[G.R. NO. 135362.

December 13, 1999]

HEIRS OF AUGUSTO L. SALAS, JR., !me"#$ TERESITA D. SALAS %&r 'er(e"% ! ) !( "e*!" *+!r),! &% -'e m, &r FA.RI/E /0RILL D. SALAS, 1A. /RISTINA S. LESA/A, ! ) 2ARINA TERESA D. SALAS, petitioners, vs. LA3ERAL REALT0 /OR3ORATION, RO/24A0 REAL ESTATE /OR3ORATION, SOUTH RIDGE 5ILLAGE, IN/., 1AHARA1I DE5ELO31ENT /OR3ORATION, S6&+(e( THEL1A D. A.RAJANO ! ) GREGORIO A.RAJANO, OS/AR DA/ILLO, S6&+(e( 5IRGINIA D. LA5A ! ) RODEL LA5A, EDUARDO A. 5A/UNA, FLORANTE DE LA /RU7, JESUS 5I/ENTE .. /A3ELLAN, ! ) -'e REGISTER OF DEEDS FOR LI3A /IT0, respondents. DE/ISION DE LEON, JR., J.$ Before us is a petition for review on certiorari of the Order[1] of Branch 85 of the Regional Trial Court of Lipa City [ ] dis!issing petitioners" co!plaint[#] for rescission of several sale transactions involving land owned $y %ugusto L& 'alas( )r&( their predecessor*in*interest( on the ground that they failed to first resort to ar$itration& 'alas( )r& was the registered owner of a vast tract of land in Lipa City( Batangas spanning 1(+8+(#5+ s,uare !eters& On -ay 15( 1.8/( he entered into an Owner*Contractor %gree!ent [+] 0hereinafter referred to as the %gree!ent1 with respondent Laperal Realty Corporation 0hereinafter referred to as Laperal Realty1 to render and provide co!plete 0hori2ontal1 construction services on his land& On 'epte!$er #( 1.88( 'alas( )r& e3ecuted a 'pecial 4ower of %ttorney in favor of respondent Laperal Realty to e3ercise general control( supervision and !anage!ent of the sale of his land( for cash or on install!ent $asis& On )une 15( 1.8.( 'alas( )r& left his ho!e in the !orning for a $usiness trip to 6ueva 7ci8a& 9e never returned& On %ugust :( 1..:( Teresita ;ia2 'alas filed with the Regional Trial Court of -a<ati City a verified petition for the declaration of presu!ptive death of her hus$and( 'alas( )r&( who had then $een !issing for !ore than seven 0/1 years& =t was granted on ;ece!$er 1 ( 1..:&[5] -eanti!e( respondent Laperal Realty su$divided the land of 'alas( )r& and sold su$divided portions thereof to respondents Roc<way Real 7state Corporation and 'outh Ridge >illage( =nc& on ?e$ruary ( 1..5@ to respondent spouses %$ra8ano and Lava and Oscar ;acillo on )une /( 1..1@ and to respondents 7duardo >acuna( ?lorante de la Cru2 and )esus >icente Capalan on )une +( 1..: 0all of who! are hereinafter referred to as respondent lot $uyers1& On ?e$ruary #( 1..8( petitioners as heirs of 'alas( )r& filed in the Regional Trial Court of Lipa City a Co!plaint [:] for declaration of nullity of sale( reconveyance( cancellation of contract( accounting and da!ages against herein respondents which was doc<eted as Civil Case 6o& .8*55+/& On %pril +( 1..8( respondent Laperal Realty filed a -otion to ;is!iss [/]on the ground that petitioners failed to su$!it their grievance to ar$itration as re,uired under %rticle >= of the %gree!ent which providesA B%RT=CL7 >=& %RB=TR%T=O6& %ll cases of dispute $etween CO6TR%CTOR and OC67R"' representative shall $e referred to the co!!ittee represented $yA a& One representative of the OC67R@ $& One representative of the CO6TR%CTOR@ c& One representative accepta$le to $oth OC67R and CO6TR%CTOR&D[8] On -ay 5( 1..8( respondent spouses %$ra8ano and Lava and respondent ;acillo filed a )oint %nswer with Counterclai! and Crossclai![.] praying for dis!issal of petitioners" Co!plaint for the sa!e reason& On %ugust .( 1..8( the trial court issued the herein assailed Order dis!issing petitioners" Co!plaint for non*co!pliance with the foregoing ar$itration clause& 9ence this petition& 4etitioners argue( thusA BThe petitioners" causes of action did not e!anate fro! the Owner*Contractor %gree!ent&D BThe petitioners" causes of action for cancellation of contract and accounting are covered $y the e3ception under the %r$itration Law&D B?ailure to ar$itrate is not a ground for dis!issal&D[15]

=n a catena of cases[11] inspired $y )ustice -alcol!"s provocative dissent in Vega v. San Carlos Milling Co.[1 ]( this Court has recogni2ed ar$itration agree!ents as valid( $inding( enforcea$le and not contrary to pu$lic policy so !uch so that when there o$tains a written provision for ar$itration which is not co!plied with( the trial court should suspend the proceedings and order the parties to proceed to ar$itration in accordance with the ter!s of their agree!ent [1#] %r$itration is the Bwave of the futureD in dispute resolution& [1+] To $rush aside a contractual agree!ent calling for ar$itration in case of disagree!ent $etween parties would $e a step $ac<ward&[15] 6onetheless( we grant the petition& % su$!ission to ar$itration is a contract&[1:] %s such( the %gree!ent( containing the stipulation on ar$itration( $inds the parties thereto( as well as their assigns and heirs&[1/] But only they& 4etitioners( as heirs of 'alas( )r&( and respondent Laperal Realty are certainly $ound $y the %gree!ent& =f respondent Laperal Realty( had assigned its rights under the %gree!ent to a third party( !a<ing the for!er( the assignor( and the latter( the assignee( such assignee would also $e $ound $y the ar$itration provision since assign!ent involves such transfer of rights as to vest in the assignee the power to enforce the! to the sa!e e3tent as the assignor could have enforced the! against the de$tor [18] or in this case( against the heirs of the original party to the %gree!ent& 9owever( respondents Roc<way Real 7state Corporation( 'outh Ridge >illage( =nc&( -ahara!i ;evelop!ent Corporation( spouses %$ra8ano( spouses Lava( Oscar ;acillo( 7duardo >acuna( ?lorante de la Cru2 and )esus >icente Capellan are &- assignees of the rights of respondent Laperal Realty under the %gree!ent to develop 'alas( )r&"s land and sell the sa!e& They are( rather( $uyers of the land that respondent Laperal Realty was given the authority to develop and sell under the %gree!ent& %s such( they are &- BassignsD conte!plated in %rt& 1#11 of the 6ew Civil Code which provides that Bcontracts ta<e effect only $etween the parties( their assigns and heirsD& 4etitioners clai! that they suffered lesion of !ore than one*fourth 01E+1 of the value of 'alas( )r&"s land when respondent Laperal Realty su$divided it and sold portions thereof to respondent lot $uyers& Thus( they instituted action[1.]against $oth respondent Laperal Realty and respondent lot $uyers for rescission of the sale transactions and reconveyance to the! of the su$divided lots& They argue that rescission( $eing their cause of action( falls under the e3ception clause in 'ec& of Repu$lic %ct 6o& 8/: which provides that Bsuch su$!ission [to] or contract [of ar$itration] shall $e valid( enforcea$le and irrevoca$le( (!8e +6& (+c' *r&+ )( !( e9,(- !- "!: %&r -'e re8&c!-,& &% ! # c& -r!c-D& The petitioners" contention is without !erit& ?or while rescission( as a general rule( is an ar$itra$le issue( [ 5] they i!pleaded in the suit for rescission the respondent lot $uyers who are neither parties to the %gree!ent nor the latter"s assigns or heirs& Conse,uently( the right to ar$itrate as provided in %rticle >= of the %gree!ent was never vested in respondent lot $uyers& Respondent Laperal Realty( as a contracting party to the %gree!ent( has the right to co!pel petitioners to first ar$itrate $efore see<ing 8udicial relief& 9owever( to split the proceedings into ar$itration for respondent Laperal Realty and trial for the respondent lot $uyers( or to hold trial in a$eyance pending ar$itration $etween petitioners and respondent Laperal Realty( would in effect result in !ultiplicity of suits( duplicitous procedure and unnecessary delay& On the other hand( it would $e in the interest of 8ustice if the trial court hears the co!plaint against all herein respondents and ad8udicates petitioners" rights as against theirs in a single and co!plete proceeding& 4HEREFORE( the instant petition is here$y FR%6T7;& The Order dated %ugust 1.( 1..8 of Branch 85 of the Regional Trial Court of Lipa City is here$y 6GLL=?=7; and '7T %'=;7& 'aid court is here$y ordered to proceed with the hearing of Civil Case 6o& .8*55+/& Costs against private respondents& SO ORDERED. [G.R. N&. 13615;. Febr+!r# <, 2==1] DEL 1ONTE /OR3ORATION>USA, 3AUL E. DER.0, JR., DANIEL /OLLINS ! ) LUIS HIDALGO, petitioners, vs. /OURT OF A33EALS, JUDGE .IEN5ENIDO L. RE0ES , ',( c!6!c,-# !( 3re(,), * J+)*e, RT/>.r. <;, 1!"!b& , 1e-r& 1! ,"!, 1ONTE.UENO 1AR2ETING, IN/., LIONG LIONG /. S0 ! ) SA.ROSA FOODS, IN/., respondents. DE/ISION .ELLOSILLO, J.$ This Petition for Review on certiorari assails the 1/ )uly 1..8 Decision[1] of the Court of %ppeals affir!ing the 11 6ove!$er 1../ Order[ ] of the Regional Trial Court which denied petitioners" Motion to Suspend Proceedings in Civil Case 6o& :#/*-6& =t also ,uestions the appellate court"s Resolution[#] of #5 Octo$er 1..8 which denied petitioners" Motion for Reconsideration& On 1 )uly 1..+( in a ;istri$utorship %gree!ent( petitioner ;el -onte Corporation*G'% 0;-C*G'%1 appointed private respondent -onte$ueno -ar<eting( =nc& 0--=1 as the sole and e3clusive distri$utor of its ;el -onte products in the 4hilippines for a period of five 051 years( renewa$le for two 0 1 consecutive five 051 year periods with the consent of the parties& The %gree!ent provided( a!ong others( for an ar$itration clause which states * 1 & FO>7R6=6F L%C %6; %RB=TR%T=O6[+] This Agreement shall be governed b the laws of the State of California and!or" if applicable" the #nited States of America. All disputes arising out of or relating to this Agreement or the parties$ relationship" including the termination thereof" shall be resolved b arbitration in the Cit of San %rancisco" State of California" under the Rules of the American Arbitration Association. The arbitration panel shall consist of three members" one of whom shall be selected b DMC&#SA" one of whom shall be selected b MM'" and third of whom shall be selected b the other two members and shall have relevant e(perience in the industr ( ( ( ( =n Octo$er 1..+ the appoint!ent of private respondent --= as the sole and e3clusive distri$utor of ;el -onte products in the 4hilippines was pu$lished in several newspapers in the country& =!!ediately after its appoint!ent( private respondent --= appointed 'a$rosa ?oods(

=nc& 0'?=1( with the approval of petitioner ;-C*G'%( as --="s !ar<eting ar! to concentrate on its !ar<eting and selling function as well as to !anage its critical relationship with the trade& On # Octo$er 1..: private respondents --=( '?= and --="s -anaging ;irector Liong Liong C& 'y 0L=LH 'H1 filed a Co!plaint [5] against petitioners ;-C*G'%( 4aul 7& ;er$y( )r&( [:] ;aniel Collins[/] and Luis 9idalgo([8] and ;ewey Ltd&[.] $efore the Regional Trial Court of -ala$on( -etro -anila& 4rivate respondents predicated their co!plaint on the alleged violations $y petitioners of %rts& 5([15] 1[11] and #[1 ] of the Civil Code& %ccording to private respondents( ;-C*G'% products continued to $e $rought into the country $y parallel i!porters despite the appoint!ent of private respondent --= as the sole and e3clusive distri$utor of ;el -onte products there$y causing the! great e!$arrass!ent and su$stantial da!age& They alleged that the products $rought into the country $y these i!porters were aged( da!aged( fa<e or counterfeit( so that in -arch 1..5 they had to cause( after prior consultation with %ntonio Ongpin( -ar<et ;irector for 'pecial -ar<ets of ;el -onte 4hilippines( =nc&( the pu$lication of a Iwarning to the tradeI paid advertise!ent in leading newspapers& 4etitioners ;-C*G'% and 4aul 7& ;er$y( )r&( apparently upset with the pu$lication( instructed private respondent --= to stop coordinating with %ntonio Ongpin and to co!!unicate directly instead with petitioner ;-C*G'% through 4aul 7& ;er$y( )r& 4rivate respondents further averred that petitioners <nowingly and surreptitiously continued to deal with the for!er in $ad faith $y involving disinterested third parties and $y proposing solutions which were entirely out of their control& 4rivate respondents clai!ed that they had e3hausted all possi$le avenues for an a!ica$le resolution and settle!ent of their grievances@ that as a result of the fraud( $ad faith( !alice and wanton attitude of petitioners( they should $e held responsi$le for all the actual e3penses incurred $y private respondents in the delayed ship!ent of orders which resulted in the e3tra handling thereof( the actual e3penses and cost of !oney for the unused Letters of Credit 0LCs1 and the su$stantial opportunity losses due to created out*of*stoc< situations and unauthori2ed ship!ents of ;el -onte*G'% products to the 4hilippine ;uty ?ree %rea and 7cono!ic Jone@ that the $ad faith( fraudulent acts and willful negligence of petitioners( !otivated $y their deter!ination to s,uee2e private respondents out of the outstanding and ongoing ;istri$utorship %gree!ent in favor of another party( had placed private respondent L=LH 'H on tenterhoo<s since then@ and( that the shrewd and su$tle !anner with which petitioners concocted i!aginary violations $y private respondent --= of the ;istri$utorship %gree!ent in order to 8ustify the unti!ely ter!ination thereof was a su$terfuge& ?or the foregoing( private respondents clai!ed( a!ong other reliefs( the pay!ent of actual da!ages( e3e!plary da!ages( attorney"s fees and litigation e3penses& On 1 Octo$er 1..: petitioners filed a Motion to Suspend Proceedings[1#] invo<ing the ar$itration clause in their %gree!ent with private respondents& =n a Resolution[1+] dated # ;ece!$er 1..: the trial court deferred consideration of petitioners" Motion to Suspend Proceedings as the grounds alleged therein did not constitute the suspension of the proceedings considering that the action was for da!ages with prayer for the issuance of )rit of Preliminar Attachment and not on the ;istri$utorship %gree!ent& On 15 )anuary 1../ petitioners filed a Motion for Reconsideration to which private respondents filed their Comment!*pposition& On #1 )anuary 1../ petitioners filed their Repl & 'u$se,uently( private respondents filed an #rgent Motion for +eave to Admit Supplemental Pleading dated %pril 1../& This -otion was ad!itted( over petitioners" opposition( in an Order of the trial court dated / )une 1../& %s a result of the ad!ission of the Supplemental Complaint( petitioners filed on )uly 1../ a Manifestation adopting their Motion to Suspend Proceedings of 1/ Octo$er 1..: and Motion for Reconsideration of 1+ )anuary 1../& On 11 6ove!$er 1../ the Motion to Suspend Proceedings was denied $y the trial court on the ground that it ,will not serve the ends of -ustice and to allow said suspension will onl dela the determination of the issues" frustrate the .uest of the parties for a -udicious determination of their respective claims" and!or deprive and dela their rights to see/ redress&I[15] On appeal( the Court of %ppeals affir!ed the decision of the trial court& =t held that the alleged da!aging acts recited in the Co!plaint( constituting petitioners" causes of action( re,uired the interpretation of %rt& 1 of the Civil Code [1:] and that in deter!ining whether petitioners had violated it Iwould re,uire a full $lown trialI !a<ing ar$itration Iout of the ,uestion&I [1/] 4etitioners" Motion for Reconsiderationof the affir!ation was denied& 9ence( this Petition for Review& The cru3 of the controversy $oils down to whether the dispute $etween the parties warrants an order co!pelling the! to su$!it to ar$itration& 4etitioners contend that the su$8ect !atter of private respondents" causes of action arises out of or relates to the %gree!ent $etween petitioners and private respondents& Thus( considering that the ar$itration clause of the %gree!ent provides that all disputes arising out of or relating to the %gree!ent or the parties" relationship( including the ter!ination thereof( shall $e resolved $y ar$itration( they insist on the suspension of the proceedings in Civil Case 6o& :#/*-6 as !andated $y 'ec& / of R% 8/:[18] * Sec. 0. 'tay of Civil %ction& 'f an suit or proceeding be brought upon an issue arising out of an agreement providing for arbitration thereof" the court in which such suit or proceeding is pending" upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration" shall sta the action or proceeding until an arbitration has been had in accordance with the terms of the agreement. 4rovided( That the applicant for the sta is not in default in proceeding with such arbitration. 4rivate respondents clai!( on the other hand( that their causes of action are rooted in %rts& 5( 1 and # of the Civil Code( [1.] the deter!ination of which de!ands a full $lown trial( as correctly held $y the Court of %ppeals& -oreover( they clai! that the issues $efore the trial court were not 8oined so that the 9onora$le )udge was not given the opportunity to satisfy hi!self that the issue involved in the case was refera$le to ar$itration& They su$!it that( apparently( petitioners filed a !otion to suspend proceedings instead of sending a written de!and to private respondents to ar$itrate $ecause petitioners were not sure whether the case could $e a su$8ect of ar$itration& They !aintain that had petitioners done so and private respondents failed to answer the de!and( petitioners could have filed with the trial court their de!and for ar$itration that would warrant a deter!ination $y the 8udge whether to refer the case to ar$itration& %ccordingly( private respondents assert that ar$itration is out of the ,uestion& 4rivate respondents further contend that the ar$itration clause centers !ore on venue rather than on ar$itration& They finally allege that petitioners filed their !otion for e3tension of ti!e to file this petition on the sa!e date [ 5] petitioner ;-C*G'% filed a petition to co!pel private

respondent --= to ar$itrate $efore the Gnited 'tates ;istrict Court in 6orthern California( doc<eted as Case 6o& C*.8*+++:& They insist that the filing of the petition to co!pel ar$itration in the Gnited 'tates !ade the petition filed $efore this Court an alternative re!edy and( in a way( an a$andon!ent of the cause they are fighting for here in the 4hilippines( thus warranting the dis!issal of the present petition $efore this Court& There is no dou$t that ar$itration is valid and constitutional in our 8urisdiction& [ 1] 7ven $efore the enact!ent of R% 8/:( this Court has countenanced the settle!ent of disputes through ar$itration& Gnless the agree!ent is such as a$solutely to close the doors of the courts against the parties( which agree!ent would $e void( the courts will loo< with favor upon such a!ica$le arrange!ent and will only interfere with great reluctance to anticipate or nullify the action of the ar$itrator& [ ] -oreover( as R% 8/: e3pressly authori2es ar$itration of do!estic disputes( foreign ar$itration as a syste! of settling co!!ercial disputes was li<ewise recogni2ed when the 4hilippines adhered to the Gnited 6ations ,Convention on the Recognition and the 1nforcement of %oreign Arbitral Awards of 2345, under the 15 -ay 1.:5 Resolution 6o& /1 of the 4hilippine 'enate( giving reciprocal recognition and allowing enforce!ent of international ar$itration agree!ents $etween parties of different nationalities within a contracting state&[ #] % careful e3a!ination of the instant case shows that the ar$itration clause in the ;istri$utorship %gree!ent $etween petitioner ;-C*G'% and private respondent --= is valid and the dispute $etween the parties is ar$itra$le& 9owever( this Court !ust deny the petition& The %gree!ent $etween petitioner ;-C*G'% and private respondent --= is a contract& The provision to su$!it to ar$itration any dispute arising therefro! and the relationship of the parties is part of that contract and is itself a contract& %s a rule( contracts are respected as the law $etween the contracting parties and produce effect as $etween the!( their assigns and heirs& [ +] Clearly( only parties to the %gree!ent( i.e&( petitioners ;-C*G'% and its -anaging ;irector for 73port 'ales 4aul 7& ;er$y( )r&( and private respondents --= and its -anaging ;irector L=LH 'H are $ound $y the %gree!ent and its ar$itration clause as they are the only signatories thereto& 4etitioners ;aniel Collins and Luis 9idalgo( and private respondent '?=( not parties to the %gree!ent and cannot even $e considered assigns or heirs of the parties( are not $ound $y the %gree!ent and the ar$itration clause therein& Conse,uently( referral to ar$itration in the 'tate of California pursuant to the ar$itration clause and the suspension of the proceedings in Civil Case 6o& :#/*-6 pending the return of the ar$itral award could $e called for[ 5] $ut only as to petitioners ;-C*G'% and 4aul 7& ;er$y( )r&( and private respondents --= and L=LH 'H( and not as to the other parties in this case( in accordance with the recent case of 6eirs of Augusto +. Salas" 7r. v. +aperal Realt Corporation ([ :] which superseded that of To ota Motor Philippines Corp. v. Court of Appeals&[ /] =n To ota" the Court ruled that I[t]he contention that the ar$itration clause has $eco!e dysfunctional $ecause of the presence of third parties is untena$le ratiocinating that I[c]ontracts are respected as the law $etween the contracting partiesI [ 8] and that I[a]s such( the parties are there$y e3pected to a$ide with good faith in their contractual co!!it!ents&I [ .] 9owever( in Salas" 7r." only parties to the %gree!ent( their assigns or heirs have the right to ar$itrate or could $e co!pelled to ar$itrate& The Court went further $y declaring that in recogni2ing the right of the contracting parties to ar$itrate or to co!pel ar$itration( the splitting of the proceedings to ar$itration as to so!e of the parties on one hand and trial for the others on the other hand( or the suspension of trial pending ar$itration $etween so!e of the parties( should not $e allowed as it would( in effect( result in !ultiplicity of suits( duplicitous procedure and unnecessary delay& [#5] The o$8ect of ar$itration is to allow the e3peditious deter!ination of a dispute& [#1] Clearly( the issue $efore us could not $e speedily and efficiently resolved in its entirety if we allow si!ultaneous ar$itration proceedings and trial( or suspension of trial pending ar$itration& %ccordingly( the interest of 8ustice would only $e served if the trial court hears and ad8udicates the case in a single and co!plete proceeding&[# ] 4HEREFORE( the petition is ;76=7;& The ;ecision of the Court of %ppeals affir!ing the Order of the Regional Trial Court of -ala$on( -etro -anila( in Civil Case 6o& :#/*-6( which denied petitioners" Motion to Suspend Proceedings( is %??=R-7;& The Regional Trial Court concerned is directed to proceed with the hearing of Civil Case 6o& :#/*-6 with dispatch& 6o costs& SO ORDERED.

