Friday, September 4, 2009

CommArb: Digest for September 4 Meeting

Gonzales v. climax mining 512 scra 138 (CHECK BECAUSE THE DIGEST CIRCULATED STATES ANOTHER CASE)

Facts:

co-production, joint venture and/or production-sharing letter-agreement :

-Gonzales granted to GeoPhilippines and Inmex the exclusive right to explore and survey the mining claims for 36 months w/n w/c the GeoPhilippines and Immex could decide to take an operating agreement on the mining claims and/or develop, operated, mine and otherwise exploit the mining claims and market any and all minerals

-They later extended the agreement to another 3 years and then agreed to an Addendum to the latter extension contract wherein Arimco would obtain a Financial and Technical Assistance Agreement (FTAA) from the Govt, which it did.

-An OPERATING AND FINANCIAL ACCOMODATION CONTRACT and Assignment, Accession Agreement was entered between Climax-Arimco and Australasian Philippines whereby Climax-Arimco transfers its FTAA t Australasian Philippines.

-GONZALES FILED BEFORE THE PANEL OF ARBITRATORS, REGION II, MINES AND GEOSCIENCES BUREAU OF THE DENR vs. Climax-Arimco Mining Corporation, Climax, and Australasian Philippines a COMPLAINT FOR NULLIFICATION OF THE ADDENDM CONTRACT (which provides for Arimco-Climax applying for a FTAA), the FTAA, and the other two agreements entered between Arimco-Climax and Australasian Philippines on the grounds of FRAUD, OPPRESSION, AND/OR VIOLATION OF SECTION 2, ARTICLE XII OF THE CONSTI

*ARB PANEL: COMPLAINT DISMISSED, lack of jurisdiction. MR GRANTED (dispute involves rights to mining areas and dispute involves surface owners, occupansta and claim owners/concessionaires, the ruling on the validity of the assailed contracts would result to the grant or denial of mining rights over the properties)

NOTE, HOWEVER, THAT DID NOT RULE ON CONSTITUTIONALITY. MR by Arimco-Climax and Australasian Philippines.

*ARB PANEL: DENIED (there was a mining dispute involved, contacts involve exploration and exploitation of minerals over disputed areas. PETITION FOR CERTIORARI W/ CA.

*CA: GRANTE PETITION.

  1. Jurisdiction of Arb Panel: NONE OVER THE ISSUE

...limited only to the resolution of mining disputes, defined as those which raise a question of fact or matter requiring the technical knowledge and experience of mining authorities. As the complaint alleged fraud, oppression and violation of the Consti, which are QUESTIONS OF LAW, Arb Panel had NO JURISDICTION.

  1. NO AVERMENTS AS TO FRAUD OR OPPRESSION

…and if ever there are, it would only make the contract voidable

  1. ACTION PRESCRIBED

…Addendum Contract executed 1991, should have annulled it w/n 4 years (til 1995) but action was filed in 1999.

  1. PETITION SHOULD HAVE BEEN SETTLED THROUGH ARBITRATION

*MR DENIED (Lack of merit)

*PETITION FOR REVIEW, R45

ISSUES

(a) Whether there was forum-shopping on the part of respondents for their failure to disclose to this Court their filing of a Petition to Compel for Arbitration before the Regional Trial Court of Makati City, Branch 148, which is currently pending.

(b) Whether counsel for respondent Climax had authority to file the petition for certiorari before the Court of Appeals considering that the signor of the petition for certiorari’s Verification and Certification of Non-forum Shopping was not authorized to sign the same in behalf of respondent Climax.

(c) Whether the complaint filed by petitioner raises a mining dispute over which the Panel of Arbitrators has jurisdiction, or a judicial question which should properly be brought before the regular courts.

(d) Whether the dispute between the parties should be brought for arbitration under Rep. Act No. 876.

HELD

(a)On Forum Shopping: NONE

-copies of the Petition to Compel for Arbitration not attached, so Court cannot determine WON the same involves related COA and the grant of the same or substantially the same reliefs

-Nature of actions different: Petition for certiorari determines GADALEJ, Petition to compel for arbitration seeks implementation of the arbitration clause

(b)AUTHORITY OF COUNSEL TO FILE PETITION FOR CERTIORARI W/O SECRETARY'S CERTIFICATE, AND THE VERIFICATION IN THE CNFS: NO AUTHORITY, NO CNFS. BUT IRRELEVANT AS THE PANEL OF ARBITRATORS HAD NO JURISDICTION OVER THE COMPLAINT FILED BY GONZALES.

-CNFS FOR CORPORATIONS: The signatory in the case of the corporation should be “a duly authorized director or officer of the corporation” who has knowledge of the matter being certified. If, as in this case, the petitioner is a corporation, a board resolution authorizing a corporate officer to execute the certification against forum-shopping is necessary. A certification not signed by a duly authorized person renders the petition subject to dismissal.

