1. G.R. No.

85455 June 2, 1994

EDITH JUINIO ATIENZA, petitioner,
vs.
COURT OF APPEALS, HON. SERGIO PESTANO, SALVADORA ATIENZA and MARIA BEATRIZ
ATIENZA,respondents.
The sole issue in this petition for certiorari is whether or not litis pendentia obtains in Civil Case No. V5456 before the Roxas City Court and in SP Proc. No. G-52510 before the Quezon City Court.
The undisputed facts are as follows:
Andres Atienza died intestate on June 26, 1987 leaving behind three (3) heirs, namely: (1) respondent
Salvadora Atienza, his mother; (2) herein petitioner Edith Juinio Atienza, his widow; and (3) respondent
Maria Beatriz Atienza, his adopted daughter.
On September 21, 1987, respondent Salvadora Atienza and Maria Beatriz Atienza filed before the
Regional Trial Court of Roxas City Civil Case No.
V-5456 for damages, accounting and partition against herein petitioner. In their
complaint, 1 respondents alleged that petitioner used a fake birth certificate of Ma. Beatriz Atienza in
claiming insurance, retirement and other benefits. This alleged tortious act effectively deprived
Salvadora Atienza of her share in the estate of the deceased. Accordingly, plaintiffs prayed that Edith
Juinio Atienza should be held liable for moral and exemplary damages and that an accounting and
partition be ordered.
Instead of filing an answer to the complaint, petitioner filed a case docketed as SP. Proc. No. Q-52510
for issuance of letters of administration of the estate before the Quezon City Court and then filed a
Motion to Dismiss the case before the Roxas City Court on the ground that there was a pending case
involving the same parties and the same action before the Quezon City Court.
Respondent Judge Sergio Pestano denied the Motion to Dismiss and appointed Salvadora Atienza as
guardian ad litem of Maria Beatriz Atienza. Respondent judge likewise denied the Motion for
Reconsideration filed by petitioner herein.
Petitioner then filed an answer to the complaint in Civil Case No. V-5456 and later filed in the Court of
Appeals a Petition for Certiorari and Prohibition with preliminary injunction against respondent Judge
alleging that the latter committed grave abuse of discretion in denying the abovementioned motion of
herein petitioner.
Finding no grave abuse of discretion, the Court of Appeals, in its Decision 2 dated August 12, 1988
dismissed the Petition for Certiorari and Prohibition thereby affirming the ruling of the trial court that
Civil Case No.
V-5456 could not be dismissed on the ground of litis pendentia. Petitioner then filed a Motion for
Reconsideration which was denied by the Court of Appeals in its Resolution 3 dated October 18, 1988.
She has now elevated the matter before this Court assigning as grounds for the petition the following:
1. The respondent court has decided questions of substance in the instant case in violation of and/or
contrary to the express provisions of Rule 74, Sec. 1, Rules of Court, in effect preferring an ordinary
action of partition to an administration proceedings for the settlement of the estate of the deceased
Andres I. Atienza notwithstanding the fact that the said deceased left debts. (Emphasis Supplied)
2. Respondent court has likewise decided questions of substance in the instant case in a way not in
accordance with but contrary to the rulings of the Supreme Court in Arcillas v. Montejo, G.R. No. L21725, November 29, 1968, 26 SCRA 197, 201-202, and Teodoro v. Mirasol, 53 O.G. 8088.
Petitioner argues that the trial court and appellate courts erred in not dismissing Civil Case No. V-5456
because: (1) as provided in Sec. 1, Rule 74 of the Rules of Court, an action for partition could not be
resorted to when the decedent left debts as in this case; and (2) SP. Proc. No. Q-52510 is the proper
proceeding for the settlement of the estate of Andres I. Atienza because in such proceeding, all the
matters and issues between and among the heirs, the creditors, and the other claimants can be finally
and definitely settled.
Would the dismissal of Civil Case No. V-5456 be warranted?
Petitioner anchors her argument for the dismissal of the case on litis pendentia, as provided in Sec. 1,
Rule 16 of the Rules of Court which provides:
Sec. 1. Grounds. Within the time for pleading a Motion to Dismiss the action may be made on any of
the following grounds:
xxx xxx xxx
(e) That there is another action pending between the same parties for the same cause.
Citing Teodoro v. Mirasol, 4 petitioner argues that even if the pending SP Proc. Q-52510 case was filed
later than the case sought to be dismissed, the latter may be properly dismissed if the pending case is
a more proper suit to resolve the issues between the parties.
Petitioners contentions are unmeritorious.
The Court of Appeals has correctly stated in its Decision:
The lower court correctly ruled that lis pendens does not obtain. The requisites for lis pendens as a
ground for dismissal of a complaint are (1) identity of parties or at least such representing the same
interest in both actions; (2) identity of rights asserted as prayed for, the relief being founded on the

same facts; and (3) the identity in both cases is such that the judgment may be rendered in the
pending case, regardless of which party is successful would amount to res judicata to the other case.
Not all these requisites are present herein.
While the parties in Civil Case No. V-5456 before the Roxas City court and in SP Proc. No. Q-52510 are
the heirs of the late Andres I. Atienza his mother, Salvadora Atienza; his wife, Edith Juinio Atienza;
and adopted child of the decedent, Maria Beatriz Atienza, the cause of action is different. Civil Case
No. 5456 is for damages, accounting and partition, whereas SP Proc. No. Q-52510 is a proceeding for
the intestate estate of the deceased Andres Atienza. In Civil Case No. 5456, plaintiffs seek to recover
moral damages from the defendant arising out of alleged tortious acts, and a decision in this cause of
action would not constitute res judicata in SP Proc. No. Q-52510.
Petitioner insists, however, that the causes of action in the two proceedings are similar because Civil
Case No. V-5456 is principally an action for partition of part of the estate of the late Andres I. Atienza.
Suffice it to say, however, that the Court of Appeals has correctly differentiated Civil Case
No. V-5456 from SP Proc. No. Q-52510. The former is for damages arising from wrongful acts while the
latter is for the administration of the estate. Moreover, in Civil Case No. V-5456, the prayer for order of
partition of the estate is an incident of the finding of the court that petitioner herein committed
wrongful acts in order to acquire the properties of the decedent to the prejudice of complainants,
private respondents herein. Res judicata would not even arise between the two cases.
Petitioner has also cited the case of Teodoro v. Mirasol 5 to bolster her claim that the case in the Roxas
City Court should be dismissed because of litis pendentia. A scrutiny of the cited decision discloses
that the Court dismissed the first case because a claim for damages was not the central cause of
action.
The court said:
The claim for damages is also invoked as a ground for allowing the continuance of the action. We note
that this supposed cause of action is merely an incident of the main question of whether or not
plaintiff should be allowed to continue to lease for two years more. It is not alleged as an independent
cause of action. It is not set forth in a paragraph different from the others as the Rules require.
In the matter now before us, Civil Case No. V-5456 is principally for damages and is alleged as the first
cause of action in the complaint.
Hence, reliance on Teodoro v. Mirasol, is misplaced.
Petitioner has likewise cited the case of Arcillas v. Montejo 6 to support her claim that respondent
Judge erred in preferring an ordinary action of partition to an administration proceeding for the
settlement of the estate of the deceased Andres Atienza, notwithstanding the fact that the deceased
left debts.
However, a study of the said case only reaffirms the options granted by law to the heirs, viz., either a
special proceeding in the extra-judicial settlement of the estate or an ordinary action of partition. It
bears stressing that private respondents herein filed an action for damages in Civil Case No. V-5456
with accounting and partition as incidents of the principal action.
The Court notes further that SP Proceeding No. Q-52510 in Quezon City was filed by petitioner long
after Civil Case No. V-54561 was instituted in Roxas City.
As the Court of Appeals observed:
It did not escape our scrutiny that the SP Proc. No. 52510 in Quezon City was filed by petitioner long
after the Civil Case No. V-5456 was instituted in Roxas City. Petitioners motion to dismiss was filed
after she was granted extension of time to file answer in Civil Case No. V-5456 thus enabling her in the
meantime to institute the special proceedings in Quezon City which petitioner has used in seeking the
dismissal of the Roxas City case.
As to which of the two suits in court ought to be dismissed, the special proceedings in Quezon City in
contrast with SP Proc. No. Q-52510, is already much in progress, a complaint, and an answer with
counterclaim have been filed, fully joining the issues. We do not deem it proper to allow petitioner to
bring the issues in Civil Case V-5456 to another court, or to withdraw them from the forum before
which they had already placed them for resolution.
Obviously, petitioner filed SP Proceeding No. Q-52510 only as an afterthought to evade liability for her
alleged tortious acts in the event that they be proved in Civil Case No. 5456. We cannot sanction this
behavior by ordering the dismissal of Civil Case No. V-5456.
On February 11, 1991, respondent Salvadora Atienza died and was survived by her sole heir and
daughter, Suzette Atienza del Rosario. Counsel for deceased respondent Salvadora Atienza filed a
Manifestation and Motion 7 praying for the substitution of Salvadora Atienza by Suzette Atienza del
Rosario. The substitution prayed for is hereby granted.
Lastly, this Court has held, time and time again, that an order denying a motion to dismiss being
merely interlocutory, it cannot be the basis of a petition for certiorari. 8 We have ruled that:
An order that does not finally dispose of the case, and does not end the Court's task of adjudicating
the parties' contentions and determining their rights and liabilities as regards each other, but
obviously indicates that other things remain to be done by the Court, is "interlocutory," e.g., an order
denying amotion to dismiss under Rule 16 of the Rules, or granting a motion for extension of time to
file a pleading, or authorizing amendment thereof, or granting or denying applications for
postponement, or production or inspection of documents or things, etc. Unlike a "final" judgment or