[G.R. N&. 12<==;. 1!rc' 11, 1999]

NATIONAL STEEL /OR3ORATION, petitioner, vs. THE REGIONAL TRIAL /OURT OF LANAO DEL NORTE, .RAN/H 2, ILIGAN /IT0 ! ) E. 4ILL2O1 ENTER3RISES, IN/., respondents. DE/ISION 3URISI1A, J.$ Before the Court is a 4etition for Certiorari with 4rayer for 4reli!inary =n8unction K Te!porary Restraining Order under Rule :5 of the Revised Rules of Court assailing the decision of the Regional Trial Court of Lanao del 6orte( Branch ( =ligan City( on the following consolidated cases A 0a1 'pecial 4roceeding Case 6o& 5: entitled 8ational Steel Corporation vs 1. )ill/om 1nterprise 'nc to >acate %r$itrators %ward@ and@

0$1 Civil Case 6o& 1.8 entitled to 1. )ill/om 1nterprises 'nc& vs 8ational Steel Corporation for 'u! of -oney with application for Confir!ation of %r$itrators %ward& The facts as found $elow are( as followsA

I333 On 6ov& 18( 1.. ( petitioner*defendant 7dward Cil<o! 7nterprises =nc& 07C7= for $revity1 together with one Ra!iro Construction and respondent*petitioner 6ational 'teel Corporation 06'C for short1 e3ecuted a contract where$y the for!er 8ointly undertoo< the Contract for 'ite ;evelop!ent 073hs& I#I K I;I1 for the latterLs =ntegrated =ron and 'teel -ills Co!ple3 to $e esta$lished at =ligan City& 'o!eti!e in the year 1.8#( the services of Ra!iro Construction was ter!inated and on -arch /( 1.8#( petitioner*defendant 7C7= too< over Ra!iroLs contractual o$ligation& ;ue to this and to other causes dee!ed sufficient $y 7C7=( e3tensions of ti!e for the ter!ination of the pro8ect( initially agreed to $e finished on )uly 1/( 1.8#( were granted $y 6'C& ;ifferences later arose( 4laintiff*defendant 7C7= filed Civil Case 6o& 1:15 $efore the Regional Trial Court of Lanao del 6orte( Branch 5:( 073hs& I%I and I1I1 praying essentially for the pay!ents of4+58(#81&551 with interest fro! the ti!e of delay@ the price ad8ust!ent as provided $y 4; 15.+@ and e3e!plary da!ages in the a!ount of 455(555&55 and attorneyLs fees& ;efendant*petitioner 6'C filed an answer with counterclai! to plaintiffLs co!plaints on -ay 18( 1..5& On %ugust 1( 1..5( the 9onora$le Court through 4residing )udge >alario -& 'ala2ar upon 8oint !otion of $oth parties had issued an order 073hs& ICI and I#I1 dis!issing the said co!plaint and counterclai! 3 3 3 in view of the desire of $oth parties to i!ple!ent 'ec& 1. of the contract( providing for a resolution of any conflict $y ar$itration 3 3 3 & 0 underscoring supplied1& =n accordance with the aforesaid order( and pursuant to 'ec& 1. of the Contract for 'ite ;evelop!ent 0id1 the herein parties constituted an %r$itration Board co!posed of the followingA 0a1 7ngr& 4afnucio -& -e8ia as Chair!an( who was no!inated $y the two ar$itrators earlier no!inated $y 7C7= and 6'C with an Oath of Office 073h& I7I1@ 0$1 0c1 7ngr& 7uta,uio 5& Lagapa( )r&( !e!$er( who was no!inated $y 7C7= with an oath office 073h& I?I1 7ngr& Fil %& %$erilia( a !e!$er who was no!inated $y 6'C( with an Oath of Office 073h& IFI1&

%fter series of hearings( the %r$itrators rendered the decision 073h& I9I K I+I1 which is the su$8ect !atter of these present causes of action( $oth initiated separately $y the herein contending parties( su$stantial portion of which directs 6'C to pay 7C7=( as followsA 0a1 4+58(#81&55 representing 7C7=Ls last $illing 6o& 1: with interest thereon at the rate of 1*1E+M per !onth fro! )anuary 1( 1.85 to actual date of pay!ent@ 0$1 41(##5(51+& 5 representing price escalation ad8ust!ent under 4; 6o& 15.+( with interest thereon at the rate of 1*1E+ M per !onth fro! )anuary 1( 1.85 to actual date of pay!ent@ 0c1 0d1 0e1 455(555 as and for e3e!plary da!ages@ 4#55(555 as and for attorneyLs fees&@ and 4#5(555&55 as and for cost of ar$itration&I[1]

The Regional Trial Court of Lanao del 6orte Branch ( =ligan City through )udge -a3i!o B& Ratunil( rendered 8udg!ent as followsA 011 =n Civil Case 6o& 11* 1.8( declaring the award of the Board of %r$itrators( dated %pril 1( 1.. to $e duly %??=R-7; and CO6?=R-7; Ien toto, @ that an entry of 8udg!ent $e entered therewith pursuant to Repu$lic %ct 6o& 8/: 0the %r$itration Law1@ and costs against respondent 6ational 'teel Corporation& 0 1 =n 'pecial 4roceeding 6o& 11* 'O OR;7R7;&[ ] I Cith the denial on Octo$er 18( 1..: of its -otion for Reconsideration( the 6ational 'teel Corporation 06'C1 has co!e to this court via the present petition& %fter deli$erating on the petition as well as the co!!ent and reply thereon( the court gave due course to the petition and considered the case ripe for decision& T'e 6,8&- &% , ?+,r# 'ere ,( :'e-'er &r &- -'e "&:er c&+r- !c-e) :,-' *r!8e !b+(e &% ),(cre-,& , !:!r). &- 8!c!-, * -'e !rb,-r!-&r@( 5:( ordering the petition to vacate the aforesaid award $e ;='-=''7;&

% stipulation to refer all future disputes or to su$!it an ongoing dispute to an ar$itrator is valid& Repu$lic %ct 8/:( otherwise <nown as the %r$itration Law( was enacted $y Congress since there was a growing need for a law regulating ar$itration in general& The parties in the present case( upon entering into a Contract for 'ite ;evelop!ent( !utually agreed that any dispute arising fro! the said contract shall $e su$!itted for ar$itration& 73plicit is 4aragraph 1. of su$8ect contract( which readsA

I3!r!*r!6' 19. AR.ITRATION& %ll disputes ,uestions or differences which !ay at any ti!e arise $etween the parties hereto in connection with or relating to this %gree!ent or the su$8ect !atter hereof( including ,uestions of interpretation or construction( shall $e referred to an %r$itration Board co!posed of three 0#1 ar$itrators( one to $e appointed $y each party( and the third( to $e appointed $y the two 0 1 ar$itrators& The appoint!ent of ar$itrators and procedure for ar$itration shall $e governed $y the provisions of the %r$itration Law 0Repu$lic %ct 6o& 8/:1& The Board shall apply 4hilippine Law in ad8udicating the dispute& The decision of a !a8ority of the !e!$ers of the %r$itration Board shall $e valid( $inding( final and conclusive upon the parties( and fro! which there will $e no appeal( su$8ect to the provisions on vacating( !odifying( or correcting an award under the said Repu$lic %ct 6o& 8/:&[#] Thereunder( if a dispute should arise fro! the contract( the %r$itration Board shall assu!e 8urisdiction and conduct hearings& %fter the Board co!es up with a decision( the parties !ay i!!ediately i!ple!ent the sa!e $y treating it as an a!ica$le settle!ent& 9owever( if one of the parties refuses to co!ply or is dissatisfied with the decision( he !ay file a 4etition to >acate the %r$itratorLs decision $efore the trial court& On the other hand( the winning party !ay as< the trial courtLs confir!ation to have such decision enforced& =t should $e stressed that voluntary ar$itrators( $y the nature of their functions( act in a ,uasi*8udicial capacity& [+] %s a rule( findings of facts $y ,uasi*8udicial $odies( which have ac,uired e3pertise $ecause their 8urisdiction is confined to specific !atters( are accorded not only respect $ut even finality if they are supported $y su$stantial evidence( [5] even if not overwhel!ing or preponderant& [:] %s the petitioner has availed of Rule :5( the Court will not review the facts found nor even of the law as interpreted or applied $y the ar$itrator unless the supposed errors of facts or of law are so patent and gross and pre8udicial as to a!ount to a grave a$use of discretion or an e(cess de pouvoir on the part of the ar$itrators&[/] Thus( in a 4etition to >acate %r$itratorLs ;ecision $efore the trial court( regularity in the perfor!ance of official functions is presu!ed and the co!plaining party has the $urden of proving the e3istence of any of the grounds for vacating the award( as provided for $y 'ections + of the %r$itration Law( to witA ISec. 2; GROUNDS FOR 5A/ATING THE A4ARD * =n any one of the following cases( the court !ust !a<e an order vacating the award upon the petition of any party to the controversy when such party proves affir!atively that in the ar$itration proceedingsA 0a1 0$1 The award was procured $y corruption( fraud or other undue !eans@ That there was evident partiality or corruption in the ar$itrators of any of the!@ or

0c1 That the ar$itrators were guilty of !isconduct in refusing to postpone the hearing upon sufficient cause shown( or in refusing to hear evidence pertinent and !aterial to the controversy@ that one or !ore of the ar$itrators was dis,ualified to act as such under section nine hereof( and wilfully refrained fro! disclosing such dis,ualification or of any other !is$ehavior $y which the rights of any party have $een !aterially pre8udiced@ or 0d1 That the ar$itrators e3ceeded their powers( or so i!perfectly e3ecuted the!( that a !utual( final and definite award upon the su$8ect !atter su$!itted to the! was not !ade& 333I The grounds relied upon $y the petitioner were the following 0a1 That there was evident partiality in the assailed decision of the %r$itrators in favor of the respondent@ and 0$1 That there was !ista<en appreciation of the facts and application of the law $y the %r$itrators& These were the very sa!e grounds alleged $y 6'C $efore the trial court in their 4etition to >acate the %r$itration %ward and which petitioner is reiterating in this petition under scrutiny& 4etitionerLs allegation that there was evident partiality is untena$le& =t is ane!ic of evidentiary support& =n the case of Adamson vs& Court of Appeals" # 'CR% :5 ( in upholding the decision of the Board of %r$itrators( this Court ruled that the fact that a party was disadvantaged $y the decision of the %r$itration Co!!ittee does not prove evident partiality& 4roofs other than !ere inference are needed to esta$lish evident partiality& 9ere( petitioner !erely averred evident partiality without any proof to $ac< it up& 4etitioner was never deprived of the right to present evidence nor was there any showing that the Board showed signs of any $ias in favor of 7C7=& %s correctly found $y the trial courtA IThirdly( this Court cannot find its way to support 6'CLs contention that there was evident partiality in the assailed %ward of the %r$itrator in favor of the respondent $ecause the conclusion of the Board( which the Court found to $e well*founded( is fully supported $y su$stantial evidence( as followsA I333 The testi!onies of witnesses fro! $oth parties were heard to clarify facts and to threash 0sic1 out the dispute in the hearings& Gpon !otion $y 6'C counsel( the hearing of testi!ony fro! witnesses was ter!inated on )anuary 1.. & To end the testi!onies in the hearing $oth litigant parties upon ,uery $y %r$itrator*Chair!an freely declared that there has $een no partiality in the !anner the %r$itrators conducted the hearing( that there has $een no instance( where %r$itrators refused to postpone re,uested or to hearEaccept evidence pertinent and !aterial to the dispute& 333 0underscoring supplied1 4arentethically( and in the light of the record a$ove*!entioned( this Court here$y holds that the Board of %r$itrators did not co!!it any Levident partialityL i!puted $y petitioner 6'C& %$ove all( this Court !ust sustain the said decision for it is a well settled rule that the actual findings of an ad!inistrative $ody should $e affir!ed if there is su$stantial evidence to support the! and the conclusions stated in the decision are not clearly against the law and 8urisprudence si!ilar to the instant case& 9enceforth( every reasona$le intend!ent will $e indulged to give effect such proceedings and in favor of the regulatory and integrity of the ar$itrators act& 0Corpus )uris( >ol& 5( p& 51I[8] =ndeed( the allegation of evident partiality is not well*ta<en $ecause the petitioner failed to su$stantiate the sa!e&

%nent the issue of !ista<en appreciation of facts and law of the case( the petitioner theori2es that the awards !ade $y the Board were unsu$stantiated and the sa!e were a plain !isapplication of the law and even contrary to 8urisprudence& To have a clearer understanding of the petition( this Court will try to discuss individually the awards !ade $y the Board( and deter!ine if there was grave a$use of discretion on the part of the trial court when it adopted such awards in toto.

I.

P458,381.00 representing EWEI's last billing No. 16

it! interest t!ereon at t!e rate o" 1 1#4$ per %ont! "ro% Jan&ar' 1, 1(85 to a)t&al date o" pa'%ent*

4etitioner see<s to $ar pay!ent of the said a!ount to 7C7=& 'ince the latter failed to co!plete the wor<s as agreed upon( 6'C had the right to withhold such a!ount& The sa!e will $e used to cover the cost differential paid to another contractor who finished the wor< allegedly left unco!pleted $y 7C7=& 'aid wor< cost 6'C 41( 5(555( and should $e !ade chargea$le to 7C7=Ls receiva$les on ?inal Billing 6o& 1: issued to 6'C& The ,uery here therefore is whether there was failure on the part of 7C7= to co!plete the wor< agreed upon& This will deter!ine whether ?inal Billing 6o& 1: can $e !ade chargea$le to the cost differential paid $y 6'C to another contractor& %fter a series of hearings( the Board of %r$itrators concluded that the wor< was co!pleted $y 7C7=& %s correctly statedA ITo authenticate the e3tent of unfinished wor<( ,uantity( unit cost differential and a!ount( 6'C was re,uired to su$!it copies of pay!ent vouchers andEor 8o$ awards e3tended to the other contractor engaged to co!plete the wor<s& The $est efforts $y 6'C despite the !ultiplicity of accountingEauditingEengineering records re,uired in a corporate co!ple3 failed to produce docu!entary proofs fro! their =ligan or -a<ati office despite repeated re,uests& 6'C failed to su$stantiate such allusion of co!pletion $y another contractor three unfinished ite!s of wor<s( actual ,uantities acco!plished and unit cost differential paid chargea$le against 7C7=& 333 333 333

The latest evaluation on record of the ite!s of wor< co!pleted $y 7C7= under the contract is drawn fro! the 6'C report 073hi$it I11*dI1 dated 1 6ove!$er 1.85 su$!itted with the 7C7= Billing 6o& 1:*?inal in the course of processing clai! on ite!s of wor< acco!plished& There is no such report or !ention of unfinished wor< of .5(555 -T of du!ped riprap( 155(555 cu& !& of site grading and #55(555 cu& !& of spreading co!!on e3cavated !aterials in the 7C7= contract alluded to $y the 6'C as unfinished wor< otherwise 7C7= Billing 6o& 1:*?inal would not have passed processing for pay!ent unless there is really no such unfinished wor< 6'C evaluation report with no adverse findings of unfinished wor< consider the contract as co!pleted& To affir! the wor< ite!s( ,uantity( unit cost differential and a!ount of unfinished wor< left $ehind $y 7C7=( 6'C in serving notice of contract ter!ination to 7C7= should have instead specifically cited these o$ligations in detail for 7C7= to perfor!Eco!ply within #5 days( such failure to perfor!Eco!ply should have constituted as an event in default that would have 8ustified ter!ination of contract of 6'C with 7C7=& =f at all( this unfinished wor< !ay $e additionalEe3tra wor< awarded in 1.8+ to another contractor at prices higher than the unit price tendered $y 7C7= in 1.8 andEor the discrepancy $etween actual ,uantities of wor< acco!plished per plans versus esti!ated ,uantities of wor< covered $y separate contract as e3pansion of the original pro8ect&I 333 333 333

=6 >=7C O? T97 ?OR7FO=6F( T97 'O*C%LL7; G6?=6='97; CORN' =6 T97 CO6TR%CT BH 7C7= %LLG;7; TO BH 6'C =' 6OT CO6'=;7R7; %6 OBL=F%T=O6 TO 47R?OR-ECO-4LH T9G' %B'OL>=6F 7C7= O? %6H ?%=LGR7 TO 47R?OR-ECO-4LH %6; T97R7?OR7 C%66OT B7 %>%=L7; O? %' % R=F9T OR R7-7;H BH 6'C TO R7CO>7R G6=T ;=??7R76T=%L CO'T ?RO- 7C7= ?OR T97 '%-7 G6'GB'T%6T=%T7; CORN ;O67 BH %6OT97R CO6TR%CTOR&I 0%667O ICI %RB=TR%T=O6( page 8:*88 of Rollo&1 ?urther!ore( under the contract sued upon( it is clear that should the Owner feel that the wor< agreed upon was not co!pleted $y the contractor( it is incu!$ent upon the OC67R to send to CO6TR%CTOR a letter within seven 0/1 days after co!pletion of the inspection to specify the o$8ections thereto[.] 6'C failed to co!ply with such re,uire!ent( and therefore it would $e unfair to refuse pay!ent to 7C7=( considering that the latter had faithfully su$!itted ?inal Billing 6o&1: $elieving that its wor< had $een co!pleted $ecause 6'C did not call its attention to any o$8ectiona$le aspect of their pro8ect& But( what cannot $e upheld is the BoardLs i!position of a 1*1E+M interest per !onth fro! )anuary 1( 1.85 to actual date of pay!ent& There is nothing in the said contract to 8ustify or authori2e such an award& The trial court should have therefore disregarded the sa!e and instead( applied the legal rate of :M per annu!( fro! )an& 1( 1.85 until this decision $eco!es final and e3ecutory& This is so $ecause the legal rate of interest on !onetary o$ligations not arising fro! loans or fore$earance of credits or goods is :M [15] per annu! in the a$sence of any stipulation to the contrary&

+II,

Pri)e es)alation

it! t!e interest rate o" 1-1#4$ per %ont! "ro% 1 Jan&ar' 1(85 to a)t&al date o" pa'%ent.

4etitioner contends that 7C7= is not entitled to price escalation a$sent any stipulation to that effect in the contract under which( the contract price is fi3ed( citing 4aragraph thereof( which stipulatesA 2. /ONTRA/T 3RI/E *

333 333 The applica$le unit prices a$ove fi3ed are $ased on the assu!ption that the disposal areas for cleared( gru$$ed !aterials( de$ris( e3cess filling !aterials and other !atters that are to $e disposed of or are within the $oundary li!its of the site( as designated in %nne3 % hereof& =n the event that disposal areas fi3ed and designated in %nne3 % are diverted and transferred to such other areas as would $e outside the li!its of the site as would re,uire additional costs to the contractor( then Owner shall $e lia$le for such additional hauling costs of 41&+5E<!E!#&I 0%nne3 I%I( Contract for 'ite ;evelop!ent( page 55 of Rollo1 The phrase Iprices a$ove fi3edI !eans that the contract price of the wor< shall $e that agreed upon $y the parties at the ti!e of the e3ecution of the contract( which is the law $etween the! provided it is not contrary to law( !orals( good custo!s( pu$lic order( or pu$lic policy& 0%rticle 1#5:( 6ew Civil Code1& =t cannot $e inferred therefro!( however( that the parties are prohi$ited fro! i!posing future increases or price escalation& =t is a cardinal rule in the interpretation of contracts that Iif the ter!s of a contract are clear and leave no dou$t upon the intention of the contracting parties( the literal !eaning of its stipulations shall control&I[11] But price escalation is e3pressly allowed under 4residential ;ecree 15.+( which law allows price escalation in all contracts involving govern!ent pro8ects including contracts entered into $y govern!ent entities and instru!entalities and Fovern!ent Owned or Controlled Corporations 0FOCCs1& =t is a $asic rule in contracts that the law is dee!ed written into the contract $etween the parties& %nd when there is no prohi$itory clause on price escalation( the Court will allow pay!ent therefor& Thus( petitioner cannot rely on the case of +lama Development Corporation vs. Court of Appeals and 8ational Steel Corporation" 9R 55:3;" Resolution" Third Division" <: Sept 2353. =t is not applica$le here since in that case( the contract e3plicitly provided that the contract price stipulated was fi3ed( inclusive of all costs and &(+bAec- -& e(c!"!-,& ( 0e!phasis supplied1& This( in effect( waived the provisions of 4; 15.+& The case under scrutiny is different as the disputed contract does not contain a si!ilar provision& =n a vain atte!pt to evade said lawLs application( they would li<e the Court to $elieve that it is an ac,uired asset corporation and not a govern!ent owned or controlled corporation so that they are not within the coverage of 4; 15.+& Chether 6'C is an asset*ac,uired corporation or a govern!ent owned or controlled corporation is of no !o!ent& =t is not deter!inative of the pivot of in,uiry& =t $ears e!phasi2ing that during the hearings conducted $y the Board of %r$itrators( there was presented docu!entary evidence to show that 6'C( despite its $eing allegedly an asset ac,uired corporation( allowed price escalation to another contractor( Feo Transport and Construction( =nc& 0FTC=1& %s said in the decision of the Board of %r$itratorsA IOn the other hand( there was docu!entary evidence presented that 6'C granted Feo Transport and Construction( =nc& 0FTC=1( the other favored contractor wor<ing side $y side with 7C7= on the site develop!ent pro8ect during the sa!e period the FTC7 was granted upon re,uest and paid $y 6'C an actual su! of 4:&. !illion as price ad8ust!ent co!pensation even without the $enefit of escalation provision in the contract $ut allowed in accordance with 4; 6O& 15.+ enforcea$le a!ong govern!ent controlled or owned corporation& The state!ent is e!$odied in an affidavit 073hi$it I111*hI1 su$!itted $y affiant )ose -& -esina( %sst& to the 4resident and Legal Counsel of FTC=( su$!itted to the %r$itrators upon solicitation of 7C7=( copy to 6'C( on # Octo$er 1..1& 6'C did not assail the affidavit upon receipt of such docu!ent as evidence until the hearing of 1. ;ece!$er 1..1 when the affidavit was $randed $y 6'C counsel as incorrect and hearsay& Cithin / days regla!entary period after receipt of affidavit in # Octo$er 1..1( the 6'C had the recourse to contest the affidavit even prefera$ly charge the affiant for slander if 6'C could disprove the state!ents as untrue&I[1 ] =f 4etitioner see<s to refute such evidence( it should have done so $efore the Board of %r$itrators( during the hearings& To raise the issue now is futile& 9owever( the sa!e line of reasoning with respect to the first award should $e used in disregarding the interest rate of 1*1E+M& The legal rate of :M per annu! should $e si!ilarly applied to the price escalation to $e co!puted fro! )an& 1( 1.85 until this decision $eco!es final and e3ecutory&

+III,

.!e a ard o" P50,000 as e/e%plar' da%ages and P350,000 as attorne''s "ees*

The e3e!plary da!ages and attorneys fees awarded $y the Board of %r$itrators should $e deleted in light of the circu!stances surrounding the case& The re,uire!ents for an award of e3e!plary da!ages( areA 011 they !ay $e i!posed $y way of e3a!ple in addition to co!pensatory da!ages( and only after the clai!ants right to the! has $een esta$lished@ 0 1 that they cannot $e recovered as a !atter of right( their deter!ination depending upon the a!ount of co!pensatory da!ages that !ay $e awarded to the clai!ant@ 0#1 the act !ust $e acco!panied $y $ad faith or done in a wanton( fraudulent( oppressive or !alevolent !anner&[1#] 7C7= cannot clai! that 6'C acted in $ad faith or in a wanton !anner when it refused pay!ent of the ?inal Billing 6o& 1:& The $elief that the wor< was never co!pleted $y 7C7= and that it 06'C1 had the right to !a<e it chargea$le to the cost differential paid $y the latter to another contractor was neither wanton nor done in evident $ad faith& The pay!ent of legal rate of interest will suffice to co!pensate 7C7= of whatever pre8udice it suffered $y reason of the delay caused $y 6'C& %s regards the award of attorneyLs fees( award for attorneyLs fees without 8ustification is a Iconclusion without a pre!ise( its $asis $eing i!properly left to speculation and con8encture& [1+] The Ifi3ed counselLs feeI of 4#55(555 should $e disallowed& The trial court acted with grave a$use of discretion when it adopted the sa!e in toto. 4HEREFORE( the awards !ade $y the Board of %r$itrators which the trial court adopted in its decision of )uly #1(1..:( are !odified( thusA

011 The award of 4+/+(/85& # for Billing 6o& 1:*?inal and 41(##5(51+& 5 for price ad8ust!ent shall $e paid with legal interest of si3 0: M1 percent per annu!( fro! )anuary 1( 1.85 until this decision shall have $eco!e final and e3ecutory@ 0 1 The award of 455(555 for e3e!plary da!ages and attorneyLs fees of 4#55(555 are deleted@ and 0#1 The cost of ar$itration of 4#5(555 to supple!ent ar$itration agree!ent has to $e paid& 6o pronounce!ent as to costs& SO ORDERED.

