ADR 3rd Set of Cases

7/26/2019 ADR 3rd Set of Cases

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DR. LUCAS ADAMSON AND ADAMSON MANAGEMENT CORP VS CA ANDAPAC HOLDINGSGR NO. 106879

ADAMSON petitioners

CA AND APAC HOLDINGS respondent

DOCTRINE/S:

ARBITRATORS RESORT TO CONTRACT INTERPRETATION IS NOT A

GROUND FOR VACATING AN AWARD - That the award was unfavorableto petitioners herein did not prove evident partiality. That the arbitratorsresorted to contract interpretation neither constituted a ground for vacatingthe award because under the circumstances, the same was necessary tosettle the controversy between the parties regarding the among of the NAV.In any case, this Court finds that the interpretation made by the arbitratorsdid not create a new contract, as alleged by herein petitioners but was afaithful application of the provisions of the Agreement. Neither was theaward arbitrary for it was based on the statements prepared by the SGVwhich was chosen by both parties to be the "auditors."|||

MISAPPREHENSION OF AGREEMENT NOT A GROUND FOR REFUSALTO PERFORM OBLIGATION THEREUNDER - e note herein that duringthe arbitration proceedings, the parties agreed that the contract as preparedby private respondent, was submitted to petitioners for approval. Petitioners,therefore, are presumed to have studied the provisions of the Agreementand agreed to its import when they approved and signed the same. When itwas submitted to arbitration to settle the issue regarding the computation ofthe NAV, petitioners agreed to be bound by the judgment of the arbitrationcommittee, except in cases where the grounds for vacating the awardexisted. Petitioners cannot now refuse to perform its obligation afterrealizing that it had erred in its understanding of the Agreement

JUDICAL REVIEW OF ARBITRATORS AWARDS -"It is stated expresslyunder Art. 2044 of the Civil Code that the finality of the arbitrators' award is

not absolute and without exceptions. Where the conditions described inArticles 2038, 2039 and 2040 applicable to both compromises and

arbitrations are obtaining, the arbitrators' award may be annulled orrescinded. Additionally, under Sections 24 and 25 of the Arbitration Law,there are grounds for vacating, modifying or rescinding an arbitrators'award. Thus, if and when the factual circumstances referred to in the above-cited provisions are present, judicial review of the award is properlywarranted." Clearly, though recourse to the courts may be availed of byparties aggrieved by decisions or awards rendered by arbitrator/s, the extentof such is neither absolute nor all encompassing

FACTS

June 15, 1990 Adamson Management Corp (AMC) and Lucas Adamson(Adamson) on the one hand and APAC Holdings Limited on the other handentered into a contract whereby AMC sold 99.97% of the OCS of AMC and

Adamson to APAC for P24,384,600 + Net Asset Value of Adamson

BUT the parties FAILED to agree on a reasonable net asset value (NAV)

Submitted the case for arbitration in accordance with RA 876 (arbitrationlaw)

1991 Arbitration Committee rendered a decision finding that NAV ofcompany is P167,188.00 which was computed on the basis of a pro-formabalance sheet submitted by SGV

Arbitration Committee disregarded the Adamsons arguments that there wasa fix NAV amounting to P5,146,000.00

According to the Committee, however, the amount of P5,146,000.00 whichwas claimed as initial NAV by petitioners, was merely an estimate of theCompany's NAV as of February 28, 1990 which was still subject to financialdevelopments until June 19, 1990, the cut-off date

The basis for this ruling was Clause 3(B) of the Agreement which fixed thesaid amount; Clause 1(A) which defined NAV and provided that it should be

computed in accordance with Clause 7(A); Clause 7(A) which directed theauditors to prepare in accordance with good accounting principles a balancesheet as of cut-off date which would include the goodwill and intangibleassets (P19,116,000.00), the value of tangible assets excluding the land asper Cuervo appraisal, the adjustment agreed upon by the parties, and thecost of redeeming preferred shares; and Clause 5(E).