(c)WON PANEL OF ARBITRATORS HAVE JURISDICTION OVER THE COMPLAINT FOR DECLARATION OF NULLITY AND/OR TERMINATION OF THE SUBJECT CONTRACTS ON THE GROUND OF FRAUD, OPPRESSION AND VIOLATION OF THE CONSTITUTION (WON THE COMPLAINT RAISES A MINING DISPUTE OR A JUDICIAL QUESTION)? NO

JUDICIAL QUESTION

MINING DISPUTE

proper for determination by the courts

Panel of arbitrators under RA 7924 (Philippine Mining Act of 1995)

question involves the determination of what the law is and what the legal rights of the parties are with respect to the matter in controversy.

(a) rights to mining areas

(b) mineral agreements, FTAAs, or permits, and

(c) surface owners, occupants and claimholders/concessionaires

Controversies or disagreements of civil or contractual nature between litigants

granting of license,

permits, lease and contracts, or approving, rejecting, reinstating or canceling applications, or deciding conflicting applications

-what the COMPLAINT ALLEGES: respondents, conspiring and confederating w/ one another, misrepresented under the Addendum Contract and FTAA that Climax-Arimco possessed financial and technical capacity to put the project into commercial production, when in truth it had no such qualification whatsoever. By so doing, respondents have allegedly caused damage not only to petitioner but also to RP

-IF FRAUD: complaint avers fraud or misrepresentation, which vitiates Gonzales' consent, and under A1390 of the NCC, is one of the grounds for the annulment of a voidable contract.

-IF VIOLATION OF ART XII, SECTION 2 OF CONSTI: by their lack of financial and technical competence to carry out the mining project, do not qualify to enter into a co-production, joint venture or production sharing agreement with the Government, in circumvention of and in patent violation of the spirit and purpose of the Constitution, particularly Section 2, Article XII thereof.

(WAH! WRONG CASE…) THE RULING HERE IS THIS:

The DENR Panel of Arbitrators had NO JURISDICTION over the complaint for the annulment of the Addendum Contract on grounds of fraud and violation of the Constitution + Action should have been brought before the regular courts as it involves judicial issues.

Court also ruled that case should not be brought for arbitration under RA 876

FROM THE DIGEST: MR of the 1995 case!

From the 1995 ruling, BOTH PARTIES FILED MR

NOTE: there is another Case wherein RTC ordered Gonzales to proceed w/ arbitration proceedings (un ung forum shopping argument ni Gonzales)

GONZALES ARGUES…

DENR Panel of Arbitrators had jurisdiction: the case involves a mining dispute

CLIMAX ARGUES…

Case could be brought for arbitration under RA 876: the arbitration clause in the Addendum Contract should be treated as an agreement independent of the other terms of the contract, and that a claimed rescission of the main contract does not avoid the duty to arbitrate

ISSUES AND RULING:

  1. WON DENR PANEL OF ARBITRATORS HAD JURISDICTION over Gonzales' petition for nullification of the container contract

AS I JUST GOT THIS FROM THE DIGEST, IT'S MAGULO. The digest seem to imply YES.

BOTH the PANEL OF ARBITRATORS AND THE CA FOUND THAT:

  1. THROUGH THE VARIOUS AGREEMENT, GONZALES HAD ASSIGNED HIS INTEREST OVER THE MINERAL CLAIMS ALL IN FAVOR OF CLIMAX-ARIMCO
  2. W/O GONZALES ASSIGNING HIS INTEREST OVER THE MINERAL CLAIMS IN FAVOR OF CLIMAX-ARIMCO, THERE WOULD BE NO FTAA TO SPEAK OF

BUT CA LIKEWISE FOUND THAT GONZALES' ALLEGATION OF FRAUD, OPPRESSION, AND VIOLATION OF THE CONSTITUTION WERE UNSUBSTANTIATED. WEIRD. PERO I GUESS NO DAPAT.

  1. WON THE PETITION IS PROPER SUBJECT OF RA 876

NO. Note however that this case involves the petition of Gonzales to nullify the Container contract which was already held proper ONLY FOR THE COURTS TO determine. The validity of the container contract is not a proper subject for arbitration.

-As would be seen in the resolution of the court below, the dispute between Climax-Arimco and Gonzales (though I don't know what are the grounds invoked by Climax-Arimco in enforcing the Arbitration contract) is proper for arbitration, with the RTC finding that the Arbitration Contract (separable from the container clause) was validly made.

PETITION to COMPEL FOR ARBITRATION CASE FILED BY CLIMAX-ARIMCO:

FACTS: Climax-Arimco sent Gonzales a Demand for Arbitration pursuant to Clause 19.1 of the Addendum Contract and Section 5 of RA 876. As Gonzales did not heed the demand, they filed a Petition to compel aritration before RTC Makati.

