You are on page 1of 6

G.R. No. 143581 January 7, 2008 KOREA TECHNOLOGIES CO., LTD., petitioner, vs. HON. ALBERTO A.

LERMA, in his capacity as Presiding Judge of Branch 256 of Regional Trial Court of Muntinlupa City, and PACIFIC GENERAL STEEL MANUFACTURING CORPORATION, respondents. FACTS: KOGIES (Korea Technologies Co., Ltd., Korean corporation engaged in the supply and installation of LPG Cylinder manufacturing plants) and PGSMC (Pacific General Steel Manufacturing Corp) executed in the Philippines, a Contract whereby KOGIES would set up an LPG Cylinder Manufacturing Plant in Carmona, Cavite. Then the parties executed, in Korea, an Amendment for Contract amending the terms of payment. When KOGIES deposited the checks paid by PGSMC, these were dishonored. When KOGIES sent a demand letter to PGSMC threatening criminal action for violation of Batas Pambansa Blg. 22 in case of nonpayment, the wife of PGSMCs President faxed a letter to KOGIES President who complained that not only did KOGIES deliver a different brand of hydraulic press from that agreed upon but it had not delivered several equipment parts already paid for. PGSMC replied that the two checks it issued KOGIES were fully funded but the payments were stopped for reasons previously made known to KOGIES. PGSMC informed KOGIES that PGSMC was canceling their Contract on the ground that KOGIES had altered the quantity and lowered the quality of the machineries and equipment it delivered to PGSMC, and that PGSMC would dismantle and transfer the machineries, equipment, and facilities installed in the Carmona plant. Five days later, PGSMC filed before the Office of the Public Prosecutor an Affidavit-Complaint for Estafa against Mr. Dae Hyun Kang, President of KOGIES. KOGIES filed a Complaint for Specific Performance, against PGSMC before the Muntinlupa RTC averring that PGSMC violated Art. 15 of their Contract, as amended, by unilaterally rescinding the contract without resorting to arbitration before the Korean Commercial Arbitration Board (KCAB) in Seoul, Korea. KOGIES also asked that PGSMC be restrained from dismantling and transferring the machinery and equipment installed in the plant. PGSMC filed an opposition to the TRO arguing that KOGIES was not entitled to the TRO since Art. 15, the arbitration clause, was null and void for being against public policy as it ousts the local courts of jurisdiction over the instant controversy. RTC held that Art. 15 of the Contract as amended was invalid as it tended to oust the trial court or any other court jurisdiction over any dispute that may arise between the parties. The Court of Appeals affirmed the trial court and declared the arbitration clause against public policy

ISSUE: WON the arbitration clause is valid. HELD: Yes, the arbitration clause is valid. Established in this jurisdiction is the rule that the law of the place where the contract is made governs. Lex loci contractus. The contract in this case was perfected here in the Philippines. Therefore, our laws ought to govern. Nonetheless, Art. 2044 of the Civil Code sanctions the validity of mutually agreed arbitral clause or the finality and binding effect of an arbitral award. Art. 2044 provides, "Any stipulation that the arbitrators award or decision shall be final, is valid, without prejudice to Articles 2038, 2039 and 2040." The arbitration clause was mutually and voluntarily agreed upon by the parties. It has not been shown to be contrary to any law, or against morals, good customs, public order, or public policy. There has been no showing that the parties have not dealt with each other on equal footing. We find no reason why the arbitration clause should not be respected and complied with by both parties. Gonzales v. Climax Mining Ltd Submission to arbitration is a contract and that a clause in a contract providing that all matters in dispute between the parties shall be referred to arbitration is a contract. Eastboard Navigation Ltd. v. Juan Ysmael and Co. An arbitration clause to resolve differences and breaches of mutually agreed contractual terms is valid. BF Corporation v. Court of Appeals Arbitration has been held valid and constitutional. Even before the approval on June 19, 1953 of Republic Act No. 876, this Court has countenanced the settlement of disputes through arbitration. Republic Act No. 876 was adopted to supplement the New Civil Codes provisions on arbitration." LM Power Engineering Corporation v. Capitol Industrial Construction Groups, Inc Being an inexpensive, speedy and amicable method of settling disputes, arbitrationalong with mediation, conciliation and negotiationis encouraged by the Supreme Court. Aside from unclogging judicial dockets, arbitration also hastens the resolution of disputes, especially of the commercial kind. It is thus regarded as the "wave of the future" in international civil and commercial disputes. Provided such clause is susceptible of an interpretation that covers the asserted dispute, an order to arbitrate should be granted. RA 9285 incorporated the UNCITRAL Model law to which we are a signatory For domestic arbitration proceedings, we have particular agencies to arbitrate disputes arising from contractual relations. In case a foreign arbitral body is chosen by the parties, the arbitration rules of our domestic arbitration bodies would not be applied. PGSMC may have been granted the right to dismantle and transfer the subject equipment and machineries, as interim measure. It does not have the right to convey or dispose of the same considering the pending arbitral proceedings to settle the differences of the parties.

