to the Planters. In... other words, it is a stipulation
to be brought in the name of the real party in interest... from
meant to benefit the Planters. Even the 1% share to be given
petitioners' own allegations, the party who would be injured
to the association as aid does not redound to the benefit of
or benefited by a decision in the arbitration proceedings will
the association but is intended to be used for its member
be the member Planters involved and... not petitioners. In
Planters. Not only that, it is explicit that said share reverts...
sum, petitioners are not the real parties in interest in the
back to respondent sugar centrals if the contracting Planter
present case.
is not affiliated with any recognized association.
Principles: these milling contracts is only incidental to their avowed
purpose of advancing the welfare and rights of their member
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 In Cargill Phils Inc v San Fernando Regala Trading, Inc the
agreement to arbitrate. An agreement to arbitrate is a Supreme Court ruled that while actions for rescission and
contract, the relation of the parties is contractual,... and the damages are ordinarily judicial matters, the dispute at hand
rights and liabilities of the parties are controlled by the law was to be referred to arbitration because the contract which
of contracts.[11] In an agreement for arbitration, the the plaintiff sought to have rescinded included an arbitration
ordinary elements of a valid contract must appear, including agreement.(1)
an agreement to arbitrate some specific thing, and an
agreement to... abide by the award, either in express Facts
language or by implication.
San Fernando Regala Trading filed before the trial court a
The requirements that an arbitration agreement must be
complaint for rescission of contract with damages against
written and subscribed by the parties thereto
Cargill Philippines, Inc. In its complaint, San Fernando Regala
The formal requirements of an agreement to arbitrate are Trading alleged that it was engaged in buying and selling
therefore the following: (a) it must be in writing and (b) it molasses and that Cargill was one of its suppliers. San
must be subscribed by the parties or their representatives. Fernando Regala Trading alleged that it purchased from
To subscribe means to write underneath, as one's name; to Cargill, and the latter had agreed to sell, 12,000 tons of cane
sign at the end of a... document. That word may sometimes blackstrap molasses originating from Thailand at the price of
be construed to mean to give consent to or to attest $192 per metric ton, and that delivery would be made in April
or May 1997. After San Fernando Regala Trading delivered
As applied to the present case, this provision has two the letter of credit, it claimed that Cargill failed to comply
requirements: 1) to institute an action, the plaintiff must be with its obligations under the contract, which included an
the real party in interest; and 2) the action must be arbitration clause as follows:
prosecuted in the name of the real party in interest.
Necessarily, the purposes of this... provision are 1) to prevent "Any dispute which the Buyer and Seller may not be able to
the prosecution of actions by persons without any right, title settle by mutual agreement shall be settled by arbitration in
or interest in the case; 2) to require that the actual party the City of New York before the American Arbitration
entitled to legal relief be the one to prosecute the action; 3) Association. The Arbitration Award shall be final and binding
to avoid a multiplicity of suits; and 4) to discourage... on both parties."
litigation and keep it within certain bounds, pursuant to
Cargill moved to dismiss and/or suspend the court
sound public policy.
proceedings citing the arbitration clause. San Fernando
When the plaintiff is not the real party in interest, the case is Regala Trading argued that since it was seeking rescission of
dismissible on the ground of lack of cause of action. the contract, it was in effect repudiating the contract which
included the arbitration clause. Further, it argued that
The mere fact that petitioners were organized for the rescission constitutes a judicial issue, which requires the
purpose of advancing the interests and welfare of their exercise of judicial function and cannot be the subject of
members does not necessarily mean that petitioners have arbitration.
the authority to represent their members in legal...
proceedings, including the present arbitration proceedings. Decision
To be considered a pour autrui provision, an incidental The Supreme Court held that the provision to submit to
benefit or interest, which another person gains, is not arbitration any dispute arising between the parties is part of
sufficient. The contracting parties must have clearly and the contract and is itself a contract. The arbitration
deliberately conferred a favor upon a third person.[18] Even agreement is to be treated as a separate agreement and does
the clause stating... that respondents must secure the not automatically terminate when the contract of which it is
consent of the association if respondents grant better a part comes to an end. To reiterate a contrary ruling would
benefits to a Planter has for its rationale the protection of the suggest that a party's mere repudiation of the main contract
member Planter. The only interest of the association therein is sufficient to avoid arbitration; that is exactly the situation
is that its member Planter will not be put at a disadvantage... that the separability doctrine seeks to avoid.