The Committee pointed out that although Adamson contested theadjustments, they were, however, not able to prove that these were notvalid, except with respect to the tax savings.|||

The Committee also held that any ambiguity in the contract should not beinterpreted against APAC because the parties themselves had stipulatedthe draft of the agreement and was submitted to Adamson for approval andthat Adamson even incorporated changes which were eventuallyincorporated in the final form of the agreement

APAC filed a petition for CONFIRMATION of the arbitration award before

the RTC of Makati Adamson opposed the petition and prayed for nullification, modification

and/or correction of the same alleging that the arbitrators committedEVIDENT PARTIALITY AND GAD

RTC rendered a decision VACATING the arbitral award

CA reversed decision of RTC

Adamson alleges that CA erred and acted in GAD

ISSUE:W/N the CA erred in affirming the arbitration award and in reversing the decision of theTC NO!W/N the arbitrators were not impartial NO


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W/N settled arbitration awards are subject to judicial review - YES

HELD:

The CA was correct in affirming the arbitration award and in reversingthe decision of the TC

Section 24 of arbitration law provides the grounds for vacating award:o The award was procured by corruption, fraud or other undue

means; oro That there was evident partiality or corruption in the arbitrators or

any of them; or

o That the arbitrators were guilty of misconduct in refusing topostpone the hearing upon sufficient cause shown, or in refusingto hear evidence pertinent and material to the controversy; that

one or more of the arbitrators was disqualified to act as suchunder section nine hereof, and willfully refrained from disclosingsuch disqualifications or any other misbehavior by which the

rights of any party have been materially prejudiced; oro That the arbitrators exceeded their powers, or so imperfectly

executed them, that a mutual, final and definite award upon thesubject matter submitted to them was not made.

ADAMSON FAILED TO PROVE THEIR ALLEGATION OF PARTIALITYOF THE ARBITRATORS

Proofs other than mere inferences are needed to establish evident partiality

It is clear therefore that the TC vacated the award not because of evidentpartiality but because the arbitrator interpreted the contract in a way whichwas not favorable to Adamson and because it considered that APAC, by

submitting the controversy to arbitration was seeking to renege on itsobligation under the contract

That the award was unfavorable to Adamson did NOT prove evident

partiality

In any case, this Court finds that the interpretation made by the arbitrators

did not create a new contract, as alleged by herein petitioners but was afaithful application of the provisions of the Agreement.

Neither was the award arbitrary for it was based on the statements preparedby the SGV which was chosen by both parties to be the "auditors

Adamson cannot claim that the consideration for private respondent'sacquisition of the outstanding common shares of stock was grosslyinadequate. If the NAV as computed was small, the result was not due to

error in the computations made by the arbitrators but due to the extent ofthe liabilities being borne by the Adamson. During the arbitrationproceedings, the committee found that petitioner has been suffering lossessince 1983, a fact which was not denied by petitioner.

Arbitration awards are subject to judicial review- The CA reversed thetrial court not because the latter reviewed the arbitration award involvedherein, but because the respondent appellate court found that the trial courthad no legal basis for vacating the award


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HEUNGHWA INDUSTRY CO LTD VS DJ BUILDERS CORPORATIONGR NO. 169095

HEUNGHWA INDUSTRY CO LTD PETITIONER

DJ BUILDERS CORPORATION RESPONDENT

DOCTRINE/S:

There are 2 acts which may vest the CIAC with jurisdiction over a

construction dispute:1. Presence of an arbitration clause in a construction contract2. Agreement by the parties to submit the dispute to the CIAC

The proceedings in the CIAC cannot then be voided merely because of thenon-participation of petitioner. Section 4.2 of the CIAC Rules is clear and itleaves no room for interpretation

FACTS:

HEUNGHWA INDUSTRY (HI) = Korean corporation doing business in the

PH

DJ Builders corp = corporation duly organized under the laws of the PH

HI was able to secure a contract with DPWH to construct Roxas-LangoganRoad in Palawan

HI entered into a subcontract agreement with DJ builders to do earthworkand box culvert of the said project in the amount of 112,228.918.00

The agreement contained an arbitration clause

The agreed price was not fully paid ! hence DJ builders filed before theRTC of Puerto Princesa a complaint for breach contract, collection of sumof money with PI, Preliminary Attachment and Prayer for TRO and

damages

HI averred that it was not liable to pay DJ builders because DJ caused thestoppage of the work

HI also claims that it failed to collect from DPWH due to DJ builders poorequipment performance

HI filed a counterclaim for P24M Sept. 27, 2000 the parties filed a joint motion to submit the following

issues to the CIAC:o Manpower and equipment stanby timeo Unrecouped mobilization expenseso Retentiono Discrepancy of billingo Price escalation for fuel and oil usage

