Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 115412 November 19, 1999

HOME BANKERS SAVINGS AND TRUST COMPANY, petitioner,

vs.
COURT OF APPEALS and FAR EAST BANK & TRUST CO., INC. respondents.

BUENA, J.:

This appeal by certiorari under Rule 45 of the Rules of Court seeks to annul and set aside the decision 1 of the Court
of Appeals 2 dated January 21, 1994 in CA-G.R. SP No. 29725, dismissing the petition for certiorari filed by petitioner
to annul the two (2) orders issued by the Regional Trial Court of Makati 3 in Civil Case No. 92-145, the first, dated April
30, 1992, denying petitioner's motion to dismiss and the second, dated October 1, 1992 denying petitioner's motion for
reconsideration thereof.

The pertinent facts may be briefly stated as follows: Victor Tancuan, one of the defendants in Civil Case No. 92-145,
issued Home Bankers Savings and Trust Company (HBSTC) check No. 193498 for P25,250,000.00 while Eugene
Arriesgado issued Far East Bank and Trust Company (FEBTC) check Nos. 464264, 464272 and 464271 for
P8,600,000.00, P8,500,000.00 and P8,100,000.00, respectively, the three checks amounting to P25,200,000.00.
Tancuan and Arriesgado exchanged each other's checks and deposited them with their respective banks for collection.
When FEBTC presented Tancuan's HBSTC check for clearing, HBSTC dishonored it for being "Drawn Against
Insufficient Funds." On October 15, 1991, HBSTC sent Arriesgado's three (3) FEBTC checks through the Philippine
Clearing House Corporation (PCHC) to FEBTC but was returned on October 18, 1991 as "Drawn Against Insufficient
Funds." HBSTC received the notice of dishonor on October 21, 1991 but refused to accept the checks and on October
22, 1991, returned them to FEBTC through the PCHC for the reason "Beyond Reglementary Period," implying that
HBSTC already treated the three (3) FEBTC checks as cleared and allowed the proceeds thereof to be withdrawn. 4
FEBTC demanded reimbursement for the returned checks and inquired from HBSTC whether it had permitted any
withdrawal of funds against the unfunded checks and if so, on what date. HBSTC, however, refused to make any
reimbursement and to provide FEBTC with the needed information.

Thus, on December 12, 1991, FEBTC submitted the dispute for arbitration before the PCHC Arbitration Committee, 5
under the PCHC's Supplementary Rules on Regional Clearing to which FEBTC and HBSTC are bound as participants
in the regional clearing operations administered by the PCHC. 6

On January 17, 1992, while the arbitration proceeding was still pending, FEBTC filed an action for sum of money and
damages with preliminary
attachment 7 against HBSTC, Robert Young, Victor Tancuan and Eugene Arriesgado with the Regional Trial Court of
Makati, Branch 133. A motion to dismiss was filed by HBSTC claiming that the complaint stated no cause of action and
accordingly ". . . should be dismissed because it seeks to enforce an arbitral award which as yet does not exist." 8 The
trial court issued an omnibus order dated April 30, 1992 denying the motion to dismiss and an order dated October 1,
1992 denying the motion for reconsideration.

On December 16, 1992, HBSTC filed a petition for certiorari with the respondent Court of Appeals contending that the
trial court acted with grave abuse of discretion amounting to lack of jurisdiction in denying the motion to dismiss filed
by HBSTC.

In a Decision 9 dated January 21, 1994, the respondent court dismissed the petition for lack of merit and held that
"FEBTC can reiterate its cause of action before the courts which it had already raised in the arbitration case" 10 after
finding that the complaint filed by FEBTC ". . . seeks to collect a sum of money from HBT [HBSTC] and not to enforce
or confirm an arbitral award." 11 The respondent court observed that "[i]n the Complaint, FEBTC applied for the issuance
of a writ of preliminary attachment over HBT's [HBSTC] property" 12 and citing section 14 of Republic Act No. 876,
otherwise known as the Arbitration Law, maintained that "[n]ecessarily, it has to reiterate its main cause of action for
sum of money against HBT [HBSTC]," 13 and that "[t]his prayer for conservatory relief [writ of preliminary attachment]
satisfies the requirement of a cause of action which FEBTC may pursue in the courts." 14

Furthermore, the respondent court ruled that based on section 7 of the Arbitration Law and the cases of National Union
Fire Insurance Company of Pittsburg vs. Stolt-Nielsen Philippines, Inc., 15 and Bengson vs. Chan, 16 ". . . when there is
a condition requiring prior submission to arbitration before the institution of a court action, the complaint is not to be
dismissed but should be suspended for arbitration." 17 Finding no merit in HBSTC's contention that section 7 of the
Arbitration Law ". . . contemplates a situation in which a party to an arbitration agreement has filed a court action without
first resorting to arbitration, while in the case at bar, FEBTC has initiated arbitration proceedings before filing a court
action," the respondent court held that ". . . if the absence of a prior arbitration may stay court action, so too and with
more reason, should an arbitration already pending as obtains in this case stay the court action. A party to a pending
arbitral proceeding may go to court to obtain conservatory reliefs in connection with his cause of action although the
disposal of that action on the merits cannot as yet be obtained." 18 The respondent court discarded Puromines, Inc. vs.
Court of Appeals, 19 stating that ". . . perhaps Puromines may have been decided on a different factual basis." 20

In the instant petition, 21 petitioner contends that first, "no party litigant can file a non-existent complaint," 22 arguing that
". . . one cannot file a complaint in court over a subject that is undergoing arbitration." 23 Second, petitioner submits that
"[s]ince arbitration is a special proceeding by a clear provision of law, 24 the civil suit filed below is, without a shadow of
doubt, barred by litis pendentia and should be dismissed de plano insofar as HBSTC is concerned." 25 Third, petitioner
insists that "[w]hen arbitration is agreed upon and suit is filed without arbitration having been held and terminated, the
case that is filed should be dismissed," 26 citing Associated Bank vs. Court of Appeals, 27 Puromines, Inc. vs. Court of
Appeals, 28 as and Ledesma vs. Court of Appeals. 29 Petitioner demurs that the Puromines ruling was deliberately not
followed by the respondent court which claimed that:

xxx xxx xxx

It would really be much easier for Us to rule to dismiss the complaint as the petitioner here
seeks to do, following Puromines. But with utmost deference to the Honorable Supreme
Court, perhaps Puromines may have been decided on a different factual basis.

xxx xxx xxx 30

Petitioner takes exception to FEBTC's contention that Puromines cannot modify or reverse the rulings
in National Union Fire Insurance Company of Pittsburg vs. Stolt-Nielsen Philippines, Inc., 31 and
Bengson vs. Chan, 32 where this Court suspended the action filed pending arbitration, and argues
that "[s]ound policy requires that the conclusion of whether a Supreme Court decision has or has not
reversed or modified [a] previous doctrine, should be left to the Supreme Court itself; until then, the
latest pronouncement should prevail." 33 Fourth, petitioner alleges that the writ of preliminary
attachment issued by the trial court is void considering that the case filed before it "is a separate
action which cannot exist," 34 and ". . . there is even no need for the attachment as far as HBSTC is
concerned because such automatic debit/credit procedure 35 may be regarded as a security for the
transactions involved and, as jurisprudence confirms, one requirement in the issuance of an
attachment [writ of preliminary attachment] is that the debtor has no sufficient security." 36 Petitioner
asserts further that a writ of preliminary attachment is unwarranted because no ground exists for its
issuance. According to petitioner, ". . . the only allegations against it [HBSTC] are that it refused to
refund the amounts of the checks of FEBTC and that it knew about the fraud perpetrated by the other
defendants," 37 which, at best, constitute only "incidental fraud" and not causal fraud which justifies
the issuance of the writ of preliminary attachment.

Private respondent FEBTC, on the other hand, contends that ". . . the cause of action for collection [of a sum of money]
can coexist in the civil suit and the arbitration [proceeding]" 38 citing section 7 of the Arbitration Law which provides for
the stay of the civil action until an arbitration has been had in accordance with the terms of the agreement providing for
arbitration. Private respondent further asserts that following section 4(3), article VIII 39 of the 1987 Constitution, the
subsequent case of Puromines does not overturn the ruling in the earlier cases of National Union Fire Insurance
Company of Pittsburg vs. Stolt-Nielsen Philippines, Inc., 40 and Bengson vs. Chan, 41 hence, private respondent
concludes that the prevailing doctrine is that the civil action must be stayed rather than dismissed pending arbitration.
In this petition, the lone issue presented for the consideration of this Court is:

WHETHER OR NOT PRIVATE RESPONDENT WHICH COMMENCED AN ARBITRATION

PROCEEDING UNDER THE AUSPICES OF THE PHILIPPINE CLEARING HOUSE
CORPORATION (PCHC) MAY SUBSEQUENTLY FILE A SEPARATE CASE IN COURT
OVER THE SAME SUBJECT MATTER OF ARBITRATION DESPITE THE PENDENCY OF
THAT ARBITRATION, SIMPLY TO OBTAIN THE PROVISIONAL REMEDY OF
ATTACHMENT AGAINST THE BANK THE ADVERSE PARTY IN THE ARBITRATION
PROCEEDING. 42

We find no merit in the petition. Section 14 of Republic Act 876, otherwise known as the Arbitration Law, allows any
party to the arbitration proceeding to petition the court to take measures to safeguard and/or conserve any matter which
is the subject of the dispute in arbitration, thus:

Sec. 14. Subpoena and subpoena duces tecum. — Arbitrators shall have the power to
require any person to attend a hearing as a witness. They shall have the power to subpoena
witnesses and documents when the relevancy of the testimony and the materiality thereof
has been demonstrated to the arbitrators. Arbitrators may also require the retirement of any
witness during the testimony of any other witness. All of the arbitrators appointed in any
controversy must attend all the hearings in that matter and hear all the allegations and
proofs of the parties; but an award by the majority of them is valid unless the concurrence
of all of them is expressly required in the submission or contract to arbitrate. The arbitrator
or arbitrators shall have the power at any time, before rendering the award, without prejudice
to the rights of any party to petition the court to take measures to safeguard and/or conserve
any matter which is the subject of the dispute in arbitration. (emphasis supplied)

Petitioner's exposition of the foregoing provision deserves scant consideration. Section 14 simply grants an arbitrator
the power to issue subpoena and subpoena duces tecum at any time before rendering the award. The exercise of such
power is without prejudice to the right of a party to file a petition in court to safeguard any matter which is the subject
of the dispute in arbitration. In the case at bar, private respondent filed an action for a sum of money with prayer for a
writ of preliminary attachment. Undoubtedly, such action involved the same subject matter as that in arbitration, i.e.,
the sum of P25,200,000.00 which was allegedly deprived from private respondent in what is known in banking as a
"kiting scheme." However, the civil action was not a simple case of a money claim since private respondent has included
a prayer for a writ of preliminary attachment, which is sanctioned by section 14 of the Arbitration Law.

