Kong, Marchini Sandro C.

Insular Savings Bank V. Far East Bank & Co

Facts:
Respondent filed a complaint against Home Bankers Trust and Company (HBTC) with the
Philippine Clearing House Corporations (PCHC) Arbitration Committee, seeking recovery from
the petitioner, the sum of P25,200,000.00 representing the total amount of the three checks
drawn and debited against its clearing account.

Before the termination of the arbitration proceedings, respondent filed another complaint but this
time with the Regional Trial Court (RTC) for Sum of Money and Damages with Preliminary
Attachment. The RTC suspended the proceedings pending the decision of the Arbitration
Committee.

The PCHC Arbitration Committee rendered its decision in favor of respondent. Petitioner
motion for reconsideration was denied. It then filed a petition for review in the earlier case filed
by respondent in the RTC. The RTC dismissed the petition for review, for lack of jurisdiction.

Issue:
Whether or not the proper remedy was availed of.

Ruling
No, the remedy was improper.
In the instant case, petitioner and respondent have agreed that the PCHC Rules would govern in
case of controversy. However, since the PCHC Rules came about only as a result of an
agreement between and among member banks of PCHC and not by law, it cannot confer
jurisdiction to the RTC. Thus, the portion of the PCHC Rules granting jurisdiction to the RTC to
review arbitral awards, only on questions of law, cannot be given effect.

Consequently, the proper recourse of petitioner from the denial of its motion for reconsideration
by the Arbitration Committee is to file either a motion to vacate the arbitral award with the RTC,
a petition for review with the Court of Appeals under Rule 43 of the Rules of Court, or a petition
for certiorari under Rule 65 of the Rules of Court. In the case at bar, petitioner filed a petition for
review with the RTC when the same should have been filed with the Court of Appeals under
Rule 43 of the Rules of Court. Thus, the RTC of Makati did not err in dismissing the petition for
review for lack of jurisdiction but not on the ground that petitioner should have filed a separate
case from Civil Case No. 92-145 but on the necessity of filing the correct petition in the proper
court. It is immaterial whether petitioner filed the petition for review in Civil Case No. 92-145 as
an appeal of the arbitral award or whether it filed a separate case in the RTC, considering that the
RTC will only have jurisdiction over an arbitral award in cases of motions to vacate the
same. Otherwise, as elucidated herein, the Court of Appeals retains jurisdiction in petitions for
review or in petitions for certiorari. Consequently, petitioners arguments, with respect to the
filing of separate action from Civil Case No. 92-145 resulting in a multiplicity of suits, cannot be
given due course.

Lunaza Jr V. BF Corporation

Facts:
Gerardo Lanuza, Jr and Antonio Olbes are members of the Board of Directors of Shangri-La.
This is an Appeal on Certiorari, assailing the CA's decision and resolution that affirmed the trial
court's decision holding that petitioners, as directors, should submit themselves as parties to the
arbitration proceedings between BF Corporation and Shangri-La Properties, Inc. (Shangri-La).
BF Corporation alleged that it entered into agreements with Shangri-La wherein it undertook to
construct for Shangri-La a mall and a multilevel parking structure along EDSA. Shangri-La had
been consistent in paying BF Corp in accordance with its progress billing statements. However,
Shangri-La started defaulting in payment. BF Corp filed a complaint against Shangri-La and its
board of directors. BF Corp alleged that Shangri-La misrepresented it had funds to pay and that it
was simply a matter of delayed processing of BFs progress billing statements. Construction
eventually was completed but despite demands, Shangri-La refused to pay the balance. BF also
alleged that Shangri-Las directors were in bad faith so they should be held jointly and severally
liable with Shangri-La. Shangri-La and respondent board members filed a motion to suspend the
proceedings in view of BFs failure to submit its dispute to arbitration. RTC denied the motion,
however. Petitioners filed an answer saying they are resigned members of the board since July
15, 1991. Shangri-La and respondents then filed certiorari with CA which granted their petition
and ordered submission to arbitration.

Issue:
Whether or not BF Corporation can be compelled to submit to arbitration.

Ruling:
Yes, they can be compelled
Thus, we rule that petitioners may be compelled to submit to the arbitration proceedings in
accordance with Shangri-La and BF Corporation's agreement, in order to determine if the
distinction between Shangri-La's personality and their personalities should be disregarded.

This jurisdiction adopts a policy in favor of arbitration. Arbitration allows the parties to avoid
litigation and settle disputes amicably and more expeditiously by themselves and through their
choice of arbitrators.
As a general rule, therefore, a corporation's representative who did not personally bind himself or
herself to an arbitration agreement cannot be forced to participate in arbitration proceedings
made pursuant to an agreement entered into by the corporation. He or she is generally not
considered a party to that agreement.

However, there are instances when the distinction between personalities of directors, officers,
and representatives, and of the corporation, are disregarded. We call this piercing the veil of
corporate fiction.