[G.R. N&. 1211<1. December 29, 199B]

ASSET 3RI5ATI7ATION TRUST, petitioner, vs., /OURT OF A33EALS, JESUS S. /A.ARRUS, SR., JESUS S. /A.ARRUS, JR., JAI1E T. /A.ARRUS, JOSE 1IGUEL /A.ARRUS, ALEJANDRO S. 3ASTOR, JR., ANTONIO U. 1IRANDA, ! ) 1IGUEL 1. ANTONIO, !( 1, &r,-# S-&cC H&")er( &% 1!r, )+?+e 1, , * ! ) I )+(-r,!" /&r6&r!-,& , respondents. DE/ISION 2A3UNAN, J.$ The petition for review on certiorari $efore us see<s us to reverse and set aside the decision of the Court of %ppeals which denied due course to the petition for certiorari filed $y the %sset 4rivati2ation Trust 0%4T1 assailing the order of the Regional Trial Court 0RTC1 Branch : ( -a<ati City& The -a<ati RTC"s order upheld and confir!ed the award !ade $y the %r$itration Co!!ittee in favor of -arindu,ue -ining and =ndustrial Corporation 0--=C1 and against the Fovern!ent( represented $y herein petitioner %4T for da!ages in the a!ount of 4 &5 B=LL=O6 0or appro3i!ately 4+&5 B=LL=O6( including interest1& =ronically( the staggering a!ount of da!ages was i!posed on the Fovern!ent for e3ercising its legiti!ate right of foreclosure as creditor against the de$tor --=C as a conse,uence of the latter"s failure to pay its overdue and unpaid o$ligation of 4 $illion to the 4hilippine 6ational Ban< 046B1 and the ;evelop!ent Ban< of the 4hilippines 0;B41&

T'e ! -ece)e - %!c-( &% -'e c!(e

The develop!ent( e3ploration and utili2ation of the !ineral deposits in the 'urigao -ineral Reservation have $een authori2ed $y Repu$lic %ct 6o& 18 8( as a!ended $y Repu$lic %cts 6o& 5// and +1:/( $y virtue of which laws( a -e!orandu! of %gree!ent was drawn on )uly #( 1.:8( where$y the Repu$lic of the 4hilippines thru the 'urigao -ineral Reservation Board( granted --=C the e3clusive right to e3plore( develop and e3ploit nic<el( co$alt and other !inerals in the 'urigao !ineral reservation& [1] --=C is a do!estic corporation engaged in !ining with respondents )esus '& Ca$arrus( 'r& as 4resident and a!ong its original stoc<holders& The 4hilippine Fovern!ent undertoo< to support the financing of --=C $y purchase of --=C de$enture and e3tension of guarantees& ?urther( the 4hilippine Fovern!ent o$tained a fir!( co!!it!ent fro! the ;B4 andEor other govern!ent financing institutions to su$scri$ed in --=C and issue guaranteeEs for foreign loans or deferred pay!ent arrange!ents secured fro! the G' 73i!$an<( %sian ;evelop!ent Ban<( No$e 'teel( of a!ount not e3ceeding G'P155 -illion&[ ] ;B4 approved guarantees in favor of --=C and su$se,uent re,uests for guarantees were $ased on the unutili2ed portion of the Fovern!ent co!!it!ent& Thereafter( the Fovern!ent e3tended acco!!odations to --=C in various a!ounts& On )uly 1#( 1.81( --=C( 46B and ;B4 e3ecuted a -ortgage Trust %gree!ent [#] where$y --=C( as !ortgagor( agreed to constitute a !ortgage in favor of 46B and ;B4 as !ortgagees( over all --=C"s assets( su$8ect of real estate and chattel !ortgage e3ecuted $y the !ortgagor( and additional assets descri$ed and identified( including assets of whatever <ind( nature or description( which the !ortgagor !ay ac,uire whether in su$stitution of( in replenish!ent( or in addition thereto& %rticle => of the -ortgage Trust %gree!ent provides for 7vents of ;efault( which e3pressly includes the event that the -ORTF%FOR shall fail to pay any a!ount secured $y this -ortgage Trust %gree!ent when due&[+] %rticle > of the -ortgage Trust %gree!ent prescri$es in detail( and in addition to the enu!erated events of defaults( circu!stances $y which the !ortgagor !ay $e declared in default( the procedure therefor( waiver of period to foreclose( authority of Trustee $efore( during and after foreclosure( including ta<ing possession of the !ortgaged properties&[5] =n various re,uest for advancesEre!ittances of loans of huge a!ounts( ;eeds of Gnderta<ings( 4ro!issory 6otes( Loans ;ocu!ents( ;eeds of Real 7state -ortgages( --=C invaria$ly co!!itted to pay either on de!and or under certain ter!s the loans and acco!!odations secured fro! or guaranteed $y $oth ;B4 and 46B& By 1.8+( ;B4 and 46B"s financial e3posure $oth in loans and in e,uity in --=C had reached tre!endous proportions( and --=C was having a difficult ti!e !eeting its financial o$ligations& --=C had an outstanding loan with ;B4 in the a!ount of 41#(/. (:5/(5:5&. as of %ugust #1( 1.8+ and in the a!ount of 48(/8.(5 8( +.&#8 as of )uly 15( 1.8+ or a total Fovern!ent e3posure of Twenty Two Billion 'i3 9undred 'i3ty*7ight -illion ?ive 9undred Thirty*'even Thousand 'even 9undred 'eventy and 55E155 04 (::8(5#/(//5&551( 4hilippine

Currency&[:] Thus( a financial restructuring plan 0?R41 designed to reduce --=CL" interest e3pense through de$t conversion to e,uity was drafted $y the 'ycip Forres >elayo accounting fir!&[/] On %pril #5( 1.8+( the ?R4 was approved $y the Board of ;irectors of the --=C& [8] 9owever( the proposed ?R4 had never $een for!ally adopted( approved or ratified $y either 46B or ;B4&[.] =n %ugust and 'epte!$er 1.8+( as the various loans and advances !ade $y ;B4 and 46B to --=C had $eco!e overdue and since any restructuring progra! relative to the loans was no longer feasi$le( and in co!pliance with the directive of 4residential ;ecree 6o& #85( ;B4 and 46B as !ortgagees of --=C assets( decided to e3ercise their right to e3tra8udicially foreclose the !ortgages in accordance with the -ortgage Trust %gree!ent&[15] The foreclosed assets were sold to 46B as the lone $idder and were assigned to three newly for!ed corporations( na!ely( 6onoc -ining Corporation( -aricalu! -ining and =ndustrial Corporation( and =sland Ce!ent Corporation& =n 1.8:( these assets were transferred to the %sset 4rivati2ation Trust 0%4T1&[11] On ?e$ruary 8( 1.85( )esus '& Ca$arrus( 'r&( together with the other stoc<holders of --=C( filed a derivative suit against ;B4 and 46B $efore the RTC of -a<ati( Branch : ( for %nnul!ent of ?oreclosures( 'pecific 4erfor!ance and ;a!ages& [1 ] The suit( doc<eted as Civil Case 6o& ..55( prayed that the courtA 011 annul the foreclosure( restore the foreclosed assets to --=C( and re,uire the $an<s to account for their use and operation in the interim@ 0 1 direct the $an<s to honor and perfor! their co!!it!ents under the alleged ?R4@ and 0#1 pay !oral and e3e!plary da!ages( attorney"s fees( litigation e3penses and costs& =n the course of the trial( private respondents and petitioner %4T( as successor of the ;B4 and 46B"s interest in --=C( !utually agreed to su$!it the case to ar$itration $y entering into a BCo!pro!ise and %r$itration %gree!ent(D stipulating( inter aliaA 6OC( T97R7?OR7( for and in consideration of the foregoing pre!ises and the !utual covenants contain herein( the parties agreed as followsA 1& Cithdrawal and Co!pro!ise& The parties have agreed to withdraw their respective clai!s fro! the Trial Court and to resolve their dispute through ar$itration $y praying to the Trial Court to issue a Co!pro!ise )udg!ent $ased on this Co!pro!ise and %r$itration %gree!ent& =n withdrawing their dispute for! the court and in choosing to resolve it through ar$itration( the parties have agreed thatA 0a1 their respective !oney clai!s shall $e reduced to purely !oney clai!s@ and

0$1 as successor and assignee of the 46B and ;B4 interest in --=C and the --=C accounts( %4T shall li<ewise succeed to the rights and o$ligations of 46B and ;B4 in respect of the controversy su$8ect of Civil Case 6o& ..55 to $e transferred to ar$itration and any ar$itral awardEorder against either 46B andEor ;B4 shall $e the responsi$ility of( $e discharged $y and $e enforcea$le against %4T( the partied having agreed to drop 46B and ;B4 fro! the ar$itration& & 'u$!ission& The parties here$y agree that 0a1 the controversy in Civil Case 6o& ..55 shall $e su$!itted instead to ar$itration under R% 8/: and 0$1 the reliefs prayed for in Civil Case 6o& ..55 shall( with the approval of the Trial Court of this Co!pro!ise and %r$itration %gree!ent( $e transferred and reduced to pure pecuniaryE!oney clai!s with the parties waiving and foregoing all other for!s of reliefs which they prayed for or should have payed for in Civil Case 6o& ..55&[1#] The Co!pro!ise and %r$itration %gree!ent li!ited the issues to the followingA 5& =ssues& The issues to $e su$!itted for the Co!!ittee"s resolution shall $eA 0a1 Chether 4L%=6T=??' have the capacity or the personality to institute this derivative suit in $ehalf of the --=C or its directors@ 0$1 Chether or not the actions leading to( and including( the 46B*;B4 foreclosure of the --=C assets were proper( valid and in good faith&[1+] This agree!ent was presented for approval to the trial court& On Octo$er 1+( 1.. ( the -a<ati RTC( Branch : ( issued an order( to witA C97R7?OR7( this Court ordersA 1& & 'u$stituting 46B and ;B4 with the %sset 4rivati2ation Trust as party defendant& %pproving the Co!pro!ise and %r$itration %gree!ent dated Octo$er :( 1.. ( attached as %nne3 BCD of the O!ni$us -otion& %pproving the Transfor!ation of the reliefs prayed for [$y] the plaintiffs in this case into pure !oney clai!s@ and The Co!plaint is here$y ;='-=''7;&[15]

#& +&

The %r$itration Co!!ittee was co!posed of retired 'upre!e Court )ustice %$raha! 'ar!iento as Chair!an( %tty& )ose C& 'ison and for!er Court of %ppeals )ustice -agdangal 7l!a as -e!$ers& On 6ove!$er +( 1..#( after conducting several hearings( the %r$itration Co!!ittee rendered a !a8ority decision in favor of --=C( the pertinent portions of which read as followsA 'ince( as this Co!!ittee finds( there is no foreclosure at all was not legally and validly done( the Co!!ittee holds and so declares that the loans of 46B and ;B4 to --=C( for the pay!ent and recovery of which the void foreclosure sales were underta<en( continue to re!ain

outstanding and unpaid& ;efendant %4T as the successor*in*interest of 46B and ;B4 to the said loans is therefore entitled and retains the right( to collect the sa!e fro! --=C pursuant to and $ased on the loan docu!ents signed $y --=C( su$8ect to the legal and valid defenses that the latter !ay duly and seasona$ly interpose& 'uch loans shall( however( $e reduced $y the a!ount which %4T !ay have reali2ed fro! the sale of the sei2ed assets of --=C which $y agree!ent should no longer $e returned even if the foreclosure were found to $e null and void& The docu!entary evidence su$!itted and adopted $y $oth parties 073hi$its B#D( B#*BD@ 73hi$its B155D@ and also 73hi$it BJJJD1 as their e3hi$its would show that the total outstanding o$ligation due to ;B4 and 46B as of the date of foreclosure is 4 (::8(5#/(//5&55( !ore or less& Therefore( defendant %4T can( and is still entitled to( collect the outstanding o$ligations of --=C to 46B and ;B4 a!ounting to 4 (::8&5#/(//5&55( !ore or less( with interest thereon as stipulated in the loan docu!ents fro! the date of foreclosure up to the ti!e they are fully paid less the proportionate lia$ility of ;B4 as owner of 8/M of the total capitali2ation of --=C under the ?R4& 'i!ply put( ;B4 shall share in the award of da!ages to( and in o$ligations of --=C in proportion to its 8/M e,uity in the total capital stoc< of --=C& 3 3 3& %s this Co!!ittee holds that the ?R4 is valid( ;B4"s e,uity in --=C is raised to 8/M& 'o pursuant to the a$ove provision of the Co!pro!ise and %r$itration %gree!ent( the 8/M e,uity of ;B4 is here$y deducted fro! the actual da!ages of 41.(+8:(118(:5+&55 resulting in the net actual da!ages of 4 (5#1(:#5(+ 5&5 plus interest& ;='4O'=T=O6 C97R7?OR7( pre!ises considered( 8udg!ent is here$y renderedA 1& Ordering the defendant to pay to the -arindu,ue -ining and =ndustrial Corporation( e3cept the ;B4( the su! of 4 (5#1(:#5(+ 5&5 with interest thereon at the legal rate of si3 per cent 0:M1 per annu!rec<oned fro! %ugust #( .( and +( 1.8+( pari passu( as and for actual da!ages& 4ay!ent of these actual da!ages shall $e offset $y %4T fro! the outstanding and unpaid loans of the --=C with ;B4 and 46B( which have not $een converted into e,uity& 'hould there $e any $alance due to the --=C after the offsetting( the sa!e shall $e satisfied fro! the funds representing the purchase price of the sale of the shares of =sland Ce!ent Corporation in the a!ount of 455#(555(555&55 held under escrow pursuant to the 7scrow %gree!ent dated %pril ( 1.88 or to such su$se,uent escrow agree!ent that would supercede [sic] it pursuant to paragraph 0.1 of the Co!pro!ise and %r$itration %gree!ent@ & Ordering the defendant to pay to the -arindu,ue -ining and =ndustrial Corporation( e3cept the ;B4( the su! of 41#(555(555&55 as and for !oral and e3e!plary da!ages& 4ay!ent of these !oral and e3e!plary da!ages shall $e offset $y %4T fro! the outstanding and unpaid loans of --=C with ;B4 and 46B( which have not $een converted into e,uity& 'hould there $e any $alance due to --=C after the offsetting( the sa!e shall $e satisfied fro! the funds representing the purchase price of the sale of the shares of =sland Ce!ent Corporation in the of 455#(555(555&55 held under escrow pursuant to the 7scrow %gree!ent dated %pril ( 1.88 or to such su$se,uent escrow agree!ent that would supercede [sic] it pursuant to paragraph 0.1 of the Co!pro!ise and %r$itration %gree!ent@ #& Ordering the defendant to pay to the plaintiff( )esus Ca$arrus( 'r&( the su! of 415(555(555&55( to $e satisfied li<ewise fro! the funds held under escrow pursuant to the 7scrow %gree!ent dated %pril ( 1.88 or to such su$se,uent escrow agree!ent that would supercede it( pursuant to paragraph 0.1 of the Co!pro!ise and %r$itration %gree!ent( as and for !oral da!ages@ and +& Ordering the defendant to pay ar$itration costs& This ;ecision is ?=6%L and 7O7CGTORH& =T =' 'O OR;7R7;&[1:] -otions for reconsiderations were filed $y $oth parties( $ut the sa!e were denied& On Octo$er 1/( 1..+( private respondents filed in the sa!e Civil Case 6o& ..55 an B%pplicationE-otion for Confir!ation of %r$itration %ward&D 4etitioner countered with an BOpposition and -otion to >acate )udg!entD raising the following groundsA 1& The plaintiff"s %pplicationE-otion is i!properly filed with this $ranch of the Court( considering that the said !otion is neither a part nor the continuation of the proceedings in Civil Case 6o& ..55 which was dis!issed upon !otion of the parties& =n fact( the defendants in the said Civil Case 6o& ..55 were the ;evelop!ent Ban< of the 4hilippines and the 4hilippine 6ational Ban< 046B1@ & Gnder 'ection of Rep& %ct 8/:( an ar$itration under a contract or su$!ission shall $e dee!ed a special proceedings and a party to the controversy which was ar$itrated !ay apply to the court having 8urisdiction( 0not necessarily with this 9onora$le Court1 for an order confir!ing the award@ #& The issues su$!itted for ar$itration have $een li!ited to twoA 011 propriety of the plaintiffs filing the derivative suit and 0 1 the regularity of the foreclosure proceedings& The ar$itration award sought to $e confir!ed herein far e3ceeded the issues su$!itted and even granted !oral da!ages to one of the herein plaintiffs@

+& Gnder 'ection + of Rep& %ct 8/:( the Court !ust !a<e an order vacating the award where the ar$itrators e3ceeded their powers( or so i!perfectly e3ecuted the!( that a !utual final and definite award upon the su$8ect !atter su$!itted to the! was not !ade& [1/] 4rivate respondents filed a BR74LH %6; O44O'=T=O6D dated 6ove!$er 15( 1.8+( arguing that a dis!issal of Civil case 6o& ..55 was !erely a B,ualified dis!issalD to pave the way for the su$!ission of the controversy to ar$itration( and operated si!ply as Ba !ere suspension of the proceedings&D They denied that the %r$itration Co!!ittee had e3ceeded its powers& =n an Order dated 6ove!$er 8( 1..+( the trial court confir!ed the award of the %r$itration Co!!ittee& The dispositive portion of said order readsA C97R7?OR7( pre!ises considered( and in the light of the parties [sic] Co!pro!ise and %r$itration %gree!ent dated Octo$er :( 1.. ( the ;ecision of the %r$itration Co!!ittee pro!ulgated on 6ove!$er +( 1..#( as affir!ed in a Resolution dated )uly :( 1..+( and finally settled and clarified in the 'eparate Opinion dated 'epte!$er ( 1..+ of Co!!ittee -e!$er 7l!a( and the pertinent provisions of R% 8/:(also <nown as the %r$itration Law( this Court FR%6T' 4L%=6T=??'" %44L=C%T=O6 %6; T9G' CO6?=R-' T97 %RB=TR%T=O6 %C%R;( %6; )G;F-76T =' 97R7BH R76;7R7;A 0a1 Ordering the defendant %4T to the -arindu,ue -ining and =ndustrial Corporation 0--=C( e3cept the ;B4( the su! of 4#(811(/5/(+ 5&55( as and for actual da!ages( which shall $e partially satisfied fro! the funds held under escrow in the a!ount of 455#(555(555&55 pursuant to the 7scrow %gree!ent dated %pril ( 1.88& The Balance of the award( after the escrow funds are fully applied( shall $e e3ecuted against the %4T@ 0$1 Ordering the defendant to pay to the --=C( e3cept the ;B4( the su! of 41#(555(555&55 as and !oral and e3e!plary da!ages@ 0c1 Ordering the defendant to pay to )esus '& Ca$arrus( 'r&( the su! of 415(555(555&55 as and for !oral da!ages@ and 0d1 Ordering the defendant to pay the herein plaintiffsEapplicantsE!ovants the su! of 41(/55(+15& as ar$itration costs&

=n reiteration of the !andates of 'tipulation 6o& 15 and 'tipulation 6o& 8 paragraph of the Co!pro!ise and %r$itration %gree!ent( and the final edict of the %r$itration Co!!ittee"s decision( and with this Court"s Confir!ation( the issuance of the %r$itration Co!!ittee"s %ward shall henceforth $e final and e3ecutory& 'O OR;7R7;&[18] On ;ece!$er /( 1..+( petitioner filed its !otion for reconsideration of the Order dated 6ove!$er 8( 1..+& 4rivate respondents( in turn( su$!itted their reply and opposition thereto& On )anuary 18( 1..5( the trial court handed down its order denying %4T"s !otion for reconsideration for lac< of !erit and for having $een filed out of ti!e& The trial court declared that Bconsidering that the defendant %4T through counsel( officially and actually received a copy of the Order of this Court dated 6ove!$er 8( 1..+ on ;ece!$er :( 1..+( the -otion for Reconsideration thereof filed $y the defendant %4T on ;ece!$er /( 1..+( or after the lapse of 1 days( was clearly filed $eyond the 15*day regle!entary period prescri$ed or provided for $y law for the filing of an appeal fro! final orders( resolutions( awards( 8udg!ents or decisions of any court in all cases( and $y necessary i!plication for the filling of a !otion for reconsideration thereof&D On ?e$ruary /( 1..5( petitioner received private respondents" !otion for 73ecution and %ppoint!ent of Custodian of 4roceeds of 73ecution dated ?e$ruary :( 1..5& 4etitioner thereafter filed with the Court of %ppeals a special civil action for certiorari with te!porary restraining order andEor preli!inary in8unction dated ?e$ruary 1#( 1..: to annul and declare as void the Orders of the RTC*-a<ati dated 6ove!$er 8( 1..+ and )anuary 18( 1..5 for having $een issued without or in e3cess of 8urisdiction andEor with grave a$use of discretion& [1.] %s ground therefor( petitioner alleged thatA I T97 R7'4O6;76T )G;F7 9%' 6OT >%L=;LH %CQG=R7; )GR=';=CT=O6 -GC9 L7''( 9%' T97 COGRT %GT9OR=TH( TO CO6?=RT97 %RB=TR%L %C%R; CO6'=;7R=6F T9%T T97 OR=F=6%L C%'7( C=>=L C%'7 6O& ..55( 9%; 4R7>=OG'LH B776 ;='-=''7;& II T97 R7'4O6;76T )G;F7 CO--=TT7; FR%>7 %BG'7 O? ;='CR7T=O6 %6; %CT7; C=T9OGT OR =6 7OC7'' O? )GR=';=CT=O6( =6 =''G=6F T97 QG7'T=O67; OR;7R' CO6?=R-=6F T97 %RB=TR%L %C%R; %6; ;76H=6F T97 -OT=O6 ?OR R7CO6'=;7R%T=O6 O? OR;7R O? %C%R;& III T97 R7'4O6;76T )G;F7 FRO''LH %BG'7; 9=' ;='CR7T=O6 %6; %CT7; C=T9OGT OR =6 7OC7'' O? %6; C=T9OGT )GR=';=CT=O6 =6 R7CNO6=6F T97 COG6T=6F O? T97 47R=O; TO ?=L7 -OT=O6 ?OR R7CO6'=;7R%T=O6( 6OT ?RO- T97 ;%T7 O? '7R>=C7 O? T97 COGRT"' CO4H CO6?=R-=6F T97 %C%R;( BGT ?RO- R7C7=4T O? % O7ROO CO4H O? C9%T 4R7'G-%BLH =' T97 O44O'=6F COG6'7L"' CO4H T97R7O?&[ 5]