Petitioner cites the cases of Associated Bank vs. Court of Appeals, 43 Puromines, Inc. vs. Court of Appeals, 44 and
Ledesma vs. Court of Appeals 45 in contending that "[w]hen arbitration is agreed upon and suit is filed without arbitration
having been held and terminated, the case that is filed should be dismissed." 46 However, the said cases are not in
point. In Associated Bank, we affirmed the dismissal of the third-party complaint filed by Associated Bank against
Philippine Commercial International Bank, Far East Bank & Trust Company, Security Bank and Trust Company, and
Citytrust Banking Corporation for lack of jurisdiction, it being shown that the said parties were bound by the Clearing
House Rules and Regulations on Arbitration of the Philippine Clearing House Corporation. In Associated Bank, we
declared that:

. . . . . .. Under the rules and regulations of the Philippine Clearing House Corporation
(PCHC), the mere act of participation of the parties concerned in its operations in effect
amounts to a manifestation of agreement by the parties to abide by its rules and regulations.
As a consequence of such participation, a party cannot invoke the jurisdiction of the courts
over disputes and controversies which fall under the PCHC Rules and Regulations without
first going through the arbitration processes laid out by the body. 47 (emphasis supplied)

And thus we concluded:

Clearly therefore, petitioner Associated Bank, by its voluntary participation and its consent
to the arbitration rules cannot go directly to the Regional Trial Court when it finds it
convenient to do so. The jurisdiction of the PCHC under the rules and regulations is clear,
undeniable and is particularly applicable to all the parties in the third party complaint under
their obligation to first seek redress of their disputes and grievances with the PCHC before
going to the trial court. 48 (emphasis supplied)
Simply put, participants in the regional clearing operations of the Philippine Clearing House Corporation cannot bypass
the arbitration process laid out by the body and seek relief directly from the courts. In the case at bar, undeniably,
private respondent has initiated arbitration proceedings as required by the PCHC rules and regulations, and pending
arbitration has sought relief from the trial court for measures to safeguard and/or conserve the subject of the dispute
under arbitration, as sanctioned by section 14 of the Arbitration Law, and otherwise not shown to be contrary to the
PCHC rules and regulations.

Likewise, in the case of Puromines, Inc. vs. Court of Appeals, 49 we have ruled that:

In any case, whether the liability of respondent should be based on the sales contract or
that of the bill of lading, the parties are nevertheless obligated to respect the arbitration
provisions on the sales contract and/or bill of lading. Petitioner being a signatory and party
to the sales contract cannot escape from his obligation under the arbitration clause as stated
therein.

In Puromines, we found the arbitration clause stated in the sales contract to be valid and applicable,
thus, we ruled that the parties, being signatories to the sales contract, are obligated to respect the
arbitration provisions on the contract and cannot escape from such obligation by filing an action for
breach of contract in court without resorting first to arbitration, as agreed upon by the parties.

At this point, we emphasize that arbitration, as an alternative method of dispute resolution, is encouraged by this Court.
Aside from unclogging judicial dockets, it also hastens solutions especially of commercial disputes. 50 The Court looks
with favor upon such amicable arrangement and will only interfere with great reluctance to anticipate or nullify the action
of the arbitrator. 51

WHEREFORE, premises considered, the petition is hereby DISMISSED and the decision of the court a quo is
AFFIRMED.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 99042 September 26, 1994

BLOOMFIELD ACADEMY AND RODOLFO J. LAGERA, petitioners,

vs.
THE HONORABLE COURT OF APPEALS, BLOOMFIELD ACADEMY PARENTS ADVISORY ASSOCIATION, INC.
(BAPAA), represented by its Vice-President, Menardo Bordeos; and The Hon. SALVADOR P. DE GUZMAN, JR.,
Presiding Judge of the Regional Trial Court, National Capital Judicial Region, Branch 142, Makati, Metro Manila,
respondents.

Villaranza & Cruz for petitioners.

San Buenaventura, Reyes, Moraleda (SAREM) Law Offices for private respondent.

VITUG, J.:
This petition for review on certiorari seeks to reverse the decision of the Court of Appeals dismissing, in CA-G.R. SP.
No. 20846, the special civil action for certiorari that has assailed a writ of preliminary injunction issued by the court a
quo.

We adopt, for purposes of this review, the case and factual settings recited by the appellate court in its decision. We
quote:

The petition originated in a complaint for injunction filed on

April 6, 1990 by private respondent, the association of parents and guardians of students
enrolled in petitioner. One of the defendants in the said case is petitioner which is a non-
stock, non-profit educational institution. What is being disputed before respondent court is
the increase in tuition fee. More particularly, the complaint alleged, among other things, that:

xxx xxx xxx

4. On the pretext that the operation, much more the survival of defendant
educational institution is in danger due to the mandatory increase of the
minimum wage under R.A. 6727, which the former is to comply, the
defendant Corporation decided to increase its aforesaid tuition fees under
the following rates:

FROM TO INCREASE IN

P%

Grade I P6,135 P7,485 P1,350 22.00

Grade II 6,135 7,485 1,350 22.00

Grade III 6,235 7,675 1,350 21.34

Grade IV 6,235 7,675 1,350 21.34

Grade V 6,380 7,730 1,350 21.16

Grade VI 6,380 7,770 1,350 21.79

HS 1st year 6,700 8,050 1,350 20.15

HS 2nd year 6,700 8,050 1,350 20.15

——— ——— ——— ———

Average 6,385 7,740 1,355 21.22

====== ====== ====== ======

5. The amount of the increase constitutes a whopping 21.22% average

increase of the 89-90 tuition fees and that the said increase was made
without prior consultation to the parents which is a requirement before
any such increase should be made effective;

6. The aforesaid increases was not approved and vigorously objected to

by the plaintiff as contained in its letters to defendant Rodolfo J. Lagera .
. . Honorable Isidro Cariño in his capacity as the Secretary of Education,
 Culture and Sports . . . These two letters brought to the attention of the
defendants that the tuition fees presently being charged by defendants
Bloomfield Academy are already among the highest in the community,
even if compared to Dela Salle Ayala and Elizabeth Seton which have
much better school and library facilities than the defendant, and that the
proposed increase is not only untimely but grossly inappropriate, and,
worse, without any valid basis already, after both parties agreed on 50%
of the increase which was implemented and paid by the students during
the school year with the clear understanding that the other 50% is waived
by the defendant;

7. In spite of the clear sharing by the plaintiff through the aforesaid letters
of the gross inappropriateness of the aforesaid proposal increase in
tuition fees, defendants Honorable Isidro Cariño, blindly approved such
proposal in its letter addressed to defendant Rodolfo S. Lagera dated
March 27, 1990 . . .;

8. Subsequently plaintiff received from the defendant Bloomfield

Academy through defendant Rodolfo S. Lagera a
letter . . . demanding full payment of the approved tuition fee increase on
or before April 6, 1990 in blatant isolation of the agreement with the
plaintiff that only 50% of the increase will be collected. As a matter of fact,
the plaintiff has already paid the said 50% of the increase;

9. The implementation of the aforesaid approval to increase tuition fees,

if not retained by this Honorable Court, would work injustice to the herein
plaintiff . . . while incorporators keep huge profits, by siphoning them to
another corporation, Rudlin International, Inc. while they also owned and
is now asking for increase in the rentals of the buildings retroactively for
three (3) years.

On the date the complaint was filed, respondent court issued an order enjoining petitioners
and Secretary Cariño and/or their agents, representatives or persons acting in their behalf
from implementing their aforesaid increase in tuition fees, and not withholding their release
of the report cards and/or other papers necessary for the students desiring to transfer to
other schools until further orders from respondent court.
The application for injunction was set for hearing on April 19, 1990 at
2:00 p.m.

Answer to the complaint was filed by petitioners on April 19, 1990. On the same date,
respondent court conducted the first hearing on the application for a writ of preliminary
injunction which hearing was followed by settings on April 25, 26 and 27, 1990.

After petitioners submitted their complete set of exhibits and memorandum in opposition to
the application for a writ of preliminary injunction, respondent court issued the disputed
order . . . 1

The order of the court a quo, dated 30 April 1990, referred to by the appellate court read:

WHEREFORE, let a writ of preliminary injunction be issued ordering the defendants, their
agents, their representatives, and all persons acting under them from collecting the second
P675.00 from the enrollees, limiting themselves only to the first P675.00 and/or from
withholding or refusing the release of the report cards and other papers necessary for
students transferring to other school, until further order from this court, upon the posting by
the plaintiff of a bond in the sum of P200,000.00 conditioned to the payment in favor of the
defendants of whatever damages they may suffer by virtue of this injunction should it appear
that the plaintiff is not entitled thereto. 2
In holding to be without merit the petition for certiorari attributing to the court a quo grave abuse of discretion in the
issuance of the aforequoted order, the appellate court ratiocinated thusly:

It is a well established rule that the grant or denial of an injunction rests upon the sound
discretion of the court, in the exercise of which appellate courts will not interfere except on
a case of a clear abuse (Belisle Investment and Finance Co., Inc. W. State Investment
House; Rodolfo vs. Alfonso, 76 Phil. 225). And to justify the issuance of a writ of certiorari it
must be shown that the abuse of discretion was grave and patent and that the discretion
was exercised arbitrarily or despotically (Soriano, et al., vs. Atienza, et al., 171 SCRA 284).

xxx xxx xxx

Rightly or wrongly, respondent judge's conclusion, which served as basis in issuing the
questioned writ, was reached only after considering the facts bared in the course of the
hearing. In other words, respondent judge was merely exercising his judgment. Errors of
judgment are not within the province of a special civil action for certiorari (Purefoods
Corporation vs. NLRC, 174 SCRA 415).

One thing we noticed about this petition is that the issues raised are factual involving as
they do errors of judgment on the part of respondent judge. Invariably, we encounter the
following arguments:

. . . public respondent Judge de Guzman appears to have been mislead

by the private respondent BAPAA's claim that petitioner Bloomfield
Academy did not conduct the requisite consultation before implementing
the tuition fee increase.

. . . public respondent Judge de Guzman appears to have been mislead

by the private respondent's untruthful claim.

It must emphatically be reiterated, since so often it is overlooked, the special civil action for
certiorari is a remedy designed for the correction of errors of jurisdiction and not errors of
judgment. Consequently, an error of jurisdiction is not controvertible through the original
civil action of certiorari (Purefoods Corporation vs. NLRC, 171 SCRA 418).

Anent the allegation that respondent judge disregarded the fact that the private respondent
failed to exhaust available administrative remedies in assailing the decision of the
Department of Education Culture and Sports approving the tuition fee increase suffice it to
state that the principle requiring the previous exhaustion of administrative remedies is not
applicable when the respondent is a department secretary whose act as an alter-ego of the
President bears the implied or assumed approval of the latter (Animos vs. Phil. Veterans
Affairs Office, 174 SCRA 214.). 3

In the herein petition for review on certiorari before this Court, petitioners formulate the sole issue of whether or not the
court a quo has acted within its jurisdiction in issuing the questioned order and, in the affirmative, whether or not it has
committed grave abuse of discretion specifically in granting private respondent's application for a writ of preliminary
injunction.

We see merit in the petition.

The pertinent provisions of Republic Act No. 6728, also commonly known as "An Act Providing Government Assistance
to Students and Teachers in Private Education, And Appropriating Funds Therefor," provide:

Sec. 9. Further Assistance To Students in Private Colleges and Universities. — . . . .

(b) For students enrolled in schools charging above one thousand five hundred pesos
(P1,500.00) per year in tuition and other fees during the school year 1988-1989 or such
amount in subsequent years as may be determined from time to time by the State
 Assistance Council, no assistance for tuition fees shall be granted by the Government:
Provided, however, That the schools concerned may raise their tuition fees subject to
Section 10 hereof.

xxx xxx xxx

Sec. 10. Consultation. — In any proposed increase in the rate of tuition fee, there shall be
appropriate consultations conducted by the school administration with the duly organized
parents and teachers associations and faculty associations with respect to secondary
schools, and with students governments or councils, alumni and faculty associations with
respect to colleges. For this purpose, audited financial statements shall be made available
to authorized representatives of these sectors. Every effort shall be exerted to reconcile
possible differences. In case of disagreement, the alumni association of the school or any
other impartial body of their choosing shall act as arbitrator.

xxx xxx xxx

Sec. 14. Program Administration/Rules and Regulations. — The State Assistance Council
shall be responsible for policy guidance and direction, monitoring and evaluation of new and
existing programs, and the promulgation of rules and regulations, while the Department of
Education, Culture and Sports shall be responsible for the day to day administration and
program implementation. Likewise, it may engage the services and support of any qualified
government or private entity for its implementation. (Emphasis supplied.)