DENR V. United Planners

Facts:
The Department of Environment and Natural Resources, through the Land Management Bureau,
entered into an Agreement for Consultancy Services with United Planners Consultants, Inc. in
connection with an LMB's project. Under the Consultancy Agreement, DENR committed to pay
a total contract price of P4,337,141.00. UPCI completed the work required, however, DENR was
able to pay only 47% of the total contract price. For failure to pay its obligation under the
Consultancy Agreement despite repeated demands, UPCI instituted a complaint against DENR
before the Regional Trial Court. Upon motion of UPCI, the case was subsequently referred to
arbitration pursuant to the arbitration clause of the Consultancy Agreement. The parties agreed to
adopt the CIAC Revised Rules Governing Construction Arbitration to govern the arbitration
proceedings. They further agreed to submit their respective draft decisions in lieu of memoranda
of arguments on or before April 21, 2010, among others.
The Arbitral Award ruled in favor of UPCI. When DENR filed a Motion for Reconsideration
before the RTC, the Arbitral Award was confirmed by the RTC. The RTC also denied DENRs
motion to quash the writ of execution of the Arbitral Award. The Court of Appeals denied
DENRs petition for certiorari, applying the Special Alternative Dispute Resolution Rules.

Issue:
Whether or not the Arbitral Award can be executed.

Ruling:
Yes, it can be executed.
While it appears that the Special ADR Rules remain silent on the procedure for the execution of
a confirmed arbitral award, it is the Courts considered view that the Rules procedural
mechanisms cover not only aspects of confirmation but necessarily extend to a confirmed
awards execution in light of the doctrine of necessary implication which states that every
statutory grant of power, right or privilege is deemed to include all incidental power, right or
privilege.
As the Court sees it, execution is but a necessary incident to the Courts confirmation of an
arbitral award. To construe it otherwise would result in an absurd situation whereby the
confirming court previously applying the Special ADR
Rules in its confirmation of the arbitral award would later shift to the regular Rules of Procedure
come execution. Irrefragably, a courts power to confirm a judgment award under the Special
ADR Rules should be deemed to include the power to order its execution for such is but a
collateral and subsidiary consequence that may be fairly and logically inferred from the statutory
grant to regional trial courts of the power to confirm domestic arbitral awards.

Aboitiz Trans System V. Carlos Gothong Lines

Facts:
ASC, CAGLI, and William Lines, Inc. (WLI), principally owned by the Aboitiz, Gothong, and
Chiongbian families, respectively, entered into an Agreement dated January 8, 1996, which was
signed by Jon Ramon Aboitiz for ASC, Benjamin D. Gothong (Gothong) for CAGLI, and
respondent Chiongbian for WLI. In the said Agreement, ASC and CAGLI agreed to transfer their
shipping assets to WLI in exchange for the latters shares of capital stock. The parties likewise
agreed that WLI would run the merged shipping business and be renamed WG&A, Inc.
Pertinently, Section 11.06 of the Agreement provides that all disputes arising out of or in
connection with the Agreement shall be finally settled by arbitration in accordance with Republic
Act No. (RA) 876, otherwise known as The Arbitration Law, and that each of the parties shall
appoint one arbitrator, and the three arbitrators would then appoint the fourth arbitrator who shall
act as Chairman.

Among the attachments to the Agreement was a letter dated January 8, 1996 written by
respondent Chiongbian and addressed to Gothong, stating that WLI committed to acquire from
CAGLIs inventory certain spare parts and materials not exceeding P400 Million. In this relation,
a valuation of CAGLIs inventory was conducted wherein it was shown that the same amounted
to P514 Million. Thereafter, WLI received inventory valued at P558.89 Million, but only paid
CAGLI the amount of P400 Million as agreed upon in the Agreement. Dissatisfied, CAGLI sent
to WLI various letters in 2001, demanding that the latter pay or return the inventory that it
received in excess of P400 Million. Sometime in 2002, the Chiongbian and Gothong families
decided to sell their respective interests in WLI/WG&A to the Aboitiz family. This resulted in the
execution of a Share Purchase Agreement whereby Aboitiz Equity Ventures (AEV) agreed to
purchase and acquire the WLI/WG&A shares of the Chiongbian and Gothong families.
Thereafter, the corporate name of WLI/WG&A was changed to ATSC.
Six (6) years later, or in 2008, CAGLI sent a letter dated February 14, 2008 to ATSC demanding
that the latter pay the excess inventory it delivered to WLI amounting to P158,399,700.00.
CAGLI likewise demanded AEV and respondent Chiongbian that they refer their dispute to
arbitration. In response, AEV countered that the excess inventory had already been returned to
CAGLI and that it should not be included in the dispute, considering that it is an entity separate
and distinct from ATSC. Thus, CAGLI was constrained to file a complaint before the RTC
against Chiongbian, ATSC, ASC, and AEV to compel them to submit to arbitration. For their
part, ATSC and AEV moved for the dismissal of the case, contending that CAGLI did not have a
cause of action for arbitration since its claim had already been paid or otherwise, extinguished,
and, in any event, said action had already prescribed.

In an Order dated December 4, 2009, the RTC dismissed the complaint only with respect to
AEV for lack of cause of action, but not as to the other defendants. Thereafter, the RTC issued an
Order dated February 26, 2010, directing CAGLI, respondent Chiongbian, ATSC, and ASC to
proceed to arbitration, and accordingly, the parties appointed their respective arbitrators, with
ATSC and ASC doing so only on an ad cautelam basis. Meanwhile, ATSC filed a Motion for
Reconsideration/To Exclude dated March 25, 2010 praying that respondent Chiongbian be
excluded from the arbitration proceedings since the latter was not a party to the Agreement.
Pending resolution of the said motion, CAGLI filed a Notice of Dismissal dated July 8, 2010,
averring that it has decided to withdraw its complaint in view of the fact that the opposing parties
had not filed their respective responsive pleadings. In an Order dated August 13, 2010, the RTC
found CAGLIs Notice of Dismissal meritorious, and, thus, confirmed the same and ordered the
case dismissed without prejudice.

