TodayisThursday,September04,2014

RepublicofthePhilippines
SUPREMECOURT
Manila

ENBANC

G.R.No.L9090September10,1957

EASTBOARDNAVIGATION,LTD.,plaintiffappellant,
vs.
JUANYSMAELandCOMPANY,INC.,defendantappellant.

Ross,Selph,Carrascoso&JandaandDelfinL.Gonzalesfortheplaintiffandappellant.
ClaroM.Rectoforthedefendantandappellant.

BAUTISTAANGELO,J.:

ThisisanappealfromadecisionoftheCourtofFirstInstanceofManilaorderingdefendanttopaytoplaintiffthe
sumof$53,037.89asawardedbyboardofarbitratorsonJune20,1950andconfirmedbytheDistrictCourtof
NewYork,U.S.A.onAugust15,1950,withthelegalinterestthereonfromDecember5,1950untilitspayment,
andthecostsofsuit.

Thefactsinvolvedinthiscasewhicharenecessarytobeconsideredinthisappealarestatedbythetrialcourtin
itsdecisionwhichwefindtobesubstantiallycorrect.Theyare:"OnJuly25,1949,Atkins,Kroll&Co.,Inc.,Manila,
wrote defendant Juan Ysmael & Co., Inc., (letter of Toronto, Canada, owners of the S/S Eastwater, 'have
acceptedyourtermsofpaymentandareagreedtochartertheS/SEastwatertoJuanYsmael&Co.,Inc.,Manila,
(toloadcargoofscrapironinthePhilippinesforBuenosAires)underthefollowingtermsandconditions:..(10)
ClauseParamount: Terms and conditions for this Charter Party not explicitly or otherwise stated in this letter of
confirmationaretobeaspergeneralconditionsofregularCharterPartyform.Willyoukindlysignifyconfirmation
of the above terms by signing the original and four copies of this letter? A formal copy of the Charter Party
documentwillbeforwardedtoyouwithinafewdays.Atkins,Kroll&Co.,Inc.,Manila,actingsolelyasagentsfor
andinbehalfoftheownersoftheS/SEastwaterbycableorlettertoallpartiesconcernedandthatthecargowill
go forward as scheduled in a satisfactory manner,' Defendant signed said letter thus, 'For Charter Party: Juan
Ysmael&Co.,Inc.,K.H.Hemady,President.'Onthesamedate,July25,1949,charterpartyagreement(Exhibit
A)wasexecutedcontaining,besidestheregularcharterpartyprintedfromatypewrittenclausereading:'Clauses
Nos.16to31inclusiveandU.S.A.ClauseParamount,warRisksClauses1and2,NowJasonClauseandBoth
toBlame Collision Clauses, as attached, to be considered as fully incorporated herein and to form part of this
CharterParty.'ClauseNo.29readsasfollows:

"ItismutuallyagreedthatshouldanydisputearisebetweenOwnersandCharterers,thematterindispute
shallbereferredtothreepersonsatNewYorkforarbitration,onetobeappointedbyeachoftheparties
hereto,andthethirdbythetwosochosentheirdecisionorthatofanytwoofthem,shallbefinal,andfor
thepurposeofenforcinganyaward,thisagreementmaybemadearuleoftheCourt.Thearbitratorsshall
becommercialmen.shouldthetwosochosennotbeabletoagreewhothethirdarbitratorshouldbe,then
theNewYorkProduceExchangeistoappointsuchthirdarbiter,Theamountindisputeshallbeplacedin
escrowatNewYorksubjecttothedecisionofthearbitrators."

OnSeptember8,1949,Atkins,Kroll&Co.,Inc.,Manilaagainwrotedefendantcompanyasfollows(letter
Exhibit3):

"We are today in receipt of the following cable instructions from our principals the Eastboard Navigation
Ltd.,regardingthereleaseofyourscrapironloadedatManila

'Re Yours sixth release bladings against full payment of freight and by Irving Trust New York fifteen
thousand dollars covering possible demurrage to be settled in accordance with the ruling of arbitration
boardNewYorkpleasehaveYsmaelimmediatelytheirarbitrator'

"InordertofacilitateyournegotiationsofyourdocumentwiththeBankofAmericaweshallappreciatevery
muchyourputtingupaguaranteebyIrvingTrustNewYorkforthesumofUS$15,000.00andtonominate
thenameofyourarbitratorimmediately."

