G.R. No.

129916 March 26, 2001

MAGELLAN CAPITAL MANAGEMENT CORPORATION and MAGELLAN CAPITAL

HOLDINGS CORPORATION, petitioners,
vs.
ROLANDO M. ZOSA and HON. JOSE P. SOBERANO, JR., in his capacity as Presiding
Judge of Branch 58 of the Regional Trial Court of Cebu, 7th Judicial
Region, respondents.

BUENA, J.:

Under a management agreement entered into on March 18, 1994, Magellan Capital Holdings
Corporation [MCHC] appointed Magellan Capital Management Corporation [MCMC] as
manager for the operation of its business and affairs.1 Pursuant thereto, on the same month,
MCHC, MCMC, and private respondent Rolando M. Zosa entered into an "Employment
Agreement" designating Zosa as President and Chief Executive Officer of MCHC.

Under the "Employment Agreement", the term of respondent Zosa's employment shall be co-
terminous with the management agreement, or until March 1996,2 unless sooner terminated
pursuant to the provisions of the Employment Agreement.3 The grounds for termination of
employment are also provided in the Employment Agreement.

On May 10, 1995, the majority of MCHC's Board of Directors decided not to re-elect
respondent Zosa as President and Chief Executive Officer of MCHC on account of loss of
trust and confidence4 arising from alleged violation of the resolution issued by MCHC's board
of directors and of the non-competition clause of the Employment Agreement.5Nevertheless,
respondent Zosa was elected to a new position as MCHC's Vice-Chairman/Chairman for
New Ventures Development.6

On September 26, 1995, respondent Zosa communicated his resignation for good reason
from the position of Vice-Chairman under paragraph 7 of the Employment Agreement on the
ground that said position had less responsibility and scope than President and Chief
Executive Officer. He demanded that he be given termination benefits as provided for in
Section 8 (c) (i) (ii) and (iii) of the Employment Agreement.7

In a letter dated October 20, 1995, MCHC communicated its non-acceptance of respondent
Zosa's resignation for good reason, but instead informed him that the Employment
Agreement is terminated for cause, effective November 19, 1995, in accordance with Section
7 (a) (v) of the said agreement, on account of his breach of Section 12 thereof. Respondent
Zosa was further advised that he shall have no further rights under the said Agreement or
any claims against the Manager or the Corporation except the right to receive within thirty
(30) days from November 19, 1995, the amounts stated in Section 8 (a) (i) (ii) of the
Agreement.8

Disagreeing with the position taken by petitioners, respondent Zosa invoked the Arbitration
Clause of the Employment Agreement, to wit:

"23. Arbitration. In the event that any dispute, controversy or claim arises out of or
under any provisions of this Agreement, then the parties hereto agree to submit such
dispute, controversy or claim to arbitration as set forth in this Section and the
determination to be made in such arbitration shall be final and binding. Arbitration
shall be effected by a panel of three arbitrators. The Manager, Employee and
 Corporation shall designate one (1) arbitrator who shall, in turn, nominate and elect
who among them shall be the chairman of the committee. Any such arbitration,
including the rendering of an arbitration award, shall take place in Metro Manila. The
arbitrators shall interpret this Agreement in accordance with the substantive laws of
the Republic of the Philippines. The arbitrators shall have no power to add to,
subtract from or otherwise modify the terms of Agreement or to grant injunctive relief
of any nature. Any judgment upon the award of the arbitrators may be entered in any
court having jurisdiction thereof, with costs of the arbitration to be borne equally by
the parties, except that each party shall pay the fees and expenses of its own
counsel in the arbitration."

On November 10, 1995, respondent Zosa designated his brother, Atty. Francis Zosa, as his
representative in the arbitration panel9 while MCHC designated Atty. Inigo S. Fojas10 and
MCMC nominated Atty. Enrique I. Quiason11as their respective representatives in the
arbitration panel. However, instead of submitting the dispute to arbitration, respondent Zosa,
on April 17, 1996, filed an action for damages against petitioners before the Regional Trial
Court of Cebu12 to enforce his benefits under the Employment Agreement.

On July 3, 1996, petitioners filed a motion to dismiss13 arguing that (1) the trial court has no
jurisdiction over the instant case since respondent Zosa's claims should be resolved through
arbitration pursuant to Section 23 of the Employment Agreement with petitioners; and (2) the
venue is improperly laid since respondent Zosa, like the petitioners, is a resident of Pasig
City and thus, the venue of this case, granting without admitting that the respondent has a
cause of action against the petitioners cognizable by the RTC, should be limited only to RTC-
Pasig City.14

Meanwhile, respondent Zosa filed an amended complaint dated July 5, 1996.

On August 1, 1996, the RTC Branch 58 of Cebu City issued an Order denying petitioners
motion to dismiss upon the findings that (1) the validity and legality of the arbitration
provision can only be determined after trial on the merits; and (2) the amount of damages
claimed, which is over P100,000.00, falls within the jurisdiction of the RTC.15Petitioners filed
a motion for reconsideration which was denied by the RTC in an order dated September 5,
1996.16

In the interim, on August 22, 1996, in compliance with the earlier order of the court directing
petitioners to file responsive pleading to the amended complaint, petitioners filed their
Answer Ad Cautelam with counterclaim reiterating their position that the dispute should be
settled through arbitration and the court had no jurisdiction over the nature of the action.17

On October 21, 1996, the trial court issued its pre-trial order declaring the pre-trial stage
terminated and setting the case for hearing. The order states:

"ISSUES:

"The Court will only resolve one issue in so far as this case is concerned, to wit:

"Whether or not the Arbitration Clause contained in Sec. 23 of the Employment

Agreement is void and of no effect: and, if it is void and of no effect, whether or not
the plaintiff is entitled to damages in accordance with his complaint and the
defendants in accordance with their counterclaim.
 "It is understood, that in the event the arbitration clause is valid and binding between
the parties, the parties shall submit their respective claim to the Arbitration
Committee in accordance with the said arbitration clause, in which event, this case
shall be deemed dismissed."18

On November 18, 1996, petitioners filed their Motion Ad Cautelam for the Correction,
Addition and Clarification of the Pre-trial Order dated November 15, 1996,19 which was
denied by the court in an order dated November 28, 1996.20

Thereafter, petitioners MCMC and MCHC filed a Motion Ad Cautelam for the parties to file
their Memoranda to support their respective stand on the issue of the validity of the
"arbitration clause" contained in the Employment Agreement. In an order dated December
13, 1996, the trial court denied the motion of petitioners MCMC and MCHC.