-Gonzales filed MTD, but failed to set for hearing so filed an ANSWER w/ Counterclaim:

  1. Question validity of Addendum Contract: VOID for Climax-Arimco's acts of fraud, oppression and violation of the consti (as he argued earlier)

*RTC: Set case for pre-trial (though initially, it was not granted): Gonzales made the issue of the making the arbitration agreement (i.e. validity of arbitration agreement)

---ARB AGREEMENT VALID. PROCEED W/ ARBITRATION. APPOINTED RETIRED CA JUSTICE COQUIA AS SOLE ARBITRATOR. MFR DENIED.

*Gonzales filed R65 PETITION

ISSUES AND RULING

  1. WON R65 PETITION MAY BE CONSIDERED AN APPEAL IN ARBITRATION PROCEEDINGS. NO.

-under RA 876, it should be APPEAL BY CERTIORARI (R45! PETITION FOR REVIEW UNDER CERTIORARI, PURE QUESTIONS OF LAW)

-term "may": refers to the filing of an appeal, not the mode of review to be employed.

-right to appeal is not part of due process of law but is a mere statutory privilege to be exercised ONLY IN THE MANNER AND IN ACCORDANCE W/ LAW

BF CASE NOT APPLICABLE: Here, Gonzales' petition raises a QUESTION OF LAW, NOT A QUESTION OF JURISDICTION

-plus Judge Pimentel merely acted pursuant to RA 876, thus it acted w/n its jurisdiction.

  1. WON it was proper for the RTC to order arbitration even if the validity of both the Container Contract and the Arbitration Clause was questioned? YES. Sans the issue of the validity of the Container Contract, based on the DOCTRINE OF SEPARABILITY, if there's a valid arbitration clause then the parties should proceed arbitration.

2 points:

  1. RA 876 is limited only to the resolution of the question of WON the arbitration agreement was validly entered (not the validity of the container contract)
  2. The separability of the arbitration clause from the Container Contract means that regardless if the container contract is valid or not, the arbitration clause's validity is a different issue.

ON HISTORY OF ARBITRATION IN RP

Civil Code and RA 876 expressly authorizes arbitration of domestic disputes.

Foreign arbitration, as a system of settling commercial disputes of an international character, was likewise recognized when RP adhered to the UN CONVENTION ON THE RECOGNITION AND ENFORECEMENT OF FOREIGN ARBITRAL AWARDS OF 1958, giving reciprocal recognition and allowing enforcement of international arbitration agreements between parties of different nationalities w/ a contracting state

The enactment of RA 9285 further institutionalized the use of alternative dispute resolution systems, including arbitration, in the settlement of disputes

ON LA NAVAL V. CA: RA 876 explicitly confines the court's authority only to the DETERMINATION OF WON THERE IS AN AGREEMENT IN WRITING PROVIDING FOR ARBITRATION.

>IF THERE IS: the court would issue an order "summarily directing the parties to proceed w/ arbitration in accordance w/ the terms thereof:

>IF THERE'S NONE: dismiss proceedings

ON DOCTRINE OF SEPARABILITY OF THE ARB CLAUSE: an agreement is to be treated as a separate agreement and the arbitration agreement does not automatically terminate when the contract of which it is part comes to an end.

-the invalidity of the main contract (CONTAINER CONTRACT) does not affect the validity of the arbitration agreement.

ON ARTICLE 16 (1) OF THE UNCITRAL MODEL LAW _ ARTICLE 21(2) OF THE UNCITRAL ARBITRATION RULES, PRIMA PAINTS CASE:

-in the Prima Paints case, Prima Paints argues that it had been fraudulently induced by F&C to sign the consulting agreement. The US High Court held that the court should not order the parties to arbitrate IF THE MAKING OF THE ARBITRATION AGREEMENT IS IN ISSUE. Court should not entertain the argument of fraud in the making of the CONTAINER AGREEMENT and if the arguments of the parties pertain to the validity of the CONTAINER AGREEMENT, NOT THE ARBITRATION AGREEMENT, then don't take cognizance of the case.

Oil and national gas comm vs. ca 293 scra 26

FACTS

-Oil and Natural Gas Commission (ONGC) is an Indian GOCC. Pacific Cement is a private RP Corporation.

-the 2 entered a contract wherein Pacific Cement would supply ONGC 4,300 metric tons of OIL WELL CEMENT and ONGC would pay $477,300.00.

THE DISPUTE

-Oil well cement was loaded on board the ship MV SURUTANA NAVA for delivery to Bombay and Calcutta, India BUT A DISPUTE BETWEEN PACIFIC CEMENT AND SHIPOWNER CAUSED THE OIL WELL CEMENT NOT BE DELIVERED. Pacific Cement was already paid for the oil well cement so ONGC demanded the delivery of the said cement

-Negotiations ensued. Pacific Cement agreed to replace the 4300 metric tons of oil well cement w/ CLASS "G" CEMEENT free. But the CLASS "G" cement did not conform with the specifications of ONGC.

