UNIVERSITY OF SANTO

TOMAS
Editors: Tricia Lacuesta
Lorenzo Luigi Gayya
Cristopher Reyes
Macky Siazon
Janine Arenas
Ninna Bonsol
Lloyd Javier

ALTERNATIV
E DISPUTE
RESOLUTIO
N
Recent Jurisprudence

ADR CASES (First Semester 2016-2017)

Table of Contents
Republic Act No. 9285

Republic Act No. 876

Grounds for vacating an arbitral award

Doctrine of Separability 6
E.O. No. 1008

Special ADR Rules 12

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ALTERNATIVE DISPUTE RESOLUTION

Republic Act No. 9285
KOREA TECHNOLOGIES CO., LTD. v. HON. ALBERTO A. LERMA, in his capacity
as Presiding Judge of Branch 256 of Regional Trial Court of Muntinlupa City,
and PACIFIC GENERAL STEEL MANUFACTURING CORPORATION
G.R. No. 143581, January 7, 2008, Velasco, Jr., J.
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.
Facts:
Korean Technologies Co., Ltd. (KOGIES) and Pacific General Steel
Manufacturing Corporation (PGSMC) entered into a contract whereby the former shall
construct a liquefied gas cylinder manufacturing plant in the Philippines for a total
contract price of $1,530,000. PGSMC issued checks as payment of the contract but
were dishonored. Dispute arose between the two parties, with KOGIES suing PGSMC
for BP 22 and PGSMC suing KOGIES for estafa, alleging that it supplied sub-par quality
equipment. Meanwhile, KOGIES insisted that their disputes should be settled by
arbitration as agreed upon in Article 15, the arbitration clause of their contract.
Thereafter, 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. Subsequently, KOGIES filed a complaint for specific
performance before the Regional Trial Court (RTC), and prayed that a Temporary
Restraining Order (TRO) be issued to restrain PGSMC from dismantling and
transferring the machinery and equipment installed in the plant which the latter
threatened to do.
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.
Issue:
Whether Article 15 of the arbitration clause of the contract is contrary to
public policy and ousted the court of its jurisdiction over the case.
Ruling:
No. 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.

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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 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.
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.

TUNA PROCESSING, INC. v. PHILIPPINE KINGFORD, INC.

G.R. No. 185582 February 29, 2012, Perez, J.
When a party enters into a contract containing a foreign arbitration clause
and, as in this case, in fact submits itself to arbitration, it becomes bound by the
contract, by the arbitration and by the result of arbitration, conceding thereby the
capacity of the other party to enter into the contract, participate in the arbitration
and cause the implementation of the result.
Facts:
Kanemitsu Yamaoka entered into a MOA with five Philippine tuna processors
including Kingford Inc. This MOA provides for the establishment of Tuna Processors,
Inc. The tuna processors withdrew from Tuna Processors Inc. and retracted from their
obligations. Tuna Processors submitted the dispute for arbitration before the
International Centre for Dispute Resolution in California and subsequently won
against Kingford. Tuna Processors filed a Petition for Confirmation, Recognition, and
Enforcement of Foreign Arbitral Award before the RTC. In response, Kingford filed a
motion to dismiss to which the RTC denied for lack of merit. The case was re-raffled
to a different RTC to which in branch, Tuna Processors petition was denied on the
ground that it lacked legal capacity to sue in the Philippines on the ground that it is a
corporation established in California and not licensed to do business in the
Philippines.
Issue:
Whether a foreign corporation not licensed to do business in the Philippines
can sue to recognize an arbitral award.
Ruling:
Yes. It is in the best interest of justice that in the enforcement of a foreign
arbitral award, the Court denies availment by the losing party of the rule that bars
foreign corporations not licensed to do business in the Philippines from maintaining a
suit in our courts. Clearly, on the matter of capacity to sue, a foreign arbitral award

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should be respected not because it is favored over domestic laws and procedures,
but because Republic Act No. 9285 has certainly erased any conflict of law question.
Finally, even assuming, only for the sake of argument, that the court a quo
correctly observed that the Model Law, not the New York Convention, governs the
subject arbitral award, petitioner may still seek recognition and enforcement of the
award in Philippine court, since the Model Law prescribes substantially identical
exclusive grounds for refusing recognition or enforcement.

