235558248 adr-cases

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[G.R. No. 143581. January 7, 2008.] KOREA TECHNOLOGIES CO., LTD., petitioner, vs. HON. ALBERTO A. LERMA, in his capacity as
Presiding Judge of Branch 256 of Regional Trial Court of Muntinlupa City, and PACIFIC GENERAL STEEL MANUFACTURING
CORPORATION, respondents.
In our jurisdiction, the policy is to favor alternative methods of resolving disputes, particularly in civil and commercial d isputes.
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 p arties
stipulatingthatthey 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 manufacturingplants, 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 themachinery and facilities necessary for manufacturing LPG cylinders for which PGSMC would pay USD 1,224,000.
KOGIES would install and initiate the operation of the plant for which PGSMC bound itself to pay USD 306,000 upon the plant's
production of the 11-kg. LPG cylinder samples. Thus, the total contract price amounted to USD 1,530,000.
On October 14, 1997, PGSMC entered into a Contract of Lease 3 with Worth Properties, Inc. (Worth) for use of Worth's 5,079-square
meter property with a 4,032-square meter warehouse building to house the LPG manufacturing plant. The monthly rental was
PhP322,560 commencing on January 1, 1998 with a 10% annual increment clause. Subsequently, the machin eries, equipment, and
facilities for the manufacture of LPG cylinders wereshipped, 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. SDHacT

For the remainingbalanceof 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 PhP4,500,000; and (2) BPI Check No. 0316413 dated March 30, 1998 for
PhP4,500,000. 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 PGSMC's President faxed a letter dated May 7, 1998 to KOGIES' President who was then staying at a Makati
City hotel. She complained that not only did KOGIES deliver a different brand of hydraulic press from that agreed upon but it had not
delivered several equipment parts already paid for.
On May 14, 1998, PGSMC replied that the two checks it issued KOGIES were fully funded but the payments were stopped for reasons
previously made known to KOGIES. 7
On June 1, 1998, PGSMC informed KOGIES that PGSMC was canceling their Contract dated March 5, 1997 on the ground that KOGIES
had altered the quantity and lowered the quality of the machineries and equipment it delivered to PGSMC, and that PGSMC would
dismantleand transfer the machineries,equipment, and facilitiesinstalled 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 disman tle
and transfer the machineries and equipment on mere imagined violations by KOGIES. It also insis ted 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 machineri es,
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 initial ly 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 loweri ng 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 s hown 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 arbi tration
clause, was null and void for being against public policy as it ousts the local courts of jurisdi ction over the instant controversy.
On July 17, 1998,PGSMC filed its Answer with Compulsory Counterclaim 9 assertingthatithad the full rightto dismantleand transfer
the machineries and equipment because ithad paid for them in full as stipulated in the contract; that KOGIES was not entitled to the
PhP9,000,000 covered by the checks for failingto completely install and make the plant operational; and that KOGIES was liable for
damages amounting to PhP4,500,000 for altering the quantity and lowering the quality of the machineries and equipment.
Moreover, PGSMC averred that it has already paid PhP2,257,920 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 pla nt never
became operational. EcaDCI
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 ma y arise
between the parties. KOGIES' prayer for an injunctive writ was denied. 10 The dispositive portion of the Order stated:
WHEREFORE, inviewof the foregoing consideration, this Court believes andsoholds that no cogent reason exists for this
Court to grant the writ of preliminaryinjunctionto restrainandrefrain defendant from dismantling the machineries and
facilitiesat the lot and buildingof WorthProperties, Incorporatedat Carmona, Cavite andtransfer the same to another site:
and therefore denies plaintiff's application for a writ of preliminary injunction.
On July 29, 1998, KOGIES filed its Reply to Answer and Answer to Counterclaim. 11 KOGIES denied it had altered the quantity and
lowered the quality of the machinery, equipment, and facilities it delivered to the plant. It claimed that it had performed a ll the
undertakings under the contract and had already produced certified samples of LPG cylinders. It averred that whatever was
unfinished was PGSMC's fault since it failed to procure raw materials due to lack of funds. KOGIES, relying on Chung Fu Industries
(Phils.), Inc. v. Court of Appeals, 12 insisted that the arbitration clause was without question valid.
After KOGIES filed a Supplemental Memorandum with Motion to Dismiss 13 answering PGSMC's memorandum of July 22, 1998 and
seeking dismissal of PGSMC's counterclaims, KOGIES, on August 4, 1998, filed its Motion for Reconsideration 14 of the July 23, 1998
Order denying its application for an injunctivewritclaiming that the contract was not merely for machinery and facilities worth USD

1,224,000 but was for the saleof an "LPG manufacturingplant"consistingof "supply of all themachinery 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 motio n
positing that the queries and issues raised in the motion for inspection fell under the coverage of the arbitration clause in their
contract.
On September 21, 1998, the trial court issued an Order (1) granting PGSMC's motion for inspection; (2) denying KOGIES' motion for
reconsideration of the July 23, 1998 RTC Order; and (3) denying KOGIES' motion to dismiss PGSMC's compulsory counterclaims as
these counterclaims fell within the requisites of compulsory counterclaims.
On October 2, 1998, KOGIES filed an Urgent Motion for Reconsideration 17 of the September 21, 1998 RTC Order granting inspection
of the plant and denying dismissal of PGSMC's compulsory counterclaims.
Ten days after, on October 12, 1998, without waiting for the resolution of its October 2, 1998 urgent motion for reconsideration,
KOGIES filed before the Court of Appeals (CA) a petition for certiorari 18 docketed as CA-G.R. SP No. 49249, seeking annulment of the
July 23, 1998 and September 21, 1998 RTC Orders and praying for the issuance of writs of prohibition, mandamus, and preliminary
injunction to enjoin the RTC and PGSMC from inspecting, dismantling, and transferring the machineries and equipment in the
Carmona plant, and to direct the RTC to enforce the specific agreement on arbitration to resolve the dispute.
In the meantime, on October 19, 1998, the RTC denied KOGIES' urgent motion for reconsideration and directed the Branch Sheriff to
proceed with the inspection of the machineries and equipment in the plant on October 28, 1998. 19
Thereafter, KOGIES filed a Supplement to the 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. TaI SDA
On November 11, 1998, the Branch Sheriff filed his Sheriff's Report 21 finding that the enumerated machineries and equipment were
not fully and properly installed.
The Court of Appeals affirmed the trial court and declared
the arbitration clause against public policy
On May 30, 2000,the CA rendered the assailed Decision 22 affirming the RTC Orders and dismissing the petition for certiorari filed by
KOGIES. The CA found that the RTC did not gravely abuse its discretion in issuing the assailed July 23, 1998 and September 21 , 1998
Orders. Moreover, the CA reasoned that KOGIES' contention that the total contract price for USD 1,530,000 was for the whole plant
and had not been fully paid was contrary to the finding of the RTC that PGSMC fully paid the price of USD 1,224,000, which wa s 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 issueof the validity of the arbitration clause,the CA agreed with the lower court that an arbitration clausewhich 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 PETITIONFOR CERTIORARI" INTENDED ONLY FOR CORRECTION OF ERRORS OF JURISDICTION OR