On )uly 1 ( 1..5( the Court of %ppeals( through its fifth ;ivision denied due course and dis!issed the petition for certiorari& 9ence( the instant petition for review on certiorari i!puting to the Court of %ppeals the following errors& %''=F6-76T O? 7RROR' I T97 COGRT O? %447%L' 7RR7; =6 6OT 9OL;=6F T9%T T97 -%N%T= R7F=O6%L TR=%L COGRT( BR%6C9 : C9=C9 9%' 4R7>=OGL'H ;='-=''7; C=>=L C%'7 6O& ..55 9%; LO'T )GR=';=CT=O6 TO CO6?=R- T97 %RB=TR%L %C%R; G6;7R T97 '%-7 C=>=L C%'7 %6; =6 6OT RGL=6F T9%T T97 %44L=C%T=O6 ?OR CO6?=R-%T=O6 '9OGL; 9%>7 B776 ?=L7; %' % 67C C%'7 TO B7 R%??L7; O?? %-O6F T97 ;=??7R76T BR%6C97' O? T97 RTC& II T97 COGRT O? %447%L' L=N7C='7 7RR7; =6 9OL;=6F T9%T 47T=T=O67R C%' 7'TO447; ?RO- QG7'T=O6=6F T97 %RB=TR%T=O6 %C%R;( C976 47T=T=O67R QG7'T=O67; T97 )GR=';=CT=O6 O? T97 RTC*-%N%T=( BR%6C9 : %6; %T T97 '%-7 T=-7 -O>7; TO >%C%T7 T97 %RB=TR%L %C%R;& III T97 COGRT O? %447%L' 7RR7; =6 6OT 9OL;=6F T9%T T97 R7'4O6;76T TR=%L COGRT '9OGL; 9%>7 7=T97R ;='-=''7;E;76=7; 4R=>%T7 R7'4O6;76T'" -OT=O6E47T=T=O6 ?OR CO6?=R-%T=O6 O? %RB=TR%T=O6 %C%R; %6;EOR '9OGL; 9%>7 CO6'=;7R7; T97 -7R=T' O? T97 -OT=O6 TO >%C%T7 %RB=TR%L %C%R;& I5 T97 COGRT O? %447%L' 7RR7; =6 6OT TR7%T=6F 47T=T=O67R %4T"' 47T=T=O6 ?OR C1RT'*RAR' %' %6 %447%L T%N76 ?RO- T97 OR;7R CO6?=R-=6F T97 %C%R; 5 T97 COGRT O? %447%L' 7RR7; =6 6OT RGL=6F O6 T97 L7F%L =''G7 O? C976 TO R7CNO6 T97 COG6T=6F O? T97 47R=O; TO ?=L7 % -OT=O6 ?OR R7CO6'=;7R%T=O6&[ 1] The petition is i!pressed with !erit& I

T'e RT/ &% 1!C!-,, .r! c' 62, ),) &- '!8e A+r,(),c-,& -& c& %,rm -'e !rb,-r!" !:!r)

The use of the ter! Bdis!issedD is not a B!ere se!antic i!perfection&D The dispositive portion of the Order of the trial court dated Octo$er 1+( 1.. stated in no uncertain ter!sA +& The Co!plaint is here$y ;='-=''7;&[
]

The ter! Bdis!issD has a precise definition in law& BTo dispose of an action suit( or !otion without trial on the issues involved& Conclude( discontinue( ter!inate( ,uash&D[ #] %d!ittedly the correct procedure was for the parties to go $ac< to the court where the case was pending to have the award confir!ed $y said court& 9owever( Branch : !ade the fatal !ista<e of issuing a final order dis!issing the case& Chile Branch : should have !erely suspended the case and not dis!issed it( [ +] neither of the parties ,uestioned said dis!issal& Thus( $oth parties as well as said court are $ound $y such error& =t is erroneous then to argue( as private respondents do( that petitioner %4T was charged with the <nowledge that the Bcase was !erely stayed until ar$itration finished(D as again( the order of Branch : in very clear ter!s stated that the Bco!plaint was dis!issed&D By its own action( Branch : had lost 8urisdiction over the vase& =t could not have validly reac,uired 8urisdiction over the said case on !ere !otion of one of the parties& The Rules of Court is specific on how a new case !ay $e initiated and such is not done $y !ere !otion in a particular $ranch of the RTC& Conse,uently( as there was no Bpending actionD to spea< of( the petition to confir! the ar$itral award should have $een filed as a new case and raffled accordingly to one of the $ranches of the Regional Trial Court& II

3e-,-,& er :!( &- e(-&66e) %r&m ?+e(-,& , * -'e A+r,(),c-,& &% .r! c' 62 &% -'e RT/ &% 1!C!-,.

The Court of %ppeals ruled that %4T was already estopped to ,uestion the 8urisdiction of the RTC to confir! the ar$itral award $ecause it sought affir!ative relief in said court $y as<ing that the ar$itral award $e vacated& The rule is that BChere the court itself clearly has no 8urisdiction over the su$8ect !atter or the nature of the action( the invocation of this defense !ay de done at any ti!e& =t is neither for the courts nor for the parties to violate or disregard that rule( let alone to confer that 8urisdiction( this !atter $eing legislative in character&D[ 5] %s a rule the( neither waiver nor estoppel shall apply to confer 8urisdiction upon a court barring highl meritorious and e(ceptional circumstances.[ :] One such e3ception was enunciated in Ti-am vs. Sibonghano ([ /] where it was held that Bafter voluntarily su$!itting a cause and encountering an adverse decision on the !erits( it is too late for the loser to ,uestion the 8urisdiction or power of the court&I 4etitioner"s situation is different $ecause fro! the outset( it has consistently held the position that the RTC( Branch : had no 8urisdiction to confir! the ar$itral award@ conse,uently( it cannot $e said that it was estopped fro! ,uestioning the RTC"s 8urisdiction& 4etitioner"s prayer for the setting aside of the ar$itral award was not inconsistent with its disavowal of the court"s 8urisdiction& III

A66e!" &% 6e-,-,& er -& -'e /&+r- &% A66e!"( -'r+ )ertiorari + )er R+"e 65 :!( 6r&6er.

The Court of %ppeals in dis!issing %4T"s petition for certiorari upheld the trial court"s denial of %4T"s !otion for reconsideration of the trial court"s order confir!ing the ar$itral award( on the ground that said !otion was filed $eyond the 15*day regle!entary period@ conse,uently( the petition for certiorari could not $e resorted to as su$stitute to the lost right of appeal& Ce do not agree& 'ection . of Repu$lic %ct 6o& 8/:([
8]

provides thatA

3 3 3 %n appeal !ay $e ta<en fro! an order !ade in a proceeding under this %ct( or fro! a 8udg!ent entered upon an award through certiorari proceedings( $ut such appeals shall $e li!ited to ,uestion of law& 3 3 3& The afore,uoted provision( however( does not preclude a party aggrieved $y the ar$itral award fro! resorting to the e3traordinary re!edy of certiorari under Rule :5 of the Rules of Court where( as in this case( the Regional Trial Court to which the award was su$!itted for confir!ation has acted without 8urisdiction( or with grave a$use of discretion and there is no appeal( nor any plain( speedy re!edy in the course of law& Thus( 'ection 1 of Rule :5 providesA '7C 1& Petition for Certiorari= * Chen any tri$unal( $oard or officer e3ercising 8udicial functions( has acted without or in e3cess of its or his 8urisdiction( or with grave a$use of discretion and there is no appeal( nor any plain( speedy( and ade,uate re!edy in the ordinary course of law( a person aggrieved there$y !ay file a verified petition in the proper court alleging the facts with certainty and praying that 8udg!ent $e rendered annulling or !odifying the proceedings( as the law re,uires( of such tri$unal( $oard or officer& =n the instant case( the respondent court erred in dis!issing the special civil action for certiorari( it $eing fro! the pleadings and the evidence that the trial court lac<ed 8urisdiction andEor co!!itted grave a$use of discretion in ta<ing cogni2ance of private respondent" !otion to confir! the ar$itral award and( worse( in confir!ing said award which is grossly and patently not in accord with the ar$itration agree!ent( as will $e hereinafter de!onstrated& I5

T'e !-+re ! ) ",m,-( &% -'e Arb,-r!-&r(D 6&:er(.

%s a rule( the award of an ar$itrator cannot $e set aside for !ere errors of 8udg!ent either as to the law or as to the facts& [ .] Courts are without power to a!end or overrule !erely $ecause of disagree!ent with !atters of law or facts deter!ined $y the ar$itrators& [#5] They will not review the findings of law and fact contained in an award( and will not underta<e to su$stitute their 8udg!ent for that of the ar$itrators( since any other rule would !a<e an award the co!!ence!ent( not the end( of litigation& [#1] 7rrors of law and fact( or an erroneous decision of !atters su$!itted to the 8udg!ent of the ar$itrators( are insufficient to invalidate an award fairly and honestly !ade& [# ] )udicial review of an ar$itration is( thus( !ore li!ited than 8udicial review of a trial&[##] 6onetheless( the ar$itrators" awards is not a$solute and without e3ceptions& The ar$itrators cannot resolve issues $eyond the scope of the su$!ission agree!ent&[#+] The parties to such an agree!ent are $ound $y the ar$itrators" award only to the e3tent and in the !anner prescri$ed $y the contract and only if the award is rendered in confor!ity thereto& [#5] Thus( 'ections + and 5 of the %r$itration Law provide grounds for vacating( rescinding or !odifying an ar$itration award& Chere the conditions descri$ed in %rticles 5#8( [#:] 5#.[#/] and 5+5[#8] of the Civil Code applica$le to co!pro!ises and ar$itration are attendant( the ar$itration award !ay also $e annulled& =n Chung %u 'ndustries >Phils.? vs. Court of Appeals"[#.] we heldA 3 3 3& =t is stated e3plicitly under %rt& 5++ of the Civil Code that the finality of the ar$itrators" awards is not a$solute and without e3ceptions& Chere the conditions descri$ed in %rticles 5#8( 5#.( and 5+5 applica$le to $oth co!pro!ises and ar$itration are o$taining(

the ar$itratorsL award !ay $e annulled or rescinded& %dditionally( under 'ections + and 5( of the %r$itration Law( there are grounds for vacating( !odifying or rescinding an ar$itrator"s award& Thus( if and when the factual circu!stances referred to in the a$ove*cited provisions are present( 8udicial review of the award is properly warranted& %ccordingly( 'ection 5 of R&%& 8/: providesA '7C& 5& %orm and contents of award. R The award !ust $e !ade in writing and signed and ac<nowledged $y a !a8ority of the ar$itrators( if !ore than one@ and $y the sole ar$itrator( if there is only one& 7ach party shall $e furnished with a copy of the award& The ar$itrators in their award !ay grant any re!edy or relief which they dee! 8ust and e,uita$le and within the scope of the agree!ent of the parties( which shall include( $ut not $e li!ited to( the specific perfor!ance of a contract& 333 The ar$itrators shall have the power to decide only those !atters which have $een su$!itted to the!& The ter!s of the award shall $e confined to such disputes& 0Gnderscoring ours1& 333& 'ection + of the sa!e law enu!erating the grounds for vacating an award statesA '7C& +& 9rounds for vacating award& R =n any one of the following cases( the court !ust !a<e an order vacating the award upon the petition of any party to the controversy when such party proves affir!atively that in the ar$itration proceedingsA 0a1 The award was procured $y corruption( fraud( or other undue !eans@ or 0$1 That there was evident partiality or corruption in ar$itrators or any of the!@ or 0c1 That the ar$itrators were guilty of !isconduct in refusing to postpone the hearing upon sufficient cause shown( or in refusing to hear evidence pertinent and !aterial to the controversy@ that one or !ore of the ar$itrators was dis,ualified to act as such under section nine hereof( and willfully refrained fro! disclosing such dis,ualifications or any other !is$ehavior $y which the rights of any party have $een !aterially pre8udiced@ or 0d1 That the ar$itrators e3ceeded their powers( or so i!perfectly e3ecuted the!( that a !utual( final and definite award upon the su$8ect !atter su$!itted to the! was not !ade& 0Gnderscoring ours1& 333& 'ection 5 which enu!erates the grounds for !odifying the award providesA '7C& 5& 9rounds for modif ing or correcting award R =n anyone of the following cases( the court !ust !a<e an order !odifying or correcting the award( upon the application of any party to the controversy which was ar$itratedA 0a1 Chere there was an evident !iscalculation of figures( or an evident !ista<e in the description of any person( thing or property referred to in the award@ or 0$1 Chere the ar$itrators have awarded upon a !atter not su$!itted to the!( not affecting the !erits of the decision upon the !atter su$!itted@ or 0c1 Chere the award is i!perfect in a !atter of for! not affecting the !erits of the controversy( and if it had $een a co!!issioner"s report( the defect could have $een a!ended or disregarded $y the court& 3 3 3& ?inally( it should $e stressed that while a court is precluded fro! overturning an award for errors in deter!ination of factual issues( nevertheless( if an e3a!ination of the record reveals no support whatever for the ar$itrators" deter!inations( their award !ust $e vacated& [+5] =n the sa!e !anner( an award !ust $e vacated if it was !ade in Bmanifest disregard of the law.@[+1] %gainst the $ac<drop of the foregoing provisions and principles( we find that the ar$itrators ca!e out with an award in e3cess of their powers and palpa$ly devoid of factual and legal $asis& 5

T'ere :!( & %, ! c,!" (-r+c-+r, * 6r&*r!mE %&rec"&(+re &% m&r-*!*e :!( %+""# A+(-,%,e).

The point need not $e $ela$ored that 46B and ;B4 had the legiti!ate right to foreclose of the !ortgages of --=C whose o$ligations were past due& The foreclosure was not a wrongful act of the $an<s and( therefore( could not $e the $asis of any award of da!ages& There was no financial restructuring agree!ent to spea< of that could have constituted an i!pedi!ent to the e3ercise of the $an<"s right to foreclose& %s correctly stated $y -r& )ose C& 'ison( a !e!$er of the %r$itration Co!!ittee who wrote a separate opinionA 1& The various loans and advances !ade $y ;B4 and 46B to --=C have $eco!e overdue and re!ain unpaid& The fact that a ?R4 was drawn up is enough to esta$lish that --=C has not $een co!plying with the ter!s of the loan agree!ent& Restructuring si!ply connotes that the o$ligations are past due that is why it is Brestructura$leD@ & Chen --=C thru its $oard and the stoc<holders agreed and adopted the ?R4( it only !eans that --=C had $een infor!ed or notified that its o$ligations were past due and that foreclosure is forthco!ing@ #& %t that stage( --=C also <new that 46B*;B4 had the option of either approving the ?R4 or proceeding with the foreclosure& Ca$arrus( who filed this case supposedly in $ehalf of --=C should have insisted on the ?R4& Het Ca$arrus hi!self opposed the ?R4@ +& 'o when 46B*;B4 proceeded with the foreclosure( it was done without $ad faith $ut with honest and sincere $elief that foreclosure was the only alternative@ a decision further e3plained $y ;r& 4lacido -apa who testified that foreclosure was( in the 8udg!ent of 46B( the $est !ove to save --=C itself& BQ % A 6ow in this portion of 73h& BLD which was !ar<ed as 73h& BL*1D( and we adopted as 73h& #/*% for the respondent( !ay = <now fro! you( ;r& -apa what you !eant $y Bthat the decision to foreclose was neither precipitate nor ar$itraryDS A Cell( it is not a whi!sical decision $ut rather decision arrived at after weighty considerations of the infor!ation that we have received( and listening to the prospects which reported to us that we had assu!ed would $e the pre!ises of the financial reha$ilitation plan was not !ateriali2ed nor e3pected to !ateriali2ed& A %nd this state!ent that Bit was pre!ised upon the <nown factD that !eans( it was referring to the decision to foreclose( was pre!ised upon the <nown fact that the reha$ilitation plan earlier approved $y the stoc<holders was no longer feasi$le( 8ust what is !eant B$y no longer feasi$leDS A Because the revenue that they were counting on to !a<e the reha$ilitation plan possi$le( was not any!ore e3pected to $e forthco!ing $ecause it will result in a short fall co!pared to the prices that were actually ta<ing place in the !ar<et& A %nd = supposed that was you were referring to when you stated that the production targets and assu!ed prices of --=C"s products( a!ong other pro8ections( used in the financial reorgani2ation progra! that will !a<e it via$le were not !et nor e3pected to $e !etS A Hes&D

% Q % 333

Chich $rings !e to !y last point in this separate opinion& Cas 46B and ;B4 a$solutely un8ustified in foreclosing the !ortgagesS =n this connection( it can readily $e seen and it cannot ,uite $e denied that --=C accounts in 46B*;B4 were past due& The drawing up of the ?R4 is the $est proof of this& Chen --=C adopted a restructuring progra! for its loan( it only !eant that these loans were already due and unpaid& =f these loans were restructura$le $ecause they were already due and unpaid( they are li<ewise Bforeclosea$leD& The option is with the 46B*;B4 on what steps to ta<e& The !ere fact that --=C adopted the ?R4 does not !ean that ;B4*46B lost the option to foreclose& 6either does it !ean that the ?R4 is legally $inding and i!ple!enta$le& =t !ust $e pointed that said ?R4 will( in effect( supersede the e3isting and past due loans of --=C with 46B*;B4& =t will $eco!e the new loan agree!ent $etween the lenders and the $orrowers& %s in all other contracts( there !ust therefore $e a !eeting of !inds of the parties@ the 46B and ;B4 !ust have to validly adopt and ratify such ?R4 $efore they can $e $ound $y it@ $efore it can $e i!ple!ented& =n this case( not an iota of proof has $een presented $y the 4L%=6T=??' showing that 46B and ;B4 ratified and adopted the ?R4& 4L%=6T=??' si!ply relied on a legal doctrine of pro!issory estoppel to support its allegation in this regard&[+ ] -oreover( 46B and ;B4 had to initiate foreclosure proceedings as !andated $y 4&;& 6o& #85( which too< effect on )anuary #1( 1./+& The decree re,uires govern!ent financial institutions to foreclose collaterals for loans where the arrearages a!ount to 5M of the total outstanding o$ligations& The pertinent provisions of said decree read as followsA '7C& 1& =t shall $e !andatory for govern!ent financial institutions( after the lapse of si3ty 0:51 days fro! the issuance of this ;ecree to foreclose the collaterals andEor securities for any loan( credit( acco!!odations( andEor guarantees granted $y the! whenever the arrearages on such account( including accrued interest and other charges( a!ount to at least twenty percent 0 5M1 of the total outstanding o$ligations( including interest and other charges( as appearing in the $oo<s of account andEor related records of the financial institutions concerned& This shall $e without pre8udice to the e3ercise $y the govern!ent financial institutions of such rights andEor re!edies availa$le to the! under their respective contracts with their de$tor( including the right to foreclosure on loans( credits( acco!!odations andEor guarantees on which the arrearages are less than twenty percent 0 5M1& '7C& & 6o restraining order( te!porary or per!anent in8unction shall $e issued $y the court against any govern!ent financial institution in any action ta<en $y such institution in co!pliance with the!andatory foreclosure provided in 'ection 1 hereof( whether such restraining order( te!porary or per!anent in8unction is sought $y the $orrower0s1 or any third party or parties( e3cept after due hearing in which it is esta$lished

$y the $orrower and ad!itted $y the govern!ent financial institution concerned that twenty percent 0 5M1 of the outstanding arrearages has $een paid after the filing of foreclosure proceedings& 0Gnderscoring supplied&1 4rivate respondents" thesis that the foreclosure proceedings were null and void $ecause of lac< of pu$lication in the newspaper is nothing !ore than a !ere unsu$stantiated allegation not $orne out $y the evidence& =n any case( a disputa$le presu!ption e3ists in favor of petitioner that official duty has $een regularly perfor!ed and ordinary course of $usiness has $een followed&[+#] 5I 6ot only was the foreclosure rightfully e3ercised $y the 46B and ;B4( $ut also( fro! the facts of the case( the ar$itrators in !a<ing the award went $eyond the ar$itration agree!ent& =n their co!plaint filed $efore the trial court( private respondent Ca$arrus( et al. prayed for 8udg!ent in their favorA 1& ;eclaring the foreclosure effected $y the defendants ;B4 and 46B on the assets of --=C null and void and directing said defendants to restore the foreclosed assets to the possession of --=C( to render an accounting of their use andEor operation of said assets and to inde!nify --=C for the loss occasioned $y its dispossession or the deterioration thereof@ & ;irecting the defendants ;B4 and 46B to honor and perfor! their co!!it!ents under the financial reorgani2ation plan which was approved at the annual stoc<holders" !eeting of --=C on #5 %pril 1.8+@ #& Conde!ning the defendants ;B4 and 46B( 8ointly and severally to pay the plaintiffs actual da!ages consisting of the loss of value of their invest!ent a!ounting to not less than 485(555(555&55( the da!nu! e!erges and lucru! cessans in such a!ount as !ay $e esta$lish during the trial( !oral da!ages in such a!ount as this 9onora$le Court !ay dee! 8ust and e,uita$le in the pre!ises( e3e!plary da!ages in such a!ount as this 9onora$le Court !ay consider appropriate for the purpose of setting an e3a!ple for the pu$lic good( attorney"s fees and litigation e3penses in such a!ounts as !ay $e proven during the trial( and the costs legally ta3a$le in this litigation& ?urther( 4laintiffs pray for such other reliefs as !ay $e 8ust and e,uita$le in the pre!ises&[++] Gpon su$!ission for ar$itration( the Co!pro!ise and %r$itration %gree!ent of the parties clearly and e3plicitly defined and li!ited the issues to the followingA 0a1 whether 4L%=6T=??' have the capacity or the personality to institute this derivative suit in $ehalf of the --=C or its directors@ 0$1 whether or not the actions leading to( and including( the 46B*;B4 foreclosure of the --=C assets were proper( valid and in good faith&[+5] =te! 6o& 8 of the %gree!ent provides for the period $y which the Co!!ittee was to render its decision( as well as the nature thereofA 8& ;ecision& The co!!ittee shall issue a decision on the controversy not later than si3 0:1 !onths fro! the date of its constitution& =n the event the co!!ittee finds that 4L%=6T=??' have the personality to file this suit and e3tra*8udicial foreclosure of the --=C assets wrongful( it shall !a<e an award in favor of the 4L%=6T=??' 0e3cluding ;B41( in an a!ount as !ay $e esta$lished or warranted $y the evidence which shall $e paya$le in 4hilippine 4esos at the ti!e of the award& 'uch award shall $e paid $y the %4T or its successor*in*interest within si3ty 0:51 days fro! the date of the award in accordance with the provisions of par& . hereunder& 3 3 3& The 4L%=6T=??'" re!edies under this 'ection shall $e in addition to other re!edies that !ay $e availa$le to the 4L%=6T=??'( all such re!edies $eing cu!ulative and not e3clusive of each other& On the other hand( in case the ar$itration co!!ittee finds that 4L%=6T=??' have no capacity to sue andEor that the e3tra*8udicial foreclosure is valid and legal( it shall also !a<e an award in favor of %4T $ased on the counterclai!s of ;B4 and 46B in an a!ount as !ay $e esta$lished or warranted $y the evidence& This decision of the ar$itration co!!ittee in favor of %4T shall li<ewise finally settle all issues regarding the foreclosure of the --=C assets so that the funds held in escrow !entioned in par& . hereunder will thus $e released in full in favor of %4T&[+:] The clear and e3plicit ter!s of the su$!ission notwithstanding( the %r$itration Co!!ittee clearly e3ceeded its powers or so i!perfectly e3ecuted the!A 0a1 in ruling on and declaring valid the ?R4@ 0$1 in awarding da!ages to --=C which was not a party to the derivative suit@ and 0c1 in awarding !oral da!ages to )esus '& Ca$arrus( 'r&

T'e !rb,-er( &8er(-e66e) -'e,r 6&:er( b# )ec"!r, * !( 8!",) 6r&6&(e) F, ! c,!" Re(-r+c-+r, * 3r&*r!m.