Dissatisfied, ATSC and ASC moved for reconsideration which was, however, denied in an Order
dated April 15, 2011. In said Order, the RTC cited Section 1 of Rule 17 of the Rules of Court
which allows the plaintiff to file a notice of dismissal of the complaint as a matter of right
before service of the answer or a motion for summary judgment. It further ruled that, save for
the condition that no answer or motion for summary judgment had been priorly filed, nothing in
the rules or law expressly prohibits or restricts the right of the plaintiff to withdraw the complaint
by mere notice of dismissal at any stage of the proceedings. Separately, the RTC issued an Order
dated July 6, 2011, denying ATSCs Motion for Reconsideration/To Exclude, holding that the
issue raised in the said motion has been rendered moot and academic in view of the confirmation
of CAGLIs notice of dismissal. Hence, the instant petitions.

Issue:
Whether or not respondent Chiongbian should be excluded from the arbitration proceedings.

Ruling:
No, they he is not excluded.
Parties covered by Arbitration Proceedings. Section 2 of RA 876 specifies who may be subjected
to arbitration, to wit:
Sec. 2. Persons and matters subject to arbitration. Two or more persons or parties may submit
to the arbitration of one or more arbitrators any controversy existing between them at the time of
the submission and which may be the subject of an action, or the parties to any contract may in
such contract agree to settle by arbitration a controversy thereafter arising between them. Such
submission or contract shall be valid, enforceable and irrevocable, save upon such grounds as
exist at law for the revocation of any contract.x x x x

In Gonzales, the Court explained that [d]isputes do not go to arbitration unless and until the
parties have agreed to abide by the arbitrators decision. Necessarily, a contract is required for
arbitration to take place and to be binding. Furthermore, in Del Monte Corporation USA v.
Court of Appeals, the Court stated that [t]he provision to submit to arbitration any dispute
arising therefrom and the relationship of the parties is part of that contract. As a rule, contracts
are respected as the law between the contracting parties and produce effect as between them,
their assigns and heirs. Succinctly put, only those parties who have agreed to submit a
controversy to arbitration who, as against each other, may be compelled to submit to arbitration.
In the present case, Section 11.06 of the Agreement, which embodies the Arbitration Agreement
among the parties, provides:

All disputes arising out of or in connection with this Agreement including any issue as to this
Agreement's validity or enforceability, which cannot be settled amicably among the parties, shall
be finally settled by arbitration in accordance with the Arbitration Law (Republic Act No. 876)
by an arbitration tribunal composed of four (4) arbitrators. Each of the parties shall appoint one
(1) arbitrator, the three (3) to appoint the fourth arbitrator who shall act as Chairman. Any award
by the arbitration tribunal shall be final and binding upon the parties and shall be enforced by
judgment of the Courts of Cebu or Metro Manila.

The three parties to the Agreement and necessarily to the arbitration agreement embodied therein
are: (a) ASC, (b) CAGLI, and (c) WLI/WG&A/ATSC. Contracts, like the subject arbitration
agreement, take effect only between the parties, their assigns and heirs. Respondent Chiongbian,
having merely physically signed the Agreement as a representative of WLI, is not a party thereto
and to the arbitration agreement contained therein. Neither is he an assignee or an heir of any of
the parties to the arbitration agreement. Hence, respondent Chiongbian cannot be included in the
arbitration proceedings. o to arbitration unless and until the parties have agreed to abide by the
arbitrators decision.

Necessarily, a contract is required for arbitration to take place and to be binding. Furthermore,
in Del Monte Corporation USA v. Court of Appeals, the Court stated that [t]he provision to
submit to arbitration any dispute arising therefrom and the relationship of the parties is part of
that contract. As a rule, contracts are respected as the law between the contracting parties and
produce effect as between them, their assigns and heirs. Succinctly put, only those parties who
have agreed to submit a controversy to arbitration who, as against each other, may be compelled
to submit to arbitration. In the present case, Section 11.06 of the Agreement, which embodies the
Arbitration Agreement among the parties, provides: All disputes arising out of or in connection
with this Agreement including any issue as to this Agreement's validity or enforceability, which
cannot be settled amicably among the parties, shall be finally settled by arbitration in accordance
with the Arbitration Law (Republic Act No. 876) by an arbitration tribunal composed of four (4)
arbitrators. Each of the parties shall appoint one (1) arbitrator, the three (3) to appoint the fourth
arbitrator who shall act as Chairman.

Any award by the arbitration tribunal shall be final and binding upon the parties and shall be
enforced by judgment of the Courts of Cebu or Metro Manila. The three parties to the Agreement
and necessarily to the arbitration agreement embodied therein are: (a) ASC, (b) CAGLI, and (c)
WLI/WG&A/ATSC. Contracts, like the subject arbitration agreement, take effect only between
the parties, their assigns and heirs. Respondent Chiongbian, having merely physically signed the
Agreement as a representative of WLI, is not a party thereto and to the arbitration agreement
contained therein. Neither is he an assignee or an heir of any of the parties to the arbitration
agreement. Hence, respondent Chiongbian cannot be included in the arbitration proceedings.