Private respondent filed with the court a quo an action, entitled "Injunction with Preliminary Prohibitory Injunction with
Prayer for Temporary Restraining Order" (docketed Civil Case No. 90-971), against petitioners and the Secretary of
Education, Culture and Sports ("DECS") seeking to stop the implementation of the increase in tuition fees by petitioner
school. Private respondent asserted that the increase was adopted without the prior
consultation required by law and that, in any case, the approved increase was exorbitant (at 21.22%). Petitioners, on
their part, contended that the parties did, in fact, hold consultations at which the wage increase for teachers mandated
by Republic Act 6727 and the resulting increase in tuition fees allowed by Republic Act No. 6728 were discussed at
length. The Solicitor General, answering the complaint for and in behalf of the DECS Secretary, attested to the approval
by DECS of a fifty percent (50%) tuition fee increase for the school year 1989-1990.

The judicial action initiated by private respondent before the court a quo appears to us to be an inappropriate recourse.
It remains undisputed that the DECS Secretary has, in fact, taken cognizance of the case for the tuition fee increase
and has accordingly acted thereon. We can only assume that in so doing the DECS Secretary has duly passed upon
the relevant legal and factual issues dealing on the propriety of the matter. In the decision process, the DECS Secretary
has verily acted in a quasi-judicial capacity. The remedy from that decision is an appeal. Conformably with Batas
Pambansa Blg. 129, the exclusive appellate jurisdiction to question that administrative action lies with the Court of
Appeals, not with the court a quo. If we were to consider, upon the other hand, the case for injunction filed with the
court a quo to be a ordinary action solely against herein petitioner (with DECS being then deemed to be merely a
nominal party), it would have meant the court's taking cognizance over the case in disregard of the doctrine of primary
jurisdiction. 4

Neither can we treat the case as a special civil action for certiorari or prohibition as the complaint filed by private
respondent with the court a quo, contains no allegation of lack, or grave abuse in the exercise, of jurisdiction on the
part of DECS nor has there been any finding made to that effect by either the court a quo or the appellate court that
could warrant the extraordinary remedy. A special civil action, either for certiorari or prohibition, can be grounded only
on either lack of jurisdiction or grave abuse of discretion. 5

In passing, we also observe that the parties have both remained silent on the provisions of Republic Act No. 6728 to
the effect that in case of disagreement on tuition fee increases (in this instance by herein private parties), the issue
should be resolved through arbitration. Although the matter has not been raised by the parties, it is an aspect,
nevertheless, in our view, that could have well been explored by them instead of immediately invoking, such as they
apparently did, the administrative and judicial relief to resolve the controversy.
All told, we hold that the court a quo has been bereft of jurisdiction in taking cognizance of private respondent's
complaint. We see no real justification, on the basis of the factual and case settings here obtaining, to permit a deviation
from the long standing rule that the issue of jurisdiction may be raised at any time even on appeal.

WHEREFORE, conformably with our above opinion, the instant petition is GRANTED and the questioned ordered of
the court a quo and the decision of the appellate court are SET ASIDE. No costs.

SO ORDERED.

G.R. No. 129916 March 26, 2001

MAGELLAN CAPITAL MANAGEMENT CORPORATION and MAGELLAN CAPITAL HOLDINGS CORPORATION,

petitioners,
vs.
ROLANDO M. ZOSA and HON. JOSE P. SOBERANO, JR., in his capacity as Presiding Judge of Branch 58 of
the Regional Trial Court of Cebu, 7th Judicial Region, respondents.

BUENA, J.:

Under a management agreement entered into on March 18, 1994, Magellan Capital Holdings Corporation [MCHC]
appointed Magellan Capital Management Corporation [MCMC] as manager for the operation of its business and affairs. 1
Pursuant thereto, on the same month, MCHC, MCMC, and private respondent Rolando M. Zosa entered into an
"Employment Agreement" designating Zosa as President and Chief Executive Officer of MCHC.

Under the "Employment Agreement", the term of respondent Zosa's employment shall be co-terminous with the
management agreement, or until March 1996,2 unless sooner terminated pursuant to the provisions of the Employment
Agreement.3 The grounds for termination of employment are also provided in the Employment Agreement.

On May 10, 1995, the majority of MCHC's Board of Directors decided not to re-elect respondent Zosa as President and
Chief Executive Officer of MCHC on account of loss of trust and confidence 4 arising from alleged violation of the
resolution issued by MCHC's board of directors and of the non-competition clause of the Employment Agreement. 5
Nevertheless, respondent Zosa was elected to a new position as MCHC's Vice-Chairman/Chairman for New Ventures
Development.6

On September 26, 1995, respondent Zosa communicated his resignation for good reason from the position of Vice-
Chairman under paragraph 7 of the Employment Agreement on the ground that said position had less responsibility
and scope than President and Chief Executive Officer. He demanded that he be given termination benefits as provided
for in Section 8 (c) (i) (ii) and (iii) of the Employment Agreement.7

In a letter dated October 20, 1995, MCHC communicated its non-acceptance of respondent Zosa's resignation for good
reason, but instead informed him that the Employment Agreement is terminated for cause, effective November 19,
1995, in accordance with Section 7 (a) (v) of the said agreement, on account of his breach of Section 12 thereof.
Respondent Zosa was further advised that he shall have no further rights under the said Agreement or any claims
against the Manager or the Corporation except the right to receive within thirty (30) days from November 19, 1995, the
amounts stated in Section 8 (a) (i) (ii) of the Agreement.8

Disagreeing with the position taken by petitioners, respondent Zosa invoked the Arbitration Clause of the Employment
Agreement, to wit:

"23. Arbitration. In the event that any dispute, controversy or claim arises out of or under any
provisions of this Agreement, then the parties hereto agree to submit such dispute, controversy or
claim to arbitration as set forth in this Section and the determination to be made in such arbitration
shall be final and binding. Arbitration shall be effected by a panel of three arbitrators. The Manager,
Employee and Corporation shall designate one (1) arbitrator who shall, in turn, nominate and elect
who among them shall be the chairman of the committee. Any such arbitration, including the
rendering of an arbitration award, shall take place in Metro Manila. The arbitrators shall interpret this
 Agreement in accordance with the substantive laws of the Republic of the Philippines. The arbitrators
shall have no power to add to, subtract from or otherwise modify the terms of Agreement or to grant
injunctive relief of any nature. Any judgment upon the award of the arbitrators may be entered in any
court having jurisdiction thereof, with costs of the arbitration to be borne equally by the parties, except
that each party shall pay the fees and expenses of its own counsel in the arbitration."

On November 10, 1995, respondent Zosa designated his brother, Atty. Francis Zosa, as his representative in the
arbitration panel9 while MCHC designated Atty. Inigo S. Fojas 10 and MCMC nominated Atty. Enrique I. Quiason 11 as
their respective representatives in the arbitration panel. However, instead of submitting the dispute to arbitration,
respondent Zosa, on April 17, 1996, filed an action for damages against petitioners before the Regional Trial Court of
Cebu12 to enforce his benefits under the Employment Agreement.

On July 3, 1996, petitioners filed a motion to dismiss13 arguing that (1) the trial court has no jurisdiction over the instant
case since respondent Zosa's claims should be resolved through arbitration pursuant to Section 23 of the Employment
Agreement with petitioners; and (2) the venue is improperly laid since respondent Zosa, like the petitioners, is a resident
of Pasig City and thus, the venue of this case, granting without admitting that the respondent has a cause of action
against the petitioners cognizable by the RTC, should be limited only to RTC-Pasig City.14

Meanwhile, respondent Zosa filed an amended complaint dated July 5, 1996.

On August 1, 1996, the RTC Branch 58 of Cebu City issued an Order denying petitioners motion to dismiss upon the
findings that (1) the validity and legality of the arbitration provision can only be determined after trial on the merits; and
(2) the amount of damages claimed, which is over P100,000.00, falls within the jurisdiction of the RTC. 15 Petitioners
filed a motion for reconsideration which was denied by the RTC in an order dated September 5, 1996.16

In the interim, on August 22, 1996, in compliance with the earlier order of the court directing petitioners to file responsive
pleading to the amended complaint, petitioners filed their Answer Ad Cautelam with counterclaim reiterating their
position that the dispute should be settled through arbitration and the court had no jurisdiction over the nature of the
action.17

On October 21, 1996, the trial court issued its pre-trial order declaring the pre-trial stage terminated and setting the
case for hearing. The order states:

"ISSUES:

"The Court will only resolve one issue in so far as this case is concerned, to wit:

"Whether or not the Arbitration Clause contained in Sec. 23 of the Employment Agreement is void
and of no effect: and, if it is void and of no effect, whether or not the plaintiff is entitled to damages in
accordance with his complaint and the defendants in accordance with their counterclaim.

"It is understood, that in the event the arbitration clause is valid and binding between the parties, the
parties shall submit their respective claim to the Arbitration Committee in accordance with the said
arbitration clause, in which event, this case shall be deemed dismissed." 18

On November 18, 1996, petitioners filed their Motion Ad Cautelam for the Correction, Addition and Clarification of the
Pre-trial Order dated November 15, 1996,19 which was denied by the court in an order dated November 28, 1996. 20

Thereafter, petitioners MCMC and MCHC filed a Motion Ad Cautelam for the parties to file their Memoranda to support
their respective stand on the issue of the validity of the "arbitration clause" contained in the Employment Agreement.
In an order dated December 13, 1996, the trial court denied the motion of petitioners MCMC and MCHC.

On January 17, 1997, petitioners MCMC and MCHC filed a petition for certiorari and prohibition under Rule 65 of the
Rules of Court with the Court of Appeals, questioning the trial court orders dated August 1, 1996, September 5, 1996,
and December 13, 1996.21
On March 21, 1997, the Court of Appeals rendered a decision, giving due course to the petition, the decretal portion of
which reads:

"WHEREFORE, the petition is GIVEN DUE COURSE. The respondent court is directed to resolve
the issue on the validity or effectivity of the arbitration clause in the Employment Agreement, and to
suspend further proceedings in the trial on the merits until the said issue is resolved. The questioned
orders are set aside insofar as they contravene this Court's resolution of the issues raised as herein
pronounced.

"The petitioner is required to remit to this Court the sum of P81.80 for cost within five (5) days from
notice.

"SO ORDERED."22

Petitioners filed a motions for partial reconsideration of the CA decision praying (1) for the dismissal of the case in the
trial court, on the ground of lack of jurisdiction, and (2) that the parties be directed to submit their dispute to arbitration
in accordance with the Employment Agreement dated March 1994. The CA, in a resolution promulgated on June 20,
1997, denied the motion for partial reconsideration for lack of merit.