On January 17, 1997, petitioners MCMC and MCHC filed a petition for certiorari and
prohibition under Rule 65 of the Rules of Court with the Court of Appeals, questioning the
trial court orders dated August 1, 1996, September 5, 1996, and December 13, 1996.21

On March 21, 1997, the Court of Appeals rendered a decision, giving due course to the
petition, the decretal portion of which reads:

"WHEREFORE, the petition is GIVEN DUE COURSE. The respondent court is

directed to resolve the issue on the validity or effectivity of the arbitration clause in
the Employment Agreement, and to suspend further proceedings in the trial on the
merits until the said issue is resolved. The questioned orders are set aside insofar as
they contravene this Court's resolution of the issues raised as herein pronounced.

"The petitioner is required to remit to this Court the sum of P81.80 for cost within five
(5) days from notice.

"SO ORDERED."22

Petitioners filed a motions for partial reconsideration of the CA decision praying (1) for the
dismissal of the case in the trial court, on the ground of lack of jurisdiction, and (2) that the
parties be directed to submit their dispute to arbitration in accordance with the Employment
Agreement dated March 1994. The CA, in a resolution promulgated on June 20, 1997,
denied the motion for partial reconsideration for lack of merit.

In compliance with the CA decision, the trial court, on July 18, 1997, rendered a decision
declaring the "arbitration clause" in the Employment Agreement partially void and of no
effect. The dispositive portion of the decision reads:

"WHEREFORE, premises considered, judgment is hereby rendered partially

declaring the arbitration clause of the Employment Agreement void and of no effect,
only insofar as it concerns the composition of the panel of arbitrators, and directing
the parties to proceed to arbitration in accordance with the Employment Agreement
under the panel of three (3) arbitrators, one for the plaintiff, one for the defendants,
and the third to be chosen by both the plaintiff and defendants. The other terms,
conditions and stipulations in the arbitration clause remain in force and effect."23
In view of the trial court's decision, petitioners filed this petition for review on certiorari, under
Rule 45 of the Rules of Court, assigning the following errors for the Court's resolution:

"I. The trial court gravely erred when it ruled that the arbitration clause under the
employment agreement is partially void and of no effect, considering that:

"A. The arbitration clause in the employment agreement dated March 1994
between respondent Zosa and defendants MCHC and MCMC is valid and
binding upon the parties thereto.

"B. In view of the fact that there are three parties to the employment
agreement, it is but proper that each party be represented in the arbitration
panel.

"C. The trial court grievously erred in its conclusion that petitioners MCMC
and MCHC represent the same interest.

"D. Respondent Zosa is estopped from questioning the validity of the

arbitration clause, including the right of petitioner MCMC to nominate its own
arbitrator, which he himself has invoked.

"II. In any event, the trial court acted without jurisdiction in hearing the case below,
considering that it has no jurisdiction over the nature of the action or suit since
controversies in the election or appointment of officers or managers of a corporation,
such as the action brought by respondent Zosa, fall within the original and exclusive
jurisdiction of the Securities and Exchange Commission.

"III. Contrary to respondent Zosa's allegation, the issue of the trial court's jurisdiction
over the case below has not yet been resolved with finality considering that
petitioners have expressly reserved their right to raise said issue in the instant
petition. Moreover, the principle of the law of the case is not applicable in the instant
case.

"IV. Contrary to respondent Zosa's allegation, petitioners MCMC and MCHC are not
guilty of forum shopping.

"V. Contrary to respondent Zosa's allegation, the instant petition for review involves
only questions of law and not of fact."24

We rule against the petitioners.

It is error for the petitioners to claim that the case should fall under the jurisdiction of the
Securities and Exchange Commission [SEC, for brevity]. The controversy does not in
anyway involve the election/appointment of officers of petitioner MCHC, as claimed by
petitioners in their assignment of errors. Respondent Zosa's amended complaint focuses
heavily on the illegality of the Employment Agreement's "Arbitration Clause" initially invoked
by him in seeking his termination benefits under Section 8 of the employment contract. And
under Republic Act No. 876, otherwise known as the "Arbitration Law," it is the regional trial
court which exercises jurisdiction over questions relating to arbitration. We thus advert to the
following discussions made by the Court of Appeals, speaking thru Justice Minerva P.
Gonzaga-Reyes,25 in C.A.-G.R. S.P. No. 43059, viz.
 "As regards the fourth assigned error, asserting that jurisdiction lies with the SEC,
which is raised for the first time in this petition, suffice it to state that the Amended
Complaint squarely put in issue the question whether the Arbitration Clause is valid
and effective between the parties. Although the controversy which spawned the
action concerns the validity of the termination of the service of a corporate officer, the
issue on the validity and effectivity of the arbitration clause is determinable by the
regular courts, and do not fall within the exclusive and original jurisdiction of the SEC.

"The determination and validity of the agreement is not a matter intrinsically

connected with the regulation and internal affairs of corporations (see Pereyra vs.
IAC, 181 SCRA 244; Sales vs. SEC, 169 SCRA 121); it is rather an ordinary case to
be decided in accordance with the general laws, and do not require any particular
expertise or training to interpret and apply (Viray vs. CA, 191 SCRA 308)."26

Furthermore, the decision of the Court of Appeals in CA-G.R. SP No. 43059 affirming the
trial court's assumption of jurisdiction over the case has become the "law of the case" which
now binds the petitioners. The "law of the case" doctrine has been defined as "a term applied
to an established rule that when an appellate court passes on a question and remands the
cause to the lower court for further proceedings, the question there settled becomes the law
of the case upon subsequent appeal."27 To note, the CA's decision in CA-G.R. SP No. 43059
has already attained finality as evidenced by a Resolution of this Court ordering entry of
judgment of said case, to wit:

"ENTRY OF JUDGMENT

This is to certify that on September 8, 1997 a decision/resolution rendered in the

above-entitled case was filed in this Office, the dispositive part of which reads as
follows:

'G.R. No. 129615. (Magellan Capital Management Corporation, et al. vs.