On October 1, 1949, the Bank of America, Manila Office wrote defendant company (letter Exhibit 3A) as
follows:

"InaccordancewithverbalinstructionsofyourPresident,Mr.K.H.Hemadyyourdraftfor$76,354.55and
attacheddocumentswereairmailedthismorningtotheabovebanktogetherwiththerelativebillsoflading
whichweresurrenderedtousbyAtkinsKroll&Co.,Inc.,foraccountandbyorderofEastboardNavigation,
Ltd.ofToronto.

"Thedocuments,whichweresentforcollection,coveredthethirdandlastundertheassignmentmadeto
youbyMr.HectorCorveraunderthetermsofthesubjectcreditandcover:" 1wphl.nt

xxxxxxxxx

'DepositaccountDemurrageunderArbitration$15,000. 1wphl.nt

xxxxxxxxx

"WehaverequestedtheIrvingTrustCompanytoadviseusbycablewhentheaboveamountshavebeen
paid.Intheeventofnonpayment,wehaverequestedthattheydeliverthebillsofladingtotheEastboard
NavigationLtd.,underadvice.

"Weexpecttobeabletoreporttoyouontheabovedescribedcollectionsometimenextweek."

On December 3, 1949, defendant Company wrote the Bank of America (Manila)(letter Exhibit 3B) as
follows:

"PleasetransmitbytelegraphictransfertoIrvingTrustCompany,NewYork,theamountofTenThousand
Dollars($10,000),fortheaccountofEastboardNavigationLtd.,Toronto,Canada,tobeheldasdepositfor
demurrageduetheSSEastwater,togetherwiththe$15,000previouslyremittedtothem.Theamountshall
beheldpendingresultofthearbitrationofthedisputebetweenthisCompanyandEastboardNavigation."

The dispute mentioned in its preceding letter having arisen, under date of April 5, 1950, the defendant
cabledAttys.Manning,HarnishandHolingerofNewYorkCityasfollows:'ThroughrecommendationofMr.
Morris Lipsett we request you kindly present our case before Arbitration Board re charter vessel S/S
Eastwater Writing" (Exhibit 2). And in its letter Exhibit 2B of the same date to said attorneys, defendant
confirmeditsrequestasfollows:

"Our good friend, Mr. Morris E. Lipsett Pacific Corporation, 80 Wall Street New York, has highly
recommendedyourlawfirmtoustopresentourcasetoarbitrationinacasewehavewiththeEastboard
Navigation Co., Inc., in connection with our charter of their vessel the S/S Eastwater. May we, therefore,
requestyoutoactassuchattorneyforus,andyoumaybillusaccordinglyforyourservicesinmatter.

"Wehavealreadyspentaconsiderablesumofthiscase,nottomentiontheinconvenienceithascaused
us,andwearemostanxioustothematterbeterminatedassoonaspossible.

"PertinentpapersanddocumentsregardingthematterhavebeenturnedovertoMr.Lipsett,andwehave
requestedhimtoturnthoseovertoyouforyourpurposes.Shouldyou,however,needfurtherinformation
regardingthematters,orshouldyouneedourassistanceatthisend,pleasefeetoaskus."

OnMay23,1959,Messrs,Manning,Harnisch,andHolinger,actingasattorneysfordefendantJuanIsmael
&Co.,Inc.,executedforplaintiffEastboardNavigationLtd.,arbitrationagreement(ExhibitB)whichreads:

"We,theundersigned,herebymutuallycovenantandagreetosubmit,andherebydosubmittoCharlesL.
Lambert, Richard Nathan and Donald E. Simmons, as Arbitrators, for their adjudication and award, a
controversyexistingbetweenusrelatingtotheliabilityifany,oftheundersigned,JuanYsmael&Co.,Inc.,
charterers to the undersigned, Eastboard Navigation, Ltd., owners of the S/S Eastwater , for demurrage,
discharging expenses, wharfage, extra meals agency fees, crew overtime and miscellaneous expenses
undercharterpartyoftheS/SEastwaterdatedJuly25th,1949.