RTC issued order GRANTING motion

HI filed an urgent manifestation praying that additional matters be referredto CIAC for arbitration

o Additional mobilization costs

o Propriety of liquidated damageso Propriety of downtime costs

DJ builders filed with CIAC a request for adjudication ! HI filed areply/manifestation stating that t was abandoning the submission to theCIAC and pursuing the case before the RTC

CIAC issued an order denying the motion to dismiss filed by HI and holdingthat the CIAC has jurisdiction over the case!MR denied !Certiorari

ISSUE:1. W/N the CIAC has jurisdiction over the case YES2. W/N the petitioners claim that it would have been estopped is

premature YES3. W/N the proceedings in the CIAC were valid YES

HELD1. YES, the CIAC has jurisdiction over the case

CIAC has jurisdiction over the construction dispute because of themere presence of the arbitration clause in the subcontract agreement.

Thus, the CIAC did not commit any patent grave abuse of discretion, nor didit act without jurisdiction when it issued the assailed Order denyingpetitioner's motion to dismiss. |

Submission to CIAC Jurisdiction An arbitration clause in a constructioncontract or a submission to arbitration of a construction dispu te shall bedeemed an agreement to submit an existing or future controversy to CIAC

jurisdiction, notwithstanding the reference to a different arbitration institution

or arbitral body in such contract or submission. When a contract contains aclause for the submission of a future controversy to arbitration, it is notnecessary for the parties to enter into a submission agreement before the

claimant may invoke the jurisdiction of CIAC

Based on the foregoing, there are two acts which may vest the CIAC

with jurisdiction over a construction dispute.o One is the presence of an arbitration clause in a construction

contract,o and the other is the agreement by the parties to submit the

dispute to the CIAC.

|||The first acts is applicable to the case at bar

The bare fact that the parties incorporated an arbitration clause in theircontract is sufficient to vest the CIAC with jurisdiction over any construction

controversy or claim between the parties. The rule is explicit that the CIAChas jurisdiction notwithstanding any reference made to another arbitral body

It is well-settled that jurisdiction is conferred by law and cannot be waived by

agreement or acts of the parties. Thus, the contention of petitioner that itnever authorized its lawyer to submit the case for arbitration must likewise

fail. Petitioner argues that notwithstanding the presence of an arbitrationclause, there must be a subsequent consent by the parties to submit thecase for arbitration. To stress, the CIAC was already vested with jurisdiction


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the moment both parties agreed to incorporate an arbitration clause in thesub-contract agreement. Thus, a subsequent consent by the parties wouldbe superfluous and unnecessary.|||

2. YES

Reliance of the CA on NIA ruling is inaacurate

In the case at bar, the only participation that can be attributed to petitioner isthe joint referral of specific issues to the CIAC and the manifestation prayingthat additional matters be referred to the CIAC. Both acts, however, havebeen disputed by petitioner because said acts were performed by theirlawyer who was not authorized to submit the case for arbitration. And evenif these were duly authorized, this would still not change the correct findingof the CA that the CIAC had jurisdiction over the dispute because, as hasbeen earlier stressed, the arbitration clause in the subcontract

agreementipso facto vested the CIAC with jurisdiction.|||

It puzzles this Court why petitioner would insist that the RTC should hear

the case when the CIAC has the required skill and expertise in addressingconstruction disputes.

Petitioner cannot presume that it would have been estopped fromquestioning the jurisdiction of the CIAC had it participated in theproceedings. In fact, estoppel is a matter for the court to consider

Given that petitioner questioned the jurisdiction of the CIAC from thebeginning, it was not remiss in enforcing its right. Hence, petitioner's claimthat it would have been estopped is premature

3. YES

This Court finds that the CIAC simply followed its rules when it proceeded

with the hearing of the dispute notwithstanding that petitioner refused toparticipate therein.