order, which is appealable, as above pointed out, an 'interlocutory' order may not be questioned on
appeal except only as part of an appeal that may eventually be taken from the final judgment
rendered in the case. 9(Emphasis supplied)
We agree with the Court of Appeals that the remedy in case of denial of a motion to dismiss is by
appeal in due course after the case has been decided on the merits. To allow all interlocutory orders to
be the subject of review bycertiorari would, not only delay the administration of justice, but also
unduly burden the court.
WHEREFORE, the petition is hereby DENIED for lack of merit and the respondent Courts decision
AFFIRMED in toto with costs.
2. REYES VS BALDE II
Before the Court is a Motion to Inhibit the Honorable Chief Justice and Motion to Refer Case
to the Court En Banc, dated August 4, 2006, filed by Atty. Francisco I. Chavez.
I.According to the movant, the Motion to Inhibit the Chief Justice is not an accusation of
wrongdoing on the part of the Honorable Chief Justice. Rather it is impelled by Atty. Chavezs
perception that in this case, the Honorable Chief Justice has not acted in an objective, impartial and
neutral manner in disposing of incidental issues and motions presented by the parties.
The movant adds that the dizzying pace by which private respondents motions have been
received and favorably acted upon in record time supports Atty. Chavezs perception that private
respondents motions without as much as requiring petitioner to respond thereto have been
granted special attention and favor by the Honorable Chief Justice. (bold types in original)
Atty. Chavezs perception about the alleged closeness and the good relationship between Atty.
Ordoez and the Chief Justice to impair the latters objectivity and impartiality has no basis, for the
following reasons:
(1)
The actions taken on the various motions and incidents enumerated by the movant were
made by the entire membership of the First Division. Not being the ponente, the Chief Justice did not
initiate or propose any of the actions and rulings made by the Court. Like the three other Division
members, he merely concurred with the actions/rulings proposed by the ponente. While some orders
and actions, especially temporary restraining orders, are issued in the name of the Division chairman
(who in this case is the Chief Justice), they are really collective actions of the entire Division, not
merely those of the Chair. This is the normal procedure in all Divisions, not just in the First.
(2)
The alleged unpleasant interaction these past 19 years between Atty. Chavez and Atty.
Sedfrey Ordoez with whom Chief Justice worked either as associate or partner sometime ago has
nothing to do at all with the concurrences made by the Chief Justice on this case. These concurrences
were given on the basis only of legal merit, and on nothing else.
(3)
True, the Chief Justice was an associate (not a partner) in 1961 to 1963 in the Salonga,
Ordoez and Associates, which incidentally had been dissolved in 1987. True also, he has had a close
personal and professional relationship with the principal partner in that law firm, Sen. Jovito R.
Salonga. That is the reason the Chief Justice has inhibited himself from cases in which Sen. Salonga
was/is a party or a counsel.[1]
However, he had no similar closeness with Atty. Ordoez. That is why he has not inhibited
himself from cases involving Atty. Ordoez. In fact, he has not hesitated, on several occasions, to vote
against parties/causes represented by the former Secretary of Justice.
(4)
In fairness to all concerned, Atty. Ordoez has never spoken, directly or indirectly, with
the Chief Justice on any matter pending in the Supreme Court and in any other court. He has never
attempted, directly or indirectly, personally or through others, to influence the Chief Justice in any
manner whatsoever. In fact, the Chief Justice understands that Atty. Ordoez has been seriously ill,
going in and out of the hospital, over the past several months. And yet the Chief Justice has not even
visited or spoken with him during such period.
(5)
On the other hand, the Chief Justice, when so warranted by the facts and law, has voted
in favor of causes and parties represented by Atty. Chavez. One outstanding example is Chavez v.
PCGG (360 Phil. 133, December 9, 1998; 366 Phil. 863, May 19, 1999), which was written by then
Associate Justice Artemio V. Panganiban. Atty. Chavez knows that he has won the vote of the Chief
Justice without his having to speak with or influence him in any manner.
(6)
Movants perception that Atty. Ordoezs concern for and interest in upholding the CIAC
jurisdiction must have somehow been relayed to the Honorable Chief Justice is completely
baseless. As already stated, there had been no conversation or communication, directly or indirectly,
personally or through others, between the Chief Justice and Atty. Ordoez (or anyone representing
him) about any matter related to any case in this, or any other, court. Neither is the Chief Justice
aware of any alleged personal interest of Atty. Ordoez to uphold the CIAC.
(7)
In a few months, the incumbent Chief Justice is scheduled to retire from the judiciary. It is
totally inconceivable that he will smear his eleven year record of integrity, independence and ethical
conduct in the Supreme Court with any action that is less than objective, impartial and neutral. On
the other hand, he assures movant (and all concerned) that he will continue with his vow to lead a
judiciary characterized by four Ins: independence, integrity, industry and intelligence.

II.
Following his misperception of closeness and bonding between Atty. Ordoez and the Chief
Justice, the movant assailed certain proceedings in this Honorable Courts First Division. However,
these proceedings can easily be explained, thus:
(1)
Respondents Motion to Include Hon. Pedro Sabundayo, Jr., Presiding Judge, Regional Trial Court
of Muntinlupa City, Branch 203, as public respondent was denied because Section 4, Rule 45 of the
Rules of Court provides that in a petition for review on certiorari to the Supreme Court, there is no
need to implead the lower courts or judges thereof either as petitioners or respondents. There is no
irregularity when the Resolution denying respondents motion was issued when the Chief Justice was
on official leave. The remaining Members of the Division can proceed with official business despite
the absence of the Chief Justice as long as the required majority is present. This is in accordance with
Section 4(3), Article VIII of the Constitution which provides that cases or matters heard by a division
shall be decided or resolved with the concurrence of a majority of the Members who actually took part
in the deliberations on the issues in the case and voted thereon, and in no case, without the
concurrence of at least three of such Members.
(2)
The issuance of a TRO enjoining the Presiding Judge of Muntinlupa City, Branch 203 from
continuing with any of the proceedings in Civil Case No. 03-110 and from enforcing the Order of the
trial court dated June 29, 2006 ordering the sheriff to implement the writ of execution dated May 17,
2006, is in order. Respondents satisfactorily established that they are entitled to the injunction.
It appears from the records that petitioner filed a complaint against respondents with the Regional
Trial Court of Muntinlupa City which was docketed as Civil Case No. 03-110 praying that an accounting
be rendered to determine the cost of the materials purchased by respondent Papas; that respondents
be ordered to pay the cost of the additional works done on the property; that the Design-Build
Construction Agreement be ordered rescinded because respondents breach the same; and that
respondents be ordered to pay moral and exemplary damages. Based on the same Design-Build
Construction Agreement, respondents filed with the Construction Industry Arbitration Commission
(CIAC) a complaint praying that petitioner be ordered to finish the project or, in the alternative, to pay
the cost to finish the same; to reimburse the overpayments made by respondents; and to pay
liquidated damages, attorneys fees and costs of the suit.
On June 8, 2005,[2] the CIAC rendered a decision on the merits of the case awarding in favor of
respondents the sum of P4,419,094.98. The case is presently on appeal with the Court of
Appeals[3] docketed as CA-G.R. SP No. 90136.[4]
Meanwhile, on July 29, 2005, the trial court rendered judgment in Civil Case No. 03-110 in favor of
petitioner ordering the respondents to pay P840,300.00 representing the cost of the additional works;
P296,658.95 representing the balance of the contract price; P500,000.00 by way of moral damages;
P500,000.00 as exemplary damages; P500,000.00 as attorneys fees and costs of the suit. In an Order
dated May 17, 2006, Judge Sabundayo, Jr. directed Sheriff Melvin T. Bagabaldo to implement the writ
of execution by causing the respondents to render an accounting of all the construction materials
they bought for the construction of the project x x x; to levy the goods and chattels of the
[respondents] x x x and to make the sale thereof x x x. [5]
In their Second Manifestation with Prayer for Issuance of a Temporary Restraining
Order/Injunction[6] filed with this Court on July 10, 2006, respondents averred that from July 7,
2006 until 4 oclock in the morning of July 8, 2006, Sheriff Bagabaldo went to the residence of
respondent Papas and levied several of her personal properties. [7] Respondents bewailed that despite
the pronouncement of the Court of Appeals that the CIAC, not the Regional Trial Court, which has
jurisdiction over the case, and despite the pendency of the instant case before us, the Regional Trial
Court still proceeded with the implementation of the writ.
It is important to mention that in both cases, the parties insist that the other breached their
obligation under the Design-Build Construction Agreement. Petitioner however argues that the
Regional Trial Court properly took cognizance of the case while respondents claim that CIAC has the
exclusive and original jurisdiction on the subject matter. Otherwise stated, if we rule in the instant
case that CIAC has jurisdiction over the controversy, then it would necessarily follow that the Regional
Trial Court does not have jurisdiction. Since it did not acquire jurisdiction over the controversy, then
the writ of execution that it issued was void. If we allow the RTC Judge and the Sheriff to continue with
the proceedings in Civil Case No. 03-110, then, whatever judgment that would be rendered in the
instant case would be rendered nugatory. In view of the above circumstances, respondents clearly
established that they are entitled to the issuance of a TRO.
Thus on July 12, 2006, the Court issued a Resolution that reads:
Acting on the prayer for issuance of a temporary restraining order/injunction, the Court further
resolves to issue a TEMPORARY RESTRAINING ORDER enjoining the Presiding Judge, Regional Trial
Court, Branch 203, Muntinlupa City, from continuing with any of the proceedings in Civil Case No. 03110 entitled Charles Bernard H. Reyes, doing business under the name and style of CBH Reyes
Architects vs. Spouses Mely and Cesar Esquig, et al. [subject matter of the assailed Court of Appeals
decision and resolution dated February 18, 2005 and May 20, 2005, respectively, in CA-G.R. SP No.
83816 entitled Charles Bernard H. Reyes, doing business under the name and style CBH REYES
ARCHITECTS vs. Antonio Yulo Balde II, et al] and from enforcing the Order dated June 29, 2006
ordering the designated sheriff to implement the writ of execution dated May 17, 2006 to enforce the
decision dated July 29, 2005 in Civil Case No. 03-110, upon the private respondents filing of a bond in
the amount of Three Hundred Thousand Pesos (P300,000.00) within a period of five (5) days from
notice hereof x x x.