GRAVE ABUSE OF DISCRETION AMOUNTING TO LACKOF (SIC) EXCESS OF JURISDICTION, AND CONCLUDING THAT THE TRIAL
COURT'S FINDING ON THE SAME QUESTION WAS IMPROPERLY RAISED IN THE PETITION BELOW;
b.DECLARING AS NULL AND VOIDTHE ARBITRATION CLAUSE IN ARTICLE 15 OF THE CONTRACT BETWEEN THE PARTIES FOR
BEING "CONTRARY TO PUBLIC POLICY" AND FOR OUSTING THE COURTS OF JURISDICTION;
c.DECREEING PRIVATE RESPONDENT'S COUNTERCLAIMS TO BE ALL COMPULSORY NOT NECESSITATING PAYMENT OF DOCKET
FEES AND CERTIFICATION OF NON-FORUM SHOPPING;
d.RULING THAT THE PETITION WAS FILEDPREMATURELY WITHOUT WAITING FOR THE RESOLUTION OF THE MOTION FOR
RECONSIDERATIONOF THE ORDERDATEDSEPTEMBER 21, 1998 OR WITHOUT GIVING THE TRIAL COURT AN OPPORTUNITY
TO CORRECT ITSELF; aHI EcS
e.PROCLAIMING THE TWO ORDERSDATEDJULY 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 PRAYEDFOR INHE (SIC) PETITIONAND, INSTEAD, DISMISSING THE SAME FOR
ALLEGEDLY "WITHOUT MERIT." 23
The Court's Ruling
The petition is partly meritorious.
Before we delve into the substantive issues, we shall first tackle the procedural issues.
The rules on the payment of docket fees for counterclaims and cross claims were amended effective August 16, 2004
KOGIES strongly argues that when PGSMC filed the counterclaims, it should have paid docket fees and filed a certificate of non-
forum shopping, and that its failure to do so was a fatal defect.
We disagree with KOGIES.
As aptly ruled by the CA, the counterclaims of PGSMC were incorporated in its Answer with Compulsory Counterclaim dated July 17,
1998 in accordance with Section 8 of Rule 11, 1997 Revised Rules of Civil Procedure, the rule that was effective at the time the
Answer with Counterclaim was filed. Sec. 8 on existing counterclaim or cross -claim states, "A compulsory counterclaim or a cross-
claim that a defending party has at the time he files his answer shall be contained therein."
On July 17, 1998, at the time PGSMC filed its Answer incorporating its counterclaims against KOGIES, it was not liab le to pay filing
fees for said counterclaims being compulsory in nature. We stress, however, that effective August 16, 2004 under Sec. 7, Rule 141,
as amended by A.M. No. 04-2-04-SC, docket fees are now required to be paid in compulsory counterclaim or cross-claims.
As to the failure to submit a certificate of forum shopping, PGSMC's Answer is not an initiatory pleading which requires a
certification against forum shopping under Sec. 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 PGSMC's compulsory countercla ims.
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 h im. 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 remedyinsuchcases is anordinaryappeal from anadverse judgment on the merits, incorporating in saidappeal
the grounds for assailing the interlocutoryorders. Allowingappeals from interlocutory orders would result in the 'sorry
spectacle'of a case beingsubject of a counterproductive ping-pong to and fromthe appellate court as oftenas a trial court is
perceivedto have made anerror in anyof its interlocutoryrulings. However, where the assailed interlocutory order was
issued withgrave abuse ofdiscretionor patentlyerroneous 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 HDcaAI
The alleged grave abuse of discretion of the respondent court equivalent to lack of jurisdiction in the issuance of the two a ssailed
orders coupled with the fact that there is no plain, speedy, and adequate remedy in the ordinary course of law amply provides the
basis for allowing the resort to a petition for certiorari under Rule 65.

Prematurity of the petition before the CA
Neither do we think that KOGIES was guilty of forum shopping in filing the petition for certiorari. Note that KOGIES' motion for
reconsideration of the July 23, 1998 RTC Order which denied the issuance of the injunctive writ had already been denied. Thus ,
KOGIES' only remedy was to assail the RTC's interlocutory order via a petition for certiorari under Rule 65.
While the October 2, 1998 motion for reconsideration of KOGIES of the September 21, 1998 RTC Order relating to the inspection of
things,and the allowanceof the compulsory counterclaims hasnotyet been resolved, the circumstances in this casewould allow an
exception to the rule that before certiorari may be availed of, the petitioner must have filed a motion for reconsideration and said
motion should have been first resolved by the court a quo. The reason behind the rule is "to enable the lower court, in the first
instance, to pass upon and correct its mistakes without the intervention of the higher court." 30
The September 21, 1998 RTC Order directing the branch sheriff to inspect the plant, equipment, and facilities when he is not
competent and knowledgeable on said matters is evidently flawed and devoid of any legal support. Moreover, there is an urgent
necessity to resolve the issue on the dismantling of the facilities and any further delay would prejudice the interests of KO GIES.
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 mayarise betweenthe parties, out ofor inrelation
to or in connection withthisContract or for the breach thereof, shall finally be settled by arbitration in Seoul, Korea in
accordance withthe CommercialArbitration Rules ofthe KoreanCommercial Arbitration Board. The award rendered by the
arbitration(s) shall be final and binding upon both parties concerned. (Emphasis supplied.)
Petitioner claims the RTC and the CA erred in ruling that the arbitration clause is null and void.
Petitioner is correct.
Established in this jurisdiction is the rule that the law of the place where the contract is made governs. Lex loci contractus. The
contract in this case was perfected here in the Philippines. Therefore, our laws ought to govern. Nonetheless, Art. 2044 of the Civil
Code sanctions the validity of mutually agreed arbitral clause or the finality and binding effect of an arbitral award. Art. 2044
provides, "Any stipulation that the arbitrators' award or decision shall be final, is valid, without prejudice to Articles 2038, 2039
and 2040." (Emphasis supplied.)
Arts. 2038, 31 2039, 32 and 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 l aw, 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 CAacTH
Arbitration clause not contrary to public policy
The arbitration clause which stipulates that the arbitration must be done in Seoul, Korea in accordance with the Commercial
Arbitration Rules of the KCAB, and that the arbitral award is final and binding, is not contrary to public policy. This Court has
sanctioned the validity of arbitration clauses in a catena of cases. In the 1957 case of Eastboard Navigation Ltd. v. Juan Ysmael and
Co., Inc., 38 this Court had occasion to rule that an arbitration clause to resolve differences and breaches of mutually agreed
contractual terms is valid. In BF Corporation v. Court of Appeals, we held that "[i]n this jurisdiction, arbitration has been held valid
and constitutional. Even before the approval on June 19, 1953 of Republic Act No. 876, this Court has countenanced the settlement
of disputes through arbitration.Republic ActNo. 876 was adopted to supplement the New Civil Code's provisionson arbitration." 39
And in LM Power Engineering Corporation v. Capitol Industrial Construction Groups, Inc., we declared that:
Beinganinexpensive, speedyandamicable method ofsettlingdisputes, arbitration — alongwith mediation, conciliationand
negotiation — is encouraged bythe Supreme Court. Aside fromunclogging judicial dockets, arbitration also hastens the
resolution ofdisputes, especiallyof the commercial kind. It is thus regardedas the "wave of the future" ininternational civil
and commercial disputes. Brushingaside a contractualagreement callingfor arbitrationbetweenthe parties would be a step
backward.