"AndwemutuallycovenantandpromisethattheawardtobemadebysaidArbitratorsorbyamajorityof
them,shallbewellandfaithfullykeptandobservedbyus,andbyeachofus.

"AnditisherebyfurthermutuallyagreedthatajudgmenttheUnitedStatesDistrictCourtfortheSouthern
DistrictofNewYorkshallberenderedupontheawardmadepursuanttothissubmission. 1wphl.nt

"WITNESS,ourhandsthis23rddayofMay,1950." 1wphl.nt
 Pursuanttosaidarbitrationagreement,thethreearbitratorsinNewYorkCitypasseduponthedifference
betweentheplaintiffandthedefendantafterhavingheardandreceivedevidencesubmittedbybothsides,'
ands rendered their arbitration decision (Exhibit C). This arbitration decision was presented by plaintiff to
theU.SDistrictCourt,SouthernDistrictofNewYork,forconfirmation,(AdmiraltyNo.A165362)andsaid
CourtconfirmedthesaidarbitrationdecisioninitsOrderandFinalDecreeofAugust15,1950,(ExhibitD)
orderingthattheaforesaidawardofarbitratorsbeandthesameherebyisinallrespectsconfirmed',and
"thatthesaidmovant,EastboardNavigation,Ltd.,recoverofandfromthesaidrespondentJuanYsmael&
Company,Inc.,thesumof$53,037.89,withinterestthereonfromthe20thdayofJune,1950,amountingto
$488.24, together the movant's cost taxed in the sum of $40.00 and amounting in all to the sum of
$53,566.13withinterestthereonuntilpaid.'

Plaintiffbroughtthisactiontoenforcetheaforesaid"OrderandFinalDecree"pursuanttoSection48,Rule39of
the Rules of Court which, among others, provides "In case of a judgment is presumptive evidence of a right as
betweenthepartiesandtheirsuccessorsininterestbyasubsequenttitlebutthejudgmentmayberepelledby
evidenceofawantofjurisdiction,wantofnoticetotheparty,collusion,fraudorclearmistakeoflaworfact."

Defendant,initsanswer,setupthedefensethatsaidjudgmentcannotbeenforcedinthisjurisdictionbecause.

(a)whentheNewYorkDistrictCourtactedonthecaseitdidnothavejurisdictionoverthepersonofdefendant
and (b) the proceeding where said judgment was rendered was summary, there was no trial on the merits and
defendant did not give its consent thereto. Defendant contends that judgment does come with the purview of
Section48,oftheRulesofCourt.

Duringthehearing,thepartiesagreedastothefollowingfacts.Thatdefendantisacorporationthestockofwhich
isheldasfollows:MagdalenaHemady,8,459sharesK.H.Hemady,6,939sharesFelipeYsmael,770shares
Carlos Komel Ysmael, 830 shares Juan Ysmael y Cortes, 1 share and Gabriel Ysmael, 1 share or a total of
17,000 shares that plaintiff, during that time material to this case, was not licensed to transact business in the
Philippinesthatthisisthefirstbusinesstransactionmadelocallybyplaintiffalthoughpreviouslyplaintiff'svessel
wascharteredbytheNationalRiceandCornCorporationtocarryriceCargotothePhilippines,thecharterparty
theretobeingdatedApril5,1949thatthecharterpartyExhibitAisonapprovedbytheDocumentaryCouncilof
theBalticandWhiteSeaConferenceandthatoneofitsstandardstipulationisaclauseregardingarbitration:that
K. H. Hemady, now deceased, as president and general manager of defendant, for 25, years had entered into
numerousothercontractswiththirdpartiesinrepresentationofdefendantallofwhichwhereratifiedbyitsBoard
of Directors that one of the arbitrators Richard Nathan was appointed by defendant corporation, another one
DonaldE.Simmonswasappointedbyplaintiff,andthesetwoappointedathirdoneCharlesP.Lambertandthat
the defense that K. H. Hemady was not authorized by the Board of Directors of defendant corporation to enter
into the arbitration agreement was raised for the first time in these proceedings, which means that it was not
raised in the arbitration proceedings in New York, nor in the proceedings held to confirm the award in the U.S.
District Court of the Southern District of New York. In addition this stipulation of facts, plaintiff and defendant
submitteddocumentaryevidence.

