G.R. No.

143581 January 7, 2008

KOREA TECHNOLOGIES CO., LTD., petitioner,

vs.
HON. ALBERTO A. LERMA, in his capacity as Presiding Judge of Branch 256 of Regional Trial Court of Muntinlupa City, and
PACIFIC GENERAL STEEL MANUFACTURING CORPORATION, respondents.

DECISION

VELASCO, JR., J.:

In our jurisdiction, the policy is to favor alternative methods of resolving disputes, particularly in civil and commercial disputes.
Arbitration along with mediation, conciliation, and negotiation, being inexpensive, speedy and less hostile methods have long been
favored by this Court. The petition before us puts at issue an arbitration clause in a contract mutually agreed upon by the parties
stipulating that they would submit themselves to arbitration in a foreign country. Regrettably, instead of hastening the resolution of their
dispute, the parties wittingly or unwittingly prolonged the controversy.

Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean corporation which is engaged in the supply and installation of Liquefied
Petroleum Gas (LPG) Cylinder manufacturing plants, while private respondent Pacific General Steel Manufacturing Corp. (PGSMC) is a
domestic corporation.

On March 5, 1997, PGSMC and KOGIES executed a Contract1 whereby KOGIES would set up an LPG Cylinder Manufacturing Plant in
Carmona, Cavite. The contract was executed in the Philippines. On April 7, 1997, the parties executed, in Korea, an Amendment for
Contract No. KLP-970301 dated March 5, 19972 amending the terms of payment. The contract and its amendment stipulated that
KOGIES will ship the machinery and facilities necessary for manufacturing LPG cylinders for which PGSMC would pay USD 1,224,000.
KOGIES would install and initiate the operation of the plant for which PGSMC bound itself to pay USD 306,000 upon the plant’s
production of the 11-kg. LPG cylinder samples. Thus, the total contract price amounted to USD 1,530,000.

On October 14, 1997, PGSMC entered into a Contract of Lease 3 with Worth Properties, Inc. (Worth) for use of Worth’s 5,079-square
meter property with a 4,032-square meter warehouse building to house the LPG manufacturing plant. The monthly rental was PhP
322,560 commencing on January 1, 1998 with a 10% annual increment clause. Subsequently, the machineries, equipment, and
facilities for the manufacture of LPG cylinders were shipped, delivered, and installed in the Carmona plant. PGSMC paid KOGIES USD
1,224,000.

However, gleaned from the Certificate4 executed by the parties on January 22, 1998, after the installation of the plant, the initial
operation could not be conducted as PGSMC encountered financial difficulties affecting the supply of materials, thus forcing the parties
to agree that KOGIES would be deemed to have completely complied with the terms and conditions of the March 5, 1997 contract.

For the remaining balance of USD306,000 for the installation and initial operation of the plant, PGSMC issued two postdated checks:
(1) BPI Check No. 0316412 dated January 30, 1998 for PhP 4,500,000; and (2) BPI Check No. 0316413 dated March 30, 1998 for PhP
4,500,000.5

When KOGIES deposited the checks, these were dishonored for the reason "PAYMENT STOPPED." Thus, on May 8, 1998, KOGIES
sent a demand letter6 to PGSMC threatening criminal action for violation of Batas Pambansa Blg.22 in case of nonpayment. On the
same date, the wife of PGSMC’s President faxed a letter dated May 7, 1998 to KOGIES’ President who was then staying at a Makati
City hotel. She complained that not only did KOGIES deliver a different brand of hydraulic press from that agreed upon but it had not
delivered several equipment parts already paid for.

On May 14, 1998, PGSMC replied that the two checks it issued KOGIES were fully funded but the payments were stopped for reasons
previously made known to KOGIES.7

On June 1, 1998, PGSMC informed KOGIES that PGSMC was canceling their Contract dated March 5, 1997 on the ground that
KOGIES had altered the quantity and lowered the quality of the machineries and equipment it delivered to PGSMC, and that PGSMC
would dismantle and transfer the machineries, equipment, and facilities installed in the Carmona plant. Five days later, PGSMC filed
before the Office of the Public Prosecutor an Affidavit-Complaint for Estafa docketed as I.S. No. 98-03813 against Mr. Dae Hyun Kang,
President of KOGIES.

On June 15, 1998, KOGIES wrote PGSMC informing the latter that PGSMC could not unilaterally rescind their contract nor dismantle
and transfer the machineries and equipment on mere imagined violations by KOGIES. It also insisted that their disputes should be
settled by arbitration as agreed upon in Article 15, the arbitration clause of their contract.

On June 23, 1998, PGSMC again wrote KOGIES reiterating the contents of its June 1, 1998 letter threatening that the machineries,
equipment, and facilities installed in the plant would be dismantled and transferred on July 4, 1998. Thus, on July 1, 1998, KOGIES
instituted an Application for Arbitration before the Korean Commercial Arbitration Board (KCAB) in Seoul, Korea pursuant to Art. 15 of
the Contract as amended.

On July 3, 1998, KOGIES filed a Complaint for Specific Performance, docketed as Civil Case No. 98-1178 against PGSMC before the
Muntinlupa City Regional Trial Court (RTC). The RTC granted a temporary restraining order (TRO) on July 4, 1998, which was
subsequently extended until July 22, 1998. In its complaint, KOGIES alleged that PGSMC had initially admitted that the checks that
were stopped were not funded but later on claimed that it stopped payment of the checks for the reason that "their value was not
received" as the former allegedly breached their contract by "altering the quantity and lowering the quality of the machinery and
equipment" installed in the plant and failed to make the plant operational although it earlier certified to the contrary as shown in a
January 22, 1998 Certificate. Likewise, KOGIES averred that PGSMC violated Art. 15 of their Contract, as amended, by unilaterally
rescinding the contract without resorting to arbitration. KOGIES also asked that PGSMC be restrained from dismantling and transferring
the machinery and equipment installed in the plant which the latter threatened to do on July 4, 1998.
On July 9, 1998, PGSMC filed an opposition to the TRO arguing that KOGIES was not entitled to the TRO since Art. 15, the arbitration
clause, was null and void for being against public policy as it ousts the local courts of jurisdiction over the instant controversy.

On July 17, 1998, PGSMC filed its Answer with Compulsory Counterclaim9 asserting that it had the full right to dismantle and transfer
the machineries and equipment because it had paid for them in full as stipulated in the contract; that KOGIES was not entitled to the
PhP 9,000,000 covered by the checks for failing to completely install and make the plant operational; and that KOGIES was liable for
damages amounting to PhP 4,500,000 for altering the quantity and lowering the quality of the machineries and equipment. Moreover,
PGSMC averred that it has already paid PhP 2,257,920 in rent (covering January to July 1998) to Worth and it was not willing to further
shoulder the cost of renting the premises of the plant considering that the LPG cylinder manufacturing plant never became operational.

After the parties submitted their Memoranda, on July 23, 1998, the RTC issued an Order denying the application for a writ of preliminary
injunction, reasoning that PGSMC had paid KOGIES USD 1,224,000, the value of the machineries and equipment as shown in the
contract such that KOGIES no longer had proprietary rights over them. And finally, the RTC held that Art. 15 of the Contract as
amended was invalid as it tended to oust the trial court or any other court jurisdiction over any dispute that may arise between the
parties. KOGIES’ prayer for an injunctive writ was denied. 10 The dispositive portion of the Order stated:

WHEREFORE, in view of the foregoing consideration, this Court believes and so holds that no cogent reason exists for this
Court to grant the writ of preliminary injunction to restrain and refrain defendant from dismantling the machineries and facilities
at the lot and building of Worth Properties, Incorporated at Carmona, Cavite and transfer the same to another site: and
therefore denies plaintiff’s application for a writ of preliminary injunction.

On July 29, 1998, KOGIES filed its Reply to Answer and Answer to Counterclaim. 11 KOGIES denied it had altered the quantity and
lowered the quality of the machinery, equipment, and facilities it delivered to the plant. It claimed that it had performed all the
undertakings under the contract and had already produced certified samples of LPG cylinders. It averred that whatever was unfinished
was PGSMC’s fault since it failed to procure raw materials due to lack of funds. KOGIES, relying on Chung Fu Industries (Phils.), Inc. v.
Court of Appeals,12 insisted that the arbitration clause was without question valid.

After KOGIES filed a Supplemental Memorandum with Motion to Dismiss 13 answering PGSMC’s memorandum of July 22, 1998 and
seeking dismissal of PGSMC’s counterclaims, KOGIES, on August 4, 1998, filed its Motion for Reconsideration 14 of the July 23, 1998
Order denying its application for an injunctive writ claiming that the contract was not merely for machinery and facilities worth USD
1,224,000 but was for the sale of an "LPG manufacturing plant" consisting of "supply of all the machinery and facilities" and "transfer of
technology" for a total contract price of USD 1,530,000 such that the dismantling and transfer of the machinery and facilities would
result in the dismantling and transfer of the very plant itself to the great prejudice of KOGIES as the still unpaid owner/seller of the plant.
Moreover, KOGIES points out that the arbitration clause under Art. 15 of the Contract as amended was a valid arbitration stipulation
under Art. 2044 of the Civil Code and as held by this Court in Chung Fu Industries (Phils.), Inc.15

In the meantime, PGSMC filed a Motion for Inspection of Things 16 to determine whether there was indeed alteration of the quantity and
lowering of quality of the machineries and equipment, and whether these were properly installed. KOGIES opposed the motion positing
that the queries and issues raised in the motion for inspection fell under the coverage of the arbitration clause in their contract.

On September 21, 1998, the trial court issued an Order (1) granting PGSMC’s motion for inspection; (2) denying KOGIES’ motion for
reconsideration of the July 23, 1998 RTC Order; and (3) denying KOGIES’ motion to dismiss PGSMC’s compulsory counterclaims as
these counterclaims fell within the requisites of compulsory counterclaims.

On October 2, 1998, KOGIES filed an Urgent Motion for Reconsideration17 of the September 21, 1998 RTC Order granting inspection of
the plant and denying dismissal of PGSMC’s compulsory counterclaims.

Ten days after, on October 12, 1998, without waiting for the resolution of its October 2, 1998 urgent motion for reconsideration,
KOGIES filed before the Court of Appeals (CA) a petition for certiorari 18 docketed as CA-G.R. SP No. 49249, seeking annulment of the
July 23, 1998 and September 21, 1998 RTC Orders and praying for the issuance of writs of prohibition, mandamus, and preliminary
injunction to enjoin the RTC and PGSMC from inspecting, dismantling, and transferring the machineries and equipment in the Carmona
plant, and to direct the RTC to enforce the specific agreement on arbitration to resolve the dispute.

In the meantime, on October 19, 1998, the RTC denied KOGIES’ urgent motion for reconsideration and directed the Branch Sheriff to
proceed with the inspection of the machineries and equipment in the plant on October 28, 1998. 19

Thereafter, KOGIES filed a Supplement to the Petition20 in CA-G.R. SP No. 49249 informing the CA about the October 19, 1998 RTC
Order. It also reiterated its prayer for the issuance of the writs of prohibition, mandamus and preliminary injunction which was not acted
upon by the CA. KOGIES asserted that the Branch Sheriff did not have the technical expertise to ascertain whether or not the
machineries and equipment conformed to the specifications in the contract and were properly installed.

On November 11, 1998, the Branch Sheriff filed his Sheriff’s Report 21 finding that the enumerated machineries and equipment were not
fully and properly installed.

The Court of Appeals affirmed the trial court and declared

the arbitration clause against public policy

On May 30, 2000, the CA rendered the assailed Decision 22 affirming the RTC Orders and dismissing the petition for certiorari filed by
KOGIES. The CA found that the RTC did not gravely abuse its discretion in issuing the assailed July 23, 1998 and September 21, 1998
Orders. Moreover, the CA reasoned that KOGIES’ contention that the total contract price for USD 1,530,000 was for the whole plant
and had not been fully paid was contrary to the finding of the RTC that PGSMC fully paid the price of USD 1,224,000, which was for all
the machineries and equipment. According to the CA, this determination by the RTC was a factual finding beyond the ambit of a petition
for certiorari.

On the issue of the validity of the arbitration clause, the CA agreed with the lower court that an arbitration clause which provided for a
final determination of the legal rights of the parties to the contract by arbitration was against public policy.
On the issue of nonpayment of docket fees and non-attachment of a certificate of non-forum shopping by PGSMC, the CA held that the
counterclaims of PGSMC were compulsory ones and payment of docket fees was not required since the Answer with counterclaim was
not an initiatory pleading. For the same reason, the CA said a certificate of non-forum shopping was also not required.

Furthermore, the CA held that the petition for certiorari had been filed prematurely since KOGIES did not wait for the resolution of its
urgent motion for reconsideration of the September 21, 1998 RTC Order which was the plain, speedy, and adequate remedy available.
According to the CA, the RTC must be given the opportunity to correct any alleged error it has committed, and that since the assailed
orders were interlocutory, these cannot be the subject of a petition for certiorari.

Hence, we have this Petition for Review on Certiorari under Rule 45.

The Issues

Petitioner posits that the appellate court committed the following errors:

a. PRONOUNCING THE QUESTION OF OWNERSHIP OVER THE MACHINERY AND FACILITIES AS "A QUESTION OF
FACT" "BEYOND THE AMBIT OF A PETITION FOR CERTIORARI" INTENDED ONLY FOR CORRECTION OF ERRORS OF
JURISDICTION OR GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF (SIC) EXCESS OF JURISDICTION, AND
CONCLUDING THAT THE TRIAL COURT’S FINDING ON THE SAME QUESTION WAS IMPROPERLY RAISED IN THE
PETITION BELOW;

b. DECLARING AS NULL AND VOID THE ARBITRATION CLAUSE IN ARTICLE 15 OF THE CONTRACT BETWEEN THE
PARTIES FOR BEING "CONTRARY TO PUBLIC POLICY" AND FOR OUSTING THE COURTS OF JURISDICTION;

c. DECREEING PRIVATE RESPONDENT’S COUNTERCLAIMS TO BE ALL COMPULSORY NOT NECESSITATING

PAYMENT OF DOCKET FEES AND CERTIFICATION OF NON-FORUM SHOPPING;

d. RULING THAT THE PETITION WAS FILED PREMATURELY WITHOUT WAITING FOR THE RESOLUTION OF THE
MOTION FOR RECONSIDERATION OF THE ORDER DATED SEPTEMBER 21, 1998 OR WITHOUT GIVING THE TRIAL
COURT AN OPPORTUNITY TO CORRECT ITSELF;

e. PROCLAIMING THE TWO ORDERS DATED JULY 23 AND SEPTEMBER 21, 1998 NOT TO BE PROPER SUBJECTS OF
CERTIORARI AND PROHIBITION FOR BEING "INTERLOCUTORY IN NATURE;"

f. NOT GRANTING THE RELIEFS AND REMEDIES PRAYED FOR IN HE (SIC) PETITION AND, INSTEAD, DISMISSING
THE SAME FOR ALLEGEDLY "WITHOUT MERIT."23

The Court’s Ruling

The petition is partly meritorious.

Before we delve into the substantive issues, we shall first tackle the procedural issues.

The rules on the payment of docket fees for counterclaims

and cross claims were amended effective August 16, 2004

KOGIES strongly argues that when PGSMC filed the counterclaims, it should have paid docket fees and filed a certificate of non-forum
shopping, and that its failure to do so was a fatal defect.

We disagree with KOGIES.

As aptly ruled by the CA, the counterclaims of PGSMC were incorporated in its Answer with Compulsory Counterclaim dated July 17,
1998 in accordance with Section 8 of Rule 11, 1997 Revised Rules of Civil Procedure, the rule that was effective at the time the Answer
with Counterclaim was filed. Sec. 8 on existing counterclaim or cross-claim states, "A compulsory counterclaim or a cross-claim that a
defending party has at the time he files his answer shall be contained therein."

On July 17, 1998, at the time PGSMC filed its Answer incorporating its counterclaims against KOGIES, it was not liable to pay filing
fees for said counterclaims being compulsory in nature. We stress, however, that effective August 16, 2004 under Sec. 7, Rule 141, as
amended by A.M. No. 04-2-04-SC, docket fees are now required to be paid in compulsory counterclaim or cross-claims.

As to the failure to submit a certificate of forum shopping, PGSMC’s Answer is not an initiatory pleading which requires a certification
against forum shopping under Sec. 524 of Rule 7, 1997 Revised Rules of Civil Procedure. It is a responsive pleading, hence, the
courts a quo did not commit reversible error in denying KOGIES’ motion to dismiss PGSMC’s compulsory counterclaims.

Interlocutory orders proper subject of certiorari

Citing Gamboa v. Cruz,25 the CA also pronounced that "certiorari and Prohibition are neither the remedies to question the propriety of
an interlocutory order of the trial court."26 The CA erred on its reliance on Gamboa. Gamboa involved the denial of a motion to acquit in
a criminal case which was not assailable in an action for certiorari since the denial of a motion to quash required the accused to plead
and to continue with the trial, and whatever objections the accused had in his motion to quash can then be used as part of his defense
and subsequently can be raised as errors on his appeal if the judgment of the trial court is adverse to him. The general rule is that
interlocutory orders cannot be challenged by an appeal. 27 Thus, in Yamaoka v. Pescarich Manufacturing Corporation, we held:

The proper remedy in such cases is an ordinary appeal from an adverse judgment on the merits, incorporating in said appeal
the grounds for assailing the interlocutory orders. Allowing appeals from interlocutory orders would result in the ‘sorry
 spectacle’ of a case being subject of a counterproductive ping-pong to and from the appellate court as often as a trial court is
perceived to have made an error in any of its interlocutory rulings. However, where the assailed interlocutory order was issued
with grave abuse of discretion or patently erroneous and the remedy of appeal would not afford adequate and expeditious
relief, the Court allows certiorari as a mode of redress.28

Also, appeals from interlocutory orders would open the floodgates to endless occasions for dilatory motions. Thus, where the
interlocutory order was issued without or in excess of jurisdiction or with grave abuse of discretion, the remedy is certiorari. 29

The alleged grave abuse of discretion of the respondent court equivalent to lack of jurisdiction in the issuance of the two assailed orders
coupled with the fact that there is no plain, speedy, and adequate remedy in the ordinary course of law amply provides the basis for
allowing the resort to a petition for certiorari under Rule 65.

Prematurity of the petition before the CA

Neither do we think that KOGIES was guilty of forum shopping in filing the petition for certiorari. Note that KOGIES’ motion for
reconsideration of the July 23, 1998 RTC Order which denied the issuance of the injunctive writ had already been denied. Thus,
KOGIES’ only remedy was to assail the RTC’s interlocutory order via a petition for certiorari under Rule 65.

While the October 2, 1998 motion for reconsideration of KOGIES of the September 21, 1998 RTC Order relating to the inspection of
things, and the allowance of the compulsory counterclaims has not yet been resolved, the circumstances in this case would allow an
exception to the rule that before certiorari may be availed of, the petitioner must have filed a motion for reconsideration and said motion
should have been first resolved by the court a quo. The reason behind the rule is "to enable the lower court, in the first instance, to pass
upon and correct its mistakes without the intervention of the higher court."30

The September 21, 1998 RTC Order directing the branch sheriff to inspect the plant, equipment, and facilities when he is not competent
and knowledgeable on said matters is evidently flawed and devoid of any legal support. Moreover, there is an urgent necessity to
resolve the issue on the dismantling of the facilities and any further delay would prejudice the interests of KOGIES. Indeed, there is real
and imminent threat of irreparable destruction or substantial damage to KOGIES’ equipment and machineries. We find the resort to
certiorari based on the gravely abusive orders of the trial court sans the ruling on the October 2, 1998 motion for reconsideration to be
proper.

The Core Issue: Article 15 of the Contract

We now go to the core issue of the validity of Art. 15 of the Contract, the arbitration clause. It provides:

Article 15. Arbitration.—All disputes, controversies, or differences which may arise between the parties, out of or in relation to
or in connection with this Contract or for the breach thereof, shall finally be settled by arbitration in Seoul, Korea in accordance
with the Commercial Arbitration Rules of the Korean Commercial Arbitration Board. The award rendered by the
arbitration(s) shall be final and binding upon both parties concerned. (Emphasis supplied.)

Petitioner claims the RTC and the CA erred in ruling that the arbitration clause is null and void.

Petitioner is correct.

Established in this jurisdiction is the rule that the law of the place where the contract is made governs. Lex loci contractus. The contract
in this case was perfected here in the Philippines. Therefore, our laws ought to govern. Nonetheless, Art. 2044 of the Civil Code
sanctions the validity of mutually agreed arbitral clause or the finality and binding effect of an arbitral award. Art. 2044 provides, "Any
stipulation that the arbitrators’ award or decision shall be final, is valid, without prejudice to Articles 2038, 2039 and 2040."
(Emphasis supplied.)

Arts. 2038,31 2039,32 and 204033 abovecited refer to instances where a compromise or an arbitral award, as applied to Art. 2044
pursuant to Art. 2043,34 may be voided, rescinded, or annulled, but these would not denigrate the finality of the arbitral award.

The arbitration clause was mutually and voluntarily agreed upon by the parties. It has not been shown to be contrary to any law, or
against morals, good customs, public order, or public policy. There has been no showing that the parties have not dealt with each other
on equal footing. We find no reason why the arbitration clause should not be respected and complied with by both parties. In Gonzales
v. Climax Mining Ltd.,35 we held that submission to arbitration is a contract and that a clause in a contract providing that all matters in
dispute between the parties shall be referred to arbitration is a contract. 36 Again in Del Monte Corporation-USA v. Court of Appeals, we
likewise ruled that "[t]he provision to submit to arbitration any dispute arising therefrom and the relationship of the parties is part of that
contract and is itself a contract."37

Arbitration clause not contrary to public policy

The arbitration clause which stipulates that the arbitration must be done in Seoul, Korea in accordance with the Commercial Arbitration
Rules of the KCAB, and that the arbitral award is final and binding, is not contrary to public policy. This Court has sanctioned the validity
of arbitration clauses in a catena of cases. In the 1957 case of Eastboard Navigation Ltd. v. Juan Ysmael and Co., Inc.,38 this Court had
occasion to rule that an arbitration clause to resolve differences and breaches of mutually agreed contractual terms is valid. In BF
Corporation v. Court of Appeals, we held that "[i]n this jurisdiction, arbitration has been held valid and constitutional. Even before the
approval on June 19, 1953 of Republic Act No. 876, this Court has countenanced the settlement of disputes through arbitration.
Republic Act No. 876 was adopted to supplement the New Civil Code’s provisions on arbitration." 39 And in LM Power Engineering
Corporation v. Capitol Industrial Construction Groups, Inc., we declared that:

Being an inexpensive, speedy and amicable method of settling disputes, arbitration––along with mediation, conciliation and
negotiation––is encouraged by the Supreme Court. Aside from unclogging judicial dockets, arbitration also hastens the
resolution of disputes, especially of the commercial kind. It is thus regarded as the "wave of the future" in international civil and
commercial disputes. Brushing aside a contractual agreement calling for arbitration between the parties would be a step
backward.
 Consistent with the above-mentioned policy of encouraging alternative dispute resolution methods, courts should liberally
construe arbitration clauses. Provided such clause is susceptible of an interpretation that covers the asserted dispute, an order
to arbitrate should be granted. Any doubt should be resolved in favor of arbitration. 40

Having said that the instant arbitration clause is not against public policy, we come to the question on what governs an arbitration
clause specifying that in case of any dispute arising from the contract, an arbitral panel will be constituted in a foreign country and the
arbitration rules of the foreign country would govern and its award shall be final and binding.

RA 9285 incorporated the UNCITRAL Model law

to which we are a signatory

For domestic arbitration proceedings, we have particular agencies to arbitrate disputes arising from contractual relations. In case a
foreign arbitral body is chosen by the parties, the arbitration rules of our domestic arbitration bodies would not be applied. As signatory
to the Arbitration Rules of the UNCITRAL Model Law on International Commercial Arbitration41 of the United Nations Commission on
International Trade Law (UNCITRAL) in the New York Convention on June 21, 1985, the Philippines committed itself to be bound by the
Model Law. We have even incorporated the Model Law in Republic Act No. (RA) 9285, otherwise known as the Alternative Dispute
Resolution Act of 2004 entitled An Act to Institutionalize the Use of an Alternative Dispute Resolution System in the Philippines and to
Establish the Office for Alternative Dispute Resolution, and for Other Purposes, promulgated on April 2, 2004. Secs. 19 and 20 of
Chapter 4 of the Model Law are the pertinent provisions:

CHAPTER 4 - INTERNATIONAL COMMERCIAL ARBITRATION

SEC. 19. Adoption of the Model Law on International Commercial Arbitration.––International commercial arbitration shall be
governed by the Model Law on International Commercial Arbitration (the "Model Law") adopted by the United Nations
Commission on International Trade Law on June 21, 1985 (United Nations Document A/40/17) and recommended for
enactment by the General Assembly in Resolution No. 40/72 approved on December 11, 1985, copy of which is hereto
attached as Appendix "A".

SEC. 20. Interpretation of Model Law.––In interpreting the Model Law, regard shall be had to its international origin and to the
need for uniformity in its interpretation and resort may be made to the travaux preparatoriesand the report of the Secretary
General of the United Nations Commission on International Trade Law dated March 25, 1985 entitled, "International
Commercial Arbitration: Analytical Commentary on Draft Trade identified by reference number A/CN. 9/264."

While RA 9285 was passed only in 2004, it nonetheless applies in the instant case since it is a procedural law which has a retroactive
effect. Likewise, KOGIES filed its application for arbitration before the KCAB on July 1, 1998 and it is still pending because no arbitral
award has yet been rendered. Thus, RA 9285 is applicable to the instant case. Well-settled is the rule that procedural laws are
construed to be applicable to actions pending and undetermined at the time of their passage, and are deemed retroactive in that sense
and to that extent. As a general rule, the retroactive application of procedural laws does not violate any personal rights because no
vested right has yet attached nor arisen from them. 42

Among the pertinent features of RA 9285 applying and incorporating the UNCITRAL Model Law are the following:

(1) The RTC must refer to arbitration in proper cases

Under Sec. 24, the RTC does not have jurisdiction over disputes that are properly the subject of arbitration pursuant to an arbitration
clause, and mandates the referral to arbitration in such cases, thus:

SEC. 24. Referral to Arbitration.––A court before which an action is brought in a matter which is the subject matter of an
arbitration agreement shall, if at least one party so requests not later than the pre-trial conference, or upon the request of both
parties thereafter, refer the parties to arbitration unless it finds that the arbitration agreement is null and void, inoperative or
incapable of being performed.

(2) Foreign arbitral awards must be confirmed by the RTC

Foreign arbitral awards while mutually stipulated by the parties in the arbitration clause to be final and binding are not immediately
enforceable or cannot be implemented immediately. Sec. 3543 of the UNCITRAL Model Law stipulates the requirement for the arbitral
award to be recognized by a competent court for enforcement, which court under Sec. 36 of the UNCITRAL Model Law may refuse
recognition or enforcement on the grounds provided for. RA 9285 incorporated these provisos to Secs. 42, 43, and 44 relative to Secs.
47 and 48, thus:

SEC. 42. Application of the New York Convention.––The New York Convention shall govern the recognition and enforcement
of arbitral awards covered by said Convention.

The recognition and enforcement of such arbitral awards shall be filed with the Regional Trial Court in accordance with the
rules of procedure to be promulgated by the Supreme Court. Said procedural rules shall provide that the party relying on the
award or applying for its enforcement shall file with the court the original or authenticated copy of the award and the arbitration
agreement. If the award or agreement is not made in any of the official languages, the party shall supply a duly certified
translation thereof into any of such languages.

The applicant shall establish that the country in which foreign arbitration award was made in party to the New York
Convention.

xxxx

SEC. 43. Recognition and Enforcement of Foreign Arbitral Awards Not Covered by the New York Convention.––The
recognition and enforcement of foreign arbitral awards not covered by the New York Convention shall be done in accordance
 with procedural rules to be promulgated by the Supreme Court. The Court may, on grounds of comity and reciprocity,
recognize and enforce a non-convention award as a convention award.

SEC. 44. Foreign Arbitral Award Not Foreign Judgment.––A foreign arbitral award when confirmed by a court of a foreign
country, shall be recognized and enforced as a foreign arbitral award and not as a judgment of a foreign court.

A foreign arbitral award, when confirmed by the Regional Trial Court, shall be enforced in the same manner as final and
executory decisions of courts of law of the Philippines

xxxx

SEC. 47. Venue and Jurisdiction.––Proceedings for recognition and enforcement of an arbitration agreement or for vacations,
setting aside, correction or modification of an arbitral award, and any application with a court for arbitration assistance and
supervision shall be deemed as special proceedings and shall be filed with the Regional Trial Court (i) where arbitration
proceedings are conducted; (ii) where the asset to be attached or levied upon, or the act to be enjoined is located; (iii) where
any of the parties to the dispute resides or has his place of business; or (iv) in the National Judicial Capital Region, at the
option of the applicant.

SEC. 48. Notice of Proceeding to Parties.––In a special proceeding for recognition and enforcement of an arbitral award, the
Court shall send notice to the parties at their address of record in the arbitration, or if any part cannot be served notice at such
address, at such party’s last known address. The notice shall be sent al least fifteen (15) days before the date set for the initial
hearing of the application.

It is now clear that foreign arbitral awards when confirmed by the RTC are deemed not as a judgment of a foreign court but as a foreign
arbitral award, and when confirmed, are enforced as final and executory decisions of our courts of law.

Thus, it can be gleaned that the concept of a final and binding arbitral award is similar to judgments or awards given by some of our
quasi-judicial bodies, like the National Labor Relations Commission and Mines Adjudication Board, whose final judgments are
stipulated to be final and binding, but not immediately executory in the sense that they may still be judicially reviewed, upon the
instance of any party. Therefore, the final foreign arbitral awards are similarly situated in that they need first to be confirmed by the
RTC.

(3) The RTC has jurisdiction to review foreign arbitral awards

Sec. 42 in relation to Sec. 45 of RA 9285 designated and vested the RTC with specific authority and jurisdiction to set aside, reject, or
vacate a foreign arbitral award on grounds provided under Art. 34(2) of the UNCITRAL Model Law. Secs. 42 and 45 provide:

SEC. 42. Application of the New York Convention.––The New York Convention shall govern the recognition and enforcement
of arbitral awards covered by said Convention.

The recognition and enforcement of such arbitral awards shall be filed with the Regional Trial Court in accordance with the
rules of procedure to be promulgated by the Supreme Court. Said procedural rules shall provide that the party relying on the
award or applying for its enforcement shall file with the court the original or authenticated copy of the award and the arbitration
agreement. If the award or agreement is not made in any of the official languages, the party shall supply a duly certified
translation thereof into any of such languages.

The applicant shall establish that the country in which foreign arbitration award was made is party to the New York
Convention.

If the application for rejection or suspension of enforcement of an award has been made, the Regional Trial Court may, if it
considers it proper, vacate its decision and may also, on the application of the party claiming recognition or enforcement of the
award, order the party to provide appropriate security.

xxxx

SEC. 45. Rejection of a Foreign Arbitral Award.––A party to a foreign arbitration proceeding may oppose an application for
recognition and enforcement of the arbitral award in accordance with the procedures and rules to be promulgated by the
Supreme Court only on those grounds enumerated under Article V of the New York Convention. Any other ground raised shall
be disregarded by the Regional Trial Court.

Thus, while the RTC does not have jurisdiction over disputes governed by arbitration mutually agreed upon by the parties, still the
foreign arbitral award is subject to judicial review by the RTC which can set aside, reject, or vacate it. In this sense, what this Court held
in Chung Fu Industries (Phils.), Inc. relied upon by KOGIES is applicable insofar as the foreign arbitral awards, while final and binding,
do not oust courts of jurisdiction since these arbitral awards are not absolute and without exceptions as they are still judicially
reviewable. Chapter 7 of RA 9285 has made it clear that all arbitral awards, whether domestic or foreign, are subject to judicial review
on specific grounds provided for.

(4) Grounds for judicial review different in domestic and foreign arbitral awards

The differences between a final arbitral award from an international or foreign arbitral tribunal and an award given by a local arbitral
tribunal are the specific grounds or conditions that vest jurisdiction over our courts to review the awards.

For foreign or international arbitral awards which must first be confirmed by the RTC, the grounds for setting aside, rejecting or vacating
the award by the RTC are provided under Art. 34(2) of the UNCITRAL Model Law.
For final domestic arbitral awards, which also need confirmation by the RTC pursuant to Sec. 23 of RA 876 44 and shall be recognized
as final and executory decisions of the RTC,45 they may only be assailed before the RTC and vacated on the grounds provided under
Sec. 25 of RA 876.46

(5) RTC decision of assailed foreign arbitral award appealable

Sec. 46 of RA 9285 provides for an appeal before the CA as the remedy of an aggrieved party in cases where the RTC sets aside,
rejects, vacates, modifies, or corrects an arbitral award, thus:

SEC. 46. Appeal from Court Decision or Arbitral Awards.—A decision of the Regional Trial Court confirming, vacating, setting
aside, modifying or correcting an arbitral award may be appealed to the Court of Appeals in accordance with the rules and
procedure to be promulgated by the Supreme Court.

The losing party who appeals from the judgment of the court confirming an arbitral award shall be required by the appellate
court to post a counterbond executed in favor of the prevailing party equal to the amount of the award in accordance with the
rules to be promulgated by the Supreme Court.

Thereafter, the CA decision may further be appealed or reviewed before this Court through a petition for review under Rule 45 of the
Rules of Court.

PGSMC has remedies to protect its interests

Thus, based on the foregoing features of RA 9285, PGSMC must submit to the foreign arbitration as it bound itself through the subject
contract. While it may have misgivings on the foreign arbitration done in Korea by the KCAB, it has available remedies under RA 9285.
Its interests are duly protected by the law which requires that the arbitral award that may be rendered by KCAB must be confirmed here
by the RTC before it can be enforced.

With our disquisition above, petitioner is correct in its contention that an arbitration clause, stipulating that the arbitral award is final and
binding, does not oust our courts of jurisdiction as the international arbitral award, the award of which is not absolute and without
exceptions, is still judicially reviewable under certain conditions provided for by the UNCITRAL Model Law on ICA as applied and
incorporated in RA 9285.

Finally, it must be noted that there is nothing in the subject Contract which provides that the parties may dispense with the arbitration
clause.

Unilateral rescission improper and illegal

Having ruled that the arbitration clause of the subject contract is valid and binding on the parties, and not contrary to public policy;
consequently, being bound to the contract of arbitration, a party may not unilaterally rescind or terminate the contract for whatever
cause without first resorting to arbitration.

What this Court held in University of the Philippines v. De Los Angeles47 and reiterated in succeeding cases,48 that the act of treating a
contract as rescinded on account of infractions by the other contracting party is valid albeit provisional as it can be judicially assailed, is
not applicable to the instant case on account of a valid stipulation on arbitration. Where an arbitration clause in a contract is availing,
neither of the parties can unilaterally treat the contract as rescinded since whatever infractions or breaches by a party or differences
arising from the contract must be brought first and resolved by arbitration, and not through an extrajudicial rescission or judicial action.

The issues arising from the contract between PGSMC and KOGIES on whether the equipment and machineries delivered and installed
were properly installed and operational in the plant in Carmona, Cavite; the ownership of equipment and payment of the contract price;
and whether there was substantial compliance by KOGIES in the production of the samples, given the alleged fact that PGSMC could
not supply the raw materials required to produce the sample LPG cylinders, are matters proper for arbitration. Indeed, we note that on
July 1, 1998, KOGIES instituted an Application for Arbitration before the KCAB in Seoul, Korea pursuant to Art. 15 of the Contract as
amended. Thus, it is incumbent upon PGSMC to abide by its commitment to arbitrate.

Corollarily, the trial court gravely abused its discretion in granting PGSMC’s Motion for Inspection of Things on September 21, 1998, as
the subject matter of the motion is under the primary jurisdiction of the mutually agreed arbitral body, the KCAB in Korea.

In addition, whatever findings and conclusions made by the RTC Branch Sheriff from the inspection made on October 28, 1998, as
ordered by the trial court on October 19, 1998, is of no worth as said Sheriff is not technically competent to ascertain the actual status
of the equipment and machineries as installed in the plant.

For these reasons, the September 21, 1998 and October 19, 1998 RTC Orders pertaining to the grant of the inspection of the
equipment and machineries have to be recalled and nullified.

Issue on ownership of plant proper for arbitration

Petitioner assails the CA ruling that the issue petitioner raised on whether the total contract price of USD 1,530,000 was for the whole
plant and its installation is beyond the ambit of a Petition for Certiorari.

Petitioner’s position is untenable.

It is settled that questions of fact cannot be raised in an original action for certiorari. 49 Whether or not there was full payment for the
machineries and equipment and installation is indeed a factual issue prohibited by Rule 65.
However, what appears to constitute a grave abuse of discretion is the order of the RTC in resolving the issue on the ownership of the
plant when it is the arbitral body (KCAB) and not the RTC which has jurisdiction and authority over the said issue. The RTC’s
determination of such factual issue constitutes grave abuse of discretion and must be reversed and set aside.

RTC has interim jurisdiction to protect the rights of the parties

Anent the July 23, 1998 Order denying the issuance of the injunctive writ paving the way for PGSMC to dismantle and transfer the
equipment and machineries, we find it to be in order considering the factual milieu of the instant case.