(3)
Thereafter, respondents filed an Urgent Motion for Clarification of the above
resolution. Accordingly, on July 19, 2006, we issued a resolution which is a clarification of the TRO
issued on July 12, 2006. Both the July 12, 2006 and July 19, 2006 Resolutions are covered by the
same bond in the amount of P300,000.00.
(4)
A petition review under Rule 45 of the Rules of Court is not a matter of right but of sound
judicial discretion.[8] For purposes of determining whether the petition should be dismissed or denied,
or where the petition is given due course, the Supreme Court may require or allow the filing of such
pleadings, briefs, memoranda or documents as it may deem necessary within such periods and
under such conditions as it may consider appropriate, and impose the corresponding sanctions in case
of non-filing or unauthorized filing of such pleadings and documents or non-compliance with the
conditions therefor.[9] This Court exercised its discretion when it did not require petitioner to file
comment on respondents Manifestation with Urgent Motion to Resolve with Prayer for
Injunction, Second Manifestation with Prayer for Issuance of a Temporary Restraining Order/Injunction,
Urgent Motion for Clarification, and Compliance.
(5)
The Court did not exceed its jurisdiction; neither did it encroach on the jurisdiction of the Court
of Appeals or of the lower court when it issued the Resolution dated July 12, 2006. As discussed, there
is compelling reason to issue a TRO as the respondents satisfactorily established they are entitled to
the relief demanded. It may further be said that the issuance of a TRO on July 12, 2006 is not a final
determination of the matter. It was a remedy intended to avoid any irreparable injury that might be
caused to the parties. It may be recalled that the CIAC and the trial court each asserted its jurisdiction
over the controversy to the exclusion of the other.
(6)
There is no truth or basis to the allegation that the case has been given special attention. All
actions on the motions and incidents have been performed regularly.
WHEREFORE, the Motion to Inhibit the Honorable Chief Justice is DENIED. The Motion to Refer Case
to the Court En Banc is GRANTED.
____________________________________________________________________________________
3. FIESTA WORLD CORPORATION
For our resolution is the instant Petition for Review on Certiorari[1] assailing the
Decision[2] dated December 12, 2001 and Resolution[3] dated February 28, 2002 rendered by the Court
of Appeals in CA-G.R. SP
No. 63671, entitled Fiesta World Mall Corporation, petitioner, versus
Hon. Florito S. Macalino,Presiding Judge of the Regional Trial Court (RTC), Branch 267, Pasig City,
and Linberg Philippines, Inc., respondents.
The facts of this case are:
Fiesta World Mall Corporation, petitioner, owns and operates Fiesta World Mall located at
Barangay Maraouy, Lipa City; while Linberg Philippines,
Inc.,respondent, is a corporation that builds and operates power plants.
On January 19, 2000, respondent filed with the Regional Trial Court (RTC), Branch
267, Pasig City, a Complaint for Sum of Money against petitioner, docketed as Civil Case No.
67755. The complaint alleges that on November 12, 1997, petitioner and
respondent executed a build-own-operate agreement, entitled Contract Agreement for Power Supply
Services, 3.8 MW Base Load Power Plant[4] (the Contract). Under
this Contract, respondent will construct, at its own cost, and operate as owner a power plant, and to
supply petitioner power/electricity at its shopping mall in Lipa City. Petitioner, on the other
hand, willpay respondent energy fees to be computed in accordance with the Seventh Schedule of
the Contract, the pertinent portions of which provide:
Where:
E1 & E2
Energy fees in pesos for the billing period. Where E1 is based on the minimum energy
off-take of 988,888 kw-hrs. per month and E2 is based on the actual meter reading less the minimum
off-take.
BER

Base energy rate at Ps 2.30/Kw-Hr billing rate based on the exchange rate of Ps 26.20 to
the US dollar, and with fuel oil to be supplied by LINBERG at its own cost. The base energy rate
is subject to exchange rate adjustment accordingly to the formula as follows:
BER

0.6426 + 0.3224 Pn + 1.345 Fn

26.40

4.00

WHERE:
Pn

is defined as the average of the Bangko Sentral ng Pilipinas published dealing rates for
thirty (30) trading days immediately prior to the new billing rate.
Fn

Weighted average of fuel price per liter based on the average of the last three (3)
purchases made by LINBERG as evidenced by purchase invoices.
ED

Energy delivered in kw-hrs per meter reading.

3.

Minimum Energy Off-Take

The energy fees payable to LINBERG shall be on the basis of actual KWH generated by the
plant. However, if the actual KWH generated is less than the minimum energy off-take level, the
calculation of the energy fees shall be made as if LINBERG has generated the minimum energy offtake level of 988,888 KW-HR per month.
The complaint further alleges that respondent constructed the power plant in Lipa City at a cost of
about P130,000,000.00. In November 1997, the power plant became operational and
started supplying power/electricity to petitioners shopping mall in Lipa City. In December 1997,
respondent started billing petitioner. As of May 21, 1999, petitioners unpaid obligation amounted
to P15,241,747.58, exclusive of interest. However, petitioner questioned the said amount and
refused to pay despite respondents repeated demands.
In its Answer with Compulsory Counterclaim, petitioner specifically denied the allegations in the
complaint, claiming that respondent failed to fulfill its obligations under the Contract by failing
to supply all its power/fuel needs. From November 10, 1998 until May 21, 1999,
petitioner personally shouldered the cost of fuel. Petitioner also disputed the amount of energy
fees specified in the billings made by respondent because the latter failed to monitor,
measure, and record the quantities of electricity delivered by taking photographs of the
electricity meter reading prior to the issuance of its invoices and billings, alsoin violation
of the Contract.[5] Moreover, in the computation of the electrical billings, the minimum off-take of
energy (E2) was based solely on the projected consumption as computed by
respondent. However, based on petitioners actual experience, it could not consume the energy
pursuant to the minimum off-take even if it kept open all its lights and operated all its
machinery and equipment for twenty-four hours a day for a month. This fact was
admitted by respondent. While both parties had discussions on the questioned billings, however,
there were no earnest efforts to resolve the differences in accordance with the arbitration clause
provided for in the Contract.
Finally, as a special affirmative defense in its answer, petitioner alleged that respondents filing of
the complaint is premature and should be dismissed on the ground of non-compliance
with paragraph 7.4 of the Contract which provides:
7.4

Disputes

If FIESTA WORLD disputes the amount specified by any invoice, it shall pay the undisputed
amount on or before such date(s), and the disputed amount shall be resolved by arbitration of
three (3) persons, one (1) by mutual choice, while the other two (2) to be each chosen by
the parties themselves, within fourteen (14) days after the due date for such invoice and all or any
part of the disputed amount paid to LINBERG shall be paid together with interest pursuant to Article
XXV from the due date of the invoice. It is agreed, however, that both parties must resolve the
disputes within thirty (30) days, otherwise any delay in payment resulting to loss to LINBERG when
converted to $US as a result of depreciation of the Pesos shall be for the account of FIESTA
WORLD. Corollarily, in case of erroneous billings, however, LINBERG shall be liable to pay FIESTA
WORLD for the cost of such deterioration, plus interest computed pursuant to Art. XXV from the date
FIESTA WORLD paid for the erroneous billing. (Underscoring supplied)

Thereafter, petitioner filed a Motion to Set Case for Preliminary Hearing on the ground that respondent
violated the arbitration clause provided in the Contract, thereby rendering its cause of action
premature.
This was opposed by respondent, claiming that paragraph 7.4 of the Contract on arbitration is not the
provision applicable to this case; and that since the parties failed to settle their dispute, then
respondent may resort to court action pursuant to paragraph 17.2 of the same Contract which
provides:
17.2

Amicable Settlement

The parties hereto agree that in the event there is any dispute or difference between them
arising out of this Agreement or in the interpretation of any of the provisions hereto, they
shall endeavor to meet together in an effort to resolve such dispute by discussion between
them but failing such resolution the Chief Executives of LINBERG and FIESTA WORLD shall
meet to resolve such dispute or difference and the joint decision of such shall be binding upon
the parties hereto,and in the event that a settlement of any such dispute or difference is not
reached, then the provisions of Article XXI shall apply.
Article XXI, referred to in paragraph 17.2 above, reads:
ARTICLE XXI
JURISDICTION
The parties hereto submit to the exclusive jurisdiction of the proper courts of Pasig City, Republic
of the Philippines for the hearing and determination of any action or proceeding arising out
of or in connection with this Agreement.
In its Order dated October 3, 2000, the trial court denied petitioners motion for lack of merit.