Koppel, Inc. vs. Makati Rotary Club Foundation, Inc.

Facts:
In 1975, Fedders Koppel, Incorporated (FKI) bequeathed a parcel of land exclusive of
improvements thereon in favor of Respondent Makati Rotary Club Foundation, Inc. by way of a
conditional donation. Respondent accepted the donation with all of its conditions. On 26 May
1975, FKI and the Respondent executed a Deed of Donation evidencing their consensus.

One of the conditions of the donation required the Respondent to lease the subject land back to
FKI under terms specified in their Deed of Donation. With the Respondents acceptance of the
donation, a lease agreement between them was, therefore, effectively incorporated in the Deed of
Donation.
Pertinent terms of such lease agreement, as provided in the Deed of Donation, were as follows:
1. The period of the lease is for twenty-five (25) years, or until the 25th of May 2000;2. The
amount of rent to be paid by FKI for the first twenty-five (25) years is P40,126.00 per annum.

The Deed of Donation also stipulated that the lease over the subject property is renewable for
another period of twenty-five (25) years upon mutual agreement of FKI and the Respondent. In
which case, the amount of rent shall be determined in accordance with item 2(g) of the Deed of
Donation.
In October 1976, FKI and the Respondent executed an Amended Deed of Donation that reiterated
the provisions of the Deed of Donation, including those relating to the lease of the subject land.
Verily, by virtue of the lease agreement contained in the Deed of Donation and Amended Deed of
Donation, FKI was able to continue in its possession and use of the subject land.
Two (2) days before the lease incorporated in the Deed of Donation and Amended Deed of
Donation was set to expire, or on 23 May 2000, FKI and Respondent executed another contract of
lease (2000 Lease Contract) covering the subject land. In this 2000 Lease Contract, FKI and
Respondent agreed on a new five-year lease to take effect on the 26th of May 2000, with annual
rents ranging from P4M for the first year up to P4.9M for the fifth year.

The 2000 Lease Contract also contained an arbitration clause enforceable in the event the parties
come to disagreement about the interpretation, application and execution of the lease.
After the 2000 Lease Contract expired, FKI and Respondent agreed to renew their lease for
another five (5) years. This new lease (2005 Lease Contract) required FKI to pay a fixed annual
rent of P4.2M.In addition to paying the fixed rent, however, the 2005 Lease Contract also
obligated FKI to make a yearly donation of money to the Respondent. Such donations ranged
from P3M for the first year up to P3.9M for the fifth year.

Notably, the 2005 Lease Contract contained an arbitration clause similar to that in the 2000 Lease
Contract, to wit:
19. Governing Law The provisions of this [2005 Lease Contract] shall be governed, interpreted
and construed in all aspects in accordance with the laws of the Republic of the Philippines.
Any disagreement as to the interpretation, application or execution of this [2005 Lease Contract]
shall be submitted to a board of three (3) arbitrators constituted in accordance with the arbitration
law of the Philippines. The decision of the majority of the arbitrators shall be binding upon [FKI
and Respondent]. (Emphasis supplied)

From 2005 to 2008, FKI faithfully paid the rentals and donations due it per the 2005 Lease
Contract. But in June of 2008, FKI sold all its rights and properties relative to its business in favor
of herein Petitioner Koppel, Incorporated.
On 29 August 2008, FKI and Petitioner executed an Assignment and Assumption of Lease and
Donationwherein FKI, with the conformity of the Respondent, formally assigned all of its
interests and obligations under the Amended Deed of Donation and the 2005 Lease Contract in
favor of Petitioner.
The following year, Petitioner discontinued the payment of the rent and donation under the 2005
Lease Contract.
Petitioners refusal to pay such rent and donation emanated from its belief that the rental
stipulations of the 2005 Lease Contract, and even of the 2000 Lease Contract, cannot be given
effect because they violated one of the material conditions of the donation of the subject land, as
stated in the Deed of Donation and Amended Deed of Donation.

According to Petitioner, the Deed of Donation and Amended Deed of Donation actually
established not only one but two (2) lease agreements between FKI and Respondent, i.e., one lease
for the first twenty-five (25) years or from 1975 to 2000, and another lease for the next twenty-five
(25) years thereafter or from 2000 to 2025. Both leases are material conditions of the donation of
the subject land.

Petitioner points out that while a definite amount of rent for the second twenty-five (25) year lease
was not fixed in the Deed of Donation and Amended Deed of Donation, both deeds nevertheless
prescribed rules and limitations by which the same may be determined. Such rules and limitations
ought to be observed in any succeeding lease agreements between Petitioner and Respondent for
they are, in themselves, material conditions of the donation of the subject land.
In this connection, Petitioner cites item 2(g) of the Deed of Donation and Amended Deed of
Donation that supposedly limits the amount of rent for the lease over the second twenty-five (25)
years to only three percent (3%) of the fair market value of the [subject] land excluding the
improvements.

