ASSIGNED CASE DIGEST REPORT ON ALTERNATIVE DISPUTE RESOLUTION

By: John Phillip C. Corpuz

Manila Law College

Case Title: EQUITABLE PCI BANKING CORPORATION, versus RCBC CAPITAL CORPORATION, December 18,
2008, G.R. No. 182248

Facts: On May 24, 2000, Equitable PCI Bank, Inc. (EPCIB) and the individual shareholders of Bankard,
Inc., as sellers, and RCBC Capital Corporation (RCBC), as buyer, executed a Share Purchase Agreement
(SPA) for the purchase of EPCIB’s interests in Bankard, representing 226,460,000 shares, for the price of
PhP 1,786,769,400. To expedite the purchase, RCBC agreed to dispense with the conduct of a due
diligence audit on the financial status of Bankard.

Under the SPA, RCBC undertakes, on the date of contract execution, to deposit, as downpayment, 20%
of the purchase price, or PhP 357,353,880, in an escrow account. The escrowed amount, the SPA stated,
should be released to petitioners on an agreed-upon release date and the balance of the purchase price
shall be delivered to the share buyers upon the fulfillment of certain conditions agreed upon, in the
form of a managers check.

On June 2, 2000, RCBC deposited the stipulated downpayment amount in an escrow account after which
it was given full management and operational control of Bankard. June 2, 2000 is also considered by the
parties as the Closing Date referred to in the SPA.

Sometime in September 2000, RCBC had Bankards accounts audited, the audit’s conclusion was that the
warranty, as contained in Section 5(h) of the SPA (simply Sec. 5[h] hereinafter), was correct.

On December 28, 2000, RCBC paid the balance of the contract price. The corresponding deeds of sale for
the shares in question were executed in January 2001.

Thereafter, in a letter of May 5, 2003, RCBC informed EPCIB of its having overpaid the purchase price of
the subject shares, claiming that there was an overstatement of valuation of accounts amounting to PhP
478 million, resulting in the overpayment of over PhP 616 million. Thus, RCBC claimed that EPCIB
violated their warranty, as sellers, embodied in Sec. 5(g) of the SPA (Sec. 5[g] hereinafter).

Following unsuccessful attempts at settlement, RCBC, in accordance with Sec. 10 of the SPA, filed
a Request for Arbitration dated May 12, 2004 with the ICC-ICA. Per RCBC, its overpayment amounted to
PhP 556 million. It thus prayed for the rescission of the SPA, restitution of the purchase price, payment
of actual damages in the amount of PhP 573,132,110, legal interest on the purchase price until actual
restitution, moral damages, and litigation and attorneys fees. As alternative to rescission and restitution,
RCBC prayed for damages in the amount of at least PhP 809,796,092 plus legal interest.

To the Request for Arbitration, EPCIB filed an Answer dated July 28, 2004, denying RCBCs inculpatory
averments and setting up RCBC is not entitled to its alternative prayer of damages, being guilty of laches
and failing to set out the details of the breach as required under Sec. 7.

Arbitration in the ICC-ICA proceeded after the formation of the arbitration tribunal consisting of retired
Justice Santiago M. Kapunan, nominated by petitioners; Neil Kaplan, RCBCs nominee; and Sir Ian Barker,
appointed by the ICC-ICA.
After drawn out proceedings with each party alleging deviation and non-compliance by the other with
arbitration rules, Justice Kapunan rendered a Partial Award dated September 27, 2007.

On the matter of prescription, the tribunal held that RCBCs claim is not time-barred. As such, the
tribunal concluded, RCBCs claim was filed within the three (3)-year period under Sec. 5(g) and that the
six (6)-month period under Sec. 5(h) did not apply.

The tribunal also exonerated RCBC from laches, the latter having sought relief within the three (3)-year
period prescribed in the SPA. On the matter of estoppel suggested in petitioners answer, the tribunal
rejected the same.

On October 26, 2007, RCBC filed with the RTC a Motion to Confirm Partial Award. On the same day,
EPCIB countered with a Motion to Vacate the Partial Award. On November 9, 2007, petitioners again
filed a Motion to Suspend and Inhibit Barker and Kaplan.

On January 8, 2008, the RTC issued the first assailed order confirming the Partial Award and denying the
adverted separate motions to vacate and to suspend and inhibit. From this order, petitioners sought
reconsideration, but their motion was denied by the RTC in the equally assailed second order of March
17, 2008.

Issue: Whether or not the trial court acted contrary to law and judicial authority in refusing to vacate
the arbitral award, notwithstanding it was rendered in plain disregard of the parties contract and
applicable Philippine law, under which the claim in arbitration was indubitably time-barred.

Held: No. The Court will not overturn an arbitral award unless it was made in manifest disregard of the
Law.

As a rule, the award of an arbitrator cannot be set aside for mere errors of judgment either as to the law
or as to the facts. Courts are without power to amend or overrule merely because of disagreement with
matters of law or facts determined by the arbitrators. They will not review the findings of law and fact
contained in an award, and will not undertake to substitute their judgment for that of the arbitrators,
since any other rule would make an award the commencement, not the end, of litigation. Errors of law
and fact, or an erroneous decision of matters submitted to the judgment of the arbitrators, are
insufficient to invalidate an award fairly and honestly made. Judicial review of an arbitration is, thus,
more limited than judicial review of a trial.

Nonetheless, the arbitrators awards is not absolute and without exceptions. The arbitrators cannot
resolve issues beyond the scope of the submission agreement. The parties to such an agreement are
bound by the arbitrators award only to the extent and in the manner prescribed by the contract and
only if the award is rendered in conformity thereto. Thus, Sections 24 and 25 of the Arbitration Law
provide grounds for vacating, rescinding or modifying an arbitration award. Where the conditions
described in Articles 2038, 2039 and 2040 of the Civil Code applicable to compromises and arbitration
are attendant, the arbitration award may also be annulled.