DEMAND FOR ARBITRATION

-ONGC informed Pacific Cement that it was referring its claim to an arbitrator pursuant to Clause 16 of their contract:

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

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

The arbitrator may with the consent of parties enlarge the time, from time to time, to make and publish the award.

The venue for arbitration shall be at Dehra dun.

ARBITRAL AWARD

-for ONGS, Pacific Cement LIABLE

ENFORCEMENT OF THE AWARD

In Dehru Dun, India

-ONGC filed PETITION w/ foreign Court in India, praying that the decision of the arbitrator be made "the Rule of Court" in India

-Foreign court sent notices to Pacific Cement for filing objections, which it did. It was also notified that it needed to pay the required filing fees, w/o specifying how much filing fees are required. Pacific Cement inquired how much they were supposed to pay BUT THE FOREIGN COURT, W/O REPLYING ON THE SAID REQUEST, GRANTED THE PETITION OF ONGC.

-ONGC made demands for Pacific Cement to comply with said order but Pacific Cement refused. SO…

In Surigao

-ONGC filed a COMPLAINT FOR ENFORCEMENT OF FOREIGN AWARD OF FOREIGN COURT

- Pacific Cement filed MTD:

  1. ONGC had NO CAPACITY TO SUE
  2. Lack of COA
  3. Claim or demand has been waived, abandoned, or otherwise extinguished

-OPPOSITION TO MTD, rejoinder

*RTC: DISMISS COMPLAINT

  1. ONGC has COA: the rule prohibiting foreign corporations transacting business in the Philippines without a license from maintaining a suit in Philippine courts admits of an exception, that is, when the foreign corporation is suing on an isolated transaction as in this case
  2. BUT ONGC lacks a valid COA: the dispute (nondelivery of the purchased materials) is not covered by the Arbitration Clause and should have been properly litigated before a court of law, pursuant to Clause No. 15 of the Contract/Supply Order. THUS, THE PROCEEDINGS BEFORE THE ARBITRATOR WERE NULL AND VOID AND THE FOREIGN COURT HAD, THEREFORE, ADOPTED NO LEGAL AWARD W/C COULD BE THE SOURCE OF AN ENFORCEABLE RIGHT.

*appeal to CA: affirm RTC. DISMISS COMPLAINT.

  1. Arbitrator did not have jurisdiction over the dispute between the parties, so foreign court cannot validly adopt arbitrator's award
  2. Full text of the foreign judgment ONLY CONTAINS THE DISPOSITIE PORTION, NO FINDINGS OF FACT AND LAW so CANNOT BE ENFORCED BY ANY PHILIPPINE COURT.
  3. Foreign court violated due process when if dismissed objections of Pacific Cement w/o first replying as to the amount of filing fees required to give Pacific Cement the opportunity to pay the same
  4. Arbitration proceeding defective because only ONGC appointed the arbitrator, and the arbitrator is a former employee of ONGC (presumed bias). MR DENIED

ISSUES AND RULING

WON the arbitrator had jurisdiction over the dispute between ONGC and Pacific Cement under Clause 16? YES

  1. WON the non-delivery of the Oil Well Cement is a proper subject for arbitration under Clause 16)? NO

Relevant part of Clause 16:

". . . or as to any other question, claim, right or thing whatsoever, in any way arising out of or relating to the supply order/contract design, drawing, specification, instruction or these conditions . . .".

COURT: to fall within the purview of this phrase, the "claim, right or thing whatsoever" must arise out of or relate to the design, drawing, specification, or instruction of the supply order/contract.

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

COURT: The doctrine of noscitur a sociis, although a rule in the construction of statutes, is equally applicable in the ascertainment of the meaning and scope of vague contractual stipulations, such as the aforementioned phrase. According to the maxim noscitur a sociis, where a particular word or phrase is ambiguous in itself or is equally susceptible of various meanings, its correct construction may be made clear and specific by considering the company of the words in which it is found or with which it is associated, or stated differently, its obscurity or doubt may be reviewed by reference to associated words.

*Under the Arbitration Clause: 3 matters may be submitted for arbitration:

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

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

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

*COURT: The non-delivery of the oil well cement is definitely not in the nature of a dispute arising from the failure to execute the supply order/contract design, drawing, instructions, specifications or quality of the materials. That Clause 16 should pertain only to matters involving the technical aspects of the contract is but a logical inference considering that the underlying purpose of a referral to arbitration is for such technical matters to be deliberated upon by a person possessed with the required skill and expertise which may be otherwise absent in the regular courts.

-agrees w/ CA that the matter is properly cognizable by regular courts under Clause 15.

All questions, disputes and differences, arising under out of or in connection with this supply order, shall be subject to the exclusive jurisdiction of the court, within the local limits of whose jurisdiction and the place from which this supply order is situated.