Petitioner then filed a Motion for Reconsideration but it was denied in an Order dated January 11,
2001.
Dissatisfied, petitioner elevated the matter to the Court of Appeals via a Petition for
Certiorari, docketed as CA-G.R. SP No. 63671. On December 12, 2001, the appellate court
rendered its Decision dismissing the petition and affirming the challenged Orders of the trial court.
Petitioners Motion for Reconsideration of the above Decision was likewise denied by the appellate
court in its Resolution[6] dated February 28, 2002.
Hence, the instant Petition for Review on Certiorari.
The sole issue for our resolution is whether the filing with the trial court of respondents complaint is
premature.
Paragraph 7.4 of the Contract, quoted earlier, mandates that should petitioner dispute any amount of
energy fees in the invoice and billings made by respondent, the same shall be resolved by
arbitration of three (3) persons, one (1) by mutual choice, while the other two (2) to be
each chosen by the parties themselves. The parties, in incorporating such agreement in their
Contract, expressly intended that the said matter in dispute must first be resolved by an
arbitration panel before it reaches the court. They made such arbitration mandatory.
It is clear from the records that petitioner disputed the amount of energy fees demanded by
respondent. However, respondent, without prior recourse to arbitration as required in the
Contract, filed directly with the trial court its complaint, thus violating the arbitration clause in the
Contract.
It bears stressing that such arbitration agreement is the law between the parties. Since that
agreement is binding between them, they are expected to abide by it in good faith. [7] And because it
covers the dispute between them in the present case, either of them may compel the other to
arbitrate.[8] Thus, it is well within petitioners right to demand recourse to arbitration.
We cannot agree with respondent that it can directly seek judicial recourse by filing an action against
petitioner simply because both failed to settle their differences amicably. Suffice it to state
that there is nothing in the Contract providing that the parties may dispense with
the arbitration clause. Article XXI on jurisdiction cited by respondent, i.e., that the parties
hereto submit to the exclusive jurisdiction of the proper courts of Pasig City merely
providesfor the venue of any action arising out of or in connection with the stipulations of the parties
in the Contract.
Moreover, we note that the computation of the energy fees disputed by
petitioner also involves technical matters that are better left to an arbitration panelwho has
expertise in those areas. Alternative dispute resolution methods or ADRs like arbitration, mediation,
negotiation and conciliation are encouraged by this Court. By enabling the parties to resolve their
disputes amicably, they provide solutions that are less time-consuming, less tedious, less
confrontational, and more productive of goodwill and lasting relationships. [9] To brush aside such
agreement providing for arbitration in case of disputes between the parties would be a step
backward. As we held in BF Corporation v. Court of Appeals,[10]
It should be noted that in this jurisdiction, arbitration has been held valid and constitutional. Even
before the approval on June 19, 1953 of Republic Act No. 876(The Arbitration Law), this Court has
countenanced the settlement of disputes through arbitration (Puromines, Inc. v. Court of Appeals, G.R.
No. 91228, March 22, 1993, 220 SCRA 281-290). Republic Act No. 876 was adopted to supplement
the New Civil Codes provisions on arbitration (Chung Fu Industries Phils., Inc. v. Court of Appeals,G.R.
No. 92683, February 25, 1992, 206 SCRA 545, 551). Its potentials as one of the alternative
dispute resolution methods that are now rightfully vaunted as the wave of the future in international
relations, is recognized worldwide. To brush aside a contractual agreement calling for arbitration in
case of disagreement between the parties would therefore be a step backward.
In this connection, since respondent has already filed a complaint with the trial court without
prior recourse to arbitration, the proper procedure to enable an arbitration panel to resolve the
parties dispute pursuant to their Contract is for the trial court to stay the proceedings.[11] After the
arbitration proceeding has been pursued and completed, then the trial court may confirm the award
made by the arbitration panel.[12]

In sum, we hold that the Court of Appeals erred in disregarding the arbitration clause in the
parties Contract.
WHEREFORE, we GRANT the instant petition. The assailed Decision and Resolution of the
Court of Appeals in CA-G.R. SP No. 63671 are REVERSED. The parties are ordered to submit their
controversy to the arbitration panel pursuant to paragraph 7.4 of the Contract. The Regional Trial
Court, Branch 267, Pasig City is directed to suspend the proceedings in Civil Case No. 67755 until after
the Arbitration Panel shall have resolved the controversy and submitted its report to the
trial court. Costs against respondent.
4.KOREA TECHNOLOGIES INC VS LERMA

In our jurisdiction, the policy is to favor alternative methods of resolving disputes, particularly in
civil and commercial disputes. Arbitration along with mediation, conciliation, and negotiation, being
inexpensive, speedy and less hostile methods have long been favored by this Court. The petition
before us puts at issue an arbitration clause in a contract mutually agreed upon by the parties
stipulating that they would submit themselves to arbitration in a foreign country. Regrettably, instead
of hastening the resolution of their dispute, the parties wittingly or unwittingly prolonged the
controversy.
Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean corporation which is engaged in the
supply and installation of Liquefied Petroleum Gas (LPG) Cylinder manufacturing plants, while private
respondent Pacific General Steel Manufacturing Corp. (PGSMC) is a domestic corporation.
On March 5, 1997, PGSMC and KOGIES executed a Contract [1] whereby KOGIES would set up an LPG
Cylinder Manufacturing Plant in Carmona,Cavite. The contract was executed in
the Philippines. On April 7, 1997, the parties executed, in Korea, an Amendment for Contract No. KLP970301 datedMarch 5, 1997[2] amending the terms of payment. The contract and its amendment
stipulated that KOGIES will ship the machinery and facilities necessary for manufacturing LPG
cylinders for which PGSMC would pay USD 1,224,000. KOGIES would install and initiate the operation
of the plant for which PGSMC bound itself to pay USD 306,000 upon the plants production of the 11kg. LPG cylinder samples. Thus, the total contract price amounted to USD 1,530,000.
On October 14, 1997, PGSMC entered into a Contract of Lease [3] with Worth Properties, Inc. (Worth) for
use of Worths 5,079-square meter property with a 4,032-square meter warehouse building to house
the LPG manufacturing plant. The monthly rental was PhP 322,560 commencing on January 1,
1998with a 10% annual increment clause. Subsequently, the machineries, equipment, and facilities
for the manufacture of LPG cylinders were shipped, delivered, and installed in the Carmona
plant. PGSMC paid KOGIES USD 1,224,000.
However, gleaned from the Certificate[4] executed by the parties on January 22, 1998, after the
installation of the plant, the initial operation could not be conducted as PGSMC encountered financial
difficulties affecting the supply of materials, thus forcing the parties to agree that KOGIES would be
deemed to have completely complied with the terms and conditions of the March 5, 1997 contract.
For the remaining balance of USD306,000 for the installation and initial operation of the plant, PGSMC
issued two postdated checks: (1) BPI Check No. 0316412 dated January 30, 1998 for PhP 4,500,000;
and (2) BPI Check No. 0316413 dated March 30, 1998 for PhP 4,500,000. [5]
When KOGIES deposited the checks, these were dishonored for the reason PAYMENT
STOPPED. Thus, on May 8, 1998, KOGIES sent a demand letter[6] to PGSMC threatening criminal
action for violation of Batas Pambansa Blg. 22 in case of nonpayment. On the same date, the wife of
PGSMCs President faxed a letter dated May 7, 1998 to KOGIES President who was then staying at
a Makati City hotel. She complained that not only did KOGIES deliver a different brand of hydraulic
press from that agreed upon but it had not delivered several equipment parts already paid for.
On May 14, 1998, PGSMC replied that the two checks it issued KOGIES were fully funded but the
payments were stopped for reasons previously made known to KOGIES. [7]
On June 1, 1998, PGSMC informed KOGIES that PGSMC was canceling their Contract dated March 5,
1997 on the ground that KOGIES had altered the quantity and lowered the quality of the machineries
and equipment it delivered to PGSMC, and that PGSMC would dismantle and transfer the machineries,
equipment, and facilities installed in the Carmona plant. Five days later, PGSMC filed before the Office
of the Public Prosecutor an Affidavit-Complaint forEstafa docketed as I.S. No. 98-03813 against Mr. Dae
Hyun Kang, President of KOGIES.
On June 15, 1998, KOGIES wrote PGSMC informing the latter that PGSMC could not unilaterally rescind
their contract nor dismantle and transfer the machineries and equipment on mere imagined violations
by KOGIES. It also insisted that their disputes should be settled by arbitration as agreed upon in
Article 15, the arbitration clause of their contract.
On June 23, 1998, PGSMC again wrote KOGIES reiterating the contents of its June 1, 1998 letter
threatening that the machineries, equipment, and facilities installed in the plant would be dismantled
and transferred on July 4, 1998. Thus, on July 1, 1998, KOGIES instituted an Application for Arbitration
before the Korean Commercial Arbitration Board (KCAB) in Seoul, Korea pursuant to Art. 15 of the
Contract as amended.