The proceedings before the CIAC were valid, for the same had beenconducted within its authority and jurisdiction and in accordance with therules of procedure provided by Section 4.2 of the CIAC Rules.

o SEC. 4.2 Failure or refusal to arbitrate. Where the jurisdictionof CIAC is properly invoked by the filing of a Request forArbitration in accordance with these Rules, the failuredespite due notice which amounts to a refusal of the

Respondent to arbitrate, shall not stay the proceedingsnotwithstanding the absence or lack of participation of theRespondent. In such case, CIAC shall appoint the arbitrator/s inaccordance with these Rules. Arbitration proceedings shallcontinue, and the award shall be made after receiving theevidence of the Claimant. (Emphasis and underscoring supplied) ||

CA did not issue the TRO promptly so as to divest the CIAC of jurisdiction

The proceedings cannot then be voided merely because of the non-participation of petitioner. Section 4.2 of the CIAC Rules is clear and itleaves no room for interpretation

Therefore, petitioner's prayer that the case be remanded to CIAC in orderthat it may be given an opportunity to present evidence is untenable.

Petitioner had its chance and lost it, more importantly so, by its own choice.This Court will not afford a relief that is apparently inconsistent with the law.


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KOREA TECHNOLOGIES CO., G.R. No. 143581LTD.,

Petitioner,- versus -

HON. ALBERTO A. LERMA, in TINGA, and

his capacity as Presiding Judge of VELASCO, JR., JJ.Branch 256 of Regional TrialCourt of Muntinlupa City, and

PACIFIC GENERAL STEELMANUFACTURINGCORPORATION,

Respondents. January 7, 2008x-----------------------------------------------------------------------------------------x

FACTSPetitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean corporation which isengaged in the supply and installation of Liquefied Petroleum Gas (LPG) Cylindermanufacturing plants, while private respondent Pacific General Steel ManufacturingCorp. (PGSMC) is a domestic corporation.

On March 5, 1997, PGSMC and KOGIES executed a contract in the Philippineswhereby KOGIES would set up an LPG Cylinder Manufacturing Plant in Carmona,Cavite. On April 7, 1997, in Korea, the parties executed Contract No. KLP-970301

dated March 5, 1997 amending the terms of payment. On October 14, 1997, PGSMCentered into a Contract of Lease with Worth Properties, Inc. (Worth) for use of Worths5,079-square meter property with a 4,032-square meter warehouse building to house

the LPG manufacturing plant.

On January 22, 1998, it was shown in the Certificate that, after the installation of theplant, the initial operation could not be conducted as PGSMC encountered financialdifficulties affecting the supply of materials, thus forcing the parties to agree thatKOGIES would be deemed to have completely complied with the terms and conditionsof 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. When KOGIES deposited thechecks, these were dishonored for the reason "PAYMENT STOPPED." Thus, on May8, 1998, KOGIES sent a demand letter to PGSMC threatening criminal action forviolation of Batas Pambansa Blg.22 in case of nonpayment. On the same date, thewife of PGSMCs President faxed a letter dated May 7, 1998 to KOGIES Presidentwho 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 hadnot delivered several equipment parts already paid for.

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

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 quantityand lowered the quality of the machineries and equipment it delivered to PGSMC, andthat PGSMC would dismantle and transfer the machineries, equipment, and facilities

installed in the Carmona plant. Five days later, PGSMC filed before the Office of thePublic Prosecutor an Affidavit-Complaint for Estafa docketed as I.S. No. 98-03813against Mr. Dae Hyun Kang, President of KOGIES.

On June 15, 1998, KOGIES wrote PGSMC informing the latter that PGSMC could notunilaterally rescind their contract nor dismantle and transfer the machineries andequipment on mere imagined violations by KOGIES. It also insisted that their disputesshould be settled by arbitration as agreed upon in Article 15, the arbitration clause oftheir 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, against PGSMC

before the Muntinlupa City Regional Trial Court (RTC). The RTC granted a temporaryrestraining order. In its complaint, KOGIES alleged that PGSMC had initially admittedthat the checks that were stopped were not funded but later on claimed that it stoppedpayment of the checks for the reason that "their value was not received" as the formerallegedly breached their contract by "altering the quantity and lowering the quality ofthe machinery and equipment" installed in the plant and failed to make the plantoperational although it earlier certified to the contrary as shown in a January 22, 1998Certificate. 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 themachinery and equipment installed in the plant which the latter threatened to do onJuly 4, 1998.

On July 9, 1998, PGSMC filed an opposition to the TRO arguing that KOGIES was notentitled 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 instantcontroversy.

On July 23, 1998, the RTC issued an Order denying the application for a writ ofpreliminary injunction, reasoning that PGSMC had paid KOGIES USD 1,224,000, the


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value of the machineries and equipment as shown in the contract such that KOGIESno longer had proprietary rights over them. And finally, the RTC held that Art. 15 of theContract 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 foran injunctive writ was denied.