Consistent withthe above-mentioned policyof encouraging alternative dispute resolutionmethods, courts should liberally
construe arbitrationclauses. Providedsuchclause 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 arbi tration
clausespecifyingthatin 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,wehave particular agencies to arbitratedisputes 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 Philippines committed itself
to be bound by the Model Law. We have even incorporated the Model Law in Republic Act No. (RA) 9285, otherwise known as the
Alternative Dispute Resolution Act of 2004 entitled An Act to Institutionalize the Use of an Alternative Dispute Resolution System in
the Philippines and to Establish the Office for Alternative Dispute Resolution, and for Other Purposes, promulgated on April 2, 2004.
Secs. 19 and 20 of Chapter 4 of the Model Law are the pertinent provisions:
CHAPTER 4 — INTERNATIONAL COMMERCIAL ARBITRATION
SEC. 19.Adoption of the Model Law on International Commercial Arbitration. — International commercialarbitration shall be
governedbythe Model Law onInternational Commercial Arbitration (the "Model Law") adopted by the United Nations
Commissionon International Trade Law on June 21, 1985 (United Nations Document A/40/17) and recommended for
enactment bythe General Assemblyin Resolution No. 40/72 approved on De cember 11, 1985, copy of which is hereto
attached as Appendix "A". cEATSI
SEC. 20.Interpretation of Model Law. — In interpreting the Model Law, regardshall be hadto its international origin and to
the need for uniformityinits interpretation and resort may be made to the travaux preparatories and the report of the
Secretary General of the United Nations Commis sion on International Trade Law dated March 25, 1985 entitled,
"InternationalCommercialArbitration:Analytical Commentaryon Draft Trade identifiedbyreference number A/CN. 9/264."
WhileRA 9285 was passed only in 2004,it nonetheless applies in the ins tantcasesinceitis a procedural law which has a retroactive
effect. Likewise, KOGIES filed its application for arbitration beforethe KCAB on July 1, 1998 and it is still pending becaus e 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 th at
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 subjectof arbitration pursuantto an arbitration
clause, and mandates the referral to arbitration in such cases, thus:
SEC. 24.Referral to Arbitration. — A court before whichanactionis brought ina matter which is the subject matter of an
arbitration agreement shall, if at least one partyso requests not later thanthe pre-trial conference, or upon the request of
both partiesthereafter, refer the partiesto 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 whilemutually 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 governthe recognition and enforcement
of arbitral awards covered by said Convention.
The recognition and enforcement ofsuch arbitral awards shall be filedwiththe Regional Trial Court in accordance with the
rules of procedure to be promulgatedbythe Supreme Court. Saidprocedural rules shall provide that the partyrelying onthe
award or applying for its enforcement shall file with the court the original or authenticated copy of the a ward and the
arbitrationagreement. If the awardor agreement is not made inanyof 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 fore ign arbitration award was made in party to the New York
Convention.
xxx xxx xxx
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 bythe Supreme Court. The Court may, ongrounds of comityand reciprocity, recognize
and enforce a non-convention award as a convention award. I EHaSc
SEC. 44.Foreign Arbitral Award Not Foreign Judgment. — A foreignarbitral 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, whenconfirmedbythe RegionalTrialCourt, shall be enforced in the same manner as final and
executory decisions of courts of law of the Philippines.
xxx xxx xxx
SEC. 47.Venue and Jurisdiction. — Proceedings for recognitionandenforcement of an arbitration agreement or for vacations,
settingaside, correction or modificationof an arbitral award, andanyapplicationwitha court for arbitrationassistance a nd
supervision shall be deemed as special proceedings andshall be filed with the Regional Trial Court (i) whe re arbitration
proceedings are conducted;(ii)where the asset to be attachedor leviedupon, or the act to be enjoinedis located;(iii) wh ere
anyof the parties to the dispute resides or has hisplace of business;or (iv) inthe National Judicial Capital Region, at the
option of the applicant.
SEC. 48.Notice of Proceeding to Parties. — In a special proceeding for recognitionandenforcement of an arbitral award, the
Court shall sendnotice to the parties at their address of recordinthe arbitration, or i f any part cannot be served notice at
such address, at such party's last knownaddress. 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 bindingarbitral 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
instanceof any party. Therefore, the final foreign arbitral awards aresimilarly 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 governthe recognition and enforcement
of arbitral awards covered by said Convention.
The recognition and enforcement ofsuch arbitral awards shall be filed withthe Regional Trial Court in accordance with the
rules of procedure to be promulgatedbythe Supreme Court. Saidprocedural rules shall provide that the partyrelying onthe
award or applying for its enforcement shall file with the court the original or authenticated copy of the award and the
arbitrationagreement. If the awardor agreement is not made inanyof 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 suspensionof enforcement of anaward has beenmade, the Regional Trial Court may, if it
considers it proper, vacate its decision and mayalso, on the application ofthe partyclaimingrecognition or enforcement of
the award, order the party to provide appropriate security. ADHcTE
xxx xxx xxx
SEC. 45.Rejection of a Foreign Arbitral Award. — A partyto a foreign arbitrationproceedingmayoppose an application for
recognition and enforcement of the arbitral awardinaccordance withthe procedures andrules to be promulgated by the
Supreme Court onlyon those grounds enumeratedunder 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, sti ll 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 sti ll

judicially reviewable. Chapter 7 of RA 9285 has made it clear that all arbitral awards, whether domestic or foreign, are subj ect 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 froman 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, rejecti ng 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 pursuantto Sec. 23 of RA 876 44 and shall berecognized
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 decisionof the RegionalTrialCourt confirming, vacating, setting
aside, modifying or correcting anarbitral award maybe appealedto the Court of Appeals inaccordance with the rules and
procedure to be promulgated by the Supreme Court.
The losingpartywho appeals fromthe judgment of the court confirming an arbitral awardshallbe requiredbythe appellate
court to post a counterbond executedinfavor of the prevailingpartyequal to the amount ofthe 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
subjectcontract. Whileitmay 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 a rbitration clause, stipulating that the arbitral award is
final and binding,does not oust our courts of jurisdiction as theinternational arbitral award, the award of which is not ab solute and
without exceptions,is still judicially reviewable under certain conditions provided for by the UNCITRAL Model Law on ICA as applied
and incorporated in RA 9285. aHSCcE
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
Havingruled that the arbitration clauseof the subject contractis valid and binding on the parties, and not contrary to pub lic policy;
consequently, being bound to the contractof arbitration,a party may not unila terally 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 c an be
judicially assailed,is notapplicableto the instantcaseon accountof a vali d stipulation on arbitration.Wherean arbitration clause in
a contract is availing,neither of the parties can unilaterally treatthe contract as rescinded sincewhatever 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 fa ct
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 pursua nt to
Art. 15 of the Contract as amended. Thus, it is incumbent upon PGSMC to abide by its commitment to arbitrate.