The %r$itration Co!!ittee went $eyond its !andate and thus acted in e3cess of its powers when it ruled on the validity of( and gave effect to( the proposed ?R4& =n su$!itting the case to ar$itration( the parties had !utually agreed to li!it the issue to the Bvalidity of the foreclosureD and to transfor! the reliefs prayed for therein into pure !oney clai!s& There is a$solutely no evidence that the ;B4 and 46B agreed( e3pressly or i!pliedly( to the proposed ?R4& =t cannot $e overe!phasi2ed that a ?R4( as a contract( re,uires the consent of the parties thereto& [+/] The contract !ust $ind $oth contracting parties& [+8] 4rivate respondents even $y their own ad!ission recogni2ed that the ?R4 had yet not $een carried out and that the loans of --=C had not yet $een converted into e,uity&[+.]

9owever( the ar$itration Co!!ittee not only declared the ?R4 valid and effective( $ut also converted the loans of --=C into e,uity raising the e,uity of ;B4 to 8/M&[55] The %r$itration Co!!ittee ruled that there was Ba co!!it!ent to carry out the ?R4D[51] on the ground of pro!issory estoppel& 'i!ilarly( the principle of pro!issory estoppel applies in the present case considering as we o$served( the fact that the govern!ent 0that is %lfredo >elayo1 was the ?R4"s proponent& %lthough the plaintiffs are agreed that the govern!ent e3ecuted no for!al agree!ent( the fact re!ains that the ;B4 itself which !ade representations that the ?R4 constituted a Bway outD for --=C& The Co!!ittee $elieves that although the ;B4 did not for!ally agree 0assu!ing that the $oard and stoc<holders" approvals were not for!al enough1( it is $ound nonetheless if only for its conspicuous representations& %lthough the ;B4 sat in the $oard in a dual capacity*as holder of #:M of --=C"s e,uity 0at that ti!e1 and as --=C"s creditor*the ;B4 can not validly renege on its co!!it!ents si!ply $ecause at the sa!e ti!e( it held interest against the --=C& The fact( of course( is that as %4T itself asserted( the ?R4 was $eing Bcarried outD although apparently( it would supposedly fall short of its targets& %ssu!ing that the ?R4 would fail to !eet its targets( the ;B4*and so this Co!!ittee holds*can not( in any event( $roo< any denial that it was $ound to $egin with( and the fact is that ade,uate or not 0the ?R41( the govern!ent is still $ound $y virtue of its acts& The ?R4( of course( did not itself pro!ise a resounding success( although it raised ;B4"s e,uity in --=C to 8/M& =t is not e3cuse( however( for the govern!ent to deny its co!!it!ents&[5 ] %tty& 'ison( however( did not agree and correctly o$served thatA But the doctrine of pro!issory estoppel can hardly find application here& The nearest that there can $e said of any estoppel $eing present in this case is the fact that the $oard of --=C was( at the ti!e the ?R4 was adopted( !ostly co!posed of 46B and ;B4 representatives& But those representatives( singly or collectively( are not the!selves 46B or ;B4& They are individuals with personalities separate and distinct fro! the $an<s they represent& 46B and ;B4 have different $oards with different !e!$ers who !ay have different decisions& =t is unfair to i!pose upon the! the decision of the $oard of another co!pany and thus pin the! down on the e,uita$le principle of estoppel& 7stoppel is a principle $ased on e,uity and it is certainly not e,uita$le to apply it in this particular situation& Otherwise the rights of entirely separate( distinct and autono!ous legal entities li<e 46B and ;B4 with thousands of stoc<holders will $e suppressed and rendered nugatory& [5#] %s a rule( a corporation e3ercises its powers( including the power to enter into contracts( through its $oard of directors& Chile a corporation !ay appoint agents to enter into a contract in its $ehalf( the agent( should not e3ceed his authority& [5+] =n the case at $ar( there was no showing that the representatives of 46B and ;B4 in --=C even had the re,uisite authority to enter into a de$t*for*e,uity swap& %nd if they had such authority( there was no showing that the $an<s( through their $oard of directors( had ratified the ?R4& ?urther( how could the --=C $e entitled to a $ig a!ount of !oral da!ages when its credit reputation was not e3actly so!ething to $e considered sound and wholeso!e& Gnder %rticle 1/ of the Civil Code( !oral da!ages include $es!irched reputation which a corporation !ay possi$ly suffer& % corporation whose overdue and unpaid de$ts to the Fovern!ent alone reached a tre!endous a!ount of 4 Billion 4esos cannot certainly have a solid $usiness reputation to $rag a$out& %s %tty& 'ison in his separate opinion persuasively put itA Besides( it is not yet a well settled 8urisprudence that corporations are entitled to !oral da!ages& Chile the 'upre!e Court !ay have awarded !oral da!ages to a corporation for $es!irched reputation in -a!$ulao vs& 46B 'CR% #5.( such ruling cannot find application in this case& =t !ust $e pointed out that when the supposed wrongful act of foreclosure was done( --=C"s credit reputation was no longer a desira$le one& The co!pany then was already suffering fro! serious financial crisis which definitely pro8ects an i!age not co!pati$le with good and wholeso!e reputation& 'o it could not $e said that there was a BreputationD $es!irches $y the act of foreclosure&[55]

T'e !rb,-er( e9cee)e) -'e,r !+-'&r,-# , !:!r), * )!m!*e( -& 11I/, :',c' ,( &- ,m6"e!)e) !( ! 6!r-# -& -'e )er,8!-,8e (+,-.

Civil Code 6o& ..55 filed $efore the RTC $eing a derivative suit( --=C should have $een i!pleaded as a party& =t was not 8oined as a party plaintiff or party defendant at any stage of the proceedings& %s it is( the award of da!ages to --=C( which was not a party $efore the %r$itration Co!!ittee( is a co!plete nullity& 'ettled is the doctrine that in a derivative suit( the corporation is the real party in interest while the stoc<holder filing suit for the corporation"s $ehalf is only no!inal party& The corporation should $e included as a party in the suit& %n individual stoc<holder is per!itted to institute a derivative suit on $ehalf of the corporation wherein he holds stoc< in order to protect or vindicate corporate rights( whenever the officials of the corporation refuse to sue( or are the ones to $e sued or hold the control of the corporation& =n such actions( the suing stoc<holder is regarded as a no!inal party( with the corporation as the real party in interest& 3 3 3&[5:] =t is a condition sine .ua non that the corporation $e i!pleaded as a party $ecause* 3 3 3& 6ot only is the corporation an indispensi$le party( $ut it is also the present rule that it !ust $e served with process& The reason given is that the 8udg!ent !ust $e !ade $inding upon the corporation and in order that the corporation !ay get the $enefit of the suit and !ay not $ring a su$se,uent suit against the sa!e defendants for the sa!e cause of action& =n other words the corporations !ust $e 8oined as party $ecause it is its cause of action that is $eing litigated and $ecause 8udg!ent !ust $e a res a-udicata against it&[5/]

The reasons given for not allowing direct individual suit areA 011 3 3 3 Bthe universally recogni2ed doctrine that a stoc<holder in a corporation has no title legal or e,uita$le to the corporate property@ that $oth of these are in the corporation itself for the $enefit of the stoc<holders&D =n other words( to allow shareholders to sue separately would conflict with the separate corporate entity principle@ 0 1 3 3 3 that the prior rights of the creditors !ay $e pre8udiced& Thus( our 'upre!e Court held in the case of 1vangelista v. Santos( that Bthe stoc<holders !ay not directly clai! those da!ages for the!selves for that would result in the appropriation $y( and the distri$ution a!ong the! of part of the corporate assets $efore the dissolution of the corporation and the li,uidation of its de$ts and lia$ilities( so!ething which cannot $e legally done in view of section 1: of the Corporation Law 333@D 0#1 the filing of such suits would conflict with the duty of the !anage!ent to sue for the protection of all concerned@ 0+1 it would produce wasteful !ultiplicity of suits@ and 051 it would involve confusion in a ascertaining the effect of partial recovery $y an individual on the da!ages recovera$le $y the corporation for the sa!e act&[58] =f at all an award was due --=C( which it was not( the sa!e should have $een given sans deduction( regardless of whether or not the party lia$le had e,uity in the corporation( in view of the doctrine that a corporation has a personality separate and distinct fro! its individual stoc<holders or !e!$ers& ;B4"s alleged e,uity( even if it were indeed 8/M( did not give it ownership over any corporate property( including the !onetary award( its right over said corporate property $eing a !ere e3pectancy or inchoate right& [5.]6ota$ly( the stipulation even had the effect of pre8udicing the other creditors of --=C&

T'e !rb,-er(, ",Ce:,(e, e9cee)e) -'e,r !+-'&r,-# , !:!r), * m&r!" )!m!*e( -& Je(+( /!b!rr+(, Sr.

=t is perple3ing how the %r$itration Co!!ittee can in one $reath rule that the case $efore it is a derivative suit( in which the aggrieved party or the real party in interest is supposedly the --=C( and at the sa!e ti!e award !oral da!ages to an individual stoc<holder( to witA C97R7?OR7( pre!ises considered( 8udg!ent is here$y renderedA 333& #& Ordering the defendant to pay to the plaintiff( )esus '& Ca$arrus( 'r&( the su! of 415(555(555&55( to $e satisfied li<ewise fro! the funds held under escrow pursuant to the 7scrow %gree!ent dated %pril ( 1.88 or to such su$se,uent escrow agree!ent that would supersede it( pursuant to paragraph 0.1( Co!pro!ise and %r$itration %gree!ent( as and for !oral da!ages@ 3 3 3[:5] The !a8ority decision of the %r$itration Co!!ittee sought to 8ustify its award of !oral da!ages to )esus '& Ca$arrus( 'r& $y pointing to the fact that a!ong the assets sei2ed $y the govern!ent were assets $elonging to =ndustrial 7nterprise =nc& 0=7=1( of which Ca$arrus is the !a8ority stoc<holder& =t then ac<nowledge that Ca$arrus had already recovered said assets in the RTC( $ut that Bhe won no !ore than actual da!ages& Chile the Co!!ittee cannot possi$ly spea< for the RTC( there is no dou$t that )esus '& Ca$arrus( 'r&( suffered !oral da!ages on account of that specific foreclosure( da!ages the Co!!ittee $elieves and so holds( he )esus '& Ca$arrus( 'r&( !ay $e awarded in this proceeding&D[:1] Ca$arrus" cause of action for the sei2ure of the assets $elonging to =7=( of which he is the !a8ority stoc<holder( having $een ventilated in a co!plaint he previously filed with the RTC( fro! which he o$tained actual da!ages( he was $arred res -udicata fro! filing a si!ilar case in another court( this ti!e as<ing for !oral da!ages which he failed to get fro! the earlier case& [: ] Corse( private respondents violated the rule against non*foru! shopping& =t is a $asic postulate that s corporation has a personality separate and distinct fro! its stoc<holders& [:#] The properties foreclosed $elonged to --=C( not to its stoc<holders& 9ence( if wrong was co!!itted in the foreclosure( it was done against the corporation& %nother reason is that )esus '& Ca$arrus( 'r& cannot directly clai! those da!ages for hi!self that would result in the appropriation $y( and the distri$ution to( hi! part of the corporation"s assets $efore the dissolution of the corporation and the li,uidation of its de$ts and lia$ilities& The %r$itration Co!!ittee( therefore( passed upon !atters not su$!itted to it& -oreover( said cause of action had already $een decided in a separate case& =t is thus ,uite patent that the ar$itration co!!ittee e3ceeded the authority granted to it $y the parties" Co!pro!ise and %r$itration %gree!ent $y awarding !oral da!ages to )esus '& Ca$arrus( 'r& %tty& 'ison( in his separate opinion( li<ewise e3pressed $efuddle!ent to the award of !oral da!ages to )esus '& Ca$arrus( 'r&A =t is clear and it cannot $e disputed therefore that $ased on these stipulated issues( the parties the!selves have agreed that the $asic ingredient of the causes of action in this case is the wrong co!!itted on the corporation 0--=C1 for the alleged illegal foreclosure of its assets& By agreeing to this stipulation( 4L%=6T=??' the!selves 0Ca$arrus( et al&1 ad!it that the cause of action pertains only to the corporation0--=C1 and that they are filing this for and in $ehalf of --=C& 4erforce this has to $e so $ecause it is the $asic rule in Corporation Law that Bthe shareholders have no title( legal or e,uita$le to the property which is owned $y the corporation 01# %!& )ur& 1:5@ 4ascual vs& Oresco( 1+ 4hil& 8#1& =n Fan2on K 'ons vs& Register of ;eeds( : 'CR% #/#(

the rule has $een reiterated that Ta stoc<holder is not the co*owner of corporate property&" 'ince the property or assets foreclosed $elongs [sic] to --=C( the wrong co!!itted( if any( is done against the corporation& There is therefore no direct in8ury or direct violation of the rights of Ca$arrus et al& There is no way( legal or e,uita$le( $y which Ca$arrus et al& could recover da!ages in their personal capacities even assu!ing or 8ust $ecause the foreclosure is i!proper or invalid& The Co!pro!ise and %r$itration %gree!ent itself and the ele!entary principles of Corporation Law say so& Therefore( = a! constrained to dissent fro! the award of !oral da!ages to Ca$arrus&[:+] ?ro! the foregoing discussions( it is evident that( not only did the ar$itration co!!ittee e3ceed its powers or so i!perfectly e3ecute the!( $ut also( its findings and conclusions are palpa$ly devoid of any factual $asis and in !anifest disregard of the law& Ce do not find it necessary to re!and this case to the RTC for appropriate action& The pleadings and !e!oranda filed with this Court( as well as in the Court of %ppeals( raised and e3tensively discussed the issues on the !erits& 'uch $eing the case( there is sufficient $asis for us to resolve the controversy $etween the parties anchored on the records and the pleadings $efore us&[:5] 4HEREFORE( the ;ecision of the Court of %ppeals dated )uly 1/( 1..5( as well as the Orders of the Regional Trial Court of -a<ati( Branch : ( dated 6ove!$er 8( 1..+ and )anuary 1.( 1..5( is here$y R7>7R'7; and '7T %'=;7( and the decision of the %r$itration Co!!ittee is here$y >%C%T7;& SO ORDERED Romero >Chairman? 7." 4lease see ;issenting Opinion. Purisima" 7." concur and also 8oined the separate concurring opinion of )& 4ardo& Pardo" 7." see separate concurring opinion

G.R. N&. 129169 N&8ember 1<, 1999 NATIONAL IRRIGATION AD1INISTRATION FNIAG, petitioner( vs& HONORA.LE /OURT OF A33EALS F;-' D,8,(,& G, /ONSTRU/TION INDUSTR0 AR.ITRATION /O11ISSION, ! ) H0DRO RESOUR/ES /ONTRA/TORS /OR3ORATION, respondents&

DA5IDE, JR., 0.J.1 =n this special civil action for certiorari under Rule :5 of the Rules of Court( the 6ational =rrigation %d!inistration 0hereafter 6=%1( see<s to annul and set aside the Resolutions 1 of the Court of %ppeals in C%*FR& '4 6o& #/185 dated 8 )une 1..: and + ?e$ruary 1../( which dis!issed respectively 6=%Ls petition for certiorari and prohi$ition against the Construction =ndustry %r$itration Co!!ission 0hereafter C=%C1( and the !otion for reconsideration thereafter filed& Records show that in a co!petitive $idding held $y 6=% in %ugust 1./8( 9ydro Resources Contractors Corporation 0hereafter 9H;RO1 was awarded Contract -4=*C* for the construction of the !ain civil wor<s of the -agat River -ulti*4urpose 4ro8ect& The contract provided that 9H;RO would $e paid partly in 4hilippine pesos and partly in G&'& dollars& 9H;RO su$stantially co!pleted the wor<s under the contract in 1.8 and final acceptance $y 6=% was !ade in 1.8+& 9H;RO thereafter deter!ined that it still had an account receiva$le fro! 6=% representing the dollar rate differential of the price escalation for the contract& 2 %fter unsuccessfully pursuing its case with 6=%( 9H;RO( on / ;ece!$er 1..+( filed with the C=%C a Re,uest for %d8udication of the aforesaid clai!& 9H;RO no!inated si3 ar$itrators for the ar$itration panel( fro! a!ong who! C=%C appointed 7ngr& Lauro -& Cru2& On : )anuary 1..5( 6=% filed its %nswer wherein it ,uestioned the 8urisdiction of the C=%C alleging lac< of cause of action( laches and estoppel in view of 9H;ROLs alleged failure to avail of its right to su$!it the dispute to ar$itration within the prescri$ed period as provided in the contract& On the sa!e date( 6=% filed a Co!pliance wherein it no!inated si3 ar$itrators( fro! a!ong who! C=%C appointed %tty& Custodio O& 4arlade( and !ade a counterclai! for 41(555(555 as !oral da!ages@ at least 4155(555 as e3e!plary da!ages@ 4155(555 as attorneyLs fees@ and the costs of the ar$itration& 3 The two designated ar$itrators appointed Certified 4u$lic %ccountant )oven B& )oa,uin as Chair!an of the %r$itration 4anel& The parties were re,uired to su$!it copies of the evidence they intended to present during the proceedings and were provided the draft Ter!s of Reference& ; %t the preli!inary conference( 6=% through its counsel %tty& )oy C& Legaspi of the Office of the Fovern!ent Corporate Counsel( !anifested that it could not ad!it the genuineness of 9H;ROLs evidence since 6=%Ls records had already $een destroyed& 6=% re,uested an opportunity to e3a!ine the originals of the docu!ents which 9H;RO agreed to provide& 5 %fter reaching an accord on the issues to $e considered $y the ar$itration panel( the parties scheduled the dates of hearings and of su$!ission of si!ultaneous !e!oranda& 6 On 1# -arch 1..5( 6=% filed a -otion to ;is!iss < alleging lac< of 8urisdiction over the disputes& 6=% contended that there was no agree!ent with 9H;RO to su$!it the dispute to C=%C for ar$itration considering that the construction contract was e3ecuted in 1./8 and the pro8ect co!pleted in 1.8 ( whereas the Construction =ndustry %r$itration Law creating C=%C was signed only in 1.85@ and that while they have agreed to ar$itration as a !ode of settle!ent of disputes( they could not have conte!plated su$!ission of their disputes to C=%C& 6=% further argued

that records show that it had not voluntarily su$!itted itself to ar$itration $y C=%C citing T1SC* Services( 'nc& v&6on& Abraham Vera( et al&( B wherein it was ruledA C=%C did not ac,uire 8urisdiction over the dispute arising fro! the su$*contract agree!ent $etween petitioner T7'CO and private respondent L%RO'%& The records do not show that the parties agreed to su$!it the disputes to ar$itration $y the C=%C & & & & Chile $oth parties in the su$*contract had agreed to su$!it the !atter to ar$itration( this was only $etween the!selves( no re,uest having $een !ade $y $oth with the C=%C& 9ence( as already stated( the C=%C( has no 8urisdiction over the dispute& & & & & 6owhere in the said article 0su$*contract1 does it !ention the C=%C( !uch less( vest 8urisdiction with the C=%C& On 11 %pril 1..5( the ar$itral $ody issued an order 9 which deferred the deter!ination of the !otion to dis!iss and resolved to proceed with the hearing of the case on the !erits as the grounds cited $y 6=% did not see! to $e Iindu$ita$le&I 6=% filed a !otion for reconsideration of the aforesaid Order& C=%C in denying the !otion for reconsideration ruled that it has 8urisdiction over the 9H;ROLs clai! over 6=% pursuant to 7&O 1558 and that the hearing should proceed as scheduled& 1= On : -ay 1..:( 6=% filed with the Court of %ppeals an original action of certiorari and prohi$ition with prayer for restraining order andEor in8unction( see<ing to annul the Orders of the C=%C for having $een issued without or in e3cess of 8urisdiction& =n support of its petition 6=% alleged thatA % R7'4O6;76T C=%C 9%' 6O %GT9OR=TH OR )GR=;=CT=O6 TO 97%R %6; TRH T9=' ;='4GT7 B7TC776 T97 97R7=6 4%RT=7' %' 7&O& 6O& 1558 9%; 6O R7TRO%CT=>7 7??7CT& B T97 ;='4GT7 B7TC776 T97 4%RT=7' '9OGL; B7 '7TTL7; =6 %CCOR;%6C7 C=T9 FC 6O& 5( %RT& 5+: O? T97 C=>=L CO;7 %6; R&%& 6O& 8/: T97 FO>7R6=6F L%C' %T T97 T=-7 CO6TR%CT C%' 7O7CGT7; %6; T7R-=6%T7;& C 7&O& 6O& 1558 =' % 'GB'T%6T=>7 L%C( 6OT -7R7LH 4ROC7;GR%L %' RGL7; BH T97 C=%C& ; %6 =6;OR'7-76T O? T97 %G;=TOR F767R%L ;7C=;=6F % CO6TRO>7R'H =' % ;7C='=O6 B7C%G'7 %LL T97 7L7-76T' ?OR )G;F-76T %R7 T97R7@ T97 CO6TRO>7R'H( T97 %GT9OR=TH TO ;7C=;7 %6; T97 ;7C='=O6& =? =T =' 6OT %447%L7; '7%'O6%BLH( T97 '%-7 B7CO-7' ?=6%L& 7 6=% 9%' T=-7LH R%='7; T97 =''G7 O? )GR=';=CT=O6& =T ;=; 6OT C%=>7 6OR =' =T 7'TO447; ?RO- %''%=L=6F T97 '%-7& ? T97 L7F%L ;OCTR=67 T9%T )GR=';=CT=O6 =' ;7T7R-=67; BH T97 'T%TGT7 =6 ?ORC7 %T T97 T=-7 O? T97 CO--76C7-76T O? T97 %CT=O6 ;O7' 6OT O6LH %44LH TO T97 =6'T%6T C%'7& 11 The Court of %ppeals( after finding that there was no grave a$use of discretion on the part of the C=%C in issuing the aforesaid Orders( dis!issed the petition in its Resolution dated 8 )une 1..:& 6=%Ls !otion for reconsideration of the said decision was li<ewise denied $y the Court of %ppeals on : ?e$ruary 1../& On )une 1../( 6=% filed $efore us an original action for certiorari and prohi$ition with urgent prayer for te!porary restraining order and writ of preli!inary in8unction( praying for the annul!ent of the Resolutions of the Court of %ppeals dated 8 )une 1..: and + ?e$ruary 1../& =n the said special civil action( 6=% !erely reiterates the issues it raised $efore the Court of %ppeals& 12 Ce ta<e 8udicial notice that on 15 )une 1../( C=%C rendered a decision in the !ain case in favor of 9H;RO& 136=% assailed the said decision with the Court of %ppeals& =n view of the pendency of the present petitions $efore us the appellate court issued a resolution dated : -arch 1..8 holding in a$eyance the resolution of the sa!e until after the instant petitions have $een finally decided& 1; %t the outset( we note that the petition suffers fro! a procedural defect that warrants its outright dis!issal& The ,uestioned resolutions of the Court of %ppeals have already $eco!e final and e3ecutory $y reason of the failure of 6=% to appeal therefro!& =nstead of filing this petition for certiorari under Rule :5 of the Rules of Court( 6=% should have filed a ti!ely petition for review under Rule +5&