United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration New York Convention on June 21, 1985 Incorporated the Model Law in Republic Act No. (RA) 9285, otherwise known as the Alternative Dispute Resolution Act of 2004 (April 2, 2004) A procedural law which has a retroactive effect Pertinent features of RA 9285 1. The RTC must refer to arbitration in proper cases Under Sec. 24, the RTC does not have jurisdiction over disputes that are properly the subject of arbitration pursuant to an arbitration clause, and mandates the referral to arbitration in such cases, thus: 2. Foreign arbitral awards must be confirmed by the RTC The recognition and enforcement of arbitral awards shall be filed with the RTC in accordance with the rules of procedure to be promulgated by the Supreme Court (covered by New York Convention) Comity, reciprocity, Travaux prparatoires (Preparatory works) Special proceedings with RTC (i) where arbitration proceedings are conducted; (ii) where the asset to be attached or levied upon, or the act to be enjoined is located; (iii) where any of the parties to the dispute resides or has his place of business; (iv) in the National Judicial Capital Region, at the option of the applicant. 3. The RTC has jurisdiction to review foreign arbitral awards Set aside, reject, or vacate a foreign arbitral award in accordance with the procedures and rules to be promulgated by the Supreme Court only on those grounds enumerated under Article V of the New York Convention. Grounds for judicial review different in domestic and foreign arbitral awards

the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or (iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Law from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Law; or (b) the court finds that: (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State; or (ii) the award is in conflict with the public policy of this State. LOCAL ARBITRAL TRIBUNAL also need confirmation by the RTC pursuant to Sec. 23 of RA 876 and shall be recognized as final and executory decisions of the RTC Sec. 25 of RA 876 (a) Where there was an evident miscalculation of figures, or an evident mistake in the description of any person, thing or property referred to in the award; or (b) Where the arbitrators have awarded upon a matter not submitted to them, not affecting the merits of the decision upon the matter submitted; or (c) Where the award is imperfect in a matter of form not affecting the merits of the controversy, and if it had been a commissioner's report, the defect could have been amended or disregarded by the court. 5. RTC decision of assailed foreign arbitral award appealable

4.

INTERNATIONAL OR FOREIGN ARBITRAL TRIBUNAL must first be confirmed by the RTC Art. 34(2) of the UNCITRAL Model Law (a) the party making the application furnishes proof that: (i) a party to the arbitration agreement referred to in article 7 was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of this State; or (ii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond

Interim Measure (Art. 17(2) of the UNCITRAL Model Law Temporary measure Issued prior to the issuance of the final decision Filed with the regular courts whenever the arbitral tribunal has no power to act or to act effectively Purpose: (a) Maintain or restore the status quo pending determination of the dispute; (b) Take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process itself; (c) Provide a means of preserving assets out of which a subsequent award may be satisfied; or (d) Preserve evidence that may be relevant and material to the resolution of the dispute.