EQUITABLE PCI BANKING CORPORATION (EPCIB) v. RCBC CAPITAL

CORPORATION
G.R. No. 182248, December 18, 2008, VELASCO, JR., J.
RTC decision of an assailed arbitral award is appealable to the CA.
Facts:
EPCIB and the individual shareholders of Bankard, Inc., as sellers, and RCBC,
as buyer, executed a Share Purchase Agreement (SPA) for the purchase of
petitioners interests in Bankard. Under the SPA, EPCIB jointly and severally represent
and warrant Financial Condition of Bankard. RCBC paid the balance of the contract
price. Thereafter, RCBC informed petitioners of its having overpaid the purchase price
of the subject shares, claiming that there was an overstatement of valuation of
accounts amounting to P478 million, resulting in the overpayment of over P616
million. Thus, RCBC claimed that EPCIB violated their warranty, as sellers, embodied
in the SPA and prayed for the rescission of the SPA, restitution of the purchase price,
payment of actual damages and legal interest. RCBC, in accordance with the SPA,
filed a Request for Arbitration. The tribunal ruled in favor of RCBC which later on filed
with the RTC a Motion to Confirm Partial Award. EPCIB countered with a Motion to
Vacate the Partial Award. RTC issued the first assailed order confirming the Partial
Award and denying the adverted separate motions to vacate and to suspend and
inhibit. From the assailed orders, EPCIB came directly to this Court through this
petition for review.
Issue:
Whether EPCIB erroneously filed an appeal before the SC instead of CA.
Ruling:
Yes. The proper mode of appeal assailing the decision of the RTC confirming as
arbitral award is an appeal before the CA pursuant to Sec. 46 of Republic Act No. (RA)
9285, otherwise known as the Alternative Dispute Resolution Act of 2004. As a rule,
the award of an arbitrator cannot be set aside for mere errors of judgment either as
to the law or as to the facts since any other rule would make an award the
commencement, not the end, of litigation. Errors of law and fact, or an erroneous
decision of matters submitted to the judgment of the arbitrators, are insufficient to
invalidate an award fairly and honestly made. Nonetheless, arbitrators cannot resolve
issues beyond the scope of the submission agreement. The parties to such an
agreement are bound by the arbitrators award only to the extent and in the manner
prescribed by the contract and only if the award is rendered in conformity thereto.
Finally, while a court is precluded from overturning an award for errors in
determination of factual issues, nevertheless, if an examination of the record reveals

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no support whatever for the arbitrators determinations, their award must be
vacated. In the same manner, an award must be vacated if it was made in manifest
disregard of the law.

Republic Act No. 876

KOPPEL, INC. (FORMERLY KNOWN AS KPL AIRCON, INC.) v. MAKATI ROTARY
CLUB FOUNDATION, INC.
G.R. No. 198075 September 4, 2013, Perez, J.
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.
Facts:
Fedders Koppel Inc. (FKI) bequeathed a parcel of land in favor of Makati Rotary
Club Foundation, Inc. (Makati Rotary) by way of conditional donation. One of the
conditions of the donation required Makati Rotary to lease to FKI the land for a period
of 25 years, extendible for another 25 years. The lease contract further states that
any disagreement to the interpretation, application, or execution of the contract shall
be referred to arbitration (arbitration clause). Makati Rotary accepted the donation
with all of its conditions. Before the term of the lease ended, FKI and Makati Rotary
extended the lease to only 5 years. The lease contract has the same arbitration
clause as that of the previous lease contract. Three years after the extension, FKI sold
all its rights to Koppel, Inc. (Koppel). Thus, the lease contract herein was assigned
and assumed by Koppel. Koppel however, refused to pay the rentals of the lease.
According to it, the extension of the lease is null and void because the condition in
the donation states that in case the lease shall be extended, it shall be for another 25
years. In this case, the extension is only for five years and thus it violates the
condition stated in the donation. Due to such refusal Makati Rotary filed an ejectment
suit against Koppel. The RTC and the CA ruled in favor of Makati Rotary. Koppel
contended that the RTC and CA do not have jurisdiction over the ejectment suit
because the lease contract provided an arbitration clause and therefore the case
must be referred to arbitration first.
Issue:
Whether the ejectment suit must be referred to arbitration before regular courts
can take cognizance of the case.
Ruling:
Yes, the ejectment suit must be referred to arbitration before regular courts can
take cognizance of the case since the lease contract provided for an arbitration
clause. Under RA 876, 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. It is clear
that under the law, the ejectment suit should have been stayed; Koppel and Makati