vis a vis other Planters. Thus, the associations' interest in
San Fernando Regala Trading filed a complaint for rescission JORGE GONZALES and PANEL OF ARBITRATORS, vs.CLIMAX
of contract and damages with the trial court. In so doing, it MINING LTD., CLIMAX-ARIMCO MINING CORP., and
alleged that a contract existed. It was that contract which AUSTRALASIAN PHILIPPINES MINING INC.,
provided for an arbitration clause which expressed the
G.R. No. 161957 February 28, 2005
parties' intention that any dispute to arise between them, as
buyer and seller, should be referred to arbitration. It is for Petitioner Jorge Gonzales, as claimowner of mineral deposits
the arbitrator and not the court to decide whether a contract located within the Addendum Area of Influence in Didipio, in
between the parties exists or is valid. Under the the provinces of Quirino and Nueva Vizcaya, entered into a
circumstances, the argument that rescission is judicial in co-production, joint venture and/or production-sharing
nature is misplaced. 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

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
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 matter.24 Decisions25 of the Supreme Court on mining
Corporation (Climax-Arimco), Climax, and disputes have recognized a distinction between (1) the
6 7
APMI, a Complaint seeking the declaration of nullity or primary powers granted by pertinent provisions of law to the
termination of the Addendum Contract, the FTAA, then Secretary of Agriculture and Natural Resources (and the
the Operating and Financial Accommodation bureau directors) of an executive or administrative nature,
Contract, the Assignment, Accession Agreement, and such as granting of license, permits, lease and contracts, or
the Memorandum of Agreement. Petitioner Gonzales prayed approving, rejecting, reinstating or canceling applications, or
for an unspecified amount of actual and exemplary damages deciding conflicting applications, and (2) controversies or
plus attorney’s fees and for the issuance of a temporary disagreements of civil or contractual nature between
restraining order and/or writ of preliminary injunction to litigants which are questions of a judicial nature that may be
restrain or enjoin respondents from further implementing adjudicated only by the courts of justice. This distinction is
the questioned agreements. He sought said releifs on the carried on even in Rep. Act No. 7942.
grounds of "FRAUD, OPPRESSION and/or VIOLATION of
The Complaint charged respondents with disregarding and
Section 2, Article XII of the CONSTITUTION perpetrated by
ignoring the provisions of the Addendum Contract, violating
these foreign RESPONDENTS, conspiring and confederating
the purpose and spirit of the May 14, 1987 Letter of
with one another and with each other…."8
Intent and February 28, 1989 Agreement, and acting in a
Issues: fraudulent and oppressive manner against petitioner and
practicing fraud and deception against the
(c) Whether the complaint filed by petitioner raises a mining 26
Government. Petitioner alleged in his Complaint that under
dispute over which the Panel of Arbitrators has jurisdiction,
the original agreements (the May 14, 1987 Letter of
or a judicial question which should properly be brought
Intent and February 28, 1989 Agreement) respondent
before the regular courts.