G.R. No. 135362 December 13, 1999 HEIRS OF AUGUSTO L. SALAS, JR., namely: TERESITA D. SALAS for herself and as legal guardian of the minor FABRICE CYRILL D. SALAS, MA. CRISTINA S. LESACA, and KARINA TERESA D. SALAS, petitioners, vs. LAPERAL REALTY CORPORATION, ROCKWAY REAL ESTATE CORPORATION, SOUTH RIDGE VILLAGE, INC., MAHARAMI DEVELOPMENT CORPORATION, Spouses THELMA D. ABRAJANO and GREGORIO ABRAJANO, OSCAR DACILLO, Spouses VIRGINIA D. LAVA and RODEL LAVA, EDUARDO A. VACUNA, FLORANTE DE LA CRUZ, JESUS VICENTE B. CAPELLAN, and the REGISTER OF DEEDS FOR LIPA CITY, respondents. FACTS: Salas, Jr. was the registered owner of a vast tract of land in Lipa City, Batangas spanning 1.5M square meters. He entered into an Owner-Contractor Agreement with respondent Laperal Realty Corporation to render and provide complete (horizontal) construction services on his land. He executed Special Power of Attorney to exercise general control, supervision and management of the sale of his land, for cash or on installment basis. In 1989, Salas, Jr. left his home in the morning for a business trip to Nueva Ecija. He never returned. Spouse Teresita Diaz Salas filed for declaration of presumptive death of her husband, Salas, Jr in 1996. Laperal Realty subdivided the land of Salas, Jr. and sold subdivided portions thereof to respondent lot buyers. Petitioners as heirs of Salas, Jr. filed in the RTC a Complaint for declaration of nullity of sale, reconveyance, cancellation of contract, accounting and damages claiming that they suffered lesion of more than one-fourth (1/4) of the value of the land. They argue that rescission, being their cause of action, falls under the exception clause in Sec. 2 of Republic Act No. 876 which provides that "such submission to or contract of arbitration shall be valid, enforceable and irrevocable, save upon such grounds as exist at law for the revocation of any contract". Respondent Laperal Realty filed a Motion to Dismiss on the ground that petitioners failed to submit their grievance to arbitration as required under Article VI of the Agreement. ISSUE: WON failure to arbitrate is not a ground for dismissal. HELD: Yes, but the same is not applicable in the case at bar because the respondent lot buyers are not assigns bound by the arbitration clause.

A submission to arbitration is a contract. As such, the Agreement, containing the stipulation on arbitration, binds the parties thereto, as well as their assigns and heirs. But only they. Petitioners, as heirs of Salas, Jr., and respondent Laperal Realty are certainly bound by the Agreement. If respondent Laperal Realty had assigned its rights under the Agreement to a third party, making the former, the assignor, and the latter, the assignee, such assignee would also be bound by the arbitration provision since assignment involves such transfer of rights as to vest in the assignee the power to enforce them to the same extent as the assignor could have enforced them against the debtor or in this case, against the heirs of the original party to the Agreement. However, respondent buyers are not assignees of the rights of respondent Laperal Realty under the Agreement to develop Salas, Jr.'s land and sell the same. As such, they are not "assigns" contemplated in Art. 1311 of the New Civil Code which provides that "contracts take effect only between the parties, their assigns and heirs". Rescission, as a general rule, is an arbitrable issue. However, the right to arbitrate as provided in Article VI of the Agreement was never vested in respondent lot buyers. Respondent Laperal Realty, as a contracting party to the Agreement, has the right to compel petitioners to first arbitrate before seeking judicial relief. However, to split the proceedings into arbitration for respondent Laperal Realty and trial for the respondent lot buyers, or to hold trial in abeyance pending arbitration between petitioners and respondent Laperal Realty, would in effect result in multiplicity of suits, duplicitous procedure and unnecessary delay. On the other hand, it would be in the interest of justice if the trial court hears the complaint against all herein respondents and adjudicates petitioners' rights as against theirs in a single and complete proceeding. WHEREFORE, the instant petition is hereby GRANTED. RTC is hereby ordered to proceed with the hearing of Civil Case on rescission of sale.

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. Both Toyota and Sun Valley are the registered owners of 2 adjoining parcels of land situated in Paraaque, Metro Manila which they purchased from the Asset Privatization Trust. The properties in question formerly belonged to Delta Motors Corporation, foreclosed by the Philippine National Bank and later transferred to the national government through the APT for disposition. After its purchase, Toyota constructed a concrete hollow block perimeter fence around its alleged property. However, Sun Valley relying upon the title description of its property and the surveys it had commissioned, claimed that Toyota's perimeter fence overlaps Sun Valley's property. Toyota filed a case against APT and Sun Valley 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. APT alleged that 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. Sun Valley, on the other hand, filed a case for recovery of possession of the disputed 723 square meters boundary. ISSUE: WON the arbitration clause has become dysfunctional because of the presence of third parties. HELD: No, the arbitration committee is the proper and convenient forum to settle the matter as clearly provided in the deed of sale. Contracts are respected as the law between the contracting parties. As such, the parties are thereby expected to abide with good faith in their contractual commitments. 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. 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 Petition is hereby DISMISSED.

