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SECOND DIVISION 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.

KOREA TECHNOLOGIES CO., G.R. No. 143581 However, gleaned from the Certificate[4] executed by the parties on January 22, 1998,
LTD., after the installation of the plant, the initial operation could not be conducted as PGSMC
Petitioner, encountered financial difficulties affecting the supply of materials, thus forcing the parties to
Present: agree that KOGIES would be deemed to have completely complied with the terms and
- versus - QUISUMBING, J., Chairperson, conditions of the March 5, 1997 contract.
CARPIO,
CARPIO MORALES, For the remaining balance of USD306,000 for the installation and initial operation of the
HON. ALBERTO A. LERMA, in TINGA, and plant, PGSMC issued two postdated checks: (1) BPI Check No. 0316412 dated January 30, 1998
his capacity as Presiding Judge of VELASCO, JR., JJ. for PhP 4,500,000; and (2) BPI Check No. 0316413 dated March 30, 1998 for PhP 4,500,000. [5]
Branch 256 of Regional Trial
Court of Muntinlupa City, and When KOGIES deposited the checks, these were dishonored for the reason PAYMENT
PACIFIC GENERAL STEEL Promulgated: STOPPED. Thus, on May 8, 1998, KOGIES sent a demand letter[6] to PGSMC threatening criminal
MANUFACTURING action for violation of Batas Pambansa Blg. 22 in case of nonpayment. On the same date, the
CORPORATION, wife of PGSMCs President faxed a letter dated May 7, 1998 to KOGIES President who was then
Respondents. January 7, 2008 staying at a Makati City hotel. She complained that not only did KOGIES deliver a different
x-----------------------------------------------------------------------------------------x brand of hydraulic press from that agreed upon but it had not delivered several equipment parts
already paid for.
DECISION
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]
VELASCO, JR., J.:
On June 1, 1998, PGSMC informed KOGIES that PGSMC was canceling their Contract
In our jurisdiction, the policy is to favor alternative methods of resolving disputes, particularly dated March 5, 1997 on the ground that KOGIES had altered the quantity and lowered the
in civil and commercial disputes. Arbitration along with mediation, conciliation, and negotiation, quality of the machineries and equipment it delivered to PGSMC, and that PGSMC would
being inexpensive, speedy and less hostile methods have long been favored by this Court. The dismantle and transfer the machineries, equipment, and facilities installed in the Carmona
petition before us puts at issue an arbitration clause in a contract mutually agreed upon by the plant. Five days later, PGSMC filed before the Office of the Public Prosecutor an Affidavit-
parties stipulating that they would submit themselves to arbitration in a foreign Complaint for Estafa docketed as I.S. No. 98-03813 against Mr. Dae Hyun Kang, President of
country. Regrettably, instead of hastening the resolution of their dispute, the parties wittingly or KOGIES.
unwittingly prolonged the controversy.
On June 15, 1998, KOGIES wrote PGSMC informing the latter that PGSMC could not
Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean corporation which is unilaterally rescind their contract nor dismantle and transfer the machineries and equipment on
engaged in the supply and installation of Liquefied Petroleum Gas (LPG) Cylinder manufacturing mere imagined violations by KOGIES. It also insisted that their disputes should be settled by
plants, while private respondent Pacific General Steel Manufacturing Corp. (PGSMC) is a arbitration as agreed upon in Article 15, the arbitration clause of their contract.
domestic corporation.
On June 23, 1998, PGSMC again wrote KOGIES reiterating the contents of its June 1,
On March 5, 1997, PGSMC and KOGIES executed a Contract [1] whereby KOGIES would 1998 letter threatening that the machineries, equipment, and facilities installed in the plant
set up an LPG Cylinder Manufacturing Plant in Carmona, Cavite. The contract was executed in would be dismantled and transferred on July 4, 1998. Thus, on July 1, 1998, KOGIES instituted
the Philippines. On April 7, 1997, the parties executed, in Korea, an Amendment for Contract an Application for Arbitration before the Korean Commercial Arbitration Board (KCAB)
No. KLP-970301 dated March 5, 1997[2] amending the terms of payment. The contract and its in Seoul, Korea pursuant to Art. 15 of the Contract as amended.
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 On July 3, 1998, KOGIES filed a Complaint for Specific Performance, docketed as Civil
and initiate the operation of the plant for which PGSMC bound itself to pay USD 306,000 upon Case No. 98-117[8] against PGSMC before the Muntinlupa City Regional Trial Court (RTC). The
the plants production of the 11-kg. LPG cylinder samples. Thus, the total contract price RTC granted a temporary restraining order (TRO) on July 4, 1998, which was subsequently
amounted to USD 1,530,000. 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
On October 14, 1997, PGSMC entered into a Contract of Lease [3] with Worth Properties, stopped payment of the checks for the reason that their value was not received as the former
Inc. (Worth) for use of Worths 5,079-square meter property with a 4,032-square meter allegedly breached their contract by altering the quantity and lowering the quality of the
warehouse building to house the LPG manufacturing plant. The monthly rental was PhP 322,560 machinery and equipment installed in the plant and failed to make the plant operational
commencing on January 1, 1998 with a 10% annual increment clause.Subsequently, the 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 and facilities would result in the dismantling and transfer of the very plant itself to the great
rescinding the contract without resorting to arbitration. KOGIES also asked that PGSMC be prejudice of KOGIES as the still unpaid owner/seller of the plant. Moreover, KOGIES points out
restrained from dismantling and transferring the machinery and equipment installed in the plant that the arbitration clause under Art. 15 of the Contract as amended was a valid arbitration
which the latter threatened to do on July 4, 1998. stipulation under Art. 2044 of the Civil Code and as held by this Court in Chung Fu Industries
(Phils.), Inc.[15]
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 In the meantime, PGSMC filed a Motion for Inspection of Things [16] to determine
public policy as it ousts the local courts of jurisdiction over the instant controversy. 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
On July 17, 1998, PGSMC filed its Answer with Compulsory Counterclaim [9] asserting positing that the queries and issues raised in the motion for inspection fell under the coverage
that it had the full right to dismantle and transfer the machineries and equipment because it of the arbitration clause in their contract.
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 On September 21, 1998, the trial court issued an Order (1) granting PGSMCs motion
operational; and that KOGIES was liable for damages amounting to PhP 4,500,000 for altering for inspection; (2) denying KOGIES motion for reconsideration of the July 23, 1998 RTC Order;
the quantity and lowering the quality of the machineries and equipment. Moreover, PGSMC and (3) denying KOGIES motion to dismiss PGSMCs compulsory counterclaims as these
averred that it has already paid PhP 2,257,920 in rent (covering January to July 1998) to Worth counterclaims fell within the requisites of compulsory counterclaims.
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. 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
After the parties submitted their Memoranda, on July 23, 1998, the RTC issued an PGSMCs compulsory counterclaims.
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 Ten days after, on October 12, 1998, without waiting for the resolution of its October 2,
contract such that KOGIES no longer had proprietary rights over them.And finally, the RTC held 1998 urgent motion for reconsideration, KOGIES filed before the Court of Appeals (CA) a
that Art. 15 of the Contract as amended was invalid as it tended to oust the trial court or any petition for certiorari[18] docketed as CA-G.R. SP No. 49249, seeking annulment of the July 23,
other court jurisdiction over any dispute that may arise between the parties. KOGIES prayer for 1998 and September 21, 1998 RTC Orders and praying for the issuance of writs of prohibition,
an injunctive writ was denied.[10] The dispositive portion of the Order stated: 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.
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 In the meantime, on October 19, 1998, the RTC denied KOGIES urgent motion for
preliminary injunction to restrain and refrain defendant from dismantling the reconsideration and directed the Branch Sheriff to proceed with the inspection of the
machineries and facilities at the lot and building of Worth Properties, machineries and equipment in the plant on October 28, 1998.[19]
Incorporated at Carmona, Cavite and transfer the same to another site: and
therefore denies plaintiffs application for a writ of preliminary injunction. 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
On July 29, 1998, KOGIES filed its Reply to Answer and Answer to Counterclaim. to ascertain whether or not the machineries and equipment conformed to the specifications in
[11]
KOGIES denied it had altered the quantity and lowered the quality of the machinery, the contract and were properly installed.
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 On November 11, 1998, the Branch Sheriff filed his Sheriffs Report [21] finding that the
averred that whatever was unfinished was PGSMCs fault since it failed to procure raw materials enumerated machineries and equipment were not fully and properly installed.
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. The Court of Appeals affirmed the trial court and declared
the arbitration clause against public policy
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 On May 30, 2000, the CA rendered the assailed Decision[22] affirming the RTC Orders
denying its application for an injunctive writ claiming that the contract was not merely for and dismissing the petition for certiorari filed by KOGIES. The CA found that the RTC did not
machinery and facilities worth USD 1,224,000 but was for the sale of an LPG manufacturing gravely abuse its discretion in issuing the assailed July 23, 1998 and September 21,
plant consisting of supply of all the machinery and facilities and transfer of technology for a 1998 Orders. Moreover, the CA reasoned that KOGIES contention that the total contract price
total contract price of USD 1,530,000 such that the dismantling and transfer of the machinery 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 f. NOT GRANTING THE RELIEFS AND REMEDIES PRAYED FOR IN
machineries and equipment. According to the CA, this determination by the RTC was a factual HE (SIC) PETITION AND, INSTEAD, DISMISSING THE SAME FOR ALLEGEDLY
finding beyond the ambit of a petition for certiorari. WITHOUT MERIT.[23]