The lower court rendered judgment affirming the decree of the New York District Court and ordering that it be
enforcedfromwhichdefendantappealed.Plaintifflikewiseappealedbutonlyonthescorethatthecourtdidnot
declare defendant liable for the amount of the foreign exchange tax due on the judgment and for the fees it
agreedtopaytoitscounselforthislitigation.Wewilldiscussseparatelytheissuesinvolvedinthisjointappeal.

Itisplaintiffappellant'scontentionthat,ifthedecisionofthelowercourtisaffirmed,itwillhavetopaytheforeign
exchangetaxontheamountawardedthereinifthesameistoberemittedtoitshomeofficeatOntario,Canada
that it should have been exempted from said tax had defendant paid the award immediately after it had been
confirmedbytheU.S.NewYorkDistrictCourtbecauseatthattimeRepublicActNo.601hadnotyetbeenacted
andthatbecausedefendant'sunduerefusaltopaythesamewhichgaverisktosaidtaxliability,plaintiffwillhave
toshoulderthesame.Thisisalosswhichdefendantshallpay,plaintiffcontends,underArticle1107oftheOld
CivilCode.

Inthefirstplace,thereisnoclearproofonrecordthatdefendant'srefusaltopaytheawardisduetofraudorbad
faith.Plaintifffailedtopresentanyevidenceinthisregard.Onthecontrary,thestandofdefendantdoesnotseem
to be entirely groundless as evidence by the several defenses it set up in its answer which give a clear
perspectiveofthereasonswhyitdeclinedtopaytheawardwhichplaintiffdemands.Inthesecondplace,itwould
appear that, if there is any agreement to pay the instant obligation in a currency other than the Philippine
currency, the same is null policy (Republic Act No. 529), and the most it could be demanded is to pay said
obligationinPhilippinecurrencytobemeasuredintheprevailingrateofexchangeatthetimetheobligationwas
incurred(section1,Idem.)FinallyinasmuchasthedecreeofNewYorkDistrictCourtwhichnowsoughttobe
enforceddoesnotspecifytheplacewheretheobligationshouldbepaid,thejudgmentdebtor,hereindefendant,
maydischargethesamehereinManilawhichisitsdomicile.Wefindthereforenovalidreasonforupholdingthe
claimthatdefendant,shoulditbeorderedtopaytheaward,paytheforeignexchangetaxrequiredbylawatthe
timetheobligationfelldue.Atanyrate,thisquestionwouldappearnowtobemootforthereasonthatsaidtax
hasalreadybeenabolished(RepublicActNo.1394).
The next issue raised by plaintiffappellant refers to the failure of the lower court to award to it the fees which
agreedtopaytoitscounselinconnectionwiththepresentlitigationunderArticle2208,subparagraph5,ofthe
new Civil Code. The alleged subparagraph allows a winning party to recover attorney's fees "where the
defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and
demandable claim." From this it would appear that to the entitle plaintiff to Attorney's fee on this ground, it is
necessary that it be proven that defendant acted "in gross and evident bad faith" in refusing plaintiff's claim.
Since,aswehavealreadystated,plaintiffdidnotpresentanyevidenceonthispoint,thelowercourtdidnoterrin
denyingplaintiff'sclaimonthisscore.

Coming now to the appeal of defendant, we may restate the main issues raised in its assignment of errors as
follows: (a) whether or not defendant agreed to submit to compulsory arbitration its dispute with plaintiff in the
charterpartyagreementexecutedbetweenthem,and,intheaffirmative,whethersuchagreementisvalidinthe
jurisdiction(b)whetherornotthearbitrationagreementExhibitB,isbindingondefendantand,intheaffirmative,
whetherornotthearbitrationproceedingsaswellasthearbitrators'decision,arevalidandbindingondefendant
(c) whether or not, on the assumption that said proceedings and decisions are valid, the decree of the U.S.
DistrictCourt,SouthernDistrictofNewYork,sittingasAdmiraltyCourt,isvalidandenforceableinthisjurisdiction
and(d)whetherornotplaintiff,beingaforeigncorporationwithoutlicensetotransactbusinessinthePhilippines,
hascapacitytosueinthisjurisdiction.