Firstly, while the issue of the proper installation of the equipment and machineries might well be under the primary jurisdiction of the
arbitral body to decide, yet the RTC under Sec. 28 of RA 9285 has jurisdiction to hear and grant interim measures to protect vested
rights of the parties. Sec. 28 pertinently provides:

SEC. 28. Grant of interim Measure of Protection.—(a) It is not incompatible with an arbitration agreement for a party to
request, before constitution of the tribunal, from a Court to grant such measure. After constitution of the arbitral tribunal
and during arbitral proceedings, a request for an interim measure of protection, or modification thereof, may be made with the
arbitral or to the extent that the arbitral tribunal has no power to act or is unable to act effectivity, the request may be
made with the Court. The arbitral tribunal is deemed constituted when the sole arbitrator or the third arbitrator, who has been
nominated, has accepted the nomination and written communication of said nomination and acceptance has been received by
the party making the request.

(b) The following rules on interim or provisional relief shall be observed:

Any party may request that provisional relief be granted against the adverse party.

Such relief may be granted:

(i) to prevent irreparable loss or injury;

(ii) to provide security for the performance of any obligation;

(iii) to produce or preserve any evidence; or

(iv) to compel any other appropriate act or omission.

(c) The order granting provisional relief may be conditioned upon the provision of security or any act or omission specified in
the order.

(d) Interim or provisional relief is requested by written application transmitted by reasonable means to the Court or arbitral
tribunal as the case may be and the party against whom the relief is sought, describing in appropriate detail the precise relief,
the party against whom the relief is requested, the grounds for the relief, and the evidence supporting the request.

(e) The order shall be binding upon the parties.

(f) Either party may apply with the Court for assistance in implementing or enforcing an interim measure ordered by an arbitral
tribunal.

(g) A party who does not comply with the order shall be liable for all damages resulting from noncompliance, including all
expenses, and reasonable attorney's fees, paid in obtaining the order’s judicial enforcement. (Emphasis ours.)

Art. 17(2) of the UNCITRAL Model Law on ICA defines an "interim measure" of protection as:

Article 17. Power of arbitral tribunal to order interim measures

xxx xxx xxx

(2) An interim measure is any temporary measure, whether in the form of an award or in another form, by which, at any time
prior to the issuance of the award by which the dispute is finally decided, the arbitral tribunal orders a party to:

(a) Maintain or restore the status quo pending determination of the dispute;

(b) Take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to
the arbitral process itself;

(c) Provide a means of preserving assets out of which a subsequent award may be satisfied; or

(d) Preserve evidence that may be relevant and material to the resolution of the dispute.

Art. 17 J of UNCITRAL Model Law on ICA also grants courts power and jurisdiction to issue interim measures:

Article 17 J. Court-ordered interim measures

 A court shall have the same power of issuing an interim measure in relation to arbitration proceedings, irrespective of whether
their place is in the territory of this State, as it has in relation to proceedings in courts. The court shall exercise such power in
accordance with its own procedures in consideration of the specific features of international arbitration.

In the recent 2006 case of Transfield Philippines, Inc. v. Luzon Hydro Corporation, we were explicit that even "the pendency of an
arbitral proceeding does not foreclose resort to the courts for provisional reliefs." We explicated this way:

As a fundamental point, the pendency of arbitral proceedings does not foreclose resort to the courts for provisional reliefs. The
Rules of the ICC, which governs the parties’ arbitral dispute, allows the application of a party to a judicial authority for interim
or conservatory measures. Likewise, Section 14 of Republic Act (R.A.) No. 876 (The Arbitration Law) recognizes the rights of
any party to petition the court to take measures to safeguard and/or conserve any matter which is the subject of the dispute in
arbitration. In addition, R.A. 9285, otherwise known as the "Alternative Dispute Resolution Act of 2004," allows the filing of
provisional or interim measures with the regular courts whenever the arbitral tribunal has no power to act or to act effectively. 50

It is thus beyond cavil that the RTC has authority and jurisdiction to grant interim measures of protection.

Secondly, considering that the equipment and machineries are in the possession of PGSMC, it has the right to protect and preserve the
equipment and machineries in the best way it can. Considering that the LPG plant was non-operational, PGSMC has the right to
dismantle and transfer the equipment and machineries either for their protection and preservation or for the better way to make good
use of them which is ineluctably within the management discretion of PGSMC.

Thirdly, and of greater import is the reason that maintaining the equipment and machineries in Worth’s property is not to the best
interest of PGSMC due to the prohibitive rent while the LPG plant as set-up is not operational. PGSMC was losing PhP322,560 as
monthly rentals or PhP3.87M for 1998 alone without considering the 10% annual rent increment in maintaining the plant.

Fourthly, and corollarily, while the KCAB can rule on motions or petitions relating to the preservation or transfer of the equipment and
machineries as an interim measure, yet on hindsight, the July 23, 1998 Order of the RTC allowing the transfer of the equipment and
machineries given the non-recognition by the lower courts of the arbitral clause, has accorded an interim measure of protection to
PGSMC which would otherwise been irreparably damaged.

Fifth, KOGIES is not unjustly prejudiced as it has already been paid a substantial amount based on the contract. Moreover, KOGIES is
amply protected by the arbitral action it has instituted before the KCAB, the award of which can be enforced in our jurisdiction through
the RTC. Besides, by our decision, PGSMC is compelled to submit to arbitration pursuant to the valid arbitration clause of its contract
with KOGIES.

PGSMC to preserve the subject equipment and machineries

Finally, while PGSMC may have been granted the right to dismantle and transfer the subject equipment and machineries, it does not
have the right to convey or dispose of the same considering the pending arbitral proceedings to settle the differences of the parties.
PGSMC therefore must preserve and maintain the subject equipment and machineries with the diligence of a good father of a
family51 until final resolution of the arbitral proceedings and enforcement of the award, if any.

WHEREFORE, this petition is PARTLY GRANTED, in that:

(1) The May 30, 2000 CA Decision in CA-G.R. SP No. 49249 is REVERSED and SET ASIDE;

(2) The September 21, 1998 and October 19, 1998 RTC Orders in Civil Case No. 98-117 are REVERSED and SET ASIDE;

(3) The parties are hereby ORDERED to submit themselves to the arbitration of their dispute and differences arising from the subject
Contract before the KCAB; and

(4) PGSMC is hereby ALLOWED to dismantle and transfer the equipment and machineries, if it had not done so, and ORDERED to
preserve and maintain them until the finality of whatever arbitral award is given in the arbitration proceedings.

No pronouncement as to costs.

SO ORDERED.
G.R. No. 196171 December 10, 2012

RCBC CAPITAL CORPORATION, Petitioners,

vs.
BANCO DE ORO UNIBANK, INC., Respondent.

X- - - - - - - - - - - - - - - - - - - - - - - - - -X

G.R. No. 199238

BANCO DE ORO UNIBANK, INC., Petitioner,

vs.
COURT OF APPEALS and RCBC CAPITAL CORPORATION, Respondents.

DECISION

VILLARAMA, JR., J.:

Before the Court are two consolidated petitions separately filed by the parties in an arbitration case administered by the International
Chamber of Commerce-International Court of Arbitration (ICC-ICA) pursuant to the arbitration clause in their contract.

The Case

In G.R. No. 196171, a petition for review under Rule 45 of the 1997 Rules of Civil Procedure, as amended, RCBC Capital Corporation
(RCBC) seeks to reverse the Court of Appeals (CA) Decision1 dated December 23, 2010 in CA-G.R. SP No. 113525 which reversed
and set aside the June 24, 2009 Order2 of the Regional Trial Court (RTC) of Makati City, Branch 148 in SP Proc. Case No. M-6046.

In G.R. No. 199238,a petition for certiorari under Rule 65, Banco De Oro Unibank, Inc. (BDO)assails the Resolution3dated September
13, 2011 in CA-G.R. SP No. 120888 which denied BDO’s application for the issuance of a stay order and/or temporary restraining order
(TRO)/preliminary injunction against the implementation of the Writ of Execution 4 dated August 22, 2011 issued by the Makati City RTC,
Branch 148 in SP Proc. Case No. M-6046.

Factual Antecedents

On May 24, 2000, RCBC entered into a Share Purchase Agreement 5 (SPA) with Equitable-PCI Bank, Inc. (EPCIB), George L. Go and
the individual shareholders6 of Bankard, Inc. (Bankard) for the sale to RCBC of 226,460,000 shares (Subject Shares) of Bankard,
constituting 67% of the latter’s capital stock. After completing payment of the contract price (₱1,786,769,400), the corresponding deeds
of sale over the subject shares were executed in January 2001.

The dispute between the parties arose sometime in May 2003 when RCBC informed EPCIB and the other selling shareholdersof an
overpayment of the subject shares, claiming there was an overstatement of valuation of accounts amounting to ₱478 million and that
the sellers violated their warrantyunder Section 5(g)of the SPA. 7

As no settlement was reached, RCBC commenced arbitration proceedings with the ICC-ICA in accordance with Section 10 of the SPA
which states:

Section 10.Arbitration

Should there be any dispute arising between the parties relating to this Agreement including the interpretation or performance hereof
which cannot be resolved by agreement of the parties within fifteen (15) days after written notice by a party to another, such matter
shall then be finally settled by arbitration under the Rules of Conciliation and Arbitration of the International Chamber of Commerce in
force as of the time of arbitration, by three arbitrators appointed in accordance with such rules. The venue of arbitration shall be in
Makati City, Philippines and the arbitration proceedings shall be conducted in the English language. Substantive aspects of the dispute
shall be settled by applying the laws of the Philippines. The decision of the arbitrators shall be final and binding upon the parties hereto
and the expenses of arbitration (including without limitation the award of attorney’s fees to the prevailing party) shall be paid as the
arbitrators shall determine.8

In its Request for Arbitration9 dated May 12, 2004, Claimant RCBC charged Bankard with deviating from and contravening generally
accepted accounting principles and practices, due to which the financial statements of Bankard prior to the stock purchase were far
from fair and accurate, and resulted in the overpayment of ₱556 million. For this violation of sellers’representations and warranties
under the SPA, RCBC sought its rescission, as well as payment of actual damages in the amount of ₱573,132,110, legal interest on the
purchase price until actual restitution, moral damages and litigation and attorney’s fees, with alternative prayer for award of damages in
the amount of at least ₱809,796,082 plus legal interest.

In their Answer,10 EPCIB, Go and the other selling individual shareholders (Respondents) denied RCBC’s allegations contending that
RCBC’s claim is one for overpayment or price reduction under Section 5(h) of the SPA which is already time-barred, the remedy of
rescission is unavailable, and even assuming that rescission is permitted by the SPA, RCBC failed to file its claim within a reasonable
time. They further asserted that RCBC is not entitled to its alternative prayer for damages, being guilty of laches and failing to set out
the details of the breach as required under Section 7 of the SPA. A counterclaim for litigation expenses and costs of arbitration in the
amount of US$300,000, as well as moral and exemplary damages, was likewise raised by the Respondents.

RCBC submitted a Reply11 to the aforesaid Answer.

Subsequently, the Arbitration Tribunal was constituted. Mr. Neil Kaplan was nominated by RCBC; Justice Santiago M. Kapunan (a
retired Member of this Court) was nominated by the Respondents; and Sir Ian Barker was appointed by the ICC-ICA as Chairman.
On August 13, 2004, the ICC-ICA informed the parties that they are required to pay US$350,000 as advance on costs pursuant to
Article 30 (3) of the ICC Rules of Arbitration (ICC Rules). RCBC paid its share of US$107,000, the balance remaining after deducting
payments of US$2,500 and US$65,000 it made earlier. Respondents’ share of the advance on costs was thus fixed at US$175,000.

Respondents filed an Application for Separate Advances on Costs12 dated September 17, 2004 under Article 30(2) of the ICC Rules,
praying that the ICC fix separate advances on the cost of the parties’ respective claims and counterclaims, instead of directing them to
share equally on the advance cost of Claimant’s (RCBC) claim. Respondents deemed this advance cost allocation to be proper,
pointing out that the total amount of RCBC’s claim is substantially higher – more than 40 times –the total amount of their counterclaims,
and that it would be unfair to require them to share in the costs of arbitrating what is essentially a price issue that is now time-barred
under the SPA.

On September 20, 2004, the ICC-ICA informed Respondents that their application for separate advances on costs was premature
pending the execution of the Terms of Reference (TOR).13 The TOR was settled by the parties and signed by the Chairman and
Members of the Arbitral Tribunal by October 11, 2004. On December 3, 2004, 14 the ICC-ICA denied the application for separate
advances on costs and invited anew the Respondents to pay its share in the advance on costs. However, despite reminders from the
ICC-ICA, Respondents refused to pay their share in the advance cost fixed by the ICC-ICA. On December 16, 2004, the ICC-ICA
informed the parties that if Respondents still failed to pay its share in the advance cost, it would apply Article 30(4) of the ICC Rules and
request the Arbitration Tribunal to suspend its work and set a new time limit, and if such requested deposit remains unpaid at the expiry
thereof, the counterclaims would be considered withdrawn. 15

In a fax-letter dated January 4, 2005, the ICC-ICA invited RCBC to pay the said amount in substitution of Respondents.It also granted
an extension until January 17, 2005 within which to pay the balance of the advance cost (US$175,000). RCBC replied that it was not
willing to shoulder the share of Respondents in the advance on costs but nevertheless requested for a clarification as to the effect of
such refusal to substitute for Respondents’share.16

On March 10, 2005, the ICC-ICA instructed the Arbitration Tribunal to suspend its work and granted the parties a final time-limit of 15
days to pay the balance of the advanceon costs, failing which the claims shall be considered withdrawn, without prejudice to their
reintroduction at a later date in another proceeding. The parties were advised that if any of them objects to the measure, it should make
a request in writing within such period.17 For the same reason of non-receipt of the balance of the advance cost, the ICC-ICA issued
Procedural Order No. 3 for the adjournment of the substantive hearings and granting the Respondents a two-month extension within
which to submit their brief of evidence and witnesses.

RCBC objected to the cancellation of hearings, pointing out that Respondents have been given ample time and opportunity to submit
their brief of evidence and prepare for the hearings and that their request for postponement serves no other purpose but to delay the
proceedings. It alleged that Respondents’ unjustified refusal to pay their share in the advance on costs warrants a ruling that they have
lost standing to participate in the proceedings. It thus prayed that Respondents be declared as in default, the substantive hearings be
conducted as originally scheduled, and RCBC be allowed to submit rebuttal evidence and additional witness statements. 18

On December 15, 2005, the ICC-ICA notified the parties of its decision to increase the advances on costs from US$350,000 to
US$450,000 subject to later readjustments, and again invited the Respondents to pay the US$100,000 increment within 30 days from
notice. Respondents, however, refused to pay the increment, insisting that RCBC should bear the cost of prosecuting its own claim and
that compelling the Respondents to fund such prosecution is inequitable. Respondents reiterated that it was willing to pay the advance
on costs for their counterclaim.19

On December 27, 2005, the ICC-ICA advised that it was not possible to fix separate advances on costs as explained in its December 3,
2004 letter, and again invited Respondents to pay their share in the advance on costs. Respondents’ response contained in the letter
dated January 6, 2006 was still the same: it was willing to pay only the separate advance on costs of their counterclaim.20 In view of
Respondents’ continuing refusal to pay its equal share in the advance on costs and increment, RCBC wrote the ICC-ICA stating that
the latter should compel the Respondents to pay as otherwise RCBC will be prejudiced and the inaction of the ICC-ICA and the
Arbitration Tribunal will detract from the effectiveness of arbitration as a means of settling disputes. In accordance with Article 30(4) of
the ICC Rules, RCBC reiterated its request to declare the Respondents as in default without any personality to participate in the
proceedings not only with respect to their counterclaims but also to the claim of RCBC.21

Chairman Ian Barker, in a letter dated January 25, 2006, stated in part:

xxxx

2. The Tribunal has no power under the ICC Rules to order the Respondents to pay the advance on costs sought by
the ICC or to give the Claimant any relief against the Respondents’ refusal to pay. The ICC Rules differ from, for
example, the Rules of the LCIA (Article 24.3) which enables a party paying the share of costs which the other party has
refused to pay, to recover "that amount as a debt immediately due from the defaulting party."

3. The only sanction under the ICC Rules is contained within Article 30 (4). Where a request for an advance on costs has not
been complied with, after consultation with the Tribunal, the Secretary-General may direct the Tribunal to suspend its work.
After expiry of a time limit, all claims and counterclaims are then considered as withdrawn. This provision cannot assist a
Claimant who is anxious to litigate its claim. Such a Claimant has to pay the sums requested (including the Respondents’
share) if it wishes the arbitration to proceed.

4. It may be possible for a Claimant in the course of the arbitral hearing (or whenever costs are being considered by
the Tribunal) to make submissions based on the failure of the Respondents to pay their share of the costs
advance.What relief, if any, would have to be then determined by the Tribunal after having heard submissions from
the Respondents.

5. I should be pleased if the Claimant will advise the Tribunal of its intention in relation to the costs advance. If the costs are
not paid, the arbitration cannot proceed.22 (Italics in the original; emphasis supplied)

RCBC paid the additional US$100,000 under the second assessment to avert suspension of the Arbitration Tribunal’s proceedings.
Upon the commencement of the hearings, the Arbitration Tribunal decided that hearings will be initially confined to issues of liability
(liability phase) while the substantial issues will be heard on a later date (quantum phase).

Meanwhile, EPCIB’s corporate name was officially changed to Banco De Oro (BDO)-EPCIB after its merger with BDO was duly
approved by the Securities and Exchange Commission. As such, BDO assumed all the obligations and liabilities of EPCIB under the
SPA.

On September 27, 2007, the Arbitration Tribunal rendered a Partial Award 23 (First Partial Award) in ICC-ICA Case No.
13290/MS/JB/JEM,as follows:

15 AWARD AND DIRECTIONS

15.1 The Tribunal makes the following declarations by way of Partial Award:

(a) The Claimant’s claim is not time-barred under the provisions of this SPA.

(b) The Claimant is not estopped by its conduct or the equitable doctrine of laches from pursuing its claim.

(c) As detailed in the Partial Award, the Claimant has established the following breaches by the Respondents of
clause 5(g) of the SPA:

i) the assets, revenue and net worth of Bankard were overstated by reason of its policy on and recognition of
Late Payment Fees;

ii) reported receivables were higher than their realisable values by reason of the ‘bucketing’ method, thus
overstating Bankard’s assets; and

iii) the relevant Bankard statements were inadequate and misleading in that their disclosures caused
readers to be misinformed about Bankard’s accounting policies on revenue and receivables.

(d) Subject to proof of loss the Claimant is entitled to damages for the foregoing breaches.

(e) The Claimant is not entitled to rescission of the SPA.

(f) All other issues, including any issue relating to costs, will be dealt with in a further or final award.

15.2 A further Procedural Order will be necessary subsequent to the delivery of this Partial Award to deal with the
determination of quantum and in particular, whether there should be an Expert appointed by the Tribunal under Article 20(4) of
the ICC Rules to assist the Tribunal in this regard.

15.3 This Award is delivered by a majority of the Tribunal (Sir Ian Barker and Mr. Kaplan). Justice Kapunan is unable to agree
with the majority’s conclusion on the claim of estoppel brought by the Respondents.24(Emphasis supplied)

On October 26, 2007, RCBC filed with the Makati City RTC, Branch 148 (SP Proc. Case No. M-6046)amotion to confirm the First
Partial Award, while Respondents filed a motion to vacate the same.

ICC-ICA by letter25 dated October 12, 2007 increased the advance on costs from US$450,000 to US$580,000. Under this third
assessment, RCBC paid US$130,000 as its share on the increment. Respondents declined to pay its adjudged total share of
US$290,000 on account of its filing in the RTC of a motion to vacate the First Partial Award.26 The ICC-ICA then invited RCBC to
substitute for Respondents in paying the balance of US$130,000 by December 21, 2007. 27 RCBC complied with the request, making its
total payments in the amount of US$580,000.28

While RCBC paid Respondents’ share in the increment (US$130,000), it reiterated its plea that Respondents be declared as in default
and the counterclaimsdeemed as withdrawn.29

Chairman Barker’s letter dated December 18, 2007 states in part:

xxxx

8. Contrary to the Complainant’s view, the Tribunal has no jurisdiction to declare that the Respondents have no right to
participate in the proceedings concerning the claim. Article 30(4) of the ICC Rules applies only to any counterclaim of the
Respondents.

9. The Tribunal interprets the Claimant’s latest letter as an application by the Claimant to the Tribunal for the issue of
a partial award against the Respondents in respect of their failure to pay their share of the ICC’s requests for advance
on costs.

10. I should be grateful if the Claimant would confirm that this is the situation. If so, the Claimant should propose a timetable
for which written submissions should be made by both parties. This is an application which can be considered by the Tribunal
on written submissions.30 (Emphasis supplied)

RCBC, in a letter dated December 26, 2007, confirmed the Arbitration Tribunal’s interpretation that it was applying for a partial award
against Respondents’ failure to pay their share in the advance on costs. 31
Meanwhile, on January 8, 2008, the Makati City RTC, Branch 148 issued an order in SP Proc. Case No. M-6046 confirming the First
Partial Award and denying Respondents’ separate motions to vacate and to suspend and inhibit Barker and Kaplan. Respondents’
motion for reconsideration was likewise denied. Respondents directly filed with this Court a petition for review on certiorari under Rule
45, docketed as G.R. No. 182248 and entitled Equitable PCI Banking Corporation v. RCBC Capital Corporation.32 In our Decision dated
December 18, 2008, we denied the petition and affirmed the RTC’s ruling confirming the First Partial Award.

On January 18, 2008, the Arbitration Tribunal set a timetable for the filing of submission by the parties on whether it should issue a
Second Partial Award in respect of the Respondents’ refusal to pay an advance on costs to the ICC-ICA.

In compliance, RCBC filed on February 7, 2008an Application for Reimbursement of Advance on Costs Paid, praying for the issuance
of a partial award directing the Respondents to reimburse its payment in the amount of US$290,000 representing Respondents’ share
in the Advance on Costs and to consider Respondents’ counterclaim for actual damages in the amount of US$300,000, and moral and
exemplary damages as withdrawn for their failure to pay their equal share in the advance on costs. RCBC invoked the plain terms of
Article 30 (2) and (3) to stress the liability of Respondents to share equally in paying the advance on costs where the Arbitration
Tribunal has fixed the same.33

Respondents, on the other hand, filed their Opposition 34 to the said application alleging that the Arbitration Tribunal has lost its
objectivity in an unnecessary litigation over the payment of Respondents’ share in the advance costs. They pointed out that RCBC’s
letter merely asked that Respondents be declared as in default for their failure to pay advance costs but the Arbitration Tribunal, while
denying the request offered an alternative to RCBC: a Partial Award for Respondents’ share in the advance costs even if it was clear
from the language of RCBC’s December 11, 2007 letter that it had no intention of litigating for the advance costs. Chairman Barker,
after ruling earlier that it cannot grant RCBC’s request to declare the Respondents as having no right to participate in the proceedings
concerning the claim, interpreted RCBC’s letter as an application for the Arbitration Tribunal to issue a partial award in respect of such
refusal of Respondents to pay their share in the advance on costs, and subsequently directed the parties to make submissions on the
matter.Aside from violating their right to due process and to be heard by an impartial tribunal, Respondents also argued that in issuing
the award for advance cost, the ArbitrationTribunal decided an issue beyond the terms of the TOR.

Respondents also emphasized that the parties agreed on a two-part arbitration: the first part of the Tribunal’s proceedings would
determine Respondents’ liability, if any, for alleged violation of Section 5(g) and (h) of the SPA; and the second part of the proceedings
would determine the amounts owed by one party to another as a consequence of a finding of liability or lack thereof. An award for
"reimbursement of advances for costs" clearly falls outside the scope of either proceedings. Neither can the Tribunal justify such
proceedings under Article 23 of the ICC Rules (Conservatory and Interim Measures) because that provision does not contemplate an
award for the reimbursement of advance on costs in arbitration cases. Respondents further asserted that since the advances on costs
have been paid by the Claimant (RCBC), the main claim and counterclaim may both be heard by the Arbitration Tribunal.

In his letter dated March 13, 2008, Chairman Barker advised the parties, as follows:

1. The Tribunal acknowledges the Respondents’ response to the Claimant’s application for a Partial Award, based on the
Respondents’ failure to pay their share of the costs, as requested by the ICC.

2. The Tribunal notes that neither party has referred to an article by Mat[t]hew Secomb on this very subject which
appears in the ICC Bulletin Vol. 14 No.1 (Spring 2003). To assist both sides and to ensure that the Tribunal does not
consider material on which the parties have not been given an opportunity to address, I attach a copy of this article, which
also contains reference to other scholarly works on the subject.

3. The Tribunal will give each party seven days within which to submit further written comments as a consequence of being
alerted to the above authorities.35 (Additional emphasis supplied)

The parties complied by submitting their respective comments.

RCBC refuted Respondents’ allegation of partiality on the part of Chairman Barker and reiterated the prayer in its application for
reimbursement of advance on costs paid to the ICC-ICA. RCBC contended that based on Mr. Secomb’s article, whether the
"contractual" or "provisional measures" approach is applied, the Arbitration Tribunal is vested with jurisdiction and authority to render an
award with respect to said reimbursement of advance cost paid by the non-defaulting party.36

Respondents, on the other hand, maintained that RCBC’s application for reimbursement of advance cost has no basis under the ICC
Rules. They contended that no manifest injustice can be inferred from an act of a party paying for the share of the defaulting party as
this scenario is allowed by the ICC Rules. Neither can a partial award for advance cost be justified under the "contractual approach"
since the matter of costs for arbitration is between the ICC and the parties, not the Arbitration Tribunal and the parties. An arbitration
tribunal can issue decisions on costs only for those costs not fixed by the ICC. 37

Respondents reiterated their position that Article 30(3) envisions a situation whereby a party would refuse to pay its share on the
advance on costs and provides a remedy therefor – the other party "shall be free to pay the whole of the advance on costs." Such
party’s reimbursement for payments of the defaulting party’s share depends on the final arbitral award where the party liable for costs
would be determined. This is the only remedy provided by the ICC Rules.38

On May 28, 2008, the Arbitration Tribunal rendered the Second Partial Award, 39 as follows:

7 AWARD

7.1 Having read and considered the submissions of both parties, the Tribunal AWARDS, DECLARES AND ORDERS as follows:

(a) The Respondents are forthwith to pay to the Claimant the sum of US$290,000.

(b) The Respondents’ counterclaim is to be considered as withdrawn.

(c) All other questions, including interest and costs, will be dealt with in a subsequent award. 40
The above partial award was received by RCBC and Respondents on June 12, 2008.

On July 11, 2008, EPCIB filed a Motion to Vacate Second Partial Award 41 in the Makati City RTC, Branch 148 (SP Proc. Case No. M-
6046). On July 10, 2008, RCBC filed in the same court a Motion to Confirm Second Partial Award. 42

EPCIB raised the following grounds for vacating the Second Partial Award: (a) the award is void ab initio having been rendered by the
arbitrators who exceeded their power or acted without it; and (b) the award was procured by undue means or issued with evident
partiality or attended by misbehavior on the part of the Tribunal which resulted in a material prejudice to the rights of the Respondents.
EPCIB argued that there is no express agreement either in the SPA or the ICC Rules for such right of reimbursement. There is likewise
no implied agreement because from the ICC Rules, the only inference is that the parties agreed to await the dispositions on costs
liability in the Final Award, not before.

On the ruling of the Arbitration Tribunal that Respondents’ application for costs are not counterclaims, EPCIB asserted that this is
contrary to Philippine law as it is basic in our jurisdiction that counterclaims for litigation expenses, moral and exemplary damages are
proper counterclaims, which rule should be recognized in view of Section 10 of the SPA which provides that "substantive aspects of the
dispute shall be settled by applying the laws of the Philippines." Finally, EPCIB takes issue with Chairman Barker’s interpretation of
RCBC’s December 11, 2007 letter as an application for a partial award for reimbursement of the substituted payments. Such conduct of
Chairman Barker is prejudicial and proves his evident partiality in favor of RCBC.

RCBC filed its Opposition,43 asserting that the Arbitration Tribunal had jurisdiction to consider Respondents’ counterclaim as withdrawn,
the same having been abandoned by not presenting any computation or substantiation by evidence, their only computation relates only
to attorney’s fees which are simply cost of litigation properly brought at the conclusion of the arbitration. It also pointed out that the
Arbitration Tribunal was empowered by the parties’ arbitral clause to determine the manner of payment of expenses of arbitration, and
that the Second Partial Award was based on authorities and treatiseson the mandatory and contractual nature of the obligation to pay
advances on costs.

In its Reply,44 EPCIB contended that RCBC had the option to agree to its proposal for separate advances on costs but decided against
it; RCBC’s act of paying the balance of the advance cost in substitution of EPCIB was for the purpose of having EPCIB defaulted and
the latter’s counterclaim withdrawn. Having agreed to finance the arbitration until its completion, RCBC is not entitled to immediate
reimbursement of the amount it paid in substitution of EPCIB under an interim award, as its right to a partial or total reimbursement will
have to be determined under the final award. EPCIB asserted that the matter of reimbursement of advance cost paid cannot be said to
have properly arisen during arbitration. EPCIB reiterated that Chairman Barker’s interpretation of RCBC’s December 11, 2007 letter as
an application for interim award for reimbursement is tantamount to a promise that the award will be issued in due course.

After a further exchange of pleadings, and other motions seeking relief from the court in connection with the arbitration proceedings
(quantum phase), the Makati City RTC, Branch 148 issued the Order 45 dated June 24, 2009 confirming the Second Partial Award and
denying EPCIB’s motion to vacate the same. Said court held that since the parties agreed to submit any dispute under the SPA to
arbitration and to be bound by the ICC Rules, they are also bound to pay in equal shares the advance on costs as provided in Article 30
(2) and (3). It noted that RCBC was forced to pay the share of EPCIB in substitution of the latter to prevent a suspension of the
arbitration proceedings, while EPCIB’s non-payment seems more like a scheme to delay such proceedings. On the Arbitration
Tribunal’s ruling on EPCIB’s counterclaim, no error was committed in considering it withdrawn for failure of EPCIB to quantify and
substantiate it with supporting evidence. As to EPCIB’s claim for attorney’s fees, the RTC agreed that these should be brought only at
the close of arbitration.

EPCIB moved to reconsider the June 24, 2009 Order and for the voluntary inhibition of the Presiding Judge (Judge Oscar B. Pimentel)
on the ground that EPCIB’s new counsel represented another client in another case before him in which said counsel assailed his
conduct and had likewise sought his inhibition. Both motions were denied in the Joint Order 46 dated March 23, 2010.

On April 14, 2010, EPCIB filed in the CA a petition for review47 with application for TRO and/or writ of preliminary injunction (CA-G.R.
SP No. 113525) in accordance with Rule 19, Section 4 of the Special Rules of Court on Alternative Dispute Resolution 48 (Special ADR
Rules). EPCIB assailed the Makati City RTC, Branch 148 in denying its motion to vacate the Second Partial Award despite (a) said
award having been rendered in excess of jurisdiction or power, and contrary to public policy; (b) the fact that it was issued with evident
partiality and serious misconduct; (c) the award deals with a dispute not contemplated within the terms of submission to arbitration or
beyond the scope of such submission, which therefore ought to be vacated pursuant to Article 34 of the UNCITRAL Model Law; and (d)
the Presiding Judge having exhibited bias and prejudice against BDO and its counsel as confirmed by his pronouncements in the Joint
Order dated March 23, 2010 in which, instead of recusing himself, he imputed malice and unethical conduct in the entry of appearance
of Belo Gozon Elma Asuncion and Lucila Law Offices in SP Proc. Case No. M-6046, which warrants his voluntary inhibition.

Meanwhile, on June 16, 2010, the Arbitration Tribunal issued the Final Award, 49 as follows:

15 AWARD

15.1 The Tribunal by a majority (Sir Ian Barker & Mr. Kaplan) awards, declares and adjudges as follows:

(a) the Respondents are to pay damages to the Claimant for breach of the sale and purchase agreement for Bankard shares
in the sum of ₱348,736,920.29.

(b) The Respondents are to pay to the Claimant the sum of US$880,000 in respect of the costs of the arbitration as fixed by
the ICC Court.

(c) The Respondents are to pay to the Claimant the sum of US$582,936.56 for the fees and expenses of Mr. Best.

(d) The Respondents are to pay to the Claimant their expenses of the arbitration as follows:

(i) Experts’ fees ₱7,082,788.55

(ii) Costs of without prejudice meeting ₱22,571.45

 (iii) Costs of arbitration hearings ₱553,420.66

(iv) Costs of transcription service ₱483,597.26

Total ₱8,144,377.62

(e) The Respondents are to pay to the Claimant the sum of ₱7,000,000 for party-and-party legal costs.

(f) The Counterclaims of the Respondents are all dismissed.

(g) All claims of the Claimant are dismissed, other than those referred to above.

15.2 Justice Kapunan does not agree with the majority of the members of the Tribunal and has issued a dissenting opinion. He has
refused to sign this Award.50

On July 1, 2010 BDO filed in the Makati City RTC a Petition to Vacate Final Award Ad Cautelam,51 docketed as SP Proc. Case No. M-
6995, which was raffled to Branch 65.

On July 28, 2010, RCBC filed with the Makati City RTC, Branch 148 (SP Proc. Case No. M-6046) a Motion to Confirm Final
Award.52 BDO filed its Opposition With Motion to Dismiss53 on grounds that a Petition to Vacate Final Award Ad Cautelamhad already
been filed in SP Proc. Case No. M-6995. BDO also pointed out that RCBC did not file the required petition but instead filed a mere
motion which did not go through the process of raffling to a proper branch of the RTC of Makati City and the payment of the required
docket/filing fees. Even assuming that Branch 148 has jurisdiction over RCBC’s motion to confirm final award, BDO asserted that
RCBC had filed before the Arbitration Tribunal an Application for Correction and Interpretation of Award under Article 29 of the ICC
Rules, which is irreconcilable with its Motion to Confirm Final Award before said court. Hence, the Motion to Confirm Award was filed
precipitately.

On August 18, 2010, RCBC filed an Omnibus Motion in SP Proc. Case No. M-6995 (Branch 65) praying for the dismissal of BDO’s
Petition to Vacate Final Award or the transfer of the same to Branch 148 for consolidation with SP Proc. Case No. M-6046. RCBC
contended that BDO’s filing of its petition with another court is a blatant violation of the Special ADR Rules and is merely a subterfuge
to commit forum-shopping. BDO filed its Opposition to the Omnibus Motion.54

On October 28, 2010, Branch 65 issued a Resolution 55 denying RCBC’s omnibus motion and directing the service of the petition to
RCBC for the latter’s filing of a comment thereon. RCBC’s motion for reconsideration was likewise denied in the said court’s Order
dated December 15, 2010. RCBC then filed its Opposition to the Petition to Vacate Final Award Ad Cautelam.

Meanwhile, on November 10, 2010, Branch 148 (SP Proc. Case No. M-6046) issued an Order56 confirming the Final Award "subject to
the correction/interpretation thereof by the Arbitral Tribunal pursuant to the ICC Rules and the UNCITRAL Model Law," and denying
BDO’s Opposition with Motion to Dismiss.

On December 30, 2010, George L. Go, in his personal capacity and as attorney-in-fact of the other listed shareholders of Bankard, Inc.
in the SPA (Individual Shareholders), filed a petition in the CA, CA-G.R. SP No. 117451, seeking to set aside the above-cited
November 10, 2010 Order and to enjoin Branch 148 from further proceeding in SP Proc. Case No. M-6046. By Decision57 dated June
15, 2011, the CA dismissed the said petition. Their motion for reconsideration of the said decision was likewise denied by the CA in its
Resolution58 dated December 14, 2011.

On December 23, 2010, the CA rendered its Decision in CA-G.R. SP No. 113525, the dispositive portion of which states:

WHEREFORE, premises considered, the following are hereby REVERSED and SET ASIDE:

1. the Order dated June 24, 2009 issued in SP Proc. Case No. M-6046 by the Regional Trial Court of Makati City, Branch 148,
insofar as it denied the Motion to Vacate Second Partial Award dated July 8, 2008 and granted the Motion to Confirm Second
Partial Award dated July 10, 2008;

2. the Joint Order dated March 23, 2010 issued in SP Proc. Case No. M-6046 by the Regional Trial Court of Makati City,
Branch 148, insofar as it denied the Motion For Reconsideration dated July 28, 2009 relative to the motions concerning the
Second Partial Award immediately mentioned above; and

3. the Second Partial Award dated May 28, 2008 issued in International Chamber of Commerce Court of Arbitration Reference
No. 13290/MS/JB/JEM.

SO ORDERED.59

RCBC filed a motion for reconsideration but the CA denied the same in its Resolution 60 dated March 16, 2011. On April 6, 2011, it filed
a petition for review on certiorari in this Court (G.R. No. 196171).

On February 25, 2011, Branch 65 rendered a Decision 61 in SP Proc. Case No. M-6995, as follows:

WHEREFORE, premises considered, the Final Award dated June 16, 2010 in ICC Ref. No. 13290/MS/JB/JEM is hereby VACATED
with cost against the respondent.

SO ORDERED.62

In SP Proc. Case No. M-6046, Branch 148 issued an Order63 dated August 8, 2011 resolving the following motions: (1) Motion for
Reconsideration filed by BDO, Go and Individual Shareholders of the November 10, 2010 Order confirming the Final Award; (2)
RCBC’s Omnibus Motion to expunge the motion for reconsideration filed by Go and Individual Shareholders, and for execution of the
Final Award; (3) Motion for Execution filed by RCBC against BDO; (4) BDO’s Motion for Leave to File Supplement to the Motion for
Reconsideration; and (5) Motion for Inhibition filed by Go and Individual Shareholders. Said Order decreed:

WHEREFORE, premises considered, it is hereby ORDERED, to wit:

1. Banco De Oro’s Motion for Reconsideration, Motion for Leave to File Supplement to Motion for Reconsideration, and Motion
to Inhibit are DENIED for lack of merit.