Corollarily,the trial courtgravely abused its discretion in granting PGSMC's Motion for Inspection of Things on September 2 1, 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, a s
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 gra nt 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 1,530,0 00 was for the
whole plant and its installation is beyond the ambit of a Petition for Certiorari.
Petitioner's position is untenable.
It is settled that questions of factcannot 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 R TC's
determination of such factual issue constitutes grave abuse of discretion and must be reversed and set aside.
RTC has interim jurisdiction to protect the rights of the parties
Anent the July 23, 1998 Order denying the issuance of the injunctive writ paving the way for PGSMC to dismantle and transfer the
equipment and machineries, we find it to be in order considering the factual milieu of the instant case. AcDaEH
Firstly, while the issue of the proper installation of the equipment and machineries might well be under the pri mary 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 constitutionof the arbitral tribunal
and during arbitral proceedings, a request for an interim measure of protection, or modificationthereof, maybe 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 arbitraltribunal is deemed constitutedwhenthe solearbitrator or the third arbitrator, who has
been nominated, has acceptedthe nominationand writtencommunicationof saidnomination and acceptance has been
received by the party making the request.
(b)The following rules on interim or provisional relief shall be observed:
Any party may request that provisional relief be granted against the adverse party.
Such relief may be granted:
(i)to prevent irreparable loss or injury;
(ii)to provide security for the performance of any obligation;
(iii)to produce or preserve any evidence; or
(iv)to compel any other appropriate act or omission.
(c)The order granting provisional relief maybe conditioned upon the provisionof securityor anyact or omission specified i n
the order.
(d)Interimor provisional relief is requested bywritten applicationtransmittedbyreasonable means to the Court or arbitral
tribunalas the case maybe andthe partyagainst whom the relief is sought, describing in appropriate detail the precise relief,
the partyagainst 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 partymayapplywith the Court for assistance in implementing or enforcing an interim measure o rdered by an
arbitral tribunal.
(g)A partywho doesnot complywiththe order shall be liable for all damagesresulting from noncompliance, including all
expenses, and reasonable attorney's fees, paid in obtaining the order's judicial enforcement. (Emphasi s 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 anytemporarymeasure, whether inthe formof an award or inanother form, bywhich, at anytime
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 actionthat wouldprevent, or refrainfromtaking actionthat is likelyto cause, current or imminent harm or prejudice
to the arbitral process itself; DTI SaH
(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 issuinganinterimmeasure in relation to arbitration proceedings, irrespective of
whether their place is inthe territoryof this State, as it has in relation to proceedings in courts. The court shallexercise such
power inaccordance withits 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 pendencyof arbitral proceedings does not foreclose resort to the courts for provisional reliefs.
The Rules of the ICC, whichgoverns the parties'arbitral dispute, allows the applicationof a party to a judicial authority for
interim or conservatorymeasures. Likewise, Section14 of Republic Act (R.A.) No. 876 (The Arbitration Law) recognizes the
rights ofanypartyto petitionthe court to take measures to safeguard and/or conserve anymatter whichis the subject of the
dispute inarbitration. Inaddition, R.A. 9285, otherwise knownas the "Alternative Dispute Resolution Act of 2004," allows the
filing of provisional or interimmeasures with the regular courts whenever the arbitraltribunal has nopower to act or to act
effectively. 50 AacCI T
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 pres erve
the equipment and machineries in the best way it can. Consideri ng that the LPG plant was non-operational, PGSMC has the right to
dismantle and transfer the equipment and machineries either for their protection and preservation or for the better way to ma ke
good use of them which is ineluctably within the management di scretion of PGSMC.
Thirdly, and of greater import is the reason that maintaining the equipment and machineries in Worth's property is not to the best
interest of PGSMC due to the prohibitive rent while the LPG plant as set-up is not operational. PGSMC was losing PhP322,560 as
monthly rentals or PhP3.87M for 1998 alone without considering the 10% annual rent increment in maintaining the plant.
Fourthly, and corollarily, while the KCAB can rule on motions or petitions relating to the preservation or transfer of the equipment
and machineries as an interim measure, yet on hindsight, the July 23, 1998 Order of the RTC allowing the transfer of the equi pment
and machineries given the non-recognition by the lower courts of the arbitral clause,has accorded an interi m measure of protection
to PGSMC which would otherwise been irreparably damaged.
Fifth, KOGIES is not unjustly prejudiced as ithas already been paid a substantial amount based on the contract. Moreover, KO GIES 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 submitto arbitration pursuantto the valid arbitration clau se 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 arbitra l proceedings to settle the differences of the parties.
PGSMC therefore must preserve and maintain the subjectequipment and machineries with the diligenceof 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. I EAHca
SO ORDERED.
[G.R. No. 169332. February 11, 2008.]ABS-CBN BROADCASTING CORPORATION, petitioner, vs. WORLD INTERACTIVE NETWORK
SYSTEMS (WINS) JAPAN CO., LTD., respondent.
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 a greement,
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. aTHCSE
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 grantof an exclusivedistribution licenseto another entity, NHK (Japan BroadcastingCorporation). 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 HI ETAc
1.Was the broadcast of WINS WEEKLY by the claimant duly authorized by the respondent [herein petitioner]?
2.Did such broadcast constitute a material breachof 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 provis ion 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 breac h 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. SHADcT
Petitioner filed in the CA a petition for review under Rule 43 of the Rules of Court or, in the alternative,a petition for c ertiorari 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 a s the assailed decision of
the arbitrator had already become the subject of an appeal in the CA. Respondent filed a motion for reconsideration but no
resolution has been issued by the lower court to date. 8
On February 16, 2005, the CA rendered the assailed decision dismissing ABS-CBN's petition for lack of jurisdiction. It stated that as
the TOR itself provided that the arbitrator's decision shall befinal and unappealableand 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 instanceitcan 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 Cour t 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: TSI EAD
WHEREFORE, the instant petitionis hereby DISMISSED for lackof jurisdiction. The application for a writ of injunction and
temporaryrestraining 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 all eged serious error on the part of the CA. HTAI cD
The issuebefore us is whether or not an aggrieved party in a voluntary arbitration dispute may avail of, directly in the CA, a petition
for review under Rule 43 or a petition for certiorari under Rule 65 of the Rules of Court, instead of filing a petition to vacate the
award in the RTC when the grounds invoked to overturn the arbitrator's decision are other than those for a petition to vacate an
arbitral award enumerated under RA 876.
RA 876 itself mandates that it is the Court of First Instance, now the RTC, which has jurisdiction over questions relating to
arbitration, 9 such as a petition to vacate an arbitral award.
Section 24 of RA 876 provides for the specific grounds for a petition to vacate an award made by an arbitrator:
Sec. 24.Grounds for vacating award. — In any one of the following cases, the court must make an order vacating the award
upon the petitionof anypartyto the controversywhensuch partyproves affirmativelythat 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 THEDcS
(c)That the arbitrators were guiltyof misconduct inrefusingto 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 suchunder 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 exceededtheir powers, or so imperfectlyexecuted them, that a mutual, final anddefinite award upon
the subject matter submitted to them was not made.
Based on the foregoing provisions,the lawitself clearly provides thatthe RTC must issuean order vacatingan arbitral award only "in
any one of the . . . cases" enumerated therein. Under the legal maxim in statutory construction expressio unius est exclusio alterius,
the explicitmention of one thingin 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 a nd 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 abus e 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 thatcase, 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 deci sion of
the trial court and affirmed the arbitral award. In affirming the CA, we held:
The Court of Appeals, inreversing the trial court's decisionheld that the nullification of the decision of the Arbitration
Committee wasnot based onthe grounds provided bythe ArbitrationLaw and that . . . private respondents (petitioners
herein)have failedto substantiate withanyevidence their claimof partiality. Significantly, evenas respondent judge ruled
against the arbitrator's award, he couldnot findfault withtheir 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. AEI HCS
xxx xxx xxx
It is clear, therefore, that the award was vacated not because of evident partiality of the arbitrators but because the latter
interpretedthe contract ina waywhichwas not favorable to hereinpetitioners andbecause it consideredthat hereinprivate
respondents, bysubmitting the controversyto arbitration, wasseeking to renege on its obligations under the contract.
xxx xxx xxx
It is clear thenthat 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 jurisdictionover allfinaljudgments, decisions, resolutions, orders or awards of Regional Trial Courts
and quasi-judicial agencies, instrumentalities, boards or commissions, including the Securities andExchange Commission, the
Employees' CompensationCommission and the Civil Service Commission, except those falling within the appellate
jurisdictionof the Supreme Court inaccordance withthe Constitution, the Labor Code of the Philippines under Presidential
Decree No. 442, as amended, the provisions of this Act andof subparagraph(1) of the thirdparagraphandsubparagraph (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: cI CHTD
SEC. 1.Scope. — This Rule shallapplyto appeals fromjudgments or final orders of the Court of Tax Appeals andfromawards,
judgments, final orders or resolutions of or authorized byanyquasi-judicial agency in the exercise of its quasi -judicial
functions. Among these agencies are the Civil Service Commission, Central Board of Assessment Appeals, Securities and
Exchange Commission, Office of the President, LandRegistration Authority, Social Security Commission, Civil Aeronautics
Board, Bureauof Patents, Trademarks andTechnologyTransfer, National ElectrificationAdministration, Energy Regulatory
Board, National Telecommunications Commission, Department of Agrarian Reform under Republic Act Number 6657,
Government Service Insurance System, EmployeesCompensation Commission, Agricultural Inventions Board, Insurance
Commission, Philippine Atomic EnergyCommission, Boardof Investments, ConstructionIndustry 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 conten tion 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:
SEC. 1.The judicial power shall be vestedinone 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 a re 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) DHTECc
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 n o
further judicial recourse if either party disagrees with the whole or any part of the arbitrator's award may be availed of" c annot 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 i n a
petition for certiorari 17 and there is no appeal, nor any plain, speedy remedy in the course of law. 18
Significantly,InsularSavings Bank v. Far East Bank and Trust Company 19 definitively outlined several judicial remedies an aggrieved
party to an arbitral award may undertake:
(1)a petitioninthe proper RTCto issue an order to vacate the awardon the grounds provided for in Section 24 of RA 876; ASCTac
(2)a petitionfor review in the CA under Rule 43 of the Rulesof Court onquestions of fact, of law, or mixed questions of fact
and law; and
(3)a petitionfor certiorari under Rule 65 of the Rules ofCourt shouldthe arbitrator have acted without or in excess of his
jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction.
Nevertheless, although petitioner's position on the judicial remedies available to it was correct, we sustain the dismissal o f 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. CcTHaD
Time and again,we have ruled that the remedies of appeal and certiorari are mutually exclusiveand 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 Whilea petition for certiorari under Rule65 should only limititself 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 COMMITTEDSERIOUS ERROR AND/OR GRAVELY ABUSED HIS DISCRETION IN RULING THAT THE
BROADCAST OF "WINS WEEKLY" WAS DULY AUTHORIZED BY ABS-CBN.
B.THE SOLE ARBITRATORCOMMITTED 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 SERIOUSERROR AND/ORGRAVELY ABUSED HIS DISCRETION IN RULING THAT WINS
SEASONABLY CURED THE BREACH. CaDATc
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 ISNOT A SIMPLE ERROR OF JUDGMENT OR ABUSE OF DISCRETION. IT IS
GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF JURISDICTION.
A careful reading of the assigned errors reveals that the real issues calling for the CA's resolution were less the alleged grave abuse
of discretion exercised by the arbitrator and more about the arbitrator's appreciation of the issues and evidence presented by the
parties.Therefore, the issues clearly fall under the classification of errors of fact and law — questions which may be passed upon by
the CA via a petition for review under Rule 43. Petitioner cleverly crafted its assignment of errors in such a way as to straddle both
judicial remedies, that is, by alleging serious errors of fact and law (in which case a petition for review under Rule 43 wou ld be
proper) and grave abuse of discretion (because of which a petition for certiorari under Rule 65 would be permissible). I TaESD