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Rotary should have been referred to arbitration pursuant to the arbitration clause of
the lease contract. The violation of RA 876 renders all proceedings in the regular
court invalid. Gone should be the days when courts treat valid arbitration agreements
with disdain and hostility, if not outright jealousy; and then get away with it. Courts
should instead learn to treat alternative means of dispute resolution as effective
partners in the administration of justice and, in the case of arbitration agreements, to
afford them judicial restraint.

Ground for vacating an arbitral award

RCBC CAPITAL CORPORATION v. BANCO DE ORO UNIBANK, INC.
G.R. No. 196171, December 10, 2012, Villarama, Jr., J.
It is the finding of evident partiality which constitutes a ground for vacating an
arbitral award.
Facts:
RCBC entered into a Share Purchase Agreement (SPA) with Equitable-PCI Bank
(EPCIB) and the individual shareholders of Bankard, Inc. (Bankard) for the sale of the
shares of Bankard to RCBC. After the sale, RCBC complained of an overpayment of
the shares saying that there was an overstatement of the valuation of the said shares
and that the sellers violated their warranty under the SPA. As no settlement was
reached, RCBC commenced arbitration proceedings with the International Chamber of
Commerce arbitration branch (ICC-ICA). Subsequently, the arbitration tribunal was
constituted, this consist of Neil Kaplan nominated by RCBC; Justice Santiago Kapunan,
nominated by EPCIB; and Ian Barker, appointed by ICC-ICA as chairman. Then, the
ICC-ICA required the parties to pay the advance on costs pursuant to ICC rules on
arbitration. RCBC complied but EPCIB declined despite repeated demands. For its
part, EPCIB declines to pay because RCBC should bear the cost of prosecuting its own
claim. RCBC contended that the refusal to pay by EPCIB will lead to the termination of
the arbitration and thus would be prejudicial for RCBC. Then, RCBC paid the share of
EPCIB in the advance on costs for the arbitration to proceed. At this stage, Ian Barker
issued a letter to RCBC and EPCIB recommending an article by Matthew Secomb to
guide the parties at what action to take regarding their conflict. This prompted the
move by RCBC to pray to the tribunal to declare EPCIB in default, and issue an order
directing the latter to reimburse the advance on costs paid by RCBC. Thus, the
tribunal issued a partial award directing EPCIB to pay its share on the advance on
costs, and if it failed to do so, it shall be declared on default and be ordered to
reimburse RCBC on the amount it paid as advance on costs. This award was
questioned by EPCIB saying that it was issued with partiality since Ian Barker favored
RCBC by issuing a letter recommending an article by Matthew Secomb. According to
them, this letter was the source of RCBCs course of action. RCBC contended that
awards by arbitral tribunal are beyond judicial review.
Issue:
Whether an award by an arbitral tribunal can be subject to judicial review.
Ruling:
Yes. An award by an arbitral tribunal can be subject to judicial review on the
ground of evident partiality. In this case, the SC adopted the reasonable impression of

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partiality standard, which requires a showing that a reasonable person would have to
conclude that an arbitrator was partial to the other party in the arbitration. Such
interest or bias however, must be direct, definite, and capable of demonstration
rather than remote, uncertain, or speculative. The act of Ian Barker furnishing the
parties with copies of Matthew Secombs article is indicative of partiality such that a
reasonable man would have to conclude that he was favoring RCBC. Matthew
Secombs article specifically dealt with the situation where one of the parties to
international commercial arbitration refuses to pay its share on the advance on costs.
With his letter, Ian Barker showed a strong inclination that he would grant such relief
as RCBC prayed. By furnishing a copy of the article, Ian Barker armed RCBC with
supporting legal arguments, which resulted to the latter succeeding to avail of a
remedy. Generally, courts are without power to amend or overrule an arbitral award
merely because of disagreement with matters of law or facts determined by the
arbitrators. They will not review the findings of law and fact contained in an award,
and will not undertake to substitute their judgment for that of the arbitrators.