2. RCBC Capital’s Motion to Expunge, Motion to Execute against Mr. George L. Go and the Bankard Shareholders, and the
Motion to Execute against Banco De Oro are hereby GRANTED.

3. The damages awarded to RCBC Capital Corporation in the amount of Ph₱348,736,920.29 is subject to an interest of 6%
per annum reckoned from the date of RCBC Capital’s extra-judicial demand or from May 5, 2003 until the confirmation of the
Final Award. Likewise, this compounded amount is subject to 12% interest per annum from the date of the confirmation of the
Final Award until its satisfaction. The costs of the arbitration amounting to US$880,000.00, the fees and expenses of Mr. Best
amounting to US$582,936.56, the Claimant’s expenses of the arbitration amounting to Ph₱8,144,377.62, and the party-and-
party legal costs amounting to Ph₱7,000,000.00 all ruled in favor of RCBC Capital Corporation in the Final Award of the
Arbitral Tribunal dated June 16, 2010 are subject to 12% legal interest per annum, also reckoned from the date of the
confirmation of the Final Award until its satisfaction.

4. Pursuant to Section 40 of R.A. No. 9285, otherwise known as the Alternative Dispute Resolution Act of 2004 in relation to
Rule 39 of the Rules of Court, since the Final Award have been confirmed, the same shall be enforced in the same manner as
final and executory decisions of the Regional Trial Court, let a writ of execution be issued commanding the Sheriff to enforce
this instant Order confirming this Court’s Order dated November 10, 2010 that judicially confirmed the June 16, 2010 Final
Award.

SO ORDERED.64

Immediately thereafter, RCBC filed an Urgent Motion for Issuance of a Writ of Execution. 65 On August 22, 2011, after approving the
execution bond, Branch 148 issued a Writ of Execution for the implementation of the said court’s "Order dated August 8, 2011
confirming the November 10, 2010 Order that judicially confirmed the June 16, 2010 Final Award x x x."66

BDO then filed in the CA, a "Petition for Review (With Application for a Stay Order or Temporary Restraining Order and/or Writ of
Preliminary Injunction," docketed as CA-G.R. SP No. 120888. BDO sought to reverse and set aside the Orders dated November 10,
2010 and August 8, 2011, and any writ of execution issued pursuant thereto, as well as the Final Award dated June 16, 2010 issued by
the Arbitration Tribunal.

In its Urgent Omnibus Motion67 to resolve the application for a stay order and/or TRO/writ of preliminary injunction, and to quash the
Writ of Execution dated August 22, 2011 and lift the Notices of Garnishment dated August 22, 2011, BDO argued that the assailed
orders of execution (Writ of Execution and Notice of Garnishment) were issued with indecent haste and despite the non-compliance
with the procedures in Special ADR Rules of the November 10, 2010 Order confirming the Final Award. BDO was not given sufficient
time to respond to the demand for payment or to elect the method of satisfaction of the judgment debt or the property to be levied upon.
In any case, with the posting of a bond by BDO, Branch 148 has no jurisdiction to implement the appealed orders as it would pre-empt
the CA from exercising its review under Rule 19 of the Special ADR Rules after BDO had perfected its appeal. BDO stressed that the
bond posted by RCBC was for a measly sum of ₱3,000,000.00 to cause execution pending appeal of a monetary award that may reach
₱631,429,345.29. RCBC also failed to adduce evidence of "good cause" or "good reason" to justify discretionary execution under
Section 2(a), Rule 39 of the Rules of Court.

BDO further contended that the writ of execution should be quashed for having been issued with grave abuse of discretion amounting
to lack or excess of jurisdiction as Branch 148 modified the Final Award at the time of execution by imposing the payment of interests
though none was provided therein nor in the Order confirming the same.

During the pendency of CA-G.R. SP No. 120888, Branch 148 continued with execution proceedings and on motion by RCBC
designated/deputized additional sheriffs to replace Sheriff Flora who was supposedly physically indisposed. 68 These court personnel
went to the offices/branches of BDO attempting to serve notices of garnishment and to levy the furniture, fixtures and equipment.

On September 12, 2011, BDO filed a Very Urgent Motion to Lift Levy and For Leave to Post Counter-Bond69 before Branch 148 praying
for the lifting of the levy of BDO Private Bank, Inc. (BPBI) shares and the cancellation of the execution sale thereof scheduled on
September 15, 2011, which was set for hearing on September 14, 2011. BDO claimed that the levy was invalid because it was served
by the RTC Sheriffs not to the authorized representatives of BPBI, as provided under Section 9(b), Rule 39 in relation to Section 7, Rule
57 of the Rules of Court stating that a notice of levy on shares of stock must be served to the president or managing agent of the
company which issued the shares. However, BDO was advised by court staff that Judge Sarabia was on leave and the case could not
be set for hearing.

In its Opposition to BDO’s application for injunctive relief, RCBC prayed for its outright denial as BDO’s petition raises questions of fact
and/or law which call for the CA to substitute its judgment with that of the Arbitration Tribunal, in patent violation of applicable rules of
procedure governing domestic arbitration and beyond the appellate court’s jurisdiction. RCBC asserted that BDO’s application has
become moot and academic as the writ of execution was already implemented and/or enforced. It also contended that BDO has no
clear and unmistakable right to warrant injunctive relief because the issue of jurisdiction was already ruled upon in CA-G.R. SP No.
117451 which dismissed the petition filed by Go and the Individual Shareholders of Bankard questioning the authority of Branch 148
over RCBC’s motion to confirm the Final Award despite the earlier filing by BDO in another branch of the RTC (Branch 65) of a petition
to vacate the said award.

On September 13, 2011, BDO, to avert the sale of the BPBI shares scheduled on September 15, 2011 and prevent further disruption in
the operations of BDO and BPBI, paid under protest by tendering a Manager’s Check in the amount of ₱637,941,185.55, which was
accepted by RCBC as full and complete satisfaction of the writ of execution. BDO manifested before Branch 148 that such payment
was made without prejudice to its appeal before the CA. 70
On even date, the CA denied BDO’s application for a stay order and/or TRO/preliminary injunction for non-compliance with Rule 19.25
of the Special ADR Rules. The CA ruled that BDO failed to show the existence of a clear right to be protected and that the acts sought
to be enjoined violated any right. Neither was BDO able to demonstrate that the injury to be suffered by it is irreparable or not
susceptible to mathematical computation.

BDO did not file a motion for reconsideration and directly filed with this Court a petition for certiorari with urgent application for writ of
preliminary mandatory injunction (G.R. No. 199238).

The Petitions

In G.R. No. 196171, RCBC set forth the following grounds for the reversal of the CA Decision dated December 23, 2010:

I.

THE COURT OF APPEALS ACTED CONTRARY TO LAW AND PRIOR RULINGS OF THIS HONORABLE COURT AND
COMMITTED REVERSIBLE ERROR IN VACATING THE SECOND PARTIAL AWARD ON THE BASIS OF CHAIRMAN
BARKER’S ALLEGED PARTIALITY, WHICH IT CLAIMS IS INDICATIVE OF BIAS CONSIDERING THAT THE
ALLEGATIONS CONTAINED IN BDO/EPCIB’S PETITION FALL SHORT OF THE JURISPRUDENTIAL REQUIREMENT
THAT THE SAME BE SUPPORTED BY CLEAR AND CONVINCING EVIDENCE.

II.

THE COURT OF APPEALS ACTED CONTRARY TO LAW AND PRIOR RULINGS OF THIS HONORABLE COURT AND
COMMITTED REVERSIBLE ERROR WHEN IT REVERSED THE ARBITRAL TRIBUNAL’S FINDINGS OF FACT AND LAW
IN THE SECOND PARTIAL AWARD IN PATENT CONTRAVENTION OF THE SPECIAL ADR RULES WHICH EXPRESSLY
PROHIBITS THE COURTS, IN AN APPLICATION TO VACATE AN ARBITRAL AWARD, FROM DISTURBING THE
FINDINGS OF FACT AND/OR INTERPRE[TA]TION OF LAW OF THE ARBITRAL TRIBUNAL.71

BDO raises the following arguments in G.R. No. 199238:

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN PERFUNCTORILY DENYING PETITIONER BDO’S APPLICATION FOR STAY ORDER, AND/OR TEMPORARY
RESTRAINING ORDER AND PRELIMINARY INJUNCTION DESPITE THE EXISTENCE AND CONCURRENCE OF ALL THE
ELEMENTS FOR THE ISSUANCE OF SAID PROVISIONAL RELIEFS

A. PETITIONER BDO HAS CLEAR AND UNMISTAKABLE RIGHTS TO BE PROTECTED BY THE ISSUANCE OF THE
INJUNCTIVE RELIEF PRAYED FOR, WHICH, HOWEVER, WERE DISREGARDED BY PUBLIC RESPONDENT WHEN IT
DENIED PETITIONER BDO’S PRAYER FOR ISSUANCE OF A STAY ORDER AND/OR TRO

B. PETITIONER BDO’S RIGHT TO DUE PROCESS AND EQUAL PROTECTION OF THE LAW WAS GROSSLY VIOLATED
BY THE RTC-MAKATI CITY BRANCH 148, THE DEPUTIZED SHERIFFS AND RESPONDENT RCBC CAPITAL, WHICH
VIOLATION WAS AIDED BY PUBLIC RESPONDENT’S INACTION ON AND EVENTUAL DENIAL OF THE PRAYER FOR
STAY ORDER AND/OR TRO

C. DUE TO THE ACTS AND ORDERS OF RTC BRANCH 148, PETITIONER BDO SUFFERED IRREPARABLE DAMAGE
AND INJURY, AND THERE WAS DIRE AND URGENT NECESSITY FOR THE ISSUANCE OF THE INJUNCTIVE RELIEF
PRAYED FOR WHICH PUBLIC RESPONDENT DENIED IN GRAVE ABUSE OF DISCRETION72

Essentially, the issues to be resolved are: (1) whether there is legal ground to vacate the Second Partial Award; and (2) whether BDO is
entitled to injunctive relief in connection with the execution proceedings in SP Proc. Case No. M-6046.

In their TOR, the parties agreed on the governing law and rules as follows:

Laws to be Applied

13 The Tribunal shall determine the issues to be resolved in accordance with the laws of the Republic of the Philippines.

Procedure to be Applied

14 The proceedings before the Tribunal shall be governed by the ICC Rules of Arbitration (1 January 1998) and the law currently
applicable to arbitration in the Republic of the Philippines. 73

As stated in the Partial Award dated September 27, 2007, although the parties provided in Section 10 of the SPA that the arbitration
shall be conducted under the ICC Rules, it was nevertheless arbitration under Philippine law since the parties are both residents of this
country. The provisions of Republic Act No. 87674 (RA 876),as amended by Republic Act No. 928575 (RA 9285)principally applied in the
arbitration between the herein parties.76

The pertinent provisions of R.A. 9285 provide:

SEC. 40. Confirmation of Award. – The confirmation of a domestic arbitral award shall be governed by Section 23 of R.A. 876.

A domestic arbitral award when confirmed shall be enforced in the same manner as final and executory decisions of the Regional Trial
Court.
The confirmation of a domestic award shall be made by the regional trial court in accordance with the Rules of Procedure to be
promulgated by the Supreme Court.

xxxx

SEC. 41. Vacation Award. – A party to a domestic arbitration may question the arbitral award with the appropriate regional trial court in
accordance with the rules of procedure to be promulgated by the Supreme Court only on those grounds enumerated in Section 25 of
Republic Act No. 876. Any other ground raised against a domestic arbitral award shall be disregarded by the regional trial court.

Rule 11.4 of the Special ADR Rules sets forth the grounds for vacating an arbitral award:

Rule 11.4. Grounds.—(A) To vacate an arbitral award. – The arbitral award may be vacated on the following grounds:

a. The arbitral award was procured through corruption, fraud or other undue means;

b. There was evident partiality or corruption in the arbitral tribunal or any of its members;

c. The arbitral tribunal was guilty of misconduct or any form of misbehavior that has materially prejudiced the rights of any
party such as refusing to postpone a hearing upon sufficient cause shown or to hear evidence pertinent and material to the
controversy;

d. One or more of the arbitrators was disqualified to act as such under the law and willfully refrained from disclosing such
disqualification; or

e. The arbitral tribunal exceeded its powers, or so imperfectly executed them, such that a complete, final and definite award
upon the subject matter submitted to them was not made.

The award may also be vacated on any or all of the following grounds:

a. The arbitration agreement did not exist, or is invalid for any ground for the revocation of a contract or is otherwise
unenforceable; or

b. A party to arbitration is a minor or a person judicially declared to be incompetent.

xxxx

In deciding the petition to vacate the arbitral award, the court shall disregard any other ground than those enumerated above.
(Emphasis supplied)

Judicial Review

At the outset, it must be stated that a review brought to this Court under the Special ADR Rules is not a matter of right. Rule 19.36 of
said Rules specified the conditions for the exercise of this Court’s discretionary review of the CA’s decision.

Rule 19.36.Review discretionary.—A review by the Supreme Court is not a matter of right, but of sound judicial discretion, which will be
granted only for serious and compelling reasons resulting in grave prejudice to the aggrieved party. The following, while neither
controlling nor fully measuring the court’s discretion, indicate the serious and compelling, and necessarily, restrictive nature of the
grounds that will warrant the exercise of the Supreme Court’s discretionary powers, when the Court of Appeals:

a. Failed to apply the applicable standard or test for judicial review prescribed in these Special ADR Rules in arriving
at its decision resulting in substantial prejudice to the aggrieved party;

b. Erred in upholding a final order or decision despite the lack of jurisdiction of the court that rendered such final order or
decision;

c. Failed to apply any provision, principle, policy or rule contained in these Special ADR Rules resulting in substantial prejudice
to the aggrieved party; and

d. Committed an error so egregious and harmful to a party as to amount to an undeniable excess of jurisdiction.

The mere fact that the petitioner disagrees with the Court of Appeals’ determination of questions of fact, of law or both questions of fact
and law, shall not warrant the exercise of the Supreme Court’s discretionary power. The error imputed to the Court of Appeals must
be grounded upon any of the above prescribed grounds for review or be closely analogous thereto.

A mere general allegation that the Court of Appeals has committed serious and substantial error or that it has acted with grave abuse of
discretion resulting in substantial prejudice to the petitioner without indicating with specificity the nature of such error or abuse of
discretion and the serious prejudice suffered by the petitioner on account thereof, shall constitute sufficient ground for the Supreme
Court to dismiss outright the petition. (Emphasis supplied)

The applicable standard for judicial review of arbitral awards in this jurisdiction is set forth in Rule 19.10 which states:

Rule 19.10. Rule on judicial review on arbitration in the Philippines.--As a general rule, the court can only vacate or set aside the
decision of an arbitral tribunal upon a clear showing that the award suffers from any of the infirmities or grounds for vacating an
arbitral award under Section 24 of Republic Act No. 876 or under Rule 34 of the Model Law in a domestic arbitration, or for setting
aside an award in an international arbitration under Article 34 of the Model Law, or for such other grounds provided under these Special
Rules.

xxxx

The court shall not set aside or vacate the award of the arbitral tribunal merelyon the ground that the arbitral tribunal committed errors
of fact, or of law, or of fact and law, as the court cannot substitute its judgment for that of the arbitral tribunal. (Emphasis supplied)

The above rule embodied the stricter standard in deciding appeals from arbitral awards established by jurisprudence. In the case
of Asset Privatization Trust v. Court of Appeals,77 this Court held:

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.78

Accordingly, we examine the merits of the petition before us solely on the statutory ground raised for vacating the Second Partial
Award: evident partiality, pursuant to Section 24 (b) of the Arbitration Law (RA 876) and Rule 11.4 (b) of the Special ADR Rules.

Evident Partiality

Evident partiality is not defined in our arbitration laws. As one of the grounds for vacating an arbitral award under the Federal Arbitration
Act (FAA) in the United States (US), the term "encompasses both an arbitrator’s explicit bias toward one party and an arbitrator’s
inferred bias when an arbitrator fails to disclose relevant information to the parties." 79

From a recent decision80 of the Court of Appeals of Oregon, we quote a brief discussion of the common meaning of evident partiality:

To determine the meaning of "evident partiality," we begin with the terms themselves. The common meaning of "partiality" is
"the inclination to favor one side."Webster’s Third New Int'l Dictionary 1646 (unabridged ed 2002); see also id. (defining "partial" as
"inclined to favor one party in a cause or one side of a question more than the other: biased, predisposed" (formatting in original)).
"Inclination," in turn, means "a particular disposition of mind or character : propensity, bent" or "a tendency to a particular aspect, state,
character, or action."Id. at 1143 (formatting in original); see also id. (defining "inclined" as "having inclination, disposition, or tendency").

The common meaning of "evident" is "capable of being perceived esp[ecially] by sight : distinctly visible : being in evidence :
discernable[;] * * * clear to the understanding : obvious, manifest, apparent."Id. at 789 (formatting in original); see also id. (stating that
synonyms of "evident" include "apparent, patent, manifest, plain, clear, distinct, obvious, [and] palpable" and that, "[s]ince evident
rather naturally suggests evidence, it may imply the existence of signs and indications that must lead to an identification or
inference" (formatting in original)). (Emphasis supplied)

Evident partiality in its common definition thus implies "the existence of signs and indications that must lead to an identification or
inference" of partiality.81 Despite the increasing adoption of arbitration in many jurisdictions, there seems to be no established standard
for determining the existence of evident partiality. In the US, evident partiality "continues to be the subject of somewhat conflicting and
inconsistent judicial interpretation when an arbitrator’s failure to disclose prior dealings is at issue." 82

The first case to delineate the standard of evident partiality in arbitration proceedings was Commonwealth Coatings Corp. v.
Continental Casualty Co., et al.83 decided by the US Supreme Court in 1968. The Court therein addressed the issue of whether the
requirement of impartiality applies to an arbitration proceeding. The plurality opinion written by Justice Black laid down the rule that the
arbitrators must disclose to the parties "any dealings that might create an impression of possible bias,"84 and that underlying such
standard is "the premise that any tribunal permitted by law to try cases and controversies not only must be unbiased but also must
avoid even the appearance of bias."85 In a separate concurring opinion, Justice White joined by Justice Marshall, remarked that "[t]he
Court does not decide today that arbitrators are to be held to the standards of judicial decorum of Article III judges, or indeed of any
judges."86 He opined that arbitrators should not automatically be disqualified from an arbitration proceeding because of a business
relationship where both parties are aware of the relationship in advance, or where the parties are unaware of the circumstances but the
relationship is trivial. However, in the event that the arbitrator has a "substantial interest" in the transaction at hand, such information
must be disclosed.

Subsequent cases decided by the US Court of Appeals Circuit Courts adopted different approaches, given the imprecise standard of
evident partiality in Commonwealth Coatings.

In Morelite Construction Corp. v. New York District Council Carpenters Benefit Funds,87 the Second Circuit reversed the judgment of the
district court and remanded with instructions to vacate the arbitrator’s award, holding that the existence of a father-son relationship
between the arbitrator and the president of appellee union provided strong evidence of partiality and was unfair to appellant
construction contractor. After examining prior decisions in the Circuit, the court concluded that –

x x x we cannot countenance the promulgation of a standard for partiality as insurmountable as "proof of actual bias" -- as the literal
words of Section 10 might suggest. Bias is always difficult, and indeed often impossible, to "prove." Unless an arbitrator publicly
announces his partiality, or is overheard in a moment of private admission, it is difficult to imagine how "proof" would be obtained. Such
a standard, we fear, occasionally would require that we enforce awards in situations that are clearly repugnant to our sense of fairness,
yet do not yield "proof" of anything.

If the standard of "appearance of bias" is too low for the invocation of Section 10, and "proof of actual bias" too high, with
what are we left? Profoundly aware of the competing forces that have already been discussed, we hold that "evident partiality" within
the meaning of 9 U.S.C. § 10 will be found where a reasonable person would have to conclude that an arbitrator was partial to
one party to the arbitration.x x x88 (Emphasis supplied)
In Apperson v. Fleet Carrier Corporation,89 the Sixth Circuit agreed with the Morelite court’s analysis, and accordingly held that to
invalidate an arbitration award on the grounds of bias, the challenging party must show that "a reasonable person would have to
conclude that an arbitrator was partial" to the other party to the arbitration.

This "myriad of judicial interpretations and approaches to evident partiality" resulted in a lack of a uniform standard, leaving the courts
"to examine evident partiality on a case-by-case basis."90 The case at bar does not present a non-disclosure issue but conduct allegedly
showing an arbitrator’s partiality to one of the parties.

EPCIB/BDO, in moving to vacate the Second Partial Award claimed that the Arbitration Tribunal exceeded its powers in deciding the
issue of advance cost not contemplated in the TOR, and that Chairman Barker acted with evident partiality in making such award. The
RTC held that BDO failed to substantiate these allegations. On appeal, the CA likewise found that the Arbitration Tribunal did not go
beyond the submission of the parties because the phrasing of the scope of the agreed issues in the TOR ("[t]he issues to be
determined by the Tribunal are those issues arising from the said Request for Arbitration, Answer and Reply and such other issues as
may properly arise during the arbitration")is broad enough to accommodate a finding on the liability and the repercussions of BDO’s
failure to share in the advances on costs. Section 10 of the SPA also gave the Arbitration Tribunal authority to decide how the costs
should be apportioned between them.

However, the CA found factual support in BDO’s charge of partiality, thus:

On the issue on evident partiality, the rationale in the American case of Commonwealth Coatings Corp. v. Continental Cas. Co. appears
to be very prudent. In Commonwealth, the United States Supreme Court reasoned that courts "should…be even more scrupulous to
safeguard the impartiality of arbitrators than judges, since the former have completely free rein to decide the law as well as the facts,
and are not subject to appellate review" in general. This taken into account, the Court applies the standard demanded of the
conduct of magistrates by analogy. After all, the ICC Rules require that an arbitral tribunal should act fairly and impartially. Hence, an
arbitrator’s conduct should be beyond reproach and suspicion. His acts should be free from the appearances of impropriety.

An examination of the circumstances claimed to be illustrative of Chairman Barker’s partiality is indicative of bias. Although RCBC had
repeatedly asked for reimbursement and the withdrawal of BDO’s counterclaims prior to Chairman Barker’s December 18, 2007 letter, it
is baffling why it is only in the said letter that RCBC’s prayer was given a complexion of being an application for a partial
award. To the Court, the said letter signaled a preconceived course of action that the relief prayed for by RCBC will be
granted.

That there was an action to be taken beforehand is confirmed by Chairman Barker’s furnishing the parties with a copy of the Secomb
article. This article ultimately favored RCBC by advancing its cause. Chairman Barker makes it appear that he intended good
to be done in doing so but due process dictates the cold neutrality of impartiality. This means that "it is not enough…[that] cases
[be decided] without bias and favoritism. Nor is it sufficient that…prepossessions [be rid of]. [A]ctuations should moreover inspire that
belief." These put into the equation, the furnishing of the Secomb article further marred the trust reposed in Chairman Barker. The
suspicion of his partiality on the subject matter deepened. Specifically, his act established that he had pre-formed opinions.

Chairman Barker’s providing of copies of the said text is easily interpretable that he had prejudged the matter before him. In any case,
the Secomb article tackled bases upon which the Second Partial Award was founded. The subject article reflected in advance the
disposition of the ICC arbitral tribunal. The award can definitely be viewed as an affirmation that the bases in the Secomb article
were adopted earlier on. To the Court, actuations of arbitrators, like the language of judges, "must be guarded and measured lest the
best of intentions be misconstrued."

x x x x91 (Emphasis supplied)

We affirm the foregoing findings and conclusion of the appellate court save for its reference to the obiter in Commonwealth
Coatings that arbitrators are held to the same standard of conduct imposed on judges. Instead, the Court adopts the reasonable
impression of partiality standard, which requires a showing that a reasonable person would have to conclude that an arbitrator was
partial to the other party to the arbitration. Such interest or bias, moreover, "must be direct, definite and capable of demonstration rather
than remote, uncertain, or speculative." 92When a claim of arbitrator’s evident partiality is made, "the court must ascertain from such
record as is available whether the arbitrators’ conduct was so biased and prejudiced as to destroy fundamental fairness." 93

Applying the foregoing standard, we agree with the CA in finding that Chairman Barker’s act of furnishing the parties with copies of
Matthew Secomb’s article, considering the attendant circumstances,is indicative of partiality such that a reasonable man would have to
conclude that he was favoring the Claimant, RCBC. Even before the issuance of the Second Partial Award for the reimbursement of
advance costs paid by RCBC, Chairman Barker exhibited strong inclination to grant such relief to RCBC, notwithstanding his
categorical ruling that the Arbitration Tribunal "has no power under the ICC Rules to order the Respondents to pay the advance on
costs sought by the ICC or to give the Claimantany relief against the Respondents’ refusal to pay." 94 That Chairman Barker was
predisposed to grant relief to RCBC was shown by his act of interpreting RCBC’s letter, which merely reiterated its plea to declare the
Respondents in default and consider all counterclaims withdrawn – as what the ICC Rules provide – as an application to the Arbitration
Tribunal to issue a partial award in respect of BDO’s failure to share in the advance costs. It must be noted that RCBC in said letter did
not contemplate the issuance of a partial order, despite Chairman Barker’s previous letter which mentioned the possibility of granting
relief upon the parties making submissions to the Arbitration Tribunal. Expectedly, in compliance with Chairman Barker’s December 18,
2007 letter, RCBC formally applied for the issuance of a partial award ordering BDO to pay its share in the advance costs.

Mr. Secomb’s article, "Awards and Orders Dealing With the Advance on Costs in ICC Arbitration: Theoretical Questions and Practical
Problems"95 specifically dealt with the situation when one of the parties to international commercial arbitration refuses to pay its share
on the advance on costs. After a brief discussion of the provisions of ICC Rules dealing with advance on costs, which did not provide
for issuance of a partial award to compel payment by the defaulting party, the author stated:

4. As we can see, the Rules have certain mechanisms to deal with defaulting parties. Occasionally, however, parties have sought to
use other methods to tackle the problem of a party refusing to pay its part of the advance on costs. These have included seeking an
order or award from the arbitral tribunal condemning the defaulting party to pay its share of the advance on costs.1âwphi1 Such
applications are the subject of this article.96
By furnishing the parties with a copy of this article, Chairman Barker practically armed RCBC with supporting legal arguments under the
"contractual approach" discussed by Secomb. True enough, RCBC in its Application for Reimbursement of Advance Costs Paid utilized
said approach as it singularly focused on Article 30(3) 97 of the ICC Rules and fiercely argued that BDO was contractually bound to
share in the advance costs fixed by the ICC.98 But whether under the "contractual approach" or "provisional approach" (an application
must be treated as an interim measure of protection under Article 23 [1] rather than enforcement of a contractual obligation), both
treated in the Secomb article, RCBC succeeded in availing of a remedy which was not expressly allowed by the Rules but in practice
has been resorted to by parties in international commercial arbitration proceedings. It may also be mentioned that the author, Matthew
Secomb, is a member of the ICC Secretariat and the "Counsel in charge of the file", as in fact he signed some early communications on
behalf of the ICC Secretariat pertaining to the advance costs fixed by the ICC. 99 This bolstered the impression that Chairman Barker
was predisposed to grant relief to RCBC by issuing a partial award.

Indeed, fairness dictates that Chairman Barker refrainfrom suggesting to or directing RCBC towards a course of action to advance the
latter’s cause, by providing it with legal arguments contained in an article written by a lawyer who serves at the ICC Secretariat and was
involved or had participation -- insofar as the actions or recommendations of the ICC – in the case. Though done purportedly to assist
both parties, Chairman Barker’s act clearly violated Article 15 of the ICC Rules declaring that "[i]n all cases, the Arbitral Tribunal shall
act fairly and impartially and ensure that each party has a reasonable opportunity to present its case." Having pre-judged the matter in
dispute, Chairman Barker had lost his objectivity in the issuance of the Second Partial Award.

In fine, we hold that the CA did not err in concluding that the article ultimately favored RCBC as it reflected in advance the disposition of
the Arbitral Tribunal, as well as "signalled a preconceived course of action that the relief prayed for by RCBC will be granted." This
conclusion is further confirmed by the Arbitral Tribunal’s pronouncements in its Second Partial Award which not only adopted the
"contractual approach" but even cited Secomb’s article along with other references, thus:

6.1 It appears to the Tribunal that the issue posed by this application is essentially a contractual one. x x x

xxxx

6.5 Matthew Secomb, considered these points in the article in 14 ICC Bulletin No. 1 (2003) which was sent to the parties. At Para. 19,
the learned author quoted from an ICC Tribunal (Case No. 11330) as follows:

"The Arbitral Tribunal concludes that the partiesin arbitrations conducted under the ICC Rules have a mutually binding obligation to pay
the advance on costs as determined by the ICC Court, based on Article 30-3 ICC Rules which – by reference – forms part of the
parties’ agreement to arbitration under such Rules."100

The Court, however, must clarify that the merits of the parties’ arguments as to the propriety of the issuance of the Second Partial
Award are not in issue here. Courts are generally 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. A contrary rule would make an arbitration award the commencement, not the end,
of litigation.101 It is the finding of evident partiality which constitutes legal ground for vacating the Second Partial Award and not the
Arbitration Tribunal’s application of the ICC Rules adopting the "contractual approach" tackled in Secomb’s article.

Alternative dispute resolution methods or ADRs – like arbitration, mediation, negotiation and conciliation – are encouraged by this
Court. By enabling parties to resolve their disputes amicably, they provide solutions that are less time-consuming, less tedious, less
confrontational, and more productive of goodwill and lasting relationship. 102Institutionalization of ADR was envisioned as "an important
means to achieve speedy and impartial justice and declog court dockets."103 The most important feature of arbitration, and indeed, the
key to its success, is the public’s confidence and trust in the integrity of the process. 104 For this reason, the law authorizes vacating an
arbitral award when there is evident partiality in the arbitrators.

Injunction Against Execution Of Arbitral Award

Before an injunctive writ can be issued, it is essential that the following requisites are present: (1) there must be a right inesse or the
existence of a right to be protected; and (2) the act against which injunction to be directed is a violation of such right. The onus
probandi is on movant to show that there exists a right to be protected, which is directly threatened by the act sought to be enjoined.
Further, there must be a showing that the invasion of the right is material and substantial and that there is an urgent and paramount
necessity for the writ to prevent a serious damage. 105

Rule 19.22 of the Special ADR Rules states:

Rule 19.22. Effect of appeal.—The appeal shall not stay the award, judgment, final order or resolution sought to be reviewed unless the
Court of Appeals directs otherwise upon such terms as it may deem just.

We find no reversible error or grave abuse of discretion in the CA’s denial of the application for stay order or TRO upon its finding that
BDO failed to establish the existence of a clear legal right to enjoin execution of the Final Award confirmed by the Makati City RTC,
Branch 148, pending resolution of its appeal.It would be premature to address on the merits the issues raised by BDO in the present
petition considering that the CA still has to decide on the validity of said court's orders confirming the Final Award. But more important,
since BOO had already paid ₱637,941,185.55 m manager's check, albeit under protest, and which payment was accepted by RCBC as
full and complete satisfaction of the writ of execution, there is no more act to be enjoined.

Settled is the rule that injunctive reliefs are preservative remedies for the protection of substantive rights and interests. Injunction is not
a cause of action in itself, but merely a provisional remedy, an adjunct to a main suit. When the act sought to be enjoined has
become fait accompli, the prayer for provisional remedy should be denied. 106

Thus, the Court ruled in Gov. Looyuko107 that when the events sought to be prevented by injunction or prohibition have already
happened, nothing more could be enjoined or prohibited. Indeed, it is a universal principle of law that an injunction will not issue to
restrain the performance of an act already done. This is so for the simple reason that nothing more can be done in reference thereto. A
writ of injunction becomes moot and academic after the act sought to be enjoined has already been consummated.
WHEREFORE, premises considered, the petition m G.R. No. 199238 is DENIED. The Resolution dated September 13,2011 ofthe
Court of Appeals in CA-G.R. SP No. 120888 is AFFIRMED.

The petition in G.R. No. 196171 is DENIED. The Decision dated December 23, 2010 of the Court of Appeals in CA-G.R. SP No.
113525 is hereby AFFIRMED.

SO ORDERED.

G.R. No. 212081 February 23, 2015

DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES (DENR), Petitioner,

vs.
UNITED PLANNERS CONSULTANTS , INC. (UPCI), Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 is the Decision2 dated March 26, 2014 of the Court of Appeals (CA) in CA-G.R. SP No.
126458 which dismissed the petition for certiorari filed by petitioner the Department of Environment and Natural Resources (petitioner).

The Facts

On July 26, 1993, petitioner, through the Land Management Bureau (LMB), entered into an Agreement for Consultancy
Services3 (Consultancy Agreement) with respondent United Planners Consultants, Inc. (respondent) in connection with the LMB' s Land
Resource Management Master Plan Project (LRMMP).4 Under the Consultancy Agreement, petitioner committed to pay a total contract
price of ₱4,337,141.00, based on a predetermined percentage corresponding to the particular stage of work accomplished. 5

In December 1994, respondent completed the work required, which petitioner formally accepted on December 27, 1994. 6 However,
petitioner was able to pay only 47% of the total contract price in the amount of ₱2,038,456.30. 7

On October 25, 1994, the Commission on Audit (COA) released the Technical Services Office Report8 (TSO) finding the contract price
of the Agreement to be 84.14% excessive.9 This notwithstanding, petitioner, in a letter dated December 10, 1998, acknowledged its
liability to respondent in the amount of ₱2,239,479.60 and assured payment at the soonest possible time. 10

For failure to pay its obligation under the Consultancy Agreement despite repeated demands, respondent instituted a
Complaint11 against petitioner before the Regional Trial Court of Quezon City, Branch 222 (RTC), docketed as Case No. Q-07-60321.12

Upon motion of respondent, the case was subsequently referred to arbitration pursuant to the arbitration clause of the Consultancy
Agreement,13 which petitioner did not oppose.14 As a result, Atty. Alfredo F. Tadiar, Architect Armando N. Alli, and Construction Industry
Arbitration Commission (CIAC) Accredited Arbitrator Engr. Ricardo B. San Juan were appointed as members of the Arbitral Tribunal.
The court-referred arbitration was then docketed as Arbitration Case No. A-001.15

During the preliminary conference, the parties agreed to adopt the CIAC Revised Rules Governing Construction Arbitration 16 (CIAC
Rules) to govern the arbitration proceedings.17 They further agreed to submit their respective draft decisions in lieu of memoranda of
arguments on or before April 21, 2010, among others.18

On the due date for submission of the draft decisions, however, only respondent complied with the given deadline, 19while petitioner
moved for the deferment of the deadline which it followed with another motion for extension of time, asking that it be given until May 11,
2010 to submit its draft decision.20

In an Order21 dated April 30, 2010, the Arbitral Tribunal denied petitioner’s motions and deemed its non-submission as a waiver, but
declared that it would still consider petitioner’s draft decision if submitted before May 7, 2010, or the expected date of the final award’s
promulgation.22 Petitioner filed its draft decision23 only on May 7, 2010.

The Arbitral Tribunal rendered its Award24 dated May 7, 2010 (Arbitral Award) in favor of respondent, directing petitioner to pay the
latter the amount of (a) ₱2,285,089.89 representing the unpaid progress billings, with interest at the rate of 12% per annum from the
date of finality of the Arbitral Award upon confirmation by the RTC until fully paid; (b) ₱2,033,034.59 as accrued interest thereon; (c)
₱500,000.00 as exemplary damages; and (d) ₱150,000.00 as attorney’s fees. 25 It also ordered petitioner to reimburse respondent its
proportionate share in the arbitration costs as agreed upon in the amount of ₱182,119.44.26

Unconvinced, petitioner filed a motion for reconsideration, 27 which the Arbitral Tribunal merely noted without any action, claiming that it
had already lost jurisdiction over the case after it had submitted to the RTC its Report together with a copy of the Arbitral Award.28

Consequently, petitioner filed before the RTC a Motion for Reconsideration 29 dated May 19, 2010 (May 19, 2010 Motion for
Reconsideration)and a Manifestation and Motion 30 dated June 1, 2010 (June 1, 2010 Manifestation and Motion), asserting that it was
denied the opportunity to be heard when the Arbitral Tribunal failed to consider its draft decision and merely noted its motion for
reconsideration.31 It also denied receiving a copy of the Arbitral Award by either electronic or registered mail. 32 For its part, respondent
filed an opposition thereto and moved for the confirmation 33 of the Arbitral Award in accordance with the Special Rules of Court on
Alternative Dispute Resolution (Special ADR Rules).34

In an Order35 dated March 30, 2011, the RTC merely noted petitioner’s aforesaid motions, finding that copies of the Arbitral Award
appear to have been sent to the parties by the Arbitral Tribunal, including the OSG, contrary to petitioner’s claim. Onthe other hand, the
RTC confirmed the Arbitral Award pursuant to Rule 11.2 (A) 36 of the Special ADR Rules and ordered petitioner to pay respondent the
costs of confirming the award, as prayed for, in the total amount of ₱50,000.00. From this order, petitioner did not file a motion for
reconsideration.