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 Appea ls
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. SaETCI
SO ORDERED.
[G.R. No. 106879. May 27, 1994.] DR. LUCAS G. ADAMSON and ADAMSON MANAGEMENT CORPORATION, petitioners, vs. HON.
COURT OF APPEALS and APAC HOLDINGS LIMITED, respondents.
Before us is a petition for review on certiorari of a decision of the Court of Appeals, the dispositive portion of which is q uoted
hereunder:
"WHEREFORE, judgment is herebyrendered setting aside respondent judge's questioned order dated 23 August 1991 and
conforming the subject arbitration award. Costs against private respondents.LLpr
SO ORDERED."
The antecedents of this case are as follows:
On June 15, 1990, the parties, Adamson Management Corporation and Lucas Adamson on the one hand, and APAC Holdings Limited
on the other, entered into a contract whereby the former sold 99.97% of outstanding common shares of stocks of Adamson and
Adamson, Inc. to the latter for P24,384,600.00 plus the Net Asset Value (NAV) of Adamson and Adamson, Inc. as of June 19, 1990.
But the parties failed to agree on a reasonableNet Asset Value. This prompted them to submitthe casefor arbitration in acc ordance
with Republic Act No. 876, otherwise known as the Arbitration Law.
On May 15, 1991, the Arbitration Committee rendered a decision finding the Net Asset Value of the Company to be P167,118.00
which was computed on the basis of a pro-forma balance sheet submitted by SGV and which was the difference between the total
assets of the Company amounting to P65,554,258.00 (the sum of the balance sheet asset amounting to P65,413,978.00 and the
increase in Cuevo appraisal amounting to P140,280.00) and total liabilities amounting to P65,387,140.00 (the difference between
current liabilities and long term debt amounting to P68,356,132.00 and Tax Savings for 1987 amounting to P2,968,992).Cdpr
In so holding that NAV equals P167,118.00, the Arbitration Committee disregarded petitioners' argument that there was a fixed NAV
amounting to P5,146,000.00 as of February 28, 1990 to which should be added the value of intangible assets (P19,116,000.00), the
increment of tangible assets excluding land P17,003,976.00), the 1987 tax savings (P2,968,992.00), and estimated net income f rom