For Petitioner then, the rental stipulations of both the 2000 Lease Contract and 2005 Lease
Contract cannot be enforced as they are clearly, in view of their exorbitant exactions, in violation
of the aforementioned threshold in item 2(g) of the Deed of Donation and Amended Deed of
Donation. Consequently, Petitioner insists that the amount of rent it has to pay thereon is and must
still be governed by the limitations prescribed in the Deed of Donation and Amended Deed of
Donation.
Respondent then sent Demand Letters to Petitioners notifying the latter of its default, demanding
for the settlement of the rent and donations due for the year 2009. Respondent intimated of
cancelling the 2005 Lease Contract should Petitioner fail to settle the said obligations. In its last
sent Demand Letter, Respondent demand Petitioner to immediately vacate the leased premises
should it fail to pay such obligations within seven (7) days from its receipt of the letter.
Petitioner refused to comply with the demands of the Respondent. Instead, on 30 September 2009,
Petitioner filed with the RTC of Paraaque City a Complaint for the Rescission or Cancellation of
the Deed of Donation and Amended Deed of Donation against the Respondent.
On 5 October 2009, Respondent filed an Unlawful Detainer case against the Petitioner before the
MeTC of Paraaque City.

On 4 November 2009, Petitioner filed an Answer with Compulsory Counterclaim.In it, Petitioner
reiterated its objection over the rental stipulations of the 2005 Lease Contract for being violative
of the material conditions of the Deed of Donation and Amended Deed of Donation.
On 27 April 2010, the MeTC rendered judgment in favor of the Petitioner. While the MeTC
refused to dismiss the action on the ground that the dispute is subject to arbitration, it nonetheless
sided with the Petitioner with respect to the issues regarding the insufficiency of the Respondents
demand and the nullity of the 2005 Lease Contract.
The Respondent appealed to the RTC which reversed the MeTCs decision.
Aggrieved, the Petitioner appealed to the CA which affirmed the decision of the RTC.
Hence, the present Petition for Review on Certiorari under Rule 45.

Issue:
1. Whether or not the present dispute is arbitrable under the Arbitration Clause of the 2005
Lease Agreement Contract?
2. What are the legal effects of the arbitration clause?

Ruling:
1. Yes. Respondent took the ruling in the Gonzales case out of context. PA-MGB was devoid of
any jurisdiction to take cognizance of the complaint for arbitration because RA 7942 (Mining Act
of 1995) grants PA-MGB with exclusive original jurisdiction only over mining disputes. Since the
complaint for arbitration in the Gonzales case did not raise mining disputes as contemplated under
RA 7942, the SC held such complaint could not arbitrated before the PA-MGB.

The Court in Gonzales did not simply reject the complaint on the ground that the issue of validity
of contracts per se is non-arbitrable. The real consideration bind the ruling was the limitation that
was placed by RA 7942 upon the jurisdiction of PA-MGB as an arbitral body.

Petitioner may still invoke the arbitration clause of the 2005 Lease Contract notwithstanding the
fact that it assails the validity of such contract. This is due to the doctrine of separability. Under
said doctrine, an arbitration agreement is considered as independent of the main contract. Being a
separate contract in itself, the arbitration agreement may thus be invoked regardless of the possible
nullity or invalidity of the main contract.

The operation of the arbitration clause in this case is not defeated by Koppels failure to file a
formal request or application with the MTC. In using the word may to qualify the act of filing
a request under Sec 24 of RA 9285 (Special ADR Rues) clearly did not intend to limit
invocation of an arbitration agreement in a pending suit solely via such request. After all, non-
compliance with an arbitration agreement is a valid defense to any offending suit and, as such,
may even be raised in an answer as provided in our ordinary rules of procedure.

CAB: As early as in its answer with counterclaim, Koppel had already apprised MTC of the
existence of the arbitration clause in the 2005 Lease Contract; such act is enough valid invocation
of his right to arbitrate.

The fact that petitioner and respondent already underwent through JDR proceedings before the
RTC, will not make the subsequent arbitration between the parties unnecessary or circuitous. The
JDR system is substantially different from arbitration proceedings.

The JDR framework is based on the processes of mediation, conciliation or early neutral
evaluation which entails the submission of a dispute before a JDR judge who shall merely
facilitate settlement between the parties in conflict or make a non-binding evaluation or
assessment of the chances of each partys case. Thus in JDR, the JDR judge lacks the authority to
render a resolution of the dispute that is binding upon the parties in conflict. In arbitration, on the
other hand, the dispute is submitted to an arbitrator/sa neutral third person or a group of thereof
who shall have the authority to render a resolution binding upon the parties.

2. Since there really are no legal impediments to the application of the arbitration clause of
the 2005 Contract of Lease in this case, the unlawful detainer action was instituted in violation of
such clause.

Under Sec 7, RA 9285, the instant unlawful detainer action should have been stayed; the petitioner
and the respondent should have been referred to arbitration pursuant to the arbitration clause of
the 2005 Lease Contract. The MeTC, however, did not do so in violation of the lawwhich
violation was, in turn, affirmed by the RTC and Court of Appeals on appeal.

The violation by the MTC of the clear directives under R.A. Nos. 876 and 9285 renders invalid all
proceedings it undertook in the ejectment case after the filing by petitioner of its Answer with
Counterclaimthe point when the petitioner and the respondent should have been referred to
arbitration. This case must, therefore, be remanded to the MeTC and be suspended at said point.
Inevitably, the decisions of the MeTC, RTC and the Court of Appeals must all be vacated and set
aside.