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 The Courts Ruling
parties to the contract by arbitration was against public policy.
The petition is partly meritorious.
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 Before we delve into the substantive issues, we shall first tackle the procedural issues.
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 The rules on the payment of docket fees for counterclaims
also not required. and cross claims were amended effective August 16, 2004

Furthermore, the CA held that the petition for certiorari had been filed prematurely KOGIES strongly argues that when PGSMC filed the counterclaims, it should have paid
since KOGIES did not wait for the resolution of its urgent motion for reconsideration of the docket fees and filed a certificate of non-forum shopping, and that its failure to do so was a
September 21, 1998 RTC Order which was the plain, speedy, and adequate remedy fatal defect.
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 We disagree with KOGIES.
the subject of a petition for certiorari.
As aptly ruled by the CA, the counterclaims of PGSMC were incorporated in its Answer
Hence, we have this Petition for Review on Certiorari under Rule 45. 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
The Issues Counterclaim was filed. Sec. 8 on existing counterclaim or cross-claimstates, A compulsory
counterclaim or a cross-claim that a defending party has at the time he files his answer shall be
Petitioner posits that the appellate court committed the following errors: contained therein.
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 On July 17, 1998, at the time PGSMC filed its Answer incorporating its counterclaims
JURISDICTION OR GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF against KOGIES, it was not liable to pay filing fees for said counterclaims being compulsory in
(SIC) EXCESS OF JURISDICTION, AND CONCLUDING THAT THE TRIAL COURTS nature. We stress, however, that effective August 16, 2004 under Sec. 7, Rule 141, as
FINDING ON THE SAME QUESTION WAS IMPROPERLY RAISED IN THE amended by A.M. No. 04-2-04-SC, docket fees are now required to be paid in compulsory
PETITION BELOW; counterclaim or cross-claims.

b. DECLARING AS NULL AND VOID THE ARBITRATION CLAUSE IN ARTICLE 15 As to the failure to submit a certificate of forum shopping, PGSMCs Answer is not an
OF THE CONTRACT BETWEEN THE PARTIES FOR BEING CONTRARY TO PUBLIC initiatory pleading which requires a certification against forum shopping under Sec. 5 [24] of Rule
POLICY AND FOR OUSTING THE COURTS OF JURISDICTION; 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
c. DECREEING PRIVATE RESPONDENTS COUNTERCLAIMS TO BE counterclaims.
ALL COMPULSORY NOT NECESSITATING PAYMENT OF DOCKET FEES AND
CERTIFICATION OF NON-FORUM SHOPPING; Interlocutory orders proper subject of certiorari

d. RULING THAT THE PETITION WAS FILED PREMATURELY Citing Gamboa v. Cruz,[25] the CA also pronounced that certiorari and Prohibition are
WITHOUT WAITING FOR THE RESOLUTION OF THE MOTION FOR neither the remedies to question the propriety of an interlocutory order of the trial court. [26] The
RECONSIDERATION OF THE ORDER DATED SEPTEMBER 21, 1998 OR WITHOUT CA erred on its reliance on Gamboa. Gamboa involved the denial of a motion to acquit in a
GIVING THE TRIAL COURT AN OPPORTUNITY TO CORRECT ITSELF; 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
e. PROCLAIMING THE TWO ORDERS DATED JULY 23 accused had in his motion to quash can then be used as part of his defense and subsequently
AND SEPTEMBER 21, 1998 NOT TO BE PROPER SUBJECTS OF CERTIORARI can be raised as errors on his appeal if the judgment of the trial court is adverse to him. The
AND PROHIBITION FOR BEING INTERLOCUTORY IN NATURE; 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 Contract or for the breach thereof, shall finally be settled by arbitration in
adverse judgment on the merits, incorporating in said appeal the grounds for Seoul, Korea in accordance with the Commercial Arbitration Rules of the
assailing the interlocutory orders. Allowing appeals from interlocutory orders Korean Commercial Arbitration Board. The award rendered by the
would result in the sorry spectacle of a case being subject of a arbitration(s) shall be final and binding upon both parties
counterproductive ping-pong to and from the appellate court as often as a trial concerned. (Emphasis supplied.)
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 Petitioner claims the RTC and the CA erred in ruling that the arbitration clause is null
afford adequate and expeditious relief, the Court allows certiorari as a mode of and void.
redress.[28]
Petitioner is correct.

Also, appeals from interlocutory orders would open the floodgates to endless occasions Established in this jurisdiction is the rule that the law of the place where the contract is
for dilatory motions. Thus, where the interlocutory order was issued without or in excess of made governs. Lex loci contractus. The contract in this case was perfected here in
jurisdiction or with grave abuse of discretion, the remedy is certiorari. [29] 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
The alleged grave abuse of discretion of the respondent court equivalent to lack of arbitral award. Art. 2044 provides, Any stipulation that the arbitrators award or decision
jurisdiction in the issuance of the two assailed orders coupled with the fact that there is no shall be final, is valid, without prejudice to Articles 2038, 2039 and 2040. (Emphasis
plain, speedy, and adequate remedy in the ordinary course of law amply provides the basis for supplied.)
allowing the resort to a petition for certiorari under Rule 65.
Arts. 2038,[31] 2039,[32] and 2040[33] abovecited refer to instances where a compromise
Prematurity of the petition before the CA 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.
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 The arbitration clause was mutually and voluntarily agreed upon by the parties. It has
denied the issuance of the injunctive writ had already been denied. Thus, KOGIES only remedy not been shown to be contrary to any law, or against morals, good customs, public order, or
was to assail the RTCs interlocutory order via a petition for certiorari under Rule 65. 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
While the October 2, 1998 motion for reconsideration of KOGIES of the September 21, complied with by both parties. In Gonzales v. Climax Mining Ltd.,[35] we held that submission to
1998 RTC Order relating to the inspection of things, and the allowance of the compulsory arbitration is a contract and that a clause in a contract providing that all matters in dispute
counterclaims has not yet been resolved, the circumstances in this case would allow an between the parties shall be referred to arbitration is a contract. [36] Again in Del Monte
exception to the rule that before certiorari may be availed of, the petitioner must have filed a Corporation-USA v. Court of Appeals, we likewise ruled that [t]he provision to submit to
motion for reconsideration and said motion should have been first resolved by the court a arbitration any dispute arising therefrom and the relationship of the parties is part of that
quo. The reason behind the rule is to enable the lower court, in the first instance, to pass upon contract and is itself a contract.[37]
and correct its mistakes without the intervention of the higher court. [30]
Arbitration clause not contrary to public policy
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 The arbitration clause which stipulates that the arbitration must be done
evidently flawed and devoid of any legal support. Moreover, there is an urgent necessity to in Seoul, Korea in accordance with the Commercial Arbitration Rules of the KCAB, and that the
resolve the issue on the dismantling of the facilities and any further delay would prejudice the arbitral award is final and binding, is not contrary to public policy. This Court has sanctioned the
interests of KOGIES. Indeed, there is real and imminent threat of irreparable destruction or validity of arbitration clauses in a catena of cases. In the 1957 case of Eastboard Navigation
substantial damage to KOGIES equipment and machineries. We find the resort to certiorari Ltd. v. Juan Ysmael and Co., Inc.,[38] this Court had occasion to rule that an arbitration clause to
based on the gravely abusive orders of the trial court sans the ruling on the October 2, resolve differences and breaches of mutually agreed contractual terms is valid. In BF
1998 motion for reconsideration to be proper. 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,
The Core Issue: Article 15 of the Contract 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
We now go to the core issue of the validity of Art. 15 of the Contract, the arbitration Power Engineering Corporation v. Capitol Industrial Construction Groups, Inc., we declared
clause. It provides: that:

Article 15. Arbitration.All disputes, controversies, or differences which Being an inexpensive, speedy and amicable method of settling
may arise between the parties, out of or in relation to or in connection with this 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 While RA 9285 was passed only in 2004, it nonetheless applies in the instant case since
commercial disputes. Brushing aside a contractual agreement calling for it is a procedural law which has a retroactive effect. Likewise, KOGIES filed its application for
arbitration between the parties would be a step backward. 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
Consistent with the above-mentioned policy of encouraging alternative procedural laws are construed to be applicable to actions pending and undetermined at the time
dispute resolution methods, courts should liberally construe arbitration clauses. of their passage, and are deemed retroactive in that sense and to that extent. As a general
Provided such clause is susceptible of an interpretation that covers the rule, the retroactive application of procedural laws does not violate any personal rights because
asserted dispute, an order to arbitrate should be granted. Any doubt should be no vested right has yet attached nor arisen from them. [42]
resolved in favor of arbitration.[40]
Among the pertinent features of RA 9285 applying and incorporating the UNCITRAL
Model Law are the following:
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 (1) The RTC must refer to arbitration in proper cases
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. 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
RA 9285 incorporated the UNCITRAL Model law in such cases, thus:
to which we are a signatory
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
For domestic arbitration proceedings, we have particular agencies to arbitrate disputes shall, if at least one party so requests not later than the pre-trial conference,
arising from contractual relations. In case a foreign arbitral body is chosen by the parties, the or upon the request of both parties thereafter, refer the parties to arbitration
arbitration rules of our domestic arbitration bodies would not be applied. As signatory to the unless it finds that the arbitration agreement is null and void, inoperative or
Arbitration Rules of the UNCITRAL Model Law on International Commercial Arbitration [41] of incapable of being performed.
the United Nations Commission on International Trade Law (UNCITRAL) in the New York
Convention on June 21, 1985, the Philippinescommitted itself to be bound by the Model
Law. We have even incorporated the Model Law in Republic Act No. (RA) 9285, otherwise
known as the Alternative Dispute Resolution Act of 2004 entitled An Act to Institutionalize the
Use of an Alternative Dispute Resolution System in the Philippines and to Establish the Office (2) Foreign arbitral awards must be confirmed by the RTC
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: 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
CHAPTER 4 - INTERNATIONAL COMMERCIAL ARBITRATION 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
SEC. 19. Adoption of the Model Law on International Commercial UNCITRAL Model Law may refuse recognition or enforcement on the grounds provided for. RA
Arbitration.International commercial arbitration shall be governed by the Model 9285 incorporated these provisos to Secs. 42, 43, and 44 relative to Secs. 47 and 48, thus:
Law on International Commercial Arbitration (the Model Law) adopted by the
United Nations Commission on International Trade Law on June 21, 1985 SEC. 42. Application of the New York Convention.The New York
(United Nations Document A/40/17) and recommended for enactment by the Convention shall govern the recognition and enforcement of arbitral awards
General Assembly in Resolution No. 40/72 approved on December 11, 1985, covered by said Convention.
copy of which is hereto attached as Appendix A.
The recognition and enforcement of such arbitral awards shall be filed
SEC. 20. Interpretation of Model Law.In interpreting the Model Law, with the Regional Trial Court in accordance with the rules of procedure to be
regard shall be had to its international origin and to the need for uniformity in promulgated by the Supreme Court. Said procedural rules shall provide that
its interpretation and resort may be made to the travaux preparatories and the the party relying on the award or applying for its enforcement shall file with
report of the Secretary General of the United Nations Commission on the court the original or authenticated copy of the award and the arbitration
International Trade Law dated March 25, 1985 entitled, International agreement. If the award or agreement is not made in any of the official
Commercial Arbitration: Analytical Commentary on Draft Trade identified by languages, the party shall supply a duly certified translation thereof into any of
reference number A/CN. 9/264. such languages.
The applicant shall establish that the country in which foreign
arbitration award was made in party to the New York Convention. 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
xxxx provided under Art. 34(2) of the UNCITRAL Model Law. Secs. 42 and 45 provide:

SEC. 43. Recognition and Enforcement of Foreign Arbitral Awards Not SEC. 42. Application of the New York Convention.The New York
Covered by the New York Convention.The recognition and enforcement of Convention shall govern the recognition and enforcement of arbitral awards
foreign arbitral awards not covered by the New York Convention shall be done covered by said Convention.
in accordance with procedural rules to be promulgated by the Supreme
Court. The Court may, on grounds of comity and reciprocity, recognize and The recognition and enforcement of such arbitral awards shall be filed
enforce a non-convention award as a convention award. 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
SEC. 44. Foreign Arbitral Award Not Foreign Judgment.A foreign arbitral award the party relying on the award or applying for its enforcement shall file with
when confirmed by a court of a foreign country, shall be recognized and the court the original or authenticated copy of the award and the arbitration
enforced as a foreign arbitral award and not as a judgment of a foreign court. 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
A foreign arbitral award, when confirmed by the Regional Trial Court, such languages.
shall be enforced in the same manner as final and executory decisions of courts
of law of the Philippines The applicant shall establish that the country in which foreign
arbitration award was made is party to the New York Convention.
xxxx
If the application for rejection or suspension of enforcement of an
SEC. 47. Venue and Jurisdiction.Proceedings for recognition and award has been made, the Regional Trial Court may, if it considers it proper,
enforcement of an arbitration agreement or for vacations, setting aside, vacate its decision and may also, on the application of the party claiming
correction or modification of an arbitral award, and any application with a court recognition or enforcement of the award, order the party to provide
for arbitration assistance and supervision shall be deemed as special appropriate security.
proceedings and shall be filed with the Regional Trial Court (i) where
arbitration proceedings are conducted; (ii) where the asset to be attached or xxxx
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 SEC. 45. Rejection of a Foreign Arbitral Award.A party to a foreign
Judicial Capital Region, at the option of the applicant. arbitration proceeding may oppose an application for recognition and
enforcement of the arbitral award in accordance with the procedures and rules
SEC. 48. Notice of Proceeding to Parties.In a special proceeding for to be promulgated by the Supreme Court only on those grounds enumerated
recognition and enforcement of an arbitral award, the Court shall send notice under Article V of the New York Convention. Any other ground raised shall be
to the parties at their address of record in the arbitration, or if any part cannot disregarded by the Regional Trial Court.
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.
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
It is now clear that foreign arbitral awards when confirmed by the RTC are deemed not by the RTC which can set aside, reject, or vacate it. In this sense, what this Court held
as a judgment of a foreign court but as a foreign arbitral award, and when confirmed, are in Chung Fu Industries (Phils.), Inc. relied upon by KOGIES is applicable insofar as the foreign
enforced as final and executory decisions of our courts of law. 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
Thus, it can be gleaned that the concept of a final and binding arbitral award is similar of RA 9285 has made it clear that all arbitral awards, whether domestic or foreign, are subject
to judgments or awards given by some of our quasi-judicial bodies, like the National Labor to judicial review on specific grounds provided for.
Relations Commission and Mines Adjudication Board, whose final judgments are stipulated to be (4) Grounds for judicial review different in domestic and foreign arbitral awards
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 The differences between a final arbitral award from an international or foreign arbitral
similarly situated in that they need first to be confirmed by the RTC. 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.
(3) The RTC has jurisdiction to review foreign arbitral awards
For foreign or international arbitral awards which must first be confirmed by the RTC, arbitration, a party may not unilaterally rescind or terminate the contract for whatever cause
the grounds for setting aside, rejecting or vacating the award by the RTC are provided under without first resorting to arbitration.
Art. 34(2) of the UNCITRAL Model Law. 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
For final domestic arbitral awards, which also need confirmation by the RTC pursuant to by the other contracting party is valid albeit provisional as it can be judicially assailed, is not
Sec. 23 of RA 876[44] and shall be recognized as final and executory decisions of the RTC, applicable to the instant case on account of a valid stipulation on arbitration. Where an
[45]
they may only be assailed before the RTC and vacated on the grounds provided under Sec. arbitration clause in a contract is availing, neither of the parties can unilaterally treat the
25 of RA 876.[46] 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
(5) RTC decision of assailed foreign arbitral award appealable extrajudicial rescission or judicial action.