On July 3, 1998, KOGIES filed a Complaint for Specific Performance, docketed as Civil Case No. 98117[8] against PGSMC before the Muntinlupa City Regional Trial Court (RTC). The RTC granted a
temporary restraining order (TRO) on July 4, 1998, which was subsequently extended until July 22,
1998. In its complaint, KOGIES alleged that PGSMC had initially admitted that the checks that were
stopped were not funded but later on claimed that it stopped payment of the checks for the reason
that their value was not received as the former allegedly breached their contract by altering the
quantity and lowering the quality of the machinery and equipment installed in the plant and failed to
make the plant operational although it earlier certified to the contrary as shown in a January 22, 1998
Certificate. Likewise, KOGIES averred that PGSMC violated Art. 15 of their Contract, as amended, by
unilaterally rescinding the contract without resorting to arbitration. KOGIES also asked that PGSMC be
restrained from dismantling and transferring the machinery and equipment installed in the plant
which the latter threatened to do on July 4, 1998.
On July 9, 1998, PGSMC filed an opposition to the TRO arguing that KOGIES was not entitled to the
TRO since Art. 15, the arbitration clause, was null and void for being against public policy as it ousts
the local courts of jurisdiction over the instant controversy.
On July 17, 1998, PGSMC filed its Answer with Compulsory Counterclaim [9] asserting that it had the full
right to dismantle and transfer the machineries and equipment because it had paid for them in full as
stipulated in the contract; that KOGIES was not entitled to the PhP 9,000,000 covered by the checks
for failing to completely install and make the plant operational; and that KOGIES was liable for
damages amounting to PhP 4,500,000 for altering the quantity and lowering the quality of the
machineries and equipment. Moreover, PGSMC averred that it has already paid PhP 2,257,920 in rent
(covering January to July 1998) to Worth and it was not willing to further shoulder the cost of renting
the premises of the plant considering that the LPG cylinder manufacturing plant never became
operational.
After the parties submitted their Memoranda, on July 23, 1998, the RTC issued an Order denying the
application for a writ of preliminary injunction, reasoning that PGSMC had paid KOGIES USD 1,224,000,
the value of the machineries and equipment as shown in the contract such that KOGIES no longer had
proprietary rights over them. And finally, the RTC held that Art. 15 of the Contract as amended was
invalid as it tended to oust the trial court or any other court jurisdiction over any dispute that may
arise between the parties. KOGIES prayer for an injunctive writ was denied. [10] The dispositive portion
of the Order stated:
WHEREFORE, in view of the foregoing consideration, this Court believes and so holds that no
cogent reason exists for this Court to grant the writ of preliminary injunction to restrain and refrain
defendant from dismantling the machineries and facilities at the lot and building of Worth Properties,
Incorporated at Carmona, Cavite and transfer the same to another site: and therefore denies plaintiffs
application for a writ of preliminary injunction.
On July 29, 1998, KOGIES filed its Reply to Answer and Answer to Counterclaim. [11] KOGIES denied it
had altered the quantity and lowered the quality of the machinery, equipment, and facilities it
delivered to the plant. It claimed that it had performed all the undertakings under the contract and
had already produced certified samples of LPG cylinders. It averred that whatever was unfinished was
PGSMCs fault since it failed to 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 PGSMCs
memorandum of July 22, 1998 and seeking dismissal of PGSMCs counterclaims, KOGIES, on August 4,
1998, filed its Motion for Reconsideration[14] of the July 23, 1998 Order denying its application for
an injunctive writ claiming that the contract was not merely for machinery and facilities worth USD
1,224,000 but was for the sale of an LPG manufacturing plant consisting of supply of all the
machinery and facilities and transfer of technology for a total contract price of USD 1,530,000 such
that the dismantling and transfer of the machinery and facilities would result in the dismantling and
transfer of the very plant itself to the great prejudice of KOGIES as the still unpaid owner/seller of the
plant. Moreover, KOGIES points out that the arbitration clause under Art. 15 of the Contract as
amended was a valid arbitration stipulation under Art. 2044 of the Civil Code and as held by this Court
in Chung Fu Industries (Phils.), Inc.[15]
In the meantime, PGSMC filed a Motion for Inspection of Things [16] to determine whether there was
indeed alteration of the quantity and lowering of quality of the machineries and equipment, and
whether these were properly installed. KOGIES opposed the motion positing that the queries and
issues raised in the motion for inspection fell under the coverage of the arbitration clause in their
contract.
On September 21, 1998, the trial court issued an Order (1) granting PGSMCs motion for inspection;
(2) denying KOGIES motion for reconsideration of the July 23, 1998 RTC Order; and (3) denying
KOGIES motion to dismiss PGSMCs compulsory counterclaims as these counterclaims fell within the
requisites of compulsory counterclaims.

On October 2, 1998, KOGIES filed an Urgent Motion for Reconsideration [17] of the September 21, 1998
RTC Order granting inspection of the plant and denying dismissal of PGSMCs compulsory
counterclaims.
Ten days after, on October 12, 1998, without waiting for the resolution of its October 2, 1998 urgent
motion for reconsideration, KOGIES filed before the Court of Appeals (CA) a petition for
certiorari[18] docketed as CA-G.R. SP No. 49249, seeking annulment of the July 23, 1998 and
September 21, 1998 RTC Orders and praying for the issuance of writs of prohibition, mandamus, and
preliminary injunction to enjoin the RTC and PGSMC from inspecting, dismantling, and transferring the
machineries and equipment in the Carmona plant, and to direct the RTC to enforce the specific
agreement on arbitration to resolve the dispute.
In the meantime, on October 19, 1998, the RTC denied KOGIES urgent motion for reconsideration and
directed the Branch Sheriff to proceed with the inspection of the machineries and equipment in the
plant on October 28, 1998.[19]
Thereafter, KOGIES filed a Supplement to the Petition [20] in CA-G.R. SP No. 49249 informing the CA
about the October 19, 1998 RTC Order. It also reiterated its prayer for the issuance of the writs of
prohibition, mandamus and preliminary injunction which was not acted upon by the CA. KOGIES
asserted that the Branch Sheriff did not have the technical expertise to ascertain whether or not the
machineries and equipment conformed to the specifications in the contract and were properly
installed.
On November 11, 1998, the Branch Sheriff filed his Sheriffs Report [21] finding that the enumerated
machineries and equipment were not fully and properly installed.
The Court of Appeals affirmed the trial court and declared the arbitration clause against
public policy
On May 30, 2000, the CA rendered the assailed Decision [22] affirming the RTC Orders and dismissing
the petition for certiorari filed by KOGIES. The CA found that the RTC did not gravely abuse its
discretion in issuing the assailed July 23, 1998 and September 21, 1998 Orders. Moreover, the CA
reasoned that KOGIES contention that the total contract price for USD 1,530,000 was for the whole
plant and had not been fully paid was contrary to the finding of the RTC that PGSMC fully paid the
price of USD 1,224,000, which was for all the machineries and equipment. According to the CA, this
determination by the RTC was a factual finding beyond the ambit of a petition for certiorari.
On the issue of the validity of the arbitration clause, the CA agreed with the lower court that an
arbitration clause which provided for a final determination of the legal rights of the parties to the
contract by arbitration was against public policy.
On the issue of nonpayment of docket fees and non-attachment of a certificate of non-forum
shopping by PGSMC, the CA held that the counterclaims of PGSMC were compulsory ones and
payment of docket fees was not required since the Answer with counterclaim was not an initiatory
pleading. For the same reason, the CA said a certificate of non-forum shopping was also not required.
Furthermore, the CA held that the petition for certiorari had been filed prematurely since KOGIES did
not wait for the resolution of its urgent motion for reconsideration of the September 21, 1998 RTC
Order which was the plain, speedy, and adequate remedy available. According to the CA, the RTC
must be given the opportunity to correct any alleged error it has committed, and that since the
assailed orders were interlocutory, these cannot be the subject of a petition for certiorari.
Hence, we have this Petition for Review on Certiorari under Rule 45.
The Issues
Petitioner posits that the appellate court committed the following errors:
a.
PRONOUNCING THE QUESTION OF OWNERSHIP OVER THE MACHINERY AND FACILITIES AS A
QUESTION OF FACT BEYOND THE AMBIT OF A PETITION FOR CERTIORARI INTENDED ONLY FOR
CORRECTION OF ERRORS OF JURISDICTION OR GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OF (SIC) EXCESS OF JURISDICTION, AND CONCLUDING THAT THE TRIAL COURTS FINDING ON THE
SAME QUESTION WAS IMPROPERLY RAISED IN THE PETITION BELOW;
b.
DECLARING AS NULL AND VOID THE ARBITRATION CLAUSE IN ARTICLE 15 OF THE CONTRACT
BETWEEN THE PARTIES FOR BEING CONTRARY TO PUBLIC POLICY AND FOR OUSTING THE COURTS
OF JURISDICTION;
c.
DECREEING PRIVATE RESPONDENTS COUNTERCLAIMS TO BE ALL COMPULSORY NOT
NECESSITATING PAYMENT OF DOCKET FEES AND CERTIFICATION OF NON-FORUM SHOPPING;
d.
RULING THAT THE PETITION WAS FILED PREMATURELY WITHOUT WAITING FOR THE
RESOLUTION OF THE MOTION FOR RECONSIDERATION OF THE ORDER DATED SEPTEMBER 21, 1998 OR
WITHOUT GIVING THE TRIAL COURT AN OPPORTUNITY TO CORRECT ITSELF;
e.
PROCLAIMING THE TWO ORDERS DATED JULY 23 AND SEPTEMBER 21, 1998 NOT TO BE
PROPER SUBJECTS OF CERTIORARI AND PROHIBITION FOR BEING INTERLOCUTORY IN NATURE;
f.
NOT GRANTING THE RELIEFS AND REMEDIES PRAYED FOR IN HE (SIC) PETITION AND,
INSTEAD, DISMISSING THE SAME FOR ALLEGEDLY WITHOUT MERIT. [23]
The Courts Ruling
The petition is partly meritorious.