Uniwide Sales Realty & Resource Corps V. Titan Ekeda Construction

Facts:
This case involved Titan-Ikeda who entered into 3 construction agreement/ contract /project with
Uniwide. Later Titan-Ikeda filed an action for sum of money against Uniwide with the RTC
because Uniwide allegedly failed to pay certain claims billed by Titan after the completion of the
3 projects. Uniwide moved for the dismissal/suspension of the proceeding for them to first
undergo arbitration. The Arbitrators issued terms of reference which was signed by the parties,
(Uniwide did not attempt to modify the TOR to accommodate its belated counterclaim on
deadlines for liquidated damages.)Titan then refiled the case with CIAC.
CIAC Decision: Project 1: Uniwide is absolved of any liability. Project 2: Uniwide is absolved of
any liability for VAT payment and for the account of Titan, and Titan is absolved from liability
for defective construction. Project 3: Uniwide id held liable for unpaid balance (5,158,364.63)
plus 12% interest/annum and to pay the full VAT for the additional work where no written
authorization was presented.
CIAC likewise rejected the claim on liquidated damages.

After Uniwides motion for reconsideration was denied by CIAC, it filed a petition for review
with CA but same was denied, thus, Uniwide filed a petition for review under rule 45 to seek
partial reversal of the decision of CA which modified the decision of CIAC. Uniwide claims that
CIAC should have applied procedural rules such as section 5, Rule 10 with more liberality
because it was an administrative tribubal free from all rigid technicalities of regular courts
because CA held that the issue on liquidated damages should be left for determination in future
proceedings.

Issue:
Whether or not CIAC should have applied the Rules of Court in the arbitration proceeding.

Ruling:
Rule of Procedure Governing Construction Arbitration promulgated by the CIAC contains no
provision on the application of the Rules of Court to arbitration proceedings, even in a suppletory
capacity. Such importation of the Rules of Court provision on amendment to conform to
evidence would contravene the spirit, if not the letter of the CIAC rules. This is for the reason
that the formulation of the Terms of Reference is done with the active participation of the parties
and their counsel themselves. The TOR is further required to be signed by all the parties, their
respective counsel and all the members of the Arbitral Tribunal. Unless the issues thus carefully
formulated in the Terms of Reference were expressly showed to be amended, issues outside
thereof may not be resolved. As already noted in the Decision, "no attempt was ever made by the
[Uniwide] to modify the TOR in order to accommodate the issues related to its belated
counterclaim" on this issue.
Arbitration has been defined as "an arrangement for taking and abiding by the judgment of
selected persons in some disputed matter, instead of carrying it to established tribunals of justice,
and is intended to avoid the formalities, the delay, the expense and vexation of ordinary
litigation.
Cargill Phil Inc V. San Fernando Regala Trading Inc

Facts:
Respondent San Fernando Regala Trading filed with the RTC of Makati City a Complaint for
Rescission of Contract with Damages against petitioner Cargill. It alleged that it agreed that it
would purchase from Cargill 12,000 metric tons of Thailand origin cane blackstrap molasses and
that the payment would be by an Irrevocable Letter of Credit payable at sight. The parties agreed
that the delivery would be made in April/May. Cargill failed to comply with its obligations
despite demands from respondent. The respondent then filed for rescission. The petitioner filed a
Motion to Dismiss/Suspend proceeding, arguing that they must first resort to arbitration as stated
in their agreement before going to court. However, the RTC ruled in favor of the respondent. The
CA affirmed the RTC decision, adding that the case cannot be brought under the Arbitration Law
for the purpose of suspending the proceedings before the RTC, since in its Motion to
Dismiss/Suspend proceedings, petitioner alleged, as one of the grounds thereof,that the
subjectcontract between the parties did not exist or it was invalid; that the said contract bearing
the arbitration clause was never consummated by the parties, thus, it was proper that such issue
be first resolved by the court through an appropriate trial; that the issue involved a question of
fact that the RTC should first resolve.

Issue:
Whether or not the CA erred in finding that this case cannot be brought under the arbitration law
for the purpose of suspending the proceedings in the RTC.

Ruling:
Yes, the petition is meritorious
Arbitration, as an alternative mode of settling disputes, has long been recognized and accepted in
our jurisdiction. R.A. No. 876 authorizes arbitration of domestic disputes. Foreign arbitration, as
a system of settling commercial disputes of an international character, is likewise recognized.
The enactment of R.A. No. 9285 on April 2, 2004 further institutionalized the use of alternative
dispute resolution systems, including arbitration, in the settlement of disputes. A contract is
required for arbitration to take place and to be binding. Submission to arbitration is a contract
and a clause in a contract providing that all matters in dispute between the parties shall be
referred to arbitration is a contract. The provision to submit to arbitration any dispute arising
therefrom and the relationship of the parties is part of the contract and is itself a contract. The
validity of the contract containing the agreement to submit to arbitration does not affect the
applicability of the arbitration clause itself. A contrary ruling would suggest that a party's mere
repudiation of the main contract is sufficient to avoid arbitration. That is exactly the situation that
the separability doctrine, as well as jurisprudence applying it, seeks to avoid.