February 28, 1990 to June 19, 1990 (P1,500,000.00, later increased to P3,949,772.00). According to the Committee, however, the
amount of P5,146,000.00 which was claimed as initial NAV by petitioners, was merely an estimate of the Company's NAV as of
February 28,1990 which was still subjectto financial developments until June 19, 1990,the cut-off date. The basis for this rulingwas
Clause 3(B) of the Agreement which fixed the said amount; Clause 1(A) which defined NAV and provided that it should be computed
in accordancewith Clause 7(A); Clause 7(A) which directed the auditors to prepare in accordance with good accounting princip les a
balance sheet as of cut-off date which would include the goodwill and intangible assets (P19,116,000.00), the value of tangi ble
assets excluding the land as per Cuervo appraisal, the adjustment agreed upon by the parties, and the cost of redeeming preferred
shares; and Clause 5(E). Furthermore, the Committee held that the parties used the figures in the pro-forma balance sheet to arrive
at the said amount of P5,146,000.00; that the same had already included the value of the intangible assets and of the Cuervo
appraisal of the tangible assets so that the latter items could not be added again to what Vendor claimed to be the initi al NAV; and
that apart from being an estimate, the amount of P5,146,000.00 was tentative as it was still subject to the adjustments to be made
thereto to reflect subsequent financial events up to the cut-off date.prLL
In the computation of the NAV, the Committee deemed it proper to appreciate in favor of petitioners the 1987 tax savings because
as of the date of the proceedings, no assessment was ever made by the BIR and the three-year prescriptive period had already
expired. However, it did not consider the estimated net income for the period beginning February 28, 1990 to June 19, 1990 as part
of the NAV because it found that as of June 1990, the books of the company carried a net loss of P4,678,627.00 which increased to
P8,547,868.00 after the proposed adjustments were included in the computation of the NAV. The Committee pointed out that
although petitioners herein contested the adjustments, they were, however, not able to prove that these were not valid, except with
respect to the tax savings.
Aside from deciding the amount of NAV, the Committee also held that any ambiguity in the contract should not necessarily be
interpreted against herein private respondents because the parties themselves had stipulated that the draft of the agreement was
submitted to petitioners for approval and that the latter even proposed changes which were eventually incorporated in the final
form of the Agreement.
Thereafter, APAC Holdings Ltd. filed a petition for confirmation of the arbitration award before the Regional Trial Court of Makati.
Herein petitioners opposed the petition and prayed for the nullification, modification and/or correction of the same, allegin g that
the arbitrators committed evident partiality and grave abuse of discretion as shown by the following errors :
a.In creating anentirelynew contract for the parties that contradicts the essence of their agreement and results in the
absurd situation where a seller incurs enormous expense to sell his property;
b.In treating the provisions inthe Agreement independentlyof one another and thereby nullifying the simple, clear and
express stipulations therein.LLpr
c.In interpreting the Agreement althoughit is couchedin plain, simple andclear language, contraryto the well established
principle that if the terms of a contract are clear, the literal meaning of its stipulations shall control;
d.In acceptingSGV's proposedadjustments, contraryto the parties' stipulation that the finaladjustment items shall pertain
to a specific periodandsubject to their agreement; andin giving full reliance onSGV report despite SGV's disclosure of its
lack of independence because it acted solely to assist petitioner and its report was intended solely for petitioner's
information;
e.In not applying the "suppressed evidence" rule against petitioner inspite of its refusal to present the Company's income
statement or anyother similar report for the adjustment period;and indisregarding respondent's estimate ofthe net income
for the period as "Adjustment" using SGV's figures and ratios;
f.In not awardingdamages andattorney's fee to respondents despite petitioner's bad faith in violating the contract. 1
The Regional Trial Courtrendered a decision vacatingthe arbitration award.Thedispositiveportion of the decision reads as follows:
"WHEREFORE, the Decision/ArbitrationAward in question is hereby VACATED, and APAC (herein petitioner) is hereby
orderedto payADAMSON (hereinrespondents)the finalNAV of Forty-sevenMillion One Hundred Twenty-One Thousand
Four HundredSixty-Eight Pesos (P47,121,468.00), Philippine Currency, in accordance with the pertinent stipulations
expressedinthe Agreement as discussedabove, plus twelve (12) percent interest on the above amount which ADAMSON
should have earned had the balance of the final NAV been paid to the Escrow Agent after offset on August 2, 1990.
ADAMSON's claim for moral andexemplarydamagesandattorney's fees are (sic) dismissed for lack of sufficient merit.LLphil
SO ORDERED." 2
On appeal, the above decision was reversed and a petition for review was filed in this Court. Petitioners allege that the Court of
Appeals erred and acted in excess of jurisdiction or with grave abuse of discretion in holding that: (a) the trial judge reversed the
arbitration award solely on the basis of the pleadings submitted by the parties;(b) petitioners failed to substantiatewith proofs their
imputation of partiality to the members of the arbitration committee; (c) the nullification by the trial court of the award was not
based on any of the grounds provided by law; (d) to allow the trial judge to substitute his own findings in lieu of the arbitrators'

would defeat the object of arbitration which is to avoid litigation; and (e) if there really was a ground for vacating the award, it was
improper for trial judge to reverse the decision because it contravened Section 25 of R.A. No. 876.
Did the Court of Appeals err in affirming the arbitration award and in reversing the decision of the trial court?
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 ". . . private respondents [petitioners herein] have fa iled to
substantiatewith any evidence their claimof partiality.Significantly, even as respondent judge ruled against the arbitrators' award,
he could not find fault with their impartiality and integrity. Evidently, the nullification of the award rendered at the case at bar was
made not on the basis of any of the grounds provided by law." 3
Assailing the above conclusion, petitioners argue that ". . . evident partiality is a state of mind tha t need not be proved by direct
evidence but may be inferred from the circumstances of the case (citations omitted). It is related to intention which is a mental
process, an internal state of mind that must be judged by the person's conduct and acts which a re the best index of his intention
(citations omitted.)" 4 They pointed out that from the following circumstances may be inferred the arbitrators' evident partiality:
1.the material difference between the results of the arbitrators' computation of the NAV and that of petitioners;
2.the allegedpiecemeal interpretation bythe arbitrators of the Agreement whichwent beyondthe clear provisions of the
contract and negated the obvious intention of the parties;
3.reliance bythe arbitrators on the financialstatements andreports submittedbySGV which, accordingto petitioners, acted
solely for the interests of private respondents; and
4.the finding of the trial court that "the arbitrationcommittee has advancedno valid justification to warrant a departure
from the well-settledrule in contract interpretation that if the terms of the contract are clear andleave no doubt upon the
intention of the contracting parties the literal meaning of its interpretation sha ll control." 5
We find no reason to depart from the Court of Appeal's conclusion.
Section 24 of the Arbitration Law provides as follows:Cdpr
"Sec. 24.Grounds for vacating award. — In anyone ofthe followingcases, the court must make anorder vacating the award
upon the petitionof anypartyto the controversy when such party proves affirmatively that inthe 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 guiltyof misconduct inrefusing to postpone the hearing upon sufficient
cause shown, or in refusing to hear evidence pertinent andmaterial to the controversy; that one or more of the
arbitrators was disqualifiedto act as such under section nine hereof, andwillfullyrefrained from disclosing such
disqualifications or anyother misbehavior bywhichthe rights of any party have been materially prejudiced; or
(d)That the arbitrators exceededtheir powers, or so imperfectlyexecuted them, that a mutual, final and
definite award upon the subject matter submitted to them wa s not made. . . ."
Petitioners herein failed to prove their allegation of partiality on the part of the arbitrators. Proofs other than mere inferences are
needed to establish evident partiality. That they were disadvantaged by the decision of the Arbitrati on Committee does not prove
evident partiality.
Too much reliance has been accorded by petitioners on the decision of the trial court. However, we find that the same is but an
adaptation of the arguments of petitioners to defeat the petition for confirmati on of the arbitral award in the trial court by herein
private respondent. The trial court itself stated as follows:
"In resolving the issues in favor of respondents, the Court has noalternative but to agree with the connection of said party,
as supported bytheir exhaustive andveryconvincing arguments containedinmore thantwenty-one (21) pages, doubled-
spaced, which are adopted and reproduced herein by reference. Said arguments may be CAPSULIZED as follows:cdll
The penultimate paragraph of its decision reads, thus:
To allayanyfear of petitioner that its replyandopposition, dated11 June 1991, has not been taken into
account in resolvingthis case, it will be well to state that the court has carefullyread the same and, what is more, it
has alsoreadrespondents'comment, dated19 June 1991, whereintheymade convincing arguments which are
likewise adopted and incorporated herein by reference." 6
The justifications advanced by the trial court for vacating the arbitration award are the following: (a) ". . . that the arbi tration
committee had advanced no valid justification to warrant a departure from the well -settled rule in contract interpretation that if the
terms of the contract are clear and leave no doubt upon the intention of the contracting parties the literal meaning of its
interpretation shall control; (b) that the final NAV of P47,121,468.00 as computed by herein petitioners was well within APAC's