PGSMC filed a Motion for Inspection of Things to determine whether there was indeedalteration of the quantity and lowering of quality of the machineries and equipment,

and whether these were properly installed. KOGIES opposed the motion positing thatthe queries and issues raised in the motion for inspection fell under the coverage ofthe arbitration clause in their contract. KOGIES asserted that the Branch Sheriff didnot have the technical expertise to ascertain whether or not the machineries andequipment conformed to the specifications in the contract and were properly installed.The trial court granted the motion. On November 11, 1998, the Branch Sheriff filed hisSheriffs Report finding that the enumerated machineries and equipment were notfully and properly installed.

Court of Appeals affirmed the trial court and declared the arbitration clause againstpublic policy.

ISSUE W/N the arbitration clause is against public policy

HELD

No. Established in this jurisdiction is the rule that the law of the place where thecontract is made governs. Lex loci contractus. The contract in this case was perfectedhere 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 finalityand binding effect of an arbitral award. Art. 2044 provides, "Any stipulation that thearbitrators award or decision shall be final, is valid , without prejudice to Articles2038, 2039 and 2040." (Emphasis supplied.)

Arbitration clause not contrary to public policy : The arbitration clause whichstipulates that the arbitration must be done in Seoul, Korea in accordance with theCommercial Arbitration Rules of the KCAB, and that the arbitral award is final andbinding, is not contrary to public policy.

Having said that the instant arbitration clause is not against public policy, we come tothe question on what governs an arbitration clause specifying that in case of anydispute arising from the contract, an arbitral panel will be constituted in a foreigncountry and the arbitration rules of the foreign country would govern and its awardshall 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 theparties, the arbitration rules of our domestic arbitration bodies would not be applied.

As signatory to the Arbitration Rules of the UNCITRAL Model Law on InternationalCommercial Arbitration of the United Nations Commission on International Trade Law(UNCITRAL) in the New York Convention on June 21, 1985, the Philippinescommitted itself to be bound by the Model Law. We have even incorporated the ModelLaw 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 AlternativeDispute Resolution System in the Philippines and to Establish the Office for AlternativeDispute Resolution, and for Other Purposes, promulgated on April 2, 2004. And while

RA 9285 was passed only in 2004, it nonetheless applies in the instant case since it isa procedural law which has a retroactive effect.

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

(1) The RTC must refer to arbitration in proper cases(2) Foreign arbitral awards must be confirmed by the RTC(3) The RTC has jurisdiction to review foreign arbitral awards(4) Grounds for judicial review different in domestic and foreign arbitral

awards(5) RTC decision of assailed foreign arbitral award appealable

PGSMC has remedies to protect its interests: Thus, based on the foregoingfeatures of RA 9285, PGSMC must submit to the foreign arbitration as it bound itselfthrough 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 areduly protected by the law which requires that the arbitral award that may be renderedby 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 arbitrationclause, stipulating that the arbitral award is final and binding, does not oust our courtsof jurisdiction as the international arbitral award, the award of which is not absoluteand without exceptions, is still judicially reviewable under certain conditions providedfor 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 providesthat the parties may dispense with the arbitration clause.

Unilateral rescission improper and illegal: Having ruled that the arbitration clauseof the subject contract is valid and binding on the parties, and not contrary to publicpolicy; consequently, being bound to the contract of arbitration, a party may notunilaterally rescind or terminate the contract for whatever cause without first resortingto arbitration.

In addition, whatever findings and conclusions made by the RTC Branch Sheriff fromthe 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.


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RTC has interim jurisdiction to protect the rights of the parties: While the issue ofthe proper installation of the equipment and machineries might well be under theprimary jurisdiction of the arbitral body to decide, yet the RTC under Sec. 28 of RA9285 has jurisdiction to hear and grant interim measures to protect vested rights of theparties

While the KCAB can rule on motions or petitions relating to the preservation ortransfer 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 andmachineries given the non-recognition by the lower courts of the arbitral clause, hasaccorded an interim measure of protection to PGSMC which would otherwise beenirreparably damaged. KOGIES is not unjustly prejudiced as it has already been paid asubstantial amount based on the contract. Moreover,KOGIES is amply protected bythe arbitral action it has instituted before the KCAB, the award of which can beenforced in our jurisdiction through the RTC. Besides, by our decision, PGSMC iscompelled to submit to arbitration pursuant to the valid arbitration clause of its contractwith KOGIES.