Court of Appeals, Rolando Zosa, et al.). Considering the petitioner's
manifestation dated August 11, 1997 and withdrawal of intention to file
petition for review on certiorari, the Court Resolved to DECLARE THIS CASE
TERMINATED and DIRECT the Clerk of Court to INFORM the parties that
the judgment sought to be reviewed has become final and executory, no
appeal therefore having been timely perfected.'

and that the same has, on September 17, 1997, become final and executory and is
hereby recorded in the Book of Entries of Judgments."28

Petitioners, therefore, are barred from challenging anew, through another remedial measure
and in any other forum, the authority of the regional trial court to resolve the validity of the
arbitration clause, lest they be truly guilty of forum-shopping which the courts consistently
consider as a contumacious practice that derails the orderly administration of justice.

Equally unavailing for the petitioners is the review by this Court, via the instant petition, of the
factual findings made by the trial court that the composition of the panel of arbitrators would,
in all probability, work injustice to respondent Zosa. We have repeatedly stressed that the
jurisdiction of this Court in a petition for review on certiorari under Rule 45 of the Revised
Rules of Court is limited to reviewing only errors of law, not of fact, unless the factual findings
complained of are devoid of support by the evidence on record, or the assailed judgment is
based on misapprehension of facts.29
Even if procedural rules are disregarded, and a scrutiny of the merits of the case is
undertaken, this Court finds the trial court's observations on why the composition of the
panel of arbitrators should be voided, incisively correct so as to merit our approval. Thus,

"From the memoranda of both sides, the Court is of the view that the defendants
[petitioner] MCMC and MCHC represent the same interest. There is no quarrel that
both defendants are entirely two different corporations with personalities distinct and
separate from each other and that a corporation has a personality distinct and
separate from those persons composing the corporation as well as from that of any
other legal entity to which it may be related.

"But as the defendants [herein petitioner] represent the same interest, it could never
be expected, in the arbitration proceedings, that they would not protect and preserve
their own interest, much less, would both or either favor the interest of the plaintiff.
The arbitration law, as all other laws, is intended for the good and welfare of
everybody. In fact, what is being challenged by the plaintiff herein is not the law itself
but the provision of the Employment Agreement based on the said law, which is the
arbitration clause but only as regards the composition of the panel of arbitrators. The
arbitration clause in question provides, thus:

'In the event that any dispute, controversy or claim arise out of or under any
provisions of this Agreement, then the parties hereto agree to submit such
dispute, controversy or claim to arbitration as set forth in this Section and the
determination to be made in such arbitration shall be final and binding.
Arbitration shall be effected by a panel of three arbitrators. The Manager,
Employee, and Corporationshall designate one (1) arbitrator who shall, in
turn, nominate and elect as who among them shall be the chairman of the
committee. Any such arbitration, including the rendering of an arbitration
award, shall take place in Metro Manila. The arbitrators shall interpret this
Agreement in accordance with the substantive laws of the Republic of the
Philippines. The arbitrators shall have no power to add to, subtract from or
otherwise modify the terms of this Agreement or to grant injunctive relief of
any nature. Any judgment upon the award of the arbitrators may be entered
in any court having jurisdiction thereof, with costs of the arbitration to be
borne equally by the parties, except that each party shall pay the fees and
expenses of its own counsel in the arbitration.' (Emphasis supplied).

"From the foregoing arbitration clause, it appears that the two (2) defendants
[petitioners] (MCMC and MCHC) have one (1) arbitrator each to compose the panel
of three (3) arbitrators. As the defendant MCMC is the Manager of defendant MCHC,
its decision or vote in the arbitration proceeding would naturally and certainly be in
favor of its employer and the defendant MCHC would have to protect and preserve
its own interest; hence, the two (2) votes of both defendants (MCMC and MCHC)
would certainly be against the lone arbitrator for the plaintiff [herein defendant].
Hence, apparently, plaintiff [defendant] would never get or receive justice and
fairness in the arbitration proceedings from the panel of arbitrators as provided in the
aforequoted arbitration clause. In fairness and justice to the plaintiff [defendant], the
two defendants (MCMC and MCHC) [herein petitioners] which represent the same
interest should be considered as one and should be entitled to only one arbitrator to
represent them in the arbitration proceedings. Accordingly, the arbitration clause,
insofar as the composition of the panel of arbitrators is concerned should be declared
void and of no effect, because the law says, "Any clause giving one of the parties
 power to choose more arbitrators than the other is void and of no effect" (Article
2045, Civil Code).

"The dispute or controversy between the defendants (MCMC and MCHC) [herein
petitioners] and the plaintiff [herein defendant] should be settled in the arbitration
proceeding in accordance with the Employment Agreement, but under the panel of
three (3) arbitrators, one (1) arbitrator to represent the plaintiff, one (1) arbitrator to
represent both defendants (MCMC and MCHC) [herein petitioners] and the third
arbitrator to be chosen by the plaintiff [defendant Zosa] and defendants [petitioners].