Sec. 46 of RA 9285 provides for an appeal before the CA as the remedy of an aggrieved The issues arising from the contract between PGSMC and KOGIES on whether the
party in cases where the RTC sets aside, rejects, vacates, modifies, or corrects an arbitral equipment and machineries delivered and installed were properly installed and operational in
award, thus: 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
SEC. 46. Appeal from Court Decision or Arbitral Awards.A decision of sample LPG cylinders, are matters proper for arbitration.Indeed, we note that on July 1, 1998,
the Regional Trial Court confirming, vacating, setting aside, modifying or KOGIES instituted an Application for Arbitration before the KCAB in Seoul, Korea pursuant to
correcting an arbitral award may be appealed to the Court of Appeals in Art. 15 of the Contract as amended. Thus, it is incumbent upon PGSMC to abide by its
accordance with the rules and procedure to be promulgated by the Supreme commitment to arbitrate.
Court.
Corollarily, the trial court gravely abused its discretion in granting PGSMCs Motion for
The losing party who appeals from the judgment of the court Inspection of Things on September 21, 1998, as the subject matter of the motion is under the
confirming an arbitral award shall be required by the appellate court to post a primary jurisdiction of the mutually agreed arbitral body, the KCAB in Korea.
counterbond executed in favor of the prevailing party equal to the amount of In addition, whatever findings and conclusions made by the RTC Branch Sheriff from
the award in accordance with the rules to be promulgated by the Supreme the inspection made on October 28, 1998, as ordered by the trial court on October 19, 1998, is
Court. 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.
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. For these reasons, the September 21, 1998 and October 19, 1998 RTC Orders
PGSMC has remedies to protect its interests pertaining to the grant of the inspection of the equipment and machineries have to be recalled
and nullified.
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 Issue on ownership of plant proper for arbitration
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 Petitioner assails the CA ruling that the issue petitioner raised on whether the total contract
rendered by KCAB must be confirmed here by the RTC before it can be enforced. price of USD 1,530,000 was for the whole plant and its installation is beyond the ambit of a
Petition for Certiorari.
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 Petitioners position is untenable.
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 It is settled that questions of fact cannot be raised in an original action for certiorari. [49] Whether
Model Law on ICA as applied and incorporated in RA 9285. or not there was full payment for the machineries and equipment and installation is indeed a
factual issue prohibited by Rule 65.
Finally, it must be noted that there is nothing in the subject Contract which provides
that the parties may dispense with the arbitration clause. 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
Unilateral rescission improper and illegal 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.
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
RTC has interim jurisdiction to protect the rights of the parties attorney's fees, paid in obtaining the orders judicial enforcement. (Emphasis
ours.)
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. Art. 17(2) of the UNCITRAL Model Law on ICA defines an interim measure of protection
as:
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 Article 17. Power of arbitral tribunal to order interim measures
Sec. 28 of RA 9285 has jurisdiction to hear and grant interim measures to protect vested rights
of the parties. Sec. 28 pertinently provides: xxx xxx xxx

SEC. 28. Grant of interim Measure of Protection.(a) It is not (2) An interim measure is any temporary measure, whether in the form of an
incompatible with an arbitration agreement for a party to request, award or in another form, by which, at any time prior to the issuance of the
before constitution of the tribunal, from a Court to grant such award by which the dispute is finally decided, the arbitral tribunal orders a
measure. After constitution of the arbitral tribunal and during arbitral party to:
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 (a) Maintain or restore the status quo pending determination of the dispute;
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 (b) Take action that would prevent, or refrain from taking action that is likely
when the sole arbitrator or the third arbitrator, who has been nominated, has to cause, current or imminent harm or prejudice to the arbitral process itself;
accepted the nomination and written communication of said nomination and
acceptance has been received by the party making the request. (c) Provide a means of preserving assets out of which a subsequent award may
be satisfied; or
(b) The following rules on interim or provisional relief shall be
observed: (d) Preserve evidence that may be relevant and material to the resolution of
the dispute.
Any party may request that provisional relief be granted against the
adverse party.
Art. 17 J of UNCITRAL Model Law on ICA also grants courts power and jurisdiction to
Such relief may be granted: issue interim measures:

(i) to prevent irreparable loss or injury; Article 17 J. Court-ordered interim measures


(ii) to provide security for the performance of any obligation;
(iii) to produce or preserve any evidence; or A court shall have the same power of issuing an interim measure in
(iv) to compel any other appropriate act or omission. 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
(c) The order granting provisional relief may be conditioned upon the shall exercise such power in accordance with its own procedures in
provision of security or any act or omission specified in the order. consideration of the specific features of international arbitration.

(d) Interim or provisional relief is requested by written application


transmitted by reasonable means to the Court or arbitral tribunal as the case In the recent 2006 case of Transfield Philippines, Inc. v. Luzon Hydro Corporation, we
may be and the party against whom the relief is sought, describing in were explicit that even the pendency of an arbitral proceeding does not foreclose resort to the
appropriate detail the precise relief, the party against whom the relief is courts for provisional reliefs. We explicated this way:
requested, the grounds for the relief, and the evidence supporting the request.
As a fundamental point, the pendency of arbitral proceedings does not
(e) The order shall be binding upon the parties. 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
(f) Either party may apply with the Court for assistance in judicial authority for interim or conservatory measures. Likewise, Section 14 of
implementing or enforcing an interim measure ordered by an arbitral tribunal. 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
(g) A party who does not comply with the order shall be liable for all matter which is the subject of the dispute in arbitration. In addition, R.A. 9285,
damages resulting from noncompliance, including all expenses, and reasonable otherwise known as the Alternative Dispute Resolution Act of 2004, allows the
filing of provisional or interim measures with the regular courts whenever the (3) The parties are hereby ORDERED to submit themselves to the arbitration of their
arbitral tribunal has no power to act or to act effectively.[50] dispute and differences arising from the subject Contract before the KCAB; and

(4) PGSMC is hereby ALLOWED to dismantle and transfer the equipment and
It is thus beyond cavil that the RTC has authority and jurisdiction to grant interim machineries, if it had not done so, and ORDERED to preserve and maintain them until the
measures of protection. finality of whatever arbitral award is given in the arbitration proceedings.

