Morado

ADR

[G.R. No. 146717. November 22, 2004]

TRANSFIELD PHILIPPINES, INC., petitioner, vs. LUZON HYDRO CORPORATION, AUSTRALIA and NEW
ZEALAND BANKING GROUP LIMITED and SECURITY BANK CORPORATION, respondents.

FACTS: On 26 March 1997, petitioner and respondent Luzon Hydro Corporation (LHC) entered into a
Turnkey Contract whereby it undertook to construct a hydro-electric power station. Petitioner was given
the sole responsibility for the design, construction, commissioning, testing and completion of the Project.
The Turnkey Contract provided for a target completion date and an entitlement to claim extensions of
time (EOT), among which is force majeure. Further, in case of dispute, the parties are bound to settle their
differences through mediation, conciliation and such other means enumerated under the Contract. To
secure performance, petitioner opened in favor of LHC two (2) standby letters of credit.

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 such as force majeure occasioned by
typhoon Zeb, barricades and demonstrations. LHC denied the requests and because of the delay in the
construction of the plant, it called on the stand-by letters of credit because of default. However, the
demand was objected by Transfield on the ground that there is still pending arbitration on their request
for extension of time.

ISSUE: Whether or not the pending of an arbitration case bars the collection of letters of credit.

HELD: NO. 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. 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.
The pendency of the arbitration proceedings would not per se make LHCs draws on the Securities wrongful
or fraudulent for there was nothing in the Contract which would indicate that the parties intended that all
disputes regarding delay should first be settled through arbitration before LHC would be allowed to call
upon the Securities. It is therefore premature and absurd to conclude that the draws on the Securities were
outright fraudulent given the fact that the ICC and CIAC have not ruled with finality on the existence of
default.

G.R. No. 126619 December 20, 2006

UNIWIDE SALES REALTY AND RESOURCES CORPORATION, petitioner,
vs.
TITAN-IKEDA CONSTRUCTION AND DEVELOPMENT CORPORATION, respondent.

FACTS: The case originated from an action for a sum of money filed by Titan against Uniwide with the RTC
arising from Uniwide's non-payment of certain claims billed by Titan after completion of three projects
covered by agreements they entered into with each other. The Civil Case was suspended for it to undergo
arbitration. An Arbitral Tribunal consisting of a chairman and two members was created in accordance
with the CIAC Rules of Procedure Governing Construction Arbitration. On 17 April 1995, after the parties
Morado
ADR

submitted their respective memoranda, the Arbitral Tribunal promulgated its decision. On Project 2
Uniwide is held liable for the unpaid balance in the amount of P6,301,075.77 with 12% interest per annum
to be paid to Titan. On Project 3, Uniwide is held liable for the unpaid balance in the amount of
P5,158,364.63 with 12% interest per annum. Uniwide filed a motion for reconsideration but was denied
by the CIAC and then to the Court of Appeals which was likewise denied. Hence, Uniwide comes to this
Court via a petition for review under Rule 45. One of the contention of Uniwide is that the CIAC should
have applied procedural rules such as Section 5, Rule 10 with more liberality because it was an
administrative tribunal free from the rigid technicalities of regular courts.

ISSUE: Whether or not CIAC should have applied the Rules of Court (i.e. Section 5, Rule 10) in the
arbitration proceeding.

HELD: The CIAC held:

The 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. Hypothetically admitting that there is such a provision, suppletory
application is made only if it would not contravene a specific provision in the arbitration rules and
the spirit thereof. The Tribunal holds that 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 [sic] 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." Voluntary
arbitration, on the other hand, involves the reference of a dispute to an impartial body, the members of
which are chosen by the parties themselves, which parties freely consent in advance to abide by the
arbitral award issued after proceedings where both parties had the opportunity to be heard. The basic
objective is to provide a speedy and inexpensive method of settling disputes by allowing the parties to
avoid the formalities, delay, expense and aggravation which commonly accompany ordinary litigation,
especially litigation which goes through the entire hierarchy of courts. As an arbitration body, the CIAC
can only resolve issues brought before it by the parties through the TOR which functions similarly as a pre-
trial brief. Thus, if Uniwide's claim for liquidated damages was not raised as an issue in the TOR or in any
modified or amended version of it, the CIAC cannot make a ruling on it. The Rules of Court cannot be used
to contravene the spirit of the CIAC rules, whose policy and objective is to "provide a fair and expeditious
settlement of construction disputes through a non-judicial process which ensures harmonious and
friendly relations between or among the parties."
Morado
ADR

G.R. No. 175404 January 31, 2011

CARGILL PHILIPPINES, INC., Petitioner,
vs.
SAN FERNANDO REGALA TRADING, INC., Respondent.