In compliance with the CA decision, the trial court, on July 18, 1997, rendered a decision declaring the "arbitration
clause" in the Employment Agreement partially void and of no effect. The dispositive portion of the decision reads:

"WHEREFORE, premises considered, judgment is hereby rendered partially declaring the arbitration
clause of the Employment Agreement void and of no effect, only insofar as it concerns the
composition of the panel of arbitrators, and directing the parties to proceed to arbitration in
accordance with the Employment Agreement under the panel of three (3) arbitrators, one for the
plaintiff, one for the defendants, and the third to be chosen by both the plaintiff and defendants. The
other terms, conditions and stipulations in the arbitration clause remain in force and effect." 23

In view of the trial court's decision, petitioners filed this petition for review on certiorari, under Rule 45 of the Rules of
Court, assigning the following errors for the Court's resolution:

"I. The trial court gravely erred when it ruled that the arbitration clause under the employment
agreement is partially void and of no effect, considering that:

"A. The arbitration clause in the employment agreement dated March 1994 between
respondent Zosa and defendants MCHC and MCMC is valid and binding upon the parties
thereto.

"B. In view of the fact that there are three parties to the employment agreement, it is but
proper that each party be represented in the arbitration panel.

"C. The trial court grievously erred in its conclusion that petitioners MCMC and MCHC
represent the same interest.

"D. Respondent Zosa is estopped from questioning the validity of the arbitration clause,
including the right of petitioner MCMC to nominate its own arbitrator, which he himself has
invoked.

"II. In any event, the trial court acted without jurisdiction in hearing the case below, considering that
it has no jurisdiction over the nature of the action or suit since controversies in the election or
appointment of officers or managers of a corporation, such as the action brought by respondent Zosa,
fall within the original and exclusive jurisdiction of the Securities and Exchange Commission.

"III. Contrary to respondent Zosa's allegation, the issue of the trial court's jurisdiction over the case
below has not yet been resolved with finality considering that petitioners have expressly reserved
 their right to raise said issue in the instant petition. Moreover, the principle of the law of the case is
not applicable in the instant case.

"IV. Contrary to respondent Zosa's allegation, petitioners MCMC and MCHC are not guilty of forum
shopping.

"V. Contrary to respondent Zosa's allegation, the instant petition for review involves only questions
of law and not of fact."24

We rule against the petitioners.

It is error for the petitioners to claim that the case should fall under the jurisdiction of the Securities and Exchange
Commission [SEC, for brevity]. The controversy does not in anyway involve the election/appointment of officers of
petitioner MCHC, as claimed by petitioners in their assignment of errors. Respondent Zosa's amended complaint
focuses heavily on the illegality of the Employment Agreement's "Arbitration Clause" initially invoked by him in seeking
his termination benefits under Section 8 of the employment contract. And under Republic Act No. 876, otherwise known
as the "Arbitration Law," it is the regional trial court which exercises jurisdiction over questions relating to arbitration.
We thus advert to the following discussions made by the Court of Appeals, speaking thru Justice Minerva P. Gonzaga-
Reyes,25 in C.A.-G.R. S.P. No. 43059, viz.

"As regards the fourth assigned error, asserting that jurisdiction lies with the SEC, which is raised for
the first time in this petition, suffice it to state that the Amended Complaint squarely put in issue the
question whether the Arbitration Clause is valid and effective between the parties. Although the
controversy which spawned the action concerns the validity of the termination of the service of a
corporate officer, the issue on the validity and effectivity of the arbitration clause is determinable by
the regular courts, and do not fall within the exclusive and original jurisdiction of the SEC.

"The determination and validity of the agreement is not a matter intrinsically connected with the
regulation and internal affairs of corporations (see Pereyra vs. IAC, 181 SCRA 244; Sales vs. SEC,
169 SCRA 121); it is rather an ordinary case to be decided in accordance with the general laws, and
do not require any particular expertise or training to interpret and apply (Viray vs. CA, 191 SCRA
308)."26

Furthermore, the decision of the Court of Appeals in CA-G.R. SP No. 43059 affirming the trial court's assumption of
jurisdiction over the case has become the "law of the case" which now binds the petitioners. The "law of the case"
doctrine has been defined as "a term applied to an established rule that when an appellate court passes on a question
and remands the cause to the lower court for further proceedings, the question there settled becomes the law of the
case upon subsequent appeal."27 To note, the CA's decision in CA-G.R. SP No. 43059 has already attained finality as
evidenced by a Resolution of this Court ordering entry of judgment of said case, to wit:

"ENTRY OF JUDGMENT

This is to certify that on September 8, 1997 a decision/resolution rendered in the above-entitled case
was filed in this Office, the dispositive part of which reads as follows:

'G.R. No. 129615. (Magellan Capital Management Corporation, et al. vs. Court of Appeals,
Rolando Zosa, et al.). Considering the petitioner's manifestation dated August 11, 1997 and
withdrawal of intention to file petition for review on certiorari, the Court Resolved to
DECLARE THIS CASE TERMINATED and DIRECT the Clerk of Court to INFORM the
parties that the judgment sought to be reviewed has become final and executory, no appeal
therefore having been timely perfected.'

and that the same has, on September 17, 1997, become final and executory and is hereby recorded
in the Book of Entries of Judgments."28

Petitioners, therefore, are barred from challenging anew, through another remedial measure and in any other forum,
the authority of the regional trial court to resolve the validity of the arbitration clause, lest they be truly guilty of forum-
shopping which the courts consistently consider as a contumacious practice that derails the orderly administration of
justice.

Equally unavailing for the petitioners is the review by this Court, via the instant petition, of the factual findings made by
the trial court that the composition of the panel of arbitrators would, in all probability, work injustice to respondent Zosa.
We have repeatedly stressed that the jurisdiction of this Court in a petition for review on certiorari under Rule 45 of the
Revised Rules of Court is limited to reviewing only errors of law, not of fact, unless the factual findings complained of
are devoid of support by the evidence on record, or the assailed judgment is based on misapprehension of facts. 29

Even if procedural rules are disregarded, and a scrutiny of the merits of the case is undertaken, this Court finds the trial
court's observations on why the composition of the panel of arbitrators should be voided, incisively correct so as to
merit our approval. Thus,

"From the memoranda of both sides, the Court is of the view that the defendants [petitioner] MCMC
and MCHC represent the same interest. There is no quarrel that both defendants are entirely two
different corporations with personalities distinct and separate from each other and that a corporation
has a personality distinct and separate from those persons composing the corporation as well as
from that of any other legal entity to which it may be related.

"But as the defendants [herein petitioner] represent the same interest, it could never be expected, in
the arbitration proceedings, that they would not protect and preserve their own interest, much less,
would both or either favor the interest of the plaintiff. The arbitration law, as all other laws, is intended
for the good and welfare of everybody. In fact, what is being challenged by the plaintiff herein is not
the law itself but the provision of the Employment Agreement based on the said law, which is the
arbitration clause but only as regards the composition of the panel of arbitrators. The arbitration
clause in question provides, thus:

'In the event that any dispute, controversy or claim arise out of or under any provisions of
this Agreement, then the parties hereto agree to submit such dispute, controversy or claim
to arbitration as set forth in this Section and the determination to be made in such arbitration
shall be final and binding. Arbitration shall be effected by a panel of three arbitrators. The
Manager, Employee, and Corporation shall designate one (1) arbitrator who shall, in turn,
nominate and elect as who among them shall be the chairman of the committee. Any such
arbitration, including the rendering of an arbitration award, shall take place in Metro Manila.
The arbitrators shall interpret this Agreement in accordance with the substantive laws of the
Republic of the Philippines. The arbitrators shall have no power to add to, subtract from or
otherwise modify the terms of this Agreement or to grant injunctive relief of any nature. Any
judgment upon the award of the arbitrators may be entered in any court having jurisdiction
thereof, with costs of the arbitration to be borne equally by the parties, except that each
party shall pay the fees and expenses of its own counsel in the arbitration.' (Emphasis
supplied).

"From the foregoing arbitration clause, it appears that the two (2) defendants [petitioners] (MCMC
and MCHC) have one (1) arbitrator each to compose the panel of three (3) arbitrators. As the
defendant MCMC is the Manager of defendant MCHC, its decision or vote in the arbitration
proceeding would naturally and certainly be in favor of its employer and the defendant MCHC would
have to protect and preserve its own interest; hence, the two (2) votes of both defendants (MCMC
and MCHC) would certainly be against the lone arbitrator for the plaintiff [herein defendant]. Hence,
apparently, plaintiff [defendant] would never get or receive justice and fairness in the arbitration
proceedings from the panel of arbitrators as provided in the aforequoted arbitration clause. In fairness
and justice to the plaintiff [defendant], the two defendants (MCMC and MCHC) [herein petitioners]
which represent the same interest should be considered as one and should be entitled to only one
arbitrator to represent them in the arbitration proceedings. Accordingly, the arbitration clause, insofar
as the composition of the panel of arbitrators is concerned should be declared void and of no effect,
because the law says, "Any clause giving one of the parties power to choose more arbitrators than
the other is void and of no effect" (Article 2045, Civil Code).

"The dispute or controversy between the defendants (MCMC and MCHC) [herein petitioners] and the
plaintiff [herein defendant] should be settled in the arbitration proceeding in accordance with the
Employment Agreement, but under the panel of three (3) arbitrators, one (1) arbitrator to represent
 the plaintiff, one (1) arbitrator to represent both defendants (MCMC and MCHC) [herein petitioners]
and the third arbitrator to be chosen by the plaintiff [defendant Zosa] and defendants [petitioners].

"xxx xxx xxx"30

In this connection, petitioners' attempt to put respondent in estoppel in assailing the arbitration clause must be struck
down. For one, this issue of estoppel, as likewise noted by the Court of Appeals, found its way for the first time only on
appeal. Well-settled is the rule that issues not raised below cannot be resolved on review in higher courts.31 Secondly,
employment agreements such as the one at bar are usually contracts of adhesion. Any ambiguity in its provisions is
generally resolved against the party who drafted the document. Thus, in the relatively recent case of Phil. Federation
of Credit Cooperatives, Inc. (PFCCI) and Fr. Benedicto Jayoma vs. NLRC and Victoria Abril,32 we had the occasion to
stress that "where a contract of employment, being a contract of adhesion, is ambiguous, any ambiguity therein should
be construed strictly against the party who prepared it." And, finally, respondent Zosa never submitted himself to
arbitration proceedings (as there was none yet) before bewailing the composition of the panel of arbitrators. He in fact,
lost no time in assailing the "arbitration clause" upon realizing the inequities that may mar the arbitration proceedings
if the existing line-up of arbitrators remained unchecked.

We need only to emphasize in closing that arbitration proceedings are designed to level the playing field among the
parties in pursuit of a mutually acceptable solution to their conflicting claims. Any arrangement or scheme that would
give undue advantage to a party in the negotiating table is anathema to the very purpose of arbitration and should,
therefore, be resisted.

WHEREFORE, premises considered, the petition is hereby DISMISSED and the decision of the trial court dated July
18, 1997 is AFFIRMED.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 102881 December 7, 1992

TOYOTA MOTOR PHILIPPINES CORPORATION, petitioner,

vs.
THE COURT OF APPEALS, HON. FERNANDO V. GOROSPE, JR. and SUN VALLEY MANUFACTURING &
DEVELOPMENT CORPORATION, respondents.

GUTIERREZ, JR., J.:

This case involves a boundary dispute between Toyota Motor Phil. Corporation (Toyota) and Sun Valley Manufacturing
and Development Corporation (Sun Valley).

Both Toyota and Sun Valley are the registered owners of two (2) adjoining parcels of land situated in La Huerta,
Parañaque, Metro Manila which they purchased from the Asset Privatization Trust (APT).

The properties in question formerly belonged to Delta Motors Corporation (DMC). They were foreclosed by the
Philippine National Bank (PNB) and later transferred to the national government through the APT for disposition.