"xxx xxx xxx"30

In this connection, petitioners' attempt to put respondent in estoppel in assailing the

arbitration clause must be struck down. For one, this issue of estoppel, as likewise noted by
the Court of Appeals, found its way for the first time only on appeal. Well-settled is the rule
that issues not raised below cannot be resolved on review in higher courts.31 Secondly,
employment agreements such as the one at bar are usually contracts of adhesion. Any
ambiguity in its provisions is generally resolved against the party who drafted the document.
Thus, in the relatively recent case of Phil. Federation of Credit Cooperatives, Inc. (PFCCI)
and Fr. Benedicto Jayoma vs. NLRC and Victoria Abril,32 we had the occasion to stress that
"where a contract of employment, being a contract of adhesion, is ambiguous, any ambiguity
therein should be construed strictly against the party who prepared it." And, finally,
respondent Zosa never submitted himself to arbitration proceedings (as there was none yet)
before bewailing the composition of the panel of arbitrators. He in fact, lost no time in
assailing the "arbitration clause" upon realizing the inequities that may mar the arbitration
proceedings if the existing line-up of arbitrators remained unchecked.

We need only to emphasize in closing that arbitration proceedings are designed to level the
playing field among the parties in pursuit of a mutually acceptable solution to their conflicting
claims. Any arrangement or scheme that would give undue advantage to a party in the
negotiating table is anathema to the very purpose of arbitration and should, therefore, be
resisted.

WHEREFORE, premises considered, the petition is hereby DISMISSED and the decision of
the trial court dated July 18, 1997 is AFFIRMED.

SO ORDERED.

G.R. No. 114323 July 23, 1998

OIL AND NATURAL GAS COMMISSION, petitioner,

vs.

COURT OF APPEALS and PACIFIC CEMENT COMPANY, INC., respondents.

MARTINEZ, J.:
This proceeding involves the enforcement of a foreign judgment rendered by the Civil Judge
of Dehra Dun, India in favor of the petitioner, OIL AND NATURAL GAS COMMISSION and
against the private respondent, PACIFIC CEMENT COMPANY, INCORPORATED.

The petitioner is a foreign corporation owned and controlled by the Government of India
while the private respondent is a private corporation duly organized and existing under the
laws of the Philippines. The present conflict between the petitioner and the private
respondent has its roots in a contract entered into by and between both parties on February
26, 1983 whereby the private respondent undertook to supply the petitioner FOUR
THOUSAND THREE HUNDRED (4,300) metric tons of oil well cement. In consideration
therefor, the petitioner bound itself to pay the private respondent the amount of FOUR
HUNDRED SEVENTY-SEVEN THOUSAND THREE HUNDRED U.S. DOLLARS
($477,300.00) by opening an irrevocable, divisible, and confirmed letter of credit in favor of
the latter. The oil well cement was loaded on board the ship MV SURUTANA NAVA at the
port of Surigao City, Philippines for delivery at Bombay and Calcutta, India. However, due to
a dispute between the shipowner and the private respondent, the cargo was held up in
Bangkok and did not reach its point destination. Notwithstanding the fact that the private
respondent had already received payment and despite several demands made by the
petitioner, the private respondent failed to deliver the oil well cement. Thereafter,
negotiations ensued between the parties and they agreed that the private respondent will
replace the entire 4,300 metric tons of oil well cement with Class "G" cement cost free at the
petitioner's designated port. However, upon inspection, the Class "G" cement did not
conform to the petitioner's specifications. The petitioner then informed the private respondent
that it was referring its claim to an arbitrator pursuant to Clause 16 of their contract which
stipulates:

Except where otherwise provided in the supply order/contract all questions

and disputes, relating to the meaning of the specification designs, drawings
and instructions herein before mentioned and as to quality of workmanship of
the items ordered or as to any other question, claim, right or thing
whatsoever, in any way arising out of or relating to the supply order/contract
design, drawing, specification, instruction or these conditions or otherwise
concerning the materials or the execution or failure to execute the same
during stipulated/extended period or after the completion/abandonment
thereof shall be referred to the sole arbitration of the persons appointed by
Member of the Commission at the time of dispute. It will be no objection to
any such appointment that the arbitrator so appointed is a Commission
employer (sic) that he had to deal with the matter to which the supply or
contract relates and that in the course of his duties as Commission's
employee he had expressed views on all or any of the matter in dispute or
difference.

The arbitrator to whom the matter is originally referred being transferred or

vacating his office or being unable to act for any reason the Member of the
Commission shall appoint another person to act as arbitrator in accordance
with the terms of the contract/supply order. Such person shall be entitled to
proceed with reference from the stage at which it was left by his predecessor.
Subject as aforesaid the provisions of the Arbitration Act, 1940, or any
Statutory modification or re-enactment there of and the rules made there
under and for the time being in force shall apply to the arbitration
proceedings under this clause.
 The arbitrator may with the consent of parties enlarge the time, from time to
time, to make and publish the award.

The venue for arbitration shall be at Dehra dun. 1*

On July 23, 1988, the chosen arbitrator, one Shri N.N. Malhotra, resolved the dispute in
petitioner's favor setting forth the arbitral award as follows:

NOW THEREFORE after considering all facts of the case, the evidence, oral
and documentarys adduced by the claimant and carefully examining the
various written statements, submissions, letters, telexes, etc. sent by the
respondent, and the oral arguments addressed by the counsel for the
claimants, I, N.N. Malhotra, Sole Arbitrator, appointed under clause 16 of the
supply order dated 26.2.1983, according to which the parties, i.e. M/S Oil and
Natural Gas Commission and the Pacific Cement Co., Inc. can refer the
dispute to the sole arbitration under the provision of the Arbitration Act. 1940,
do hereby award and direct as follows: —

The Respondent will pay the following to the claimant: —

1. Amount received by the Respondent

against the letter of credit No. 11/19

dated 28.2.1983 US $ 477,300.00

2. Re-imbursement of expenditure incurred

by the claimant on the inspection team's

visit to Philippines in August 1985 US $ 3,881.00

3. L.C. Establishment charges incurred

by the claimant US $ 1,252.82

4. Loss of interest suffered by claimant

from 21.6.83 to 23.7.88 US $ 417,169.95

Total amount of award US $ 899,603.77

In addition to the above, the respondent would also be liable to pay to the
claimant the interest at the rate of 6% on the above amount, with effect from
24.7.1988 up to the actual date of payment by the Respondent in full
settlement of the claim as awarded or the date of the decree, whichever is
earlier.
 I determine the cost at Rs. 70,000/- equivalent to US $5,000 towards the
expenses on Arbitration, legal expenses, stamps duly incurred by the
claimant. The cost will be shared by the parties in equal proportion.