FACTS: In 1988, respondent San Fernando Regala Trading, Inc. (SFRTI) filed with the RTC of Makati City a
Complaint for Rescission of Contract with Damages against petitioner Cargill Philippines, Inc. Respondent
alleged that it entered into a contract dated July 11, 1996 with petitioner, wherein it was agreed upon
that respondent would purchase from petitioner 12,000 metric tons of Thailand origin cane blackstrap
molasses at the price of US$192 per metric ton. Petitioner, as seller, failed to comply with its obligations
under the contract, despite demands from respondent, thus, the latter prayed for rescission of the
contract and payment of damages. Petitioner filed a Motion to Dismiss/Suspend Proceedings and To Refer
Controversy to Voluntary Arbitration. Petitioner contended that the RTC was not the proper forum to
ventilate such issue. It claimed that the contract contained an arbitration clause that any dispute
between them shall be settled by arbitration in the City of New York before the American Arbitration
Association. The Arbitration Award shall be final and binding on both parties.

The Motion to Dismiss was denied. The RTC found that the arbitration clause in question contravened
these procedures, i.e., the arbitration clause contemplated an arbitration proceeding in New York before
a non-resident arbitrator (American Arbitration Association); that the arbitral award shall be final and
binding on both parties. The CA affirmed the decision of RTC.

ISSUE: Whether or not the party who has repudiated the main contract is prevented from enforcing its
arbitration clause.

HELD: NO. Applying the doctrine of seperability, the arbitration agreement is independent of the main
contract. The doctrine denotes that the invalidity of the main contract, also referred to as the "container"
contract, does not affect the validity of the arbitration agreement. Irrespective of the fact that the main
contract is invalid, the arbitration clause/agreement still remains valid and enforceable.

Applying the Gonzales ruling, an arbitration agreement which forms part of the main contract shall not be
regarded as invalid or non-existent just because the main contract is invalid or did not come into existence,
since the arbitration agreement shall be treated as a separate agreement independent of the main
contract. To reiterate, a contrary ruling would suggest that a party's mere repudiation of the main contract
is sufficient to avoid arbitration and that is exactly the situation that the separability doctrine sought to
avoid. Thus, we find that even the party who has repudiated the main contract is not prevented from
enforcing its arbitration clause.

G.R. No. 182248 December 18, 2008

EQUITABLE PCI BANKING CORPORATION,1 GEORGE L. GO, PATRICK D. GO, GENEVIEVE W.J. GO,
FERDINAND MARTIN G. ROMUALDEZ, OSCAR P. LOPEZ-DEE, RENE J. BUENAVENTURA, GLORIA L. TAN-
Morado
ADR

CLIMACO, ROGELIO S. CHUA, FEDERICO C. PASCUAL, LEOPOLDO S. VEROY, WILFRIDO V. VERGARA,

EDILBERTO V. JAVIER, ANTHONY F. CONWAY, ROMULAD U. DY TANG, WALTER C. WESSMER, and
ANTONIO N. COTOCO, petitioners,
vs.
RCBC CAPITAL CORPORATION, respondent.

FACTS: In May 2000, petitioners EPCIB and the individual shareholders of Bankard, Inc. (as sellers) and
respondent RCBC (as buyer) executed a Share Purchase Agreement (SPA) for the purchase of petitioners
interests in Bankard,representing 226,460,000 shares, for the price of PhP 1,786,769,400. Under the SPA,
RCBC undertakes, on the date of contract execution, to deposit, as downpayment, P357,353,880 in an
escrow account. The amount should be released to petitioners on an agreed-upon release date and the
balance of the purchase price shall be delivered to the share buyers upon the fulfillment of certain
conditions agreed upon, in the form of a managers check.

On December 28, 2000, RCBC paid the balance of the contract price. The corresponding deeds of sale for
the shares in question were executed in January 2001. Thereafter, in a letter of May 5, 2003, 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.

Following unsuccessful attempts at settlement, RCBC, in accordance with Sec. 10 of the SPA, filed a
Request for Arbitration dated May 12, 2004[8] with the ICC-ICA. It prayed for the rescission of the SPA,
restitution of the purchase price, payment of actual damages in the amount of PhP 573,132,110, legal
interest on the purchase price until actual restitution, moral damages, and litigation and attorneys fees.
As alternative to rescission and restitution, RCBC prayed for damages in the amount of at least PhP
809,796,092 plus legal interest.

ISSUE: Whether or not the trial court acted contrary to law and judicial authority in refusing to vacate and
in confirming the arbitral award

HELD: The Court Will Not Overturn an Arbitral Award Unless It Was Made in Manifest Disregard of the
Law.

We established the parameters by which an arbitral award may be set aside, to wit:
As a rule, the award of an arbitrator cannot be set aside for mere errors of judgment either as to
the law or as to the facts. Courts are without power to amend or overrule merely because of
disagreement with matters of law or facts determined by the arbitrators. They will not review the
findings of law and fact contained in an award, and will not undertake to substitute their judgment
for that of the arbitrators, since any other rule would make an award the commencement, not
the end, of litigation. Errors of law and fact, or an erroneous decision of matters submitted to the
judgment of the arbitrators, are insufficient to invalidate an award fairly and honestly made.
Judicial review of an arbitration is, thus, more limited than judicial review of a trial.
Morado
ADR

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.

In the present case, petitioners, in a bid to establish that the arbitral award was issued in manifest
disregard of the law, allege that the Partial Award violated the principles of prescription, due process, and
estoppel. A review of petitioners arguments would, however, show that their arguments are bereft of
merit. Thus, the Partial Award dated September 27, 2007 cannot be vacated.