APT then proceeded to classify the DMC properties according to the existing improvements, i.e., buildings, driveways,
parking areas, perimeter fence, walls and gates and the land on which the improvements stood. The entire DMC
property is called GC III-Delta Motors Corporation, divided into Delta I, Delta II, and Delta III. Further subdivisions for
the separate catalogues were made for each division e.g. Delta I into Lots 1, 2 and 3. After this classification, APT
parcelled out and catalogued the properties for bidding and sale.

Part of the duly parcelled Delta I property (Lot 2) was sold to Toyota through public bidding on May 12, 1988 for the
amount of P95,385,000.00. After its purchase, Toyota constructed a concrete hollow block (CHB) perimeter fence
around its alleged property.

On October 5, 1990, another part of the parcelled Delta I (Lot 1) covering an area of 55,236 square meters was
purchased by Sun Valley from APT for the bid price of P124,349,767.00. Relying upon the title description of its property
and the surveys it had commissioned, Sun Valley claimed that Toyota's perimeter fence overlaps Sun Valley's property
along corners 11 to 15 by 322 square meters and corners 19 to 1 by 401 square meters for a total of 723 square meters.
(Rollo, p. 841)

Negotiations between the two (2) corporations for a possible settlement of the dispute bogged down. Court battles
ensued, grounded on purely procedural issues. In pursuing the resolution of the dispute, both Toyota and Sun Valley
opted to file separate actions. Much of the complications that arose and are now before us can be traced to the two
separate cases pursued by both parties. There are other cases arising from the same dispute but which are not before
us.

Culled from the records, these are the antecedents of the two cases which transpired below.

TOYOTA CASE (Civil Case No. 91-2504)

On September 11, 1991, Toyota filed a case against APT and Sun Valley docketed as Civil Case No. 91-2504 with the
Regional Trial Court of Makati, Branch 146 presided by Judge Salvador Tensuan. The complaint was for the reformation
of the Deed of Sale executed between Toyota and APT. Toyota alleges that the instrument failed to reflect the true
intention of the parties, as evidenced by the failure of the title to include the 723 square meters strip of land.

Toyota alleges that the discrepancy came about because of the serious flaw in the classification/cataloguing of
properties bidded out for sale by APT. Toyota was made to understand that included in its perimeter fence is the
disputed strip of land. Thus, Toyota sought the resurvey of the property to correct this error in the title. Sun Valley was
impleaded considering that it purchased the adjoining land whose title allegedly included the 723 square meters
property.

On September 11, 1991, upon Toyota's application, Judge Tensuan issued a temporary restraining order (TRO)
enjoining Sun Valley and APT from any act of destruction and removal of Toyota's walls and structures. Sun Valley and
APT were respectively served summons on the following day.

On September 16, 1991, Sun Valley filed a motion to dismiss, on the ground that the Toyota complaint failed to state a
cause of action against it (1) since it was not a party to the contract of the deed of sale between Toyota and APT, and
(2) the complaint was in effect a collateral attack on its title.

On September 27, 1991, Judge Tensuan initially denied Toyota's application for preliminary injunction on the finding
that there was no evidence of any threatened destruction, removal or dispossession of Toyota's property.

On October 10, 1991, Judge Tensuan denied Sun Valley's motion to dismiss.

Both Toyota and Sun Valley filed their respective motions for reconsideration. Toyota moved to reconsider the denial
of its injunctive application while Sun Valley moved to reconsider the denial of its motion to dismiss.

On October 30, 1991, APT filed its answer with affirmative defenses alleging that the complaint must be dismissed on
the ground that Toyota and APT should first have resorted to arbitration as provided in Toyota's deed of sale with APT.
On December 4, 1991, Toyota filed a motion alleging that Sun Valley's long threatened destruction and removal of
Toyota's walls and structures were actually being implemented to which Judge Tensuan issued another TRO enjoining
acts of destruction and removal of the perimeter walls and structures on the contested area.

Consequently, on December 17, 1991, Judge Tensuan reconsidered his earlier denial of Toyota's application for
injunction and granted a writ of preliminary injunction enjoining Sun Valley from proceeding with its threatened
destruction and removal of Toyota's walls and directed Sun Valley to restore the premises to the status quo ante.

On December 11, 1991, Judge Tensuan denied Sun Valley's motion for reconsideration of its motion to dismiss. Sun
Valley elevated this denial to the Court of Appeals. The case was docketed as CA-G.R. Sp. No. 26942 and raffled to
the Eleventh (11th) Division.

Judge Tensuan's jurisdiction to act considering the defense of prematurity of action for failure to arbitrate the validity of
the TRO issued on December 4, 1991 and the order granting injunctive reliefs were challenged in a petition for certiorari
filed with the Court of Appeals and docketed as CA-G.R. No. 26813, assigned to the Second (2nd) Division.

SUN VALLEY CASE (Civil Case No. 91-2550)

On September 16, 1991, Sun Valley, on the other hand, filed a case for recovery of possession of the disputed 723
square meters boundary with the Regional Trial Court (RTC) Makati, Branch 61 presided by Judge Fernando Gorospe,
Jr.

On the same day, Judge Gorospe issued a TRO enjoining Toyota from committing further acts of dispossession against
Sun Valley.

On September 19, 1991, Toyota moved to lift the TRO and opposed Sun Valley's application for injunction.

On September 23, 1991, Toyota filed a motion to dismiss on the ground that the RTC has no jurisdiction over the case
since the complaint was a simple ejectment case cognizable by the Metropolitan Trial Court (MTC). The motion to
dismiss was set for hearing on September 27, 1991.

On September 27, 1991, Sun Valley filed an amended complaint to incorporate an allegation that Toyota's possession
of the alleged disputed area began in September, 1988 when Toyota purchased the property.

Ruling that the amendment was a matter of right, Judge Gorospe admitted the amended complaint. Toyota adopted its
motion to dismiss the original complaint as its motion to dismiss the amended complaint. After the arguments to Toyota's
motion to dismiss, the same was submitted for resolution. Sun Valley's application for prohibitory and mandatory
injunction contained in its complaint was set for hearing on October 1, 1991.

Protesting the admission of the amended complaint, Toyota went to the Court of Appeals, on certiorari on October 1,
1991. This petition was docketed as CA-G.R. No. 26152 raffled to the Tenth (10th) Division.

Toyota was later prompted to file two supplemental petitions, before the Court of Appeals as a result of Judge Gorospe's
alleged hasty issuance of four (4) Orders, all dated October 1, 1992. These are:

(1) First supplemental petition dated October 4, 1991 which sought to nullify the Order denying Toyota's motion to
dismiss the amended complaint.

(2) Second supplemental petition dated October 23, 1991 which sought the nullification of the orders granting Sun
Valley's application for preliminary prohibitory and mandatory injunction and denying Toyota's motion to cross-examine
Sun Valley's witnesses on the latter's injunction application.

On November 27, 1991, respondent Court of Appeals' Tenth Division promulgated its questioned decision which is
primarily the subject matter of the present petition before us.
The respondent court denied due course to the Toyota petition on the finding that the amendment of Sun Valley's
complaint was a valid one as Sun Valley's action was not for unlawful detainer but an accion publiciana. Furthermore,
the supplemental petitions filed by Toyota assailing the prohibitory and mandatory injunctive writ were not ruled upon
as they were expunged from the records because of Toyota's failure to attach a motion to admit these supplemental
petitions.

Consequently, Toyota filed the present petition for certiorari on December 9, 1991.

Earlier, upon an ex-parte motion to clarify filed by Sun Valley on October 25, 1991, Judge Gorospe issued another
order dated December 2, 1991 which followed Sun Valley to break open and demolish a portion of the Toyota perimeter
walls, and eventually to secure possession of the disputed area. Toyota was constrained to come to this Court for relief.

On December 11, 1991, we issued a TRO enjoining the implementation of Judge Gorospe's injunction and break-open
orders dated October 1, 1991 and December 2, 1991 respectively as well as further proceedings in Civil Case No. 91-
2550.

Meanwhile, the Court of Appeals' Second Division issued a TRO ordering respondent Judge Tensuan and all other
persons acting in his behalf to cease and desist from further proceeding with Civil Case No. 91-2504 and from enforcing
the Order dated December 17, 1991 and the writ of preliminary mandatory injunction dated December 19, 1991.

This prompted Toyota to file a motion to quash the TRO and file a supplemental petition with this Court impleading the
Court of Appeals' Second Division.

On January 13, 1992, we admitted the supplemental petition.

On January 10, 1992, the Court of Appeals' Second Division issued the Resolution granting Sun Valley's application
for preliminary injunction which enjoined Judge Tensuan in the Toyota case from implementing his injunction Order
and from proceeding with the case before him (Civil Case No. 91-2504).

Thus, Toyota filed its Second Supplemental Petition with this Court challenging the validity of the injunction writ issued
by the Court of Appeals' Second Division.

This Second Supplemental Petition was admitted on February 10, 1992.

On February 10, 1992, we gave due course to Toyota's petition.

Subsequently, through a manifestation dated April 29, 1992, Toyota informed the Court that on April 15, 1992, the Court
of Appeals' 11th Division (Sun Valley case) rendered a decision dismissing the case before it for lack of merit. The
Court of Appeals ruled that the Toyota complaint was not a collateral attack on Sun Valley's title and that misjoinder of
parties is not a ground for dismissal.

A subsequent motion for reconsideration was denied in a resolution dated August 10, 1992.

In the instant petition Toyota raises the following issues, to wit:

1. The Court of Appeals' 10th Division gravely abused its discretion when it ignored or pretended to ignore Toyota's
protests against Judge Gorospe's injunction orders.

2. Sun Valley is guilty of forum-shopping and Judge Gorospe of case-grabbing.

Sun Valley, on the other hand raises the following:

1. Whether or not the petitioner availed of the proper mode of elevating the case to this Court.

2. Whether or not the Court of Appeals committed grave abuse of discretion in refusing to act upon petitioner's
supplemental petitions for certiorari.
3. Whether or not the complaint filed in the court below is an accion publiciana which is within the jurisdiction of the
RTC.

4. Whether or not Judge Salvador S. Tensuan had jurisdiction to take cognizance of Civil Case No. 2504 for reformation
of instrument.

5. Whether or not respondent Judge Gorospe, Jr. committed grave abuse of discretion in granting private respondent's
application for a writ of preliminary prohibitory/mandatory injunction.

6. Whether or not Judge Tensuan committed grave abuse of discretion in issuing the writ of mandatory injunction dated
December 19, 1991.

This case is far from settlement on the merits. Through legal maneuverings, the parties have succeeded in muddling
up the vital issues of the case and getting the lower courts embroiled in numerous appeals over technicalities. As it is
now, there are three appellate decisions/resolutions before us for review and conflicting orders issued by lower courts
as a result of the separate cases filed by the parties. As in the case of Consolidated Bank and Trust Corp. v. Court of
Appeal,s 193 SCRA 158 [1991], the Court is explicit in stating that:

xxx xxx xxx

Where there are conflicting but inextricably interconnected issues in one and the same
complicated case, it is best that these be resolved in one integrated proceeding where an
overall picture of the entirety of the case can be presented and examined. Piecemeal
determinations by several trial courts on segments of the basic issue and disconnected
appeals to different Divisions of the Court of Appeals resulting in separate decisions each
dealing with only part of the problem are discouraged. Needless multiplicity of suits is
something which is frowned upon.

xxx xxx xxx

Amid the clutter of extraneous materials which have certainly bloated the records of this case, we find only two (2)
issues vital to the disposition of the petition: first, is the matter of jurisdiction, who as between Judge Tensuan or Judge
Gorospe has jurisdiction over the dispute; and second, who as between the parties has the rightful possession of the
land.