Equitable PCI Bank V. RCBC Capital Corp

Facts:
Petitioners Equitable PCI Bank, Inc. (EPCIB) and the individual shareholders of Bankard, Inc.,
as sellers, and respondent RCBC Capital Corporation (RCBC), as buyer, executed a Share
Purchase Agreement5(SPA) for the purchase of petitioners interests in Bankard, representing
226,460,000 shares, for the price of PhP 1,786,769,400. To expedite the purchase, RCBC agreed
to dispense with the conduct of a due diligence audit on the financial status of Bankard. RCBC
deposited the stipulated downpayment amount in an escrow account after which it was given full
management and operational control of Bankard. June 2, 2000 is also considered by the parties
as the Closing Date referred to in the SPA. Sometime in September 2000, RCBC had Bankards
accounts audited, creating for the purpose an audit team and the conclusion was that the
warranty, as contained in Section 5(h) of the SPA (simply Sec. 5[h] hereinafter), was correct.

RCBC paid the balance of the contract price. The corresponding deeds of sale for the shares in
question were executed in January 2001. Thereafter RCBC informed petitioners of its having
overpaid the purchase price of the subject shares, claiming that there was an overstatement of
valuation of accounts amounting to PhP 478 million, resulting in the overpayment of over PhP
616 million. Thus, RCBC claimed that petitioners violated their warranty, as sellers, embodied in
Sec. 5(g) of the SPA (Sec. 5[g] hereinafter). RCBC, in accordance with Sec. 10 of the SPA, filed
a Request for Arbitration dated May 12, 2004 with the ICC-ICA. In the request, RCBC charged
Bankard with deviating from, contravening and not following generally accepted accounting
principles and practices in maintaining their books. Arbitration in the ICC-ICA proceeded after
the formation of the arbitration tribunal consisting of retired Justice Santiago M. Kapunan,
nominated by petitioners; Neil Kaplan, RCBCs nominee; and Sir Ian Barker, appointed by the
ICC-ICA. After drawn out proceedings with each party alleging deviation and non-compliance
by the other with arbitration rules, the tribunal, with Justice Kapunan dissenting, rendered a
Partial Award .

On the matter of prescription, the tribunal held that RCBCs claim is not time-barred, the claim
properly falling under the contemplation of Sec. 5(g) and not Sec. 5(h). As such, the tribunal
concluded, RCBCs claim was filed within the three (3)-year period under Sec. 5(g) and that the
six (6)month period under Sec. 5(h) did not apply.The tribunal also exonerated RCBC from
laches, the latter having sought relief within the three (3)-year period prescribed in the SPA.
Notably, the tribunal considered the rescission of the SPA and ASPA as impracticable and "totally
out of the question." RCBC filed with the RTC a Motion to Confirm Partial Award. The RTC
issued the first assailed order confirming the Partial Award and denying the adverted separate
motions to vacate and to suspend and inhibit. From this order, petitioners sought reconsideration,
but their motion was denied by the RTC .

Issue:
Whether or not ICC-ICA erred on its decision.

Ruling:
No, it did not.
This is a procedural miscue for petitioners who erroneously bypassed the Court of Appeals (CA)
in pursuit of its appeal. While this procedural gaffe has not been raised by RCBC, still we would
be remiss in not pointing out the proper mode of appeal from a decision of the RTC confirming,
vacating, setting aside, modifying, or correcting an arbitral award. Rule 45 is not the remedy
available to petitioners as the proper mode of appeal assailing the decision of the RTC
confirming as arbitral award is an appeal before the CA pursuant to Sec. 46 of Republic Act No.
(RA) 9285, otherwise known as the Alternative Dispute Resolution Act of 2004, or completely,
An Act to Institutionalize the Use of an Alternative Dispute Resolution System in the Philippines
and to Establish the Office for Alternative Dispute Resolution, and for other Purposes,
promulgated on April 2, 2004 and became effective on April 28, 2004 after its publication on
April 13, 2004. In Korea Technologies Co., Ltd v. Lerma, we explained, inter alia, that the RTC
decision of an assailed arbitral award is appealable to the CA and may further be appealed to this
Court.
It is clear from the factual antecedents that RA 9285 applies to the instant case. This law was
already effective at the time the arbitral proceedings were commenced by RCBC through a
request for arbitration filed before the ICC-ICA on May 12, 2004.

The Court Will Not Overturn an Arbitral Award Unless It Was Made in Manifest Disregard of the
Law Following Asset Privatization Trust vs CA, , errors in law and fact would not generally
justify the reversal of an arbitral award. A party asking for the vacation of an arbitral award must
show that any of the grounds for vacating, rescinding, or modifying an award are present or that
the arbitral award was made in manifest disregard of the law. Otherwise, the Court is duty-bound
to uphold an arbitral award. The instant petition dwells on the alleged manifest disregard of the
law by the ICC-ICA. The US case of Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Jaros18
expounded on the phrase "manifest disregard of the law" in the following wise: This court has
emphasized that manifest disregard of the law is a very narrow standard of review. Anaconda Co.
v. District Lodge No. 27, 693 F.2d 35 (6th Cir.1982). A mere error in interpretation or application
of the law is insufficient. Anaconda, 693 F.2d at 37-38. Rather, the decision must fly in the face
of clearly established legal precedent. When faced with questions of law, an arbitration panel
does not act in manifest disregard of the law unless (1) the applicable legal principle is clearly
defined and not subject to reasonable debate; and (2) the arbitrators refused to heed that legal
principle. Thus, to justify the vacation of an arbitral award on account of "manifest disregard of
the law," the arbiters findings must clearly and unequivocally violate an established legal
precedent. Anything less would not suffice. A review of petitioners arguments would, however,
show that their arguments are bereft of merit. Thus, the Partial Award cannot be vacated.