Secondly, considering that the equipment and machineries are in the possession of No pronouncement as to costs.
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 SO ORDERED.
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. PRESBITERO J. VELASCO, JR.
Associate Justice
Thirdly, and of greater import is the reason that maintaining the equipment and
machineries in Worths property is not to the best interest of PGSMC due to the prohibitive rent
while the LPG plant as set-up is not operational. PGSMC was losing PhP322,560 as monthly
rentals or PhP3.87M for 1998 alone without considering the 10% annual rent increment in
maintaining the plant.

Fourthly, and corollarily, while the KCAB can rule on motions or petitions relating to the
preservation or transfer of the equipment and machineries as an interim measure, yet on
hindsight, the July 23, 1998 Order of the RTC allowing the transfer of the equipment and
machineries given the non-recognition by the lower courts of the arbitral clause, has accorded
an interim measure of protection to PGSMC which would otherwise been irreparably damaged.

Fifth, KOGIES is not unjustly prejudiced as it has already been paid a substantial
amount based on the contract. Moreover, KOGIES is amply protected by the arbitral action it
has instituted before the KCAB, the award of which can be enforced in our jurisdiction through
the RTC. Besides, by our decision, PGSMC is compelled to submit to arbitration pursuant to the
valid arbitration clause of its contract with KOGIES.

PGSMC to preserve the subject equipment and machineries

Finally, while PGSMC may have been granted the right to dismantle and transfer the
subject equipment and machineries, it does not have the right to convey or dispose of the same
considering the pending arbitral proceedings to settle the differences of the parties. PGSMC
therefore must preserve and maintain the subject equipment and machineries with the diligence
of a good father of a family[51] until final resolution of the arbitral proceedings and enforcement
of the award, if any.

WHEREFORE, this petition is PARTLY GRANTED, in that:

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

(2) The September 21, 1998 and October 19, 1998 RTC Orders in Civil Case No. 98-
117 are REVERSED and SET ASIDE;
3. G.R. No. 146717, Transfield Philippines, Inc. v. Luzon Hydro
SPECIAL SECOND DIVISION Corporation, Australia and New Zealand Banking Group Limited and Security
TRANSFIELD PHILIPPINES, INC., G.R. No. 146717 Bank Corp. filed on 5 February 2001, which was an appeal by certiorari with
Petitioner, prayer for TRO/preliminary prohibitory and mandatory injunction, of the Court
Present: of Appeals Decision dated 31 January 2001 in CA-G.R. SP No. 61901.

PUNO, J., a. CA-G.R. SP No. 61901 was a petition for review of the Decision in
Chairman, Civil Case No. 00-1312, wherein TPI claimed that LHCs call on the
- versus - AUSTRIA-MARTINEZ, securities was premature considering that the issue of default has not
CALLEJO, SR., yet been resolved with finality; the petition was however denied by the
TINGA, and Court of Appeals;
CHICO-NAZARIO, JJ.
LUZON HYDRO CORPORATION, b. Civil Case No. 00-1312 was a complaint for injunction with prayer for
AUSTRALIA AND NEW ZEALAND temporary restraining order and/or writ of preliminary injunction
BANKING GROUP LIMITED and dated 5 November 2000, which sought to restrain LHC from calling on
SECURITY BANK CORPORATION, Promulgated: the securities and respondent banks from transferring or paying of the
Respondents. securities; the complaint was denied by the RTC.
May 19, 2006

x---------------------------------------------------------------------------------x
On the other hand, TPI claims that it is LHC which is guilty of forum-shopping when it raised the
issue of forum-shopping not only in this case, but also in Civil Case No. 04-332, and even asked
RESOLUTION for the dismissal of the other case based on this ground. Moreover, TPI argues that LHC
is relitigating in Civil Case No. 04-332 the very same causes of action in ICC Case No.
TINGA, J.: 11264/TE/MW, and even manifesting therein that it will present evidence earlier presented
before the arbitral tribunal.[5]
The adjudication of this case proved to be a two-stage process as its constituent parts involve Meanwhile, ANZ Bank and Security Bank moved to be excused from filing a memorandum. They
two segregate but equally important issues. The first stage relating to the merits of the case, claim that with the finality of the Courts Decision dated 22 November 2004, any resolution by
specifically the question of the propriety of calling on the securities during the pendency of the the Court on the issue of forum-shopping will not materially affect their role as the banking
arbitral proceedings, was resolved in favor of Luzon Hydro Corporation (LHC) with the Courts entities involved are concerned.[6] The Court granted their respective motions.
Decision[1] of 22 November 2004. The second stage involving the issue of forum-shopping on
which the Court required the parties to submit their respective memoranda [2] is disposed of in
this Resolution. On 1 August 2005, TPI moved to set the case for oral argument, positing that the resolution of
the Court on the issue of forum-shopping may have significant implications on the interpretation
The disposal of the forum-shopping charge is crucial to the parties to this case on account of its of the Alternative Dispute Resolution Act of 2004, as well as the viability of international
profound effect on the final outcome of the international arbitral proceedings which they have commercial arbitration as an alternative mode of dispute resolution in the country. [7] Said
chosen as their principal dispute resolution mechanism.[3] motion was opposed by LHC in its opposition filed on 2 September 2005, with LHC arguing
that the respective memoranda of the parties are sufficient for the Court to resolve the issue of
LHC claims that Transfield Philippines, Inc. (TPI) is guilty of forum-shopping when it filed the forum-shopping.[8] On 28 October 2005, TPI filed its Manifestation and Reiterative Motion [9] to
following suits: set the case for oral argument, where it manifested that the International Chamber of
Commerce (ICC) arbitral tribunal had issued its Final Award ordering LHC to pay TPI
1. Civil Case No. 04-332 filed on 19 March 2004, pending before the US$24,533,730.00 (including the US$17,977,815.00 proceeds of the two standby letters of
Regional Trial Court (RTC) of Makati, Branch 56 for confirmation, recognition credit). TPI also submitted a copy thereof with a Supplemental Petition [10] to the Regional Trial
and enforcement of the Third Partial Award in case 11264 TE/MW, ICC Court (RTC), seeking recognition and enforcement of the said award. [11]
International Court of Arbitration, entitled Transfield Philippines, Inc. v. Luzon
Hydro Corporation.[4] The essence of forum-shopping is the filing of multiple suits involving the same parties for the
same cause of action, either simultaneously or successively, for the purpose of obtaining a
2. ICC Case No. 11264/TE/MW, Transfield Philippines, Inc. v. Luzon favorable judgment.[12] Forum-shopping has likewise been defined as the act of a party against
Hydro Corporation filed before the International Court of Arbitration, whom an adverse judgment has been rendered in one forum, seeking and possibly getting a
International Chamber of Commerce (ICC) a request for arbitration dated 3 favorable opinion in another forum, other than by appeal or the special civil action of certiorari,
November 2000 pursuant to the Turnkey Contract between LHC and TPI; or the institution of two or more actions or proceedings grounded on the same cause on the
supposition that one or the other court would make a favorable disposition. [13]
matter which is the subject of the dispute in arbitration. In addition, R.A. 9285, otherwise
Thus, for forum-shopping to exist, there must be (a) identity of parties, or at least such parties known as the Alternative Dispute Resolution Act of 2004, allows the filing of provisional or
as represent the same interests in both actions; (b) identity of rights asserted and relief prayed interim measures with the regular courts whenever the arbitral tribunal has no power to act or
for, the relief being founded on the same facts; and (c) the identity of the two preceding to act effectively.[19]
particulars is such that any judgment rendered in the other action will, regardless of which TPIs verified petition in Civil Case No. 04-332, filed on 19 March 2004, was captioned as one
party is successful, amount to res judicata in the action under consideration.[14] For: Confirmation, Recognition and Enforcement of Foreign Arbitral Award in Case 11264
TE/MW, ICC International Court of Arbitration, Transfield Philippines, Inc. v. Luzon Hydro
There is no identity of causes of action between and among the arbitration case, the instant Corporation (Place of arbitration: Singapore).[20] In the said petition, TPI prayed:
petition, and Civil Case No. 04-332.