Thus, on June 15, 2011, respondent moved for the issuance of a writ of execution, to which no comment/opposition was filed by
petitioner despite the RTC’s directive therefor. In an Order 37 dated September 12, 2011, the RTC granted respondent’s motion. 38

Petitioner moved to quash39 the writ of execution, positing that respondent was not entitled to its monetary claims. It also claimed that
the issuance of said writ was premature since the RTC should have first resolved its May 19, 2010 Motion for Reconsideration and
June 1, 2010 Manifestation and Motion, and not merely noted them, thereby violating its right to due process. 40

The RTC Ruling

In an Order41 dated July 9, 2012, the RTC denied petitioner’s motion to quash.

It found no merit in petitioner’s contention that it was denied due process, ruling that its May 19, 2010 Motion for Reconsideration was a
prohibited pleading under Section 17.2,42 Rule 17 of the CIAC Rules. It explained that the available remedy to assail an arbitral award
was to file a motion for correction of final award pursuant to Section 17.1 43 of the CIAC Rules, and not a motion for reconsideration of
the said award itself.44 On the other hand, the RTC found petitioner’s June 1, 2010 Manifestation and Motion seeking the resolution of
its May 19, 2010 Motion for Reconsideration to be defective for petitioner’s failure to observe the three day notice rule. 45 Having then
failed to avail of the remedies attendant to an order of confirmation, the Arbitral Award had become final and executory. 46

On July 12, 2012, petitioner received the RTC’s Order dated July 9, 2012 denying its motion to quash.47

Dissatisfied, it filed on September 10, 2012a petition for certiorari 48 before the CA, docketed as CA-G.R. SP No. 126458, averring in the
main that the RTC acted with grave abuse of discretion in confirming and ordering the execution of the Arbitral Award.

The CA Ruling

In a Decision49 dated March 26, 2014, the CA dismissed the certiorari petition on two (2) grounds, namely: (a) the petition essentially
assailed the merits of the Arbitral Award which is prohibited under Rule 19.7 50 of the Special ADR Rules;51 and (b) the petition was filed
out of time, having been filed way beyond 15 days from notice of the RTC’s July 9, 2012 Order, in violation of Rule 19.28 52 in relation to
Rule 19.853 of said Rules which provide that a special civil action for certiorari must be filed before the CA within 15 days from notice of
the judgment, order, or resolution sought to be annulled or set aside (or until July 27, 2012). Aggrieved, petitioner filed the instant
petition.

The Issue Before the Court

The core issue for the Court’s resolution is whether or not the CA erred in applying the provisions of the Special ADR Rules, resulting in
the dismissal of petitioner’s special civil action for certiorari.

The Court’s Ruling

The petition lacks merit.

I.

Republic Act No. (RA) 9285,54 otherwise known as the Alternative Dispute Resolution Act of 2004," institutionalized the use of an
Alternative Dispute Resolution System (ADR System)55 in the Philippines. The Act, however, was without prejudice to the adoption by
the Supreme Court of any ADR system as a means of achieving speedy and efficient means of resolving cases pending before all
courts in the Philippines.56

Accordingly, A.M. No. 07-11-08-SC was created setting forth the Special Rules of Court on Alternative Dispute Resolution (referred
herein as Special ADR Rules) that shall govern the procedure to be followed by the courts whenever judicial intervention is sought in
ADR proceedings in the specific cases where it is allowed.57

Rule 1.1 of the Special ADR Rules lists down the instances when the said rules shall apply, namely: "(a) Relief on the issue of
Existence, Validity, or Enforceability of the Arbitration Agreement; (b) Referral to Alternative Dispute Resolution ("ADR"); (c) Interim
Measures of Protection; (d) Appointment of Arbitrator; (e) Challenge to Appointment of Arbitrator; (f) Termination of Mandate of
Arbitrator; (g) Assistance in Taking Evidence; (h) Confirmation, Correction or Vacation of Award in Domestic Arbitration; (i) Recognition
and Enforcement or Setting Aside of an Award in International Commercial Arbitration; (j) Recognition and Enforcement of a Foreign
Arbitral Award; (k) Confidentiality/Protective Orders; and (l) Deposit and Enforcement of Mediated Settlement Agreements." 58

Notably, the Special ADR Rules do not automatically govern the arbitration proceedings itself. A pivotal feature of arbitration as an
alternative mode of dispute resolution is that it is a product of party autonomy or the freedom of the parties to make their own
arrangements to resolve their own disputes.59 Thus, Rule 2.3 of the Special ADR Rules explicitly provides that "parties are free to agree
on the procedure to be followed in the conduct of arbitral proceedings. Failing such agreement, the arbitral tribunal may conduct
arbitration in the manner it considers appropriate." 60

In the case at bar, the Consultancy Agreement contained an arbitration clause. 61 Hence, respondent, after it filed its complaint, moved
for its referral to arbitration62 which was not objected to by petitioner.63 By its referral to arbitration, the case fell within the coverage of
the Special ADR Rules. However, with respect to the arbitration proceedings itself, the parties had agreed to adopt the CIAC Rules
before the Arbitral Tribunal in accordance with Rule 2.3 of the Special ADR Rules.

On May 7, 2010, the Arbitral Tribunal rendered the Arbitral Award in favor of respondent. Under Section 17.2, Rule 17 of the CIAC
Rules, no motion for reconsideration or new trial may be sought, but any of the parties may file a motion for correction 64 of the final
award, which shall interrupt the running of the period for appeal, 65 based on any of the following grounds, to wit: a. an evident
miscalculation of figures, a typographical or arithmetical error;

b. an evident mistake in the description of any party, person, date, amount, thing or property referred to in the award;

c. where the arbitrators have awarded upon a matter not submitted to them, not affecting the merits of the decision upon the
matter submitted;

d. where the arbitrators have failed or omitted to resolve certain issue/s formulated by the parties in the Terms of Reference
(TOR) and submitted to them for resolution, and

e. where the award is imperfect in a matter of form not affecting the merits of the controversy.

The motion shall be acted upon by the Arbitral Tribunal or the surviving/remaining members. 66

Moreover, the parties may appeal the final award to the CA through a petition for review under Rule43 of the Rules of Court.67

Records do not show that any of the foregoing remedies were availed of by petitioner. Instead, it filed the May 19, 2010 Motion for
Reconsideration of the Arbitral Award, which was a prohibited pleading under the Section 17.2, 68Rule 17 of the CIAC Rules, thus
rendering the same final and executory.

Accordingly, the case was remanded to the RTC for confirmation proceedings pursuant to Rule 11 of the Special ADR Rules which
requires confirmation by the court of the final arbitral award. This is consistent with Section 40, Chapter 7 (A) of RA 9285 which similarly
requires a judicial confirmation of a domestic award to make the same enforceable:

SEC. 40. Confirmation of Award.– The confirmation of a domestic arbitral award shall be governed by Section 23 69of R.A. 876.70

A domestic arbitral award when confirmed shall be enforced in the same manner as final and executory decisions of the regional trial
court.

The confirmation of a domestic award shall be made by the regional trial court in accordance with the Rules of Procedure to be
promulgated by the Supreme Court.

A CIAC arbitral award need not be confirmed by the regional trial court to be executory as provided under E.O. No. 1008. (Emphases
supplied)

During the confirmation proceedings, petitioners did not oppose the RTC’s confirmation by filing a petition to vacate the Arbitral Award
under Rule 11.2 (D)71 of the Special ADR Rules. Neither did it seek reconsideration of the confirmation order in accordance with Rule
19.1 (h) thereof. Instead, petitioner filed only on September 10, 2012 a special civil action for certiorari before the CA questioning the
propriety of (a) the RTC Order dated September 12, 2011 granting respondent’s motion for issuance of a writ of execution, and (b)
Order dated July 9,2012 denying its motion to quash. Under Rule 19.26 of the Special ADR Rules, "[w]hen the Regional Trial Court, in
making a ruling under the Special ADR Rules, has acted without or in excess of its jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction, and there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of
law, a party may file a special civil action for certiorari to annul or set aside a ruling of the Regional Trial Court." Thus, for failing to avail
of the foregoing remedies before resorting to certiorari, the CA correctly dismissed its petition.

II.

Note that the special civil action for certiorari described in Rule 19.26 above may be filed to annul or set aside the following orders of
the Regional Trial Court.

a. Holding that the arbitration agreement is in existent, invalid or unenforceable;

b. Reversing the arbitral tribunal’s preliminary determination upholding its jurisdiction;

c. Denying the request to refer the dispute to arbitration;

d. Granting or refusing an interim relief;

e. Denying a petition for the appointment of an arbitrator;

f. Confirming, vacating or correcting a domestic arbitral award;

g. Suspending the proceedings to set aside an international commercial arbitral award and referring the case back to the
arbitral tribunal;

h. Allowing a party to enforce an international commercial arbitral award pending appeal;

i. Adjourning or deferring a ruling on whether to set aside, recognize and or enforce an international commercial arbitral award;

j. Allowing a party to enforce a foreign arbitral award pending appeal; and

k. Denying a petition for assistance in taking evidence. (Emphasis supplied)

Further, Rule 19.772 of the Special ADR Rules precludes a party to an arbitration from filing a petition for certiorari questioning the
merits of an arbitral award.

If so falling under the above-stated enumeration, Rule 19.28 of the Special ADR Rules provide that said certiorari petition should be
filed "with the [CA] within fifteen (15) days from notice of the judgment, order or resolution sought to be annulled or set aside. No
extension of time to file the petition shall be allowed."

In this case, petitioner asserts that its petition is not covered by the Special ADR Rules (particularly, Rule 19.28 on the 15-day
reglementary period to file a petition for certiorari) but by Rule 65 of the Rules of Court (particularly, Section 4 thereof on the 60-day
reglementary period to file a petition for certiorari), which it claimed to have suppletory application in arbitration proceedings since the
Special ADR Rules do not explicitly provide for a procedure on execution. The position is untenable.

Execution is fittingly called the fruit and end of suit and the life of the law. A judgment, if left unexecuted, would be nothing but an empty
victory for the prevailing party.73

While it appears that the Special ADR Rules remain silent on the procedure for the execution of a confirmed arbitral award, it is the
Court’s considered view that the Rules’ procedural mechanisms cover not only aspects of confirmation but necessarily extend to a
confirmed award’s execution in light of the doctrine of necessary implication which states that every statutory grant of power, right or
privilege is deemed to include all incidental power, right or privilege. In Atienza v. Villarosa,74 the doctrine was explained, thus:

No statute can be enacted that can provide all the details involved in its application.1âwphi1 There is always an omission that may not
meet a particular situation. What is thought, at the time of enactment, to be an all embracing legislation may be inadequate to provide
for the unfolding of events of the future. So-called gaps in the law develop as the law is enforced. One of the rules of statutory
construction used to fill in the gap is the doctrine of necessary implication. The doctrine states that what is implied in a statute is as
much a part thereof as that which is expressed. Every statute is understood, by implication, to contain all such provisions as may be
necessary to effectuate its object and purpose, or to make effective rights, powers, privileges or jurisdiction which it grants, including all
such collateral and subsidiary consequences as may be fairly and logically inferred from its terms. Ex necessitate legis. And every
statutory grant of power, right or privilege is deemed to include all incidental power, right or privilege. This is so because the greater
includes the lesser, expressed in the maxim, in eo plus sit, simper inest et minus.75 (Emphases supplied)

As the Court sees it, execution is but a necessary incident to the Court’s confirmation of an arbitral award. To construe it otherwise
would result in an absurd situation whereby the confirming court previously applying the Special ADR Rules in its confirmation of the
arbitral award would later shift to the regular Rules of Procedure come execution. Irrefragably, a court’s power to confirm a judgment
award under the Special ADR Rules should be deemed to include the power to order its execution for such is but a collateral and
subsidiary consequence that may be fairly and logically inferred from the statutory grant to regional trial courts of the power to confirm
domestic arbitral awards.

All the more is such interpretation warranted under the principle of ratio legis est anima which provides that a statute must be read
according to its spirit or intent,76 for what is within the spirit is within the statute although it is not within its letter, and that which is within
the letter but not within the spirit is not within the statute.77 Accordingly, since the Special ADR Rules are intended to achieve speedy
and efficient resolution of disputes and curb a litigious culture,78every interpretation thereof should be made consistent with these
objectives.

Thus, with these principles in mind, the Court so concludes that the Special ADR Rules, as far as practicable, should be made to apply
not only to the proceedings on confirmation but also to the confirmed award’s execution.

Further, let it be clarified that – contrary to petitioner’s stance – resort to the Rules of Court even in a suppletory capacity is not allowed.
Rule 22.1 of the Special ADR Rules explicitly provides that "[t]he provisions of the Rules of Court that are applicable to the proceedings
enumerated in Rule 1.1 of these Special ADR Rules have either been included and incorporated in these Special ADR Rules or
specifically referred to herein."79 Besides, Rule 1.13 thereof provides that "[i]n situations where no specific rule is provided under the
Special ADR Rules, the court shall resolve such matter summarily and be guided by the spirit and intent of the Special ADR Rules and
the ADR Laws."

As above-mentioned, the petition for certiorari permitted under the Special ADR Rules must be filed within a period of fifteen (15) days
from notice of the judgment, order or resolution sought to be annulled or set aside. 80 Hence, since petitioner’s filing of its certiorari
petition in CA-G.R. SP No. 126458 was made nearly two months after its receipt of the RTC’s Order dated July 9, 2012,or on
September 10, 2012,81 said petition was clearly dismissible.82

III.

Discounting the above-discussed procedural considerations, the Court still finds that the certiorari petition had no merit.

Indeed, petitioner cannot be said to have been denied due process as the records undeniably show that it was accorded ample
opportunity to ventilate its position. There was clearly nothing out of line when the Arbitral Tribunal denied petitioner’s motions for
extension to file its submissions having failed to show a valid reason to justify the same or in rendering the Arbitral Award sans
petitioner’s draft decision which was filed only on the day of the scheduled promulgation of final award on May 7, 2010.83 The
touchstone of due process is basically the opportunity to be heard. Having been given such opportunity, petitioner should only blame
itself for its own procedural blunder.

On this score, the petition for certiorari in CA-G.R. SP No. 126458 was likewise properly dismissed.

IV.

Nevertheless, while the Court sanctions the dismissal by the CA of the petition for certiorari due to procedural infirmities, there is a need
to explicate the matter of execution of the confirmed Arbitral Award against the petitioner, a government agency, in the light of
Presidential Decree No. (PD) 144584 otherwise known as the "Government Auditing Code of the Philippines." Section 26 of PD 1445
expressly provides that execution of money judgment against the Government or any of its subdivisions, agencies and instrumentalities
is within the primary jurisdiction of the COA, to wit:

SEC. 26. General jurisdiction. The authority and powers of the Commission shall extend to and comprehend all matters relating to
auditing procedures, systems and controls, the keeping of the general accounts of the Government, the preservation of vouchers
pertaining thereto for a period of ten years, the examination and inspection of the books, records, and papers relating to those
accounts; and the audit and settlement of the accounts of all persons respecting funds or property received or held by them in an
accountable capacity, as well as the examination, audit, and settlement of all debts and claims of any sort due from or owing to the
Government or any of its subdivisions, agencies and instrumentalities. The said jurisdiction extends to all government-owned or
controlled corporations, including their subsidiaries, and other self-governing boards, commissions, or agencies of the Government, and
as herein prescribed, including non-governmental entities subsidized by the government, those funded by donation through the
government, those required to pay levies or government share, and those for which the government has put up a counterpart fund or
those partly funded by the government. (Emphases supplied)

From the foregoing, the settlement of respondent’s money claim is still subject to the primary jurisdiction of the COA despite finality of
the confirmed arbitral award by the RTC pursuant to the Special ADR Rules. 85 Hence, the respondent has to first seek the approval of
the COA of their monetary claim. This appears to have been complied with by the latter when it filed a "Petition for Enforcement and
Payment of Final and Executory Arbitral Award"86before the COA. Accordingly, it is now the COA which has the authority to rule on this
latter petition. WHEREFORE, the petition is DENIED. The Decision dated March 26, 2014 of the Court of Appeals in CA-G.R. SP No.
126458 which dismissed the petition for certiorari filed by petitioner the Department of Environment and Natural Resources is hereby
AFFIRMED.

SO ORDERED.

G.R. No. 198226 July 18, 2014

ABOITIZ TRANSPORT SYSTEM CORPORATION and ABOITIZ SHIPPING CORPORATION, Petitioners,

vs.
CARLOS A. GOTHONG LINES, INC. and VICTOR S. CHIONGBIAN, Respondents.

x-----------------------x

G.R. No. 198228

ABOITIZ TRANSPORT SYSTEM CORPORATION, Petitioner,

vs.
CARLOS A. GOTHONG LINES, INC. and VICTOR S. CHIONGBIAN, Respondents.

DECISION

PERLAS-BERNABE, J.:

Assailed in these petitions for review on certiorari1 are the Orders dated August 13, 2010,2 April 15, 2011,3 and July 6, 20114 of the
Regional Trial Court of Cebu City, Branch 20 (RTC) in Civil Case No. CEB-34951, which confirmed the notice of dismissal filed by
respondent Carlos A. Gothong Lines, Inc. (CAGLI) and, consequently, dismissed the case without prejudice, denied petitioners Aboitiz
Transport System Corporation (ATSC) and Aboitiz Shipping Corporation’s (ASC) motion for reconsideration, and deemed ATSC’s
motion to exclude respondent Victor S. Chiongbian (respondent Chiongbian) from arbitration moot and academic, respectively.

The Facts

ASC, CAGLI, and William Lines, Inc. (WLI), principally owned by the Aboitiz, Gothong, and Chiongbian families, respectively, entered
into an Agreement5 dated January 8, 1996, which was signed by Jon Ramon Aboitiz for ASC, Benjamin D. Gothong (Gothong) for
CAGLI, and respondent Chiongbian for WLI. In the said Agreement, ASC and CAGLI agreed to transfer their shipping assets to WLI
inexchange for the latter’s shares of capital stock. The parties likewise agreed that WLI would run the merged shipping business and be
renamed "WG&A, Inc." Pertinently, Section 11.06 of the Agreement provides that all disputes arising out of or in connection with the
Agreement shall be finally settled by arbitration in accordance with Republic Act No. (RA) 876, otherwise known as "The Arbitration
Law,"6 and that each of the parties shall appoint one arbitrator, and the three arbitrators would then appoint the fourth arbitrator who
shall act as Chairman.

Among the attachments to the Agreement was a letter7 dated January 8, 1996 written by respondent Chiongbian and addressed to
Gothong, stating that WLI committed to acquire from CAGLI’s inventory certain spare parts and materials not exceeding ₱400 Million. In
this relation, a valuation of CAGLI’s inventory was conducted wherein it was shown that the same amounted to ₱514
Million.8 Thereafter, WLI received inventory valued at ₱558.89 Million, but only paid CAGLI the amount of ₱400 Million as agreed upon
in the Agreement.9 Dissatisfied, CAGLI sent to WLI various letters in 2001, demanding that the latter pay or return the inventory that it
received in excess of ₱400 Million.10

Sometime in 2002, the Chiongbian and Gothong families decided to sell their respective interests in WLI/WG&A to the Aboitiz family.
This resulted in the execution of a Share Purchase Agreement 11 whereby Aboitiz Equity Ventures (AEV) agreed to purchase and
acquire the WLI/WG&A shares of the Chiongbian and Gothong families. Thereafter, the corporate name of WLI/WG&A was changed to
ATSC.12

Six (6) years later, or in 2008, CAGLI sent a letter13 dated February 14, 2008 to ATSC demanding that the latter pay the excess
inventory it delivered to WLI amounting to 158,399,700.00. CAGLI likewise demanded AEV and respondent Chiongbian that they refer
their dispute to arbitration.14 In response, AEV countered that the excess inventory had already been returned to CAGLI and that it
should not be included in the dispute, considering that it is an entity separate and distinct from ATSC. 15 Thus, CAGLI was constrained
to file a complaint16 before the RTC against Chiongbian, ATSC, ASC, and AEV to compel them to submit to arbitration.

For their part, ATSC and AEV moved for the dismissal of the case, contending that CAGLI did not have a cause of action for arbitration
since its claim had already been paid or otherwise, extinguished, and, in any event, said action had already prescribed. 17

The RTC Proceedings

In an Order18 dated December 4, 2009, the RTC dismissed the complaint only with respect to AEV for lack of cause of action, 19 but not
as to the other defendants. Thereafter, the RTC issued an Order 20 dated February 26, 2010, directing CAGLI, respondent Chiongbian,
ATSC, and ASC to proceed to arbitration, and accordingly, the parties appointed their respective arbitrators, with ATSC and ASC doing
so only on an ad cautelam basis.21

Meanwhile, ATSC filed a Motion for Reconsideration/To Exclude 22 dated March 25, 2010 praying that respondent Chiongbian be
excluded from the arbitration proceedings since the latter was not a party to the Agreement. Pending resolution of the said
motion,CAGLI filed a Notice of Dismissal23 dated July 8, 2010, averring that it has decided to withdraw its complaint in view of the fact
that the opposing parties had not filed their respective responsive pleadings.

In an Order24 dated August 13, 2010, the RTC found CAGLI’s Notice of Dismissal meritorious, and, thus, confirmed the same and
ordered the case dismissed without prejudice. Dissatisfied, ATSC and ASC moved for reconsideration 25 which was, however, denied in
an Order26 dated April 15, 2011. In said Order, the RTC cited Section 1 of Rule 17 of the Rules of Court which allows the plaintiff to file
a notice of dismissal of the complaint as a matter of right "before service of the answer or a motion for summary judgment." It further
ruled that, save for the condition that no answer or motion for summary judgment had been priorly filed, nothing in the rules or law
expressly prohibits or restricts the right of the plaintiff to withdraw the complaint by mere notice of dismissal at any stage of the
proceedings.27

Separately, the RTC issued an Order28 dated July 6, 2011, denying ATSC’s Motion for Reconsideration/To Exclude, holding that the
issue raised in the said motion has been rendered moot and academic in view of the confirmation of CAGLI’s notice of dismissal.

Hence, the instant petitions.

The Issues Before the Court

The issues for the Court’s resolution are as follows: (a) whether or not the RTC was correct in confirming CAGLI’s notice of dismissal
and, consequently, dismissing the case without prejudice; and (b) whether or not respondent Chiongbian should be excluded from the
arbitration proceedings.

The Court’s Ruling

The petition is meritorious.

A. Propriety of CAGLI’s Notice of Dismissal.

At the outset, the Court notes that the nature of the complaint filed by CAGLI before the RTC is for the enforcement of an arbitration
agreement, governed by Section 6 of RA 876, viz.:

Section 6. Hearing by court. – A party aggrieved by the failure, neglect or refusal of another to perform under an agreement in writing
providing for arbitration may petition the court for an order directing that such arbitration proceed in the manner provided for in such
agreement. Five days notice in writing of the hearing of such application shall be served either personally or by registered mail upon the
party in default. The court shall hear the parties, and upon being satisfied that the making of the agreement or such failure to comply
therewith is not in issue, shall make an order directing the parties to proceed to arbitration in accordance with the terms of the
agreement. If the making of the agreement or default be in issue the court shall proceed to summarily hear such issue. If the finding be
that no agreement in writing providing for arbitration was made, or that there is no default in the proceeding thereunder, the proceeding
shall be dismissed. Ifthe finding be that a written provision for arbitration was made and there is a default in proceeding thereunder, an
order shall be made summarily directing the parties to proceed with the arbitration in accordance with the terms thereof.

x x x x (Emphasis supplied)

In the case of Gonzales v. Climax Mining, Ltd. (Gonzales), 29 the Court had instructed that the special proceeding under the above-
quoted provision is the procedural mechanism for the enforcement of the contract to arbitrate. 30 RA 876 explicitly confines the court’s
authority only to pass upon the issue of whether there is or there is no agreement in writing providing for arbitration. If there is such
agreement, the court shall issue an order summarily directing the parties to proceed with the arbitration in accordance with the terms
thereof; otherwise,the proceeding shall be dismissed.31 To stress, such proceeding is merelya summary remedy to enforce the
agreement to arbitrate and the duty of the court is not to resolve the merits of the parties’ claims but only to determine if they should
proceed to arbitration or not.32

In the present case, the records show that the primary relief sought for in CAGLI’s complaint, i.e., to compel the parties to submit to
arbitration,33 had already been granted by the RTC through its Order34 dated February 26, 2010. Undeniably, such Order partakes of a
judgment on the merits of the complaint for the enforcement ofthe arbitration agreement.

At this point, although no responsive pleading had been filed by ATS C, 35 it is the rules on appeal, or other proceedings after rendition
of a judgment or final order – no longer those on notice of dismissal – that come into play. Verily, upon the rendition of a judgment or
final order,36 the period "before service of the answer or of a motion for summary judgment," mentioned in Section 1 37 of Rule 17 of the
Rules of Court when a notice of dismissal may be filed by the plaintiff, no longer applies. As a consequence, a notice of dismissal filed
by the plaintiff at such judgment stage should no longer be entertained or confirmed.1âwphi1
In view of the foregoing, it was anerror on the part of the RTC to have confirmed the notice of dismissal and to have dismissed the
complaint without prejudice.

B. Parties covered by Arbitration Proceedings.

Section 2 of RA 876 specifies who may be subjected to arbitration, to wit:

Sec. 2. Persons and matters subject to arbitration. – Two or more persons or parties may submit to the arbitration of one or more
arbitrators any controversy existing between them atthe time of the submission and which may be the subject of an action, or the
parties to any contract may in such contract agree to settle byarbitration 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.

xxxx

In Gonzales, the Court explained that "[d]isputes do not go to arbitration unless and until the parties have agreed to abide by the
arbitrator’s decision. Necessarily, a contract is required for arbitration to take place and to be binding."38Furthermore, in Del Monte
Corporation – USA v. Court of Appeals,39 the Court stated that "[t]he provision to submit to arbitration any dispute arising therefrom and
the relationship of the parties is part of that contract. As a rule, contracts are respected as the law between the contracting parties and
produce effectas between them, their assigns and heirs." 40 Succinctly put, only those parties who have agreed to submit a controversy
to arbitration who, as against each other, may be compelled to submit to arbitration. In the present case, Section 11.06 of the
Agreement, which embodies the Arbitration Agreement among the parties, provides:

All disputes arising out of or inconnection with this Agreement including any issue as to this Agreement's validity or enforceability, which
cannot be settled amicably among the parties, shall be finally settled by arbitration in accordance with the Arbitration Law (Republic Act
No. 876) by an arbitration tribunal composed of four (4) arbitrators. Each of the parties shall appoint one (1) arbitrator, the three (3) to
appoint the fourth arbitrator who shall act as Chairman. Any award by the arbitration tribunal shall be final and binding upon the parties
and shall be enforced by judgment of the Courts of Cebu or Metro Manila. 41

The three parties to the Agreement and necessarily to the arbitration agreement embodied therein are: (a) ASC, (b) CAGLI, and (c)
WLI/WG&A/ATSC. Contracts, like the subject arbitration agreement, take effect only between the parties, their assigns and
heirs.42 Respondent Chiongbian, having merely physically signed the Agreement as a representative of WLI, is not a party thereto and
to the arbitration agreement contained therein. Neither is he an assignee or an heir of any of the parties to the arbitration agreement.
Hence, respondent Chiongbian cannot be included in the arbitration proceedings.

WHEREFORE, the petitions are GRANTED. The Orders dated August 13, 2010, April 15, 2011, and July 6, 2011 of the Regional Trial
Court of Cebu City, Branch 20 (RTC) in Civil Case No. CEB-34951 are hereby REVERSED and SET ASIDE. The Order dated February
26, 2010 of the RTC is REINSTATED with MODIFICATION excluding Victor S. Chiongbian from the arbitration proceedings.

SO ORDERED.

G.R. No. 185758 March 9, 2011

LINDA M. CHAN KENT, represented by ROSITA MANALANG, Petitioner,

vs.
DIONESIO C. MICAREZ, SPOUSES ALVARO E. MICAREZ & PAZ MICAREZ, and THE REGISTRY OF DEEDS, DAVAO DEL
NORTE, Respondents.

DECISION

MENDOZA, J.:

This is a petition for review on certiorari seeking to reverse and set aside the July 17, 2008 Order 1 of the Regional Trial Court of Panabo
City, Branch 34 (RTC), dismissing the complaint for recovery of property filed by petitioner Linda M. Chan Kent (petitioner), docketed as
Civil Case No. 13-2007, and its November 21, 2008, Order2 denying her motion for reconsideration.

The Facts

This petition draws its origin from a complaint for recovery of real property and annulment of title filed by petitioner, through her younger
sister and authorized representative, Rosita Micarez-Manalang (Manalang), before the RTC. Petitioner is of Filipino descent who
became a naturalized American citizen after marrying an American national in 1981. She is now a permanent resident of the United
States of America (USA).

In her complaint, petitioner claimed that the residential lot in Panabo City, which she purchased in 1982, was clandestinely and
fraudulently conveyed and transferred by her parents, respondent spouses Alvaro and Paz Micarez (Spouses Micarez), in favor of her
youngest brother, respondent Dionesio Micarez (Dionesio), to her prejudice and detriment. She alleged that sometime in 1982, she
asked her parents to look for a residential lot somewhere in Poblacion Panabo where the Spouses Micarez would build their new home.
Aware that there would be difficulty in registering a real property in her name, she being married to an American citizen, she arranged
to pay for the purchase price of the residential lot and register it, in the meantime, in the names of Spouses Micarez under an implied
trust. The title thereto shall be transferred in her name in due time.

Thus, on October 20, 1982, a deed of absolute sale was executed between Spouses Micarez and the owner, Abundio Panganiban, for
the 328 square meter residential lot covered by Transfer Certificate of Title (TCT) No. T-25833. Petitioner sent the money which was
used for the payment of the lot. TCT No. T-25833 was cancelled upon the registration of the deed of sale before the Registry of Deeds
of Davao del Norte. In lieu thereof, TCT No. T-38635 was issued in the names of Spouses Micarez on January 31, 1983.

Sometime in 2005, she learned from Manalang that Spouses Micarez sold the subject lot to Dionesio on November 22, 2001 and that
consequently, TCT T-172286 was issued in her brother’s name on January 21, 2002.

At the end, petitioner prayed that she be declared as the true and real owner of the subject lot; that TCT No. T-172286 be cancelled;
and that a new one be issued in her name.3

Considering that all the respondents are now also permanent residents of the USA, summons was served upon them by publication per
RTC Order4 dated May 17, 2007. Meanwhile, the respondents executed two special powers of attorney5 both dated August 3, 2007
before the Consulate General of the Philippines in Los Angeles, California, U.S.A., authorizing their counsel, Atty. Richard C.
Miguel (Atty. Miguel), to file their answer in Civil Case No. 13-2007 and to represent them during the pre-trial conference and all
subsequent hearings with power to enter into a compromise agreement. By virtue thereof, Atty. Miguel timely filed his principals’ answer
denying the material allegations in the complaint.

After the parties had filed their respective pre-trial briefs, and the issues in the case had been joined, the RTC explored the possibility of
an amicable settlement among the parties by ordering the referral of the case to the Philippine Mediation Center (PMC). On March 1,
2008, Mediator Esmeraldo O. Padao, Sr. (Padao) issued a Mediator’s Report6 and returned Civil Case No. 13-2007 to the RTC
allegedly due to the non-appearance of the respondents on the scheduled conferences before him. Acting on said Report, the RTC
issued an order on May 29, 2009 allowing petitioner to present her evidence ex parte.7

Later, Padao clarified, through a Manifestation, 8 dated July 15, 2008, that it was petitioner, represented by Atty. Benjamin Utulle (Atty.
Utulle), who did not attend the mediation proceedings set on March 1, 2008, and not Atty. Miguel, counsel for the respondents and their
authorized representative. Padao explained that Atty. Miguel inadvertently affixed his signature for attendance purposes on the column
provided for the plaintiff’s counsel in the mediator’s report. In light of this development, the RTC issued the assailed Order9 dated July
17, 2008 dismissing Civil Case No. 13-2007. The pertinent portion of said order reads:

Being so, the Order dated May 29, 2008 is hereby corrected. For plaintiff’s and her counsel’s failure to appear during the mediation
proceeding, this instant case is hereby ordered DISMISSED.

SO ORDERED.

Petitioner, through her counsel, filed a motion for reconsideration 10 to set aside the order of dismissal, invoking the relaxation of the rule
on non-appearance in the mediation proceedings in the interest of justice and equity. Petitioner urged the trial court not to dismiss the
case based merely on technicalities contending that litigations should as much as possible be decided on the merits. Resolving the
motion in its second assailed Order11 dated November 21, 2008, the RTC ruled that it was not proper for the petitioner to invoke
liberality inasmuch as the dismissal of the civil action was due to her own fault. The dispositive portion of said order reads:

WHEREFORE, there being no cogent reason to depart from our earlier Order, this instant motion for reconsideration is hereby ordered
DENIED.

SO ORDERED.12

The denial prompted the petitioner to file this petition directly with this Court claiming that the dismissal of the case was not in
accordance with applicable law and jurisprudence.

ISSUES

1. WITH ALL DUE RESPECT, THE HONORABLE COURT A QUO GRAVELY ERRED IN DISMISSING THE CASE SIMPLY
ON THE REASON THAT PLAINTIFF FAILED TO APPEAR DURING THE MEDIATION PROCEEDING, ALTHOUGH
PRESENT FOR TWO (2) TIMES.

2. IS THE EXCUSABLE AND EXPLAINED FAILURE TO ATTEND THE MEDIATION PROCEEDING FOR TWO (2) TIMES
OR SETTINGS, OUT OF THE FOUR (4) SCHEDULED SETTINGS, BY THE PLAINTIFF A GROUND TO DISMISS THE
CASE UNDER THE SUPREME COURT’S ADMINISTRATIVE CIRCULAR NO. 20-2002?

The pivotal issue in this case is whether the RTC erred in dismissing Civil Case No. 13-2007 due to the failure of petitioner’s duly
authorized representative, Manalang, and her counsel to attend the mediation proceedings under the provisions of A.M. No. 01-10-5-
SC-PHILJA and 1997 Rules on Civil Procedure.

Petitioner claims that the dismissal of the case was unjust because her representative, Manalang, and her counsel, Atty. Etulle, did not
deliberately snub the mediation proceedings. In fact, Manalang and Atty. Etulle twice attended the mediation conferences on January
19, 2008 and on February 9, 2008. On both occasions, Manalang was present but was not made to sign the attendance sheet and was
merely at the lobby waiting to be called by Atty. Etulle upon arrival of Atty. Miguel. Manalang and Atty. Etulle only left PMC at 11:00
o’clock in the morning when Atty. Miguel had not yet arrived. 13

Petitioner, however, admits that her representative and counsel indeed failed to attend the last scheduled conference on March 1,
2008, when they had to attend some urgent matters caused by the sudden increase in prices of commodities. 14

In the interest of justice, the Court grants the petition.

A.M. No. 01-10-5-SC-PHILJA dated October 16, 2001, otherwise known as the Second Revised Guidelines for the Implementation of
Mediation Proceedings, was issued pursuant to par. (5), Section 5, Article VII of the 1987 Constitution mandating this Court to
promulgate rules providing for a simplified and inexpensive procedure for the speedy disposition of cases. Also, Section 2(a), Rule 18 of
the 1997 Rules of Civil Procedure, as amended, requires the courts to consider the possibility of an amicable settlement or of
submission to alternative modes of resolution for the early settlement of disputes so as to put an end to litigations. The provisions of
A.M. No. 01-10-5-SC-PHILJA pertinent to the case at bench are as follows:

9. Personal appearance/Proper authorizations

Individual parties are encouraged to personally appear for mediation. In the event they cannot attend, their representatives must be fully
authorized to appear, negotiate and enter into a compromise by a Special Power of Attorney. A corporation shall, by board resolution,
fully authorize its representative to appear, negotiate and enter into a compromise agreement.

12. Sanctions

Since mediation is part of Pre-Trial, the trial court shall impose the appropriate sanction including but not limited to censure, reprimand,
contempt and such other sanctions as are provided under the Rules of Court for failure to appear for pre-trial, in case any or both of the
parties absent himself/themselves, or for abusive conduct during mediation proceedings. [Underscoring supplied]

To reiterate, A.M. No. 01-10-5-SC-PHILJA regards mediation as part of pre-trial where parties are encouraged to personally attend the
proceedings. The personal non-appearance, however, of a party may be excused only when the representative, who appears in his
behalf, has been duly authorized to enter into possible amicable settlement or to submit to alternative modes of dispute resolution. To
ensure the attendance of the parties, A.M. No. 01-10-5-SC-PHILJA specifically enumerates the sanctions that the court can impose
upon a party who fails to appear in the proceedings which includes censure, reprimand, contempt, and even dismissal of the action in
relation to Section 5, Rule 18 of the Rules of Court. 15 The respective lawyers of the parties may attend the proceedings and, if they do
so, they are enjoined to cooperate with the mediator for the successful amicable settlement of disputes 16 so as to effectively reduce
docket congestion.

Although the RTC has legal basis to order the dismissal of Civil Case No. 13-2007, the Court finds this sanction too severe to be
imposed on the petitioner where the records of the case is devoid of evidence of willful or flagrant disregard of the rules on mediation
proceedings. There is no clear demonstration that the absence of petitioner’s representative during mediation proceedings on March 1,
2008 was intended to perpetuate delay in the litigation of the case. Neither is it indicative of lack of interest on the part of petitioner to
enter into a possible amicable settlement of the case.