G.R. No. 126212 March 2, 2000 SEA-LAND SERVICE, INC., petitioner, vs. COURT OF APPEALS, A.P. MOLLER/MAERSK LINE and MAERSK-TABACALERA SHIPPING AGENCY (FILIPINAS), INC., respondents. FACTS: Petitioner Sea-Land Services, Inc. and private respondent A.P. Moller/Maersk Line both carriers of cargo in containerships as well as common carriers, entered into a contract entitled, "Co-operation in the Pacific", a vessel sharing agreement whereby they mutually agreed to purchase, share and exchange needed space for cargo in their respective containerships. Under the Agreement, they could be, depending on the occasion, either a principal carrier (with a negotiable bill of lading or other contract of carriage with respect to cargo) or a containership operator (owner, operator or charterer of containership on which the cargo is carried). Florex International, Inc. delivered to respondent AMML cargo of various foodstuffs, with Oakland, California as port of discharge and San Francisco as place of delivery. Pursuant to the Agreement, respondent AMML loaded the subject cargo on MS Sealand Pacer, a vessel owned by petitioner. Under this arrangement, therefore, respondent AMML was the principal carrier while petitioner was the containership operator. The consignee refused to pay for the cargo, alleging that delivery thereof was delayed. Thus, Florex filed a complaint against respondent Maersk-Tabacalera Shipping Agency (Filipinas), Inc. for reimbursement of the value of the cargo and other charges. Respondent AMML filed its Answer alleging that even on the assumption that Florex was entitled to reimbursement, it was petitioner who should be liable. Accordingly, respondent AMML filed a Third Party Complaint against petitioner, averring that whatever damages sustained by Florex were caused by petitioner, which actually received and transported Florex's cargo on its vessels and unloaded them. Petitioner filed a Motion to Dismiss the Third Party Complaint on the ground, inter alia, that there exists an arbitration agreement between it and respondent AMML. ISSUE: WON the terms of the contract require arbitration as a condition precedent to judicial action. HELD: Yes, based on the contract: 1. Disputes between the Principal Carrier and the Containership Operator arising from contracts of carriage shall be governed by the provisions of the bills of lading issued to the Principal Carrier by the Containership Operator.

2.

3.

4.

The Principal Carrier shall use its best efforts to defend or settle all suits against it for loss of or damage to cargo pursuant to bills of lading issued by it. The Principal Carrier shall have the right to seek damages and/or indemnity from the Containership Operator by arbitration, pursuant to Clause 32 of the agreement. The Principal Carrier shall have the right to commence such arbitration any time until one year after its liability has been finally determined by agreement, arbitration award or judgment, provided that the Containership Operator was given notice in writing by the Principal Carrier within three months of the Principal Carrier receiving notice in writing of said claim.

To begin with, allowing respondent AMML's Third Party Claim against petitioner to proceed would be in violation of Clause 16.2 of the Agreement. As summarized, the clause provides that whatever dispute there may be between the Principal Carrier and the Containership Operator arising from contracts of carriage shall be governed by the provisions of the bills of lading deemed issued to the Principal Carrier by the Containership Operator. On the other hand, to sustain the Third Party Complaint would be to allow private respondent to hold petitioner liable under the provisions of the bill of lading issued by the Principal Carrier to Florex, under which the latter is suing in its Complaint, not under the bill of lading petitioner, as containership operator, issued to respondent AMML, as Principal Carrier, contrary to what is contemplated in Clause 16.2. The Court of Appeals ruled that the terms of the Agreement "explicitly required that the principal carrier's claim against the containership operator first be finally determined by, among others, a court judgment, before the right to arbitration accrues." However, the Court of Appeals failed to consider that, precisely, arbitration is the mode by which the liability of the Containership Operator may be finally determined. In the light of the Agreement clauses aforequoted, it is clear that arbitration is the mode provided by which respondent AMML as Principal Carrier can seek damages and/or indemnity from petitioner, as Containership Operator. Stated differently, respondent AMML is barred from taking judicial action against petitioner by the clear terms of their Agreement. In turn, respondent AMML can seek damages and/or indemnity from petitioner as Containership Operator for whatever final judgment may be adjudged against it under the Complaint of Florex. The crucial point is that collection of said damages and/or indemnity from petitioner should be by arbitration. Arbitration being the mode of settlement between the parties expressly provided for by their Agreement, the Third Party Complaint should have been dismissed. Petition for Review on Certiorari is GRANTED.