Before we delve into the substantive issues, we shall first tackle the procedural issues.
The rules on the payment of docket fees for counterclaims and cross claims were
amended effective August 16, 2004
KOGIES strongly argues that when PGSMC filed the counterclaims, it should have paid docket fees
and filed a certificate of non-forum shopping, and that its failure to do so was a fatal defect.
We disagree with KOGIES.
As aptly ruled by the CA, the counterclaims of PGSMC were incorporated in its Answer with
Compulsory Counterclaim dated July 17, 1998 in accordance with Section 8 of Rule 11, 1997 Revised
Rules of Civil Procedure, the rule that was effective at the time the Answer with Counterclaim was
filed. Sec. 8 onexisting counterclaim or cross-claim states, A compulsory counterclaim or a crossclaim that a defending party has at the time he files his answer shall be contained therein.

On July 17, 1998, at the time PGSMC filed its Answer incorporating its counterclaims against KOGIES, it
was not liable to pay filing fees for said counterclaims being compulsory in nature. We stress,
however, that effective August 16, 2004 under Sec. 7, Rule 141, as amended by A.M. No. 04-2-04-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, PGSMCs Answer is not an initiatory
pleading which requires a certification against forum shopping under Sec. 5 [24] of Rule 7, 1997 Revised
Rules of Civil Procedure. It is a responsive pleading, hence, the courts a quo did not commit reversible
error in denying KOGIES motion to dismiss PGSMCs compulsory counterclaims.
Interlocutory orders proper subject of certiorari
Citing Gamboa v. Cruz,[25] the CA also pronounced that certiorari and Prohibition are neither the
remedies to question the propriety of an interlocutory order of the trial court. [26] The CA erred on its
reliance on Gamboa. Gamboa involved the denial of a motion to acquit in a criminal case which was
not assailable in an action for certiorari since the denial of a motion to quash required the accused to
plead and to continue with the trial, and whatever objections the accused had in his motion to quash
can then be used as part of his defense and subsequently can be raised as errors on his appeal if the
judgment of the trial court is adverse to him. The general rule is that interlocutory orders cannot be
challenged by an appeal.[27] Thus, in Yamaoka v. Pescarich Manufacturing Corporation, we held:
The proper remedy in such cases is an ordinary appeal from an adverse judgment on the merits,
incorporating in said appeal the grounds for assailing the interlocutory orders. Allowing appeals from
interlocutory orders would result in the sorry spectacle of a case being subject of a
counterproductive ping-pong to and from the appellate court as often as a trial court is perceived to
have made an error in any of its interlocutory rulings. However, where the assailed interlocutory order
was issued with grave abuse of discretion or patently erroneous and the remedy of appeal would not
afford adequate and expeditious relief, the Court allows certiorari as a mode of redress. [28]

Also, appeals from interlocutory orders would open the floodgates to endless occasions for dilatory
motions. Thus, where the interlocutory order was issued without or in excess of jurisdiction or with
grave abuse of discretion, the remedy is certiorari. [29]
The alleged grave abuse of discretion of the respondent court equivalent to lack of jurisdiction in the
issuance of the two assailed orders coupled with the fact that there is no plain, speedy, and adequate
remedy in the ordinary course of law amply provides the basis for allowing the resort to a petition for
certiorari under Rule 65.
Prematurity of the petition before the CA
Neither do we think that KOGIES was guilty of forum shopping in filing the petition for certiorari. Note
that KOGIES motion for reconsideration of the July 23, 1998 RTC Order which denied the issuance of
the injunctive writ had already been denied. Thus, KOGIES only remedy was to assail the RTCs
interlocutory order via a petition for certiorari under Rule 65.
While the October 2, 1998 motion for reconsideration of KOGIES of the September 21, 1998 RTC Order
relating to the inspection of things, and the allowance of the compulsory counterclaims has not yet
been resolved, the circumstances in this case would allow an exception to the rule that before
certiorari may be availed of, the petitioner must have filed a motion for reconsideration and said

motion should have been first resolved by the court a quo. The reason behind the rule is to enable
the lower court, in the first 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 KOGIES. Indeed, there is real and
imminent threat of irreparable destruction or substantial damage to KOGIES equipment and
machineries. We find the resort to certiorari based on the gravely abusive orders of the trial court
sans the ruling on theOctober 2, 1998 motion for reconsideration to be proper.
The Core Issue: Article 15 of the Contract
We now go to the core issue of the validity of Art. 15 of the Contract, the arbitration clause. It
provides:
Article 15. Arbitration.All disputes, controversies, or differences which may arise between the
parties, out of or in relation to or in connection with this Contract or for the breach thereof, shall finally
be settled by arbitration in Seoul, Korea in accordance with the Commercial Arbitration Rules of the
Korean Commercial Arbitration Board. The award rendered by the arbitration(s) shall 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 law, or against morals, good customs, public order, or public
policy. There has been no showing that the parties have not dealt with each other on equal
footing. We find no reason why the arbitration clause should not be respected and complied with by
both parties. In Gonzales v. Climax Mining Ltd.,[35] we held that submission to arbitration is a contract
and that a clause in a contract providing that all matters in dispute between the parties shall be
referred to arbitration is a contract.[36] Again in Del Monte Corporation-USA v. Court of Appeals, we
likewise ruled that [t]he provision to submit to arbitration any dispute arising therefrom and the
relationship of the parties is part of that contract and is itself a contract. [37]
Arbitration clause not contrary to public policy
The arbitration clause which stipulates that the arbitration must be done in Seoul, Korea in
accordance with the Commercial Arbitration Rules of the KCAB, and that the arbitral award is final and
binding, is not contrary to public policy. This Court has sanctioned the validity of arbitration clauses in
a catenaof 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 Act No. 876 was adopted to supplement the New Civil Codes provisions on
arbitration.[39] And in LM Power Engineering Corporation v. Capitol Industrial Construction Groups,
Inc., we declared that:
Being an inexpensive, speedy and amicable method of settling disputes, arbitrationalong with
mediation, conciliation and negotiationis encouraged by the Supreme Court. Aside from unclogging
judicial dockets, arbitration also hastens the resolution of disputes, especially of the commercial
kind. It is thus regarded as the wave of the future in international civil and commercial
disputes. Brushing aside a contractual agreement calling for arbitration between the parties would be
a step backward.
Consistent with the above-mentioned policy of encouraging alternative dispute resolution methods,
courts should liberally construe arbitration clauses. Provided such clause is susceptible of an
interpretation that covers the asserted dispute, an order to arbitrate should be granted. Any doubt
should be resolved in favor of arbitration.[40]

Having said that the instant arbitration clause is not against public policy, we come to the question on
what governs an arbitration clause specifying that in case of any dispute arising from the contract, an
arbitral panel will be constituted in a foreign country and the arbitration rules of the foreign country
would govern and its award shall be final and binding.
RA 9285 incorporated the UNCITRAL Model law to which we are a signatory
For domestic arbitration proceedings, we have particular agencies to arbitrate disputes arising from
contractual relations. In case a foreign arbitral body is chosen by the parties, the arbitration rules of
our domestic arbitration bodies would not be applied. As signatory to the Arbitration Rules of the
UNCITRAL Model Law on International Commercial Arbitration [41] of the United Nations Commission on
International Trade Law (UNCITRAL) in the New York Convention on June 21, 1985,
the 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
commercial arbitration shall be governed by the Model Law on International Commercial Arbitration
(the Model Law) adopted by the United Nations Commission on International Trade Law on June 21,
1985 (United Nations Document A/40/17) and recommended for enactment by the General Assembly
in Resolution No. 40/72 approved on December 11, 1985, copy of which is hereto attached as
Appendix A.
SEC. 20. Interpretation of Model Law.In interpreting the Model Law, regard shall be had to its
international origin and to the need for uniformity in its interpretation and resort may be made to
the travaux preparatories and the report of the Secretary General of the United Nations Commission
on International Trade Law dated March 25, 1985 entitled, International Commercial Arbitration:
Analytical Commentary on Draft Trade identified by reference number A/CN. 9/264.
While RA 9285 was passed only in 2004, it nonetheless applies in the instant case since it is a
procedural law which has a retroactive effect. Likewise, KOGIES filed its application for arbitration
before the KCAB on July 1, 1998 and it is still pending because no arbitral award has yet been
rendered. Thus, RA 9285 is applicable to the instant case. Well-settled is the rule that procedural
laws are construed to be applicable to actions pending and undetermined at the time of their passage,
and are deemed retroactive in that sense and to that extent. As a general rule, the retroactive
application of procedural laws does not violate any personal rights because no vested right has yet
attached nor arisen from them.[42]
Among the pertinent features of RA 9285 applying and incorporating the UNCITRAL Model Law are the
following:
(1)