1. That the THIRD PARTIAL AWARD dated February 18, 2004 in


Case No. 11264/TE/MW made by the ICC International Court of Arbitration, the
The arbitration case, ICC Case No. 11264 TE/MW, is an arbitral proceeding commenced signed original copy of which is hereto attached as Annex H hereof, be
pursuant to the Turnkey Contract between TPI and LHC, to determine the primary issue of confirmed, recognized and enforced in accordance with law.
whether the delays in the construction of the project were excused delays, which would
consequently render valid TPIs claims for extension of time to finish the project.Together with 2. That the corresponding writ of execution to enforce Question 31
the primary issue to be settled in the arbitration case is the equally important question of of the said Third Partial Award, be issued, also in accordance with law.
monetary awards to the aggrieved party.
3. That TPI be granted such other relief as may be deemed just
On the other hand, Civil Case No. 00-1312, the precursor of the instant petition, was and equitable, and allowed, in accordance with law.[21]
filed to enjoin LHC from calling on the securities and respondent banks from transferring or
paying the securities in case LHC calls on them. However, in view of the fact that LHC collected
the proceeds, TPI, in its appeal and petition for review asked that the same be returned and The pertinent portion of the Third Partial Award[22] relied upon by TPI were the answers
placed in escrow pending the resolution of the disputes before the ICC arbitral tribunal. [15] to Questions 10 to 26, to wit:

While the ICC case thus calls for a thorough review of the facts which led to the delay
in the construction of the project, as well as the attendant responsibilities of the parties therein, Question 30 Did TPI [LHC] wrongfully draw upon the security?
in contrast, the present petition puts in issue the propriety of drawing on the letters of credit Yes
during the pendency of the arbitral case, and of course, absent a final determination by the ICC
Arbitral tribunal. Moreover, as pointed out by TPI, it did not pray for the return of the proceeds Question 31 Is TPI entitled to have returned to it any sum wrongfully taken by
of the letters of credit. What it asked instead is that the said moneys be placed in escrow until LHC for liquidated damages?
the final resolution of the arbitral case. Meanwhile, in Civil Case No. 04-332, TPI no longer Yes
seeks the issuance of a provisional relief, but rather the issuance of a writ of execution to
enforce the Third Partial Award. Question 32 Is TPI entitled to any acceleration costs?
TPI is entitled to the reasonable costs TPI incurred
after Typhoon Zeb as a result of LHCs 5 February
Neither is there an identity of parties between and among the three (3) cases. The ICC 1999 Notice to Correct.[23]
case only involves TPI and LHC logically since they are the parties to the Turnkey Contract. In
comparison, the instant petition includes Security Bank and ANZ Bank, the banks sought to be
enjoined from releasing the funds of the letters of credit. The Court agrees with TPI that it
would be ineffectual to ask the ICC to issue writs of preliminary injunction against Security Bank
and ANZ Bank since these banks are not parties to the arbitration case, and that the ICC
Arbitral tribunal would not even be able to compel LHC to obey any writ of preliminary According to LHC, the filing of the above case constitutes forum-shopping since it is the
injunction issued from its end.[16] Civil Case No. 04-322, on the other hand, logically involves same claim for the return of US$17.9 Million which TPI made before the ICC Arbitral Tribunal
TPI and LHC only, they being the parties to the arbitration agreement whose partial award is and before this Court. LHC adds that while Civil Case No. 04-332 is styled as an action for
sought to be enforced. money, the Third Partial Award used as basis of the suit does not authorize TPI to seek a writ of
execution for the sums drawn on the letters of credit. Said award does not even contain an
As a fundamental point, the pendency of arbitral proceedings does not foreclose resort to the order for the payment of money, but instead has reserved the quantification of the amounts for
courts for provisional reliefs. The Rules of the ICC, which governs the parties arbitral dispute, a subsequent determination, LHC argues. In fact, even the Fifth Partial Award,[24] dated 30
allows the application of a party to a judicial authority for interim or conservatory measures. March 2005, does not contain such orders. LHC insists that the declarations or the partial
[17]
Likewise, Section 14 of Republic Act (R.A.) No. 876 (The Arbitration Law)[18] recognizes the awards issued by the ICC Arbitral Tribunal do not constitute orders for the payment of money
rights of any party to petition the court to take measures to safeguard and/or conserve any and are not intended to be enforceable as such, but merely constitute amounts which will be
included in the Final Award and will be taken into account in determining the actual amount
payable to the prevailing party.[25] 167. In view of this the Tribunal will make no orders for payment in this Fifth
Partial Award. The Tribunal will make a number of declarations
R.A. No. 9825 provides that international commercial arbitrations shall be governed concerning the quantum issues it has resolved in this Award together
shall be governed by the Model Law on International Commercial Arbitration (Model Law) with the outstanding liability issues. The declarations do not
adopted by the United Nations Commission on International Trade Law (UNCITRAL). [26] The constitute orders for the payment of money and are not
UNCITRAL Model Law provides: intended to be enforceable as such. They merely constitute
amounts which will be included in the Final Award and will be
ARTICLE 35. Recognition and enforcement taken into account in determining the actual amount payable.
[31]
(Emphasis Supplied.)
(1) An arbitral award, irrespective of the country in which it was made,
shall be recognized as binding and, upon application in writing to the
competent court, shall be enforced subject to the provisions of this article and Further, in the Declarations part of the award, the tribunal held:
of article 36.
6.2 Declarations
(2) The party relying on an award or applying for its enforcement shall supply
the duly authenticated original award or a duly certified copy thereof, and the 168. The Tribunal makes the following declarations:
original arbitration agreement referred to in article 7 or a duly certified copy xxx
thereof. If the award or agreement is not made in an official language of this
State, the party shall supply a duly certified translation thereof into such 3. LHC is liable to repay TPI the face value of the securities drawn down by it,
language. namely, $17,977,815. It is not liable for any further damages claimed by TPI in
respect of the drawdown of the securities.
x x x.[32]
Moreover, the New York Convention,[27] to which the Philippines is a signatory, governs
the recognition and enforcement of foreign arbitral awards. The applicability of the New York Finally, on 9 August 2005, the ICC Arbitral tribunal issued its Final Award, in essence
Convention in the Philippines was confirmed in Section 42 of R.A. 9285. Said law also provides awarding US$24,533,730.00, which included TPIs claim of U$17,977,815.00 for the return of
that the application for the recognition and enforcement of such awards shall be filed with the the securities from LHC.[33]
proper RTC. While TPIs resort to the RTC for recognition and enforcement of the Third Partial
Award is sanctioned by both the New York Convention and R.A. 9285, its application for The fact that the ICC Arbitral tribunal included the proceeds of the securities shows that
enforcement, however, was premature, to say the least. True, the ICC Arbitral it intended to make a final determination/award as to the said issue only in the Final Award and
Tribunal had indeed ruled that LHC wrongfully drew upon the securities, yet there is no order not in the previous partial awards. This supports LHCs position that when the Third Partial
for the payment or return of the proceeds of the said securities. In fact, Paragraph 2142, which Award was released and Civil Case No. 04-332 was filed, TPI was not yet authorized to seek the
is the final paragraph of the Third Partial Award, reads: issuance of a writ of execution since the quantification of the amounts due to TPI had not yet
been settled by the ICC Arbitral tribunal.Notwithstanding the fact that the amount of proceeds
2142. All other issues, including any issues as to quantum and costs, drawn on the securities was not disputed the application for the enforcement of the Third Partial
are reserved to a future award.[28] Award was precipitately filed. To repeat, the declarations made in the Third Partial Award do not
Meanwhile, the tribunal issued its Fifth Partial Award[29] on 30 March 2005. It contains, constitute orders for the payment of money.
among others, a declaration that while LHC wrongfully drew on the securities, the drawing was
made in good faith, under the mistaken assumption that the contractor, TPI, was in Anent the claim of TPI that it was LHC which committed forum-shopping, suffice it to say that
default. Thus, the tribunal ruled that while the amount drawn must be returned, TPI is not its bare allegations are not sufficient to sustain the charge.
entitled to any damages or interests due to LHCs drawing on the securities.[30] In the Fifth
Partial Award, the tribunal ordered: WHEREFORE, the Court RESOLVES to DISMISS the charges of forum-shopping filed by both
parties against each other.
6. Order
No pronouncement as to costs.
6.1 General
SO ORDERED.
166. This Fifth Partial Award deals with many issues of quantum. However, it
does not resolve them all. The outstanding quantum issues will be
determined in a future award. It will contain a reconciliation of the DANTE O. TINGA
amounts awarded to each party and a determination of the net Associate Justice
amount payable to Claimant or Respondent, as the case may be.
However, upon a petition for review filed by Genabe, the DOJ Undersecretary Ernesto
SECOND DIVISION L. Pineda (Pineda) found that:

LETICIA B. AGBAYANI, G.R. No. 183623 After careful evaluation and consideration of the evidence on record,
Petitioner, we find merit in the instant petition.
Present:
- versus - Contrary to the findings in the assailed resolution, we find that the
CARPIO, J., subject utterances of respondent constitute only slight oral defamation.
Chairperson,
BRION, As alleged by the [petitioner] in paragraphs 2, 3 and 4 of her
COURT OF APPEALS, DEPARTMENT OF JUSTICE PEREZ, complaint-affidavit, respondent uttered the remarks subject matter of the
and LOIDA MARCELINA J. GENABE, SERENO, and instant case in the heat of anger. This was also the tenor of the sworn
Respondents. REYES, JJ. statements of the witnesses for complainant. The Supreme Court, in the case
of Cruz vs. Court of Appeals, G.R. Nos. L-56224-26, November 25, 1982, x x x
Promulgated: held that although abusive remarks may ordinarily be considered as serious
defamation, under the environmental circumstances of the case, there having
June 25, 2012 been provocation on complainants part, and the utterances complained of
having been made in the heat of unrestrained anger and obfuscation, such
x----------------------------------------------------------------------------------------x utterances constitute only the crime of slight oral defamation.

DECISION Notwithstanding the foregoing, we believe that the instant case should
nonetheless be dismissed for non-compliance with the provisions of Book III,
REYES, J.: Title I, Chapter 7 (Katarungang Pambarangay), of Republic Act No. 7160 (The
Local Government Code of 1991). As shown by the records, the parties herein
On petition for review under Rule 45 of the 1997 Rules of Court is the Decision [1] dated are residents of Las Pias City. x x x
March 27, 2008 of the Court of Appeals (CA) dismissing the petition for certiorari and the
Resolution[2] dated July 3, 2008 denying the motion for reconsideration thereof in CA-G.R. SP The complaint-affidavit, however, failed to show that the instant case
No. 99626. Petitioner Leticia B. Agbayani (Agbayani) assails the resolution of the Department of was previously referred to the barangay for conciliation in compliance with
Justice (DOJ) which directed the withdrawal of her complaint for grave oral defamation filed Sections 408 and 409, paragraph (d), of the Local Government Code, which
against respondent Loida Marcelina J. Genabe (Genabe). provides:

Antecedent Facts Section 408. Subject Matter for Amicable Settlement; Exception
Thereto. The lupon of each barangay shall have authority to bring together the
Agbayani and Genabe were both employees of the Regional Trial Court (RTC), Branch parties actually residing in the same city or municipality for amicable
275 of Las Pias City, working as Court Stenographer and Legal Researcher II, respectively. On settlement of all disputes except: xxx
December 29, 2006, Agbayani filed a criminal complaint for grave oral defamation against
Genabe before the Office of the City Prosecutor of Las Pias City, docketed as I.S. No. 07-0013, Section 409. Venue. x x x (d) Those arising at the workplace where
for allegedly uttering against her, in the presence of their fellow court employees and while she the contending parties are employed or xxx shall be brought in the barangay
was going about her usual duties at work, the following statements, to wit: where such workplace or institution is located.

ANG GALING MO LETY, SINABI MO NA TINAPOS MO The records of the case likewise show that the instant case is not one
YUNG MARVILLA CASE, ANG GALING MO. FEELING LAWYER KA KASI, BAKIT of the exceptions enumerated under Section 408 of the Local Government
DI KA MAGDUTY NA LANG, STENOGRAPHER KA MAGSTENO KA NA LANG, ANG Code. Hence, the dismissal of the instant petition is proper.
GALING MO, FEELING LAWYER KA TALAGA. NAGBEBENTA KA NG KASO,
TIRADOR KA NG JUDGE. SIGE HIGH BLOOD DIN KA, MAMATAY KA SANA SA It is well-noted that the Supreme Court held that where the case is
HIGH BLOOD MO.[3] covered by P.D. 1508 (Katarungang Pambarangay Law), the compulsory
process of arbitration required therein is a pre-condition for filing a complaint
in court. Where the complaint (a) did not state that it is one of the excepted
In a Resolution[4] rendered on February 12, 2007, the Office of the City Prosecutor of cases, or (b) it did not allege prior availment of said conciliation process, or (c)
Las Pias City[5] found probable cause for the filing of the Information for grave oral defamation did not have a certification that no conciliation or settlement had been reached
against Genabe. by the parties, the case should be dismissed x x x. While the foregoing doctrine
is handed down in civil cases, it is submitted that the same should apply to
criminal cases covered by, but filed without complying with, the provisions of II. RESPONDENT COURT GRAVELY ERRED IN AFFIRMING RESPONDENT
P.D. 1508 x x x.[6] DOJ'S FINDING THAT WHAT PRIVATE RESPONDENT COMMITTED WAS
ONLY SLIGHT ORAL DEFAMATION.

Thus, in a Resolution[7] dated May 17, 2007, the DOJ disposed, to wit: III. RESPONDENT COURT GRAVELY ERRED IN AFFIRMING RESPONDENT DOJ'S
DISMISSAL OF THE COMPLAINT DUE TO NON-COMPLIANCE WITH THE
WHEREFORE, premises considered, the assailed resolution is PROVISIONS OF THE LOCAL GOVERNMENT CODE OF 1991.
hereby REVERSED and SET ASIDE. Accordingly, the City Prosecutor of Las
Pias City is directed to move for the withdrawal of the information for grave IV. RESPONDENT COURT GRAVELY ERRED WHEN IT HELD THAT THE
oral defamation filed against respondent Loida Marcelina J. Genabe, and report REQUIREMENTS UNDER DOJ CIRCULAR NO. 70 (2000 NPS Rule on Appeal)
the action taken thereon within ten (10) days from receipt hereof. ARE NOT MANDATORY.[12]

SO ORDERED.[8] Ruling and Discussions

The petition is bereft of merit.


The petitioner filed a motion for reconsideration, which was denied in a
Resolution[9] dated June 25, 2007. We shall first tackle Agbayani's arguments on the first two issues raised in the instant
petition.
Consequently, Agbayani filed a petition for certiorari with the CA alleging that the DOJ
committed grave abuse of discretion in setting aside the Resolution dated February 12, 2007 of 1. Petitioner Agbayani alleged that Undersecretary Pineda unfairly heeded only to the
the City Prosecutor of Las Pias City in I.S. Case No. 07-0013. She averred that the respondents arguments interposed by respondent Genabe in her comment; and the CA, in turn, took his
petition for review filed with the DOJ did not comply with Sections 5 and 6 of DOJ Circular No. findings and reasoning as gospel truth. Agbayanis comment was completely disregarded
70, or the 2000 National Prosecution Service (NPS) Rules on Appeal, and maintained that her and suppressed in the records of the DOJ. Agbayani discovered this when she went to the DOJ
evidence supported a finding of probable cause for grave oral defamation against respondent to examine the records, as soon as she received a copy of the DOJ Resolution of her motion for
Genabe. reconsideration.