Anent the issue on jurisdiction, we examine the two actions filed by the parties.

Toyota filed an action for reformation on September 11, 1991, before Judge Tensuan alleging that the true intentions
of the parties were not expressed in the instrument (Art. 1359 Civil Code). The instrument sought to be reformed is the
deed of sale executed by APT in favor of Toyota. Toyota alleges that there was a mistake in the designation of the real
properties subject matter of the contract. Sun Valley was impleaded in order to obtain complete relief since it was the
owner of the adjacent lot.

Sun Valley, however, argues that the complaint for reformation states no cause of action against it since an action for
reformation is basically one strictly between the parties to the contract itself. Third persons who are not parties to the
contract cannot and should not be involved. Thus, Sun Valley contends that it should not have been impleaded as a
defendant.

The Court of Appeals' 11th Division, in its decision promulgated on April 15, 1992 where the denial of Sun Valley's
motion to dismiss was sustained, correctly ruled that misjoinder of parties is not a ground for dismissal.

American jurisprudence from where provisions on reformation of instruments were taken discloses that suits to reform
written instruments are subject to the general rule in equity that all persons interested in the subject matter of the
litigation, whether it is a legal or an equitable interest should be made parties, so that the court may settle all their rights
at once and thus prevent the necessity of a multiplicity of suits (Bevis Construction Co. v. Grace [Fla App] 115 So 2d
84; Green v. Stone, 54 N.J.E. 387, 34 A 1099). As a general rule, therefore, all persons to be affected by the proposed
reformation must be made parties (American Fidelity & Casualty Co. v. Elder, 189 Ga 229, 5 SE 2d 668; Kemp v.
Funderburk, 224 NC 353, 30 SE 2d 155). In an action to reform a deed, all parties claiming an interest in the land or
any part thereof purportedly conveyed by the instrument sought to be reformed, and whose interests will be affected
by the reformation of the instrument are necessary parties to the action (Kemp v. Funderburk, 224 NC 353, 30 SE 2d
155).

From the foregoing jurisprudence, it would appear that Toyota was correct in impleading Sun Valley as party defendant.
However, these principles are not applicable under the particular circumstances of this case. Under the facts of the
present case, Toyota's action for reformation is dismissible as against Sun Valley.

Attention must first be brought to the fact that the contract of sale executed between APT and Toyota provides an
arbitration clause which states that:

xxx xxx xxx

5. In case of disagreement or conflict arising out of this Contract, the parties hereby
undertake to submit the matter for determination by a committee of experts, acting as
arbitrators, the composition of which shall be as follows:

a) One member to be appointed by the VENDOR;

b) One member to be appointed by the VENDEE;

c) One member, who shall be a lawyer, to be appointed by both of the

aforesaid parties;

The members of the Arbitration Committee shall be appointed not later than three (3)
working days from receipt of a written notice from either or both parties. The Arbitration
Committee shall convene not later than three (3) weeks after all its members have been
appointed and proceed with the arbitration of the dispute within three (3) calendar months
counted therefrom. By written mutual agreement by the parties hereto, such time limit for
the arbitration may be extended for another calendar month. The decision of the Arbitration
Committee by majority vote of at least two (2) members shall be final and binding upon both
the VENDOR and the VENDEE; (Rollo, pp. 816-817)

xxx xxx xxx

The contention that the arbitration clause has become disfunctional because of the presence of third parties is
untenable.

Contracts are respected as the law between the contracting parties (Mercantile Ins. Co. Inc. v. Felipe Ysmael, Jr. &
Co., Inc., 169 SCRA 66 [1989]). As such, the parties are thereby expected to abide with good faith in their contractual
commitments (Quillan v. CA, 169 SCRA 279 [1989]). Toyota is therefore bound to respect the provisions of the contract
it entered into with APT.

Toyota filed an action for reformation of its contract with APT, the purpose of which is to look into the real
intentions/agreement of the parties to the contract and to determine if there was really a mistake in the designation of
the boundaries of the property as alleged by Toyota. Such questions can only be answered by the parties to the contract
themselves. This is a controversy which clearly arose from the contract entered into by APT and Toyota. Inasmuch as
this concerns more importantly the parties APT and Toyota themselves, the arbitration committee is therefore the proper
and convenient forum to settle the matter as clearly provided in the deed of sale.

Having been apprised of the presence of the arbitration clause in the motion to dismiss filed by APT, Judge Tensuan
should have at least suspended the proceedings and directed the parties to settle their dispute by arbitration (Bengson
v. Chan, 78 SCRA 113 [1977], Sec. 7, RA 876). Judge Tensuan should have not taken cognizance of the case.

But the more apparent reason which warrants the dismissal of the action as against Sun Valley is the fact that the
complaint for reformation amounts to a collateral attack on Sun Valley's title, contrary to the finding of the Court of
Appeals' 11th Division.
It is disputed that Sun Valley has a Torrens title registered in its name by virtue of its purchase of the land from APT.

Toyota contends that the 723 square meters strip of land which it understood to be included in its purchase from APT
was erroneously included in Sun Valley's title. This is the reason why reformation was sought to correct the mistake.

Well-settled is the rule that a certificate of title can not be altered, modified, or cancelled except in a direct proceeding
in accordance with law (Section 48, P.D. No. 1529).

In the case of Domingo v. Santos Ongsiako, Lim y Sia (55 Phil. 361 [1930]), the Court held that:

. . . The fact should not be overlooked that we are here confronted with what is really a
collateral attack upon a Torrens title. The circumstance that the action was directly brought
to recover a parcel of land does not alter the truth that the proceeding involves a collateral
attack upon a Torrens title, because as we have found, the land in controversy lies within
the boundaries determined by that title. The Land Registration Law defines the methods
under which a wrongful adjudication of title to land under the Torrens system may be
corrected . . .

While reformation may often be had to correct mistakes in defining the boundary of lands conveyed so as to identify
the lands, it may not be used to pass other lands from those intended to be bought and sold, notwithstanding a mistake
in pointing out the lines, since reformation under these circumstances would be inequitable and unjust. (McCay v.
Jenkins, 244 Ala 650, 15 So 2d 409, 149 ALR 746)

Assuming that Toyota is afforded the relief prayed for in the Tensuan court, the latter can not validly order the contested
portion to be taken out from the Sun Valley's TCT and award it in favor of Toyota.

An action for reformation is in personam, not in rem (Cohen v. Hellman Commercial Trust & Savings Bank, 133 Cal
App 758, 24 P2d 960; Edwards v. New York Life Ins. Co. 173 Tenn 102, 114 SW 2d 808) even when real estate is
involved (Agurs v. Holt, 232 La 1026, 95 So 2d 644; Vallee v. Vallee (La App) 180 So 2d 570). It is merely an equitable
relief granted to the parties where through mistake or fraud, the instrument failed to express the real agreement or
intention of the parties. While it is a recognized remedy afforded by courts of equity it may not be applied if it is contrary
to well-settled principles or rules. It is a long standing principle that equity follows the law. It is applied in the abscence
of and never against statutory law (Zabat v. Court of Appeals, 142 SCRA 587 [1986]). Courts are bound by rules of law
and have no arbitrary discretion to disregard them. (See Arsenal v. Intermediate Appellate Court, 143 SCRA 40 [1986].)
Courts of equity must proceed with utmost caution especially when rights of third parties may intervene. Thus in the
instant case, vis-a-vis well-settled principles or rules in land registration, the equitable relief of reformation may not
come into play in order to transfer or appropriate a piece of land that one claims to own but which is titled in the name
of a third party.

On the other hand, Sun Valley filed an action for reconveyance against Toyota to recover possession of the strip of
land encroached upon and occupied by the latter. What Sun Valley seeks in its complaint is the recovery of possession
de jure and not merely possession de facto. Toyota moved to dismiss on the assumption that the complaint was one
for unlawful detainer cognizable by the MTC.

We do not find any reversible error in the decision of the Court of Appeals' 10th Division where it upheld Judge
Gorospe's order denying Toyota's motion to dismiss. An amendment to a complaint before a responsive pleading is
filed, is a matter of right (Rule 10, Sec. 2). Whether or not the complaint was amended, Sun Valley's complaint was one
for accion publiciana cognizable by the RTC. Its right over the land is premised on the certificate of title registered in its
name after it had purchased said land from APT. As the registered owner it had the right of possession of said land
illegally occupied by another (Ybañez v. IAC, 194 SCRA 743 [1991]). The case of Banayos v. Susana Realty, Inc. (71
SCRA 557 [1976]) is quite instructive:

xxx xxx xxx

We deem it advisable, at this point, to reiterate the essential differences between three kinds
of actions for the recovery of possession of real property, namely: (1) the summary action
for forcible entry and unlawful detainer; (2) the accion publiciana; and (3) the accion de
reivindicacion.
 The action for forcible entry may be brought where dispossession of real property had taken
place by any of the means provided for in Section 1 of Rule 70 of the Revised Rules of
Court, and in the case of unlawful detainer, where the possession is withheld after the
expiration or termination of the right to hold possession, by virtue of any contract express
or implied. These two actions must be filed within one (1) year after such unlawful
deprivation or withholding of possession with the municipal or city court. These actions in
their essence are mere quieting processes by virtue of which a party in possession of land
may not be, by force, dispossessed of that land, the law restoring to him such possession
in a summary manner, until the right of ownership can be tried in due course of law. They
are, therefore, intended to provide an expeditious means of protecting actual possession or
right to possession of property. The aforesaid Rule 70 does not, however, cover all of the
cases of dispossession of lands. Thus, "whenever the owner is dispossessed by any other
means than those mentioned he may maintain his action in the Court of First Instance, and
it is not necessary for him to wait until the expiration of twelve months before commencing
an action to be repossessed or declared to be owner of land." (Gumiran v. Gumiran, 21 Phil.
174, 179. Cf. Medina, et al. v. Valdellon, 63 SCRA 278) Courts of First Instance have
jurisdiction over actions to recover possession of real property illegally detained, together
with rents due and damages, even though one (1) year has not expired from the beginning
of such illegal detention, provided the question of ownership of such property is also
involved. In other words, if the party illegal dispossessed desires to raise the question of
illegal dispossession as well as that of the ownership over the property, he may commence
such action in the Court of First Instance immediately or at any time after such illegal
dispossession. If he decides to raise the question of illegal dispossession only, and the
action is filed more than one (1) year after such deprivation or withholding of possession,
then the Court of First Instance will have original jurisdiction over the case. (Bishop of Cebu
v. Mangoron, 6 Phil. 286; Catholic Church v. Tarlac and Victoria, 9 Phil. 450; Ledesma v.
Marcos, 9 Phil. 618; Medina, et al. v. Valdellon, supra) The former is an accion de
reivindicacion which seeks the recovery of ownership as well as possession, while the latter
refers to an accion publiciana, which is the recovery of the right to possess and is a plenary
action in an ordinary proceeding in the Court of First Instance. (Sec. 88, Rep. Act No. 296;
Rule 70, Rules of Court; Manila Railroad Co. v. Attorney General, 20 Phil. 523; Lim Cay v.
Del, 55 Phil. 692; Central Azucarera de Tarlac v. De Leon, 56 Phil. 169; Navarro v. Aguila,
66 Phil. 604; Luna v. Carandang, 26 SCRA 306; Medina, et al. v. Valdellon, supra; Pasaqui,
et al. v. Villablanca, et al., supra).

With the finding that Toyota's action for reformation is dismissable as it is in effect a collateral attack on Sun Valley's
title, Sun Valley's action for recovery of possession filed before Judge Gorospe now stands to be the proper forum
where the following dispute may be tried or heard.