G.R. No. 155001 May 5, 2003 AGAN Jr., vs. PIATCO FACTS: DOTC had a study conducted to determine whether or not the present Ninoy Aquino International Airport can cope with traffic development up to the year 2010. Four years later, six Filipino-Chinese business leaders met with then President Fidel Ramos to explore the possibility of investing in the construction and operation of a new international airport terminal. The six later formed the Asias Emerging Dragon Corp (AEDC) which submitted an unsolicited proposal for the development of NAIA International Passenger Terminal III. DOTC endorsed the AEDC proposal to the National Economic and Development Authority. It then published an invitation for competitive bidding in two daily newspapers, as required by law. PAIRCARGO submitted their competitive proposal to the PBAC. AEDC filed with PBAC its reservations regarding PAIRCARGo, noting the lack of corporate approvals and financial capability of PAIRCARGO. The PBAC however said that based on the documents submitted and the prequalification criteria, PAIRCARGO was prequalified. The DOTC secretary approved PBACs findings. Both PAIRCARGO and AEDC offered to build the NAIA Passenger Terminal III for at least $350 million at no cost to the government and to pay the government share in gross revenues. However, AEDC offered to pay the government P135 million as guaranteed payment for 27 years. PAIRCARGO offered a total of P17.75 billion for the same period. PBAC informed AEDC it had accepted PAIRCARGOs price proposal, and given AEDC 30 working days to match the bid. When AEDC failed to do so, the DOTC issued a notice regarding AEDCs failure to match the proposal. PAIRCARGO incorporated into Philippine International Airport Terminals Co Inc (PIATCO). AEDC protested the alleged undue preference given to PIATCO and filed before the Pasig RTC a petition for declaration of nullity of the proceedings, mandamus and injunction against the DOTC and the PBAC. DOTC issued the notice of award for the project to PIATCO and signed the Concession Agreement granting PIATCO the franchise to operate and maintain the NAIA Passenger Terminal III. The government and PIATCO signed an Amended and Restated Concession Agreement (ARCA) stipulating Sec. 10.02 providing for the venue of the arbitration

proceedings in case a dispute or controversy arises between the parties to the agreement. Other complaints were filed (including from employees, congressmen, etc). The court heard the case on oral argument, the required the parties to file their respective memoranda, and to explore the possibility of arbitration as provided in the challenged contracts. PIATCO then commenced arbitration proceedings before the International Chamber of Commerce, International Court of Arbitration against Government of the Philippines, DOTC and MIAA. ISSUE: WON there is legal effect on the commencement of arbitration proceedings by PIATCO HELD: The arbitration step taken by PIATCO will not oust this Court of its jurisdiction over the cases at bar. This Court denied petitioner's Motion to Suspend Proceedings pursuant to the arbitration clause under the contract in a previous case. In so ruling, this Court held that as contracts produce legal effect between the parties, their assigns and heirs, only the parties to the Agreement are bound by its terms, including the arbitration clause stipulated therein. This Court ruled that arbitration proceedings could be called for but only with respect to the parties to the contract in question. Considering that there are parties to the case who are neither parties to the Agreement nor heirs or assigns of the parties thereto, this Court, held that to tolerate the splitting of proceedings by allowing arbitration as to some of the parties on the one hand and trial for the others on the other hand would, in effect, result in multiplicity of suits, duplicitous procedure and unnecessary delay. Thus, we ruled that the interest of justice would best be served if the trial court hears and adjudicates the case in a single and complete proceeding. It is established that petitioners in the present cases who have presented legitimate interests in the resolution of the controversy are not parties to the PIATCO Contracts. Accordingly, they cannot be bound by the arbitration clause provided for in the ARCA and hence, cannot be compelled to submit to arbitration proceedings. A speedy and decisive resolution of all the critical issues in the present controversy, including those raised by petitioners, cannot be made before an arbitral tribunal. The object of arbitration is precisely to allow an expeditious determination of a dispute. This objective would not be met if this Court were to allow the parties to settle the cases by arbitration as there are certain issues involving non-parties to the PIATCO Contracts which the arbitral tribunal will not be equipped to resolve.

You might also like