Climax-Arimco had committed to complete the Bankable
(d) Whether the dispute between the parties should be Feasibility Study by 28 February 1992, but the same was not
brought for arbitration under Rep. Act No. 876. accomplished. Instead, respondent Climax-Arimco, through
false and insidious representations and machinations by
alleging technical and financial capacity, induced petitioner
Ruling: to enter into the Addendum Contract and the FTAA in order
to repeatedly extend the option period within which to
A judicial question is a question that is proper for conduct the feasibility study. In essence, petitioner alleges
determination by the courts, as opposed to a moot question that respondents, conspiring and confederating with one
or one properly decided by the executive or legislative another, misrepresented under the Addendum Contract and
branch.18 A judicial question is raised when the FTAA that respondent Climax-Arimco possessed financial and
determination of the question involves the exercise of a technical capacity to put the project into commercial
judicial function; that is, the question involves the production, when in truth it had no such qualification
determination of what the law is and what the legal rights of whatsoever to do so. By so doing, respondents have allegedly
the parties are with respect to the matter in controversy.19 caused damage not only to petitioner but also to the Republic
On the other hand, a mining dispute is a dispute involving (a) of the Philippines.27
rights to mining areas, (b) mineral agreements, FTAAs, or It is apparent that the Panel of Arbitrators is bereft of
permits, and (c) surface owners, occupants and jurisdiction over the Complaint filed by petitioner. The basic
claimholders/concessionaires.20 Under Republic Act No. 7942 issue in petitioner’s Complaint is the presence of fraud or
(otherwise known as the Philippine Mining Act of 1995), the misrepresentation allegedly attendant to the execution of
Panel of Arbitrators has exclusive and original jurisdiction to the Addendum Contract and the other contracts emanating
hear and decide these mining disputes.21 The Court of from it, such that the contracts are rendered invalid and not
Appeals, in its questioned decision, correctly stated that the binding upon the parties. It avers that petitioner was misled
Panel’s jurisdiction is limited only to those mining disputes by respondents into agreeing to the Addendum
which raise questions of fact or matters requiring the Contract. This constitutes fraud which vitiated petitioner’s
application of technological knowledge and experience.22 consent, and under Article 1390 of the Civil Code, is one of
In Pearson v. Intermediate Appellate Court,23 this Court the grounds for the annulment of a voidable contract.
observed that the trend has been to make the adjudication Voidable or annullable contracts, before they are set aside,
of mining cases a purely administrative are existent, valid, and binding, and are effective and
obligatory between the parties.28 They can be ratified.29
-whether the case involves void or voidable contracts is still FTAA and future FTAAs, and the need to avert a multiplicity
a judicial question. It may, in some instances, involve of suits."33
questions of fact especially with regard to the
Arbitration before the Panel of Arbitrators is proper only
determination of the circumstances of the execution of the
when there is a disagreement between the parties as to some
contracts. But the resolution of the validity or voidness of
provisions of the contract between them, which needs the
the contracts remains a legal or judicial question as it
interpretation and the application of that particular
requires the exercise of judicial function. It requires the
knowledge and expertise possessed by members of that
ascertainment of what laws are applicable to the dispute,
Panel. It is not proper when one of the parties repudiates the
the interpretation and application of those laws, and the
existence or validity of such contract or agreement on the
rendering of a judgment based thereon. Clearly, the dispute
ground of fraud or oppression as in this case. The validity of
is not a mining conflict. It is essentially judicial. The
the contract cannot be subject of arbitration proceedings.
complaint was not merely for the determination of rights
Allegations of fraud and duress in the execution of a contract
under the mining contracts since the very validity of those
are matters within the jurisdiction of the ordinary courts of
contracts is put in issue.
law. These questions are legal in nature and require the
The Complaint is not about a dispute involving rights to application and interpretation of laws and jurisprudence
mining areas, nor is it a dispute involving claimholders or which is necessarily a judicial function.
concessionaires. The main question raised was the validity of
-We agree that the case should not be brought under the
the Addendum Contract, the FTAA and the subsequent
ambit of the Arbitration Law, but for a different reason. The
contracts. The question as to the rights of petitioner or
question of validity of the contract containing the agreement
respondents to the mining area pursuant to these contracts,
to submit to arbitration will affect the applicability of the
as well as the question of whether or not petitioner had
arbitration clause itself. A party cannot rely on the contract
ceded his mining claims in favor of respondents by way of
and claim rights or obligations under it and at the same time
execution of the questioned contracts, is merely corollary to
impugn its existence or validity. Indeed, litigants are enjoined
the main issue, and may not be resolved without first
from taking inconsistent positions. As previously discussed,
determining the main issue.
the complaint should have been filed before the regular
The Complaint is also not what is contemplated by Rep. Act courts as it involved issues which are judicial in nature.
No. 7942 when it says the dispute should involve FTAAs.
WHEREFORE, in view of the foregoing, the Petition for
The Complaint is not exclusively within the jurisdiction of the
Review on Certiorari Under Rule 45 is DENIED. The Orders
Panel of Arbitrators just because, or for as long as, the
dated 18 October 2001 and 25 June 2002 of the Panel of
dispute involves an FTAA. The Complaint raised the issue of
Arbitrators are SET ASIDE. Costs against petitioner Jorge
the constitutionality of the FTAA, which is definitely a judicial
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