*review on StatCon…

-If the Clause 16 would be interpreted to contemplate even the non-delivery of the oil well cement, Clause 15 would be a mere superfluity! The correct interpretation to give effect to both stipulations in the contract is for Clause 16 to be confined to all claims or disputes arising from or relating to the design, drawing, instructions, specifications or quality of the materials of the supply order/contract, and for Clause 15 to cover all other claims or disputes.

  1. WON the failure of the replacement cement to conform to the specifications of the contact falls w/n the ambit of the Arbitration Clause? YES

-This may fall under the first classification (see above)

ON ARGUMENT OF PACIFIC CEMENT THAT IT HAD NO OBLIGATION TO MAKE REPLACEMENT, AND THAT IT UNDERTOOK THE LATTER ONLY IN THE SPIRIT OF LIBERALITY AND TO FOSTER GOOD BUSINESS RELATIONSHIP: NONSENSE!

  1. WON Pacific Cement was able to recover the cargo is immaterial to its subsisting duty to make good its promise to deliver the cargo at the stipulated place of delivery.
  2. What inspires credulity is not that the replacement was done in the spirit of liberality but that it was undertaken precisely because of the private respondent's recognition of its duty to do so under the supply order/contract, Clause 16 of which remains in force and effect until the full execution thereof.

WON the judgment of the foreign court is enforceable in this jurisdiction even if it does not state the facts and the law upon which the award was based? YES

-The Order of the Civil Judge of Dehra Dun adopted the findings of facts and law of the arbitrator as contained in the Award Paper. The Award Paper contains an exhaustive discussion of the representative claims and defenses of the parties, and the arbitrator's evaluation of the same

-the consti mandate DOES NOT PRECLUDE THE VALIDITY OF "MEMORANDUM DECISIONS" (Francisco v. Permskul, Romero vs. CA). Even in RP, incorporation by reference is allowed IF ONLY TO AVOID THE CUMBERSOME REPRODUCTION OF THE DECISION OF THE LOWER COURTS, OR PORTIONS THEROF, IN THE DECISION OF THE HIGHER COURT. This is particularly true when the decision sought to be incorporated is a lengthy and thorough discussion of the facts and conclusions arrived at. (Award Paper in this case is 18 pages long, single spaced)

NORTHWEST ORIENT AIRLINES V. CA: A foreign judgment is presumed to be valid and binding in the country from which it comes, until the contrary is shown. It is also proper to presume the regularity of the proceedings and the giving of due notice therein.

Under Section 50, Rule 39 of the Rules of Court, a judgment in an action in personam of a tribunal of a foreign country having jurisdiction to pronounce the same is presumptive evidence of a right as between the parties and their successors-in-interest by a subsequent title. The judgment may, however, be assailed by evidence of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. Also, under Section 3 of Rule 131, a court, whether of the Philippines or elsewhere, enjoys the presumption that it was acting in the lawful exercise of jurisdiction and has regularly performed its official duty. 39

-Consequently, the party attacking a foreign judgment, the private respondent herein, had the burden of overcoming the presumption of its validity which it failed to do in the instant case.

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

WON Pacific Cement's right to due process was violated?

NO. There is no violation of due process even if no hearing was conducted, where the party was given a chance to explain his side of the controversy and he waived his right to do so.

ON FAILURE OF THE FOREIGN COURT TO REPLY

-Pacific Cement should not have waited almost 1 year for the foreign court's reply, as the court is not required to do so. A genuine concern for its cause should have prompted the private respondent to ascertain with all due diligence the correct amount of legal fees to be paid. The private respondent did not act with prudence and diligence thus its plea that they were not accorded the right to procedural due process cannot elicit either approval or sympathy from this Court.

ON PRESUMED BIAS OF THE ARBITRATOR

-the Arbitration clause specifically provides that if the arbitrator is an employee of the ONGC, it is not a ground for objection.


DISPOSITION: GRANT PETITION, ENFORCE FOREIGN JUDGMENT.

Magellan capital mngt corp vs. zosa 355 scra 157

-Under a management agreement, Magellan Capital Holdings (MCHC) appointed Magellan Capital Management Corp (MCMC) as manager for the operation of its business and affairs. Pursant thereto, Zosa, MCHC and MCMC entered into an "EMPLOYMENT AGREEMENT" where Zosa was designated as President and CEO of MCMC, and which provided that his term is co-terminous w/ the management agreement (until March 1996) unless sooner terminated.

DISPUTE

Zosa's was not re-elected by MCHC's Board of Directors on May 1995 for account of loss of trust and confidence arising from alleged violation of the resolution issued by MCHC's board of directors and of the non-competition clause of the Employment Agreement. Nevertheless, respondent Zosa was elected to a new position as MCHC's Vice-Chairman/Chairman for New Ventures Development.