The Court notes that Manalang was not entirely at fault for the cancellation and resettings of the conferences. Let it be
underscored that respondents’ representative and counsel, Atty. Miguel, came late during the January 19 and February 9,
2008 conferences which resulted in their cancellation and the final resetting of the mediation proceedings to March 1, 2008.
Considering the circumstances, it would be most unfair to penalize petitioner for the neglect of her lawyer.1avvphi1

Assuming arguendo that the trial court correctly construed the absence of Manalang on March 1, 2008 as a deliberate refusal
to comply with its Order or to be dilatory, it cannot be said that the court was powerless and virtually without recourse.
Indeed, there are other available remedies to the court a quo under A.M. No. 01-10-5-SC-PHILJA, apart from immediately
ordering the dismissal of the case. If Manalang’s absence upset the intention of the court a quo to promptly dispose the case,
a mere censure or reprimand would have been sufficient for petitioner’s representative and her counsel so as to be informed
of the court’s intolerance of tardiness and laxity in the observation of its order. By failing to do so and refusing to resuscitate
the case, the RTC impetuously deprived petitioner of the opportunity to recover the land which she allegedly paid for.

Unless the conduct of the party is so negligent, irresponsible, contumacious, or dilatory as for non-appearance to provide
substantial grounds for dismissal, the courts should consider lesser sanctions which would still achieve the desired end. The
Court has written "inconsiderate dismissals, even if without prejudice, do not constitute a panacea nor a solution to the
congestion of court dockets, while they lend a deceptive aura of efficiency to records of the individual judges, they merely
postpone the ultimate reckoning between the parties. In the absence of clear lack of merit or intention to delay, justice is
better served by a brief continuance, trial on the merits, and final disposition of the cases before the court. 17

It bears emphasis that the subject matter of the complaint is a valuable parcel of land measuring 328 square meters and that
petitioner had allegedly spent a lot of money not only for the payment of the docket and other filing fees but also for the extra-
territorial service of the summons to the respondents who are now permanent residents of the U.S.A. Certainly, petitioner
stands to lose heavily on account of technicality. Even if the dismissal is without prejudice, the refiling of the case would still
be injurious to petitioner because she would have to pay again all the litigation expenses which she previously paid for. The
Court should afford party-litigants the amplest opportunity to enable them to have their cases justly determined, free from
constraints of technicalities.18 Technicalities should take a backseat against substantive rights and should give way to the
realities of the situation. Besides, the petitioner has manifested her interest to pursue the case through the present petition.
At any rate, it has not been shown that a remand of the case for trial would cause undue prejudice to respondents.

In the light of the foregoing, the Court finds it just and proper that petitioner be allowed to present her cause of action during trial on the
merits to obviate jeopardizing substantive justice. Verily, the better and more prudent course of action in a judicial proceeding is to hear
both sides and decide the case on the merits instead of disposing the case by technicalities. What should guide judicial action is the
principle that a party-litigant is to be given the fullest opportunity to establish the merits of his complaint or defense rather than for him to
lose life, liberty or property on technicalities.19 The ends of justice and fairness would best be served if the issues involved in the case
are threshed out in a full-blown trial. Trial courts are reminded to exert efforts to resolve the matters before them on the merits and to
adjudge them accordingly to the satisfaction of the parties, lest in hastening the proceedings, they further delay the resolution of the
cases.

WHEREFORE, the petition is GRANTED. Civil Case No. 13-2007 is hereby REINSTATED and REMANDED to the Regional Trial Court
of Panobo City, Branch 34 for referral back to the Philippine Mediation Center for possible amicable settlement or for other proceedings.

SO ORDERED.
G.R. No. 163101 February 13, 2008

BENGUET CORPORATION, petitioner,

vs.
DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES -MINES ADJUDICATION BOARD and J.G. REALTY AND
MINING CORPORATION, respondents.

DECISION

VELASCO, JR., J.:

The instant petition under Rule 65 of the Rules of Court seeks the annulment of the December 2, 2002 Decision 1and March 17, 2004
Resolution2 of the Department of Environment and Natural Resources-Mining Adjudication Board (DENR-MAB) in MAB Case No. 0124-
01 (Mines Administrative Case No. R-M-2000-01) entitled Benguet Corporation (Benguet) v. J.G. Realty and Mining Corporation (J.G.
Realty). The December 2, 2002 Decision upheld the March 19, 2001 Decision3 of the MAB Panel of Arbitrators (POA) which canceled
the Royalty Agreement with Option to Purchase (RAWOP) dated June 1, 19874 between Benguet and J.G. Realty, and excluded
Benguet from the joint Mineral Production Sharing Agreement (MPSA) application over four mining claims. The March 17, 2004
Resolution denied Benguet’s Motion for Reconsideration.

The Facts

On June 1, 1987, Benguet and J.G. Realty entered into a RAWOP, wherein J.G. Realty was acknowledged as the owner of four mining
claims respectively named as Bonito-I, Bonito-II, Bonito-III, and Bonito-IV, with a total area of 288.8656 hectares, situated in Barangay
Luklukam, Sitio Bagong Bayan, Municipality of Jose Panganiban, Camarines Norte. The parties also executed a Supplemental
Agreement5 dated June 1, 1987. The mining claims were covered by MPSA Application No. APSA-V-0009 jointly filed by J.G. Realty as
claimowner and Benguet as operator.

In the RAWOP, Benguet obligated itself to perfect the rights to the mining claims and/or otherwise acquire the mining rights to the
mineral claims. Within 24 months from the execution of the RAWOP, Benguet should also cause the examination of the mining claims
for the purpose of determining whether or not they are worth developing with reasonable probability of profitable production. Benguet
undertook also to furnish J.G. Realty with a report on the examination, within a reasonable time after the completion of the examination.
Moreover, also within the examination period, Benguet shall conduct all necessary exploration in accordance with a prepared
exploration program. If it chooses to do so and before the expiration of the examination period, Benguet may undertake to develop the
mining claims upon written notice to J.G. Realty. Benguet must then place the mining claims into commercial productive stage within 24
months from the written notice.6 It is also provided in the RAWOP that if the mining claims were placed in commercial production by
Benguet, J.G. Realty should be entitled to a royalty of five percent (5%) of net realizable value, and to royalty for any production done
by Benguet whether during the examination or development periods.

Thus, on August 9, 1989, the Executive Vice-President of Benguet, Antonio N. Tachuling, issued a letter informing J.G. Realty of its
intention to develop the mining claims. However, on February 9, 1999, J.G. Realty, through its President, Johnny L. Tan, then sent a
letter to the President of Benguet informing the latter that it was terminating the RAWOP on the following grounds:

a. The fact that your company has failed to perform the obligations set forth in the RAWOP, i.e., to undertake development
works within 2 years from the execution of the Agreement;

b. Violation of the Contract by allowing high graders to operate on our claim.

c. No stipulation was provided with respect to the term limit of the RAWOP.

d. Non-payment of the royalties thereon as provided in the RAWOP. 7

In response, Benguet’s Manager for Legal Services, Reynaldo P. Mendoza, wrote J.G. Realty a letter dated March 8, 1999,8 therein
alleging that Benguet complied with its obligations under the RAWOP by investing PhP 42.4 million to rehabilitate the mines, and that
the commercial operation was hampered by the non-issuance of a Mines Temporary Permit by the Mines and Geosciences Bureau
(MGB) which must be considered as force majeure, entitling Benguet to an extension of time to prosecute such permit. Benguet further
claimed that the high graders mentioned by J.G. Realty were already operating prior to Benguet’s taking over of the premises, and that
J.G. Realty had the obligation of ejecting such small scale miners. Benguet also alleged that the nature of the mining business made it
difficult to specify a time limit for the RAWOP. Benguet then argued that the royalties due to J.G. Realty were in fact in its office and
ready to be picked up at any time. It appeared that, previously, the practice by J.G. Realty was to pick-up checks from Benguet
representing such royalties. However, starting August 1994, J.G. Realty allegedly refused to collect such checks from Benguet. Thus,
Benguet posited that there was no valid ground for the termination of the RAWOP. It also reminded J.G. Realty that it should submit the
disagreement to arbitration rather than unilaterally terminating the RAWOP.

On June 7, 2000, J.G. Realty filed a Petition for Declaration of Nullity/Cancellation of the RAWOP 9 with the Legaspi City POA, Region
V, docketed as DENR Case No. 2000-01 and entitled J.G. Realty v. Benguet.

On March 19, 2001, the POA issued a Decision,10 dwelling upon the issues of (1) whether the arbitrators had jurisdiction over the case;
and (2) whether Benguet violated the RAWOP justifying the unilateral cancellation of the RAWOP by J.G. Realty. The dispositive
portion stated:

WHEREFORE, premises considered, the June 01, 1987 [RAWOP] and its Supplemental Agreement is hereby declared
cancelled and without effect. BENGUET is hereby excluded from the joint MPSA Application over the mineral claims
denominated as "BONITO-I", "BONITO-II", "BONITO-III" and "BONITO-IV".

SO ORDERED.
Therefrom, Benguet filed a Notice of Appeal 11 with the MAB on April 23, 2001, docketed as Mines Administrative Case No. R-M-2000-
01. Thereafter, the MAB issued the assailed December 2, 2002 Decision. Benguet then filed a Motion for Reconsideration of the
assailed Decision which was denied in the March 17, 2004 Resolution of the MAB. Hence, Benguet filed the instant petition.

The Issues

1. There was serious and palpable error when the Honorable Board failed to rule that the contractual obligation of the parties
to arbitrate under the Royalty Agreement is mandatory.

2. The Honorable Board exceeded its jurisdiction when it sustained the cancellation of the Royalty Agreement for alleged
breach of contract despite the absence of evidence.

3. The Questioned Decision of the Honorable Board in cancelling the RAWOP prejudice[d] the substantial rights of Benguet
under the contract to the unjust enrichment of JG Realty.12

Restated, the issues are: (1) Should the controversy have first been submitted to arbitration before the POA took cognizance of the
case?; (2) Was the cancellation of the RAWOP supported by evidence?; and (3) Did the cancellation of the RAWOP amount to unjust
enrichment of J.G. Realty at the expense of Benguet?

The Court’s Ruling

Before we dwell on the substantive issues, we find that the instant petition can be denied outright as Benguet resorted to an improper
remedy.

The last paragraph of Section 79 of Republic Act No. (RA) 7942 or the "Philippine Mining Act of 1995" states, "A petition for review by
certiorari and question of law may be filed by the aggrieved party with the Supreme Court within thirty (30) days from receipt of the
order or decision of the [MAB]."

However, this Court has already invalidated such provision in Carpio v. Sulu Resources Development Corp.,13 ruling that a decision of
the MAB must first be appealed to the Court of Appeals (CA) under Rule 43 of the Rules of Court, before recourse to this Court may be
had. We held, thus:

To summarize, there are sufficient legal footings authorizing a review of the MAB Decision under Rule 43 of the Rules of
Court. First, Section 30 of Article VI of the 1987 Constitution, mandates that "[n]o law shall be passed increasing the appellate
jurisdiction of the Supreme Court as provided in this Constitution without its advice and consent." On the other hand, Section
79 of RA No. 7942 provides that decisions of the MAB may be reviewed by this Court on a "petition for review by certiorari."
This provision is obviously an expansion of the Court’s appellate jurisdiction, an expansion to which this Court has not
consented. Indiscriminate enactment of legislation enlarging the appellate jurisdiction of this Court would unnecessarily burden
it.

Second, when the Supreme Court, in the exercise of its rule-making power, transfers to the CA pending cases involving a
review of a quasi-judicial body’s decisions, such transfer relates only to procedure; hence, it does not impair the substantive
and vested rights of the parties. The aggrieved party’s right to appeal is preserved; what is changed is only the procedure by
which the appeal is to be made or decided. The parties still have a remedy and a competent tribunal to grant this remedy.

Third, the Revised Rules of Civil Procedure included Rule 43 to provide a uniform rule on appeals from quasi-judicial agencies.
Under the rule, appeals from their judgments and final orders are now required to be brought to the CA on a verified petition
for review. A quasi-judicial agency or body has been defined as an organ of government, other than a court or legislature,
which affects the rights of private parties through either adjudication or rule-making. MAB falls under this definition; hence, it is
no different from the other quasi-judicial bodies enumerated under Rule 43. Besides, the introductory words in Section 1 of
Circular No. 1-91––"among these agencies are"––indicate that the enumeration is not exclusive or conclusive and
acknowledge the existence of other quasi-judicial agencies which, though not expressly listed, should be deemed included
therein.

Fourth, the Court realizes that under Batas Pambansa (BP) Blg. 129 as amended by RA No. 7902, factual controversies are
usually involved in decisions of quasi-judicial bodies; and the CA, which is likewise tasked to resolve questions of fact, has
more elbow room to resolve them. By including questions of fact among the issues that may be raised in an appeal from quasi-
judicial agencies to the CA, Section 3 of Revised Administrative Circular No. 1-95 and Section 3 of Rule 43 explicitly expanded
the list of such issues.

According to Section 3 of Rule 43, "[a]n appeal under this Rule may be taken to the Court of Appeals within the period and in
the manner herein provided whether the appeal involves questions of fact, of law, or mixed questions of fact and law." Hence,
appeals from quasi-judicial agencies even only on questions of law may be brought to the CA.

Fifth, the judicial policy of observing the hierarchy of courts dictates that direct resort from administrative agencies to this Court
will not be entertained, unless the redress desired cannot be obtained from the appropriate lower tribunals, or unless
exceptional and compelling circumstances justify availment of a remedy falling within and calling for the exercise of our
primary jurisdiction.14

The above principle was reiterated in Asaphil Construction and Development Corporation v. Tuason, Jr. (Asaphil).15However,
the Carpio ruling was not applied to Asaphil as the petition in the latter case was filed in 1999 or three years before the promulgation
of Carpio in 2002. Here, the petition was filed on April 28, 2004 when the Carpiodecision was already applicable, thus Benguet should
have filed the appeal with the CA.

Petitioner having failed to properly appeal to the CA under Rule 43, the decision of the MAB has become final and executory. On this
ground alone, the instant petition must be denied.
Even if we entertain the petition although Benguet skirted the appeal to the CA via Rule 43, still, the December 2, 2002 Decision and
March 17, 2004 Resolution of the DENR-MAB in MAB Case No. 0124-01 should be maintained.

First Issue: The case should have first been brought to

voluntary arbitration before the POA

Secs. 11.01 and 11.02 of the RAWOP pertinently provide:

11.01 Arbitration

Any disputes, differences or disagreements between BENGUET and the OWNER with reference to anything whatsoever
pertaining to this Agreement that cannot be amicably settled by them shall not be cause of any action of any kind whatsoever
in any court or administrative agency but shall, upon notice of one party to the other, be referred to a Board of Arbitrators
consisting of three (3) members, one to be selected by BENGUET, another to be selected by the OWNER and the third to be
selected by the aforementioned two arbitrators so appointed.

xxxx

11.02 Court Action

No action shall be instituted in court as to any matter in dispute as hereinabove stated, except to enforce the decision of the
majority of the Arbitrators.16

Thus, Benguet argues that the POA should have first referred the case to voluntary arbitration before taking cognizance of the case,
citing Sec. 2 of RA 876 on persons and matters subject to arbitration.

On the other hand, in denying such argument, the POA ruled that:

While the parties may establish such stipulations clauses, terms and conditions as they may deem convenient, the same must not be
contrary to law and public policy. At a glance, there is nothing wrong with the terms and conditions of the agreement. But to state that
an aggrieved party cannot initiate an action without going to arbitration would be tying one’s hand even if there is a law which allows
him to do so.17

The MAB, meanwhile, denied Benguet’s contention on the ground of estoppel, stating:

Besides, by its own act, Benguet is already estopped in questioning the jurisdiction of the Panel of Arbitrators to hear and
decide the case. As pointed out in the appealed Decision, Benguet initiated and filed an Adverse Claim docketed as MAC-R-
M-2000-02 over the same mining claims without undergoing contractual arbitration. In this particular case (MAC-R-M-2000-02)
now subject of the appeal, Benguet is likewise in estoppel from questioning the competence of the Panel of Arbitrators to hear
and decide in the summary proceedings J.G. Realty’s petition, when Benguet itself did not merely move for the dismissal of
the case but also filed an Answer with counterclaim seeking affirmative reliefs from the Panel of Arbitrators. 18

Moreover, the MAB ruled that the contractual provision on arbitration merely provides for an additional forum or venue and does not
divest the POA of the jurisdiction to hear the case. 19

In its July 20, 2004 Comment,20 J.G. Realty reiterated the above rulings of the POA and MAB. It argued that RA 7942 or the "Philippine
Mining Act of 1995" is a special law which should prevail over the stipulations of the parties and over a general law, such as RA 876. It
also argued that the POA cannot be considered as a "court" under the contemplation of RA 876 and that jurisprudence saying that
there must be prior resort to arbitration before filing a case with the courts is inapplicable to the instant case as the POA is itself already
engaged in arbitration.

On this issue, we rule for Benguet.

Sec. 2 of RA 876 elucidates the scope of arbitration:

Section 2. Persons and matters subject to arbitration.––Two or more persons or parties may submit to the arbitration of
one or more arbitrators any controversy existing between them at the time of the submission and which may be the
subject of an action, or the parties to any contract may in such contract agree to settle by arbitration a controversy
thereafter arising between them. Such submission or contract shall be valid, enforceable and irrevocable, save upon
such grounds as exist at law for the revocation of any contract.

Such submission or contract may include question[s] arising out of valuations, appraisals or other controversies which may be
collateral, incidental, precedent or subsequent to any issue between the parties. (Emphasis supplied.)

In RA 9285 or the "Alternative Dispute Resolution Act of 2004," the Congress reiterated the efficacy of arbitration as an alternative
mode of dispute resolution by stating in Sec. 32 thereof that domestic arbitration shall still be governed by RA 876. Clearly, a
contractual stipulation that requires prior resort to voluntary arbitration before the parties can go directly to court is not illegal and is in
fact promoted by the State. Thus, petitioner correctly cites several cases whereby arbitration clauses have been upheld by this Court.21

Moreover, the contention that RA 7942 prevails over RA 876 presupposes a conflict between the two laws. Such is not the case here.
To reiterate, availment of voluntary arbitration before resort is made to the courts or quasi-judicial agencies of the government is a valid
contractual stipulation that must be adhered to by the parties. As stated in Secs. 6 and 7 of RA 876:

Section 6. Hearing by court.––A party aggrieved by the failure, neglect or refusal of another to perform under an
agreement in writing providing for arbitration may petition the court for an order directing that such arbitration
proceed in the manner provided for in such agreement. Five days notice in writing of the hearing of such application shall
 be served either personally or by registered mail upon the party in default. The court shall hear the parties, and upon being
satisfied that the making of the agreement or such failure to comply therewith is not in issue, shall make an order
directing the parties to proceed to arbitration in accordance with the terms of the agreement. If the making of the
agreement or default be in issue the court shall proceed to summarily hear such issue. If the finding be that no
agreement in writing providing for arbitration was made, or that there is no default in the proceeding thereunder, the
proceeding shall be dismissed. If the finding be that a written provision for arbitration was made and there is a
default in proceeding thereunder, an order shall be made summarily directing the parties to proceed with the
arbitration in accordance with the terms thereof.

xxxx

Section 7. Stay of civil action.––If any suit or proceeding be brought upon an issue arising out of an agreement providing for
the arbitration thereof, the court in which such suit or proceeding is pending, upon being satisfied that the issue involved in
such suit or proceeding is referable to arbitration, shall stay the action or proceeding until an arbitration has been had in
accordance with the terms of the agreement: Provided, That the applicant, for the stay is not in default in proceeding with such
arbitration. (Emphasis supplied.)

In other words, in the event a case that should properly be the subject of voluntary arbitration is erroneously filed with the courts or
quasi-judicial agencies, on motion of the defendant, the court or quasi-judicial agency shall determine whether such contractual
provision for arbitration is sufficient and effective. If in affirmative, the court or quasi-judicial agency shall then order the enforcement of
said provision. Besides, in BF Corporation v. Court of Appeals, we already ruled:

In this connection, it bears stressing that the lower court has not lost its jurisdiction over the case. Section 7 of Republic Act
No. 876 provides that proceedings therein have only been stayed. After the special proceeding of arbitration has been pursued
and completed, then the lower court may confirm the award made by the arbitrator.22

J.G. Realty’s contention, that prior resort to arbitration is unavailing in the instant case because the POA’s mandate is to arbitrate
disputes involving mineral agreements, is misplaced. A distinction must be made between voluntary and compulsory arbitration. In Ludo
and Luym Corporation v. Saordino, the Court had the occasion to distinguish between the two types of arbitrations:

Comparatively, in Reformist Union of R.B. Liner, Inc. vs. NLRC, compulsory arbitration has been defined both as "the process
of settlement of labor disputes by a government agency which has the authority to investigate and to make an
award which is binding on all the parties, and as a mode of arbitration where the parties are compelled to accept the resolution
of their dispute through arbitration by a third party." While a voluntary arbitrator is not part of the governmental unit or labor
department’s personnel, said arbitrator renders arbitration services provided for under labor laws. 23 (Emphasis supplied.)

There is a clear distinction between compulsory and voluntary arbitration. The arbitration provided by the POA is compulsory, while the
nature of the arbitration provision in the RAWOP is voluntary, not involving any government agency. Thus, J.G. Realty’s argument on
this matter must fail.

As to J.G. Realty’s contention that the provisions of RA 876 cannot apply to the instant case which involves an administrative agency, it
must be pointed out that Section 11.01 of the RAWOP states that:

[Any controversy with regard to the contract] shall not be cause of any action of any kind whatsoever in any court
or administrative agency but shall, upon notice of one party to the other, be referred to a Board of Arbitrators consisting of
three (3) members, one to be selected by BENGUET, another to be selected by the OWNER and the third to be selected by
the aforementioned two arbiters so appointed.24 (Emphasis supplied.)

There can be no quibbling that POA is a quasi-judicial body which forms part of the DENR, an administrative agency. Hence, the
provision on mandatory resort to arbitration, freely entered into by the parties, must be held binding against them. 25

In sum, on the issue of whether POA should have referred the case to voluntary arbitration, we find that, indeed, POA has no
jurisdiction over the dispute which is governed by RA 876, the arbitration law.

However, we find that Benguet is already estopped from questioning the POA’s jurisdiction. As it were, when J.G. Realty filed DENR
Case No. 2000-01, Benguet filed its answer and participated in the proceedings before the POA, Region V. Secondly, when the
adverse March 19, 2001 POA Decision was rendered, it filed an appeal with the MAB in Mines Administrative Case No. R-M-2000-01
and again participated in the MAB proceedings. When the adverse December 2, 2002 MAB Decision was promulgated, it filed a motion
for reconsideration with the MAB. When the adverse March 17, 2004 MAB Resolution was issued, Benguet filed a petition with this
Court pursuant to Sec. 79 of RA 7942 impliedly recognizing MAB’s jurisdiction. In this factual milieu, the Court rules that the jurisdiction
of POA and that of MAB can no longer be questioned by Benguet at this late hour. What Benguet should have done was to immediately
challenge the POA’s jurisdiction by a special civil action for certiorari when POA ruled that it has jurisdiction over the dispute. To redo
the proceedings fully participated in by the parties after the lapse of seven years from date of institution of the original action with the
POA would be anathema to the speedy and efficient administration of justice.

Second Issue: The cancellation of the RAWOP

was supported by evidence

The cancellation of the RAWOP by the POA was based on two grounds: (1) Benguet’s failure to pay J.G. Realty’s royalties for the
mining claims; and (2) Benguet’s failure to seriously pursue MPSA Application No. APSA-V-0009 over the mining claims.

As to the royalties, Benguet claims that the checks representing payments for the royalties of J.G. Realty were available for pick-up in
its office and it is the latter which refused to claim them. Benguet then thus concludes that it did not violate the RAWOP for nonpayment
of royalties. Further, Benguet reasons that J.G. Realty has the burden of proving that the former did not pay such royalties following the
principle that the complainants must prove their affirmative allegations.
With regard to the failure to pursue the MPSA application, Benguet claims that the lengthy time of approval of the application is due to
the failure of the MGB to approve it. In other words, Benguet argues that the approval of the application is solely in the hands of the
MGB.

Benguet’s arguments are bereft of merit.

Sec. 14.05 of the RAWOP provides:

14.05 Bank Account

OWNER shall maintain a bank account at ___________ or any other bank from time to time selected by OWNER with notice
in writing to BENGUET where BENGUET shall deposit to the OWNER’s credit any and all advances and payments which may
become due the OWNER under this Agreement as well as the purchase price herein agreed upon in the event that BENGUET
shall exercise the option to purchase provided for in the Agreement. Any and all deposits so made by BENGUET shall be a
full and complete acquittance and release to [sic] BENGUET from any further liability to the OWNER of the amounts
represented by such deposits. (Emphasis supplied.)

Evidently, the RAWOP itself provides for the mode of royalty payment by Benguet. The fact that there was the previous practice
whereby J.G. Realty picked-up the checks from Benguet is unavailing. The mode of payment is embodied in a contract between the
parties. As such, the contract must be considered as the law between the parties and binding on both. 26 Thus, after J.G. Realty
informed Benguet of the bank account where deposits of its royalties may be made, Benguet had the obligation to deposit the checks.
J.G. Realty had no obligation to furnish Benguet with a Board Resolution considering that the RAWOP itself provided for such payment
scheme.

Notably, Benguet’s claim that J.G. Realty must prove nonpayment of its royalties is both illogical and unsupported by law and
jurisprudence.

The allegation of nonpayment is not a positive allegation as claimed by Benguet. Rather, such is a negative allegation that does not
require proof and in fact transfers the burden of proof to Benguet. Thus, this Court ruled in Jimenez v. National Labor Relations
Commission:

As a general rule, one who pleads payment has the burden of proving it. Even where the plaintiff must allege non-payment,
the general rule is that the burden rests on the defendant to prove payment, rather than on the plaintiff to prove non-
payment. The debtor has the burden of showing with legal certainty that the obligation has been discharged by
payment.27 (Emphasis supplied.)

In the instant case, the obligation of Benguet to pay royalties to J.G. Realty has been admitted and supported by the provisions of the
RAWOP. Thus, the burden to prove such obligation rests on Benguet.

It should also be borne in mind that MPSA Application No. APSA-V-0009 has been pending with the MGB for a considerable length of
time. Benguet, in the RAWOP, obligated itself to perfect the rights to the mining claims and/or otherwise acquire the mining rights to the
mineral claims but failed to present any evidence showing that it exerted efforts to speed up and have the application approved. In fact,
Benguet never even alleged that it continuously followed-up the application with the MGB and that it was in constant communication
with the government agency for the expeditious resolution of the application. Such allegations would show that, indeed, Benguet was
remiss in prosecuting the MPSA application and clearly failed to comply with its obligation in the RAWOP.

Third Issue: There is no unjust enrichment in the instant case

Based on the foregoing discussion, the cancellation of the RAWOP was based on valid grounds and is, therefore, justified. The
necessary implication of the cancellation is the cessation of Benguet’s right to prosecute MPSA Application No. APSA-V-0009 and to
further develop such mining claims.

In Car Cool Philippines, Inc. v. Ushio Realty and Development Corporation, we defined unjust enrichment, as follows:

We have held that "[t]here is unjust enrichment when a person unjustly retains a benefit to the loss of another, or when a
person retains money or property of another against the fundamental principles of justice, equity and good conscience." Article
22 of the Civil Code provides that "[e]very person who through an act of performance by another, or any other means, acquires
or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him."
The principle of unjust enrichment under Article 22 requires two conditions: (1) that a person is benefited without a valid basis
or justification, and (2) that such benefit is derived at another’s expense or damage.

There is no unjust enrichment when the person who will benefit has a valid claim to such benefit.28(Emphasis
supplied.)

Clearly, there is no unjust enrichment in the instant case as the cancellation of the RAWOP, which left Benguet without any legal right
to participate in further developing the mining claims, was brought about by its violation of the RAWOP. Hence, Benguet has no one to
blame but itself for its predicament.

WHEREFORE, we DISMISS the petition, and AFFIRM the December 2, 2002 Decision and March 17, 2004 Resolution of the DENR-
MAB in MAB Case No. 0124-01 upholding the cancellation of the June 1, 1987 RAWOP. No costs.

SO ORDERED.
G.R. No. 126619 December 20, 2006

UNIWIDE SALES REALTY AND RESOURCES CORPORATION, petitioner,

vs.
TITAN-IKEDA CONSTRUCTION AND DEVELOPMENT CORPORATION, respondent.

DECISION

TINGA, J.:

This Petition for Review on Certiorari under Rule 45 seeks the partial reversal of the 21 February 1996 Decision 1 of the Court of
Appeals Fifteenth Division in CA-G.R. SP No. 37957 which modified the 17 April 1995 Decision 2 of the Construction Industry Arbitration
Commission (CIAC).

The case originated from an action for a sum of money filed by Titan-Ikeda Construction and Development Corporation (Titan) against
Uniwide Sales Realty and Resources Corporation (Uniwide) with the Regional Trial Court (RTC), Branch 119, 3 Pasay City 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. Upon Uniwide's motion to dismiss/suspend proceedings and Titan's open court manifestation agreeing to the suspension,
Civil Case No. 98-0814 was suspended for it to undergo arbitration.4 Titan's complaint was thus re-filed with the CIAC.5 Before the
CIAC, Uniwide filed an answer which was later amended and re-amended, denying the material allegations of the complaint, with
counterclaims for refund of overpayments, actual and exemplary damages, and attorney's fees. The agreements between Titan and
Uniwide are briefly described below.

PROJECT 1.6

The first agreement (Project 1) was a written "Construction Contract" entered into by Titan and Uniwide sometime in May 1991 whereby
Titan undertook to construct Uniwide's Warehouse Club and Administration Building in Libis, Quezon City for a fee of P120,936,591.50,
payable in monthly progress billings to be certified to by Uniwide's representative. 7 The parties stipulated that the building shall be
completed not later than 30 November 1991. As found by the CIAC, the building was eventually finished on 15 February 19928 and
turned over to Uniwide.

PROJECT 2.

Sometime in July 1992, Titan and Uniwide entered into the second agreement (Project 2) whereby the former agreed to construct an
additional floor and to renovate the latter's warehouse located at the EDSA Central Market Area in Mandaluyong City. There was no
written contract executed between the parties for this project. Construction was allegedly to be on the basis of drawings and
specifications provided by Uniwide's structural engineers. The parties proceeded on the basis of a cost estimate of P21,301,075.77
inclusive of Titan's 20% mark-up. Titan conceded in its complaint to having received P15,000,000.00 of this amount. This project was
completed in the latter part of October 1992 and turned over to Uniwide.

PROJECT 3.9

The parties executed the third agreement (Project 3) in May 1992. In a written "Construction Contract," Titan undertook to construct the
Uniwide Sales Department Store Building in Kalookan City for the price of P118,000,000.00 payable in progress billings to be certified
to by Uniwide's representative.10 It was stipulated that the project shall be completed not later than 28 February 1993. The project was
completed and turned over to Uniwide in June 1993.

Uniwide asserted in its petition that: (a) it overpaid Titan for unauthorized additional works in Project 1 and Project 3; (b) it is not liable to
pay the Value-Added Tax (VAT) for Project 1; (c) it is entitled to liquidated damages for the delay incurred in constructing Project 1 and
Project 3; and (d) it should not have been found liable for deficiencies in the defectively constructed Project 2.

An Arbitral Tribunal consisting of a chairman and two members was created in accordance with the CIAC Rules of Procedure
Governing Construction Arbitration. It conducted a preliminary conference with the parties and thereafter issued a Terms of Reference
(TOR) which was signed by the parties. The tribunal also conducted an ocular inspection, hearings, and received the evidence of the
parties consisting of affidavits which were subject to cross-examination. On 17 April 1995, after the parties submitted their respective
memoranda, the Arbitral Tribunal promulgated a Decision, 11 the decretal portion of which is as follows:

"WHEREFORE, judgment is hereby rendered as follows:

On Project 1 – Libis:

[Uniwide] is absolved of any liability for the claims made by [Titan] on this Project.

Project 2 – Edsa Central:

[Uniwide] is absolved of any liability for VAT payment on this project, the same being for the account of the [Titan]. On the
other hand, [Titan] is absolved of any liability on the counterclaim for defective construction of this project.

[Uniwide] is held liable for the unpaid balance in the amount of P6,301,075.77 which is ordered to be paid to the [Titan] with
12% interest per annum commencing from 19 December 1992 until the date of payment.
On Project 3 – Kalookan:

[Uniwide] is held liable for the unpaid balance in the amount of P5,158,364.63 which is ordered to be paid to the [Titan] with
12% interest per annum commencing from 08 September 1993 until the date of payment.

[Uniwide] is held liable to pay in full the VAT on this project, in such amount as may be computed by the Bureau of Internal
Revenue to be paid directly thereto. The BIR is hereby notified that [Uniwide] Sales Realty and Resources Corporation has
assumed responsibility and is held liable for VAT payment on this project. This accordingly exempts Claimant Titan-Ikeda
Construction and Development Corporation from this obligation.

Let a copy of this Decision be furnished the Honorable Aurora P. Navarette Recina, Presiding Judge, Branch 119, Pasay City,
in Civil Case No. 94-0814 entitled Titan-Ikeda Construction Development Corporation, Plaintiff – versus – Uniwide Sales
Realty and Resources Corporation, Defendant, pending before said court for information and proper action.

SO ORDERED."12

Uniwide filed a motion for reconsideration of the 17 April 1995 decision which was denied by the CIAC in its Resolution dated 6 July
1995. Uniwide accordingly filed a petition for review with the Court of Appeals,13 which rendered the assailed decision on 21 February
1996. Uniwide's motion for reconsideration was likewise denied by the Court of Appeals in its assailed Resolution 14 dated 30
September 1996.

Hence, Uniwide comes to this Court via a petition for review under Rule 45. The issues submitted for resolution of this Court are as
follows:15 (1) Whether Uniwide is entitled to a return of the amount it allegedly paid by mistake to Titan for additional works done on
Project 1; (2) Whether Uniwide is liable for the payment of the Value-Added Tax (VAT) on Project 1; (3) Whether Uniwide is entitled to
liquidated damages for Projects 1 and 3; and (4) Whether Uniwide is liable for deficiencies in Project 2.

As a rule, findings of fact of administrative agencies and quasi-judicial bodies, which have acquired expertise because their jurisdiction
is confined to specific matters, are generally accorded not only respect, but also finality, especially when affirmed by the Court of
Appeals.16 In particular, factual findings of construction arbitrators are final and conclusive and not reviewable by this Court on
appeal.17 This rule, however admits of certain exceptions.

In David v. Construction Industry and Arbitration Commission,18 we ruled that, as exceptions, factual findings of construction arbitrators
may be reviewed by this Court when the petitioner proves affirmatively that: (1) the award was procured by corruption, fraud or other
undue means; (2) there was evident partiality or corruption of the arbitrators or of any of them; (3) the arbitrators were guilty of
misconduct in refusing to hear evidence pertinent and material to the controversy; (4) one or more of the arbitrators were disqualified to
act as such under Section nine of Republic Act No. 876 and willfully refrained from disclosing such disqualifications or of any other
misbehavior by which the rights of any party have been materially prejudiced; or (5) the arbitrators exceeded their powers, or so
imperfectly executed them, that a mutual, final and definite award upon the subject matter submitted to them was not made. 19

Other recognized exceptions are as follows: (1) when there is a very clear showing of grave abuse of discretion 20resulting in lack or loss
of jurisdiction as when a party was deprived of a fair opportunity to present its position before the Arbitral Tribunal or when an award is
obtained through fraud or the corruption of arbitrators, 21 (2) when the findings of the Court of Appeals are contrary to those of the
CIAC,22 and (3) when a party is deprived of administrative due process. 23

Thus, in Hi-Precision Steel Center, Inc. v. Lim Kim Builders, Inc.,24 we refused to review the findings of fact of the CIAC for the reason
that petitioner was requiring the Court to go over each individual claim and counterclaim submitted by the parties in the CIAC. A review
of the CIAC's findings of fact would have had the effect of "setting at naught the basic objective of a voluntary arbitration and would
reduce arbitration to a largely inutile institution." Further, petitioner therein failed to show any serious error of law amounting to grave
abuse of discretion resulting in lack of jurisdiction on the part of the Arbitral Tribunal, in either the methods employed or the results
reached by the Arbitral Tribunal, in disposing of the detailed claims of the respective parties. In Metro Construction, Inc. v. Chatham
Properties, Inc.,25 we reviewed the findings of fact of the Court of Appeals because its findings on the issue of whether petitioner therein
was in delay were contrary to the findings of the CIAC. Finally, in Megaworld Globus Asia, Inc. v. DSM Construction and Development
Corporation,26 we declined to depart from the findings of the Arbitral Tribunal considering that the computations, as well as the propriety
of the awards, are unquestionably factual issues that have been discussed by the Arbitral Tribunal and affirmed by the Court of
Appeals.

In the present case, only the first issue presented for resolution of this Court is a question of law while the rest are factual in nature.
However, we do not hesitate to inquire into these factual issues for the reason that the CIAC and the Court of Appeals, in some matters,
differed in their findings.

We now proceed to discuss the issues in seriatim.

Payment by Mistake for Project 1

The first issue refers to the P5,823,481.75 paid by Uniwide for additional works done on Project 1. Uniwide asserts that Titan was not
entitled to be paid this amount because the additional works were without any written authorization.

It should be noted that the contracts do not contain stipulations on "additional works," Uniwide's liability for "additional works," and prior
approval as a requirement before Titan could perform "additional works."