PGSMC to preserve the subject equipment and machineries: While PGSMC mayhave 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 consideringthe pending arbitral proceedings to settle the differences of the parties. PGSMCtherefore must preserve and maintain the subject equipment and machineries with the

diligence of a good father of a family until final resolution of the arbitral proceedingsand enforcement of the award, if any.


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ABS-CBN BROADCASTING G.R. No. 169332CORPORATION, February 11, 2008

Petitioner,- v e r s u s -

WORLD INTERACTIVENETWORK SYSTEMS (WINS)JAPAN CO., LTD.,

Respondent.

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

FACTSOn September 27, 1999, petitioner ABS-CBN Broadcasting Corporation

entered into a licensing agreement with respondent World Interactive NetworkSystems (WINS) Japan Co., Ltd., a foreign corporation licensed under the laws ofJapan. Under the agreement, respondent was granted the exclusive license todistribute and sublicense the distribution of the television service known as TheFilipino Channel (TFC) in Japan. By virtue thereof, petitioner undertook to transmit theTFC 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 newsprogram for Filipinos in Japan, into the TFC programming from March to May 2002.Petitioner claimed that these were unauthorized insertions constituting a material

breach of their agreement. Consequently, petitioner notified respondent of itsintention to terminate the agreement effective June 10, 2002.

Thereafter, respondent filed an arbitration suit pursuant to the arbitrationclause of its agreement with petitioner.Respondents contentions: (1.) airing of WINS WEEKLY was made with petitioner'sprior approval; (2.) petitioner only threatened to terminate their agreement because itwanted to renegotiate the terms thereof to allow it to demand higher fee. Respondentalso prayed for damages for petitioner's alleged grant of an exclusive distribution

license to another entity, NHK (Japan Broadcasting Corporation).

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

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 ofSection 13 (a)?

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

The arbitrator found in favor of respondent. He held that (1.) petitioner gaveits approval to respondent for the airing of WINS WEEKLY as shown by a series of

written exchanges between the parties; (2.) had there really been a material breach ofthe agreement, petitioner should have terminated the same instead of sending a merenotice to terminate said agreement; (3.) petitioner threatened to terminate theagreement due to its desire to compel respondent to re-negotiate the terms thereof forhigher fees. He then allowed respondent to recover temperate damages, attorney'sfees 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 ofCourt 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.

Respondent, on the other hand, filed a petition for confirmation of arbitral

award before the Regional Trial Court (RTC) of Quezon City.

Consequently, petitioner filed a supplemental petition in the CA seeking to

enjoin the RTC of Quezon City from further proceeding with the hearing ofrespondent's petition for confirmation of arbitral award which was granted.

On February 16, 2005, the CA rendered the assailed decision dismissingABS-CBNs petition for lack of jurisdiction. It stated that as the TOR itself providedthat the arbitrator's decision shall be final and unappealable . It ruled that it is theRTC which has jurisdiction over questions relating to arbitration. It held that the onlyinstance it can exercise jurisdiction over an arbitral award is an appeal from the trialcourt's decision confirming, vacating or modifying the arbitral award. It further statedthat a petition for certiorari under Rule 65 of the Rules of Court is proper in arbitrationcases only if the courts refuse or neglect to inquire into the facts of an arbitrator'saward.

Petitioner then filed for a petition for review on certiorari under Rule 45 andcontends that the CA, in effect, ruled that: (a) it should have first filed a petition tovacate the award in the RTC and only in case of denial could it elevate the matter tothe CA via a petition for review under Rule 43 and (b) the assailed decision impliedthat 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 CAeven 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.


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ISSUE: Whether or not an aggrieved party in a voluntary arbitrationdispute may avail of, directly in the CA, a petition for review under Rule 43 or a petitionfor certiorari under Rule 65 of the Rules of Court, instead of filing a petition to vacatethe award in the RTC when the grounds invoked to overturn the arbitrators decision

are other than those for a petition to vacate an arbitral award enumerated under RA876.

HELD:

Yes. RA 876 itself mandates that it is the RTC which has jurisdiction over questionsrelating to arbitration

such as a petition to vacate an arbitral award.