-September 1995: Zosa resigned for good reason from VChair position under PAR7, EMPLOYMENT AGREEMENT: position had less responsibility and scope than President and Chief Executive Officer. Demanded that he be given termination benefits as provided in the Employment Agreement. Instead, he was terminated for cause (breach of SECTION 12) and was further advised that he shall have no further rights under the EMPLOYMENT AGREEMENT. His demand for termination benefits were granted however.

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

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

-Zosa, MCMC and MCHC each designated their nominees for the arbitration panel BUT Zosa ABANDONED RESORT TO ARBITRATION AND FILED AN ACTION FOR DAMAGES TO ENFORCE BENEFITS UNDER THE EMPLOYMENT AGREEMENT before RTC Cebu.
-MTD:

  1. RTC had no jurisdiction: should resort to Arbitration
  2. Venue improperly laid: all the parties are residents of Pasig City so the proper venue should be RTC Pasig, w/o admitting that Zosa had a COA.

*Zosa filed Amended Complaint

*RTC: MTD DISMISSED

  1. Validity and legality of the arbitration provision can only be determined after trial on the merits
  2. Amount of damages claimed (P100k) falls w/n jurisdiction of RTC

*MR DENIED. So MCMC and MCHC filed ANSWER AD CAUTELAM (w/ same arguments as MTD)

*PRETRIAL ORDER: limited the issue to be resolved on the VALIDITY OF THE ARBITRATION CLAUSE

>>>if void: WON Zosa entitled to damages as prayed for in his complaint or MCMC and MCHC for their counterclaim.

-mejo magulo, basta, from what I understood, MCMC and MCHC still insisted that the dispute is arbitrable, thus the RTC should

Dismiss it. As the RTC denied their motions and wanted to proceed with trial on the merits, they filed a R65 Petition for Certiorari before CA

*CA: RTC directed to resolve the issue on the validity or effectivity of the arbitration clause + suspend trial on the merits until the validity of the arbitration clause is resolved. MCMC and MCHC filed MOTIONS FOR PARTIAL RECON. Denied for lack of merit.

*RTC: rendered arbitration clause PARTIALLY VOID insofar as it concerns the composition of the panel of arbitrators (each of the parties elect 1 arbitrator); directed the parties to proceed w/ arbitration with 3 arbitrators, 1 for Zosa, 1 for MCMC and MCHC, and the 3rd to be selected by both parties.

-to appeal, MCMC and MCHC filed R45 Petition: RTC erred in ruling that the manner of selection of the panel arbitrators is void insofar as MCMC and MCHC represent the same interest and that Zosa is estopped from questioning the validity of the arbitration agreement as he already designated his own arbitrator.


ISSUES and RULING:

  1. WON the case should fall under SEC jurisdiction (apparently, this was raised as an issue before the CA). NO.

The controversy does not in anyway involve the election/appointment of officers of petitioner MCHC BUT THE ILLEGALITY OF THE ARBITRATION CLAUSE IN THE EMPLOYMENT AGREEMENT.

IT FALLS UNDER RTC. Under Republic Act No. 876, otherwise known as the "Arbitration Law," it is the regional trial court which exercises jurisdiction over questions relating to arbitration. Although the dispute stems from the validity of the termination of the service of a corporate officer, the issue on the validity and effectivity of the arbitration clause is determinable by the regular courts, and do not fall within the exclusive and original jurisdiction of the SEC.

LAW OF THE CASE DOCTRINE: a term applied to an established rule that when an appellate court passes on a question and remands the cause to the lower court for further proceedings, the question there settled becomes the law of the case upon subsequent appeal. MCMC and MCHC are therefore barred from challenging anew the authority of the RTC to resolve the validity of the arbitration clause, or else guilty of forum shopping.

  1. WON TC erred in voiding the arbitration clause as it would work injustice (in all probability) to Zosa? NO.

-R45 Petition is limited to reviewing errors of law.

-even if we review facts, RTC still correct:

*MCMC and MCHC represent the same interest. Though they are 2 corporations w/ distinct personalities, they represent the same interest. Thus, it would be expected that they would protect and preserve their own interest and neither would favor Zosa's interest during arbitration. If the arbitration clause would be followed, MCMC would have 1 arbitrator, MCHC would have another arbitrator, and Zosa would have 1. But MCMC is the manager of MCHC, MCHC would naturally favor its employer. Thus, their 2 votes would win vs. Zosa's lone vote.

-A2045, NCC: "Any clause giving one of the parties power to choose more arbitrators than the other is void and of no effect" (Article 2045, Civil Code).

  1. WON Zosa is estopped from assailing the validity of the arbitration clause? NO
    1. Issue of estoppel raised for the 1st time on appeal. Issues not raised in the pleadings cannot be resolved on review in higher courts.
    2. Employment agreements are contracts of adhesion. Any ambiguity in its provision is generally resolved against the party who drafted the document.

CHA: But nothing is ambiguous in the arbitration clause. It may be unfair but it's not ambiguous.

