CHUNG FU INDUSTRIES (PHILS.), INC. V.

COURT OF APPEALS Emergency Recitation: Chung Fu entered into an agreement for Roblecor to build its factory, dormitory, and other facilities. Roblecor failed to continue the construction and Chung Fu was forced to take over and finish it himself. Roblecor filed a case to recover its alleged unpaid progress billings. Chung Fu and Roblecor entered into an arbitration agreement that they will adhere to the decision of an arbitrator and such decision will be final, unappealable, and executory. No judicial review will be allowed. Arbitrator awarded 16M to Roblecor but Chung Fu contested this claiming GADLEJ on the part of the arbitrator RTC and CA ruled that Chung Fu was estopped to question the arbitrators award because of the above stipulation stating its finality Issue: can the courts review such award despite the provision? Yes they can If there is GADLEJ, the courts have the legal duty to review. To adhere absolutely to such stipulation prohibiting judicial review is against public policy Chung Fu successfully showed that arbitrator did not adhere to the parties construction agreement in determining the award and hence acted GADLEJ Held: Petition granted. Remand case to lower court. FACTS: Chung Fu Industries Inc. entered into a construction agreement with Roblecor. Roblecor will build Chung Fus: o Industrial/factory complex in Tanawan, Tanza, Cavite for 42,000,000 o Dormitory and support facilities for 3,875,285 o Installation of electrical, water, and hydrant systems at their plant site for 12,100,000 Roblecor failed to complete the project despite an extension of time given by Chung Fu Chung Fu ended up taking over the construction as it was evident that Roblecor couldnt continue it Roblecor filed a petition for compulsory arbitration with prayer for TRO in RTC o Claimed an unsatisfied account of 10,500,000 and unsatisfied unpaid progress billings of 2,370,179.23 Parties negotiated and formulated an arbitration agreement which was submitted and approved by the RTC The arbitration agreement had a stipulation: o The parties mutually agree that they will abide by the decision of the arbitrator including any amount that may be awarded to either party 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 arbitrators award Their chosen arbitrator, Engineer Willardo Asuncion, ruled for Chung Fu to pay Roblecor 16,108,8100 Roblecor moved for the execution of the judgment while Chung Fu contested and asked for reconsideration Chung Fu claims that the arbitrator committed 12 instances of grave error by disregarding the provisions of their contract in awarding extra compensation to Roblecor RTC denied Chung Fus motion to remand and granted Roblecors motion for confirmation of award and writ of execution CA affirmed RTC ruling RTC and CA relied on the above stipulation, enforcing the intent and agreement of the parties. Chung Fu is estopped from questioning the arbitration award

ISSUES: W/N RTC and CA were correct in dismissing the motion of Chung Fu to review the arbitrators award NO W/N courts can still review the arbitrators award despite the stipulation above declaring it final and unappealable - YES HELD: Motion of Chung Fu granted. Case remanded to lower court to determine the proper award. RATIO: Chung Fu claims: o The courts denied it due process and substantial justice by refusing to exercise its legal duty to review the arbitrators award o CA GADLEJ in refusing to take into consideration 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 In opting for arbitration, the parties do not intend to completely deprive the courts of jurisdiction Jurisprudence: a clause in a contract providing that all matters in dispute shall be referred to arbitrators and to them alone is contrary to public policy and cannot oust the courts of jurisdictionBut certainly, the stipulation to refer all future disputes to an arbitrator or to submit an on-going dispute to one is valid. However, the parties CANNOT absolutely agree to submit their disputes to arbitration and provide that the arbitrators award shall be final, unappealable, and executory. Art. 2044 of the Civil Code where the conditions described in Art. 2038,

2039, and 2040 are present, the arbitrators award may be annulled or rescinded In such cases, then judicial review of the award is properly warranted If the courts refuse or neglect to inquire into the factual milieu of an arbitrators award on such grounds, the remedy is certiorari under Rule 65 of the Revised Rules of Court o But, this is applicable only when GADLEJ on the part of the arbitrator is clearly shown Even decisions of administrative agencies which are declared final by law are not exempt from judicial review when so warranted o Oceanic Bic Div v. Romero: In spite of statutory provisions making final the decisions of certain administrative agencies, we have taken cognizance of petitions questioning these decisions where want of jurisdiction, GAD, violation of due process, denial of substantial justice, or erroneous interpretation of the law were brought to our attention In the case at bar, arbitrator used practices in the construction industry rather than the construction agreement in granting the award o He granted extra compensation for loss due to adverse weather conditions, loss of productivity due to cement crisis, extended overhead expenses, etc. Chung Fu has successfully shown that the arbitrator failed to apply the terms and provisions of the construction agreement thus committing GAD Hence, judicial review is proper and warranted

Reference to Art. 2038, 2039 and 2040 mentioned in case: Art. 2038. A compromise in which there is mistake, fraud, violence, intimidation, undue influence, or falsity of documents, is subject to the provisions of Article 1330 of this Code. However, one of parties cannot set up a mistake of fact as against the other if the latter, by virtue of the compromise, has withdrawn from a litigation already commenced. (1817a) Art. 2039. When the parties compromise generally on all differences which they might have with each other, the discovery of documents referring to one or more but not to all of the questions settled shall not itself be a cause for annulment or rescission of the compromise, unless said documents have been concealed by one of the parties. But the compromise may be annulled or rescinded if it refers only to one thing to which one of the parties has no right, as shown by the newly-discovered documents. (n) Art. 2040. If after a litigation has been decided by a final judgment, a compromise should be agreed upon, either or both parties being unaware of the existence of the final judgment, the compromise may be rescinded. Ignorance of a judgment which may be revoked or set aside is not a valid ground for

attacking a compromise. (1819a)