Nonetheless, Uniwide cites Article (Art. ) 1724 of the New Civil Code as basis for its claim that it is not liable to pay for "additional
works" it did not authorize or agree upon in writing. The provision states:

Art. 1724. The contractor who undertakes to build a structure or any other work for a stipulated price, in conformity with plans
and specifications agreed upon with the landowner, can neither withdraw from the contract nor demand an increase in the
price on account of the higher cost of labor or materials, save when there has been a change in the plans and specifications,
provided:
 (1) Such change has been authorized by the proprietor in writing; and

(2) The additional price to be paid to the contractor has been determined in writing by both parties.

The Court of Appeals did take note of this provision, but deemed it inapplicable to the case at bar because Uniwide had already paid,
albeit with unwritten reservations, for the "additional works." The provision would have been operative had Uniwide refused to pay for
the costs of the "additional works." Instead, the Court of Appeals applied Art. 1423 27 of the New Civil Code and characterized Uniwide's
payment of the said amount as a voluntary fulfillment of a natural obligation. The situation was characterized as being akin to Uniwide
being a debtor who paid a debt even while it knew that it was not legally compelled to do so. As such debtor, Uniwide could no longer
demand the refund of the amount already paid.

Uniwide counters that Art. 1724 makes no distinction as to whether payment for the "additional works" had already been made. It claims
that it had made the payments, subject to reservations, upon the false representation of Titan-Ikeda that the "additional works" were
authorized in writing. Uniwide characterizes the payment as a "mistake," and not a "voluntary" fulfillment under Art. 1423 of the Civil
Code. Hence, it urges the application, instead, of the principle of solutio indebiti under Arts. 215428 and 215629 of the Civil Code.

To be certain, this Court has not been wont to give an expansive construction of Art. 1724, denying, for example, claims that it applies
to constructions made of ship vessels,30 or that it can validly deny the claim for payment of professional fees to the architect.31 The
present situation though presents a thornier problem. Clearly, Art. 1724 denies, as a matter of right, payment to the contractor for
additional works which were not authorized in writing by the proprietor, and the additional price of which was not determined in writing
by the parties.

Yet the distinction pointed out by the Court of Appeals is material. The issue is no longer centered on the right of the contractor to
demand payment for additional works undertaken because payment, whether mistaken or not, was already made by Uniwide. Thus, it
would not anymore be incumbent on Titan to establish that it had the right to demand or receive such payment.

But, even if the Court accepts Art. 1724 as applicable in this case, such recognition does not ipso facto accord Uniwide the right to be
reimbursed for payments already made, since Art. 1724 does not effect such right of reimbursement. It has to be understood that Art.
1724 does not preclude the payment to the contractor who performs additional works without any prior written authorization or
agreement as to the price for such works if the owner decides anyway to make such payment. What the provision does preclude is the
right of the contractor to insist upon payment for unauthorized additional works.

Accordingly, Uniwide, as the owner who did pay the contractor for such additional works even if they had not been authorized in writing,
has to establish its own right to reimbursement not under Art. 1724, but under a different provision of law. Uniwide's burden of
establishing its legal right to reimbursement becomes even more crucial in the light of the general presumption contained in Section
3(f), Rule 131 of the Rules of Court that "money paid by one to another was due to the latter."

Uniwide undertakes such a task before this Court, citing the provisions on solutio indebiti under Arts. 2154 and 2156 of the Civil Code.
However, it is not enough to prove that the payments made by Uniwide to Titan were "not due" because there was no prior
authorization or agreement with respect to additional works. There is a further requirement that the payment by the debtor was made
either through mistake or under a cloud of doubt. In short, for the provisions on solutio indebiti to apply, there has to be evidence
establishing the frame of mind of the payor at the time the payment was made. 32

The CIAC refused to acknowledge that the additional works on Project 1 were indeed unauthorized by Uniwide. Neither did the Court of
Appeals arrive at a contrary determination. There would thus be some difficulty for this Court to agree with this most basic premise
submitted by Uniwide that it did not authorize the additional works on Project 1 undertaken by Titan. Still, Uniwide does cite testimonial
evidence from the record alluding to a concession by employees of Titan that these additional works on Project 1 were either authorized
or documented.33

Yet even conceding that the additional works on Project 1 were not authorized or committed into writing, the undisputed fact remains
that Uniwide paid for these additional works. Thus, to claim a refund of payments made under the principle of solutio indebiti, Uniwide
must be able to establish that these payments were made through mistake. Again, this is a factual matter that would have acquired a
mantle of invulnerability had it been determined by both the CIAC and the Court of Appeals. However, both bodies failed to arrive at
such a conclusion. Moreover, Uniwide is unable to direct our attention to any pertinent part of the record that would indeed establish
that the payments were made by reason of mistake.

We note that Uniwide alleged in its petition that the CIAC award in favor of Titan in the amount P5,158,364.63 as the unpaid balance in
Project 3 included claims for additional works of P1,087,214.18 for which no written authorization was presented. Unfortunately, this
issue was not included in its memorandum as one of the issues submitted for the resolution of the Court.

Liability for the Value-Added Tax (VAT)

The second issue takes us into an inquiry on who, under the law, is liable for the payment of the VAT, in the absence of a written
stipulation on the matter. Uniwide claims that the VAT was already included in the contract price for Project 1. Citing Secs. 99 and 102
of the National Internal Revenue Code, Uniwide asserts that VAT, being an indirect tax, may be shifted to the buyer by including it in the
cash or selling price and it is entirely up to the buyer to agree or not to agree to absorb the VAT. 34 Thus, Uniwide concludes, if there is
no provision in the contract as to who should pay the VAT, it is presumed that it would be the seller. 35

The contract for Project 1 is silent on which party should shoulder the VAT while the contract for Project 3 contained a provision to the
effect that Uniwide is the party responsible for the payment of the VAT. 36 Thus, when Uniwide paid the amount of P2,400,000.00 as
billed by Titan for VAT, it assumed that it was the VAT for Project 3. However, the CIAC and the Court of Appeals found that the same
was for Project 1.

We agree with the conclusions of both the CIAC and the Court of Appeals that the amount of P2,400,000.00 was paid by Uniwide as
VAT for Project 1. This conclusion was drawn from an Order of Payment 37 dated 7 October 1992 wherein Titan billed Uniwide the
amount of P2,400,000.00 as "Value Added Tax based on P60,000,000.00 Contract," computed on the basis of 4% of P60,000,000.00.
Said document which was approved by the President of Uniwide expressly indicated that the project involved was the "UNIWIDE
SALES WAREHOUSE CLUB & ADMIN BLDG." located at "90 E. RODRIGUEZ JR. AVE., LIBIS, Q.C." The reduced base for the
computation of the tax, according to the Court of Appeals, was an indication that the parties agreed to pass the VAT for Project 1 to
Uniwide but based on a lower contract price. Indeed, the CIAC found as follows:

Without any documentary evidence than Exhibit "H" to show the extent of tax liability assumed by [Uniwide], the Tribunal holds
that the parties is [sic] obliged to pay only a share of the VAT payment up to P60,000,000.00 out of the total contract price
of P120,936,591.50. As explained by Jimmy Gow, VAT is paid on labor only for construction contracts since VAT had
already been paid on the materials purchased. Since labor costs is [sic] proportionately placed at 60%-40% of the
contract price, simplified accounting computes VAT at 4% of the contract price. Whatever is the balance for VAT that
remains to be paid on Project 1 – Libis shall remain the obligation of [Titan]. (Emphasis supplied.) 38

Liquidated Damages

On the third issue of liquidated damages, the CIAC rejected such claim while the Court of Appeals held that the matter should be left for
determination in future proceedings where the issue has been made clear.

In rejecting Uniwide's claim for liquidated damages, the CIAC held that there is no legal basis for passing upon and resolving Uniwide's
claim for the following reasons: (1) no claim for liquidated damages arising from the alleged delay was ever made by Uniwide at any
time before the commencement of Titan's complaint; (2) the claim for liquidated damages was not included in the counterclaims stated
in Uniwide's answer to Titan's complaint; (3) the claim was not formulated as an issue to be resolved by the CIAC in the TOR; 39 and (4)
no attempt was made to modify the TOR to accommodate the same as an issue to be resolved.

Uniwide insists that the CIAC should have applied Section 5, Rule 10 of the Rules of Court.40 On this matter, the Court of Appeals held
that the CIAC is an arbitration body, which is not necessarily bound by the Rules of Court. Also, the Court of Appeals found that the
issue has never been made concrete enough to make Titan and the CIAC aware that it will be an issue. In fact, Uniwide only introduced
and quantified its claim for liquidated damages in its Memorandum submitted to the CIAC at the end of the arbitration proceeding. The
Court of Appeals also noted that the only evidence on record to prove delay in the construction of Project 1 is the testimony of Titan's
engineer regarding the date of completion of the project while the only evidence of delay in the construction of Project 3 is the affidavit
of Uniwide's President.

According to Uniwide, the ruling of the Court of Appeals on the issue of liquidated damages goes against the established judicial policy
that a court should always strive to settle in one proceeding the entire controversy leaving no root or branch to bear the seeds of future
litigations.41 Uniwide claims that the required evidence for an affirmative ruling on its claim is already on the record. It cites the pertinent
provisions of the written contracts which contained deadlines for liquidated damages. Uniwide also noted that the evidence show that
Project 1 was completed either on 15 February 1992, as found by the CIAC, or 12 March 1992, as shown by Titan's own evidence,
while Project 3, according to Uniwide's President, was completed in June 1993. Furthermore, Uniwide asserts, 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.42

On this point, 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. (Emphasis supplied.)

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."43 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. 44 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."45

Further, a party may not be deprived of due process of law by an amendment of the complaint as provided in Section 5, Rule 10 of the
Rules of Court. In this case, as noted by the Court of Appeals, Uniwide only introduced and quantified its claim for liquidated damages
in its memorandum submitted to the CIAC at the end of the arbitration proceeding. Verily, Titan was not given a chance to present
evidence to counter Uniwide's claim for liquidated damages.

Uniwide alludes to an alleged judicial admission made by Engr. Luzon Tablante wherein he stated that Project 1 was completed on 10
March 1992. It now claims that by virtue of Engr. Tablante's statement, Titan had admitted that it was in delay. We disagree. The
testimony of Engr. Tablante was offered only to prove that Project 1 was indeed completed. It was not offered to prove the fact of delay.
It must be remembered that the purpose for which evidence is offered must be specified because such evidence may be admissible for
several purposes under the doctrine of multiple admissibility, or may be admissible for one purpose and not for another, otherwise the
adverse party cannot interpose the proper objection. Evidence submitted for one purpose may not be considered for any other
purpose.46Furthermore, even assuming, for the sake of argument, that said testimony on the date of completion of Project 1 is admitted,
the establishment of the mere fact of delay is not sufficient for the imposition of liquidated damages. It must further be shown that delay
was attributable to the contractor if not otherwise justifiable. Contrarily, Uniwide's belated claim constitutes an admission that the delay
was justified and implies a waiver of its right to such damages.
Project 2: "as-built" plans, overpricing, defective construction

To determine whether or not Uniwide is liable for the unpaid balance of P6,301,075.77 for Project 2, we need to resolve four sub-
issues, namely: (1) whether or not it was necessary for Titan to submit "as-built" plans before it can be paid by Uniwide; (2) whether or
not there was overpricing of the project; (3) whether or not the P15,000,000.00 paid by Uniwide to Titan for Project 2 constitutes full
payment; and (4) whether or not Titan can be held liable for defective construction of Project 2.

The CIAC, as affirmed by the Court of Appeals, held Uniwide liable for deficiency relating to Project 2 in the amount of P6,301,075.77. It
is nonetheless alleged by Uniwide that Titan failed to submit any "as-built" plans for Project 2, such plans allegedly serving as a
condition precedent for payment. Uniwide further claims that Titan had substantially overcharged Uniwide for Project 2, there being
uncontradicted expert testimony that the total cost of Project 2 did not exceed P7,812,123.60. Furthermore, Uniwide alleged that the
works performed were structurally defective, as evidenced by the structural damage on four columns as observed on ocular inspection
by the CIAC and confirmed by Titan's project manager.

On the necessity of submitting "as-built" plans, this Court rules that the submission of such plans is not a pre-requisite for Titan to be
paid by Uniwide. The argument that said plans are required by Section 308 of Presidential Decree No. 1098 (National Building Code)
and by Section 2.11 of its Implementing Rules before payment can be made is untenable. The purpose of the law is "to safeguard life,
health, property, and public welfare, consistent with the principles of sound environmental management and control." The submission of
these plans is necessary only in furtherance of the law's purpose by setting minimum standards and requirements to control the
"location, site, design, quality of materials, construction, use, occupancy, and maintenance" of buildings constructed and not as a
requirement for payment to the contractor.47 The testimony of Engr. Tablante to the effect that the "as-built" plans are required before
payment can be claimed by Titan is a mere legal conclusion which is not binding on this Court.

Uniwide claims that, according to one of its consultants, the true price for Project 2 is only P7,812,123.60. The CIAC and the Court of
Appeals, however, found the testimony of this consultant suspect and ruled that the total contract price for Project 2 is P21,301,075.77.
The CIAC held:

The Cost Estimate for Architectural and Site Development Works for the EDSA Central, Dau Branch Project (Exhibit "2-A" for
[Uniwide] and made as a common exhibit by [Titan] who had it marked at [sic] its own Exhibit "U"), which was admittedly
prepared by Fermindoza and Associates, [Uniwide]'s own architects, shows that the amount of P17,750,896.48 was arrived at.
Together with the agreed upon mark-up of 20% on said amount, the total project cost was P21,301,075.77.

The Tribunal holds that the foregoing document is binding upon the [Uniwide], it being the mode agreed upon by which its
liability for the project cost was to be determined.48 (Emphasis supplied.)

Indeed, Uniwide is bound by the amount indicated in the above document. Claims of connivance or fraudulent conspiracy between
Titan and Uniwide's representatives which, it is alleged, grossly exaggerated the price may properly be dismissed. As held by the CIAC:

The Tribunal holds that [Uniwide] has not introduced any evidence to sustain its charge of fraudulent conspiracy. As a matter
of fact, [Uniwide]'s own principal witness, Jimmy Gow, admitted on cross-examination that he does not have any direct
evidence to prove his charge of connivance or complicity between the [Titan] and his own representatives. He only made that
conclusion by the process of his own "logical reasoning" arising from his consultation with other contractors who gave him a
much lower estimate for the construction of the Dau Project. There is thus no reason to invalidate the binding character
of Exhibit "2-A" which, it is significant to point out, is [Uniwide]'s own evidence. 49 (Emphasis supplied.)

Accordingly, deducting the P15,000,000.00 already paid by Uniwide from the total contract price of P21,301,075.77, the unpaid balance
due for Project 2 is P6,301,075.77. This is the same amount reflected in the Order of Payment prepared by Uniwide's representative,
Le Consultech, Inc. and signed by no less than four top officers and architects of Le Consultech, Inc. endorsing for payment by Uniwide
to Titan the amount of P6,301,075.77.50

Uniwide asserts that Titan should not have been allowed to recover on Project 2 because the said project was defective and would
require repairs in the amount of P800,000.00. It claims that the CIAC and the Court of Appeals should have applied Nakpil and Sons v.
Court of Appeals51 and Art. 1723 of the New Civil Code holding a contractor responsible for damages if the edifice constructed falls
within fifteen years from completion on account of defects in the construction or the use of materials of inferior quality furnished by him
or due to any violation of the terms of the contract.

On this matter, the CIAC conducted an ocular inspection of the premises on 30 January 1995. What transpired in the said ocular
inspection is described thus:

On 30 January 1995, an ocular inspection was conducted by the Arbitral Tribunal as requested by [Uniwide]. Photographs
were taken of the alleged construction defects, an actual ripping off of the plaster of a certain column to expose the alleged
structural defect that is claimed to have resulted in its being "heavily damaged" was done, clarificatory questions were asked
and manifestations on observations were made by the parties and their respective counsels. The entire proceedings were
recorded on tape and subsequently transcribed. The photographs and transcript of the ocular inspection form part of the
records and considered as evidence.52

And, according to these evidence, the CIAC concluded as follows:

It is likewise the holding of this Tribunal that [Uniwide]'s counterclaim of defective construction has not been sufficiently proven.
The credibility of Engr. Cruz, [Uniwide]'s principal witness on this issue, has been severely impaired. During the ocular
inspection of the premises, he gave such assurance of the soundness of his opinion as an expert that a certain column was
heavily damaged judging from the external cracks that was readily apparent x x x

xxxx

On insistence of the Tribunal, the plaster was chipped off and revealed a structurally sound column x x x
 Further, it turns out that what was being passed off as a defective construction by [Titan], was in fact an old column, as
admitted by Mr. Gow himself x x x x53 (Emphasis supplied.)

Uniwide had the burden of proving that there was defective construction in Project 2 but it failed to discharge this burden. Even the
credibility of its own witness was severely impaired. Further, it was found that the concrete slab placed by Titan was not attached to the
old columns where cracks were discovered. The CIAC held that the post-tensioning of the new concrete slab could not have caused
any of the defects manifested by the old columns. We are bound by this finding of fact by the CIAC.

It is worthy to stress our ruling in Hi-Precision Steel Center, Inc. v. Lim Kim Steel Builders, Inc.54 which was reiterated in David v.
Construction Industry and Arbitration Commission,55 that:

x x x Executive Order No. 1008 created an arbitration facility to which the construction industry in the Philippines can have
recourse. The Executive Order was enacted to encourage the early and expeditious settlement of disputes in the
construction industry, a public policy the implementation of which is necessary and important for the realization of
national development goals.

Aware of the objective of voluntary arbitration in the labor field, in the construction industry, and in any other area for that
matter, the Court will not assist one or the other or even both parties in any effort to subvert or defeat that objective for their
private purposes. The Court will not review the factual findings of an arbitral tribunal upon the artful allegation that such body
had "misapprehended facts" and will not pass upon issues which are, at bottom, issues of fact, no matter how cleverly
disguised they might be as "legal questions." The parties here had recourse to arbitration and chose the arbitrators
themselves; they must have had confidence in such arbitrators. The Court will not, therefore, permit the parties to relitigate
before it the issues of facts previously presented and argued before the Arbitral Tribunal, save only where a clear showing is
made that, in reaching its factual conclusions, the Arbitral Tribunal committed an error so egregious and hurtful to one party as
to constitute a grave abuse of discretion resulting in lack or loss of jurisdiction. Prototypical examples would be factual
conclusions of the Tribunal which resulted in deprivation of one or the other party of a fair opportunity to present its position
before the Arbitral Tribunal, and an award obtained through fraud or the corruption of arbitrators. Any other, more relaxed rule
would result in setting at naught the basic objective of a voluntary arbitration and would reduce arbitration to a largely inutile
institution. (Emphasis supplied.)

WHEREFORE, premises considered, the petition is DENIED and the Decision of the Court of Appeals dated 21 February 1996 in CA-
G.R. SP No. 37957 is hereby AFFIRMED.

SO ORDERED.

G.R. No. 126619 December 20, 2006

UNIWIDE SALES REALTY AND RESOURCES CORPORATION, petitioner,

vs.
TITAN-IKEDA CONSTRUCTION AND DEVELOPMENT CORPORATION, respondent.

DECISION

TINGA, J.:

This Petition for Review on Certiorari under Rule 45 seeks the partial reversal of the 21 February 1996 Decision 1 of the Court of
Appeals Fifteenth Division in CA-G.R. SP No. 37957 which modified the 17 April 1995 Decision 2 of the Construction Industry Arbitration
Commission (CIAC).

The case originated from an action for a sum of money filed by Titan-Ikeda Construction and Development Corporation (Titan) against
Uniwide Sales Realty and Resources Corporation (Uniwide) with the Regional Trial Court (RTC), Branch 119, 3 Pasay City 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. Upon Uniwide's motion to dismiss/suspend proceedings and Titan's open court manifestation agreeing to the suspension,
Civil Case No. 98-0814 was suspended for it to undergo arbitration.4 Titan's complaint was thus re-filed with the CIAC.5 Before the
CIAC, Uniwide filed an answer which was later amended and re-amended, denying the material allegations of the complaint, with
counterclaims for refund of overpayments, actual and exemplary damages, and attorney's fees. The agreements between Titan and
Uniwide are briefly described below.

PROJECT 1.6

The first agreement (Project 1) was a written "Construction Contract" entered into by Titan and Uniwide sometime in May 1991 whereby
Titan undertook to construct Uniwide's Warehouse Club and Administration Building in Libis, Quezon City for a fee of P120,936,591.50,
payable in monthly progress billings to be certified to by Uniwide's representative.7 The parties stipulated that the building shall be
completed not later than 30 November 1991. As found by the CIAC, the building was eventually finished on 15 February 1992 8 and
turned over to Uniwide.

PROJECT 2.

Sometime in July 1992, Titan and Uniwide entered into the second agreement (Project 2) whereby the former agreed to construct an
additional floor and to renovate the latter's warehouse located at the EDSA Central Market Area in Mandaluyong City. There was no
written contract executed between the parties for this project. Construction was allegedly to be on the basis of drawings and
specifications provided by Uniwide's structural engineers. The parties proceeded on the basis of a cost estimate of P21,301,075.77
inclusive of Titan's 20% mark-up. Titan conceded in its complaint to having received P15,000,000.00 of this amount. This project was
completed in the latter part of October 1992 and turned over to Uniwide.
PROJECT 3.9

The parties executed the third agreement (Project 3) in May 1992. In a written "Construction Contract," Titan undertook to construct the
Uniwide Sales Department Store Building in Kalookan City for the price of P118,000,000.00 payable in progress billings to be certified
to by Uniwide's representative.10 It was stipulated that the project shall be completed not later than 28 February 1993. The project was
completed and turned over to Uniwide in June 1993.

Uniwide asserted in its petition that: (a) it overpaid Titan for unauthorized additional works in Project 1 and Project 3; (b) it is not liable to
pay the Value-Added Tax (VAT) for Project 1; (c) it is entitled to liquidated damages for the delay incurred in constructing Project 1 and
Project 3; and (d) it should not have been found liable for deficiencies in the defectively constructed Project 2.

An Arbitral Tribunal consisting of a chairman and two members was created in accordance with the CIAC Rules of Procedure
Governing Construction Arbitration. It conducted a preliminary conference with the parties and thereafter issued a Terms of Reference
(TOR) which was signed by the parties. The tribunal also conducted an ocular inspection, hearings, and received the evidence of the
parties consisting of affidavits which were subject to cross-examination. On 17 April 1995, after the parties submitted their respective
memoranda, the Arbitral Tribunal promulgated a Decision,11 the decretal portion of which is as follows:

"WHEREFORE, judgment is hereby rendered as follows:

On Project 1 – Libis:

[Uniwide] is absolved of any liability for the claims made by [Titan] on this Project.

Project 2 – Edsa Central:

[Uniwide] is absolved of any liability for VAT payment on this project, the same being for the account of the [Titan]. On the
other hand, [Titan] is absolved of any liability on the counterclaim for defective construction of this project.

[Uniwide] is held liable for the unpaid balance in the amount of P6,301,075.77 which is ordered to be paid to the [Titan] with
12% interest per annum commencing from 19 December 1992 until the date of payment.

On Project 3 – Kalookan:

[Uniwide] is held liable for the unpaid balance in the amount of P5,158,364.63 which is ordered to be paid to the [Titan] with
12% interest per annum commencing from 08 September 1993 until the date of payment.

[Uniwide] is held liable to pay in full the VAT on this project, in such amount as may be computed by the Bureau of Internal
Revenue to be paid directly thereto. The BIR is hereby notified that [Uniwide] Sales Realty and Resources Corporation has
assumed responsibility and is held liable for VAT payment on this project. This accordingly exempts Claimant Titan-Ikeda
Construction and Development Corporation from this obligation.

Let a copy of this Decision be furnished the Honorable Aurora P. Navarette Recina, Presiding Judge, Branch 119, Pasay City,
in Civil Case No. 94-0814 entitled Titan-Ikeda Construction Development Corporation, Plaintiff – versus – Uniwide Sales
Realty and Resources Corporation, Defendant, pending before said court for information and proper action.

SO ORDERED."12

Uniwide filed a motion for reconsideration of the 17 April 1995 decision which was denied by the CIAC in its Resolution dated 6 July
1995. Uniwide accordingly filed a petition for review with the Court of Appeals, 13 which rendered the assailed decision on 21 February
1996. Uniwide's motion for reconsideration was likewise denied by the Court of Appeals in its assailed Resolution 14 dated 30
September 1996.

Hence, Uniwide comes to this Court via a petition for review under Rule 45. The issues submitted for resolution of this Court are as
follows:15 (1) Whether Uniwide is entitled to a return of the amount it allegedly paid by mistake to Titan for additional works done on
Project 1; (2) Whether Uniwide is liable for the payment of the Value-Added Tax (VAT) on Project 1; (3) Whether Uniwide is entitled to
liquidated damages for Projects 1 and 3; and (4) Whether Uniwide is liable for deficiencies in Project 2.

As a rule, findings of fact of administrative agencies and quasi-judicial bodies, which have acquired expertise because their jurisdiction
is confined to specific matters, are generally accorded not only respect, but also finality, especially when affirmed by the Court of
Appeals.16 In particular, factual findings of construction arbitrators are final and conclusive and not reviewable by this Court on
appeal.17 This rule, however admits of certain exceptions.

In David v. Construction Industry and Arbitration Commission,18 we ruled that, as exceptions, factual findings of construction arbitrators
may be reviewed by this Court when the petitioner proves affirmatively that: (1) the award was procured by corruption, fraud or other
undue means; (2) there was evident partiality or corruption of the arbitrators or of any of them; (3) the arbitrators were guilty of
misconduct in refusing to hear evidence pertinent and material to the controversy; (4) one or more of the arbitrators were disqualified to
act as such under Section nine of Republic Act No. 876 and willfully refrained from disclosing such disqualifications or of any other
misbehavior by which the rights of any party have been materially prejudiced; or (5) the arbitrators exceeded their powers, or so
imperfectly executed them, that a mutual, final and definite award upon the subject matter submitted to them was not made. 19

Other recognized exceptions are as follows: (1) when there is a very clear showing of grave abuse of discretion 20resulting in lack or loss
of jurisdiction as when a party was deprived of a fair opportunity to present its position before the Arbitral Tribunal or when an award is
obtained through fraud or the corruption of arbitrators, 21 (2) when the findings of the Court of Appeals are contrary to those of the
CIAC,22 and (3) when a party is deprived of administrative due process. 23
Thus, in Hi-Precision Steel Center, Inc. v. Lim Kim Builders, Inc.,24 we refused to review the findings of fact of the CIAC for the reason
that petitioner was requiring the Court to go over each individual claim and counterclaim submitted by the parties in the CIAC. A review
of the CIAC's findings of fact would have had the effect of "setting at naught the basic objective of a voluntary arbitration and would
reduce arbitration to a largely inutile institution." Further, petitioner therein failed to show any serious error of law amounting to grave
abuse of discretion resulting in lack of jurisdiction on the part of the Arbitral Tribunal, in either the methods employed or the results
reached by the Arbitral Tribunal, in disposing of the detailed claims of the respective parties. In Metro Construction, Inc. v. Chatham
Properties, Inc.,25 we reviewed the findings of fact of the Court of Appeals because its findings on the issue of whether petitioner therein
was in delay were contrary to the findings of the CIAC. Finally, in Megaworld Globus Asia, Inc. v. DSM Construction and Development
Corporation,26 we declined to depart from the findings of the Arbitral Tribunal considering that the computations, as well as the propriety
of the awards, are unquestionably factual issues that have been discussed by the Arbitral Tribunal and affirmed by the Court of
Appeals.

In the present case, only the first issue presented for resolution of this Court is a question of law while the rest are factual in nature.
However, we do not hesitate to inquire into these factual issues for the reason that the CIAC and the Court of Appeals, in some matters,
differed in their findings.

We now proceed to discuss the issues in seriatim.

Payment by Mistake for Project 1

The first issue refers to the P5,823,481.75 paid by Uniwide for additional works done on Project 1. Uniwide asserts that Titan was not
entitled to be paid this amount because the additional works were without any written authorization.

It should be noted that the contracts do not contain stipulations on "additional works," Uniwide's liability for "additional works," and prior
approval as a requirement before Titan could perform "additional works."

Nonetheless, Uniwide cites Article (Art. ) 1724 of the New Civil Code as basis for its claim that it is not liable to pay for "additional
works" it did not authorize or agree upon in writing. The provision states:

Art. 1724. The contractor who undertakes to build a structure or any other work for a stipulated price, in conformity with plans
and specifications agreed upon with the landowner, can neither withdraw from the contract nor demand an increase in the
price on account of the higher cost of labor or materials, save when there has been a change in the plans and specifications,
provided:

(1) Such change has been authorized by the proprietor in writing; and

(2) The additional price to be paid to the contractor has been determined in writing by both parties.

The Court of Appeals did take note of this provision, but deemed it inapplicable to the case at bar because Uniwide had already paid,
albeit with unwritten reservations, for the "additional works." The provision would have been operative had Uniwide refused to pay for
the costs of the "additional works." Instead, the Court of Appeals applied Art. 142327 of the New Civil Code and characterized Uniwide's
payment of the said amount as a voluntary fulfillment of a natural obligation. The situation was characterized as being akin to Uniwide
being a debtor who paid a debt even while it knew that it was not legally compelled to do so. As such debtor, Uniwide could no longer
demand the refund of the amount already paid.

Uniwide counters that Art. 1724 makes no distinction as to whether payment for the "additional works" had already been made. It claims
that it had made the payments, subject to reservations, upon the false representation of Titan-Ikeda that the "additional works" were
authorized in writing. Uniwide characterizes the payment as a "mistake," and not a "voluntary" fulfillment under Art. 1423 of the Civil
Code. Hence, it urges the application, instead, of the principle of solutio indebiti under Arts. 215428 and 215629 of the Civil Code.

To be certain, this Court has not been wont to give an expansive construction of Art. 1724, denying, for example, claims that it applies
to constructions made of ship vessels,30 or that it can validly deny the claim for payment of professional fees to the architect. 31 The
present situation though presents a thornier problem. Clearly, Art. 1724 denies, as a matter of right, payment to the contractor for
additional works which were not authorized in writing by the proprietor, and the additional price of which was not determined in writing
by the parties.

Yet the distinction pointed out by the Court of Appeals is material. The issue is no longer centered on the right of the contractor to
demand payment for additional works undertaken because payment, whether mistaken or not, was already made by Uniwide. Thus, it
would not anymore be incumbent on Titan to establish that it had the right to demand or receive such payment.

But, even if the Court accepts Art. 1724 as applicable in this case, such recognition does not ipso facto accord Uniwide the right to be
reimbursed for payments already made, since Art. 1724 does not effect such right of reimbursement. It has to be understood that Art.
1724 does not preclude the payment to the contractor who performs additional works without any prior written authorization or
agreement as to the price for such works if the owner decides anyway to make such payment. What the provision does preclude is the
right of the contractor to insist upon payment for unauthorized additional works.

Accordingly, Uniwide, as the owner who did pay the contractor for such additional works even if they had not been authorized in writing,
has to establish its own right to reimbursement not under Art. 1724, but under a different provision of law. Uniwide's burden of
establishing its legal right to reimbursement becomes even more crucial in the light of the general presumption contained in Section
3(f), Rule 131 of the Rules of Court that "money paid by one to another was due to the latter."

Uniwide undertakes such a task before this Court, citing the provisions on solutio indebiti under Arts. 2154 and 2156 of the Civil Code.
However, it is not enough to prove that the payments made by Uniwide to Titan were "not due" because there was no prior
authorization or agreement with respect to additional works. There is a further requirement that the payment by the debtor was made
either through mistake or under a cloud of doubt. In short, for the provisions on solutio indebiti to apply, there has to be evidence
establishing the frame of mind of the payor at the time the payment was made. 32
The CIAC refused to acknowledge that the additional works on Project 1 were indeed unauthorized by Uniwide. Neither did the Court of
Appeals arrive at a contrary determination. There would thus be some difficulty for this Court to agree with this most basic premise
submitted by Uniwide that it did not authorize the additional works on Project 1 undertaken by Titan. Still, Uniwide does cite testimonial
evidence from the record alluding to a concession by employees of Titan that these additional works on Project 1 were either authorized
or documented.33

Yet even conceding that the additional works on Project 1 were not authorized or committed into writing, the undisputed fact remains
that Uniwide paid for these additional works. Thus, to claim a refund of payments made under the principle of solutio indebiti, Uniwide
must be able to establish that these payments were made through mistake. Again, this is a factual matter that would have acquired a
mantle of invulnerability had it been determined by both the CIAC and the Court of Appeals. However, both bodies failed to arrive at
such a conclusion. Moreover, Uniwide is unable to direct our attention to any pertinent part of the record that would indeed establish
that the payments were made by reason of mistake.

We note that Uniwide alleged in its petition that the CIAC award in favor of Titan in the amount P5,158,364.63 as the unpaid balance in
Project 3 included claims for additional works of P1,087,214.18 for which no written authorization was presented. Unfortunately, this
issue was not included in its memorandum as one of the issues submitted for the resolution of the Court.

Liability for the Value-Added Tax (VAT)

The second issue takes us into an inquiry on who, under the law, is liable for the payment of the VAT, in the absence of a written
stipulation on the matter. Uniwide claims that the VAT was already included in the contract price for Project 1. Citing Secs. 99 and 102
of the National Internal Revenue Code, Uniwide asserts that VAT, being an indirect tax, may be shifted to the buyer by including it in the
cash or selling price and it is entirely up to the buyer to agree or not to agree to absorb the VAT. 34 Thus, Uniwide concludes, if there is
no provision in the contract as to who should pay the VAT, it is presumed that it would be the seller.35

The contract for Project 1 is silent on which party should shoulder the VAT while the contract for Project 3 contained a provision to the
effect that Uniwide is the party responsible for the payment of the VAT. 36 Thus, when Uniwide paid the amount of P2,400,000.00 as
billed by Titan for VAT, it assumed that it was the VAT for Project 3. However, the CIAC and the Court of Appeals found that the same
was for Project 1.

We agree with the conclusions of both the CIAC and the Court of Appeals that the amount of P2,400,000.00 was paid by Uniwide as
VAT for Project 1. This conclusion was drawn from an Order of Payment 37 dated 7 October 1992 wherein Titan billed Uniwide the
amount of P2,400,000.00 as "Value Added Tax based on P60,000,000.00 Contract," computed on the basis of 4% of P60,000,000.00.
Said document which was approved by the President of Uniwide expressly indicated that the project involved was the "UNIWIDE
SALES WAREHOUSE CLUB & ADMIN BLDG." located at "90 E. RODRIGUEZ JR. AVE., LIBIS, Q.C." The reduced base for the
computation of the tax, according to the Court of Appeals, was an indication that the parties agreed to pass the VAT for Project 1 to
Uniwide but based on a lower contract price. Indeed, the CIAC found as follows:

Without any documentary evidence than Exhibit "H" to show the extent of tax liability assumed by [Uniwide], the Tribunal holds
that the parties is [sic] obliged to pay only a share of the VAT payment up to P60,000,000.00 out of the total contract price
of P120,936,591.50. As explained by Jimmy Gow, VAT is paid on labor only for construction contracts since VAT had
already been paid on the materials purchased. Since labor costs is [sic] proportionately placed at 60%-40% of the
contract price, simplified accounting computes VAT at 4% of the contract price. Whatever is the balance for VAT that
remains to be paid on Project 1 – Libis shall remain the obligation of [Titan]. (Emphasis supplied.)38

Liquidated Damages

On the third issue of liquidated damages, the CIAC rejected such claim while the Court of Appeals held that the matter should be left for
determination in future proceedings where the issue has been made clear.

In rejecting Uniwide's claim for liquidated damages, the CIAC held that there is no legal basis for passing upon and resolving Uniwide's
claim for the following reasons: (1) no claim for liquidated damages arising from the alleged delay was ever made by Uniwide at any
time before the commencement of Titan's complaint; (2) the claim for liquidated damages was not included in the counterclaims stated
in Uniwide's answer to Titan's complaint; (3) the claim was not formulated as an issue to be resolved by the CIAC in the TOR; 39 and (4)
no attempt was made to modify the TOR to accommodate the same as an issue to be resolved.

Uniwide insists that the CIAC should have applied Section 5, Rule 10 of the Rules of Court. 40 On this matter, the Court of Appeals held
that the CIAC is an arbitration body, which is not necessarily bound by the Rules of Court. Also, the Court of Appeals found that the
issue has never been made concrete enough to make Titan and the CIAC aware that it will be an issue. In fact, Uniwide only introduced
and quantified its claim for liquidated damages in its Memorandum submitted to the CIAC at the end of the arbitration proceeding. The
Court of Appeals also noted that the only evidence on record to prove delay in the construction of Project 1 is the testimony of Titan's
engineer regarding the date of completion of the project while the only evidence of delay in the construction of Project 3 is the affidavit
of Uniwide's President.

According to Uniwide, the ruling of the Court of Appeals on the issue of liquidated damages goes against the established judicial policy
that a court should always strive to settle in one proceeding the entire controversy leaving no root or branch to bear the seeds of future
litigations.41 Uniwide claims that the required evidence for an affirmative ruling on its claim is already on the record. It cites the pertinent
provisions of the written contracts which contained deadlines for liquidated damages. Uniwide also noted that the evidence show that
Project 1 was completed either on 15 February 1992, as found by the CIAC, or 12 March 1992, as shown by Titan's own evidence,
while Project 3, according to Uniwide's President, was completed in June 1993. Furthermore, Uniwide asserts, 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.42

On this point, 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. (Emphasis supplied.)