  1. Zosa never submitted himself to arbitration proceedings, immediately assailed the arbitration clause upon realizing the inequities that may mar the arbitration proceedings...


DISPOSITION: DISMISS PETITION. RTC AFFIRMED>

BF Corp vs. CA 288 scra 267

Facts:

-SHANG & BF Corp entered into a construction agreement where BF Corp would construct the main structure of the "EDSA Plaza Project (shopping mall). While construction was in progress, Shang decided to expand the project by engaging the services of BF Corp again so they entered into the main contract works.

-BF incurred delay w/c Shang considered as "serious and substantial". BF reasoned out that construction progressed in faithful compliance w/ 1st agreement BUT fire broke out damaging Phase 1 of the project. Shang proposed the renegotiation of the agreement between them and the parties entered an "Agreement for the Execution of Builder's Work for the EDSA Plaza Project" on May 30, 1991 that would cover construction work on projects as of May 1, 1991 until completion.

DISPUTE

-Accdg to Shang, BF Corp failed to complete construction and abandoned the project. The parties attempted to settle but they failed to come to an agreement.

-2 days later, BF Corp filed w/ RTC Pasig COMPLAINT FOR COLLECTION OF BALANCE DUE UNDER CONSTRUCTION AGREEMENT. Impleaded Shang and its Board of Directors.

-Shang et al. filed MOTION TO SUSPEND PROCEEDINGS, alleging that the formal trade contract provided for an ARBITRATION CLAUSE. Submitted the next day the Arb Clause which it failed to append.

-OPPOSITION TO THE MOTION: no formal contract though they entered into an agreement defining the rights and obligations in undertaking the project AND THE AGREEMENT DID NOT PROVIDE FOR ARBITRATION.

-REPLY: there was an arbitration clause. Suspension of the proceedings would not deprive the courts of jurisdiction, arbitration would expedite the settlement of the parties' claims.

-REJOINDER: NO arb clause, should declare Shang et al in default!

-SUR-REJOINDER (di naman sila masyadong makulit): BF Corp admitted the due execution of the "Articles of Agreement"
*RTC: there was a valid arbitration clause BUT DENIED THE MOTION TO SUSPEND because it found that the Arbitration Clause is not binding upon BF Corp:

  1. the "Conditions of Contract" which contains the Arbitration Clause is provided in the Articles of Agreement which appears to have been duly signed by the Board of Directors of Shang and thereafter acknowledged before a Notary Public. The Articles of Agreement, which is part of the Contract Documents for Builder's Work Trade Contractor...
  2. however, the Conditions of the Contract provides that 3 copies of the Contract Document shall be signed by the parties to the contract and distributed to the Owner and the Contractor for Safe-keeping. But the Conditions of Contract is NOT DULY SIGNED BY THE PARTIES ON ANY PAGE THEREOF (THOUGH IT BEARS THE INITIALS OF BF - BAYANI FERNANDO! - AND REYNALDO M. DE LA CRUZ BUT NOT REP FROM SHANG)
  3. assuming the arb clause was valid and binding, it was too late for Shang to invoke arbitration as the clause provides that the notice of the demand for arbitration shall be filed in writing w/ the other party w/n reasonable time after the rise of the dispute BUT IN NO CASE BE LATER THAN THE TIME OF FINAL PAYMENT , except as expressly stipulated in the contract. Allegedly, the time of final payment had elapsed not only because Shang took possession of the finished works and BF's billings for the payment remained pending since November 1991 BUT ALSO for the failure of Shang to file any written notice of demand to arbitrate. MR DENIED.

-Shang filed R65 Petition for certiorari before CA

*CA: REVERSE RTC

  1. Notarized copy of the Articles of Agreement bears the signature of BF Corps' and Shang's Board of Directors President.
    G-5, petition, pp. 227-229). The fact that Conditions of Contract containing the arbitration clause bears only the initials of BF Corp's reps w/o Shang's reps DOES NOT MILITATE AGAINST THE EFFECTIVITY of the arb clause as the container clause already contains the signatures of the reps of the parties.
  1. Only 2 days after the settlement of the dispute of the parties did BF Corp resort to file action before the court, during which Shang requested arbitration. As the Arbitration clause provides that the demand for arbitration should be made w/n reasonable time after the dispute has arisen and attempts to settle amicably had failed, Shang should be considered to have reasonably demanded arbitration.

ARB CLAUSE PROVISION CONTESTED.