We now come to the issue as to which of the parties has a legal right over the property to warrant the issuance of the
preliminary mandatory/prohibitory injunction.

In actions involving realty, preliminary injunction will lie only after the plaintiff has fully established his title or right thereto
by a proper action for the purpose. To authorize a temporary injunction, the complainant must make out at least a prima
facie showing of a right to the final relief. Preliminary injunction will not issue to protect a right not in esse (Buayan
Cattle Co. Inc. v. Quintillan, 128 SCRA 286-287 [1984]; Ortigas & Company, Limited Partnership v. Ruiz, 148 SCRA
326 [1987]).

Two requisites are necessary if a preliminary injunction is to issue, namely, the existence of the right to be protected,
and the facts against which the injunction is to be directed, are violative of said right. In particular, for a writ of preliminary
injunction to issue, the existence of the right and the violation must appear in the allegations of the complaint and an
injunction is proper also when the plaintiff appears to be entitled to the relief demanded in his complaint. Furthermore,
the complaint for injunctive relief must be construed strictly against the pleader (Ortigas & Company, Limited
Partnership v. Ruiz, supra).

In the instant case the existence of a "clear positive right" especially calling for judicial protection has been shown by
Sun Valley.
Toyota's claim over the disputed property is anchored on the fact of its purchase of the property from APT, that from
the circumstances of the purchase and the intention of the parties, the property including the disputed area was sold to
it.

Sun Valley, on the other hand has TCT No. 49019 of the Registry of Deeds of Parañaque embracing the aforesaid
property in its name, having been validly acquired also from APT by virtue of a Deed of Sale executed in its favor on
December 5, 1990 (Rollo, pp. 823-825; 826-827).

There are other circumstances in the case which militate against Toyota's claim for legal possession over the disputed
area.

The fact that Toyota has filed a suit for reformation seeking the inclusion of the 723 square meters strip of land is
sufficient to deduce that it is not entitled to take over the piece of property it now attempts to appropriate for itself.

As early as September, 1988 prior to the construction of the perimeter fence, Toyota was already aware of the
discrepancies in the property's description in the title and the actual survey.

The letter of its surveyor company, Summa Kumagai thus reveals:

09 September, 1988

TOYOTA MOTOR PHILIPPINES CORPORATION

10th Floor, Metrobank Plaza
Sen. Gil J. Puyat Ave.
Makati, Metro Manila

ATTENTION: MR. FLORENCIO JURADO

Finance Officer

SUBJECT: PHASE I RENOVATION WORK

PERIMETER FENCE

GENTLEMEN:

This is in connection with the construction of the Perimeter Fence for the Toyota Motor Plant
Facilities which to this date we have not started yet due to the following reasons:

1. Lack of fencing permit which can only be applied to and issued by the Parañaque Building
Official upon receipt of the transfer certificate to title and tax declaration.

2. Although the Building Official has verbally instructed us to proceed with the renovation
work and construction of fence, we could not execute the fencing work due to discrepancies
on the consolidation plan and the existing property monuments. These discrepancies was
(sic) confirmed with the representatives of the Geodetic Engineer.

Kindly expedite the immediate confirmation with the Geodetic Engineer on the final
descriptions of the property lines.

We would appreciate your usual prompt attention regarding this matter.

Very truly yours,

CESAR D. ELE
Project Manager (Emphasis supplied, Rollo, p. 811)
Despite such notification, Toyota continued to build the perimeter fence. It is highly doubtful whether Toyota may be
considered a builder in good faith to be entitled to protection under Article 448 of the Civil Code.

The records also reveal that Toyota's own surveyor, the Certeza Surveying & Acrophoto Systems, Inc. confirmed in its
reports dated April 1 and April 5, 1991 that Toyota's perimeter fence overlaps the boundaries of Sun Valley's lot (Rollo,
pp. 833-383).

Even communication exchanges between and among APT, Toyota & Sun Valley show that the parties are certainly
aware that the ownership of the disputed property more properly pertains to Sun Valley. Among these are the following:

May 28, 1991

MR. JOSE CH. ALVAREZ

President
Sun Valley Manufacturing &
Development Corp. (SVMDC)
Cor. Aurora Blvd. and Andrews Ave.
Pasay City, Metro Manila

Dear Mr. Alvarez:

Thank you for honoring our invitation to a luncheon meeting held at noon time today at Sugi
Restaurant.

As per our understanding, we would like to propose as a package the settlement of

differences between your property and ours as follows:

1. Boundary Issue between TMP Main Office & Factory and the recently
acquired property of SVMDC.

The boundary lines to our property lines bidded early 1988 were
determined after making full payment in August 1988 jointly by
representatives of TMP/Metrobank — Messrs. Mitake, Pedrosa, Alonzo
and Jurado, APT — Mr. Bince together with representatives of Geo-
Resources who installed the monuments and prepared the technical
description of the property. The construction of the fence utilized existing
fence marked yellow on Exhibit 1 and made sure that the new fence to
set boundaries were on top of the monuments set by Geo-Resources.
The replacement of existing wire fence were affected by setting concrete
walls on exactly the same position.

This is the reason why we are surprised top be informed that our fence
goes beyond the boundary lines set forth in the Technical Description on
the Transfer Certificate of Title (TCT) to our property. This occurs even
on fence already existing and should have been maintained in the TCT.

Since we have manifested our intention when we set boundaries to our

property, we propose the following in relation to the excess area occupied
by TMP.

1. We offer to give way to an access road 5 m. wide more or less from

point 15 to 16 of Lot 2 (14.65 m. in length) at the back of our Paint Storage
Building (Exhibit 2).

2. We propose to pay for the balance of excess land inside TMP fence
(contested areas) at a price mutually agreed upon.
 II. Question of ownership of certain permanent improvements
(underground water reservoir and perimeter walls/fences) located at Lot
6 which we won by bidding from APT on October 5, 1990.

We have made our position to APT that these permanent improvements

are part of Lot 6 on "as is where is" bid basis (See explanatory map —
Exhibit 3). However, since you have relayed to us that the underground
water reservoir is of no use to you, as part of the total package we are
proposing to pay for the underground water reservoir, the applicable
perimeter walls/fences and the water pump/pipings at a price mutually
agreed upon.

We hope that through this proposal we would settle our differences and look forward to a
more cooperative relationship between good neighbors.

We will appreciate your favorable consideration and immediate attention on the matter.

V
e
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y
t
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l
y
y
o
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s
,

M
A
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A
O
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I
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A
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E
P
r
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s
i
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t

July 4, 1991
 TOYOTA MOTOR PHILIPPINES CORPORATION
Rm. 15, South Superhighway
Parañaque, Metro Manila

ATTENTION: MR. MASAO MITAKE

President

Gentlemen:

This refers to our several meetings regarding the property problems at "Lot 6" and your
encroachment of SVMD LOT I.

We wish to thank you for finally acknowledging the legitimacy of our demands on both
properties. In order to start a good business relationship, we propose that the property
problem at "LOT 6" which consists of the perimeter fence, water reservoir, water pump and
systems be settled first, in the amount of P3,500,000.00 payable to CMANC.

We also would like to request you to allow us to continue usage of the MERALCO posts
and lines connecting to SVMD power station which passes thru your property and allow
entry of MERALCO linemen from time to time.

Upon acceptance of these requests, I will confer which our Japanese partners to consider
the selling of the 723 sq. m. of land adjacent to your Assembly Plant which you continue to
use even after said property has been legally transferred to us from last quarter of 1990.

In view of your present good behavior, we are hoping that this first problem be settled not
later than July 15, 1991, otherwise, we will consider the whole matter as unacceptable to
you and we, therefore, proceed as earlier demanded to immediately demolish the CHB
fence that prevents us from using our property.

We hope for your immediate action to start the resolution of these unwanted problems.

Very truly yours,

JOSE CH.
ALVAREZ
President (Rollo,
p. 832; Emphasis
supplied)

Moreover, Sun Valley puts forth evidence that Toyota has altered the boundaries of its own property by moving the
monuments erected thereon by APT's surveyor Geo-Resources and Consultancy, Inc. when Lot 2 was initially surveyed
in August 1988:

The Asset Privitalization Trust

10th Floor, BA-Lepanto Building
9847 Paseo de Roxas Building
Metro Manila

Attention: Mr. Felipe B. Bince, Jr.

Associate Executive Trustee

Dear Sirs:

This has reference to our letter to your office dated April 8, 1991, a copy of which is attached,
regarding the check survey of Delta I. After asking some of the field men who participated
in the various surveys of Delta I from the consolidation to subdivision surveys, we found out
that some more of the present corner points are not the same points shown to them during
the surveys. We shall show this during a meeting with the representatives of the owners of
Lots 1 and 2.

We hope this will clarify the discrepancies.

V
e
r
y
t
r
u
l
y
y
o
u
r
s
,

N
O
R
B
E
R
T
O
S
.
V
I
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A
E
x
e
c
.
V
i
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e
P
r
e
s
.
&
G
e
n
.
M
a
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a
g
 e
r

(Emphasis supplied; Rollo, p. 839)

There is therefore sufficient and convincing proof that Sun Valley has a clear legal right to possession in its favor to
warrant the issuance of a writ of preliminary/mandatory injunction. Sun Valley's TCT gives it that right to possession.
On the other hand, Toyota has not established its right over the said property except for the assertion that there was a
mistake in an instrument which purportedly should have included the questioned strip of land.

As between the two (2) parties, Sun Valley has a better right. Under the circumstances, therefore, and considering that
the clear legal right of Toyota to possession of the disputed area has not been established sufficient to grant the prayed
for relief, a writ of preliminary mandatory injunction may be issued pendente lite. (See Mara, Inc. v. Estrella, 65 SCRA
471 [1975]; De Gracia v. Santos, 79 Phil. 365 [1947]; Rodulfa v. Alfonso, 76 Phil. 225 [1946] and Torre v. Querubin,
101 Phil. 53 [1957])

In view of all the foregoing, the petition is hereby DISMISSED for failure to show reversible error, much less grave
abuse of discretion, on the part of the respondent court.

Bidin, Davide, Jr., Romero and Melo, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 96283 February 25, 1992

CHUNG FU INDUSTRIES (PHILIPPINES) INC., its Directors and Officers namely: HUANG KUO-CHANG, HUANG
AN-CHUNG, JAMES J.R. CHEN, TRISTAN A. CATINDIG, VICENTE B. AMADOR, ROCK A.C. HUANG, JEM S.C.
HUANG, MARIA TERESA SOLIVEN and VIRGILIO M. DEL ROSARIO, petitioners,

vs.

COURT OF APPEALS, HON. FRANCISCO X. VELEZ (Presiding Judge, Regional Trail Court of Makati [Branch
57]) and ROBLECOR PHILIPPINES, INC., respondents.

ROMERO, J.:

This is a special civil action for certiorari seeking to annul the Resolutions of the Court of Appeals* dated October 22,
1990 and December 3, 1990 upholding the Orders of July 31, 1990 and August 23, 1990 of the Regional Trial Court of
Makati, Branch 57, in Civil Case No. 90-1335. Respondent Court of Appeals affirmed the ruling of the trial court that
herein petitioners, after submitting themselves for arbitration and agreeing to the terms and conditions thereof, providing
that the arbitration award shall be final and unappealable, are precluded from seeking judicial review of subject
arbitration award.

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.