The RTC must refer to arbitration in proper cases

Under Sec. 24, the RTC does not have jurisdiction over disputes that are properly the subject of
arbitration pursuant to an arbitration clause, and mandates the referral to arbitration in such cases,
thus:
SEC. 24. Referral to Arbitration.A court before which an action is brought in a matter which is the
subject matter of an arbitration agreement shall, if at least one party so requests not later than the
pre-trial conference, or upon the request of both parties thereafter, refer the parties to arbitration
unless it finds that the arbitration agreement is null and void, inoperative or incapable of being
performed.
(2)

Foreign arbitral awards must be confirmed by the RTC

Foreign arbitral awards while mutually stipulated by the parties in the arbitration clause to be final
and binding are not immediately enforceable or cannot be implemented immediately. Sec. 35[43] of
the UNCITRAL Model Law stipulates the requirement for the arbitral award to be recognized by a
competent court for enforcement, which court under Sec. 36 of the UNCITRAL Model Law may refuse
recognition or enforcement on the grounds provided for. RA 9285 incorporated these provisos to Secs.
42, 43, and 44 relative to Secs. 47 and 48, thus:
SEC. 42. Application of the New York Convention.The New York Convention shall govern the
recognition and enforcement of arbitral awards covered by said Convention.

The recognition and enforcement of such arbitral awards shall be filed with the Regional Trial
Court in accordance with the rules of procedure to be promulgated by the Supreme Court. Said
procedural rules shall provide that the party relying on the award or applying for its enforcement shall
file with the court the original or authenticated copy of the award and the arbitration agreement. If
the award or agreement is not made in any of the official languages, the party shall supply a duly
certified translation thereof into any of such languages.
The applicant shall establish that the country in which foreign arbitration award was made in party to
the New York Convention.
xxxx
SEC. 43. Recognition and Enforcement of Foreign Arbitral Awards Not Covered by the New York
Convention.The recognition and enforcement of foreign arbitral awards not covered by the New York
Convention shall be done in accordance with procedural rules to be promulgated by the Supreme
Court. The Court may, on grounds of comity and reciprocity, recognize and enforce a non-convention
award as a convention award.
SEC. 44. Foreign Arbitral Award Not Foreign Judgment.A foreign arbitral award when
confirmed by a court of a foreign country, shall be recognized and enforced as a foreign arbitral award
and not as a judgment of a foreign court.
A foreign arbitral award, when confirmed by the Regional Trial Court, shall be enforced in the same
manner as final and executory decisions of courts of law of thePhilippines
xxxx
SEC. 47. Venue and Jurisdiction.Proceedings for recognition and enforcement of an arbitration
agreement or for vacations, setting aside, correction or modification of an arbitral award, and any
application with a court for arbitration assistance and supervision shall be deemed as special
proceedings and shall be filed with the Regional Trial Court (i) where arbitration proceedings are
conducted; (ii) where the asset to be attached or levied upon, or the act to be enjoined is located; (iii)
where any of the parties to the dispute resides or has his place of business; or (iv) in the National
Judicial Capital Region, at the option of the applicant.
SEC. 48. Notice of Proceeding to Parties.In a special proceeding for recognition and enforcement of
an arbitral award, the Court shall send notice to the parties at their address of record in the
arbitration, or if any part cannot be served notice at such address, at such partys last known
address. The notice shall be sent al least fifteen (15) days before the date set for the initial hearing of
the application.
It is now clear that foreign arbitral awards when confirmed by the RTC are deemed not as a judgment
of a foreign court but as a foreign arbitral award, and when confirmed, are enforced as final and
executory decisions of our courts of law.
Thus, it can be gleaned that the concept of a final and binding arbitral award is similar to judgments
or awards given by some of our quasi-judicial bodies, like the National Labor Relations Commission
and Mines Adjudication Board, whose final judgments are stipulated to be final and binding, but not
immediately executory in the sense that they may still be judicially reviewed, upon the instance of any
party. Therefore, the final foreign arbitral awards are similarly situated in that they need first to be
confirmed by the RTC.
(3)

The RTC has jurisdiction to review foreign arbitral awards

Sec. 42 in relation to Sec. 45 of RA 9285 designated and vested the RTC with specific authority and
jurisdiction to set aside, reject, or vacate a foreign arbitral award on grounds provided under Art. 34(2)
of the UNCITRAL Model Law. Secs. 42 and 45 provide:
SEC. 42. Application of the New York Convention.The New York Convention shall govern the
recognition and enforcement of arbitral awards covered by said Convention.
The recognition and enforcement of such arbitral awards shall be filed with the Regional Trial
Court in accordance with the rules of procedure to be promulgated by the Supreme Court. Said
procedural rules shall provide that the party relying on the award or applying for its enforcement shall
file with the court the original or authenticated copy of the award and the arbitration agreement. If
the award or agreement is not made in any of the official languages, the party shall supply a duly
certified translation thereof into any of such languages.
The applicant shall establish that the country in which foreign arbitration award was made is party to
the New York Convention.

If the application for rejection or suspension of enforcement of an award has been made, the Regional
Trial Court may, if it considers it proper, vacate its decision and may also, on the application of the
party claiming recognition or enforcement of the award, order the party to provide appropriate
security.
xxxx
SEC. 45. Rejection of a Foreign Arbitral Award.A party to a foreign arbitration proceeding may
oppose an application for recognition and enforcement of the arbitral award in accordance with the
procedures and rules to be promulgated by the Supreme Court only on those grounds enumerated
under Article V of the New York Convention. Any other ground raised shall be disregarded by the
Regional Trial Court.
Thus, while the RTC does not have jurisdiction over disputes governed by arbitration mutually agreed
upon by the parties, still the foreign arbitral award is subject to judicial review by the RTC which can
set aside, reject, or vacate it. In this sense, what this Court held in Chung Fu Industries (Phils.), Inc.
relied upon by KOGIES is applicable insofar as the foreign arbitral awards, while final and binding, do
not oust courts of jurisdiction since these arbitral awards are not absolute and without exceptions as
they are still judicially reviewable. Chapter 7 of RA 9285 has made it clear that all arbitral awards,
whether domestic or foreign, are subject to judicial review on specific grounds provided for.
(4)

Grounds for judicial review different in domestic and foreign arbitral awards

The differences between a final arbitral award from an international or foreign arbitral tribunal and an
award given by a local arbitral tribunal are the specific grounds or conditions that vest jurisdiction
over our courts to review the awards.
For foreign or international arbitral awards which must first be confirmed by the RTC, the grounds for
setting aside, rejecting r vacating the award by the RTC are provided under Art. 34(2) of the UNCITRAL
Model Law.
For final domestic arbitral awards, which also need confirmation by the RTC pursuant to Sec. 23 of RA
876[44] and shall be recognized as final and executory decisions of the RTC, [45] they may only be
assailed before the RTC and vacated on the grounds provided under Sec. 25 of RA 876. [46]
(5)

RTC decision of assailed foreign arbitral award appealable

Sec. 46 of RA 9285 provides for an appeal before the CA as the remedy of an aggrieved party in cases
where the RTC sets aside, rejects, vacates, modifies, or corrects an arbitral award, thus:

SEC. 46. Appeal from Court Decision or Arbitral Awards.A decision of the Regional Trial Court
confirming, vacating, setting aside, modifying or correcting an arbitral award may be appealed to the
Court of Appeals in accordance with the rules and procedure to be promulgated by the Supreme
Court.
The losing party who appeals from the judgment of the court confirming an arbitral award shall be
required by the appellate court to post a counterbond executed in favor of the prevailing party equal
to the amount of the award in accordance with the rules to be promulgated by the Supreme Court.
Thereafter, the CA decision may further be appealed or reviewed before this Court through a petition
for review under Rule 45 of the Rules of Court.
PGSMC has remedies to protect its interests
Thus, based on the foregoing features of RA 9285, PGSMC must submit to the foreign arbitration as it
bound itself through the subject contract. While it may have misgivings on the foreign arbitration
done in Korea by the KCAB, it has available remedies under RA 9285. Its interests are duly protected
by the law which requires that the arbitral award that may be rendered by KCAB must be confirmed
here by the RTC before it can be enforced.
With our disquisition above, petitioner is correct in its contention that an arbitration clause, stipulating
that the arbitral award is final and binding, does not oust our courts of jurisdiction as the international
arbitral award, the award of which is not absolute and without exceptions, is still judicially reviewable
under certain conditions provided for by the UNCITRAL Model Law on ICA as applied and incorporated
in RA 9285.