normal investment level which was at least US$1 million and to say that the NAV was merely P167,118.00 would negate Clause 6 of
the Agreement which provided that the purchaser would deposit in escow P5,146,000.00 to be held for two (2) years and to be used
to satisfy any actual or contingent liability of the vendor under the Agreement; (c) that the provision for an escow account negated
any idea of the NAV being less than P5,146,000.00; and (d) that herein private respondent, being the drafter of the Agreement could
not avoid performanceof its obligations by raising ambiguity of the contract, or its failure to express the intention of the parties, or
the difficulty of performing the same.
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.
That the award was unfavorable to petitioners herein did not prove evident partiality. The arbitrators resorted to contract
interpretation neither constituted a ground for vacating the award because under the circumstances, the same was necessary to
settle the controversy between the parties regarding the amount of the NAV. In any case, this Court finds that the interpreta tion
made by the arbitrators did not create a new contract, as alleged by herein petitioners but was a faithful application of the
provisions of the Agreement. Neither was the award arbitrary for it was based on the statements prepared by the SGV which was
chosen by both parties to be the "auditors."
The trial court held that herein private respondent could not shirk from performing its obligations on account of the difficulty of
complying with the terms of the contract. It said further that the contract may be harsh but private respondent could not exc use
itself from performing its obligationson accountof the ambiguity of the contract becauseas its drafter, private respondent was well
aware of the implications of the Agreement. We note herein that during the arbitration proceedings, the parties agreed that the
contract as prepared by private respondent, was submitted to petitioners for approval. Petitioners, therefore, are presumed to have
studied the provisions of the Agreement and agreed to its import when they approved and signed the same. When it was submitted
to arbitration to settle the issue regarding the computation of the NAV, petitioners agreed to be bound by the judgment of th e
arbitration committee, except in cases where the grounds for vacating the award existed. Petitioners cannot now refuse to per form
its obligation after realizing that it had erred in its understanding of the Agreement.LLpr
Petitioners also assailed the arbitrator's reliance upon the financial statements submitted by SGV as they allegedly served the
interests of private respondents and did not reflect the true intention of the parties. We agree with the observation made by the
arbitrators that SGV, being a reputable firm, it should be presumed to have prepared the statements in accordance with sound
accounting principles. Petitioners have presented no proof to establish that SGV's computation was erroneous and biased.
Petitioners likewise pointed out that the computation of the arbitrators leads to the absurd result of petitioners incurring great
expense just to sell its properties. In arguing that the NAV could not be less than P5,146,000, petitioners quote Clause (B) of the
Agreement as follows:
"CLAUSE 3 (B)
The consideration for the purchase of the Sale Sharesbythe Purchaser shall be equivalent to the Net Asset Value of the
Company, . . . which the parties HAVE FIXED at P5,146,000.00 prior to Adjustments . . . "
However, such quotation is incomplete and, therefore, misleading. The full text of the above provision as quoted by the arbitration
committee reads as follows:
"(B)The considerationfor the purchase ofthe Sale Shares bythe purchaser shall be equivalent to the Net Asset Value of the
Company, without the Property, whichthe parties have fixed at P5,146,000 prior to Adjustments plus P24,384,600. The
consideration for the sale ofthe Sale Shares bythe Vendor, is the acquisitionof the propertybythe Vendor, through Aloha,
from the Companyat historicalcost plus all Taxes due onsaidtransfer of Property, and the release of all collaterals of th e
Vendor securing the RSBSCredit Facility. However, inthe implementationof thisAgreement, the parties shall designate the
amounts specifiedinClause 5 as the purchaser prices in the pro-forma deeds of sale andother documents required to effect
the transfers contemplated in this Agreement."
Thus, petitioner cannot claimthatthe consideration for privaterespondent's acquisition of the outstanding common shares of stock
was grossly inadequate. If the NAV as computed was small, the result was not due to error in the computations made by the
arbitrators but due to the extent of the liabilities being borne by the petitioners. During the arbitration proceedings, the committee
found that petitioner has been suffering losses since 1983, a fact which was not denied by petitioner . We cannot sustain the
argument of petitioners that the amount of P5,146,000.00 was an initial NAV as of February 28, 1990 to which should still be added
the value of tangible assets (excluding the land) and of intangible assets. If indeed the P5,146,000.00 was the initial NAV as of
February 28, 1990, then as of said date, the total assets and liabilities of the company have already been set off against ea ch other.
NET ASSET VALUE, is arrived at only after deducting TOTAL LIABILITIES from TOTAL ASSETS. "TOTAL ASSETS" includes those that are
tangible and intangible. If the amount of the tangible and intangible assets would still be added to the "initial NAV," this would
constitute double counting. Unless the company acquired new assets from February 28, 1990 up to June 19, 1990, no value
corresponding to tangible and intangible assets may be added to the NAV.LibLex
We also note that the computation by petitioners of the NAV did not reflect the liabilities of the company. The term "net ass et
value" indicates the amount of assets exceeding the liabilities as differentiated from total assets which include the liabilities. If