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."43 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.44 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."45

Further, a party may not be deprived of due process of law by an amendment of the complaint as provided in Section 5, Rule 10 of the
Rules of Court. In this case, as noted by the Court of Appeals, Uniwide only introduced and quantified its claim for liquidated damages
in its memorandum submitted to the CIAC at the end of the arbitration proceeding. Verily, Titan was not given a chance to present
evidence to counter Uniwide's claim for liquidated damages.

Uniwide alludes to an alleged judicial admission made by Engr. Luzon Tablante wherein he stated that Project 1 was completed on 10
March 1992. It now claims that by virtue of Engr. Tablante's statement, Titan had admitted that it was in delay. We disagree. The
testimony of Engr. Tablante was offered only to prove that Project 1 was indeed completed. It was not offered to prove the fact of delay.
It must be remembered that the purpose for which evidence is offered must be specified because such evidence may be admissible for
several purposes under the doctrine of multiple admissibility, or may be admissible for one purpose and not for another, otherwise the
adverse party cannot interpose the proper objection. Evidence submitted for one purpose may not be considered for any other
purpose.46Furthermore, even assuming, for the sake of argument, that said testimony on the date of completion of Project 1 is admitted,
the establishment of the mere fact of delay is not sufficient for the imposition of liquidated damages. It must further be shown that delay
was attributable to the contractor if not otherwise justifiable. Contrarily, Uniwide's belated claim constitutes an admission that the delay
was justified and implies a waiver of its right to such damages.

Project 2: "as-built" plans, overpricing, defective construction

To determine whether or not Uniwide is liable for the unpaid balance of P6,301,075.77 for Project 2, we need to resolve four sub-
issues, namely: (1) whether or not it was necessary for Titan to submit "as-built" plans before it can be paid by Uniwide; (2) whether or
not there was overpricing of the project; (3) whether or not the P15,000,000.00 paid by Uniwide to Titan for Project 2 constitutes full
payment; and (4) whether or not Titan can be held liable for defective construction of Project 2.

The CIAC, as affirmed by the Court of Appeals, held Uniwide liable for deficiency relating to Project 2 in the amount of P6,301,075.77. It
is nonetheless alleged by Uniwide that Titan failed to submit any "as-built" plans for Project 2, such plans allegedly serving as a
condition precedent for payment. Uniwide further claims that Titan had substantially overcharged Uniwide for Project 2, there being
uncontradicted expert testimony that the total cost of Project 2 did not exceed P7,812,123.60. Furthermore, Uniwide alleged that the
works performed were structurally defective, as evidenced by the structural damage on four columns as observed on ocular inspection
by the CIAC and confirmed by Titan's project manager.

On the necessity of submitting "as-built" plans, this Court rules that the submission of such plans is not a pre-requisite for Titan to be
paid by Uniwide. The argument that said plans are required by Section 308 of Presidential Decree No. 1098 (National Building Code)
and by Section 2.11 of its Implementing Rules before payment can be made is untenable. The purpose of the law is "to safeguard life,
health, property, and public welfare, consistent with the principles of sound environmental management and control." The submission of
these plans is necessary only in furtherance of the law's purpose by setting minimum standards and requirements to control the
"location, site, design, quality of materials, construction, use, occupancy, and maintenance" of buildings constructed and not as a
requirement for payment to the contractor.47 The testimony of Engr. Tablante to the effect that the "as-built" plans are required before
payment can be claimed by Titan is a mere legal conclusion which is not binding on this Court.

Uniwide claims that, according to one of its consultants, the true price for Project 2 is only P7,812,123.60. The CIAC and the Court of
Appeals, however, found the testimony of this consultant suspect and ruled that the total contract price for Project 2 is P21,301,075.77.
The CIAC held:

The Cost Estimate for Architectural and Site Development Works for the EDSA Central, Dau Branch Project (Exhibit "2-A" for
[Uniwide] and made as a common exhibit by [Titan] who had it marked at [sic] its own Exhibit "U"), which was admittedly
prepared by Fermindoza and Associates, [Uniwide]'s own architects, shows that the amount of P17,750,896.48 was arrived at.
Together with the agreed upon mark-up of 20% on said amount, the total project cost was P21,301,075.77.

The Tribunal holds that the foregoing document is binding upon the [Uniwide], it being the mode agreed upon by which its
liability for the project cost was to be determined.48 (Emphasis supplied.)

Indeed, Uniwide is bound by the amount indicated in the above document. Claims of connivance or fraudulent conspiracy between
Titan and Uniwide's representatives which, it is alleged, grossly exaggerated the price may properly be dismissed. As held by the CIAC:

The Tribunal holds that [Uniwide] has not introduced any evidence to sustain its charge of fraudulent conspiracy. As a matter
of fact, [Uniwide]'s own principal witness, Jimmy Gow, admitted on cross-examination that he does not have any direct
evidence to prove his charge of connivance or complicity between the [Titan] and his own representatives. He only made that
conclusion by the process of his own "logical reasoning" arising from his consultation with other contractors who gave him a
 much lower estimate for the construction of the Dau Project. There is thus no reason to invalidate the binding character
of Exhibit "2-A" which, it is significant to point out, is [Uniwide]'s own evidence. 49 (Emphasis supplied.)

Accordingly, deducting the P15,000,000.00 already paid by Uniwide from the total contract price of P21,301,075.77, the unpaid balance
due for Project 2 is P6,301,075.77. This is the same amount reflected in the Order of Payment prepared by Uniwide's representative,
Le Consultech, Inc. and signed by no less than four top officers and architects of Le Consultech, Inc. endorsing for payment by Uniwide
to Titan the amount of P6,301,075.77.50

Uniwide asserts that Titan should not have been allowed to recover on Project 2 because the said project was defective and would
require repairs in the amount of P800,000.00. It claims that the CIAC and the Court of Appeals should have applied Nakpil and Sons v.
Court of Appeals51 and Art. 1723 of the New Civil Code holding a contractor responsible for damages if the edifice constructed falls
within fifteen years from completion on account of defects in the construction or the use of materials of inferior quality furnished by him
or due to any violation of the terms of the contract.

On this matter, the CIAC conducted an ocular inspection of the premises on 30 January 1995. What transpired in the said ocular
inspection is described thus:

On 30 January 1995, an ocular inspection was conducted by the Arbitral Tribunal as requested by [Uniwide]. Photographs
were taken of the alleged construction defects, an actual ripping off of the plaster of a certain column to expose the alleged
structural defect that is claimed to have resulted in its being "heavily damaged" was done, clarificatory questions were asked
and manifestations on observations were made by the parties and their respective counsels. The entire proceedings were
recorded on tape and subsequently transcribed. The photographs and transcript of the ocular inspection form part of the
records and considered as evidence.52

And, according to these evidence, the CIAC concluded as follows:

It is likewise the holding of this Tribunal that [Uniwide]'s counterclaim of defective construction has not been sufficiently proven.
The credibility of Engr. Cruz, [Uniwide]'s principal witness on this issue, has been severely impaired. During the ocular
inspection of the premises, he gave such assurance of the soundness of his opinion as an expert that a certain column was
heavily damaged judging from the external cracks that was readily apparent x x x

xxxx

On insistence of the Tribunal, the plaster was chipped off and revealed a structurally sound column x x x

Further, it turns out that what was being passed off as a defective construction by [Titan], was in fact an old column, as
admitted by Mr. Gow himself x x x x53 (Emphasis supplied.)

Uniwide had the burden of proving that there was defective construction in Project 2 but it failed to discharge this burden. Even the
credibility of its own witness was severely impaired. Further, it was found that the concrete slab placed by Titan was not attached to the
old columns where cracks were discovered. The CIAC held that the post-tensioning of the new concrete slab could not have caused
any of the defects manifested by the old columns. We are bound by this finding of fact by the CIAC.

It is worthy to stress our ruling in Hi-Precision Steel Center, Inc. v. Lim Kim Steel Builders, Inc.54 which was reiterated in David v.
Construction Industry and Arbitration Commission,55 that:

x x x Executive Order No. 1008 created an arbitration facility to which the construction industry in the Philippines can have
recourse. The Executive Order was enacted to encourage the early and expeditious settlement of disputes in the
construction industry, a public policy the implementation of which is necessary and important for the realization of
national development goals.

Aware of the objective of voluntary arbitration in the labor field, in the construction industry, and in any other area for that
matter, the Court will not assist one or the other or even both parties in any effort to subvert or defeat that objective for their
private purposes. The Court will not review the factual findings of an arbitral tribunal upon the artful allegation that such body
had "misapprehended facts" and will not pass upon issues which are, at bottom, issues of fact, no matter how cleverly
disguised they might be as "legal questions." The parties here had recourse to arbitration and chose the arbitrators
themselves; they must have had confidence in such arbitrators. The Court will not, therefore, permit the parties to relitigate
before it the issues of facts previously presented and argued before the Arbitral Tribunal, save only where a clear showing is
made that, in reaching its factual conclusions, the Arbitral Tribunal committed an error so egregious and hurtful to one party as
to constitute a grave abuse of discretion resulting in lack or loss of jurisdiction. Prototypical examples would be factual
conclusions of the Tribunal which resulted in deprivation of one or the other party of a fair opportunity to present its position
before the Arbitral Tribunal, and an award obtained through fraud or the corruption of arbitrators. Any other, more relaxed rule
would result in setting at naught the basic objective of a voluntary arbitration and would reduce arbitration to a largely inutile
institution. (Emphasis supplied.)

WHEREFORE, premises considered, the petition is DENIED and the Decision of the Court of Appeals dated 21 February 1996 in CA-
G.R. SP No. 37957 is hereby AFFIRMED.

SO ORDERED.
G.R. No. 196723 August 28, 2013

ASIAN CONSTRUCTION AND DEVELOPMENT CORPORATION, Petitioner,

vs.
SUMITOMO CORPORATION, Respondent.

x-----------------------x

G.R. No. 196728

SUMITOMO CORPORATION, Petitioner,

vs.
ASIAN CONSTRUCTION AND DEVELOPMENT CORPORATION, Respondent.

DECISION

PERLAS-BERNABE, J.:

Before the Court are consolidated petitions for review on certiorari which assail separate issuances of the Court of Appeals (C A) in
relation to the partial and final awards rendered by the Construction Industry Arbitration Commission's (CIAC) Arbitral Tribunal (Arbitral
Tribunal) in CIAC Case No. 28-2008.

In particular, the petition in G.R. No. 1967231 filed by Asian Construction and Development Corporation (Asian Construction) seeks to
annul and set aside the CA’s Resolutions dated July 23, 2010 2 and April 18, 20113 in CA-G.R. SP No. 112127 which dismissed its
appeal from the Arbitral Tribunal’s Partial Award4 dated December 15, 2009 (Partial Award) on the ground of forum shopping; while the
petition in G.R. No. 1967285 filed by Sumitomo Corporation (Sumitomo) seeks to annul and set aside the CA’s Decision 6 dated January
26, 2011 and Resolution7dated April 29, 2011 in CA-G.R. SP No. 113828 which modified the Arbitral Tribunal’s Final Award8 dated
March 17, 2010 (Final Award) by way of deleting the award of attorney’s fees in Sumitomo’s favor.

The Facts

On March 15, 1996, Asian Construction entered into a Civil Work Agreement 9 (Agreement) with Sumitomo for the construction of a
portion of the Light Rail Transit System along the Epifanio Delos Santos Avenue, specifically, from Shaw Boulevard, Mandaluyong City
to Taft Avenue, Pasay City for a total cost of US$19,982,000.00 (Project).10 The said Agreement provides that the "validity,
interpretation, enforceability, and performance of the same shall be governed by and construed in accordance with the law of the State
of New York, U.S.A. (New York State Law), without regard to, or legal effect of, the conflicts of law provisions thereof" 11 and that any
dispute, controversy or claim arising therefrom "shall be solely and finally settled by arbitration." 12

In May 1996, Sumitomo paid Asian Construction the amount of US$2,997,300.00 as advance payment to be recovered in accordance
with the terms of the Agreement. Later, an additional advance payment of US$1,998,200.00 was made in October 1997. 13 In all, Asian
Construction received from Sumitomo the amount of US$9,731,606.62, inclusive of the advance payments (before withholding tax of
US$97,308.44).14

On September 1, 1998, Sumitomo informed Asian Construction that it was terminating the Agreement effective September 5, 1998 due
to the following reasons: (a) Asian Construction’s failure "to perform and complete the civil work for Notice to Proceed issued
construction areas within the duration of the Time Schedule in the ‘Contract Specification of Civil and Architectural Works (Station No. 8
to Station No. 13) x x x’"; (b) Asian Construction’s failure to "provide adequate traffic management as required in the Scope of Works
pursuant to subparagraph 5.2.4 of the Contract Specification of Civil and Architectural Work"; and (c) Asian Construction’s failure to
"pay the suppliers of certain materials and equipment used in the construction of the Project in violation of paragraph 3.1.3, Article 3 of
the Agreement."15 In view of the foregoing, Sumitomo requested Asian Construction to "make the necessary arrangements for the
proper turnover of the Project x x x."16 Asian Construction, however, claimed that the accomplishments under Progress Billing No. (PB)
01817 dated June 10, 1998 and PB 01918 dated July 6, 1998, as well as other various claims, were still left unpaid.19 Hence, on
December 22, 1998, it sent Sumitomo a letter,20demanding payment of the total amount of US$6,371,530.89. This was followed by
several correspondences between the parties through 1999 to 2007 but no settlement was achieved. 21

The Proceedings Before the Arbitral Tribunal

On September 2, 2008, Asian Construction filed a complaint 22 with the CIAC, docketed as CIAC Case No. 28-2008, seeking payment
for its alleged losses and reimbursements amounting to US$9,501,413.13, plus attorney’s fees in the amount of ₱2,000,000.00. 23 As a
matter of course, an Arbitral Tribunal was constituted, with Alfredo F. Tadiar being designated as Chairman, and Salvador P. Castro
and Jesse B. Grove as Members.24

For its part, Sumitomo filed a Motion to Dismiss,25 questioning the CIAC’s jurisdiction over the dispute on the ground that the arbitration
should proceed in accordance with the Commercial Arbitration Rules of Japan.26 However, the aforesaid motion was denied. 27 As
such, Sumitomo filed an Answer,28 reiterating the CIAC’s alleged lack of jurisdiction and further asserting that the claim was already
time-barred. It added that had Asian Construction discharged its obligations under the Agreement to itemize and justify its claims, the
same could have been amicably settled years ago. In this respect, it made a counterclaim for the unutilized portion of the advance
payments, attorney’s fees and costs of litigation in the amount of at least ₱10,000,000.00.29

Subsequently, the parties signed a TOR,30 stipulating the admitted facts and defining the issues to be determined in the arbitration
proceedings.

On December 15, 2009, the Arbitral Tribunal rendered the Partial Award 31 which affirmed its jurisdiction over the dispute but held that
the parties were bound by their Agreement that the substantive New York State Law shall apply in the resolution of the issues.32 It
proceeded to dismiss both the claims and counterclaims of the parties on the ground that these had already prescribed under New York
State Law’s six-year statute of limitations33 and ruled that, in any case, were it to resolve the same on the merits, "it would not produce
an affirmative recovery for the claimant."34
Aggrieved, Asian Construction filed before the CA, on January 5, 2010, a Rule 43 Petition for Review, 35 docketed as CA-G.R. SP No.
112127 (First CA Petition), seeking the reversal of the Partial Award.

Meanwhile, notwithstanding its dismissal of the claims and counterclaims, the Arbitral Tribunal further directed the parties to itemize
their respective claims for costs and attorney’s fees and to submit factual proof and legal bases for their entitlement thereto. 36 Pursuant
to this directive, Sumitomo submitted evidence to prove the costs it had incurred and paid as a result of the arbitration
proceedings.37 Asian Construction, on the other hand, did not present any statement or document to substantiate its claims but, instead,
submitted an Opposition38 dated March 8, 2010 (opposition) to Sumitomo’s claim for costs. The Arbitral Tribunal did not act upon the
opposition because it was treated, in effect, as a motion for reconsideration which was prohibited under the CIAC Revised Rules of
Procedure Governing Construction Arbitration (CIAC Revised Rules).39

On March 17, 2010, the Arbitral Tribunal rendered the Final Award 40 which granted Sumitomo’s claim for attorney’s fees in the amount
of US$200,000.00. It held that while the filing of the arbitration suit cannot be regarded as "clearly unfounded" because of the two
progress billings that were left unpaid, Asian Construction’s disregard of the Agreement to have the dispute resolved in accordance with
New York State Law had forced Sumitomo to incur attorney’s fees in order to defend its interest. 41 It further noted that if Asian
Construction had accepted the settlement offered by Sumitomo, then, the arbitration proceedings would have even been aborted. 42 On
the other hand, a similar claim for attorney’s fees made by Asian Construction was denied by reason of the latter’s failure to submit, as
directed, proof of its entitlement thereto.43 As to the matter of costs, the Arbitral Tribunal declared Sumitomo relieved from sharing pro-
rata in the arbitration costs and, consequently, directed Asian Construction to shoulder the same costs in full and reimburse Sumitomo
the amount of ₱849,532.45. However, it ordered Sumitomo to bear all the expenses related to the appointment of the foreign arbitrator
considering that such service was secured upon its own initiative and without the participation and consent of Asian Construction.44

Dissatisfied with the Arbitral Tribunal’s ruling, Asian Construction filed another Rule 43 Petition for Review 45 before the CA, on May 3,
2010, docketed as CA-G.R. SP No. 113828 (Second CA Petition), this time, to set aside the Final Award. In this light, it claimed gross
negligence and partiality on the part of the Arbitral Tribunal and asserted, inter alia, that, apart from being a non-arbitrable issue, an
award of attorney’s fees would be premature since the prevailing party can only be determined when the case is decided with finality.
Moreover, it maintained that both claims of Asian Construction and the counterclaims of Sumitomo had already been dismissed for
being time-barred.46

The CA Ruling

On July 23, 2010, the CA rendered a Resolution47 (July 23, 2010 Resolution), dismissing Asian Construction’s First CA Petition against
the Partial Award on the ground of forum-shopping, after it was shown that: (a) the aforesaid petition was filed while the arbitration case
was still pending final resolution before the Arbitral Tribunal; and (b) Asian Construction’s opposition to Sumitomo’s claim for costs filed
before the Arbitral Tribunal had, in fact, effectively sought for the same relief and stated the same allegations as those in its First CA
Petition. The CA also noted Asian Construction’s premature resort to a petition for review because what was sought to be nullified was
not a final award, but only a partial one. The CA eventually denied Asian Construction’s motion for reconsideration in a
Resolution48 dated April 18, 2011. Hence, Asian Construction’s petition before the Court, docketed as G.R. No. 196723.

Meanwhile, the CA gave due course to Asian Construction’s Second CA Petition assailing the Final Award and rendered a
Decision49 on January 26, 2011, upholding the Arbitral Tribunal’s ruling except the award of attorney’s fees in favor of Sumitomo. The
CA held that the fact that Asian Construction initiated an action or refused to compromise its claims cannot be considered unjustified or
made in bad faith as to entitle Sumitomo to the aforesaid award. Consequently, Sumitomo moved for reconsideration, 50 asserting that
Asian Construction’s Second CA Petition should have instead been dismissed in its entirety considering their Agreement that the
Arbitral Tribunal’s decisions and awards would be final and non-appealable. However, in a Resolution51 dated April 29, 2011, the CA
denied the motion for reconsideration. Thus, Sumitomo’s petition before the Court, docketed as G.R. No. 196728.

The Issues Before the Court

The essential issues for the Court’s resolution are as follows: (a) in G.R. No. 196723, whether or not the CA erred in dismissing Asian
Construction’s First CA Petition on the ground of forum shopping; and (b) in G.R. No. 196728, whether or not the CA erred in reviewing
and modifying the Final Award which Sumitomo insists to be final and unappealable.

The Court’s Ruling

The petitions should be denied.

A. Dismissal of Asian

Construction’s First CA

Petition; forum shopping.

Forum shopping is the act of a litigant who repetitively availed of several judicial remedies in different courts, simultaneously or
successively, all substantially founded on the same transactions and the same essential facts and circumstances, and all raising
substantially the same issues, either pending in or already resolved adversely by some other court, to increase his chances of obtaining
a favorable decision if not in one court, then in another. More particularly, forum shopping can be committed in three ways, namely: (a)
by filing multiple cases based on the same cause of action and with the same prayer, the previous case not having been resolved yet
(where the ground for dismissal is litis pendentia); (b) by filing multiple cases based on the same cause of action and with the same
prayer, the previous case having been finally resolved (where the ground for dismissal is res judicata); and (c) by filing multiple cases
based on the same cause of action but with different prayers (splitting of causes of action, where the ground for dismissal is also either
litis pendentia or res judicata).52 Forum shopping is treated as an act of malpractice and, in this accord, constitutes a ground for the
summary dismissal of the actions involved.53 To be sure, the rule against forum shopping seeks to prevent the vexation brought upon
the courts and the litigants by a party who asks different courts to rule on the same or related causes and grant the same or
substantially the same reliefs and in the process creates the possibility of conflicting decisions being rendered by the different fora upon
the same issues.54
In this case, the Court finds that the CA committed no reversible error in dismissing Asian Construction’s First CA Petition on the
ground of forum shopping since the relief sought (i.e., the reconsideration of the Partial Award) and the allegations stated therein are
identical to its opposition to Sumitomo’s claim for costs filed before the Arbitral Tribunal while CIAC Case No. 28-2008 was still pending.
These circumstances clearly square with the first kind of forum shopping which thereby impels the dismissal of the First CA Petition on
the ground of litis pendentia.

On this score, it is apt to point out that Asian Construction’s argument that it merely complied with the directive of the Arbitral Tribunal
cannot be given any credence since it (as well as Sumitomo) was only directed to submit evidence to prove the costs it had incurred
and paid as a result of the arbitration proceedings. However, at variance with the tribunal’s directive, Asian Construction, in its
opposition to Sumitomo’s claim for costs, proceeded to seek the reversal of the Partial Award in the same manner as its First CA
Petition. It cannot, therefore, be doubted that it treaded the course of forum shopping, warranting the dismissal of the aforesaid petition.

In any case, the Court observes that the First CA Petition remains dismissible since the CIAC Revised Rules provides for the resort to
the remedy of a petition for review only against a final arbitral award,55 and not a partial award, as in this case.

In fine, the Court upholds the CA’s dismissal of Asian Construction’s petition in CA-G.R. SP No. 112127 (First CA Petition) and based
on this, denies its petition in G.R. No. 196723.

B. Review and modification of the Final Award.

Sumitomo Corporation faults the CA for reviewing and modifying a final and non-appealable arbitral award and insists that the Asian
Construction’s Second CA Petition should have been, instead, dismissed outright. It mainly argues that by entering into stipulations in
the arbitration clause – which provides that "the order or award of the arbitrators will be the sole and exclusive remedy between the
parties regarding any and all claims and counterclaims with respect to the matter of the arbitrated dispute" 56 and that "the order or
award rendered in connection with an arbitration shall be final and binding upon the parties," 57 Asian Construction effectively waived
any and all appeals from the Arbitral Tribunal’s decision or award.

Sumitomo’s argument is untenable.

A brief exegesis on the development of the procedural rules governing CIAC cases clearly shows that a final award rendered by the
Arbitral Tribunal is not absolutely insulated from judicial review.

To begin, Executive Order No. (EO) 1008,58 which vests upon the CIAC original and exclusive jurisdiction over disputes arising from, or
connected with, contracts entered into by parties involved in construction in the Philippines, plainly states that the arbitral award "shall
be final and inappealable except on questions of law which shall be appealable to the Court." 59 Later, however, the Court, in Revised
Administrative Circular (RAC) No. 1-95,60 modified this rule, directing that the appeals from the arbitral award of the CIAC be first
brought to the CA on "questions of fact, law or mixed questions of fact and law." This amendment was eventually transposed into the
present CIAC Revised Rules which direct that "a petition for review from a final award may be taken by any of the parties within fifteen
(15) days from receipt thereof in accordance with the provisions of Rule 43 of the Rules of Court." 61 Notably, the current provision is in
harmony with the Court’s pronouncement that "despite statutory provisions making the decisions of certain administrative agencies
‘final,’ the Court still takes cognizance of petitions showing want of jurisdiction, grave abuse of discretion, violation of due process,
denial of substantial justice or erroneous interpretation of the law" and that, in particular, "voluntary arbitrators, by the nature of their
functions, act in a quasi-judicial capacity, such that their decisions are within the scope of judicial review." 62

In this case, the Court finds that the CA correctly reviewed and modified the Arbitral Tribunal’s Final Award insofar as the award of
attorney’s fees in favor of Sumitomo is concerned since the same arose from an erroneous interpretation of the law.1âwphi1

To elucidate, jurisprudence dictates that in the absence of a governing stipulation, attorney’s fees may be awarded only in case the
plaintiff's action or defendant's stand is so untenable as to amount to gross and evident bad faith. 63This is embodied in Article 2208 of
the Civil Code which states:

Article 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered,
except:

xxxx

(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's 64 plainly valid, just and demandable
claim;

xxxx

In this case, the parties agreed that reasonable attorney’s fees shall be paid by the defaulting party if it fails to perform any of its
obligations under the Agreement or by the party not prevailing, if any dispute concerning the meaning and interpretation thereto
arises.65 However, since the parties’ respective claims under the Agreement had already prescribed pursuant to New York State Law,
considering as well that the dispute was not regarding the meaning or construction of any provision under the Agreement,66 their
stipulation on attorney’s fees should remain inoperative. Therefore, discounting the application of the foregoing stipulation, the Court
proceeds to examine the matter under the lens of bad faith pursuant to the above-discussed rules on attorney’s fees.

After a careful scrutiny of the records, the Court observes that there was no gross and evident bad faith on the part of Asian
Construction in filing its complaint against Sumitomo since it was merely seeking payment of its unpaid works done pursuant to the
Agreement. Neither can its subsequent refusal to accept Sumitomo’s offered compromise be classified as a badge of bad faith since it
was within its right to either accept or reject the same owing to its contractual nature.67 Verily, absent any other just or equitable reason
to rule otherwise,68 these incidents are clearly off-tangent with a finding of gross and evident bad faith which altogether negates
Sumitomo’s entitlement to attorney’s fees.

Hence, finding the CA’s review of the Final Award and its consequent deletion of the award of attorney’s fees to be proper, the Court
similarly denies Sumitomo’s petition in G.R. No. 196728.
WHEREFORE, the petitions are DENIED. The Resolutions dated July 23, 2010 and April 18, 2011 of the Court of Appeals in CA-G.R.
SP No. 112127, as well as its Decision dated January 26, 2011 and Resolution dated April 29, 2011 in CA-G.R. SP No. 113828 are
hereby AFFIRMED.

SO ORDERED.

G.R. No. 169332 February 11, 2008

ABS-CBN BROADCASTING CORPORATION, petitioner,

vs.
WORLD INTERACTIVE NETWORK SYSTEMS (WINS) JAPAN CO., LTD., respondent.

DECISION

CORONA, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court seeks to set aside the February 16, 2005 decision1 and August
16, 2005 resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 81940.

On September 27, 1999, petitioner ABS-CBN Broadcasting Corporation entered into a licensing agreement with respondent World
Interactive Network Systems (WINS) Japan Co., Ltd., a foreign corporation licensed under the laws of Japan. Under the agreement,
respondent was granted the exclusive license to distribute and sublicense the distribution of the television service known as "The
Filipino Channel" (TFC) in Japan. By virtue thereof, petitioner undertook to transmit the TFC programming signals to respondent which
the latter received through its decoders and distributed to its subscribers.

A dispute arose between the parties when petitioner accused respondent of inserting nine episodes of WINS WEEKLY, a weekly 35-
minute community news program for Filipinos in Japan, into the TFC programming from March to May 2002. 3 Petitioner claimed that
these were "unauthorized insertions" constituting a material breach of their agreement. Consequently, on May 9, 2002, 4 petitioner
notified respondent of its intention to terminate the agreement effective June 10, 2002.

Thereafter, respondent filed an arbitration suit pursuant to the arbitration clause of its agreement with petitioner. It contended that the
airing of WINS WEEKLY was made with petitioner's prior approval. It also alleged that petitioner only threatened to terminate their
agreement because it wanted to renegotiate the terms thereof to allow it to demand higher fees. Respondent also prayed for damages
for petitioner's alleged grant of an exclusive distribution license to another entity, NHK (Japan Broadcasting Corporation).5

The parties appointed Professor Alfredo F. Tadiar to act as sole arbitrator. They stipulated on the following issues in their terms of
reference (TOR)6:

1. Was the broadcast of WINS WEEKLY by the claimant duly authorized by the respondent [herein petitioner]?

2. Did such broadcast constitute a material breach of the agreement that is a ground for termination of the agreement in
accordance with Section 13 (a) thereof?

3. If so, was the breach seasonably cured under the same contractual provision of Section 13 (a)?

4. Which party is entitled to the payment of damages they claim and to the other reliefs prayed for?

xxx xxx xxx

The arbitrator found in favor of respondent. 7 He held that petitioner gave its approval to respondent for the airing of WINS WEEKLY as
shown by a series of written exchanges between the parties. He also ruled that, had there really been a material breach of the
agreement, petitioner should have terminated the same instead of sending a mere notice to terminate said agreement. The arbitrator
found that petitioner threatened to terminate the agreement due to its desire to compel respondent to re-negotiate the terms thereof for
higher fees. He further stated that even if respondent committed a breach of the agreement, the same was seasonably cured. He then
allowed respondent to recover temperate damages, attorney's fees and one-half of the amount it paid as arbitrator's fee.

Petitioner filed in the CA a petition for review under Rule 43 of the Rules of Court or, in the alternative, a petition for certiorari under
Rule 65 of the same Rules, with application for temporary restraining order and writ of preliminary injunction. It was docketed as CA-
G.R. SP No. 81940. It alleged serious errors of fact and law and/or grave abuse of discretion amounting to lack or excess of jurisdiction
on the part of the arbitrator.

Respondent, on the other hand, filed a petition for confirmation of arbitral award before the Regional Trial Court (RTC) of Quezon City,
Branch 93, docketed as Civil Case No. Q-04-51822.

Consequently, petitioner filed a supplemental petition in the CA seeking to enjoin the RTC of Quezon City from further proceeding with
the hearing of respondent's petition for confirmation of arbitral award. After the petition was admitted by the appellate court, the RTC of
Quezon City issued an order holding in abeyance any further action on respondent's petition as the assailed decision of the arbitrator
had already become the subject of an appeal in the CA. Respondent filed a motion for reconsideration but no resolution has been
issued by the lower court to date.8

On February 16, 2005, the CA rendered the assailed decision dismissing ABS-CBN’s petition for lack of jurisdiction. It stated that as the
TOR itself provided that the arbitrator's decision shall be final and unappealable and that no motion for reconsideration shall be filed,
then the petition for review must fail. It ruled that it is the RTC which has jurisdiction over questions relating to arbitration. It held that the
only instance it can exercise jurisdiction over an arbitral award is an appeal from the trial court's decision confirming, vacating or
modifying the arbitral award. It further stated that a petition for certiorari under Rule 65 of the Rules of Court is proper in arbitration
cases only if the courts refuse or neglect to inquire into the facts of an arbitrator's award. The dispositive portion of the CA decision
read:

WHEREFORE, the instant petition is hereby DISMISSED for lack of jurisdiction. The application for a writ of injunction and
temporary restraining order is likewise DENIED. The Regional Trial Court of Quezon City Branch 93 is directed to proceed with
the trial for the Petition for Confirmation of Arbitral Award.

SO ORDERED.

Petitioner moved for reconsideration. The same was denied. Hence, this petition.

Petitioner contends that the CA, in effect, ruled that: (a) it should have first filed a petition to vacate the award in the RTC and only in
case of denial could it elevate the matter to the CA via a petition for review under Rule 43 and (b) the assailed decision implied that an
aggrieved party to an arbitral award does not have the option of directly filing a petition for review under Rule 43 or a petition for
certiorari under Rule 65 with the CA even if the issues raised pertain to errors of fact and law or grave abuse of discretion, as the case
may be, and not dependent upon such grounds as enumerated under Section 24 (petition to vacate an arbitral award) of RA 876 (the
Arbitration Law). Petitioner alleged serious error on the part of the CA.

The issue before us is whether or not an aggrieved party in a voluntary arbitration dispute may avail of, directly in the CA, a petition for
review under Rule 43 or a petition for certiorari under Rule 65 of the Rules of Court, instead of filing a petition to vacate the award in the
RTC when the grounds invoked to overturn the arbitrator’s decision are other than those for a petition to vacate an arbitral award
enumerated under RA 876.

RA 876 itself mandates that it is the Court of First Instance, now the RTC, which has jurisdiction over questions relating to
arbitration,9 such as a petition to vacate an arbitral award.

Section 24 of RA 876 provides for the specific grounds for a petition to vacate an award made by an arbitrator:

Sec. 24. Grounds for vacating award. - In any one of the following cases, the court must make an order vacating the
award upon the petition of any party to the controversy when such party proves affirmatively that in the arbitration
proceedings:

(a) The award was procured by corruption, fraud, or other undue means; or

(b) That there was evident partiality or corruption in the arbitrators or any of them; or

(c) That the arbitrators were guilty of misconduct in refusing to postpone the hearing upon sufficient cause shown, or in
refusing to hear evidence pertinent and material to the controversy; that one or more of the arbitrators was disqualified to act
as such under section nine hereof, and willfully refrained from disclosing such disqualifications or of any other misbehavior by
which the rights of any party have been materially prejudiced; or

(d) That the arbitrators exceeded their powers, or so imperfectly executed them, that a mutual, final and definite award upon
the subject matter submitted to them was not made.

Based on the foregoing provisions, the law itself clearly provides that the RTC must issue an order vacating an arbitral award only "in
any one of the . . . cases" enumerated therein. Under the legal maxim in statutory construction expressio unius est exclusio alterius, the
explicit mention of one thing in a statute means the elimination of others not specifically mentioned. As RA 876 did not expressly
provide for errors of fact and/or law and grave abuse of discretion (proper grounds for a petition for review under Rule 43 and a petition
for certiorari under Rule 65, respectively) as grounds for maintaining a petition to vacate an arbitral award in the RTC, it necessarily
follows that a party may not avail of the latter remedy on the grounds of errors of fact and/or law or grave abuse of discretion to overturn
an arbitral award.

Adamson v. Court of Appeals10 gave ample warning that a petition to vacate filed in the RTC which is not based on the grounds
enumerated in Section 24 of RA 876 should be dismissed. In that case, the trial court vacated the arbitral award seemingly based on
grounds included in Section 24 of RA 876 but a closer reading thereof revealed otherwise. On appeal, the CA reversed the decision of
the trial court and affirmed the arbitral award. In affirming the CA, we held:

The Court of Appeals, in reversing the trial court's decision held that the nullification of the decision of the Arbitration
Committee was not based on the grounds provided by the Arbitration Law and that xxx private respondents (petitioners herein)
have failed to substantiate with any evidence their claim of partiality. Significantly, even as respondent judge ruled against the
arbitrator's award, he could not find fault with their impartiality and integrity. Evidently, the nullification of the award
rendered at the case at bar was not made on the basis of any of the grounds provided by law.

xxx xxx xxx

It is clear, therefore, that the award was vacated not because of evident partiality of the arbitrators but because the
latter interpreted the contract in a way which was not favorable to herein petitioners and because it considered that herein
private respondents, by submitting the controversy to arbitration, was seeking to renege on its obligations under the contract.

xxx xxx xxx

It is clear then that the Court of Appeals reversed the trial court not because the latter reviewed the arbitration award
involved herein, but because the respondent appellate court found that the trial court had no legal basis for vacating
the award. (Emphasis supplied).
In cases not falling under any of the aforementioned grounds to vacate an award, the Court has already made several pronouncements
that a petition for review under Rule 43 or a petition for certiorari under Rule 65 may be availed of in the CA. Which one would depend
on the grounds relied upon by petitioner.

In Luzon Development Bank v. Association of Luzon Development Bank Employees,11 the Court held that a voluntary arbitrator is
properly classified as a "quasi-judicial instrumentality" and is, thus, within the ambit of Section 9 (3) of the Judiciary Reorganization Act,
as amended. Under this section, the Court of Appeals shall exercise:

xxx xxx xxx

(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of Regional Trial Courts
and quasi-judicial agencies, instrumentalities, boards or commissions, including the Securities and Exchange Commission,
the Employees’ Compensation Commission and the Civil Service Commission, except those falling within the appellate
jurisdiction of the Supreme Court in accordance with the Constitution, the Labor Code of the Philippines under Presidential
Decree No. 442, as amended, the provisions of this Act and of subparagraph (1) of the third paragraph and subparagraph (4)
of the fourth paragraph of Section 17 of the Judiciary Act of 1948. (Emphasis supplied)

As such, decisions handed down by voluntary arbitrators fall within the exclusive appellate jurisdiction of the CA. This decision was
taken into consideration in approving Section 1 of Rule 43 of the Rules of Court. 12 Thus:

SECTION 1. Scope. - This Rule shall apply to appeals from judgments or final orders of the Court of Tax Appeals and from
awards, judgments, final orders or resolutions of or authorized by any quasi-judicial agency in the exercise of its quasi-judicial
functions. Among these agencies are the Civil Service Commission, Central Board of Assessment Appeals, Securities and
Exchange Commission, Office of the President, Land Registration Authority, Social Security Commission, Civil Aeronautics
Board, Bureau of Patents, Trademarks and Technology Transfer, National Electrification Administration, Energy Regulatory
Board, National Telecommunications Commission, Department of Agrarian Reform under Republic Act Number 6657,
Government Service Insurance System, Employees Compensation Commission, Agricultural Inventions Board, Insurance
Commission, Philippine Atomic Energy Commission, Board of Investments, Construction Industry Arbitration Commission,
and voluntary arbitrators authorized by law. (Emphasis supplied)

This rule was cited in Sevilla Trading Company v. Semana,13 Manila Midtown Hotel v. Borromeo,14 and Nippon Paint Employees Union-
Olalia v. Court of Appeals.15 These cases held that the proper remedy from the adverse decision of a voluntary arbitrator, if errors of
fact and/or law are raised, is a petition for review under Rule 43 of the Rules of Court. Thus, petitioner's contention that it may avail of a
petition for review under Rule 43 under the circumstances of this case is correct.