There is no dou$t that the Court of %ppeals has 8urisdiction over the special civil action for certiorari under Rule :5 filed $efore it $y 6=%& The original 8urisdiction of the Court of %ppeals over special civil actions for certiorari is vested upon it under 'ection .011 of B&4& 1 .& This 8urisdiction is concurrent with the 'upre!e Court 15 and with the Regional Trial Court& 16 Thus( since the Court of %ppeals had 8urisdiction over the petition under Rule :5( any alleged errors co!!itted $y it in the e3ercise of its 8urisdiction would $e errors of 8udg!ent which are reviewa$le $y ti!ely appeal and not $y a special civil action of certiorari& 1< =f the aggrieved party fails to do so within the regle!entary period( and the decision accordingly $eco!es final and e3ecutory( he cannot avail hi!self of the writ of certiorari( his predica!ent $eing the effect of his deli$erate inaction& 1B The appeal fro! a final disposition of the Court of %ppeals is a petition for review under Rule +5 and not a special civil action under Rule :5 of the Rules of Court( now Rule +5 and Rule :5( respectively( of the 1../ Rules of Civil 4rocedure& 19 Rule +5 is clear that decisions( final orders or resolutions of the Court of %ppeals in any case( i&e&( regardless of the nature of the action or proceedings involved( !ay $e appealed to this Court $y filing a petition for review( which would $e $ut a continuation of the appellate process over the original case& 2= Gnder Rule +5 the regle!entary period to appeal is fifteen 0151 days fro! notice of 8udg!ent or denial of !otion for reconsideration&21 =n the instant case the Resolution of the Court of %ppeals dated + ?e$ruary 1../ denying the !otion for reconsideration of its Resolution dated 8 )une 1../ was received $y 6=% on + -arch 1../& Thus( it had until 1. -arch 1../ within which to perfect its appeal& 6=% did not appeal& Chat it did was to file an original action for certiorari $efore this Court( reiterating the issues and argu!ents it raised $efore the Court of %ppeals& ?or the writ of certiorari under Rule :5 of the Rules of Court to issue( a petitioner !ust show that he has no plain( speedy and ade,uate re!edy in the ordinary course of law against its perceived grievance& 22 % re!edy is considered Iplain( speedy and ade,uateI if it will pro!ptly relieve the petitioner fro! the in8urious effects of the 8udg!ent and the acts of the lower court or agency& 23 =n this case( appeal was not only availa$le $ut also a speedy and ade,uate re!edy& O$viously( 6=% interposed the present special civil action of certiorari not $ecause it is the speedy and ade,uate re!edy $ut to !a<e up for the loss( through o!ission or oversight( of the right of ordinary appeal& =t is ele!entary that the special civil action of certiorari is not and cannot $e a su$stitute for an appeal( where the latter re!edy is availa$le( as it was in this case& % special civil action under Rule :5 of the Rules of Court will not $e a cure for failure to ti!ely file a petition for review on certiorari under Rule +5 of the Rules of Court& 2; Rule :5 is an independent action that cannot $e availed of as a su$stitute for the lost re!edy of an ordinary appeal( including that under Rule +5( 25 especially if such loss or lapse was occasioned $y oneLs own neglect or error in the choice of re!edies& 26 ?or o$vious reasons the rules for$id recourse to a special civil action for certiorari if appeal is availa$le( as the re!edies of appeal and certiorari are !utually e3clusive and not alternative or successive& 2< %lthough there are e3ceptions to the rules( none is present in the case at $ar& 6=% failed to show circu!stances that will 8ustify a deviation fro! the general rule as to !a<e availa$le a petition for certiorari in lieu of ta<ing an appropriate appeal& Based on the foregoing( the instant petition should $e dis!issed& =n any case( even if the issue of technicality is disregarded and recourse under Rule :5 is allowed( the sa!e result would $e reached since a review of the ,uestioned resolutions of the C=%C shows that it co!!itted no grave a$use of discretion& Contrary to the clai! of 6=%( the C=%C has 8urisdiction over the controversy& 73ecutive Order 6o& 1558( otherwise <nown as the IConstruction =ndustry %r$itration LawI which was pro!ulgated on + ?e$ruary 1.85( vests upon C=%C original and e3clusive 8urisdiction over disputes arising fro!( or connected with contracts entered into $y parties involved in construction in the 4hilippines( whether the dispute arises $efore or after the co!pletion of the contract( or after the a$andon!ent or $reach thereof& The disputes !ay involve govern!ent or private contracts& ?or the Board to ac,uire 8urisdiction( the parties to a dispute !ust agree to su$!it the sa!e to voluntary ar$itration& 2B The co!plaint of 9H;RO against 6=% on the $asis of the contract e3ecuted $etween the! was filed on / ;ece!$er 1..+( during the effectivity of 7&O& 6o& 1558& 9ence( it is well within the 8urisdiction of C=%C& The 8urisdiction of a court is deter!ined $y the law in force at the ti!e of the co!!ence!ent of the action& 29 6=%Ls argu!ent that C=%C had no 8urisdiction to ar$itrate on contract which preceded its e3istence is untena$le& 7&O& 1558 is clear that the C=%C has 8urisdiction over all disputes arising fro! or connected with construction contract whether the dispute arises $efore or after the co!pletion of the contract& Thus( the date the parties entered into a contract and the date of co!pletion of the sa!e( even if these occurred $efore the constitution of the C=%C( did not auto!atically divest the C=%C of 8urisdiction as long as the dispute su$!itted for ar$itration arose after the constitution of the C=%C& 'tated differently( the 8urisdiction of C=%C is over the dispute( not the contract@ and the instant dispute having arisen when C=%C was already constituted( the ar$itral $oard was actually e3ercising current( not retroactive( 8urisdiction& %s such( there is no need to pass upon the issue of whether 7&O& 6o& 1558 is a su$stantive or procedural statute& 6=% also contended that the C=%C did not ac,uire 8urisdiction over the dispute since it was only 9H;RO that re,uested for ar$itration& =t asserts that to ac,uire 8urisdiction over a case( as provided under 7&O& 1558( the re,uest for ar$itration filed with C=%C should $e !ade $y $oth parties( and hence the re,uest $y one party is not enough& =t is undisputed that the contracts $etween 9H;RO and 6=% contained an ar$itration clause wherein they agreed to su$!it to ar$itration any dispute $etween the! that !ay arise $efore or after the ter!ination of the agree!ent& Conse,uently( the clai! of 9H;RO having arisen fro! the contract is ar$itra$le& 6=%Ls reliance with the ruling on the case of Tesco Services 'ncorporated v& Vera( 3= is !isplaced&

The 1.88 C=%C Rules of 4rocedure which were applied $y this Court in Tesco case had $een duly a!ended $y C=%C Resolutions 6o& *.1 and #*.#( 'ection 1 of %rticle === of which read as followsA Submission to C'AC 7urisdiction U %n ar$itration clause in a construction contract or a su$!ission to ar$itration of a construction contract or a su$!ission to ar$itration of a construction dispute shall $e dee!ed an agree!ent to su$!it an e3isting or future controversy to C=%C 8urisdiction( notwithstanding the reference to a different ar$itration institution or ar$itral $ody in such contract or su$!ission& Chen a contract contains a clause for the su$!ission of a future controversy to ar$itration( it is not necessary for the parties to enter into a su$!ission agree!ent $efore the clai!ant !ay invo<e the 8urisdiction of C=%C& Gnder the present Rules of 4rocedure( for a particular construction contract to fall within the 8urisdiction of C=%C( it is !erely re,uired that the parties agree to su$!it the sa!e to voluntary ar$itration& Gnli<e in the original version of 'ection 1( as applied in the Tesco case( the law as it now stands does not provide that the parties should agree to su$!it disputes arising fro! their agree!ent specifically to the C=%C for the latter to ac,uire 8urisdiction over the sa!e& Rather( it is plain and clear that as long as the parties agree to su$!it to voluntary ar$itration( regardless of what foru! they !ay choose( their agree!ent will fall within the 8urisdiction of the C=%C( such that( even if they specifically choose another foru!( the parties will not $e precluded fro! electing to su$!it their dispute $efore the C=%C $ecause this right has $een vested upon each party $y law( i&e&( 7&O& 6o& 1558& 31 -oreover( it is undenia$le that 6=% agreed to su$!it the dispute for ar$itration to the C=%C& 6=% through its counsel actively participated in the ar$itration proceedings $y filing an answer with counterclai!( as well as its co!pliance wherein it no!inated ar$itrators to the proposed panel( participating in the deli$erations on( and the for!ulation of( the Ter!s of Reference of the ar$itration proceeding( and e3a!ining the docu!ents su$!itted $y 9H;RO after 6=% as<ed for the originals of the said docu!ents& 32 %s to the defenses of laches and prescription( they are evidentiary in nature which could not $e esta$lished $y !ere allegations in the pleadings and !ust not $e resolved in a !otion to dis!iss& Those issues !ust $e resolved at the trial of the case on the !erits wherein $oth parties will $e given a!ple opportunity to prove their respective clai!s and defenses& 33 Gnder the rule 3; the defer!ent of the resolution of the said issues was( thus( in order& %n allegation of prescription can effectively $e used in a !otion to dis!iss only when the co!plaint on its face shows that indeed the action has already prescri$ed& 35 =n the instant case( the issue of prescription and laches cannot $e resolved on the $asis solely of the co!plaint& =t !ust( however( $e pointed that under the new rules( 36defer!ent of the resolution is no longer per!itted& The court !ay either grant the !otion to dis!iss( deny it( or order the a!end!ent of the pleading& C97R7?OR7( the instant petition is ;='-=''7; for lac< of !erit& The Court of %ppeals is here$y ;=R7CT7; to proceed with reasona$le dispatch in the disposition of C&%& F&R& 6o& ++5 / and include in the resolution thereof the issue of laches and prescription& 'O OR;7R7;& Puno" Aapunan" Pardo and Bnares&Santiago" 77." concur. 76 B%6C

[G.R. N&. 155==1. J! +!r# 21, 2==;]

DE1OSTHENES 3. AGAN, JR., JOSE3H .. /ATAHAN, JOSE 1ARI .. REUNILLA, 1ANUEL ANTONIO .. .OHE, 1A1ERTO S. /LARA, REUEL E. DI1ALANTA, 1OR0 5. DO1ALAON, /ONRADO G. DI1AANO, LOLITA R. HI7ON, RE1EDIOS 3. ADOLFO, .IEN5ENIDO /. HILARIO, 1IAS/OR 4OR2ERS UNION>NATIONAL LA.OR UNION F14U>NLUG, ! ) 3HILI33INE AIRLINES E13LO0EES ASSO/IATION F3ALEAG, petitioners, vs. 3HILI33INE INTERNATIONAL AIR TER1INALS /O., IN/., 1ANILA INTERNATIONAL AIR3ORT AUTHORIT0, DE3ART1ENT OF TRANS3ORTATION AND /O11UNI/ATIONS ! ) SE/RETAR0 LEANDRO 1. 1ENDO7A, , ',( c!6!c,-# !( He!) &% -'e De6!r-me - &% Tr! (6&r-!-,& ! ) /&mm+ ,c!-,& (, respondents, 1IAS/OR GROUNDHANDLING /OR3ORATION, DNATA>4INGS A5IATION S0STE1S /OR3ORATION, 1A/ROASIA>EUREST SER5I/ES, IN/., 1A/ROASIA>1EN7IES AIR3ORT SER5I/ES /OR3ORATION, 1IAS/OR /ATERING SER5I/ES /OR3ORATION, 1IAS/OR AIR/RAFT 1AINTENAN/E /OR3ORATION, ! ) 1IAS/OR LOGISTI/S /OR3ORATION, Petitioners-in-Intervention, FLORESTE AL/ONIS, GINA ALNAS, RE0 A13OLOIUIO, ROSE1ARIE ANG, EUGENE ARADA, NENETTE .ARREIRO, NOEL .ARTOLO1E, ALDRIN .ASTADOR, ROLETTE DI5INE .ERNARDO, 1INETTE .RA5O, 2AREN .RE/ILLA, NIDA /AILAO, ER4IN /ALAR, 1ARIFEL /ONSTANTINO, JANETTE /ORDERO, ARNOLD FELI/ITAS, 1ARISSA GA0AGO0, ALEJ GENERILLO, ELI7A.ETH GRA0, 7OILO HERI/O, JA/IUELINE IGNA/IO, THEL1A INFANTE, JOEL JU1AO>AS, 1ARIETTA LIN/HO/O, ROLL0 LORI/O, FRAN/IS AUGUSTO 1A/ATOL, 1I/HAEL 1ALIGAT, DENNIS 1ANALO, RAUL 1ANGALI1AN, JOEL 1ANLANGIT, /HARLIE 1ENDO7A, HA7NAH 1ENDO7A, NI/HOLS 1ORALES, ALLEN OLAHO, /ESAR ORTAL, 1I/HAEL ORTEGA, 4A0NE 3LA7A, JOSELITO RE0ES, ROLANDO RE0ES, AILEEN SA3INA, RA1IL TA1A0O, 3HILLI3S TAN, ANDRE4 U0, 4ILLIA1 5ELAS/O, E1ILIO 5ELE7, NOE1I 0U3ANO, 1AR0 JANE ONG, RI/HARD RA1IRE7, /HER0LE 1ARIE ALFONSO, L0NDON .AUTISTA, 1ANUEL /A.O/AN AND NED0 LA7O, 2espondents-in-Intervention, NAG2AISANG 1ARALITA NG TAHONG ASSO/IATION, IN/., 2espondents-in-Intervention,

[G.R. N&. 1555;<. J! +!r# 21, 2==3]

SALA/NI. F. .ATERINA, /LA5EL A. 1ARTINE7 ! ) /ONSTANTINO G. JARAULA, petitioners, vs. 3HILI33INE INTERNATIONAL AIR TER1INALS /O., IN/., 1ANILA INTERNATIONAL AIR3ORT AUTHORIT0, DE3ART1ENT OF TRANS3ORTATION AND /O11UNI/ATIONS, DE3ART1ENT OF 3U.LI/ 4OR2S AND HIGH4A0S, SE/RETAR0 LEANDRO 1. 1ENDO7A, , ',( c!6!c,-# !( He!) &% -'e De6!r-me - &% Tr! (6&r-!-,& ! ) /&mm+ ,c!-,& (, ! ) SE/RETAR0 SI1EON A. DATU1ANONG, , ',( c!6!c,-# !( He!) &% -'e De6!r-me - &% 3+b",c 4&rC( ! ) H,*':!#(, re(6& )e -(, JA/INTO 5. 3ARAS, RAFAEL 3. NANTES, EDUARDO /. 7IAL/ITA, 4ILL0 .U0SON 5ILLARA1A, 3ROS3ERO /. NOGRALES, 3ROS3ERO A. 3I/HA0, JR., HARLIN /AST A.A0ON, ! ) .ENASING O. 1A/ARAN.ON, 2espondents-Intervenors, FLORESTE AL/ONIS, GINA ALNAS, RE0 A13OLOIUIO, ROSE1ARIE ANG, EUGENE ARADA, NENETTE .ARREIRO, NOEL .ARTOLO1E, ALDRIN .ASTADOR, ROLETTE DI5INE .ERNARDO, 1INETTE .RA5O, 2AREN .RE/ILLA, NIDA /AILAO, ER4IN /ALAR, 1ARIFEL /ONSTANTINO, JANETTE /ORDERO, ARNOLD FELI/ITAS, 1ARISSA GA0AGO0, ALEJ GENERILLO, ELI7A.ETH GRA0, 7OILO HERI/O, JA/IUELINE IGNA/IO, THEL1A INFANTE, JOEL JU1AO>AS, 1ARIETTA LIN/HO/O, ROLL0 LORI/O, FRAN/IS AUGUSTO 1A/ATOL, 1I/HAEL 1ALIGAT, DENNIS 1ANALO, RAUL 1ANGALI1AN, JOEL 1ANLANGIT, /HARLIE 1ENDO7A, HA7NAH 1ENDO7A, NI/HOLS 1ORALES, ALLEN OLAHO, /ESAR ORTAL, 1I/HAEL ORTEGA, 4A0NE 3LA7A, JOSELITO RE0ES, ROLANDO RE0ES, AILEEN SA3INA, RA1IL TA1A0O, 3HILLI3S TAN, ANDRE4 U0, 4ILLIA1 5ELAS/O, E1ILIO 5ELE7, NOE1I 0U3ANO, 1AR0 JANE ONG, RI/HARD RA1IRE7, /HER0LE 1ARIE ALFONSO, L0NDON .AUTISTA, 1ANUEL /A.O/AN AND NED0 LA7O, 2espondents-in-Intervention, NAG2AISANG 1ARALITA NG TAHONG ASSO/IATION, IN/., 2espondents-in-Intervention,

[G.R. N&. 155661. J! +!r# 21, 2==3]

/EFERINO /. LO3E7, RA1ON 1. SALES, ALFREDO .. 5ALEN/IA, 1A. TERESA 5. GAERLAN, LEONARDO DE LA ROSA, DINA /. DE LEON, 5IRGIE /ATA1IN, RONALD S/HLO.O1, ANGELITO SANTOS, 1A. LUISA 1. 3AL/ON ! ) SA1AHANG 1ANGGAGA4A SA 3ALI3ARAN NG 3ILI3INAS FS133G, petitioners, vs. 3HILI33INE INTERNATIONAL AIR TER1INALS /O., IN/., 1ANILA INTERNATIONAL AIR3ORT AUTHORIT0, DE3ART1ENT OF TRANS3ORTATION AND /O11UNI/ATIONS, SE/RETAR0 LEANDRO 1. 1ENDO7A, , ',( c!6!c,-# !( He!) &% -'e De6!r-me - &% Tr! (6&r-!-,& ! ) /&mm+ ,c!-,& (, respondents, FLORESTE AL/ONIS, GINA ALNAS, RE0 A13OLOIUIO, ROSE1ARIE ANG, EUGENE ARADA, NENETTE .ARREIRO, NOEL .ARTOLO1E, ALDRIN .ASTADOR, ROLETTE DI5INE .ERNARDO, 1INETTE .RA5O, 2AREN .RE/ILLA, NIDA /AILAO, ER4IN /ALAR, 1ARIFEL /ONSTANTINO, JANETTE /ORDERO, ARNOLD FELI/ITAS, 1ARISSA GA0AGO0, ALEJ GENERILLO, ELI7A.ETH GRA0, 7OILO HERI/O, JA/IUELINE IGNA/IO, THEL1A INFANTE, JOEL JU1AO>AS, 1ARIETTA LIN/HO/O, ROLL0 LORI/O, FRAN/IS AUGUSTO 1A/ATOL, 1I/HAEL 1ALIGAT, DENNIS 1ANALO, RAUL 1ANGALI1AN, JOEL 1ANLANGIT, /HARLIE 1ENDO7A, HA7NAH 1ENDO7A, NI/HOLS 1ORALES, ALLEN OLAHO, /ESAR ORTAL, 1I/HAEL ORTEGA, 4A0NE 3LA7A, JOSELITO RE0ES, ROLANDO RE0ES, AILEEN SA3INA, RA1IL TA1A0O, 3HILLI3S TAN, ANDRE4 U0, 4ILLIA1 5ELAS/O, E1ILIO 5ELE7, NOE1I 0U3ANO, 1AR0 JANE ONG, RI/HARD RA1IRE7, /HER0LE 1ARIE ALFONSO, L0NDON .AUTISTA, 1ANUEL /A.O/AN AND NED0 LA7O, 2espondents-in-Intervention, NAG2AISANG 1ARALITA NG TAHONG ASSO/IATION, IN/., 2espondents-in-Intervention. RESOLUTION 3+ &, J.$ Before this Court are the separate -otions for Reconsideration filed $y respondent 4hilippine =nternational %ir Ter!inals Co&( =nc& 04=%TCO1( respondents*intervenors )acinto >& 4aras( Rafael 4& 6antes( 7duardo C& Jialcita( Cillie Buyson >illara!a( 4rospero C& 6ograles( 4rospero %& 4ichay( )r&( 9arlin Cast %$ayon and Benasing O& -acaran$on( all !e!$ers of the 9ouse of Representatives 0Respondent Congress!en1([1] respondents*intervenors who are e!ployees of 4=%TCO and other wor<ers of the 6inoy %,uino =nternational %irport =nternational 4assenger Ter!inal === 06%=% =4T ===1 04=%TCO 7!ployees1 [ ] and respondents*intervenors 6ag<aisang -aralita ng TaVong %ssociation( =nc&( 06-T%=1[#] of the ;ecision of this Court dated -ay 5( 55# declaring the contracts for the 6%=% =4T === pro8ect null and void& Briefly( the proceedings& On Octo$er 5( 1..+( %sia"s 7!erging ;ragon Corp& 0%7;C1 su$!itted an unsolicited proposal to the 4hilippine Fovern!ent through the ;epart!ent of Transportation and Co!!unication 0;OTC1 and -anila =nternational %irport %uthority 0-=%%1 for the construction and develop!ent of the 6%=% =4T === under a $uild*operate*and*transfer arrange!ent pursuant to R&%& 6o& :.5/( as a!ended $y R&%& 6o& //18 0BOT Law1& [+] =n accordance with the BOT Law and its =!ple!enting Rules and Regulations 0=!ple!enting Rules1( the ;OTCE-=%% invited the pu$lic for su$!ission of co!petitive and co!parative proposals to the unsolicited proposal of %7;C& On 'epte!$er 5( 1..: a consortiu! co!posed of the 4eople"s %ir Cargo and Carehousing Co&( =nc& 04aircargo1( 4hil& %ir and Frounds 'ervices( =nc& 04%F'1 and 'ecurity Ban< Corp& 0'ecurity Ban<1 0collectively( 4aircargo Consortiu!1( su$!itted their co!petitive proposal to the 4re,ualification Bids and %wards Co!!ittee 04B%C1& %fter finding that the 4aircargo Consortiu! su$!itted a $id superior to the unsolicited proposal of %7;C and after failure $y %7;C to !atch the said $id( the ;OTC issued the notice of award for the 6%=% =4T === pro8ect to the 4aircargo Consortiu!( which later organi2ed into herein respondent 4=%TCO& 9ence( on )uly 1 ( 1../( the Fovern!ent( through then ;OTC 'ecretary %rturo T& 7nrile( and 4=%TCO( through

its 4resident( 9enry T& Fo( signed the BConcession %gree!ent for the Build*Operate*and*Transfer %rrange!ent of the 6inoy %,uino =nternational %irport 4assenger Ter!inal ===D 01../ Concession %gree!ent1& On 6ove!$er :( 1..8( the 1../ Concession %gree!ent was superseded $y the %!ended and Restated Concession %gree!ent 0%RC%1 containing certain revisions and !odifications fro! the original contract& % series of supple!ental agree!ents was also entered into $y the Fovern!ent and 4=%TCO& The ?irst 'upple!ent was signed on %ugust /( 1...( the 'econd 'upple!ent on 'epte!$er +( 555( and the Third 'upple!ent on )une ( 551 0collectively( 'upple!ents1 0the 1../ Concession %gree!ent( %RC% and the 'upple!ents collectively referred to as the 4=%TCO Contracts1& On 'epte!$er 1/( 55 ( various petitions were filed $efore this Court -& ! +" -'e 199< /& ce((,& A*reeme -, -'e AR/A ! ) -'e S+66"eme -( and to prohi$it the pu$lic respondents ;OTC and -=%% fro! i!ple!enting the!& =n a decision dated -ay 5( 55#( this Court granted the said petitions and declared the 1../ Concession %gree!ent( the %RC% and the 'upple!ents null and void& Respondent 4=%TCO( respondent*Congress!en and respondents*intervenors now see< the reversal of the -ay 5( 55# decision and pray that the petitions $e dis!issed& =n the alternative( 4=%TCO prays that the Court should not stri<e down the entire 1../ Concession %gree!ent( the %RC% and its supple!ents in light of their separa$ility clause& Respondent*Congress!en and 6-T%= also pray that in the alternative( the cases at $ar should $e referred to ar$itration pursuant to the provisions of the %RC%& 4=%TCO*7!ployees pray that the petitions $e dis!issed and re!anded to the trial courts for trial on the !erits or in the alternative that the 1../ Concession %gree!ent( the %RC% and the 'upple!ents $e declared valid and $inding& I