Subsequent negotiations between the parties eventually led to the formulation of an arbitration agreement which,
among others, provides:

2. The parties mutually agree that the arbitration shall proceed in accordance with the
following terms and conditions: —

xxx xxx xxx

d. The parties mutually agree that they will abide by the decision of the
arbitrator including any amount that may be awarded to either party as
compensation, consequential damage and/or interest thereon;

e. The parties mutually agree that the decision of the arbitrator shall be
final and unappealable. Therefore, there shall be no further judicial
recourse if either party disagrees with the whole or any part of the
arbitrator's award.

f. As an exception to sub-paragraph (e) above, the parties mutually agree

that either party is entitled to seek judicial assistance for purposes of
enforcing the arbitrator's award;

xxx xxx xxx 4

(Emphasis supplied)

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.

Consequently, Roblecor moved for the confirmation of said award. On the other hand, Chung Fu moved to remand the
case for further hearing and asked for a reconsideration of the judgment award claiming that Arbitrator Asuncion
committed twelve (12) instances of grave error by disregarding the provisions of the parties' contract.

Respondent lower court denied Chung Fu's Motion to Remand thus compelling it to seek reconsideration therefrom but
to no avail. The trial court granted Roblecor's Motion for Confirmation of Award and accordingly, entered judgment in
conformity therewith. Moreover, it granted the motion for the issuance of a writ of execution filed by respondent.
Chung Fu elevated the case via a petition for certiorari to respondent Court of Appeals. On October 22,1990 the
assailed resolution was issued. The respondent appellate court concurred with the findings and conclusions of
respondent trial court resolving that Chung Fu and its officers, as signatories to the Arbitration Agreement are bound
to observe the stipulations thereof providing for the finality of the award and precluding any appeal therefrom.

A motion for reconsideration of said resolution was filed by petitioner, but it was similarly denied by respondent Court
of Appeals thru its questioned resolution of December 3, 1990.

Hence, the instant petition anchored on the following grounds:

First

Respondents Court of Appeals and trial Judge gravely abused their discretion and/or
exceeded their jurisdiction, as well as denied due process and substantial justice to
petitioners, — (a) by refusing to exercise their judicial authority and legal duty to review the
arbitration award, and (b) by declaring that petitioners are estopped from questioning the
arbitration award allegedly in view of the stipulations in the parties' arbitration agreement
that "the decision of the arbitrator shall be final and unappealable" and that "there shall be
no further judicial recourse if either party disagrees with the whole or any part of the
arbitrator's award."

Second

Respondent Court of Appeals and trial Judge gravely abused their discretion and/or
exceeded their jurisdiction, as well as denied due process and substantial justice to
petitioner, by not vacating and annulling the award dated 30 June 1990 of the Arbitrator, on
the ground that the Arbitrator grossly departed from the terms of the parties' contracts and
misapplied the law, and thereby exceeded the authority and power delegated to him. (Rollo,
p. 17)

Allow us to take a leaf from history and briefly trace the evolution of arbitration as a mode of dispute settlement.

Because conflict is inherent in human society, much effort has been expended by men and institutions in devising ways
of resolving the same. With the progress of civilization, physical combat has been ruled out and instead, more specific
means have been evolved, such as recourse to the good offices of a disinterested third party, whether this be a court
or a private individual or individuals.

Legal history discloses that "the early judges called upon to solve private conflicts were primarily the arbiters, persons
not specially trained but in whose morality, probity and good sense the parties in conflict reposed full trust. Thus, in
Republican Rome, arbiter and judge (judex) were synonymous. The magistrate or praetor, after noting down the
conflicting claims of litigants, and clarifying the issues, referred them for decision to a private person designated by the
parties, by common agreement, or selected by them from an apposite listing (the album judicium) or else by having the
arbiter chosen by lot. The judges proper, as specially trained state officials endowed with own power and jurisdiction,
and taking cognizance of litigations from beginning to end, only appeared under the Empire, by the so-called cognitio
extra ordinem." 5

Such means of referring a dispute to a third party has also long been an accepted alternative to litigation at common
law. 6

Sparse though the law and jurisprudence may be on the subject of arbitration in the Philippines, it was nonetheless
recognized in the Spanish Civil Code; specifically, the provisions on compromises made applicable to arbitrations under
Articles 1820 and 1821.7 Although said provisions were repealed by implication with the repeal of the Spanish Law of
Civil Procedure, 8 these and additional ones were reinstated in the present Civil Code. 9

Arbitration found a fertile field in the resolution of labor-management disputes in the Philippines. Although early on,
Commonwealth Act 103 (1936) provided for compulsory arbitration as the state policy to be administered by the Court
of Industrial Relations, in time such a modality gave way to voluntary arbitration. While not completely supplanting
compulsory arbitration which until today is practiced by government officials, the Industrial Peace Act which was passed
in 1953 as Republic Act No. 875, favored the policy of free collective bargaining, in general, and resort to grievance
procedure, in particular, as the preferred mode of settling disputes in industry. It was accepted and enunciated more
explicitly in the Labor Code, which was passed on November 1, 1974 as Presidential Decree No. 442, with the
amendments later introduced by Republic Act No. 6715 (1989).

Whether utilized in business transactions or in employer-employee relations, arbitration was gaining wide acceptance.
A consensual process, it was preferred to orders imposed by government upon the disputants. Moreover, court
litigations tended to be time-consuming, costly, and inflexible due to their scrupulous observance of the due process of
law doctrine and their strict adherence to rules of evidence.

As early as the 1920's, this Court declared:

In the Philippines fortunately, the attitude of the courts toward arbitration agreements is
slowly crystallizing into definite and workable form. . . . The rule now is that 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 arrangements
and will only with great reluctance interfere to anticipate or nullify the action of the arbitrator.
10

That there was a growing need for a law regulating arbitration in general was acknowledged when Republic Act No.
876 (1953), otherwise known as the Arbitration Law, was passed. "Said Act was obviously adopted to
supplement — not to supplant — the New Civil Code on arbitration. It expressly declares that "the provisions of chapters
one and two, Title XIV, Book IV of the Civil Code shall remain in force." 11

In recognition of the pressing need for an arbitral machinery for the early and expeditious settlement of disputes in the
construction industry, a Construction Industry Arbitration Commission (CIAC) was created by Executive Order No.
1008, enacted on February 4, 1985.

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." 13

But certainly, the stipulation to refer all future disputes to an arbitrator or to submit an ongoing dispute to one is valid.
Being part of a contract between the parties, it is binding and enforceable in court in case one of them neglects, fails
or refuses to arbitrate. Going a step further, in the event that they declare their intention to refer their differences to
arbitration first before taking court action, this constitutes a condition precedent, such that where a suit has been
instituted prematurely, the court shall suspend the same and the parties shall be directed forthwith to proceed to
arbitration. 14

A court action may likewise be proven where the arbitrator has not been selected by the parties. 15

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
Under the original Labor Code, voluntary arbitration awards or decisions were final, unappealable and executory.
"However, voluntary arbitration awards or decisions on money claims, involving an amount exceeding One Hundred
Thousand Pesos (P100,000.00) or forty-percent (40%) of the paid-up capital of the respondent employer, whichever is
lower, maybe appealed to the National Labor Relations Commission on any of the following grounds: (a) abuse of
discretion; and (b) gross incompetence." 17 It is to be noted that the appeal in the instances cited were to be made to
the National Labor Relations Commission and not to the courts.

With the subsequent deletion of the above-cited provision from the Labor Code, the voluntary arbitrator is now
mandated to render an award or decision within twenty (20) calendar days from the date of submission of the dispute
and such decision shall be final and executory after ten (10) calendar days from receipt of the copy of the award or
decision by the parties. 18

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.

What if courts refuse or neglect to inquire into the factual milieu of an arbitrator's award to determine whether it is in
accordance with law or within the scope of his authority? How may the power of judicial review be invoked?

This is where the proper remedy is certiorari under Rule 65 of the Revised Rules of Court. It is to be borne in mind,
however, that this action will lie only where a grave abuse of discretion or an act without or in excess of jurisdiction on
the part of the voluntary arbitrator is clearly shown. For "the writ of certiorari is an extra-ordinary remedy and that
certiorari jurisdiction is not to be equated with appellate jurisdiction. In a special civil action of certiorari, the Court will
not engage in a review of the facts found nor even of the law as interpreted or applied by the arbitrator unless the
supposed errors of fact or of law are so patent and gross and prejudicial as to amount to a grave abuse of 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., 22 this 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.

In the case at bar, petitioners assailed the arbitral award on the following grounds, most of which allege error on the
part of the arbitrator in granting compensation for various items which apparently are disputed by said petitioners:

1. The Honorable Arbitrator committed grave error in failing to apply the terms and
conditions of the Construction Agreement, Dormitory Contract and Electrical Contract, and
in using instead the "practices" in the construction industry;

2. The Honorable Arbitrator committed grave error in granting extra compensation to

Roblecor for loss of productivity due to adverse weather conditions;
 3. The Honorable Arbitrator committed grave error in granting extra compensation to
Roblecor for loss due to delayed payment of progress billings;

4. The Honorable Arbitrator committed grave error in granting extra compensation to

Roblecor for loss of productivity due to the cement crisis;

5. The Honorable Arbitrator committed grave error in granting extra compensation to

Roblecor for losses allegedly sustained on account of the failed coup d'état;

6. The Honorable Arbitrator committed grave error in granting to Roblecor the amount
representing the alleged unpaid billings of Chung Fu;

7. The Honorable Arbitrator committed grave error in granting to Roblecor the amount
representing the alleged extended overhead expenses;

8. The Honorable Arbitrator committed grave error in granting to Roblecor the amount
representing expenses for change order for site development outside the area of
responsibility of Roblecor;

9. The Honorable Arbitrator committed grave error in granting to Roblecor the cost of
warehouse No. 2;

10. The Honorable Arbitrator committed grave error in granting to Roblecor extra
compensation for airduct change in dimension;

11. The Honorable Arbitrator committed grave error in granting to Roblecor extra
compensation for airduct plastering; and

12. The Honorable Arbitrator committed grave error in awarding to Roblecor attorney's fees.

After closely studying the list of errors, as well as petitioners' discussion of the same in their Motion to Remand Case
For Further Hearing and Reconsideration and Opposition to Motion for Confirmation of Award, we find that petitioners
have amply made out a case where the voluntary arbitrator failed to apply the terms and provisions of the Construction
Agreement which forms part of the law applicable as between the parties, thus committing a grave abuse of discretion.
Furthermore, in granting unjustified extra compensation to respondent for several items, he exceeded his powers — all
of which would have constituted ground for vacating the award under Section 24 (d) of the Arbitration Law.

But the respondent trial court's refusal to look into the merits of the case, despite prima facie showing of the existence
of grounds warranting judicial review, effectively deprived petitioners of their opportunity to prove or substantiate their
allegations. In so doing, the trial court itself committed grave abuse of discretion. Likewise, the appellate court, in not
giving due course to the petition, committed grave abuse of discretion. Respondent courts should not shirk from
exercising their power to review, where under the applicable laws and jurisprudence, such power may be rightfully
exercised; more so where the objections raised against an arbitration award may properly constitute grounds for
annulling, vacating or modifying said award under the laws on arbitration.

WHEREFORE, the petition is GRANTED. The Resolutions of the Court of Appeals dated October 22, 1990 and
December 3, 1990 as well as the Orders of respondent Regional Trial Court dated July 31, 1990 and August 23, 1990,
including the writ of execution issued pursuant thereto, are hereby SET ASIDE. Accordingly, this case is REMANDED
to the court of origin for further hearing on this matter. All incidents arising therefrom are reverted to the status quo ante
until such time as the trial court shall have passed upon the merits of this case. No costs.

SO ORDERED.