petitioners were not satisfied, they could have presented their own financial statements to rebut SGV's report but this, they did not
do.
Lastly,in assailingthedecision of the Court of Appeals, petitioners would have this Court believe that the respondent court held that
the decision of the arbitrators was not subject to review by the courts. This was not the position taken by the respondent court.
The Court of Appeals, in its decision stated, thus:
It is settled that arbitration awards are subject to judicial review. Inthe recent case ofChung Fu Industries (Philippines), Inc.,
et al. v. Court of Appeals, Hon. Francisco X. Velez, et. al. G.R. No. 96283, February25, 1992, the Supreme Court categorically
ruled that:
"It is stated expresslyunder Art. 2044 of the Civil Code that the finality of the arbitrators' award is not
absolute andwithout exceptions. Where the conditions describedin Articles 2038, 2039 and 2040 applicable to
both compromisesandarbitrationare obtaining, the arbitrators'award maybe annulledor rescinded, Additionally,
under Sections 24 and25 of the Arbitration Law, there are grounds for vacating, modifying or resci nding an
arbitrators' award. Thus, ifandwhenthe factual circumstances referred to in the above -cited provisions are
present, judicial review of the award is properly warranted."
Clearly, though recourse to the courts may be availed of by parties aggrieved by decisions or awards rendered by
arbitrator/s, the extent of such is neither absolute nor all encompassing. . . . 7
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.LLpr
WHEREFORE, in view of the foregoing, this petition is hereby DISMISSED and the decision of the Court of Appeals AFFIRMED.
SO ORDERED.
[G.R. No. 169095. December 8, 2008.] HEUNGHWA INDUSTRY CO., LTD., petitioner, vs. DJ BUILDERS CORPORATION, respondent.
Before this Court is a Petition for Review on Certiorari 1 under Rule 45 of the Rules of Court, seeking to set aside the August 20, 2004
Decision 2 and August 1, 2005 Resolution 3 of the Court of Appeals (CA) in CA-G.R. SP Nos. 70001 and 71621. ESCDHA
The facts of the case, as aptly presented by the CA, are as follows:
Heunghwa Industry Co., Ltd. (petitioner) is a Korean corporation doing business in the Philippines, while DJ Builders Corporation
(respondent) is a corporation duly organized under the laws of the Philippines. Petitioner was able to secure a contract with the
Department of Public Works and Highways (DPWH) to construct the Roxas -Langogan Road in Palawan.
Petitioner entered into a subcontract agreement with respondent to do earthwork, sub base course and box culvert of said proj ect
in the amount of Php113,228,918.00. The agreement contained an arbitration clause. The agreed price was not ful ly paid; hence, on
January 19, 2000, respondent filed before the Regional Trial Court (RTC) of Puerto Princesa, Branch 51, a Complaint for "Brea ch of
Contract, Collection of Sum of Money with Application for Preliminary Injunction,Preliminary Attachment, and Prayer for Temporary
Restraining Order and Damages" docketed as Civil Case No. 3421. 4
Petitioner's Amended Answer 5 averred that it was not obliged to pay respondent because the latter caused the stoppage of work.
Petitioner further claimed that it failed to collect from the DPWH due to respondent's poor equipment performance. The Amended
Answer also contained a counterclaim for Php24,293,878.60.
On September 27, 2000, parties through their respective counsels, filed a "Joint Motion to Submit Specific Issues To The
Construction Industry Arbitration Commission" 6 (CIAC), to wit:

5.Parties would submit onlyspecific issuesto the CIACfor arbitration, leavingother claims to this Honorable Court for further
hearing and adjudication. Specifically, the issues to be submitted to the CIAC are as follows:
a.Manpower and equipment standby time;
b.Unrecouped mobilization expenses;
c.Retention;
d.Discrepancy of billings; and
e.Price escalation for fuel and oil usage. 7
On the same day, the RTC issued an Order 8 granting the motion.
On October 9, 2000, petitioner, through its counsel, filed an "Urgent Manifestation" 9 praying that additional matters be referred to
CIAC for arbitration, to wit: cSTHaE
1.Additional mobilization costs incurred by [petitioner] for work abandoned by [respondent];
2.Propriety of liquidated damages in favor of [petitioner] for delay i ncurred by [respondent];
3.Proprietyof downtime costs on a dailybasis during the period ofthe existence of the previous temporaryrestrainingorder
against [petitioner]. 10
On October 24, 2000,respondent filed with CIAC a Request for Adjudication 11 accompanied by a Complaint. Petitioner, in turn filed
a "Reply/Manifestation" informing the CIAC that it was abandoning the submission to CIAC and pursuing the case before the RTC . In
respondent's Comment on petitioner's Manifestation, it prayed for CIAC to declare petitioner in default.
CIAC then issued an Order 12 dated November 27, 2000 ordering respondent to move for the dismissal of Civil Cas e No. 3421
pending before the RTC of Palawan and directingpetitioner to file anew its answer. The said Order also denied respondent's motion
to declare petitioner in default.
Respondent filed a Motion for Partial Reconsideration of the November 27, 2000 Order while petitioner moved to suspend the
proceeding before the CIAC until the RTC had dismissed Civil Case No. 3421.
On January 8, 2000,CIAC issued an Order 13 setting asideits Order of November 27, 2000 by directingthe dismissal of Civil Case No.
3421 only insofar as the five issues referred to it were concerned. It also directed respondent to file a request for adjudic ation. In
compliance, respondent filed anew a "Revised Complaint" 14 which increased the amount of the claim from Php23,391,654.22 to
Php65,393,773.42.
On February 22, 2001, petitioner, through its new counsel, filed with the RTC a motion to withdraw the Order dated September 27,
2000 which referred the case to the CIAC, claiming it never authorized the referral. Respondent opposed the motion 15 contending
that petitioner was already estopped from asking for the recall of the Order.
Petitioner filed in the CIAC its opposition to the second motion to declare it in default, with a motion to dismiss informing the CIAC
that it was abandoning the submission of the case to it and asserting that the RTC had original and exclusive jurisdictio n over Civil
Case No. 3421, including the five issues referred to the CIAC. HSDCTA
On March 5, 2001, the CIAC denied petitioner's motion to dismiss on the ground that the November 27, 2000 Order had already
been superseded by its Order of January 8, 2001. 16
On March 13, 2001, the CIAC issued an Order setting the preliminary conference on April 10, 2001. 17
On March 23, 2001 petitioner filed with the CIAC a motion for reconsideration of the March 5, 2001 Order.
For clarity, the succeeding proceedings before the RTC and CIAC are presented in graph form in chronological order.
RTCCIAC
April 5, 2001 — Petitioner filed a
Motion
to Suspendproceedings because of
the
Motion to Recall it filedwith the RTC.
April 6, 2001 — CIAC granted
petitioner's
motionandsuspendedthe hearings
dated
April 10 and17, 2001.
May16, 2001 — the RTCissueda
Resolution 18 granting petitioner's
Motion to Recall. 19
June 1, 2001 — Respondent moved
for a reconsiderationof the May 16,
2001 Resolutionandprayed for
the dismissal of the case without
prejudice to the filingof a
complaint withthe CIAC. 20
June 11, 2001 — Petitioner
opposedrespondent's motion for
reconsiderationandalsoprayed
for the dismissal of the case but
with prejudice. 21 SHTcDE
July6, 2001 — The RTCdenied
respondent's motionfor
reconsiderationbut stated that

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