Doctrine of Separability
JORGE GONZALES and PANEL OF ARBITRATORS v. CLIMAX MINING LTD.,
CLIMAX-ARIMCO MINING CORP., and AUSTRALASIAN PHILIPPINES MINING
INC.
G.R. No. 161957 January 22, 2007, Tinga, J.
The doctrine of separability or severability enunciates that an arbitration
agreement is independent of the main contract. The arbitration agreement is to be
treated as a separate agreement and the arbitration agreement does not
automatically terminate when the contract of which it is part comes to an end.
Facts:
Two petitions arose from one addendum contract entered into by the parties.
In one, the Court held that the DENR Panel of Arbitrators has no jurisdiction over the
complaint for the annulment of the said contract as it should have been brought to
the regular courts. The petitioner claims that the DENR Panel had jurisdiction as the
case involves a mining dispute. Climax claims that it should not be brought for
arbitration under RA 876 on the ground that the arbitration clause in the Addenum
Contract should be treated mutually exclusive from the other terms of the contract
and a claimed rescission of the main contract does not avoid the duty to arbitrate.
Issue:
Whether arbitration is the proper recourse.
Ruling:
Yes. The Court held that R.A. No. 876 explicitly confines the court's authority
only to the determination of whether or not there is an agreement in writing
providing for arbitration. In the affirmative, the statute ordains that the court shall
issue an order "summarily directing the parties to proceed with the arbitration in
accordance with the terms thereof." If the court, upon the other hand, finds that no
such agreement exists, "the proceeding shall be dismissed."

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The separability of the arbitration agreement is especially significant to the
determination of whether the invalidity of the main contract also nullifies the
arbitration clause. Indeed, the doctrine denotes that the invalidity of the main
contract, also referred to as the container contract, does not affect the validity of
the arbitration agreement. Irrespective of the fact that the main contract is invalid,
the arbitration clause/agreement still remains valid and enforceable.
The Court added that when it declared that the case should not be brought for
arbitration, it should be clarified that the case referred to is the case actually filed by
Gonzales before the DENR Panel of Arbitrators, which was for the nullification of the
main contract on the ground of fraud, as it had already been determined that the
case should have been brought before the regular courts involving as it did judicial
issues.

CARGILL PHILIPPINES, INC. v. SAN FERNANDO REGALA TRADING, INC.

G.R. No. 175404 January 31, 2011, Peralta, J.
A contract is required for arbitration to take place and to be binding.
Submission to arbitration is a contract and a clause in a contract providing that all
matters in dispute between the parties shall be referred to arbitration is a contract.
Facts:
San Fernando Inc. Filed with the RTC a Complaint for Rescission of Contract
against Cargill for breach of contract. Cargill filed a Motion to Dismiss and To Refer
Controversy to Voluntary Arbitration as the contract between them had an arbitration
clause. Respondent San Fernando Inc. filed an Opposition stating that the RTC has
jurisdiction over the action and could not be changed by an arbitration clause. The
RTC ruled in favor of San Fernando Inc. The CA upheld the RTCs decision.
Issue:
Whether arbitration can proceed.
RULING:
Yes. An arbitration agreement which forms part of the main contract shall not
be regarded as invalid or non-existent just because the main contract is invalid or did
not come into existence, since the arbitration agreement shall be treated as a
separate agreement independent of the main contract. To reiterate, a contrary ruling
would suggest that a party's mere repudiation of the main contract is sufficient to
avoid arbitration and that is exactly the situation that the separability doctrine
sought to avoid. Thus, we find that even the party who has repudiated the main
contract is not prevented from enforcing its arbitration clause.
Moreover, it is worthy to note that respondent filed a complaint for rescission
of contract and damages with the RTC. In so doing, respondent alleged that a
contract exists between respondent and petitioner. It is that contract which provides
for an arbitration clause which states that "any dispute which the Buyer and Seller
may not be able to settle by mutual agreement shall be settled before the City of
New York by the American Arbitration Association. The arbitration agreement clearly
expressed the parties' intention that any dispute between them as buyer and seller

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should be referred to arbitration. It is for the arbitrator and not the courts to decide
whether a contract between the parties exists or is valid.