Notice of the demand for arbitration dispute shall be filed in writing with the other party to the contract and a copy filed with the Project Manager. The demand for arbitration shall be made within a reasonable time after the dispute has arisen and attempts to settle amicably had failed; in no case, however, shall the demand be made later than the time of final payment except as otherwise expressly stipulated in the contract

ISSUE
WON the contract for the construction of the EDSA Plaza between petitioner BF Corporation and respondent Shangri-la Properties, Inc. embodies an arbitration clause in case of disagreement between the parties in the implementation of contractual provisions (i.e. WON the arbitration clause exists). YES

(discussion on petition for certiorari under r65 deleted)

BF's arguments to support its claim that there is no arbitration clause:

  1. TC found that "conditions of contract" embodying the arbitration clause is not duly signed by the parties
  2. Shang misrepresented before CA that they produced in the TC a notarized duplicate original copy of the construction agreement BUT IN FACT SUBMITTED MERE PHOTOCOPIES, W/ DUBIOUS AUTHENTICITY, BECAUSE:

(a) the Agreement for the Execution of Builder's Work for the EDSA Plaza Project does not contain an arbitration clause,

(b) private respondents "surreptitiously attached as Annexes "G-3" to "G-5" to their petition before the Court of Appeals but these documents are not parts of the Agreement of the parties as "there was no formal trade contract executed,"

(c) if the entire compilation of documents "is indeed a formal trade contract," then it should have been duly notarized,

(d) the certification from the Records Management and Archives Office dated August 26, 1993 merely states that "the notarial record of Nilberto Briones . . . is available in the files of (said) office as Notarial Registry Entry only,"

(e) the same certification attests that the document entered in the notarial registry pertains to the Articles of Agreement only without any other accompanying documents, and therefore, it is not a formal trade contract, and

(f) the compilation submitted by respondents are a "mere hodge-podge of documents and do not constitute a single intelligible agreement.

***IN SHORT, DENY EXISTENCE OF ARB CLAUSE BECAUSE SHANG'S REPS DID NOT SIGN THE "CONDITIONS OF CONTRACT", A SEPARATE DOCUMENT THAT CONTAINED THE ARBITRATION CLAUSE.

  1. FORMAL REQUISTIES OF AN ARBITRATION AGREEMENT COMPLIED WITH : RA 876

Sec. 4. Form of arbitration agreement. — A contract to arbitrate a controversy thereafter arising between the parties, as well as a submission to arbitrate an existing controversy, shall be in writing and subscribed by the party sought to be charged, or by his lawful agent.

The making of a contract or submission for arbitration described in section two hereof, providing for arbitration of any controversy, shall be deemed a consent of the parties of the province or city where any of the parties resides, to enforce such contract of submission. (Emphasis supplied.).

SO SUMMARY:

(a) it must be in writing and

(b) it must be subscribed by the parties or their representatives.

"subscribe": to write underneath, as one's name; to sign at the end of a document. That word may sometimes be construed to mean to give consent to or to attest.

>>>IN THIS CASE: these were complied with. The ARTICLES OF AGREEMENT, which incorporates all the other contracts and agreements between the parties, was signed by representatives of both parties and duly notarized. The failure of the private respondent's representative to initial the "Conditions of Contract" would therefor not affect compliance with the formal requirements for arbitration agreements because that particular portion of the covenants between the parties was included by reference in the Articles of Agreement.

ON ARGUMENT THAT THE CONTRACT INCORPORATING ARB CLAUSE IS PART OF A "HODGE-PODGE" DOCUMENT: UNTENABLE

- A contract need not be contained in a single writing. It may be collected from several different writings which do not conflict with each other and which, when connected, show the parties, subject matter, terms and consideration, as in contracts entered into by correspondence. A contract may be encompassed in several instruments even though every instrument is not signed by the parties, since it is sufficient if the unsigned instruments are clearly identified or referred to and made part of the signed instrument or instruments. Similarly, a written agreement of which there are two copies, one signed by each of the parties, is binding on both to the same extent as though there had been only one copy of the agreement and both had signed it.

THIS LINE SUMMARIZES IT ALL: In other words, the subscription of the principal agreement effectively covered the other documents incorporated by reference therein.

ON REASONABLE TIME: "Reasonableness" is a relative term and the question of whether the time within which an act has to be done is reasonable depends on attendant circumstances.

-one-month period from the time the parties held a conference on July 12, 1993 until private respondent SPI notified petitioner that it was invoking the arbitration clause, is a reasonable time. Indeed, petitioner may not be faulted for resorting to the court to claim what was due it under the contract. However, we find its denial of the existence of the arbitration clause as an attempt to cover up its misstep in hurriedly filing the complaint before the lower court.

LOWER COURT DOES NOT LOSE ITS JURISDICTION: SEC7, RA 876 PROVIDES THAT PROCEEDIGNS HAVE ONLY BEEN STAYED. After the special proceeding of arbitration 16 has been pursued and completed, then the lower court may confirm the award made by the arbitrator.

"Its potentials as one of the alternative dispute resolution methods that are now rightfully vaunted as "the wave of the future" in international relations, is recognized worldwide. To brush aside a contractual agreement calling for arbitration in case of disagreement between the parties would therefore be a step backward."

DISPOSITION: AFFIRM CA, DENY CERTIORARI

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