(a) it should be recalled that as a confirmation of the correspondence had between plaintiff's agents in the
Philippinesanddefendant,prescribedbyitsPresidentK.H.Hemady,theformersentaletteradvisingtheletter
that plaintiff had accepted its offer to charter plaintiff's vessel S/S Eastwater to load cargo of scrap iron in the
PhilippinesforBuenosAiresundercertaintermsandconditionsthereinenumerated(Exhibit1).Inthisletteritis
statedthatthetermsandconditionsforthischarterofconfirmationaretobeaspergeneralconditionsofregular
charterpartyform",aformalcopyofwhichwouldbeforwardedtodefendant.Thiswasdone,andtheformabove
referred to is Exhibit A which was duly signed by plaintiff, through its president, and by defendant, through its
presidentandgeneralmanager,K.H.Hemady.Thisdocumentisinprintedinformwiththeblanksproperlyfilled
out,atthebottomofwhichappearsatypewrittenclausewhichstates,"ClausesNos.16to31inclusiveandU.S.
A. Clause Paramount, War Risks Clauses 1 and 2, Now Jason Clause and BothtoBlame Collision Clauses, as
attached, to be considered as fully incorporated herein and to form part of this Charter Party." (Emphasis
supplied)BoththeprintedformandthetypewrittensheetcontainingClausesNos.16to31inclusive,weresigned
by the contracting parties. Clause 29 in the typewritten form refers to the arbitration agreement, and reads as
follows:

29.ItismutuallyagreedthatshouldanydisputearisebetweenOwnersandtheCharterers,thematterin
disputeshallbereferredtothreepersonsatNewYorkforarbitration,onetobeappointedbyeachofthe
partieshereto,andthethirdbythetwosochosentheirdecisionorthatofanytwoofthemshallbefinal,
and for the purpose of enforcing any award, this agreement may be a rule of the Court. The Arbitrators
shallbecommercialmen.ShouldthetwosochosennotbeabletoagreewhothethirdArbitratorshouldbe,
then the New York Produce Exchange is to appoint such third Arbiter. The amount in dispute shall be
placedinescrowNewYork,subjecttothedecisionofthearbitrators. 1wphl.nt

ItisnowcontendedthatwhileK.H.HemadyhadsignedExhibitAwhichcontainsatypewrittenclauseattheend
ofthedocument,aswellasthetypewrittensheetsattachedthereto,whereinisembodiedClause29whichrefers
tothearbitrationagreement,thefacthoweveristhatHemadysignedsaidpaperswithoutreadingthesameand
solelyontheassumptionthattheymerelyformalizedthetermsandconditionsalreadyagreeduponintheletterof
confirmationExhibit1.ItisemphasizedthatHemadyneverintendedtosubmitanydisputethatmayariseoutof
itscharterpartytocompulsoryarbitration,muchlesstorecognizethefindingsorawardofthearbitratorsthatmay
beappointedbythepartiesasfinalandnotsubjecttoreviewbyourcourts.ItisfurthercontendedthatHemady
signedthedocumentExhibitAthatthesamewouldmerelywithits"generalconditions"thetermsandconditions
stated in the letter of confirmation Exhibit 1, and the typewritten clause attached to the document Exhibit A,
specially that which provides for foreign arbitration, refers to special conditions which were not intended by the
partiesnorincludedinthepreliminarynegotiationconductedbetweenthem.ThisstandofHemadycorroborated
by the fact that when he received from his lawyers the arbitration agreement Exhibit B, he refused to sign it
becauseitwasneverdisputewithplaintifftocompulsoryarbitration.