Pronounced at Dehra Dun to-day, the 23rd of July 1988. 2

To enable the petitioner to execute the above award in its favor, it filed a Petition
before the Court of the Civil Judge in Dehra Dun. India (hereinafter referred to as the
foreign court for brevity), praying that the decision of the arbitrator be made "the Rule
of Court" in India. The foreign court issued notices to the private respondent for filing
objections to the petition. The private respondent complied and sent its objections
dated January 16, 1989. Subsequently, the said court directed the private
respondent to pay the filing fees in order that the latter's objections could be given
consideration. Instead of paying the required filing fees, the private respondent sent
the following communication addressed to the Civil judge of Dehra Dun:

The Civil Judge

Dehra Dun (U.P.) India

Re: Misc. Case No. 5 of 1989

M/S Pacific Cement Co.,

Inc. vs. ONGC Case

Sir:

1. We received your letter dated 28 April 1989

only last 18 May 1989.

2. Please inform us how much is the court fee

to be paid. Your letter did not mention the
amount to be paid.

3. Kindly give us 15 days from receipt of your

letter advising us how much to pay to comply
with the same.

Thank you for your kind consideration.

Pacific Cement Co., Inc.

By:

Jose Cortes, Jr.

President 3
Without responding to the above communication, the foreign court refused to admit the
private respondent's objections for failure to pay the required filing fees, and thereafter
issued an Order on February 7, 1990, to wit:

ORDER

Since objections filed by defendant have been rejected through Misc. Suit
No. 5 on 7.2.90, therefore, award should be made Rule of the Court.

ORDER

Award dated 23.7.88, Paper No. 3/B-1 is made Rule of the Court. On the
basis of conditions of award decree is passed. Award Paper No. 3/B-1 shall
be a part of the decree. The plaintiff shall also be entitled to get from
defendant (US$ 899,603.77 (US$ Eight Lakhs ninety nine thousand six
hundred and three point seventy seven only) along with 9% interest per
annum till the last date of realisation. 4

Despite notice sent to the private respondent of the foregoing order and several demands by
the petitioner for compliance therewith, the private respondent refused to pay the amount
adjudged by the foreign court as owing to the petitioner. Accordingly, the petitioner filed a
complaint with Branch 30 of the Regional Trial Court (RTC) of Surigao City for the
enforcement of the aforementioned judgment of the foreign court. The private respondent
moved to dismiss the complaint on the following grounds: (1) plaintiffs lack of legal capacity
to sue; (2) lack of cause of action; and (3) plaintiffs claim or demand has been waived,
abandoned, or otherwise extinguished. The petitioner filed its opposition to the said motion to
dismiss, and the private respondent, its rejoinder thereto. On January 3, 1992, the RTC
issued an order upholding the petitioner's legal capacity to sue, albeit dismissing the
complaint for lack of a valid cause of action. The RTC held that the rule prohibiting foreign
corporations transacting business in the Philippines without a license from maintaining a suit
in Philippine courts admits of an exception, that is, when the foreign corporation is suing on
an isolated transaction as in this case. 5 Anent the issue of the sufficiency of the
petitioner's cause of action, however, the RTC found the referral of the dispute
between the parties to the arbitrator under Clause 16 of their contract erroneous.
According to the RTC,

[a] perusal of the shove-quoted clause (Clause 16) readily shows that
the matter covered by its terms is limited to "ALL QUESTIONS AND
DISPUTES, RELATING TO THE MEANING OF THE SPECIFICATION,
DESIGNS, DRAWINGS AND INSTRUCTIONS HEREIN BEFORE
MENTIONED and as to the QUALITY OF WORKMANSHIP OF THE ITEMS
ORDERED or as to any other questions, claim, right or thing
whatsoever, but qualified to "IN ANY WAY ARISING OR RELATING TO
THE SUPPLY ORDER/CONTRACT, DESIGN, DRAWING,
SPECIFICATION, etc.," repeating the enumeration in the opening
sentence of the clause.

The court is inclined to go along with the observation of the defendant

that the breach, consisting of the non-delivery of the purchased
materials, should have been properly litigated before a court of law,
pursuant to Clause No. 15 of the Contract/Supply Order, herein quoted,
to wit:
 "JURISDICTION

All questions, disputes and differences, arising under out

of or in connection with this supply order, shall be
subject to the EXCLUSIVE JURISDICTION OF THE
COURT, within the local limits of whose jurisdiction and
the place from which this supply order is situated."6

The RTC characterized the erroneous submission of the dispute to the

arbitrator as a "mistake of law or fact amounting to want of jurisdiction".
Consequently, the proceedings had before the arbitrator were null and void
and the foreign court had therefore, adopted no legal award which could be the
source of an enforceable right. 7

The petitioner then appealed to the respondent Court of Appeals which affirmed the
dismissal of the complaint. In its decision, the appellate court concurred with the
RTC's ruling that the arbitrator did not have jurisdiction over the dispute between the
parties, thus, the foreign court could not validly adopt the arbitrator's award. In
addition, the appellate court observed that the full text of the judgment of the foreign
court contains the dispositive portion only and indicates no findings of fact and law
as basis for the award. Hence, the said judgment cannot be enforced by any
Philippine court as it would violate the constitutional provision that no decision shall
be rendered by any court without expressing therein clearly and distinctly the facts
and the law on which it is based. 8 The appellate court ruled further that the dismissal
of the private respondent's objections for non-payment of the required legal fees,
without the foreign court first replying to the private respondent's query as to the
amount of legal fees to be paid, constituted want of notice or violation of due process.
Lastly, it pointed out that the arbitration proceeding was defective because the
arbitrator was appointed solely by the petitioner, and the fact that the arbitrator was a
former employee of the latter gives rise to a presumed bias on his part in favor of the
petitioner. 9

A subsequent motion for reconsideration by the petitioner of the appellate court's

decision was denied, thus, this petition for review on certiorari citing the following as
grounds in support thereof:

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN AFFIRMING

THE LOWER COURT'S ORDER OF DISMISSAL SINCE:

A. THE NON-DELIVERY OF THE CARGO WAS A MATTER PROPERLY

COGNIZABLE BY THE PROVISIONS OF CLAUSE 16 OF THE
CONTRACT;

B. THE JUDGMENT OF THE CIVIL COURT OF DEHRADUN, INDIA WAS

AN AFFIRMATION OF THE FACTUAL AND LEGAL FINDINGS OF THE
ARBITRATOR AND THEREFORE ENFORCEABLE IN THIS
JURISDICTION;

C. EVIDENCE MUST BE RECEIVED TO REPEL THE EFFECT OF A

PRESUMPTIVE RIGHT UNDER A FOREIGN JUDGMENT. 10
The threshold issue is whether or not the arbitrator had jurisdiction over the dispute
between the petitioner and the private respondent under Clause 16 of the contract. To
reiterate, Clause 16 provides as follows:

Except where otherwise provided in the supply order/contract all

questions and disputes, relating to the meaning of the specification
designs, drawings and instructions herein before mentioned and as to
quality of workmanship of the items ordered or as to any other
question, claim, right or thing whatsoever, in any way arising out of or
relating to the supply order/contract design, drawing, specification,
instruction or these conditions or otherwise concerning the materials or
the execution or failure to execute the same during stipulated/extended
period or after the completion/abandonment thereof shall be referred to
the sole arbitration of the persons appointed by Member of the
Commission at the time of dispute. It will be no objection to any such
appointment that the arbitrator so appointed is a Commission employer
(sic) that he had to deal with the matter to which the supply or contract
relates and that in the course of his duties as Commission's employee
he had expressed views on all or any of the matter in dispute or
difference. 11

The dispute between the parties had its origin in the non-delivery of the 4,300 metric
tons of oil well cement to the petitioner. The primary question that may be posed,
therefore, is whether or not the non-delivery of the said cargo is a proper subject for
arbitration under the above-quoted Clause 16. The petitioner contends that the same
was a matter within the purview of Clause 16, particularly the phrase, ". . . or as to any
other questions, claim, right or thing whatsoever, in any way arising or relating to the
supply order/contract, design, drawing, specification, instruction . . .". 12 It is argued
that the foregoing phrase allows considerable latitude so as to include non-delivery of
the cargo which was a "claim, right or thing relating to the supply order/contract". The
contention is bereft of merit. First of all, the petitioner has misquoted the said phrase,
shrewdly inserting a comma between the words "supply order/contract" and "design"
where none actually exists. An accurate reproduction of the phrase reads, ". . . or as
to any other question, claim, right or thing whatsoever, in any way arising out of or
relating to the supply order/contract design, drawing, specification, instruction or
these conditions . . .". The absence of a comma between the words "supply
order/contract" and "design" indicates that the former cannot be taken separately but
should be viewed in conjunction with the words "design, drawing, specification,
instruction or these conditions". It is thus clear that to fall within the purview of this
phrase, the "claim, right or thing whatsoever" must arise out of or relate to the design,
drawing, specification, or instruction of the supply order/contract. The petitioner also
insists that the non-delivery of the cargo is not only covered by the foregoing phrase
but also by the phrase, ". . . or otherwise concerning the materials or the execution or
failure to execute the same during the stipulated/extended period or after
completion/abandonment thereof . . .".

The doctrine of noscitur a sociis, although a rule in the construction of statutes, is

equally applicable in the ascertainment of the meaning and scope of vague
contractual stipulations, such as the aforementioned phrase. According to the
maxim noscitur a sociis, where a particular word or phrase is ambiguous in itself or is
equally susceptible of various meanings, its correct construction may be made clear
and specific by considering the company of the words in which it is found or with
which it is associated, or stated differently, its obscurity or doubt may be reviewed by
reference to associated words. 13 A close examination of Clause 16 reveals that it
covers three matters which may be submitted to arbitration namely,

(1) all questions and disputes, relating to the meaning of the specification designs,
drawings and instructions herein before mentioned and as to quality of workmanship
of the items ordered; or

(2) any other question, claim, right or thing whatsoever, in any way arising out of or
relating to the supply order/contract design, drawing, specification, instruction or
these conditions; or

(3) otherwise concerning the materials or the execution or failure to execute the same
during stipulated/extended period or after the completion/abandonment thereof.

The first and second categories unmistakably refer to questions and disputes relating
to the design, drawing, instructions, specifications or quality of the materials of the
supply/order contract. In the third category, the clause, "execution or failure to
execute the same", may be read as "execution or failure to execute the supply
order/contract". But in accordance with the doctrine of noscitur a sociis, this
reference to the supply order/contract must be construed in the light of the preceding
words with which it is associated, meaning to say, as being limited only to the design,
drawing, instructions, specifications or quality of the materials of the supply
order/contract. The non-delivery of the oil well cement is definitely not in the nature of
a dispute arising from the failure to execute the supply order/contract design,
drawing, instructions, specifications or quality of the materials. That Clause 16 should
pertain only to matters involving the technical aspects of the contract is but a logical
inference considering that the underlying purpose of a referral to arbitration is for
such technical matters to be deliberated upon by a person possessed with the
required skill and expertise which may be otherwise absent in the regular courts.