As to petitioner's arguments that a petition for certiorari under Rule 65 may also be resorted to, we hold the same to be in accordance
with the Constitution and jurisprudence.

Section 1 of Article VIII of the 1987 Constitution provides that:

SECTION 1. The judicial power shall be vested in one Supreme Court and in such lower courts as may be established by law.

Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally
demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of any branch or instrumentality of the Government. (Emphasis supplied)

As may be gleaned from the above stated provision, it is well within the power and jurisdiction of the Court to inquire whether any
instrumentality of the Government, such as a voluntary arbitrator, has gravely abused its discretion in the exercise of its functions and
prerogatives. Any agreement stipulating that "the decision of the arbitrator shall be final and unappealable" and "that no further judicial
recourse if either party disagrees with the whole or any part of the arbitrator's award may be availed of" cannot be held to preclude in
proper cases the power of judicial review which is inherent in courts. 16 We will not hesitate to review a voluntary arbitrator's award
where there is a showing of grave abuse of authority or discretion and such is properly raised in a petition for certiorari 17 and there is no
appeal, nor any plain, speedy remedy in the course of law.18

Significantly, Insular Savings Bank v. Far East Bank and Trust Company 19 definitively outlined several judicial remedies an aggrieved
party to an arbitral award may undertake:

(1) a petition in the proper RTC to issue an order to vacate the award on the grounds provided for in Section 24 of RA 876;

(2) a petition for review in the CA under Rule 43 of the Rules of Court on questions of fact, of law, or mixed questions of fact
and law; and

(3) a petition for certiorari under Rule 65 of the Rules of Court should the arbitrator have acted without or in excess of his
jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction.

Nevertheless, although petitioner’s position on the judicial remedies available to it was correct, we sustain the dismissal of its petition by
the CA. The remedy petitioner availed of, entitled "alternative petition for review under Rule 43 or petition for certiorari under Rule 65,"
was wrong.

Time and again, we have ruled that the remedies of appeal and certiorari are mutually exclusive and not alternative or successive. 20

Proper issues that may be raised in a petition for review under Rule 43 pertain to errors of fact, law or mixed questions of fact and
law.21 While a petition for certiorari under Rule 65 should only limit itself to errors of jurisdiction, that is, grave abuse of discretion
amounting to a lack or excess of jurisdiction.22 Moreover, it cannot be availed of where appeal is the proper remedy or as a substitute
for a lapsed appeal.23
In the case at bar, the questions raised by petitioner in its alternative petition before the CA were the following:

A. THE SOLE ARBITRATOR COMMITTED SERIOUS ERROR AND/OR GRAVELY ABUSED HIS DISCRETION IN RULING
THAT THE BROADCAST OF "WINS WEEKLY" WAS DULY AUTHORIZED BY ABS-CBN.

B. THE SOLE ARBITRATOR COMMITTED SERIOUS ERROR AND/OR GRAVELY ABUSED HIS DISCRETION IN RULING
THAT THE UNAUTHORIZED BROADCAST DID NOT CONSTITUTE MATERIAL BREACH OF THE AGREEMENT.

C. THE SOLE ARBITRATOR COMMITTED SERIOUS ERROR AND/OR GRAVELY ABUSED HIS DISCRETION IN RULING
THAT WINS SEASONABLY CURED THE BREACH.

D. THE SOLE ARBITRATOR COMMITTED SERIOUS ERROR AND/OR GRAVELY ABUSED HIS DISCRETION IN RULING
THAT TEMPERATE DAMAGES IN THE AMOUNT OF P1,166,955.00 MAY BE AWARDED TO WINS.

E. THE SOLE ARBITRATOR COMMITTED SERIOUS ERROR AND/OR GRAVELY ABUSED HIS DISCRETION IN
AWARDING ATTORNEY'S FEES IN THE UNREASONABLE AMOUNT AND UNCONSCIONABLE AMOUNT
OF P850,000.00.

F. THE ERROR COMMITTED BY THE SOLE ARBITRATOR IS NOT A SIMPLE ERROR OF JUDGMENT OR ABUSE OF
DISCRETION. IT IS GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF JURISDICTION.

A careful reading of the assigned errors reveals that the real issues calling for the CA's resolution were less the alleged grave abuse of
discretion exercised by the arbitrator and more about the arbitrator’s appreciation of the issues and evidence presented by the parties.
Therefore, the issues clearly fall under the classification of errors of fact and law — questions which may be passed upon by the CA via
a petition for review under Rule 43. Petitioner cleverly crafted its assignment of errors in such a way as to straddle both judicial
remedies, that is, by alleging serious errors of fact and law (in which case a petition for review under Rule 43 would be proper) and
grave abuse of discretion (because of which a petition for certiorari under Rule 65 would be permissible).

It must be emphasized that every lawyer should be familiar with the distinctions between the two remedies for it is not the duty of the
courts to determine under which rule the petition should fall. 24 Petitioner's ploy was fatal to its cause. An appeal taken either to this
Court or the CA by the wrong or inappropriate mode shall be dismissed. 25Thus, the alternative petition filed in the CA, being an
inappropriate mode of appeal, should have been dismissed outright by the CA.

WHEREFORE, the petition is hereby DENIED. The February 16, 2005 decision and August 16, 2005 resolution of the Court of Appeals
in CA-G.R. SP No. 81940 directing the Regional Trial Court of Quezon City, Branch 93 to proceed with the trial of the petition for
confirmation of arbitral award is AFFIRMED.

Costs against petitioner.

SO ORDERED.

G.R. No. 198075 September 4, 2013

KOPPEL, INC. (formerly known as KPL AIRCON, INC.), Petitioner,

vs.
MAKATI ROTARY CLUB FOUNDATION, INC., Respondent.

DECISION

PEREZ, J.:

This case is an appeal1 from the Decision2 dated 19 August 2011 of the Court of Appeals in C.A.-G.R. SP No. 116865.

The facts:

The Donation

Fedders Koppel, Incorporated (FKI), a manufacturer of air-conditioning products, was the registered owner of a parcel of land located at
Km. 16, South Superhighway, Parañaque City (subject land).3 Within the subject land are buildings and other improvements dedicated
to the business of FKI.4

In 1975, FKI5 bequeathed the subject land (exclusive of the improvements thereon) in favor of herein respondent Makati Rotary Club
Foundation, Incorporated by way of a conditional donation.6 The respondent accepted the donation with all of its conditions. 7 On 26
May1975, FKI and the respondent executed a Deed of Donation 8evidencing their consensus.

The Lease and the Amended Deed of Donation

One of the conditions of the donation required the respondent to lease the subject land back to FKI under terms specified in their Deed
of Donation.9 With the respondent’s acceptance of the donation, a lease agreement between FKI and the respondent was, therefore,
effectively incorporated in the Deed of Donation.

Pertinent terms of such lease agreement, as provided in the Deed of Donation , were as follows:
 1. The period of the lease is for twenty-five (25) years,10 or until the 25th of May 2000;

2. The amount of rent to be paid by FKI for the first twenty-five (25) years is ₱40,126.00 per annum .11

The Deed of Donation also stipulated that the lease over the subject property is renewable for another period of twenty-five (25) years "
upon mutual agreement" of FKI and the respondent. 12 In which case, the amount of rent shall be determined in accordance with item
2(g) of the Deed of Donation, viz:

g. The rental for the second 25 years shall be the subject of mutual agreement and in case of disagreement the matter shall be referred
to a Board of three Arbitrators appointed and with powers in accordance with the Arbitration Law of the Philippines, Republic Act 878,
whose function shall be to decide the current fair market value of the land excluding the improvements, provided, that, any increase in
the fair market value of the land shall not exceed twenty five percent (25%) of the original value of the land donated as stated in
paragraph 2(c) of this Deed. The rental for the second 25 years shall not exceed three percent (3%) of the fair market value of the land
excluding the improvements as determined by the Board of Arbitrators. 13

In October 1976, FKI and the respondent executed an Amended Deed of Donation 14 that reiterated the provisions of the Deed of
Donation , including those relating to the lease of the subject land.

Verily, by virtue of the lease agreement contained in the Deed of Donation and Amended Deed of Donation , FKI was able to continue
in its possession and use of the subject land.

2000 Lease Contract

Two (2) days before the lease incorporated in the Deed of Donation and Amended Deed of Donation was set to expire, or on 23 May
2000, FKI and respondent executed another contract of lease ( 2000 Lease Contract )15covering the subject land. In this 2000 Lease
Contract, FKI and respondent agreed on a new five-year lease to take effect on the 26th of May 2000, with annual rents ranging from
₱4,000,000 for the first year up to ₱4,900,000 for the fifth year. 16 The 2000 Lease Contract also contained an arbitration clause
enforceable in the event the parties come to disagreement about the" interpretation, application and execution" of the lease, viz :

19. Governing Law – The provisions of this 2000 Lease Contract shall be governed, interpreted and construed in all aspects in
accordance with the laws of the Republic of the Philippines.

Any disagreement as to the interpretation, application or execution of this 2000 Lease Contract shall be submitted to a board of three
(3) arbitrators constituted in accordance with the arbitration law of the Philippines. The decision of the majority of the arbitrators shall be
binding upon FKI and respondent.17 (Emphasis supplied)

2005 Lease Contract

After the 2000 Lease Contract expired, FKI and respondent agreed to renew their lease for another five (5) years. This new lease (2005
Lease Contract )18 required FKI to pay a fixed annual rent of ₱4,200,000.19 In addition to paying the fixed rent, however, the 2005
Lease Contract also obligated FKI to make a yearly " donation " of money to the respondent. 20 Such donations ranged from ₱3,000,000
for the first year up to ₱3,900,000for the fifth year. 21Notably, the 2005 Lease Contract contained an arbitration clause similar to that in
the 2000 Lease Contract, to wit:

19. Governing Law – The provisions of this 2005 Lease Contract shall be governed, interpreted and construed in all aspects in
accordance with the laws of the Republic of the Philippines.

Any disagreement as to the interpretation, application or execution of this 2005 Lease Contract shall be submitted to a board of three
(3) arbitrators constituted in accordance with the arbitration law of the Philippines. The decision of the majority of the arbitrators shall be
binding upon FKI and respondent.22 (Emphasis supplied)

The Assignment and Petitioner’s Refusal to Pay

From 2005 to 2008, FKI faithfully paid the rentals and " donations "due it per the 2005 Lease Contract. 23 But in June of 2008, FKI sold
all its rights and properties relative to its business in favor of herein petitioner Koppel, Incorporated. 24 On 29 August 2008, FKI and
petitioner executed an Assignment and Assumption of Lease and Donation 25 —wherein FKI, with the conformity of the respondent,
formally assigned all of its interests and obligations under the Amended Deed of Donation and the 2005 Lease Contract in favor of
petitioner.

The following year, petitioner discontinued the payment of the rent and " donation " under the 2005 Lease Contract.

Petitioner’s refusal to pay such rent and "donation " emanated from its belief that the rental stipulations of the 2005 Lease Contract, and
even of the 2000 Lease Contract, cannot be given effect because they violated one of the" material conditions " of the donation of the
subject land, as stated in the Deed of Donation and Amended Deed of Donation. 26

According to petitioner, the Deed of Donation and Amended Deed of Donation actually established not only one but two (2) lease
agreements between FKI and respondent, i.e. , one lease for the first twenty-five (25)years or from 1975 to 2000, and another lease for
the next twenty-five (25)years thereafter or from 2000 to 2025. 27 Both leases are material conditions of the donation of the subject
land.

Petitioner points out that while a definite amount of rent for the second twenty-five (25) year lease was not fixed in the Deed of Donation
and Amended Deed of Donation , both deeds nevertheless prescribed rules and limitations by which the same may be determined.
Such rules and limitations ought to be observed in any succeeding lease agreements between petitioner and respondent for they are, in
themselves, material conditions of the donation of the subject land. 28
In this connection, petitioner cites item 2(g) of the Deed of Donation and Amended Deed of Donation that supposedly limits the amount
of rent for the lease over the second twenty-five (25) years to only " three percent (3%) of the fair market value of the subject land
excluding the improvements.29

For petitioner then, the rental stipulations of both the 2000 Lease Contract and 2005 Lease Contract cannot be enforced as they are
clearly, in view of their exorbitant exactions, in violation of the aforementioned threshold in item 2(g) of the Deed of Donation and
Amended Deed of Donation . Consequently, petitioner insists that the amount of rent it has to pay thereon is and must still be governed
by the limitations prescribed in the Deed of Donation and Amended Deed of Donation. 30

The Demand Letters

On 1 June 2009, respondent sent a letter (First Demand Letter) 31 to petitioner notifying the latter of its default " per Section 12 of the
2005 Lease Contract " and demanding for the settlement of the rent and " donation " due for the year 2009. Respondent, in the same
letter, further intimated of canceling the 2005 Lease Contract should petitioner fail to settle the said obligations. 32 Petitioner received the
First Demand Letter on2 June 2009.33

On 22 September 2009, petitioner sent a reply34 to respondent expressing its disagreement over the rental stipulations of the 2005
Lease Contract — calling them " severely disproportionate," "unconscionable" and "in clear violation to the nominal rentals mandated by
the Amended Deed of Donation." In lieu of the amount demanded by the respondent, which purportedly totaled to ₱8,394,000.00,
exclusive of interests, petitioner offered to pay only ₱80,502.79, 35 in accordance with the rental provisions of the Deed of Donation and
Amended Deed of Donation.36Respondent refused this offer.37

On 25 September 2009, respondent sent another letter (Second Demand Letter) 38 to petitioner, reiterating its demand for the payment
of the obligations already due under the 2005 Lease Contract. The Second Demand Letter also contained a demand for petitioner to "
immediately vacate the leased premises " should it fail to pay such obligations within seven (7) days from its receipt of the letter. 39 The
respondent warned of taking " legal steps " in the event that petitioner failed to comply with any of the said demands. 40 Petitioner
received the Second Demand Letter on 26September 2009. 41

Petitioner refused to comply with the demands of the respondent. Instead, on 30 September 2009, petitioner filed with the Regional
Trial Court (RTC) of Parañaque City a complaint42 for the rescission or cancellation of the Deed of Donation and Amended Deed of
Donation against the respondent. This case is currently pending before Branch 257 of the RTC, docketed as Civil Case No. CV 09-
0346.

The Ejectment Suit

On 5 October 2009, respondent filed an unlawful detainer case 43 against the petitioner before the Metropolitan Trial Court (MeTC) of
Parañaque City. The ejectment case was raffled to Branch 77 and was docketed as Civil Case No. 2009-307.

On 4 November 2009, petitioner filed an Answer with Compulsory Counterclaim. 44 In it, petitioner reiterated its objection over the rental
stipulations of the 2005 Lease Contract for being violative of the material conditions of the Deed of Donation and Amended Deed of
Donation.45 In addition to the foregoing, however, petitioner also interposed the following defenses:

1. The MeTC was not able to validly acquire jurisdiction over the instant unlawful detainer case in view of the insufficiency of
respondent’s demand.46 The First Demand Letter did not contain an actual demand to vacate the premises and, therefore, the
refusal to comply there with does not give rise to an action for unlawful detainer. 47

2. Assuming that the MeTC was able to acquire jurisdiction, it may not exercise the same until the disagreement between the
parties is first referred to arbitration pursuant to the arbitration clause of the 2005 Lease Contract. 48

3. Assuming further that the MeTC has jurisdiction that it can exercise, ejectment still would not lie as the 2005 Lease Contract
is void abinitio.49 The stipulation in the 2005 Lease Contract requiring petitioner to give yearly " donations " to respondent is a
simulation, for they are, in fact, parts of the rent. 50 Such grants were only denominated as " donations " in the contract so that
the respondent—anon-stock and non-profit corporation—could evade payment of the taxes otherwise due thereon. 51

In due course, petitioner and respondent both submitted their position papers, together with their other documentary
evidence.52 Remarkably, however, respondent failed to submit the Second Demand Letter as part of its documentary evidence.

Rulings of the MeTC, RTC and Court of Appeals

On 27 April 2010, the MeTC rendered judgment53 in favor of the petitioner. While the MeTC refused to dismiss the action on the ground
that the dispute is subject to arbitration, it nonetheless sided with the petitioner with respect to the issues regarding the insufficiency of
the respondent’s demand and the nullity of the 2005 Lease Contract.54 The MeTC thus disposed:

WHEREFORE, judgment is hereby rendered dismissing the case x x x, without pronouncement as to costs.

SO ORDERED.55

The respondent appealed to the Regional Trial Court (RTC). This appeal was assigned to Branch 274 of the RTC of Parañaque City
and was docketed as Civil Case No. 10-0255.

On 29 October 2010, the RTC reversed56 the MeTC and ordered the eviction of the petitioner from the subject land:

WHEREFORE, all the foregoing duly considered, the appealed Decision of the Metropolitan Trial Court, Branch 77, Parañaque City, is
hereby reversed, judgment is thus rendered in favor of the plaintiff-appellant and against the defendant-appellee, and ordering the latter
–
 (1) to vacate the lease[d] premises made subject of the case and to restore the possession thereof to the plaintiff-appellant;

(2) to pay to the plaintiff-appellant the amount of Nine Million Three Hundred Sixty Two Thousand Four Hundred Thirty Six
Pesos (₱9,362,436.00), penalties and net of 5% withholding tax, for the lease period from May 25, 2009 to May 25, 2010 and
such monthly rental as will accrue during the pendency of this case;

(3) to pay attorney’s fees in the sum of ₱100,000.00 plus appearance fee of ₱3,000.00;

(4) and costs of suit.

As to the existing improvements belonging to the defendant-appellee, as these were built in good faith, the provisions of Art. 1678of the
Civil Code shall apply.

SO ORDERED.57

The ruling of the RTC is premised on the following ratiocinations:

1. The respondent had adequately complied with the requirement of demand as a jurisdictional precursor to an unlawful
detainer action.58 The First Demand Letter, in substance, contains a demand for petitioner to vacate when it mentioned that it
was a notice " per Section12 of the 2005 Lease Contract."59 Moreover, the issue of sufficiency of the respondent’s demand
ought to have been laid to rest by the Second Demand Letter which, though not submitted in evidence, was nonetheless
admitted by petitioner as containing a" demand to eject " in its Answer with Compulsory Counterclaim. 60

2. The petitioner cannot validly invoke the arbitration clause of the 2005 Lease Contract while, at the same time, impugn such
contract’s validity.61 Even assuming that it can, petitioner still did not file a formal application before the MeTC so as to render
such arbitration clause operational.62 At any rate, the MeTC would not be precluded from exercising its jurisdiction over an
action for unlawful detainer, over which, it has exclusive original jurisdiction. 63

3. The 2005 Lease Contract must be sustained as a valid contract since petitioner was not able to adduce any evidence to
support its allegation that the same is void.64 There was, in this case, no evidence that respondent is guilty of any tax
evasion.65

Aggrieved, the petitioner appealed to the Court of Appeals.

On 19 August 2011, the Court of Appeals affirmed66 the decision of the RTC:

WHEREFORE , the petition is DENIED . The assailed Decision of the Regional Trial Court of Parañaque City, Branch 274, in Civil Case
No. 10-0255 is AFFIRMED.

xxxx

SO ORDERED.67

Hence, this appeal.

On 5 September 2011, this Court granted petitioner’s prayer for the issuance of a Temporary Restraining Order68staying the immediate
implementation of the decisions adverse to it.

OUR RULING

Independently of the merits of the case, the MeTC, RTC and Court of Appeals all erred in overlooking the significance of the arbitration
clause incorporated in the 2005 Lease Contract . As the Court sees it, that is a fatal mistake.

For this reason, We grant the petition.

Present Dispute is Arbitrable Under the

Arbitration Clause of the 2005 Lease
Agreement Contract

Going back to the records of this case, it is discernable that the dispute between the petitioner and respondent emanates from the
rental stipulations of the 2005 Lease Contract. The respondent insists upon the enforce ability and validity of such stipulations,
whereas, petitioner, in substance, repudiates them. It is from petitioner’s apparent breach of the 2005 Lease Contract that respondent
filed the instant unlawful detainer action.

One cannot escape the conclusion that, under the foregoing premises, the dispute between the petitioner and respondent arose from
the application or execution of the 2005 Lease Contract . Undoubtedly, such kinds of dispute are covered by the arbitration clause of
the 2005 Lease Contract to wit:

19. Governing Law – The provisions of this 2005 Lease Contract shall be governed, interpreted and construed in all aspects in
accordance with the laws of the Republic of the Philippines.

Any disagreement as to the interpretation, application or execution of this 2005 Lease Contract shall be submitted to a board of three
(3) arbitrators constituted in accordance with the arbitration law of the Philippines. The decision of the majority of the arbitrators shall be
binding upon FKI and respondent.69 (Emphasis supplied)
The arbitration clause of the 2005 Lease Contract stipulates that "any disagreement" as to the " interpretation, application or execution "
of the 2005 Lease Contract ought to be submitted to arbitration. 70 To the mind of this Court, such stipulation is clear and is
comprehensive enough so as to include virtually any kind of conflict or dispute that may arise from the 2005 Lease Contract including
the one that presently besets petitioner and respondent.

The application of the arbitration clause of the 2005 Lease Contract in this case carries with it certain legal effects. However, before
discussing what these legal effects are, We shall first deal with the challenges posed against the application of such arbitration clause.

Challenges Against the Application of the

Arbitration Clause of the 2005 Lease
Contract

Curiously, despite the lucidity of the arbitration clause of the 2005 Lease Contract, the petitioner, as well as the MeTC, RTC and the
Court of Appeals, vouched for the non-application of the same in the instant case. A plethora of arguments was hurled in favor of
bypassing arbitration. We now address them.

At different points in the proceedings of this case, the following arguments were offered against the application of the arbitration clause
of the 2005 Lease Contract:

1. The disagreement between the petitioner and respondent is non-arbitrable as it will inevitably touch upon the issue of the
validity of the 2005 Lease Contract.71 It was submitted that one of the reasons offered by the petitioner in justifying its failure to
pay under the 2005 Lease Contract was the nullity of such contract for being contrary to law and public policy. 72 The Supreme
Court, in Gonzales v. Climax Mining, Ltd.,73 held that " the validity of contract cannot be subject of arbitration proceedings " as
such questions are " legal in nature and require the application and interpretation of laws and jurisprudence which is
necessarily a judicial function ." 74

2. The petitioner cannot validly invoke the arbitration clause of the 2005 Lease Contract while, at the same time, impugn such
contract’s validity.75

3. Even assuming that it can invoke the arbitration clause whilst denying the validity of the 2005 Lease Contract , petitioner still
did not file a formal application before the MeTC so as to render such arbitration clause operational.76 Section 24 of Republic
Act No. 9285 requires the party seeking arbitration to first file a " request " or an application therefor with the court not later
than the preliminary conference.77

4. Petitioner and respondent already underwent Judicial Dispute Resolution (JDR) proceedings before the RTC.78 Hence, a
further referral of the dispute to arbitration would only be circuitous. 79 Moreover, an ejectment case, in view of its summary
nature, already fulfills the prime purpose of arbitration, i.e. , to provide parties in conflict with an expedient method for the
resolution of their dispute.80 Arbitration then would no longer be necessary in this case. 81

None of the arguments have any merit.

First. As highlighted in the previous discussion, the disagreement between the petitioner and respondent falls within the all-
encompassing terms of the arbitration clause of the 2005 Lease Contract. While it may be conceded that in the arbitration of such
disagreement, the validity of the 2005 Lease Contract, or at least, of such contract’s rental stipulations would have to be determined,
the same would not render such disagreement non-arbitrable. The quotation from Gonzales that was used to justify the contrary
position was taken out of context. A rereading of Gonzales would fix its relevance to this case.

In Gonzales, a complaint for arbitration was filed before the Panel of Arbitrators of the Mines and Geosciences Bureau (PA-MGB)
seeking the nullification of a Financial Technical Assistance Agreement and other mining related agreements entered into by private
parties.82

Grounds invoked for the nullification of such agreements include fraud and unconstitutionality. 83 The pivotal issue that confronted the
Court then was whether the PA-MGB has jurisdiction over that particular arbitration complaint. Stated otherwise, the question was
whether the complaint for arbitration raises arbitrable issues that the PA-MGB can take cognizance of.

Gonzales decided the issue in the negative. In holding that the PA-MGB was devoid of any jurisdiction to take cognizance of the
complaint for arbitration, this Court pointed out to the provisions of R.A. No. 7942, or the Mining Act of 1995, which granted the PA-
MGB with exclusive original jurisdiction only over mining disputes, i.e., disputes involving " rights to mining areas," "mineral agreements
or permits," and " surface owners, occupants, claim holders or concessionaires" requiring the technical knowledge and experience of
mining authorities in order to be resolved.84 Accordingly, since the complaint for arbitration in Gonzales did not raise mining disputes as
contemplated under R.A. No. 7942 but only issues relating to the validity of certain mining related agreements, this Court held that such
complaint could not be arbitrated before the PA-MGB.85 It is in this context that we made the pronouncement now in discussion:

Arbitration before the Panel of Arbitrators is proper only when there is a disagreement between the parties as to some provisions of the
contract between them, which needs the interpretation and the application of that particular knowledge and expertise possessed by
members of that Panel. It is not proper when one of the parties repudiates the existence or validity of such contract or agreement on the
ground of fraud or oppression as in this case. The validity of the contract cannot be subject of arbitration proceedings. Allegations of
fraud and duress in the execution of a contract are matters within the jurisdiction of the ordinary courts of law. These questions are legal
in nature and require the application and interpretation of laws and jurisprudence which is necessarily a judicial function. 86(Emphasis
supplied)

The Court in Gonzales did not simply base its rejection of the complaint for arbitration on the ground that the issue raised therein, i.e. ,
the validity of contracts, is per se non-arbitrable. The real consideration behind the ruling was the limitation that was placed by R.A. No.
7942 upon the jurisdiction of the PA-MGB as an arbitral body . Gonzales rejected the complaint for arbitration because the issue raised
therein is not a mining dispute per R.A. No. 7942 and it is for this reason, and only for this reason, that such issue is rendered non-
arbitrable before the PA-MGB. As stated beforehand, R.A. No. 7942 clearly limited the jurisdiction of the PA-MGB only to mining
disputes.87
Much more instructive for our purposes, on the other hand, is the recent case of Cargill Philippines, Inc. v. San Fernando Regal
Trading, Inc.88 In Cargill , this Court answered the question of whether issues involving the rescission of a contract are arbitrable. The
respondent in Cargill argued against arbitrability, also citing therein Gonzales . After dissecting Gonzales , this Court ruled in favor of
arbitrability.89 Thus, We held:

Respondent contends that assuming that the existence of the contract and the arbitration clause is conceded, the CA's decision
declining referral of the parties' dispute to arbitration is still correct. It claims that its complaint in the RTC presents the issue of whether
under the facts alleged, it is entitled to rescind the contract with damages; and that issue constitutes a judicial question or one that
requires the exercise of judicial function and cannot be the subject of an arbitration proceeding. Respondent cites our ruling in
Gonzales, wherein we held that a panel of arbitrator is bereft of jurisdiction over the complaint for declaration of nullity/or termination of
the subject contracts on the grounds of fraud and oppression attendant to the execution of the addendum contract and the other
contracts emanating from it, and that the complaint should have been filed with the regular courts as it involved issues which are judicial
in nature.

Such argument is misplaced and respondent cannot rely on the Gonzales case to support its argument. 90(Emphasis ours)

Second. Petitioner may still invoke the arbitration clause of the 2005 Lease Contract notwithstanding the fact that it assails the validity
of such contract. This is due to the doctrine of separability. 91

Under the doctrine of separability, an arbitration agreement is considered as independent of the main contract. 92Being a separate
contract in itself, the arbitration agreement may thus be invoked regardless of the possible nullity or invalidity of the main contract.93

Once again instructive is Cargill, wherein this Court held that, as a further consequence of the doctrine of separability, even the very
party who repudiates the main contract may invoke its arbitration clause. 94

Third . The operation of the arbitration clause in this case is not at all defeated by the failure of the petitioner to file a formal "request" or
application therefor with the MeTC. We find that the filing of a "request" pursuant to Section 24 of R.A. No. 9285 is not the sole means
by which an arbitration clause may be validly invoked in a pending suit.

Section 24 of R.A. No. 9285 reads:

SEC. 24. Referral to Arbitration . - A court before which an action is brought in a matter which is the subject matter of an arbitration
agreement shall, if at least one party so requests not later that the pre-trial conference, or upon the request of both parties thereafter,
refer the parties to arbitration unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed.
[Emphasis ours; italics original]

The " request " referred to in the above provision is, in turn, implemented by Rules 4.1 to 4.3 of A.M. No. 07-11-08-SC or the Special
Rules of Court on Alternative Dispute Resolution (Special ADR Rules):

RULE 4: REFERRAL TO ADR

Rule 4.1. Who makes the request. - A party to a pending action filed in violation of the arbitration agreement, whether contained in an
arbitration clause or in a submission agreement, may request the court to refer the parties to arbitration in accordance with such
agreement.

Rule 4.2. When to make request. - (A) Where the arbitration agreement exists before the action is filed . - The request for referral shall
be made not later than the pre-trial conference. After the pre-trial conference, the court will only act upon the request for referral if it is
made with the agreement of all parties to the case.

(B) Submission agreement . - If there is no existing arbitration agreement at the time the case is filed but the parties subsequently enter
into an arbitration agreement, they may request the court to refer their dispute to arbitration at any time during the proceedings.

Rule 4.3. Contents of request. - The request for referral shall be in the form of a motion, which shall state that the dispute is covered by
an arbitration agreement.

A part from other submissions, the movant shall attach to his motion an authentic copy of the arbitration agreement.

The request shall contain a notice of hearing addressed to all parties specifying the date and time when it would be heard. The party
making the request shall serve it upon the respondent to give him the opportunity to file a comment or opposition as provided in the
immediately succeeding Rule before the hearing. [Emphasis ours; italics original]

Attention must be paid, however, to the salient wordings of Rule 4.1.It reads: "a party to a pending action filed in violation of the
arbitration agreement x x x may request the court to refer the parties to arbitration in accordance with such agreement."

In using the word " may " to qualify the act of filing a " request " under Section 24 of R.A. No. 9285, the Special ADR Rules clearly did
not intend to limit the invocation of an arbitration agreement in a pending suit solely via such "request." After all, non-compliance with an
arbitration agreement is a valid defense to any offending suit and, as such, may even be raised in an answer as provided in our
ordinary rules of procedure.95

In this case, it is conceded that petitioner was not able to file a separate " request " of arbitration before the MeTC. However, it is
equally conceded that the petitioner, as early as in its Answer with Counterclaim ,had already apprised the MeTC of the existence of the
arbitration clause in the 2005 Lease Contract96 and, more significantly, of its desire to have the same enforced in this case. 97 This act of
petitioner is enough valid invocation of his right to arbitrate. Fourth . The fact that the petitioner and respondent already under went
through JDR proceedings before the RTC, will not make the subsequent conduct of arbitration between the parties unnecessary or
circuitous. The JDR system is substantially different from arbitration proceedings.
The JDR framework is based on the processes of mediation, conciliation or early neutral evaluation which entails the submission of a
dispute before a " JDR judge " who shall merely " facilitate settlement " between the parties in conflict or make a " non-binding
evaluation or assessment of the chances of each party’s case." 98 Thus in JDR, the JDR judge lacks the authority to render a resolution
of the dispute that is binding upon the parties in conflict. In arbitration, on the other hand, the dispute is submitted to an arbitrator/s —a
neutral third person or a group of thereof— who shall have the authority to render a resolution binding upon the parties. 99

Clearly, the mere submission of a dispute to JDR proceedings would not necessarily render the subsequent conduct of arbitration a
mere surplusage. The failure of the parties in conflict to reach an amicable settlement before the JDR may, in fact, be supplemented by
their resort to arbitration where a binding resolution to the dispute could finally be achieved. This situation precisely finds application to
the case at bench.

Neither would the summary nature of ejectment cases be a valid reason to disregard the enforcement of the arbitration clause of the
2005 Lease Contract . Notwithstanding the summary nature of ejectment cases, arbitration still remains relevant as it aims not only to
afford the parties an expeditious method of resolving their dispute.

A pivotal feature of arbitration as an alternative mode of dispute resolution is that it is, first and foremost, a product of party autonomy or
the freedom of the parties to " make their own arrangements to resolve their own disputes." 100Arbitration agreements manifest not only
the desire of the parties in conflict for an expeditious resolution of their dispute. They also represent, if not more so, the parties’ mutual
aspiration to achieve such resolution outside of judicial auspices, in a more informal and less antagonistic environment under the terms
of their choosing. Needless to state, this critical feature can never be satisfied in an ejectment case no matter how summary it may be.

Having hurdled all the challenges against the application of the arbitration clause of the 2005 Lease Agreement in this case, We shall
now proceed with the discussion of its legal effects.

Legal Effect of the Application of the

Arbitration Clause

Since there really are no legal impediments to the application of the arbitration clause of the 2005 Contract of Lease in this case, We
find that the instant unlawful detainer action was instituted in violation of such clause. The Law, therefore, should have governed the
fate of the parties and this suit:

R.A. No. 876 Section 7. Stay of civil action. - If any suit or proceeding be brought upon an issue arising out of an agreement providing
for the arbitration thereof, the court in which such suit or proceeding is pending, upon being satisfied that the issue involved in such suit
or proceeding is referable to arbitration, shall stay the action or proceeding until an arbitration has been had in accordance with the
terms of the agreement: Provided, That the applicant for the stay is not in default in proceeding with such arbitration.[Emphasis
supplied]

R.A. No. 9285

Section 24. Referral to Arbitration. - A court before which an action is brought in a matter which is the subject matter of an arbitration
agreement shall, if at least one party so requests not later that the pre-trial conference, or upon the request of both parties thereafter,
refer the parties to arbitration unless it finds that the arbitration agreement is null and void, in operative or incapable of being performed.
[Emphasis supplied]

It is clear that under the law, the instant unlawful detainer action should have been stayed; 101 the petitioner and the respondent should
have been referred to arbitration pursuant to the arbitration clause of the 2005 Lease Contract . The MeTC, however, did not do so in
violation of the law—which violation was, in turn, affirmed by the RTC and Court of Appeals on appeal.

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

The petitioner and the respondent must then be referred to arbitration pursuant to the arbitration clause of the 2005 Lease Contract.

This Court is not unaware of the apparent harshness of the Decision that it is about to make. Nonetheless, this Court must make the
same if only to stress the point that, in our jurisdiction, bona fide arbitration agreements are recognized as valid; 102 and that
laws,103 rules and regulations104 do exist protecting and ensuring their enforcement as a matter of state policy. Gone should be the days
when courts treat otherwise valid arbitration agreements with disdain and hostility, if not outright " jealousy," 105 and then get away with
it. Courts should instead learn to treat alternative means of dispute resolution as effective partners in the administration of justice and,
in the case of arbitration agreements, to afford them judicial restraint.106 Today, this Court only performs its part in upholding a once
disregarded state policy.

Civil Case No. CV 09-0346

This Court notes that, on 30 September 2009, petitioner filed with the RTC of Parañaque City, a complaint 107 for the rescission or
cancellation of the Deed of Donation and Amended Deed of Donation against the respondent. The case is currently pending before
Branch 257 of the RTC, docketed as Civil Case No. CV 09-0346.

This Court recognizes the great possibility that issues raised in Civil Case No. CV 09-0346 may involve matters that are rightfully
arbitrable per the arbitration clause of the 2005 Lease Contract. However, since the records of Civil Case No. CV 09-0346 are not
before this Court, We can never know with true certainty and only speculate. In this light, let a copy of this Decision be also served to
Branch 257of the RTC of Parañaque for its consideration and, possible, application to Civil Case No. CV 09-0346.

WHEREFORE, premises considered, the petition is hereby GRANTED . Accordingly, We hereby render a Decision:
 1. SETTING ASIDE all the proceedings undertaken by the Metropolitan Trial Court, Branch 77, of Parañaque City in relation to
Civil Case No. 2009-307 after the filing by petitioner of its Answer with Counterclaim ;

2. REMANDING the instant case to the MeTC, SUSPENDED at the point after the filing by petitioner of its Answer with
Counterclaim;

3. SETTING ASIDE the following:

a. Decision dated 19 August 2011 of the Court of Appeals in C.A.-G.R. SP No. 116865,

b. Decision dated 29 October 2010 of the Regional Trial Court, Branch 274, of Parañaque City in Civil Case No. 10-
0255,

c. Decision dated 27 April 2010 of the Metropolitan Trial Court, Branch 77, of Parañaque City in Civil Case No. 2009-
307; and

4. REFERRING the petitioner and the respondent to arbitration pursuant to the arbitration clause of the 2005 Lease Contract,
repeatedly included in the 2000 Lease Contract and in the 1976 Amended Deed of Donation.

Let a copy of this Decision be served to Branch 257 of the RTC of Parañaque for its consideration and, possible, application to Civil
Case No. CV 09-0346.

No costs.

SO ORDERED.