Republic of the Philippines SUPREME COURT Manila

SECOND DIVISION BENGUET CORPORATION, Petitioner, G.R. No. 163101 Present: QUISUMBING, J., Chairperson, CARPIO, CARPIO MORALES, TINGA, and DEPARTMENT OF ENVIRONMENT VELASCO, JR., JJ. AND NATURAL RESOURCES -MINES ADJUDICATION BOARD and J.G. REALTY AND MINING Promulgated: CORPORATION, Respondents. February 13, 2008 x-----------------------------------------------------------------------------------------x DECISION VELASCO, JR., J.: The instant petition under Rule 65 of the Rules of Court seeks the annulment of the December 2, 2002 Decision[1] and March 17, 2004 Resolution[2] of the Department of Environment and Natural Resources-Mining Adjudication Board (DENR-MAB) in MAB Case No. 0124-01 (Mines Administrative Case No. R-M2000-01) entitled Benguet Corporation (Benguet) v. J.G. Realty and Mining Corporation (J.G. Realty). The December 2, 2002 Decision upheld the March 19, 2001 Decision[3] of the MAB Panel of Arbitrators (POA) which canceled the Royalty Agreement with Option to Purchase (RAWOP) dated June 1, 1987[4] between Benguet and J.G. Realty, and excluded Benguet from the joint Mineral Production Sharing Agreement (MPSA) application over four mining - versus -

claims. The March 17, 2004 Resolution denied Benguets 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 Agreement[5] 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, Benguets 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 Benguets 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 Courts 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 Courts 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 rulemaking power, transfers to the CA pending cases involving a review of a quasi-judicial bodys decisions, such transfer relates only to p rocedure; hence, it does not impair the substantive and vested rights of the parties. The aggrieved partys 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 quasijudicial 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. 1-91among these agencies areindicate 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).[15] However, the Carpio ruling was not

applied toAsaphil 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 ones hand even if there is a law which allows him to do so.[17]

The MAB, meanwhile, denied Benguets 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. Realtys 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. Realtys contention, that prior resort to arbitration is unavailing in the instant case because the POAs 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 departments 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. Realtys argument on this matter must fail. As to J.G. Realtys 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 POAs 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-M2000-01 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 MABs 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 POAs 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) Benguets failure to pay J.G. Realtys royalties for the mining claims; and (2) Benguets 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. Benguets 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 OWNERs 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 pickedup 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, Benguets 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 Benguets 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 anothers 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.
Republic of the Philippines SUPREME COURT Manila

SECOND DIVISION KOREA TECHNOLOGIES CO., LTD., Petitioner, G.R. No. 143581

Present:

- versus -

HON. ALBERTO A. LERMA, in his capacity as Presiding Judge of Branch 256 of Regional Trial Court of Muntinlupa City, and PACIFIC GENERAL STEEL Promulgated: MANUFACTURING CORPORATION, Respondents. January 7, 2008 x-----------------------------------------------------------------------------------------x DECISION

QUISUMBING, J., Chairperson, CARPIO, CARPIO MORALES, TINGA, and VELASCO, JR., JJ.

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 Contract[1] 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, 1997[2] 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 plants 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 Worths 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 Certificate[4] 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 letter[6] to PGSMC threatening criminal action for violation of Batas Pambansa Blg. 22 in case of nonpayment. On the same date, the wife of PGSMCs 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. 98-117[8] 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 Counterclaim[9] 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 plaintiffs 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 PGSMCs fault since it failed to pro cure 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 PGSMCs memorandum of July 22, 1998 and seeking dismissal of PGSMCs 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 PGSMCs motion for inspection; (2) denying KOGIES motion for reconsideration of the July 23, 1998 RTC Order; and (3) denying KOGIES motion to dismiss PGSMCs compulsory counterclaims as these counterclaims fell within the requisites of compulsory counterclaims. On October 2, 1998, KOGIES filed an Urgent Motion for Reconsideration[17] of the September 21, 1998 RTC Order granting inspection of the plant and denying dismissal of PGSMCs 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 Petition[20] 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 Sheriffs 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 COURTS 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 RESPONDENTS 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 Courts 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-claimstates, 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. 04-204-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, PGSMCs Answer is not an initiatory pleading which requires a certification against forum

shopping under Sec. 5[24] 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 PGSMCs 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 RTCs 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 inst ance, 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 befinal 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 2040[33] 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 ofEastboard 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 Codes 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, arbitrationalong with mediation, conciliation and negotiationis 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 Arbitration[41] 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 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

preparatories and 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 pretrial 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. 35[43] 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 partys 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 theUNCITRAL 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 Angeles[47] 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 PGSMCs 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. Petitioners 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 RTCs 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) (ii) (iii) (iv) to prevent irreparable loss or injury; to provide security for the performance of any obligation; to produce or preserve any evidence; or 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 orders 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 nonoperational, 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 Worths 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 family[51] 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. FIRST DIVISION ABS-CBN BROADCASTING CORPORATION, Petitioner, G.R. No. 169332 Present: PUNO, C.J., Chairperson, SANDOVAL-GUTIERREZ, CORONA, AZCUNA and LEONARDO-DE CASTRO, JJ.

-versus-

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

Promulgated: February 11, 2008

x--------------------------------------------------x 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 decision[1] and August 16, 2005 resolution[2] 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-CBNs 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 arbitrators 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 Appeals[10] 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 quasijudicial 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) (2)

(3)

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; 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 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 petitioners 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 arbitrators 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.[25] Thus, 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.