3r&ce)+r!" 1!--er(

!. L!cC &% J+r,(),c-,& 4rivate respondents and respondents*intervenors reiterate a nu!$er of procedural issues which they insist deprived this Court of 8urisdiction to hear and decide the instant cases on its !erits& They continue to clai! that the cases at $ar raise factual ,uestions which this Court is ill*e,uipped to resolve( hence( they !ust $e re!anded to the trial court for reception of evidence& ?urther( they allege that although designated as petitions for certiorari and prohi$ition( the cases at $ar are actually actions for nullity of contracts over which the trial courts have e3clusive 8urisdiction& 7ven assu!ing that the cases at $ar are special civil actions for certiorari and prohi$ition( they contend that the principle of hierarchy of courts precludes this Court fro! ta<ing pri!ary 8urisdiction over the!& Ce are not persuaded& There is a ,uestion of fact when dou$t or difference arises as to the truth or falsity of the facts alleged& [5] 7ven a cursory reading of the cases at $ar will show that the Court decided the! $y interpreting and applying the Constitution( the BOT Law( its =!ple!enting Rules and other relevant legal principles on the $asis of c"e!r"# + ),(6+-e) %!c-(& %ll the&6er!-,8e %!c-( were settled( hence( there is no need for a trial type deter!ination of their truth or falsity $y a trial court& Ce re8ect the unyielding insistence of 4=%TCO 7!ployees that the following factual issues are critical and $eyond the capa$ility of this Court to resolve( viCA 0a1 whether the 6ational 7cono!ic ;evelop!ent %uthority* =nvest!ent Coordinating Co!!ittee 067;%*=CC1 approved the 'upple!ents@ 0$1 whether the ?irst 'upple!ent created ten 0151 new financial o$ligations on the part of the govern!ent@ and 0c1 whether the 1../ Concession %gree!ent departed fro! the draft Concession %gree!ent contained in the Bid ;ocu!ents&[:] The factual issue of whether the 67;%*=CC approved the 'upple!ents is hardly relevant& =t is clear in our ;ecision that the 4=%TCO contracts were invalidated on other and !ore su$stantial grounds& =t did not rely on the presence or a$sence of 67;%*=CC approval of the 'upple!ents& On the other hand( the last two issues do not involve disputed facts& Rather( they involve contractual provisions which are c"e!r ! ) c!-e*&r,c!" ! ) ee) & "# -& be , -er6re-e). The interpretation of contracts and the deter!ination of whether their provisions violate our laws or contravene any pu$lic policy ,( ! "e*!" ,((+e :',c' -',( /&+r- m!# 6r&6er"# 6!(( +6& . Respondents" corollary contention that this Court violated the ',er!rc'# &% c&+r-( when it entertained the cases at $ar !ust also fail& The rule on hierarchy of courts in cases falling within the concurrent 8urisdiction of the trial courts and appellate courts generally applies to cases involving warring factual allegations& ?or this reason( litigants are re,uired to repair to the trial courts at the first instance to deter!ine the truth or falsity of these contending allegations on the $asis of the evidence of the parties& Cases which depend on disputed facts for decision cannot $e $rought i!!ediately $efore appellate courts as they are not triers of facts& =t goes without saying that when cases $rought $efore the appellate courts do not involve factual $ut "e*!" ?+e(-,& (, a strict application of the rule of hierarchy of courts is not necessary& %s the cases at $ar !erely concern the construction of the Constitution( the interpretation of the BOT Law and its =!ple!enting Rules and Regulations on + ),(6+-e) c& -r!c-+!" 6r&8,(,& ( and govern!ent actions( and as the cases c& cer 6+b",c , -ere(-( this Court resolved to ta<e pri!ary 8urisdiction over the!& This choice of action follows the consistent stance of this Court to settle any controversy with a high pu$lic interest co!ponent in a single proceeding and to leave no root or $ranch that could $ear the seeds of future litigation& The suggested re!and of the cases at $ar to the trial court will stray away fro! this policy& [/]

b. Le*!" S-! ), *

Respondent 4=%TCO stands pat with its argu!ent that petitioners lac< legal personality to file the cases at $ar as they are not real parties in interest who are $ound principally or su$sidiarily to the 4=%TCO Contracts& ?urther( respondent 4=%TCO contends that petitioners failed to show any legally de!anda$le or enforcea$le right to 8ustify their standing to file the cases at $ar& These argu!ents are not difficult to deflect& The deter!ination of whether a person !ay institute an action or $eco!e a party to a suit $rings to fore the concepts of real party in interest( capacity to sue and standing to sue& To the legally discerning( these three concepts are different although co!!only directed towards ensuring that only certain parties can !aintain an action& [8] %s defined in the Rules of Court( a real party in interest is the party who stands to $e $enefited or in8ured $y the 8udg!ent in the suit or the party entitled to the avails of the suit& [.] Capacity to sue deals with a situation where a person who !ay have a cause of action is dis,ualified fro! $ringing a suit under applica$le law or is inco!petent to $ring a suit or is under so!e legal disa$ility that would prevent hi! fro! !aintaining an action unless represented $y a guardian ad litem& Legal standing is relevant in the real! of pu$lic law& =n certain instances( courts have allowed private parties to institute actions challenging the validity of govern!ental action for violation of private rights or constitutional principles& [15] =n these cases( courts apply the doctrine of legal standing $y deter!ining whether the party has a ),rec- ! ) 6er(& !" , -ere(- , -'e c& -r&8er(# ! ) :'e-'er (+c' 6!r-# '!( (+(-!, e) &r ,( , ,mm, e - )! *er &% (+(-!, , * ! , A+r# !( ! re(+"- &% -'e !c- c&m6"!, e) &% ( a standard which is distinct fro! the concept of real party in interest&[11] -easured $y this yardstic<( the application of the doctrine on legal standing necessarily involves a preli!inary consideration of the !erits of the case and is not purely a procedural issue&[1 ] Considering the nature of the controversy and the issues raised in the cases at $ar( this Court affir!s its ruling that the petitioners have the re,uisite legal standing& The petitioners in F&R& 6os& 155551 and 155::1 are e!ployees of service providers operating at the e3isting international airports and e!ployees of -=%% while petitioners*intervenors are service providers with e3isting contracts with -=%% and they will all sustain direct in8ury upon the i!ple!entation of the 4=%TCO Contracts& The 1../ Concession %gree!ent and the %RC% $oth provide that upon the co!!ence!ent of operations at the 6%=% =4T ===( 6%=% 4assenger Ter!inals = and == will cease to $e used as international passenger ter!inals&[1#] ?urther( the %RC% providesA 0d1 ?or the purpose of an orderly transition( -=%% shall not renew any e3pired concession agree!ent relative to any service or operation currently $eing underta<en at the 6inoy %,uino =nternational %irport 4assenger Ter!inal =( or e3tend any concession agree!ent which !ay e3pire su$se,uent hereto( e3cept to the e3tent that the continuation of the e3isting services and operations shall lapse on or $efore the =n* 'ervice ;ate&[1+] Beyond iota of dou$t( the i!ple!entation of the 4=%TCO Contracts( which the petitioners and petitioners*intervenors denounce as unconstitutional and illegal( would deprive the! of their sources of livelihood& Gnder settled 8urisprudence( oneLs e!ploy!ent( profession( trade( or calling is a property right and is protected fro! wrongful interference& [15] =t is also self evident that the petitioning service providers stand in i!!inent danger of losing legiti!ate $usiness invest!ents in the event the 4=%TCO Contracts are upheld& Over and a$ove all these( constitutional and other legal issues with far*reaching econo!ic and social i!plications are e!$edded in the cases at $ar( hence( this Court li$erally granted legal standing to the petitioning !e!$ers of the 9ouse of Representatives& ?irst( at sta<e is the $uild*operate*andRtransfer contract of the country"s pre!ier international airport with a pro8ected capacity of 15 !illion passengers a year& 'econd( the huge a!ount of invest!ent to co!plete the pro8ect is esti!ated to $e 41#(555(555(555&55& Third( the pri!ary issues posed in the cases at $ar de!and a discussion and interpretation of the Constitution( the BOT Law and its i!ple!enting rules which have not $een passed upon $y this Court in previous cases& They can chart the future inflow of invest!ent under the BOT Law& Before writing finis to the issue of legal standing( the Court notes the $id of new parties to participate in the cases at $ar as respondents* intervenors( na!ely( 011 the 4=%TCO 7!ployees and 0 1 6-T%= 0collectively( the 6ew Respondents*=ntervenors1& %fter the Court"s ;ecision( the 6ew Respondents*=ntervenors filed separate -otions for Reconsideration*=n*=ntervention alleging pre8udice and direct in8ury& 4=%TCO e!ployees clai! that Bthey have a direct and personal interest [in the controversy]&&& since they stand to lose their 8o$s should the govern!ent"s contract with 4=%TCO $e declared null and void&D [1:] 6-T%=( on the other hand( represents itself as a corporation co!posed of responsi$le ta3*paying ?ilipino citi2ens with the o$8ective of Bprotecting and sustaining the rights of its !e!$ers to civil li$erties( decent livelihood( opportunities for social advance!ent( and to a good( conscientious and honest govern!ent&D[1/] The Rules of Court govern the ti!e of filing a -otion to =ntervene& 'ection ( Rule 1. provides that a -otion to =ntervene should $e filed B$efore rendition of 8udg!ent&&&&D The 6ew Respondents*=ntervenors filed their separate !otions after a decision has $een pro!ulgated in the present cases& They have not offered any worthy e3planation to 8ustify their late intervention& Conse,uently( their -otions for Reconsideration*=n*=ntervention are denied for the rules cannot $e rela3ed to await litigants who sleep on their rights& =n any event( a sideglance at these late !otions will show that they hoist no novel argu!ents&

c. F!,"+re -& Im6"e!) ! I ),(6e (!b"e 3!r-# 4=%TCO ne3t contends that petitioners should have i!pleaded the Repu$lic of the 4hilippines as an indispensa$le party& =t alleges that petitioners sued the ;OTC( -=%% and the ;4C9 in their own capacities or as i!ple!entors of the 4=%TCO Contracts and not as a contract party or as representatives of the Fovern!ent of the Repu$lic of the 4hilippines& =t then leapfrogs to the conclusion that the Ba$sence of an indispensa$le party renders ineffectual all the proceedings su$se,uent to the filing of the co!plaint including the 8udg!ent&D[18] 4=%TCO"s allegations are inaccurate& The petitions clearly $ear out that pu$lic respondents ;OTC and -=%% were i!pleaded as 6!r-,e( -& -'e 3IAT/O /& -r!c-( and not !erely as their i!ple!entors& The separate petitions filed $y the -=%% e!ployees [1.] and !e!$ers of the 9ouse of Representatives[ 5] alleged that Bpu$lic respondents are i!pleaded herein $ecause they either e9ec+-e) -'e 3IAT/O /& -r!c-( or are underta<ing acts which are related to the 4=%TCO Contracts& They are interested and indispensa$le parties to this 4etition&D [ 1] Thus( pu$lic respondents ;OTC and -=%% were i!pleaded as parties to the case for having e9ec+-e) the contracts& -ore i!portantly( it is also too late in the day for 4=%TCO to raise this issue& =f 4=%TCO seriously views the non*inclusion of the Repu$lic of the 4hilippines as an indispensa$le party as fatal to the petitions at $ar( it should have raised the issue at the onset of the proceedings as a

ground to dis!iss& 4=%TCO cannot litigate issues on a piece!eal $asis( otherwise( litigations shall $e li<e a shore that <nows no end& =n any event( the 'olicitor Feneral( the legal counsel of the Repu$lic( appeared in the cases at $ar in representation of the interest of the govern!ent& II

3re>?+!",%,c!-,& &% 3IAT/O The =!ple!enting Rules provide for the unyielding standards the 4B%C should apply to deter!ine the financial capa$ility of a $idder for pre*,ualification purposesA 0i1 proof of the a$ility of the pro8ect proponent andEor the consortiu! -& 6r&8,)e ! m, ,m+m !m&+ - &% e?+,-# -& -'e 6r&Aec- and 0ii1 a letter testi!onial fro! reputa$le $an<s attesting that -'e 6r&Aec- 6r&6& e - ! )K&r member( &% -'e c& (&r-,+m !re b! C, * :,-' -'em, -'!- -'e# !re , *&&) %, ! c,!" (-! ), *, ! ) -'!- -'e# '!8e !)e?+!-e re(&+rce( &[ ] The evident intent of these standards is to protect the integrity and insure the via$ility of the pro8ect $y seeing to it that the proponent has the financial capa$ility to carry it out& %s a further !easure to achieve this intent( it m!, -!, ( ! cer-!, )eb->-&>e?+,-# r!-,& %&r -'e 6r&Aec-. %t the pre*,ualification stage( it is !ost i!portant for a $idder to show that it has the financial capacity to underta<e the pro8ect $y proving that it can fulfill the re,uire!ent on !ini!u! a!ount of e,uity& ?or this purpose( the Bid ;ocu!ents re,uire in no uncertain ter!sA The !ini!u! a!ount of e,uity to which the proponent"s financial capa$ility will $e $ased shall $e -',r-# 6erce - F3=LG &% -'e 6r&Aec- c&(, (-e!) &% -'e -:e -# 6erce - F2=LG (6ec,%,e) , Sec-,& 3.6.; &% -'e .,) D&c+me -(. This is to correlate with the re,uired de$t*to*e,uity ratio of /5A#5 in 'ection &51a of the draft concession agree!ent& The de$t portion of the pro8ect financing should not e3ceed /5M of the actual pro8ect cost&[ #] =n relation thereto( section &51 0a1 of the %RC% providesA 'ection &51 4ro8ect 'cope& The scope of the pro8ect shall includeA 0a1 ?inancing the pro8ect at an actual 4ro8ect cost of not less than Three 9undred ?ifty -illion Gnited 'tates ;ollars 0G'P#55(555(555&551 while !aintaining a de$t*to*e,uity ratio of /5A#5( provided that if the actual 4ro8ect costs should e3ceed the aforesaid a!ount( Concessionaire shall ensure that the de$t*to*e,uity ratio is !aintained@[ +] Gnder the de$t*to*e,uity restriction( a $idder !ay only see< financing of the 6%=% =4T === 4ro8ect up to /5M of the pro8ect cost& Thirty percent 0#5M1 of the cost !ust co!e in the for! of e,uity or invest!ent $y the $idder itself& =t cannot $e overly e!phasi2ed that the rules re,uire a !ini!u! a!ount of e,uity to ensure that a $idder is not !erely an operator or i!ple!entor of the pro8ect b+- ! , 8e(-&r :,-' ! (+b(-! -,!" , -ere(- , ,-( (+cce((& The !ini!u! e,uity re,uire!ent also guarantees the 4hilippine govern!ent and the general pu$lic( who are the ulti!ate $eneficiaries of the pro8ect( that a $idder will not $e indifferent to the co!pletion of the pro8ect& The discontinuance of the pro8ect will irrepara$ly da!age pu$lic interest !ore than private interest& =n the cases at $ar( after applying the invest!ent ceilings provided under the Feneral Ban<ing %ct and considering the !a3i!u! a!ounts that each !e!$er of the consortiu! !ay validly invest in the pro8ect( it is daylight clear that the 4aircargo Consortiu!( at the ti!e of pre*,ualification( had a net worth e,uivalent to only 6.=BL &% -'e -&-!" e(-,m!-e) 6r&Aec- c&(- &[ 5] By any rec<oning( a showing $y a $idder that at the ti!e of pre*,ualification its !a3i!u! funds availa$le for invest!ent a!ount to only :&58M of the pro8ect cost is insufficient to satisfy the re,uire!ent prescri$ed $y the =!ple!enting Rules that the pro8ect proponent !ust have the a$ility to provide at least #5M of the total esti!ated pro8ect cost& =n peso and centavo ter!s( at the ti!e of pre*,ualification( the 4aircargo Consortiu! had !a3i!u! funds availa$le for invest!ent to the 6%=% =4T === 4ro8ect only in the a!ount of4558(#8+(8/1&55( when it had to show that it had the a$ility to provide at least 4 (/55(5.5(555&55& The huge disparity cannot $e dis!issed as of de minimis i!portance considering the high pu$lic interest at sta<e in the pro8ect& 4=%TCO ni!$ly tries to sidestep its failure $y alleging that it su$!itted not only audited financial state!ents $ut also testi!onial letters fro! reputa$le $an<s attesting to the good financial standing of the 4aircargo Consortiu!& =t contends that in ad8udging whether the 4aircargo Consortiu! is a pre*,ualified $idder( the 4B%C should have considered not only its financial state!ents $ut other factors showing its financial capa$ility& %nent this argu!ent( the guidelines provided in the Bid ;ocu!ents are instructiveA #&#&+ ?=6%6C=6F %6; ?=6%6C=%L 4R7QG%L=?=C%T=O6' R7QG=R7-76T' W -ini!u! %!ount of 7,uity

7ach !e!$er of the proponent entity is to provide e8,)e ce &% e-:&r-' in cash and assets representing the proportionate share in the proponent entity& A+),-e) %, ! c,!" (-!-eme -( for the past five 051 years as a co!pany for each !e!$er are to $e provided& W 4ro8ect Loan ?inancing

Te(-,m& ,!" "e--er( %r&m re6+-!b"e b! C( attesting that each of the !e!$ers of the ownership entity are $an<ing with the!( in good financial standing and having ade,uate resources are to $e provided&[ :]

=t is $eyond refutation that 4aircargo Consortiu! failed to prove its !b,",-# -& 6r&8,)e -'e !m&+ - &% !- "e!(- 32,<55,=95,===.==, &r 3=L &% -'e e(-,m!-e) 6r&Aec- c&(-& =ts su$!ission of testi!onial letters attesting to its good financial standing will not cure this failure& %t $est( the said letters !erely esta$lish its credit worthiness or its a$ility to o$tain loans to finance the pro8ect& They do not( however( prove co!pliance with the aforesaid re,uire!ent of !ini!u! a!ount of e,uity in relation to the prescri$ed de$t*to*e,uity ratio& This e,uity cannot $e satisfied through possi$le loans& =n su!( we again hold that given the glaring gap $etween the net worth of 4aircargo and 4%F' co!$ined with the a!ount of !a3i!u! funds that 'ecurity Ban< !ay invest $y e,uity in a non*allied underta<ing( 4aircargo Consortiu!( at the ti!e of pre*,ualification( failed to show that it had the a$ility to provide #5M of the pro8ect cost and necessarily( its financial capa$ility for the pro8ect cannot pass !uster& III

199< /& ce((,& A*reeme %gain( we $rightline the principle that in pu$lic $idding( $ids are su$!itted in accord with the prescri$ed ter!s( conditions and para!eters laid down $y govern!ent and pursuant to the re,uire!ents of the pro8ect $idded upon& =n light of these para!eters( $idders for!ulate co!peting proposals which are evaluated to deter!ine the $id !ost favora$le to the govern!ent& Once the contract $ased on the $id !ost favora$le to the govern!ent is awarded( all that is left to $e done $y the parties is to e3ecute the necessary agree!ents and i!ple!ent the!& There can $e no su$stantial or !aterial change to the para!eters of the pro8ect( including the essential ter!s and conditions of the contract $idded upon( after the contract award& =f there were changes and the contracts end up unfavora$le to govern!ent( the pu$lic $idding $eco!es a !oc<ery and the !odified contracts !ust $e struc< down& Respondents insist that there were no su$stantial or !aterial a!end!ents in the 1../ Concession %gree!ent as to the technical aspects of the pro8ect( i&e&( engineering design( technical soundness( operational and !aintenance !ethods and procedures of the pro8ect or the -ec' ,c!" 6r&6&(!" of 4=%TCO& ?urther( they !aintain that there was no !odification of the financial features of the pro8ect( i&e&( !ini!u! pro8ect cost( de$t*to*e,uity ratio( the operations and !aintenance $udget( the schedule and a!ount of annual guaranteed pay!ents( or the %, ! c,!" 6r&6&(!" of 4=%TCO& % discussion of so!e of these changes to deter!ine whether they altered the ter!s and conditions upon which the $ids were !ade is again in order&

!. 1&),%,c!-,& & Fee( ! ) /'!r*e( -& be c&""ec-e) b# 3IAT/O 4=%TCO clings to the contention that the re!oval of the groundhandling fees( airline office rentals and porterage fees fro! the category of fees su$8ect to -=%% regulation in the 1../ Concession %gree!ent does not constitute a su$stantial a!end!ent as these fees are not really pu$lic utility fees& =n other words( 4=%TCO 8ustifies the re*classification under the 1../ Concession %gree!ent & -'e *r&+ ) -'!-'e(e %ee( !re & >6+b",c +-,",-# re8e +e(& Ce disagree& The re!oval of groundhandling fees( airline office rentals and porterage fees fro! the category of B4u$lic Gtility RevenuesD under the draft Concession %gree!ent and its re*classification to B6on*4u$lic Gtility RevenuesD under the 1../ Concession %gree!ent is significant and has far reaching conse,uence. The 1../ Concession %gree!ent provides that with respect to 6on*4u$lic Gtility Revenues( which include groundhandling fees( airline office rentals and porterage fees( [ /] B[4=%TCO] !ay !a<e any ad8ust!ents it dee!s appropriate :,-'&+- ee) %&r -'e c& (e - &% GR3 &r ! # *&8er me - !*e c# &D[ 8] =n contrast( the draft Concession %gree!ent specifies these fees as part of 4u$lic Gtility Revenues and can $e ad8usted B& "# & ce e8er# -:& #e!r( and in accordance with the 4ara!etric ?or!ulaD and Bthe ad8ust!ents shall $e !ade effective & "# !%-er -'e :r,--e e96re(( !66r&8!" &% -'e 1IAA &D[ .] The Bid ;ocu!ents the!selves clearly provideA +& &# -echanis! for %d8ust!ent of ?ees and Charges +& &#&1 4eriodic %d8ust!ent in ?ees and Charges %d8ust!ents in the fees and charges enu!erated hereunder( :'e-'er &r &- %!"", * :,-', -'e 6+r8,e: &% 6+b",c +-,",-# re8e +e(, shall $e allowed only once every two years in accordance with the para!etric for!ula attached hereto as %nne3 +& f& 4rovided that the ad8ust!ents shall $e !ade effective only after the written e3press approval of -=%%& 4rovided( further( that -=%%"s approval( shall $e contingent only on confor!ity of the ad8ust!ents to the said para!etric for!ula& X The fees and charges to $e regulated in the a$ove !anner shall consist of the followingA &&&& c1 groundhandling fees@ d1 rentals on airline offices@ &&&&