E.O. No. 1008

F.F. CRUZ & CO., INC. v. HR CONSTRUCTION CORP.
G.R. No. 187521 March 14, 2012, Reyes, J.
Generally, the arbitral award of CIAC is final and may not be appealed except
on questions of law.
Facts:
FF Cruz entered in to a contract with the DPWH for the construction of the
Magsaysay Viaduct. In turn, FF Cruz entered into a Subcontract Agreement with HRCC
the construction of a portion of the project. They agreed upon a price of P31, 293,
532.72. They further agreed than when HRCC requests payment, they should also
provide progress accomplishment reports approved by FF Cruz. Eventually, FF Cruz
refused to pay the progress bills of HRCC, thus HRCC sent a letter to FF Cruz. With no
other recourse, HRCC submitted the dispute before the CIAC as their contract
contained an arbitration clause where the CIAC gave a decision in favor of HRCC. The
CA affirmed the CIACs decision.
Issue:
Whether the findings of the CIAC are final and may not be appealed.
Ruling:
Yes. Generally, the arbitral award of CIAC is final and may not be appealed
except on questions of law. Executive Order (E.O.) No. 100822 vests upon the CIAC
original and exclusive jurisdiction over disputes arising from, or connected with,
contracts entered into by parties involved in construction in the Philippines. Under
Section 19 of E.O. No. 1008, the arbitral award of CIAC "shall be final and
inappealable except on questions of law which shall be appealable to the Supreme
Court."
Thus, in cases assailing the arbitral award rendered by the CIAC, this Court
may only pass upon questions of law. Factual findings of construction arbitrators are
final and conclusive and not reviewable by this Court on appeal. This rule, however,
admits of certain exceptions namely when (1) the award was procured by corruption,
fraud or other undue means; (2) there was evident partiality or corruption of the
arbitrators or of any of them; (3) the arbitrators were guilty of misconduct in refusing
to postpone the hearing upon sufficient cause shown, or in refusing to hear evidence
pertinent and material to the controversy; (4) one or more of the arbitrators were
disqualified to act as such under section nine of Republic Act No. 876 and willfully
refrained from disclosing such disqualifications or of any other misbehavior by which
the rights of any party have been materially prejudiced; or (5) the arbitrators
exceeded their powers, or so imperfectly executed them, that a mutual, final and
definite award upon the subject matter submitted to them was not made.

METROPOLITAN CEBU WATER DISTRICT v. MACTAN ROCK INDUSTRIES, INC.

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G.R. No. 172438 July 4, 2012, Mendoza, J.
The text of Section 4 of E.O. No. 1008 is broad enough to cover any dispute
arising from, or connected with, construction contracts, whether these involve mere
contractual money claims or execution of the works. This jurisdiction cannot be
altered by stipulations restricting the nature of construction disputes, appointing
another arbitral body, or making that bodys decision final and binding.
Facts:
MCWD entered into a Water Supply Contract with MRII wherein the MRII would
supply MCWD with potable water with a minium guaranteed annual volume. MRII
filed a complaint against MCWD with the CIAC as an arbitration clause exists on the
contract. MCWD filed a motion to dismiss on the ground that CIAC had no jurisdiction
over the case as the contract was not for construction.
Issue:
Whether or not the CIAC has jurisdiction over the case.
Ruling:
Yes. The jurisdiction of courts and quasi-judicial bodies is determined by the
Constitution and the law. It cannot be fixed by the will of the parties to the dispute,
nor can it be expanded or diminished by stipulation or agreement. The text of Section
4 of E.O. No. 1008 is broad enough to cover any dispute arising from, or connected
with, construction contracts, whether these involve mere contractual money claims
or execution of the works. This jurisdiction cannot be altered by stipulations
restricting the nature of construction disputes, appointing another arbitral body, or
making that bodys decision final and binding.
Thus, unless specifically excluded, all incidents and matters relating to
construction contracts are deemed to be within the jurisdiction of the CIAC. Based on
the previously cited provision outlining the CIACs jurisdiction, it is clear that with
regard to contracts over which it has jurisdiction, the only matters that have been
excluded by law are disputes arising from employer-employee relationships, which
continue to be governed by the Labor Code of the Philippines. Moreover, this is
consistent with the policy against split jurisdiction.

STRONGHOLD INSURANCE COMPANY, INC. v. SPOUSES RUNE and LEA

STROEM
G.R. No. 204689. January 21, 2015, Second Division. Leonen, J.