This Court agrees with the appellate court in its ruling that the non-delivery of the oil
well cement is a matter properly cognizable by the regular courts as stipulated by the
parties in Clause 15 of their contract:

All questions, disputes and differences, arising under out of or in

connection with this supply order, shall be subject to the exclusive
jurisdiction of the court, within the local limits of whose jurisdiction and
the place from which this supply order is situated. 14

The following fundamental principles in the interpretation of contracts and

other instruments served as our guide in arriving at the foregoing conclusion:

Art. 1373. If some stipulation of any contract should admit of several

meanings, it shall be understood as bearing that import which is most
adequate to render it effectual. 15

Art. 1374. The various stipulations of a contract shall be interpreted

together, attributing the doubtful ones that sense which may result from
all of them taken jointly. 16

Sec. 11. Instrument construed so as to give effect to all provisions. In

the construction of an instrument, where there are several provisions or
 particulars, such a construction is, if possible, to be adopted as will
give effect to all. 17

Thus, this Court has held that as in statutes, the provisions of a contract should not
be read in isolation from the rest of the instrument but, on the contrary, interpreted in
the light of the other related provisions. 18The whole and every part of a contract must
be considered in fixing the meaning of any of its harmonious whole. Equally
applicable is the canon of construction that in interpreting a statute (or a contract as
in this case), care should be taken that every part thereof be given effect, on the
theory that it was enacted as an integrated measure and not as a hodge-podge of
conflicting provisions. The rule is that a construction that would render a provision
inoperative should be avoided; instead, apparently inconsistent provisions should be
reconciled whenever possible as parts of a coordinated and harmonious whole. 19

The petitioner's interpretation that Clause 16 is of such latitude as to contemplate

even the non-delivery of the oil well cement would in effect render Clause 15 a mere
superfluity. A perusal of Clause 16 shows that the parties did not intend arbitration to
be the sole means of settling disputes. This is manifest from Clause 16 itself which is
prefixed with the proviso, "Except where otherwise provided in the supply
order/contract . . .", thus indicating that the jurisdiction of the arbitrator is not all
encompassing, and admits of exceptions as may be provided elsewhere in the supply
order/contract. We believe that the correct interpretation to give effect to both
stipulations in the contract is for Clause 16 to be confined to all claims or disputes
arising from or relating to the design, drawing, instructions, specifications or quality
of the materials of the supply order/contract, and for Clause 15 to cover all other
claims or disputes.

The petitioner then asseverates that granting, for the sake of argument, that the non-
delivery of the oil well cement is not a proper subject for arbitration, the failure of the
replacement cement to conform to the specifications of the contract is a matter clearly
falling within the ambit of Clause 16. In this contention, we find merit. When the 4,300
metric tons of oil well cement were not delivered to the petitioner, an agreement was
forged between the latter and the private respondent that Class "G" cement would be
delivered to the petitioner as replacement. Upon inspection, however, the replacement
cement was rejected as it did not conform to the specifications of the contract. Only
after this latter circumstance was the matter brought before the arbitrator.
Undoubtedly, what was referred to arbitration was no longer the mere non-delivery of
the cargo at the first instance but also the failure of the replacement cargo to conform
to the specifications of the contract, a matter clearly within the coverage of Clause 16.

The private respondent posits that it was under no legal obligation to make
replacement and that it undertook the latter only "in the spirit of liberality and to foster
good business relationship". 20 Hence, the undertaking to deliver the replacement
cement and its subsequent failure to conform to specifications are not anymore
subject of the supply order/contract or any of the provisions thereof. We disagree.

As per Clause 7 of the supply order/contract, the private respondent undertook to

deliver the 4,300 metric tons of oil well cement at "BOMBAY (INDIA) 2181 MT and
CALCUTTA 2119 MT". 21 The failure of the private respondent to deliver the cargo to
the designated places remains undisputed. Likewise, the fact that the petitioner had
already paid for the cost of the cement is not contested by the private respondent. The
private respondent claims, however, that it never benefited from the transaction as it
was not able to recover the cargo that was unloaded at the port of Bangkok. 22 First of
all, whether or not the private respondent was able to recover the cargo is immaterial
to its subsisting duty to make good its promise to deliver the cargo at the stipulated
place of delivery. Secondly, we find it difficult to believe this representation. In its
Memorandum filed before this Court, the private respondent asserted that the Civil
Court of Bangkok had already ruled that the non-delivery of the cargo was due solely
to the fault of the carrier. 23 It is, therefore, but logical to assume that the necessary
consequence of this finding is the eventual recovery by the private respondent of the
cargo or the value thereof. What inspires credulity is not that the replacement was
done in the spirit of liberality but that it was undertaken precisely because of the
private respondent's recognition of its duty to do so under the supply order/contract,
Clause 16 of which remains in force and effect until the full execution thereof.

We now go to the issue of whether or not the judgment of the foreign court is
enforceable in this jurisdiction in view of the private respondent's allegation that it is
bereft of any statement of facts and law upon which the award in favor of the
petitioner was based. The pertinent portion of the judgment of the foreign court reads:

ORDER

Award dated 23.7.88, Paper No. 3/B-1 is made Rule of the Court. On the
basis of conditions of award decree is passed. Award Paper No. 3/B-1
shall be a part of the decree. The plaintiff shall also be entitled to get
from defendant (US$ 899,603.77 (US$ Eight Lakhs ninety nine thousand
six hundred and three point seventy seven only) along with 9% interest
per annum till the last date of realisation. 24

As specified in the order of the Civil Judge of Dehra Dun, "Award Paper No. 3/B-1
shall be a part of the decree". This is a categorical declaration that the foreign court
adopted the findings of facts and law of the arbitrator as contained in the latter's
Award Paper. Award Paper No. 3/B-1, contains an exhaustive discussion of the
respective claims and defenses of the parties, and the arbitrator's evaluation of the
same. Inasmuch as the foregoing is deemed to have been incorporated into the
foreign court's judgment the appellate court was in error when it described the latter
to be a "simplistic decision containing literally, only the dispositive portion". 25

The constitutional mandate that no decision shall be rendered by any court without
expressing therein dearly and distinctly the facts and the law on which it is based
does not preclude the validity of "memorandum decisions" which adopt by reference
the findings of fact and conclusions of law contained in the decisions of inferior
tribunals. In Francisco v. Permskul, 26 this Court held that the following memorandum
decision of the Regional Trial Court of Makati did not transgress the requirements of
Section 14, Article VIII of the Constitution:

MEMORANDUM DECISION

After a careful perusal, evaluation and study of the records of this

case, this Court hereby adopts by reference the findings of fact and
conclusions of law contained in the decision of the Metropolitan Trial
Court of Makati, Metro Manila, Branch 63 and finds that there is no
cogent reason to disturb the same.
 WHEREFORE, judgment appealed from is hereby affirmed in
toto. 27 (Emphasis supplied.)