Section 24 of RA 876 provides for the specific grounds for a petition tovacate 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 tothe controversy when such party proves affirmatively that in the arbitrationproceedings:

(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 actas such under section nine hereof, and willfully refrained from disclosing suchdisqualifications or of any other misbehavior by which the rights of any party havebeen materially prejudiced; or

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

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 instatutory construction expressio unius est exclusio alterius, the explicit mention of onething in a statute means the elimination of others not specifically mentioned. As RA876 did not expressly provide for errors of fact and/or law and grave abuse ofdiscretion (proper grounds for a petition for review under Rule 43 and a petition forcertiorari 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 thelatter remedy on the grounds of errors of fact and/or law or grave abuse of discretionto overturn an arbitral award.

In cases not falling under any of the aforementioned grounds to vacate anaward, the Court has already made several pronouncements that a petition for reviewunder 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 BankEmployees, 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. As such, decisions handed down by voluntaryarbitrators fall within the exclusive appellate jurisdiction of the CA. This decision wastaken into consideration in approving Section 1 of Rule 43 of the Rules of Court.

This rule was cited in Sevilla Trading Company v. Semana, Manila MidtownHotel v. Borromeo,and Nippon Paint Employees Union-Olalia v. Court of Appeals.

These cases held that the proper remedy from the adverse decision of a voluntaryarbitrator, if errors of fact and/or law are raised, is a petition for review under Rule 43of the Rules of Court. Thus, petitioner's contention that it may avail of a petition forreview under Rule 43 under the circumstances of this case is correct.

DECISION OF ARBITRATOR MAY BE SUBJECT OF JUDICIAL REVIEW

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

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

Judicial power includes the duty of the courts of justice to settle actualcontroversies involving rights which are legally demandable and enforceable, and todetermine whether or not there has been a grave abuse of discretion amountingto lack or excess of jurisdiction on the part of any branch or instrumentality ofthe Government.

As may be gleaned from the above stated provision, it is well within thepower and jurisdiction of the Court to inquire whether any instrumentality of the

Government, such as a voluntary arbitrator, has gravely abused its discretion in theexercise of its functions and prerogatives. Any agreement stipulating that thedecision 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 thearbitrator's award may be availed of cannot be held to preclude in proper casesthe power of judicial review which is inherent in courts.

Significantly, Insular Savings Bank v. Far East Bank and Trust Company definitively

outlined several judicial remedies an aggrieved party to an arbitral award mayundertake:


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(1) a petition in the proper RTC to issue an order to vacate the award on thegrounds provided for in Section 24 of RA 876;(2) a petition for review in the CA under Rule 43 of the Rules of Court onquestions 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 thearbitrator have acted without or in excess of his jurisdiction or with grave abuse ofdiscretion amounting to lack or excess of jurisdiction.

Nevertheless, although petitioners position on the judicial remediesavailable to it was correct, we sustain the dismissal of its petition by the CA. Theremedy petitioner availed of, entitled alternativepetition for review under Rule 43 or

petition for certiorari under Rule 65, was wrong.

APPEAL AND CERTIORARI- The remedies of appeal and certiorari are mutually exclusive and not

alternative or successive.

- Proper issues that may be raised in a petition for review under Rule 43pertain to errors of fact, law or mixed questions of fact and law, while apetition for certiorari under Rule 65 should only limit itself to errors of

jurisdiction, that is, grave abuse of discretion amounting to a lack or excessof jurisdiction.

- Certiorari cannot be availed of where appeal is the proper remedy or as a

substitute for a lapsed appeal.

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 bythe arbitrator and more about the arbitrators appreciation of the issues and evidencepresented by the parties. Therefore, the issues clearly fall under the classification oferrors of fact and law questions which may be passed upon by the CA via a petitionfor review under Rule 43. Petitioner cleverly crafted its assignment of errors in such away as to straddle both judicial remedies, that is, by alleging serious errors of fact andlaw (in which case a petition for review under Rule 43 would be proper) and graveabuse of discretion (because of which a petition for certiorari under Rule 65 would bepermissible).

An appeal taken either to the SC or the CA by the wrong or inappropriate mode shallbe dismissed. Thus, the alternativepetition filed in the CA, being an inappropriatemode of appeal, should have been dismissed outright by the CA.

ADR 3rd Set of Cases

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