The Performance Bond is significantly and substantially connected to the

construction contract that there can be no doubt it is the CIAC, under Section 4 of EO
No. 1008, which has jurisdiction over any dispute arising from or connected with it.

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Facts:

Spouses Rune and Lea Stroem (Spouses Stroem) entered into a contract with
Asis-Leif & Company, Inc. (Asis-Leif) whereby the later undertook to build a house for
Spouses Stroem. The contract includes a performance bond issued by Stronghold
Insurance Company, Inc. (Stronghold) securing the obligation thereby binding itself
solidarily liable with Asis-Leif in case the later failed to perform its obligation. Due to
the failure of Asis-Leif to finish the project despite demands, Spouses Stroem
rescinded the agreement. Later, Spouses Stroem filed a complaint for breach of
contract and for sum of money with a claim for damages against Asis-Leif, Ms.
Cynthia Asis-Leif, and Stronghold.

The RTC rendered a judgment in favor of the Spouses Stroem and ordered
Stronghold to pay the spouses. Both parties appeal to the CA which affirmed the
decision of the RTC with modification as to the amount of attorneys fees. Hence this
petition. Before the SC, Stronghold contends that RTC never acquired jurisdiction of
the case in view of the arbitration clause in the agreement and the lower court
should have ordered the parties to proceed with the arbitration.

Issues:

1. Whether the dispute involves a construction contract.

2. Whether the CIAC has exclusive jurisdiction over the controversy between
the parties.

Ruling:

1. Yes. When a dispute arises from a construction contract, the CIAC has
exclusive and original jurisdiction. Construction has been defined as referring to "all
on-site works on buildings or altering structures, from land clearance through
completion including excavation, erection and assembly and installation of
components and equipment." In this case, there is no dispute as to whether the

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Owners-Contractor Agreement between Asis-Leif and respondents is a construction
contract. Petitioner and respondents recognize that CIAC has jurisdiction over
disputes arising from the agreement.

2. Yes. A performance bond, which is meant "to guarantee the supply of labor,
materials, tools, equipment, and necessary supervision to complete the project," is
significantly and substantially connected to the construction contract and, therefore,
falls under the jurisdiction of the CIAC. Although not the construction contract itself,
the performance bond is deemed as an associate of the main construction contract
that it cannot be separated or severed from its principal. The Performance Bond is
significantly and substantially connected to the construction contract that there can
be no doubt it is the CIAC, under Section 4 of EO No. 1008, which has jurisdiction over
any dispute arising from or connected with it.

GERARDO LANUZA, JR. AND ANTONIO O. OLBES v. BF CORPORATION,

SHANGRI-LA PROPERTIES, INC., ALFREDO C. RAMOS, RUFO B. COLAYCO,
MAXIMO G. LICAUCO III, AND BENJAMIN C. RAMOS
G.R. No. 174938, October 1, 2014, Leonen, J.
In Heirs of Augusto Salas, the Court affirmed the basic arbitration principle
that only parties to an arbitration agreement may be compelled to submit to
arbitration.
Facts:
BF corporation entered into agreements with Shangri-La wherein it undertook
to construct for Shangri-La. Shangri-La defaulted in payment but the construction
pushed through. After the completion of the establishments, Shangri-La refused to
pay the balance. A complaint was filed by BF Corporation and Shangri-La moved to
suspend the proceedings in accordance with the arbitration clause provided in its
contract. In response, BF Corporation opposed the motion to suspend the
proceedings. The RTC denied the motion to suspend the proceedings.
Petitioners, as former members of Shangri-Las board of directors, filed an
answer to BF Corporations complaint, with compulsory counterclaim against BF
Corporation and crossclaim against Shangri-La. In the CA, the court held that the
dispute be submitted for arbitration. The Arbitral Tribunal rendered a decision, finding
that BF Corporation failed to prove the existence of circumstances that render
petitioners and the other directors solidarily liable. It ruled that petitioners and
Shangri-Las other directors were not liable for the contractual obligations of ShangriLa to BF Corporation.
Issue:
Whether the petitioners should be made parties to the arbitration
proceedings, pursuant to the arbitration clause provided in the contract
between BF Corporation and Shangri-La.