0f1 porterage fees@ & & & &[#5] The plain purpose in re*classifying groundhandling fees( airline office rentals and porterage fees as non*pu$lic utility fees ,( -& rem&8e -'em %r&m re*+"!-,& b# -'e 1IAA& =n e3cluding these fees fro! govern!ent regulation( the danger to pu$lic interest cannot $e downplayed& Ce are not i!pressed $y the effort of 4=%TCO to depress this pre8udice to pu$lic interest $y its contention that in the 1../ Concession %gree!ent governing 6on*4u$lic Gtility Revenues( it is provided that B[4=%TCO] shall at all ti!es $e A+),c,&+( in fi3ing fees and charges constituting 6on*4u$lic Gtility Revenues in order to ensure that 7nd Gsers are not unreasona$ly deprived of services&D [#1] 4=%TCO then peddles the proposition that the said provision confers upon -=%% B%+"" re*+"!-&r# 6&:er( to ensure that 4=%TCO is charging non*pu$lic utility revenues at -udicious rates&D[# ] To the trained eye( the argu!ent will not fly for it is o$viously non se.uitur& ?airly read( it is 4=%TCO that wields the power to deter!ine the 8udiciousness of the said fees and charges& =n the draft Concession %gree!ent the power was e3pressly lodged with the -=%% and any ad8ust!ent can only $e done once every two years& The changes are not insignificant spec<s as interpreted $y 4=%TCO& 4=%TCO further argues that there is no su$stantial change in the 1../ Concession %gree!ent with respect to fees and charges 4=%TCO is allowed to i!pose which are not covered $y %d!inistrative Order 6o& 1( 'eries of 1..# [##] as the Brelevant provision of the 1../ Concession %gree!ent is practically identical with the draft Concession %gree!ent&D[#+] Ce are not persuaded& Gnder the draft Concession %gree!ent( 4=%TCO !ay ,m6&(e fees and charges other than those fees and charges previously i!posed or collected at the 6inoy %,uino =nternational %irport 4assenger Ter!inal =( su$8ect to the written approval of -=%%&[#5] ?urther( the draft Concession %gree!ent provides that -=%% re(er8e( -'e r,*'- -& re*+"!-e these new fees and charges if in its 8udg!ent the users of the airport shall $e deprived of a free option for the services they cover& [#:] =n contrast( under the 1../ Concession %gree!ent( -'e 1IAA mere"# re-!, e) -'e r,*'- -& !66r&8e ! # ,m6&(,-,& &% e: fees and charges which were not previously collected at the 6inoy %,uino =nternational %irport 4assenger Ter!inal =& T'e !*reeme - ),) &- c& -!, ! e?+,8!"e - 6r&8,(,& !""&:, * 1IAA -& re(er8e -'e r,*'- -& re*+"!-e -'e !)A+(-me -( of these new fees and charges&[#/] 4=%TCO 8ustifies the a!end!ent $y arguing that -=%% can esta$lish ter!s $efore approval of new fees and charges( inclusive of the !ode for their ad8ust!ent& 4=%TCO"s stance is again a strained one& There would have $een no need for an a!end!ent if there were no change in the power to regulate on the part of -=%%& The deletion of -=%%"s reservation of its right to regulate the price ad8ust!ents of new fees and charges can have no other purpose $ut -& ),"+-e -'e e9-e - of -=%%"s regulation in the collection of these fees& %gain( the a!end!ent di!inished the authority of -=%% to protect the pu$lic interest in case of a$use $y 4=%TCO&

b. A((+m6-,& b# -'e G&8er me - &% -'e ",!b,",-,e( &% 3IAT/O , -'e e8e - &% -'e "!--erD( )e%!+"4=%TCO posits the thesis that the new provisions in the 1../ Concession %gree!ent in case of default $y 4=%TCO on its loans were !erely !eant to prescri$e and li!it the rights of 4=%TCO"s creditors with regard to the 6%=% Ter!inal ===& 4=%TCO alleges that 'ection +&5+ of the 1../ Concession %gree!ent si!ply provides that 4=%TCO"s creditors have no right to foreclose the 6%=% Ter!inal ===& Ce cannot concur& The pertinent provisions of the 1../ Concession %gree!ent stateA 'ection +&5+ &&&& 0$1 =n the event Concessionaire should default in the pay!ent of an %ttendant Lia$ility( and the default has resulted in the acceleration of the pay!ent due date of the %ttendant Lia$ility prior to its stated date of !aturity( the Gnpaid Creditors and Concessionaire shall i!!ediately infor! FR4 in writing of such default& FR4 shall( within one hundred eighty 01851 ;ays fro! receipt of the 8oint written notice of the Gnpaid Creditors and Concessionaire( either 0i1 ta<e over the ;evelop!ent ?acility ! ) !((+me -'e A--e )! - L,!b,",-,e(( or 0ii1 allow the Gnpaid Creditors( if ,ualified( to $e su$stituted as concessionaire and operator of the ;evelop!ent ?acility in accordance with the ter!s and conditions hereof( or designate a ,ualified operator accepta$le to FR4 to operate the ;evelop!ent ?acility( li<ewise under the ter!s and conditions of this %gree!ent@ 4rovided that if at the end of the 185*day period FR4 shall not have served the Gnpaid Creditors and Concessionaire written notice of its choice( FR4 shall $e dee!ed to have elected to ta<e over the ;evelop!ent ?acility :,-' -'e c& c&m,-! !((+m6-,& &% A--e )! - L,!b,",-,e(& 0c1 =f FR4 should( $y written notice( allow the Gnpaid Creditors to $e su$stituted as concessionaire( the latter shall for! and organi2e a concession co!pany ,ualified to ta<e over the operation of the ;evelop!ent ?acility& =f the concession co!pany should elect to designate an operator for the ;evelop!ent ?acility( the concession co!pany shall in good faith identify and designate a ,ualified operator accepta$le to FR4 within one hundred eighty 01851 days fro! receipt of FR4"s written notice& =f the concession co!pany( acting in good faith and with due diligence( is una$le to designate a ,ualified operator within the aforesaid period( then FR4 shall at the end of the 185*day period ta<e over the ;evelop!ent ?acility ! ) !((+me A--e )! - L,!b,",-,e(& % plain reading of the a$ove provision shows that it spells out in li!pid language the o$ligation of govern!ent in case of default $y 4=%TCO on its loans& There can $e no $lin<ing fro! the fact that in case of 4=%TCO"s default( the govern!ent will assu!e 4=%TCO"s %ssign!ent&

%ttendant Lia$ilities as defined in the 1../ Concession %gree!ent&[#8] This o$ligation is not found in the draft Concession %gree!ent and the change runs roughshod to the spirit and policy of the BOT Law which was crafted precisely to prevent govern!ent fro! incurring financial ris<& =n any event( 4=%TCO pleads that the e -,re !*reeme - should not $e struc< down as the 1../ Concession %gree!ent contains a separa$ility clause& The plea is $ereft of !erit& The contracts at $ar which !ade a !oc<ery of the $idding process cannot $e upheld and !ust $e annulled in their entirety for violating law and pu$lic policy& %s de!onstrated( the contracts were su$stantially a!ended after their award to the successful $idder on ter!s !ore $eneficial to 4=%TCO and pre8udicial to pu$lic interest& =f this flawed process would $e allowed( pu$lic $idding will cease to $e co!petitive and worse( govern!ent would not $e favored with the $est $id& Bidders will no longer $id on the $asis of the prescri$ed ter!s and conditions in the $id docu!ents $ut will for!ulate their $id in anticipation of the e3ecution of a future contract containing new and $etter ter!s and conditions that were not previously availa$le at the ti!e of the $idding& 'uch a pu$lic $idding will not inure to the pu$lic good& The resulting contracts cannot $e given half a life $ut !ust $e struc< down as totally lawless& I5.

D,rec- G&8er me - G+!r! -ee The respondents further contend that the 4=%TCO Contracts do not contain direct govern!ent guarantee provisions& They assert that section +&5+ of the %RC%( which superseded sections +&5+0$1 and 0c1( %rticle => of the 1../ Concession %gree!ent( is $ut a Bclarification and e3planationD[#.] of the securities allowed in the $id docu!ents& They allege that these provisions !erely provide for Bco!pensation to 4=%TCOD[+5] in case of a govern!ent $uy*out or ta<eover of 6%=% =4T ===& The respondents( particularly respondent 4=%TCO( also !aintain that the guarantee contained in the contracts( if any( is an indirect guarantee allowed under the BOT Law( as a!ended&[+1] Ce do not agree& 'ection +&5+0c1( %rticle =>[+ ] of the %RC% should $e read in con8unction with section 1&5:( %rticle =( [+#] in the sa!e !anner that sections +&5+0$1 and 0c1( %rticle => of the 1../ Concession %gree!ent should $e related to %rticle 1&5: of the sa!e contract& 'ection 1&5:( %rticle = of the %RC% and its counterpart provision in the 1../ Concession %gree!ent define in no uncertain ter!s the !eaning of Battendant lia$ilities&D They tell us of the a!ounts that the Fovern!ent has to pay in the event respondent 4=%TCO defaults in its loan pay!ents to its 'enior Lenders and no ,ualified transferee or no!inee is chosen $y the 'enior Lenders or is willing to ta<e over fro! respondent 4=%TCO& % reasona$le reading of all these relevant provisions would reveal that the %RC% !ade the Fovern!ent lia$le to pay B !"" !m&+ -( &&& fro! ti!e to ti!e &:e) &r :',c' m!# bec&me &:, * b# /& ce((,& !,re [3IAT/O] -& Se ,&r Le )er( &r ! # &-'er 6er(& ( &r e -,-,e( :'& '!8e 6r&8,)e), "&! e), &r !)8! ce) %+ )( &r 6r&8,)e) %, ! c,!" %!c,",-,e( -& /& ce((,& !,re [3IAT/O] for the 4ro8ect [6%=% Ter!inal #]&D[++] These a!ounts include B:,-'&+- ",m,-!-,& , !"" 6r, c,6!", , -ere(-, !((&c,!-e) %ee(, c'!r*e(, re,mb+r(eme -(, ! ) &-'er re"!-e) e96e (e(&&& whether paya$le at !aturity( $y acceleration or otherwise&D [+5] They further include a!ounts owed $y respondent 4=%TCO to its Bprofessional consultants and advisers( suppliers( contractors and su$*contractorsD as well as Bfees( charges and e3penses of any agents or trusteesD of the 'enior Lenders or any other persons or entities who have provided loans or financial facilities to respondent 4=%TCO in relation to 6%=% =4T ===& [+:] The counterpart provision in the 1../ Concession %gree!ent specifying the attendant lia$ilities that the Fovern!ent would $e o$ligated to pay should 4=%TCO default in its loan o$ligations is e,ually onerous to the Fovern!ent as those contained in the %RC%& %ccording to the 1../ Concession %gree!ent( in the event the Fovern!ent is forced to pre!aturely ta<e over 6%=% =4T === as a result of respondent 4=%TCO"s default in the pay!ent of its loan o$ligations to its 'enior Lenders( it would $e lia$le to pay the following a!ounts as Battendant lia$ilitiesDA 'ection 1&5:& %ttendant Lia$ilities

%ttendant Lia$ilities refer to !"" !m&+ -( rec&r)e) ! ) %r&m -,me -& -,me &+-(-! ), * , -'e b&&C( &% -'e /& ce((,& !,re !( &:, * -& U 6!,) /re),-&r( who have provided( loaned or advanced funds actually used for the 4ro8ect( , c"+), * !"" , -ere(-(, 6e !"-,e(, !((&c,!-e) %ee(, c'!r*e(, (+rc'!r*e(, , )em ,-,e(, re,mb+r(eme -( ! ) &-'er re"!-e) e96e (e(, and further including a!ounts owed $y Concessionaire to its suppliers( contractors and su$*contractors&[+/] These provisions re8ect respondents" contention that what the Fovern!ent is o$ligated to pay( in the event that respondent 4=%TCO defaults in the pay!ent of its loans( is !erely ter!ination pay!ent or 8ust co!pensation for its ta<eover of 6%=% =4T ===& =t is clear fro! said section 1&5: that what -'e G&8er me - :&+") 6!# ,( -'e (+m -&-!" &% !"" -'e )eb-(, , c"+), * !"" , -ere(-, %ee( ! ) c'!r*e( ( that respondent 4=%TCO incurred in pursuance of the 6%=% =4T === 4ro8ect& This reading is consistent with section +&5+ of the %RC% itself which states that the Fovern!ent Bshall !a<e a ter!ination pay!ent to Concessionaire [4=%TCO] e,ual to the %ppraised >alue 0as hereinafter defined1 of the ;evelop!ent ?acility [6%=% Ter!inal ===] &r -'e (+m &% -'e A--e )! - L,!b,",-,e(, ,% *re!-er &D F&r (+re, re(6& )e - 3IAT/O :,"" &- rece,8e ! # !m&+ - "e(( -'! (+%%,c,e - -& c&8er ,-( )eb-(, re*!r)"e(( &% :'e-'er &r &- -'e 8!"+e &% NAIA I3T III, !- -'e -,me &% ,-( -+r &8er -& -'e G&8er me -, m!# !c-+!""# be "e(( -'! -'e !m&+ - &% 3IAT/OD( )eb-(. The sche!e is a for! of direct govern!ent guarantee for it is undenia$le that it leaves the govern!ent no option $ut to pay the Battendant lia$ilitiesD in the event that the 'enior Lenders are una$le or unwilling to appoint a ,ualified no!inee or transferee as a result of 4=%TCO"s default in the pay!ent of its 'enior Loans& %s we stressed in our ;ecision( this Court cannot depart fro! the legal !a3i! that Bthose that cannot $e done directly cannot $e done indirectly&D This is not to hold( however( that indirect govern!ent guarantee is not allowed under the BOT Law( as a!ended& The intention to per!it indirect govern!ent guarantee is evident fro! the 'enate deli$erations on the a!end!ents to the BOT Law& The idea is to allow for reasona$le govern!ent underta<ings( such as to authori2e the pro8ect proponent to underta<e related ventures within the pro8ect area( in order to encourage private sector participation in develop!ent pro8ects&[+8] %n e3a!ple cited $y then 'enator Floria -acapagal*%rroyo( one of the sponsors of R&%& 6o& //18( is the -andaluyong pu$lic !ar<et which was $uilt under the Build*and*Transfer 0BBTD1 sche!e wherein instead of the govern!ent paying for the transfer( the pro8ect proponent was allowed to operate the upper floors of the structure as a co!!ercial !all in order to recoup their invest!ents&[+.] =t was repeatedly stressed in the deli$erations that in allowing indirect govern!ent guarantee( the law

see<s to encourage $oth the govern!ent and the private sector to for!ulate reasona$le and innovative govern!ent underta<ings in pursuance of BOT pro8ects& =n no way( however( can the govern!ent $e !ade lia$le for the de$ts of the pro8ect proponent as this would $e tanta!ount to a direct govern!ent guarantee which is prohi$ited $y the law& 'uch lia$ility would defeat the very purpose of the BOT Law which is to encourage the use of private sector resources in the construction( !aintenance andEor operation of develop!ent pro8ects with no( or at least !ini!al( capital outlay on the part of the govern!ent& The respondents again urge that should this Court affir! its ruling that the 4=%TCO Contracts contain direct govern!ent guarantee provisions( the whole contract should not $e nullified& They rely on the separa$ility clause in the 4=%TCO Contracts& Ce are not persuaded& The BOT Law and its i!ple!enting rules provide that there are three 0#1 essential re,uisites for an unsolicited proposal to $e acceptedA 011 the pro8ect involves a new concept in technology andEor is not part of the list of priority pro8ects( F2G & ),rec- *&8er me *+!r! -ee, (+b(,)# &r e?+,-# ,( re?+,re), and 0#1 the govern!ent agency or local govern!ent unit has invited $y pu$lication other interested parties to a pu$lic $idding and conducted the sa!e& [55] The failure to fulfill any of the re,uisites will result in the denial of the proposal& =ndeed( it is further provided that a direct govern!ent guarantee( su$sidy or e,uity provision will Bnecessarily dis,ualify a proposal fro! $eing treated and accepted as an unsolicited proposal&D[51] =n fine( the !ere inclusion of a direct govern!ent guarantee in an unsolicited proposal is fatal to the proposal& There is !ore reason to invalidate a contract if a direct govern!ent guarantee provision is inserted later in the contract via a $ac<door a!end!ent& 'uch an a!end!ent constitutes a crass circu!vention of the BOT Law and renders the entire contract void& Respondent 4=%TCO li<ewise clai!s that in view of the fact that other BOT contracts such as the )%6CO- contract( the -anila Cater contract and the -RT contract had $een considered valid( the 4=%TCO contracts should $e held valid as well& [5 ] There is no parity in the cited cases& ?or instance( a reading of 1e-r&6&",-! 1! ,"! De8e"&6me - A+-'&r,-# 8. JAN/O1 E 8,r& me -!" /&r6&r!-,& [5#] will show that its issue is different fro! the issues in the cases at $ar& =n the )%6CO- case( the !ain issue is whether there is a perfected contract $etween )%6CO- and the Fovern!ent& The resolution of the issue hinged on the followingA 011 whether the conditions precedent to the perfection of the contract were co!plied with@ 0 1 whether there is a valid notice of award@ and 0#1 whether the signature of the 'ecretary of the ;epart!ent of 7nviron!ent and 6atural Resources is sufficient to $ind the Fovern!ent& These issue and su$*issues are clearly distinguisha$le and different& ?or one( the issue of direct govern!ent guarantee was not considered $y this Court when it held the )%6CO- contract valid( yet( it is a <ey reason for invalidating the 4=%TCO Contracts& =t is a $asic principle in law that cases with dissi!ilar facts cannot have si!ilar disposition& This Court( however( is not un!indful of the reality that the structures co!prising the 6%=% =4T === facility are al!ost co!plete and that funds have $een spent $y 4=%TCO in their construction& ?or the govern!ent to ta<e over the said facility( it has to co!pensate respondent 4=%TCO as $uilder of the said structures& The co!pensation !ust $e 8ust and in accordance with law and e,uity for the govern!ent can not un8ustly enrich itself at the e3pense of 4=%TCO and its investors& II.

Tem6&r!r# -!Ce&8er &% b+(, e(( !%%ec-e) :,-' 6+b",c , -ere(- , -,me( &% !-,& !" emer*e c# 'ection 1/( %rticle O== of the 1.8/ Constitution grants the 'tate in ti!es of national e!ergency the right to te!porarily ta<e over the operation of any $usiness affected with pu$lic interest& This right is an e3ercise of police power which is one of the inherent powers of the 'tate& 4olice power has $een defined as the Istate authority to enact legislation that !ay interfere with personal li$erty or property in order to pro!ote the general welfare&I[5+] =t consists of two essential ele!ents& ?irst( it is an i!position of restraint upon li$erty or property& 'econd( the power is e3ercised for the $enefit of the co!!on good& =ts definition in elastic ter!s underscores its all*enco!passing and co!prehensive e!$race&[55] =t is and still is the B!ost essential( insistent( and illi!ita$leD [5:] of the 'tate"s powers& =t is fa!iliar <nowledge that + ",Ce -'e 6&:er &% em, e - )&m!, , 6&",ce 6&:er ,( e9erc,(e) :,-'&+- 6r&8,(,& %&r A+(- c&m6e (!-,& for its para!ount consideration is pu$lic welfare&
[5/]

=t is also settled that pu$lic interest on the occasion of a national e!ergency is the pri!ary consideration when the govern!ent decides to te!porarily ta<e over or direct the operation of a pu$lic utility or a $usiness affected with pu$lic interest& The nature and e3tent of the e!ergency is the !easure of the duration of the ta<eover as well as the ter!s thereof& =t is the 'tate that prescri$es such reasona$le ter!s which will guide the i!ple!entation of the te!porary ta<eover as dictated $y the e3igencies of the ti!e& %s we ruled in our ;ecision( this power of the 'tate can not $e negated $y any party nor should its e3ercise $e a source of o$ligation for the 'tate& 'ection 5&150c1( %rticle > of the %RC% provides that respondent 4=%TCO Bshall $e entitled to reasona$le co!pensation for the duration of the te!porary ta<eover $y FR4( which co!pensation shall ta<e into account the reasona$le cost for the use of the Ter!inal andEor Ter!inal Co!ple3&D[58] =t clearly o$ligates the govern!ent in the e3ercise of its police power to co!pensate respondent 4=%TCO and this o$ligation is offensive to the Constitution& 4olice power can not $e di!inished( let alone defeated $y any contract for its para!ount consideration is pu$lic welfare and interest&[5.] %gain( respondent 4=%TCO"s reliance on the case of He,r( &% S+*+,-! 8. /,-# &% 1! )!"+#& * [:5] to 8ustify its clai! for reasona$le co!pensation for the Fovern!ent"s te!porary ta<eover of 6%=% =4T === in ti!es of national e!ergency is erroneous& Chat was involved in He,r( &% S+*+,-! is the e3ercise of the state"s power of e!inent do!ain and not of police power( hence( 8ust co!pensation was awarded& The cases at $ar will not involve the e3ercise of the power of e!inent do!ain& III.

1& &6&"# 'ection 1.( %rticle O== of the 1.8/ Constitution !andates that the 'tate prohi$it or regulate !onopolies when pu$lic interest so re,uires& -onopolies are not per se prohi$ited& Fiven its suscepti$ility to a$use( however( the 'tate has the $ounden duty to regulate !onopolies to protect pu$lic interest& 'uch regulation !ay $e called for( especially in sensitive areas such as the operation of the country"s pre!ier international airport( considering the pu$lic interest at sta<e& By virtue of the 4=%TCO contracts( 6%=% =4T === would $e the only international passenger airport operating in the =sland of Lu2on( with the e3ception of those already operating in'u$ic Bay ?reeport 'pecial 7cono!ic Jone 0B'B?'7JD1( Clar< 'pecial 7cono!ic Jone 0BC'7JD1 and in Laoag City& Gndenia$ly( the contracts would create a !onopoly in the operation of an international co!!ercial passenger airport at the 6%=% in favor of 4=%TCO& The grant to respondent 4=%TCO of the e3clusive right to operate 6%=% =4T === should not e3e!pt it fro! regulation $y the govern!ent& The govern!ent has the right( indeed the duty( to protect the interest of the pu$lic& 4art of this duty is to assure that respondent 4=%TCO"s e3ercise of its right does not violate the legal rights of third parties& Ce reiterate our ruling that while the service providers presently operating at 6%=% Ter!inals = and == do not have the right to de!and for the renewal or e3tension of their contracts to continue their services in 6%=% =4T ===( those who have su$sisting contracts $eyond the =n*'ervice ;ate of 6%=% =4T === can not $e ar$itrarily or unreasona$ly treated& ?inally( the Respondent Congress!en assert that at least two 0 1 co!!ittee reports $y the 9ouse of Representatives found the 4=%TCO contracts valid and contend that this Court( $y ta<ing cogni2ance of the cases at $ar( reviewed an action of a co*e,ual $ody& [:1] They insist that the Court !ust respect the findings of the said co!!ittees of the 9ouse of Representatives& [: ] Cith due respect( we cannot su$scri$e to their su$!ission& There is a funda!ental difference $etween a case in court and an investigation of a congressional co!!ittee& The purpose of a 8udicial proceeding is to settle the dispute in controversy $y ad8udicating the legal rights and o$ligations of the parties to the case& On the other hand( a congressional investigation is conducted in aid of legislation& [:#] =ts ai! is to assist and reco!!end to the legislature a possi$le action that the $ody !ay ta<e with regard to a particular issue( specifically as to whether or not to enact a new law or a!end an e3isting one& Conse,uently( this Court cannot treat the findings in a congressional co!!ittee report as $inding $ecause the facts elicited in congressional hearings are not su$8ect to the rigors of the Rules of Court on ad!issi$ility of evidence& The Court in assu!ing 8urisdiction over the petitions at $ar si!ply perfor!ed its constitutional duty as the ar$iter of legal disputes properly $rought $efore it( especially in this instance when pu$lic interest re,uires nothing less& 4HEREFORE( the !otions for reconsideration filed $y the respondent 4=%TCO( respondent Congress!en and the respondents*in* intervention are ;76=7; with finality& SO ORDERED