There are many circumstances on record which discredit this claim Of defendantappellant. To begin with, it
appearsthatthecharterpartyagreementExhibitAisonetheoriginalofwhichwasapprovedbytheDocumentary
CounciloftheBalticWhitSeaConferencein1922andoneofitsstandardclausesisthearbitrationclauseandas
much as the latter, though in typewritten form, is considered as integral part of the agreement. This fact was
admitted by defendant's counsel. In the second place, Hemady as it would appear, signed not only the printed
portionofthecharterpartyagreement,butthetypewrittenportionsaswell,whichcontainsthearbitrationclause,
and it cannot be believed that a businessman of long experience as he was, would affix his signature to the
document involving a very important transaction without knowing its contents and would do only on the
assumptionthatitcontainedmereformalizedstatementsofthetermsandconditionsoftheletterofconfirmation
Exhibit 1. Moreover, if Hemady did not intend to submit his dispute with plaintiff to arbitration Messrs. Manning,
HarnischandHolingeraslawyertorepresentdefendantcorporationinthearbitrationproceedingstobeheldin
NewYork?(Exhibits2and2B)WhydidheinstructtheBankofAmericaontwodifferentoccasionstotransmitto
theIrvingTrustCompanyofNewYorkthetotalsumof$25,000tobe"heldpendingresultofthearbitrationofthe
disputebetweenthiscompany(Ysmael)andEastboardNavigation,Ltd.?"(Exhibit3B)Ifdefendantcorporation
didnotreallyintendtosubmititsdisputewiththeplaintifftoarbitrationthelogicalstepitshouldhavetakenwould
betorepudiatetheactofitsPresidentHemady,butfarfromdoingso,itapprovedandratifieditbysubsequent
thatitwasagreeabletosaidarbitration.

b)TheclaimthatthearbitrationproceedingsconductedinNewYorkaswellastheawardofthearbitratorscannot
binddefendantcorporationforthereasonthatthesamewerewithoutitsauthorityorcontrarytoitsinstructionsis
alsountenable.Itistruethatwhendefendant'scounselsentthedocumentExhibitBtoitsPresidentK.H.Hemady
forhissignature,thelatterreturneditbutthatdefendant'scounselneverthelesssignedthedocumentinbehalfof
defendant and submitted it to the Board of Arbitrators, and this act is now alleged as one would indicate that
defendant did not agree to submit the dispute to arbitrations. But there is one circumstance which justifies the
action taken by defendants counsel in New York. Note that said document Exhibit B is mistakenly termed
"arbitrationagreement",foritisnotso.Aperusalthereofwouldshowthatitisamereagreementtosubmitthe
disputetothearbitratorsforarbitrationandaward.Suchisnecessaryfortherecouldbenovalidarbitrationand
awardifthearbitratorswouldnotknowwhattoarbitrateanddecide.ThearbitrationagreementisClause29of
thecharterPartyExhibitA.ThefactthatHemadyreturnedsaiddocumentExhibitBisofnosignificanceforsuch
ispreviouslygivenbydefendanttoitscounselMessrs.Manning,HarnischandHolinger"topresentourcaseto
thearbitratorsinacasewehavetheEastboardNavigationCo.,Ltd.,inconnectionwithourcharteroftheirvessel
theS/SEastwater."containedinitsletterdatedApril5,1950(Exhibit2B).ThesigningofsaiddocumentExhibitB
by defendant's counsel is therefore perfectly within the scope of the authority given them by defendant
corporation.

Butdefendantinsiststhatthedecisionofthearbitratorsisnotbindinguponitbecause(1)noneofthearbitrators
whoactedthereoninaccordancewiththearbitrationagreementhadbeenappointedbydefendant,and(2)even
if the appointment of Attys. Manning, Harnisch and Holinger to represent defendant before the arbitration boar
would be considered as an authority to submit their dispute to arbitration board is nevertheless void because it
wasnotinaccordancewiththeconditionofsaidsubmissionthatthearbitratorsconsideronlyclaimsorawards
notinexcessof$25,000.