Finally, it must be noted that there is nothing in the subject Contract which provides that the parties
may dispense with the arbitration clause.
Unilateral rescission improper and illegal
Having ruled that the arbitration clause of the subject contract is valid and binding on the parties, and
not contrary to public policy; consequently, being bound to the contract of arbitration, a party may not
unilaterally rescind or terminate the contract for whatever cause without first resorting to arbitration.
What this Court held in University of the Philippines v. De Los Angeles [47] and reiterated in succeeding
cases,[48] that the act of treating a contract as rescinded on account of infractions by the other
contracting party is valid albeit provisional as it can be judicially assailed, is not applicable to the
instant case on account of a valid stipulation on arbitration. Where an arbitration clause in a contract
is availing, neither of the parties can unilaterally treat the contract as rescinded since whatever
infractions or breaches by a party or differences arising from the contract must be brought first and
resolved by arbitration, and not through an extrajudicial rescission or judicial action.
The issues arising from the contract between PGSMC and KOGIES on whether the equipment and
machineries delivered and installed were properly installed and operational in the plant in Carmona,
Cavite; the ownership of equipment and payment of the contract price; and whether there was
substantial compliance by KOGIES in the production of the samples, given the alleged fact that PGSMC
could not supply the raw materials required to produce the sample LPG cylinders, are matters proper
for arbitration. Indeed, we note that on July 1, 1998, KOGIES instituted an Application for Arbitration
before the KCAB inSeoul, Korea pursuant to Art. 15 of the Contract as amended. Thus, it is incumbent
upon PGSMC to abide by its commitment to arbitrate.
Corollarily, the trial court gravely abused its discretion in granting PGSMCs Motion for Inspection of
Things on September 21, 1998, as the subject matter of the motion is under the primary jurisdiction of
the mutually agreed arbitral body, the KCAB in Korea.
In addition, whatever findings and conclusions made by the RTC Branch Sheriff from the inspection
made on October 28, 1998, as ordered by the trial court on October 19, 1998, is of no worth as said
Sheriff is not technically competent to ascertain the actual status of the equipment and machineries
as installed in the plant.
For these reasons, the September 21, 1998 and October 19, 1998 RTC Orders pertaining to the grant
of the inspection of the equipment and machineries have to be recalled and nullified.
Issue on ownership of plant proper for arbitration
Petitioner assails the CA ruling that the issue petitioner raised on whether the total contract
price of USD 1,530,000 was for the whole plant and its installation is beyond the ambit of a Petition for
Certiorari.
Petitioners position is untenable.
It is settled that questions of fact cannot be raised in an original action for certiorari. [49] Whether
or not there was full payment for the machineries and equipment and installation is indeed a factual
issue prohibited by Rule 65.
However, what appears to constitute a grave abuse of discretion is the order of the RTC in
resolving the issue on the ownership of the plant when it is the arbitral body (KCAB) and not the RTC
which has jurisdiction and authority over the said issue. The RTCs determination of such factual issue
constitutes grave abuse of discretion and must be reversed and set aside.
RTC has interim jurisdiction to protect the rights of the parties
Anent the July 23, 1998 Order denying the issuance of the injunctive writ paving the way for PGSMC
to dismantle and transfer the equipment and machineries, we find it to be in order considering the
factual milieu of the instant case.
Firstly, while the issue of the proper installation of the equipment and machineries might well be
under the primary jurisdiction of the arbitral body to decide, yet the RTC under Sec. 28 of RA 9285 has
jurisdiction to hear and grant interim measures to protect vested rights of the parties. Sec. 28
pertinently provides:
SEC. 28. Grant of interim Measure of Protection.(a) It is not incompatible with an arbitration
agreement for a party to request, before constitution of the tribunal, from a Court to grant
such measure. After constitution of the arbitral tribunal and during arbitral proceedings, a request

for an interim measure of protection, or modification thereof, may be made with the arbitral or to the
extent that the arbitral tribunal has no power to act or is unable to act effectivity, the
request may be made with the Court. The arbitral tribunal is deemed constituted when the sole
arbitrator or the third arbitrator, who has been nominated, has accepted the nomination and written
communication of said nomination and acceptance has been received by the party making the
request.
(b) The following rules on interim or provisional relief shall be observed:
Any party may request that provisional relief be granted against the adverse party.
Such relief may be granted:
(i)

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 may be conditioned upon the provision of security or any act
or omission specified in the order.
(d) Interim or provisional relief is requested by written application transmitted by reasonable means
to the Court or arbitral tribunal as the case may be and the party against whom the relief is sought,
describing in appropriate detail the precise relief, the party against whom the relief is requested, the
grounds for the relief, and the evidence supporting the request.
(e) The order shall be binding upon the parties.
(f) Either party may apply with the Court for assistance in implementing or enforcing an interim
measure ordered by an arbitral tribunal.
(g) A party who does not comply with the order shall be liable for all damages resulting from
noncompliance, including all expenses, and reasonable attorney's fees, paid in obtaining the orders
judicial enforcement. (Emphasis ours.)
Art. 17(2) of the UNCITRAL Model Law on ICA defines an interim measure of protection as:
Article 17. Power of arbitral tribunal to order interim measures
(2) An interim measure is any temporary measure, whether in the form of an award or in another
form, by which, at any time prior to the issuance of the award by which the dispute is finally decided,
the arbitral tribunal orders a party to:
(a) Maintain or restore the status quo pending determination of the dispute;
b) Take action that would prevent, or refrain from taking action that is likely to cause, current or
imminent harm or prejudice to the arbitral process itself;
(c) Provide a means of preserving assets out of which a subsequent award may be satisfied; or
(d) Preserve evidence that may be relevant and material to the resolution of the dispute.
Art. 17 J of UNCITRAL Model Law on ICA also grants courts power and jurisdiction to issue interim
measures:
Article 17 J. Court-ordered interim measures
A court shall have the same power of issuing an interim measure in relation to arbitration proceedings,
irrespective of whether their place is in the territory of this State, as it has in relation to proceedings in
courts. The court shall exercise such power in accordance with its own procedures in consideration of
the specific features of international arbitration.
In the recent 2006 case of Transfield Philippines, Inc. v. Luzon Hydro Corporation, we were explicit that
even the pendency of an arbitral proceeding does not foreclose resort to the courts for provisional
reliefs. We explicated this way:
As a fundamental point, the pendency of arbitral proceedings does not foreclose resort to the courts
for provisional reliefs. The Rules of the ICC, which governs the parties arbitral dispute, allows the
application of a party to a judicial authority for interim or conservatory measures. Likewise, Section
14 of Republic Act (R.A.) No. 876 (The Arbitration Law) recognizes the rights of any party to petition
the court to take measures to safeguard and/or conserve any matter which is the subject of the
dispute in arbitration. In addition, R.A. 9285, otherwise known as the Alternative Dispute Resolution
Act of 2004, allows the filing of provisional or interim measures with the regular courts whenever the
arbitral tribunal has no power to act or to act effectively. [50]
It is thus beyond cavil that the RTC has authority and jurisdiction to grant interim measures of
protection.

Secondly, considering that the equipment and machineries are in the possession of PGSMC, it has the
right to protect and preserve the equipment and machineries in the best way it can. Considering that
the LPG plant was 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 make good use of
them which is ineluctably within the management discretion of PGSMC.
Thirdly, and of greater import is the reason that maintaining the equipment and machineries in
Worths property is not to the best interest of PGSMC due to the prohibitive rent while the LPG plant as
set-up is not operational. PGSMC was losing PhP322,560 as monthly rentals or PhP3.87M for 1998
alone without considering the 10% annual rent increment in maintaining the plant.
Fourthly, and corollarily, while the KCAB can rule on motions or petitions relating to the preservation
or transfer of the equipment and machineries as an interim measure, yet on hindsight, the July 23,
1998 Order of the RTC allowing the transfer of the equipment and machineries given the nonrecognition by the lower courts of the arbitral clause, has accorded an interim measure of protection
to PGSMC which would otherwise been irreparably damaged.
Fifth, KOGIES is not unjustly prejudiced as it has already been paid a substantial amount based on the
contract. Moreover, KOGIES is amply protected by the arbitral action it has instituted before the
KCAB, the award of which can be enforced in our jurisdiction through the RTC. Besides, by our
decision, PGSMC is compelled to submit to arbitration pursuant to the valid arbitration clause of its
contract with KOGIES.
PGSMC to preserve the subject equipment and machineries
Finally, while PGSMC may have been granted the right to dismantle and transfer the subject
equipment and machineries, it does not have the right to convey or dispose of the same considering
the pending arbitral proceedings to settle the differences of the parties. PGSMC therefore must
preserve and maintain the subject equipment and machineries with the diligence of a good father of a
family[51] until final resolution of the arbitral proceedings and enforcement of the award, if any.
WHEREFORE, this petition is PARTLY GRANTED, in that:
(1)

The May 30, 2000 CA Decision in CA-G.R. SP No. 49249 is REVERSED and SET ASIDE;

(2)
The September 21, 1998 and October 19, 1998 RTC Orders in Civil Case No. 98-117
are REVERSED and SET ASIDE;
(3)
The parties are hereby ORDERED to submit themselves to the arbitration of their dispute and
differences arising from the subject Contract before the KCAB; and
(4)
PGSMC is hereby ALLOWED to dismantle and transfer the equipment and machineries, if it had
not done so, and ORDERED to preserve and maintain them until the finality of whatever arbitral
award is given in the arbitration proceedings.
No pronouncement as to costs.
SO ORDERED.