Transfield Phil Inc V. Luzon Hydro Corp

Facts:
On 26 March 1997, petitioner and respondent Luzon Hydro Corporation entered into a Turnkey
Contract whereby petitioner, as Turnkey Contractor, undertook to construct, on a turnkey basis, a
seventy (70)Megawatt hydro-electric power station at the Bakun River in the provinces of
Benguet and Ilocos Sur (hereinafter, the Project). Petitioner was given the sole responsibility for
the design, construction, commissioning, testing and completion of the Project.
The Turnkey Contract provides that:
(1) the target completion date of the Project shall be on 1 June 2000, or such later date as may be
agreed upon between petitioner and respondent LHC or otherwise determined in accordance with
the Turnkey Contract; and
(2) petitioner is entitled to claim extensions of time (EOT) for reasons enumerated in the
Turnkey Contract, among which are variations, force majeure, and delays caused by LHC itself.

To secure performance of petitioner's obligation on or before the target completion, petitioner

opened in favor of LHC two (2) standby letters of credit both dated 20 March 2000 (hereinafter
referred to as "the Securities") in the amount of US$8,988,907.00 each.
Standby Letter of Credit No. E001126/8400 - local branch of respondent Australia and New
Zealand Banking Group Limited (ANZ Bank)
Standby Letter of Credit No.IBDIDSB-00/4 - respondent Security Bank Corporation (SBC)
In the course of the construction of the project, petitioner sought various EOT to complete the
Project.

The extensions were requested allegedly due to several factors which prevented the completion
of the Project on target date, such as force majeure occasioned by typhoon Zeb, barricades and
demonstrations.LHC denied the requests, however.
This gave rise to a series of legal actions between the parties which culminated in the instant
petition. In the arbitration proceedings, the common issues presented were:
[1] whether typhoon Zeb and any of its associated events constituted force majeure to justify the
extension of time sought by petitioner; and
[2] whether LHC had the right to terminate the Turnkey Contract for failure of petitioner to
complete the Project on target date.
Meanwhile, foreseeing that LHC would call on the Securities pursuant to the pertinent provisions
of the Turnkey Contract, petitioner advised respondent banks of the arbitration proceedings
already pending with its alleged default in the performance of its obligations. Asserting that LHC
had no right to call on the Securities until the resolution of disputes before the arbitral tribunals,
petitioner warned respondent banks that any transfer, release, or disposition of the Securities in
favor of LHC or any person claiming under LHC would constrain it to hold respondent banks
liable for liquidated damages.

As petitioner had anticipated, LHC sent notice to petitioner that pursuant to the Turnkey
Contract, it failed to comply with its obligation to complete the Project. Despite the letters of
petitioner, however, both banks informed petitioner that they would pay on the Securities if and
when LHC calls on them.

LHC asserted that additional extension of time would not be warranted; accordingly it declared
petitioner in default/delay in the performance of its obligations under the Turnkey Contract and
demanded from petitioner the payment of US$75,000.00 for each day of delay beginning 28 June
2000 until actual completion of the Project. At the same time, LHC served notice that it would
call on the securities for the payment of liquidated damages for the delay.
On 5 November 2000, petitioner as plaintiff filed a Complaint for Injunction , with prayer for
TRO and writ of preliminary injunction, against herein respondents as defendants. Petitioner
sought to restrain respondent LHC from calling on the Securities and respondent banks from
transferring, paying on, or in any manner disposing of the Securities or any renewals or
substitutes thereof. The RTC issued a 72-hour TRO on the same day and was extended for a
period of 17 days or until November 26, 2000.
The RTC, in its Order dated 24 November 2000, denied petitioner's application for a writ of
preliminary injunction. It ruled that petitioner had no legal right and suffered no irreparable
injury to justify the issuance of the writ.
Petitioner elevated the case to the CA via a Petition for Certiorari under Rule 65, with prayer for
the issuance of a TRO and writ of preliminary injunction.
In its Resolution dated 28 November 2000, the CA issued a TRO, enjoining LHC from calling on
the Securities or any renewals or substitutes thereof and ordering respondent banks to cease and
desist from transferring, paying or in any manner disposing of the Securities. However, the
appellate court failed to act on the application for preliminary injunction until the TRO expired
on 27 January 2001.

Immediately thereafter, representatives of LHC trooped to ANZ Bank and withdrew the total
amount of US$4,950,000.00, thereby reducing the balance in ANZ Bank to US$1,852,814.00.
On 2 February 2001, the appellate court dismissed the petition for certiorari. The appellate court
expressed conformity with the trial court's decision.

Issue:
Whether or not Arbitration must be done first.

Ruling:
No, it is not needed
Petitioners argument that any dispute must first be resolved by the parties, whether through
negotiations or arbitration, before the beneficiary is entitled to call on the letter of credit in
essence would convert the letter of credit into a mere guarantee. Jurisprudence has laid down a
clear distinction between a letter of credit and a guarantee in that the settlement of a dispute
between the parties is not a pre-requisite for the release of funds under a letter of credit. In other
words, the argument is incompatible with the very nature of the letter of credit. If a letter of
credit is drawable only after settlement of the dispute on the contract entered into by the
applicant and the beneficiary, there would be no practical and beneficial use for letters of credit
in commercial transactions.