This Court had occasion to make a similar pronouncement in the earlier case
of Romero v. Court of Appeals, 28 where the assailed decision of the Court of
Appeals adopted the findings and disposition of the Court of Agrarian
Relations in this wise:

We have, therefore, carefully reviewed the evidence and made a re-

assessment of the same, and We are persuaded, nay compelled, to
affirm the correctness of the trial court's factual findings and the
soundness of its conclusion. For judicial convenience and expediency,
therefore, We hereby adopt by way of reference, the findings of facts
and conclusions of the court a quo spread in its decision, as integral
part of this Our decision. 29 (Emphasis supplied)

Hence, even in this jurisdiction, incorporation by reference is allowed if only to

avoid the cumbersome reproduction of the decision of the lower courts, or
portions thereof, in the decision of the higher court. 30 This is particularly true
when the decision sought to be incorporated is a lengthy and thorough
discussion of the facts and conclusions arrived at, as in this case, where
Award Paper No. 3/B-1 consists of eighteen (18) single spaced pages.

Furthermore, the recognition to be accorded a foreign judgment is not necessarily

affected by the fact that the procedure in the courts of the country in which such
judgment was rendered differs from that of the courts of the country in which the
judgment is relied on. 31 This Court has held that matters of remedy and procedure are
governed by the lex fori or the internal law of the forum. 32 Thus, if under the
procedural rules of the Civil Court of Dehra Dun, India, a valid judgment may be
rendered by adopting the arbitrator's findings, then the same must be accorded
respect. In the same vein, if the procedure in the foreign court mandates that an Order
of the Court becomes final and executory upon failure to pay the necessary docket
fees, then the courts in this jurisdiction cannot invalidate the order of the foreign
court simply because our rules provide otherwise.

The private respondent claims that its right to due process had been blatantly
violated, first by reason of the fact that the foreign court never answered its queries as
to the amount of docket fees to be paid then refused to admit its objections for failure
to pay the same, and second, because of the presumed bias on the part of the
arbitrator who was a former employee of the petitioner.

Time and again this Court has held that the essence of due process is to be found in
the reasonable opportunity to be heard and submit any evidence one may have in
support of one's defense 33 or stated otherwise, what is repugnant to due process is
the denial of opportunity to be heard. 34 Thus, there is no violation of due process even
if no hearing was conducted, where the party was given a chance to explain his side
of the controversy and he waived his right to do so. 35

In the instant case, the private respondent does not deny the fact that it was notified
by the foreign court to file its objections to the petition, and subsequently, to pay legal
fees in order for its objections to be given consideration. Instead of paying the legal
fees, however, the private respondent sent a communication to the foreign court
inquiring about the correct amount of fees to be paid. On the pretext that it was yet
awaiting the foreign court's reply, almost a year passed without the private
respondent paying the legal fees. Thus, on February 2, 1990, the foreign court rejected
the objections of the private respondent and proceeded to adjudicate upon the
petitioner's claims. We cannot subscribe to the private respondent's claim that the
foreign court violated its right to due process when it failed to reply to its queries nor
when the latter rejected its objections for a clearly meritorious ground. The private
respondent was afforded sufficient opportunity to be heard. It was not incumbent
upon the foreign court to reply to the private respondent's written communication. On
the contrary, a genuine concern for its cause should have prompted the private
respondent to ascertain with all due diligence the correct amount of legal fees to be
paid. The private respondent did not act with prudence and diligence thus its plea that
they were not accorded the right to procedural due process cannot elicit either
approval or sympathy from this Court. 36

The private respondent bewails the presumed bias on the part of the arbitrator who
was a former employee of the petitioner. This point deserves scant consideration in
view of the following stipulation in the contract:

. . . . It will be no objection any such appointment that the arbitrator so

appointed is a Commission employer (sic) that he had to deal with the
matter to which the supply or contract relates and that in the course of
his duties as Commission's employee he had expressed views on all or
any of the matter in dispute or difference. 37 (Emphasis supplied.)

Finally, we reiterate hereunder our pronouncement in the case of Northwest Orient

Airlines, Inc. v. Court of Appeals 38 that:

A foreign judgment is presumed to be valid and binding in the country

from which it comes, until the contrary is shown. It is also proper to
presume the regularity of the proceedings and the giving of due notice
therein.

Under Section 50, Rule 39 of the Rules of Court, a judgment in an action

in personam of a tribunal of a foreign country having jurisdiction to
pronounce the same is presumptive evidence of a right as between the
parties and their successors-in-interest by a subsequent title. The
judgment may, however, be assailed by evidence of want of
jurisdiction, want of notice to the party, collusion, fraud, or clear
mistake of law or fact. Also, under Section 3 of Rule 131, a court,
whether of the Philippines or elsewhere, enjoys the presumption that it
was acting in the lawful exercise of jurisdiction and has regularly
performed its official duty. 39

Consequently, the party attacking a foreign judgment, the private respondent

herein, had the burden of overcoming the presumption of its validity which it
failed to do in the instant case.

The foreign judgment being valid, there is nothing else left to be done than to order its
enforcement, despite the fact that the petitioner merely prays for the remand of the
case to the RTC for further proceedings. As this Court has ruled on the validity and
enforceability of the said foreign judgment in this jurisdiction, further proceedings in
the RTC for the reception of evidence to prove otherwise are no longer necessary.

WHEREFORE, the instant petition is GRANTED, and the assailed decision of the Court
of Appeals sustaining the trial court's dismissal of the OIL AND NATURAL GAS
COMMISSION's complaint in Civil Case No. 4006 before Branch 30 of the RTC of
Surigao City is REVERSED, and another in its stead is hereby rendered ORDERING
private respondent PACIFIC CEMENT COMPANY, INC. to pay to petitioner the
amounts adjudged in the foreign judgment subject of said case.

SO ORDERED.