Theclaimthatnoneofthethreearbitratorswhoactedonthedisputewasappointedbydefendant,orunderits
authority,isuntenable,forthesameisdisprovedbytheevidence.Thusduringthetrialofthiscaseandparties
agreed say to certain facts which appear to be not disputed among them being that one of the arbitrators who
acted in New York on the case, Richard Nathan, was appointed by authority of defendant corporation, and his
appears to be supported by the decision of the New York District Court. Thus, in said decision it appears that
when the case was called for hearing both parties were represented by counsel who submitted documentary
evidenceamongwhich(1)copyoftheauthorizationsignedbythedefendantcorporationempoweringoneMorris
E,Lipsetttoappointasubstitutearbitratorinitsbehalf,(2)copyofaletterofsaidMorrisE.Lipsettdesignating
RichardNathanasarbitrator,and(3)copyoftheletterofRichardNathanacceptinghisappointmentasarbitrator
(ExhibitD).NotethatMr.MorrisE.Lipsettisthesamepersonwho,accordingtoK.H.Hemady,recommended
Messrs.Manning,HarnischandHolingertobehislawyersinthearbitrationcaseinNewYorkandthatbecausehe
was his good friend Hemady accepted his recommendation (Exhibit 2B). On the strength of this evidence, we
cannotthereforetakeseriouslythatcontentionthattheperson,RichardNathan,whoactedasarbitratorinbehalf
ofrespondent,didsowithouttheauthorityofthelatter.

Ofcourse,defendantnowcontendsthatthedecisionofthearbitratorscanhavenobindingeffectonitbecauseit
wasrenderedwithoutfirstobtainingitswrittenconformityofapproval,orwithoutitslawyerhavingfirstsubmitted
tothemattertoitforconsultation,inaccordancewiththeinstructionithasgiveninitsletterdatedApril20,1950
(Exhibit2C),butcertainly,suchinstruction,ifany,ispreposterousunderthecircumstances,fortoallowthatto
prevailwouldbetodefeattheverypurposeofthearbitration.Theproceedingwouldbepurposelessfornoaward
canbeobtainedifthesameshouldbemadedependentupontheinstructionorapprovalofanyoftheparties.

The contention that defendant corporation has limited its agreement to arbitrate to an amount not exceeding
$25,000 cannot also be sustained. Such claims is not borne out by the evidence for neither the cable nor the
letterwhichdefendantsenttoitslawyersinNewYorkcontainsanystatementlimitingtheirauthoritytorepresentit
to disputes not exceeding $25,000. In other words, there is no evidence whatsoever in the record showing that
Mr.Hemadyunderstood,orwasmadetounderstand,thatthearbitrationproceeding"wouldbeconductedsolely
forthepurposeoffriendlyadjustmentofdisputeslimitedtoandnotexceedingtheamountof$25,000."Moreover,
the aforesaid deposit merely represents an estimate of the amounts that may accrue to plaintiff for demurrage
pursuant to the charter agreement while the vessel was in transit from Manila to Buenos Aires and does not
includeanyadditionaldemurragethatmaybeincurredwhilethevesselisdockedinBuenosAireswaitingforthe
unloadingofthecargo.Tosustaindefendant'scontentionwouldbetodefeatthepurposeofthearbitrationwhich
is to settle all disputes that may arise out of the contract in connection with the voyage. It cannot therefore be
pretendedthatthearbitratorsactedbeyondthescopeoftheirauthority.

Asacorollarytothequestionregardingtotheexistenceofanarbitrationagreement,defendantraisestheissue
that,evenifitbegrantedthatitagreedtosubmititsdisputewithplaintifftoarbitration,saidagreementisvoidand
withouteffectforitamountsofremovingsaiddisputefromthejurisdictionofthecourtsinwhichthepartiesare
domiciledorwherethedisputeoccurred.Itistruethatthereareauthoritieswhichholdthat"aclauseincontract
providing that all maters in dispute between the parties shall be referred to arbitrators and to them alone, is
contrarytopublicpolicyandcannotoustthecourtsofjurisdiction"(ManilaElectricCo.vs.PasayTransportation
Co.,57Phil.,600,603),however,thereareauthoritieswhichfavor"themoreintelligentviewthatarbitration,as
an expensive, speedy and amicable method of settling disputes, and as a means of avoiding litigation, should
receiveeveryencouragementfromthecourtswhichmaybeextendedwithoutcontraveningsoundpublicpolicyor
settledlaw"(3Am.Jur.,p.835).Congresshasofficiallyadoptedthemodernviewwhenitreproducedinthenew
Civil Code the provisions of the old Code on Arbitration. And only recently it approved republic Act No. 876
expresslyauthorizingarbitrationoffuturedisputes.Thussection2ofsaidActprovides:

SEC.2.Personsandmatterssubjecttoarbitration.TwoormorePersonsorPartiesmaysubmittothe
arbitrationofoneormorearbitratorsanycontroversyexistingbetweenthematthetimeofthesubmission
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.".