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Ruling:
Yes. When there are allegations of bad faith or malice against corporate
directors or representatives, it becomes the duty of courts or tribunals to determine if
these persons and the corporation should be treated as one. Hence, when the
directors, as in this case, are impleaded in a case against a corporation, alleging
malice or bad faith on their part in directing the affairs of the corporation,
complainants are effectively alleging that the directors and the corporation are not
acting as separate entities.
However, in ruling that petitioners may be compelled to submit to the
arbitration proceedings, we are not overturning Heirs of Augusto Salas wherein this
court affirmed the basic arbitration principle that only parties to an arbitration
agreement may be compelled to submit to arbitration. In that case, this court
recognized that persons other than the main party may be compelled to submit to
arbitration, e.g., assignees and heirs. Assignees and heirs may be considered parties
to an arbitration agreement entered into by their assignor because the assignors
rights and obligations are transferred to them upon assignment. In other words, the
assignors rights and obligations become their own rights and obligations. In the
same way, the corporations obligations are treated as the representatives
obligations when the corporate veil is pierced.
In cases alleging solidary liability with the corporation or praying for the
piercing of the corporate veil, parties who are normally treated as distinct individuals
should be made to participate in the arbitration proceedings in order to determine if
such distinction should indeed be disregarded and, if so, to determine the extent of
their liabilities.

Special ADR Rules

DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES (DENR) v.
UNITED PLANNERS CONSULTANTS, INC. (UPCI)
G.R. No. 212081, February 23, 2015, PERLAS-BERNABE, J.
The Special ADR Rules, as far as practicable, should be made to apply not
only to the proceedings on confirmation but also to the confirmed awards execution.
Facts:
Petitioner and respondent entered into a consultancy agreement. Petitioner
was able to pay only 47% of the total contract price. Consequently, respondent filed a
complaint against petitioner. The case then was referred to arbitration and the parties
agreed to adopt the CIAC Revised Rules Governing Construction ArbitratioN (CIAC
Rules) to govern the arbitration proceedings. The Arbitral Tribunal rendered its
decision in favour of respondent. Thereafter, the petitioner filed a motion for
reconsideration which the Arbitral Tribunal merely noted without any action, claiming
that it had already lost jurisdiction over the case after it had submitted to the RTC its
Report together with a copy of the Arbitral Award.
Petitioner filed a motion for reconsideration before the RTC but the RTC
confirmed the Arbitral Award. Thus, respondent moved for the issuance of a writ of
execution, to which no comment/opposition was filed by petitioner despite the RTCs

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ADR CASES (First Semester 2016-2017)

directive therefore, and the RTC granted the respondents motion. Petitioner moved
to quash the writ of execution and the RTC denied the motion on July 9, 2012.
Petitioner then filed a petition for certiorari on September 10, 2012 (two
months after) before the CA. CA dismissed the certiorari petition on two (2) grounds,
namely: (a) the petition essentially assailed the merits of the Arbitral Award which is
prohibited under the Special ADR Rules; and (b) the petition was filed out of time,
having been filed way beyond 15 days from notice of the RTCs July 9, 2012 Order.
Issue:
Whether the remedies availed by the petitioner were proper.
Ruling:
No. Under the Special ADR Rules, it precludes a party to an arbitration from
filing a petition for certiorari questioning the merits of an arbitral award. While it
appears that the Special ADR Rules remain silent on the procedure for the execution
of a confirmed arbitral award, it is the Courts considered view that the Rules
procedural mechanisms cover not only aspects of confirmation but necessarily
extend to a confirmed awards execution in light of the doctrine of necessary
implication which states that every statutory grant of power, right or privilege is
deemed to include all incidental power, right or privilege. Irrefragably, a courts
power to confirm a judgment award under the Special ADR Rules should be deemed
to include the power to order its execution for such is but a collateral and subsidiary
consequence that may be fairly and logically inferred from the statutory grant to
regional trial courts of the power to confirm domestic arbitral awards.
Further, let it be clarified that contrary to petitioners stance resort to the
Rules of Court even in a suppletory capacity is not allowed. The petition for certiorari
permitted under the Special ADR Rules must be filed within a period of fifteen (15)
days from notice of the judgment, order or resolution sought to be annulled or set
aside. Hence, since petitioners filing of its certiorari petition in CA-G.R. SP No.
126458 was made nearly two months after its receipt of the RTCs Order dated July 9,
2012, or on September 10, 2012, said petition was clearly dismissible.

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