ConsideringthisdeclaredpolicyofCongressinfavorofarbitrationofallkindsofarbitrationofallkindsofdisputes,
and the fact that, according to the explanatory note of Republic Act No. 876, "to afford the public a cheap and
expeditious procedure of setting not only commercial but other kinds of controversies most of the states of the
AmericanUnionhaveadoptedstatutesprovidingforarbitration,andAmericanbusinessmanarereportedtohave
enthusiasticallyacceptedtheinnovationofitsobviousadvantagesovertheordinarycourtprocedure",wefindno
plausible reason for holding that the arbitration agreement in question, simply because it refers to a future
dispute,isnullandvoidasbeingagainstpublicpolicy.(Emphasissupplied.)

(c)ItiscontendedthatthedecisionrenderedbytheU.S.DistrictCourtofNewYorksittingasanAdmiraltyCourt,
which ratified the award made by the arbitrators, has no binding effect on defendant corporation, nor can it be
enforced in this jurisdiction, for the reason that when said court acted on the case it did not acquire jurisdiction
oversaiddefendant.Andthisclaimispredicatedontheallegedfactthatdefendantwasneverservedwithnotice,
summons,orprocessrelativetothesubmissionoftheawardofthearbitratorstosaidcourt,invokinginsupportof
thiscontentiontheU.S.ArbitrationActofFebruary12,1925underwhichtheNewYorkDistrictCourtconfirmed
thearbitrators'award.Butwefindthatthelawthusinvokeddoesnotsustaindefendant'spretense,forthesame,
incaseofanonresident,doesnotnecessarilyrequirethatserviceofnoticeoftheapplicationforconfirmationbe
made on the adverse party himself, it being sufficient that it be made upon his attorney (July 30, 1947, c. 392,
section 1, 61 Stat. 669, p. 4 Exhibit E). This is precisely what was done in this case. Copy of the notice of
submissionoftheawardtotheDistrictCourtofNewYorkwasservedupondefendant'scounselwhoinduetime
ofappearanceandactuallyappearedwhenthecasewasheard.ThisisclearlystatedinthedecisionofsaidCourt
(ExhibitD).Itissignificantthatrespondent'scounselneverimpugnedthejurisdictionofthedefendantnordidever
plead before it that they were bereft of authority to represent defendant. Defendant cannot therefore in this
instance defeat the effect of this decision by alleging want of jurisdiction, or want of notice, as provided for in
section48,Rule39ofourRulesofCourt.

(d)WhileplaintiffisaforeigncorporationwithoutlicensetotransactbusinessinthePhilippines,itdoesnotfollow
thatithasnocapacitytobringthepresentaction.Suchlicenseisnotnecessarybecauseitisinbusinessinthe
Philippines.Infact,thetransactionhereininvolvedisthefirstbusinessundertakenbyplaintiffinthePhilippines,
although on a previous occasion plaintiff's vessel was chartered by the National Rice and Corn Corporation to
carry rice cargo from abroad to the Philippines. These two isolated transactions do not constitute engaging in
businessinthePhilippineswithinthepurviewofSections68and69oftheCorporationLawsoastobarplaintiff
fromseekingredressinourcourts.(MarshallWellsCo.vs.HenryW.Elser&Co.49Phil.,70PacificVegetable
OilCorporationvs.Angel0.Singson,G.R.No.L7917,April29,1955.) 1wphl.nt

Wherefore,thedecisionappealedfromitsaffirmed,withoutpronouncementastocosts. 1wphl.nt

Bengzon,Paras,C.J.,Padilla,Montemayor,Reyes,A.,Labrador,Concepcion,Reyes,J.B.L.,EndenciaandFelix,
JJ.,concur.

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