On March 27, 2008, the CA dismissed the petition after finding no grave abuse of 2. Further, petitioner Agbayani maintained that respondent Genabes Petition for
discretion on the part of the DOJ. Citing Punzalan v. Dela Pea,[10] the CA stated that for grave Review[13] should have been dismissed outright, since it failed to state the name and address of
abuse of discretion to exist, the complained act must constitute a capricious and whimsical the petitioner, nor did it show proof of service to her, pursuant to Sections 5 and 6 of DOJ
exercise of judgment as it is equivalent to lack of jurisdiction, or when the power is exercised in Circular No. 70. Also, the petition was not accompanied with the required
an arbitrary or despotic manner by reason of passion or personal hostility, and it must be so attachments, i.e. certified copies of the complaint, affidavits of witnesses, petitioner's reply to
patent and gross as to amount to an evasion of positive duty enjoined or to act at all in respondent's counter-affidavit, and documentary evidences of petitioner. Thus, a grave
contemplation of law. It is not sufficient that a tribunal, in the exercise of its power, abused its irregularity was committed by the DOJ in allowing the surreptitious insertion of these and many
discretion; such abuse must be grave. other documents in the records of the case, after the petition had been filed.

On motion for reconsideration by the petitioner, the CA denied the same in its In particular, petitioner Agbayani alleged that when the petition was filed on March 22,
Resolution[11] dated July 3, 2008. Hence, the instant petition. 2007, only five (5) documents were attached thereto, namely: (a) the Resolution of the City
Prosecutor; (b) the respondent's Counter-affidavit; (c) Letter of the staff dated January 2,
2005; (d) her Answer; and (e) the Information filed against respondent Genabe with the Office
of the City Prosecutor of Las Pias City. However, at the time the Resolution of the DOJ was
Assignment of Errors issued, a total of forty-one (41) documents[14] formed part of the records of the
petition. Besides, respondent Genabe's Motion to Defer Arraignment (Document No. 40) and the
Maintaining her stance, Agbayani raised the following, to wit: court order relative to the granting of the same (Document No. 41) were both dated March 23,
2007, or a day after the petition was filed. Agbayani asserted that these thirty-six (36)
I. RESPONDENT COURT GRAVELY ERRED IN HOLDING THAT THE documents were surreptitiously and illegally attached to the records of the case, an act
RESPONDENT DOJ DID NOT ABUSE ITS DISCRETION WHEN THE LATTER constituting extrinsic fraud and grave misconduct.[15] At the very least, the DOJ should have
REVERSED AND SET ASIDE THE RESOLUTION OF THE CITY PROSECUTOR required respondent Genabe to formalize the insertion of the said documents.
OF LAS PIAS CITY.
Petitioner Agbayani reiterated that her version of the incident was corroborated by
several witnesses (officemates of Agbayani and Genabe), while that of Genabe was not.And
since the crime committed by respondent Genabe consisted of her exact utterances, the DOJ
erred in downgrading the same to slight oral defamation, completely disregarding the finding by DOJ. Moreover, a computer verification requested by the petitioner showed that the prosecutor
the Investigating Prosecutor of probable cause for the greater offense of grave oral assigned to the case had received a copy of the petitioners comment. [17]
defamation. She denied that she gave provocation to respondent Genabe, insisting that the
latter committed the offense with malice aforethought and not in the heat of anger. As to the charge of extrinsic fraud, which consists of the alleged suppression of
Agbayani's Comment and the unauthorized insertion of documents in the records of the case
We find no merit in the above arguments. with the DOJ, we agree with the CA that this is a serious charge, especially if made against the
Undersecretary of Justice; and in order for it to prosper, it must be supported by clear and
It is well to be reminded, first of all, that the rules of procedure should be viewed as convincing evidence. However, petitioner Agbayani's only proof is her bare claim that she
mere instruments designed to facilitate the attainment of justice. They are not to be applied personally checked the records and found that her Comment was missing and 36 new
with severity and rigidity when such application would clearly defeat the very rationale for their documents had been inserted. This matter was readily brought to the attention of
conception and existence. Even the Rules of Court reflects this principle.[16] Undersecretary Pineda by petitioner Agbayani in her motion for reconsideration, who however
must surely have found such contention without merit, and thus denied the motion. [18]
Anent the charge of non-compliance with the rules on appeal, Sections 5 and 6 of the
aforesaid DOJ Circular provide: Section 5 of the 2000 NPS Rules on Appeal also provides that the petition for review
must be accompanied by a legible duplicate original or certified true copy of the resolution
SECTION 5. Contents of petition. - The petition shall contain or state: appealed from, together with legible true copies of the complaint, affidavits or sworn
(a) the names and addresses of the parties; (b) the Investigation Slip number statements and other evidence submitted by the parties during the preliminary investigation or
(I.S. No.) and criminal case number, if any, and title of the case, including the reinvestigation. Petitioner Agbayani does not claim that she was never furnished, during the
offense charged in the complaint; (c) the venue of the preliminary preliminary investigation, with copies of the alleged inserted documents, or that any of these
investigation; (d) the specific material dates showing that it was filed on time; documents were fabricated. In fact, at least seven (7) of these documents were copies of her
(e) a clear and concise statement of the facts, the assignment of errors, and own submissions to the investigating prosecutor.[19]Presumably, the DOJ required respondent
the reasons or arguments relied upon for the allowance of the appeal; and (f) Genabe to submit additional documents produced at the preliminary investigation, along with
proof of service of a copy of the petition to the adverse party and the Document Nos. 40 and 41, for a fuller consideration of her petition for review.
Prosecution Office concerned.
As for Document Nos. 40 and 41, which were dated a day after the filing of the petition,
The petition shall be accompanied by legible duplicate original or Section 5 of the 2000 NPS Rules on Appeal provides that if an Information has been filed in
certified true copy of the resolution appealed from together with legible true court pursuant to the appealed resolution, a copy of the Motion to Defer Proceedings must also
copies of the complaint, affidavits/sworn statements and other evidence accompany the petition. Section 3 of the above Rules states that an appeal to the DOJ must be
submitted by the parties during the preliminary investigation/ reinvestigation. taken within fifteen (15) days from receipt of the resolution or of the denial of the motion for
reconsideration. While it may be presumed that the motion to defer arraignment accompanying
If an information has been filed in court pursuant to the appealed the petition should also be filed within the appeal period, respondent Genabe can not actually
resolution, a copy of the motion to defer proceedings filed in court must also be faulted if the resolution thereof was made after the lapse of the period to appeal.
accompany the petition.
In Guy vs. Asia United Bank,[20] a motion for reconsideration from the resolution of the
The investigating/reviewing/approving prosecutor shall not be Secretary of Justice, which was filed four (4) days beyond the non-extendible period of ten (10)
impleaded as party respondent in the petition. The party taking the appeal days, was allowed under Section 13 of the 2000 NPS Rules on Appeal. The Supreme Court held
shall be referred to in the petition as either "Complainant-Appellant" or that the authority of the Secretary of Justice to review and order the withdrawal of an
"Respondent-Appellant." Information in instances where he finds the absence of a prima facie case is not time-barred,
albeit subject to the approval of the court, if its jurisdiction over the accused has meanwhile
SECTION 6. Effect of failure to comply with the requirements. The attached.[21] We further explained:
failure of petitioner to comply WITH ANY of the foregoing
requirements shall constitute sufficient ground for the dismissal of the petition. [I]t is not prudent or even permissible for a court to compel the Secretary of
Justice or the fiscal, as the case may be, to prosecute a proceeding originally
initiated by him on an information, if he finds that the evidence relied upon by
Contrary to petitioner Agbayani's claim, there was substantial compliance with the him is insufficient for conviction. Now, then, if the Secretary of Justice
rules. Respondent Genabe actually mentioned on page 2 of her petition for review to the DOJ possesses sufficient latitude of discretion in his determination of what
the name of the petitioner as the private complainant, as well as indicated the latters address constitutes probable cause and can legally order a reinvestigation even in
on the last page thereof as RTC Branch 275, Las Pias City. The CA also noted that there was those extreme instances where an information has already been filed in court,
proper service of the petition as required by the rules since the petitioner was able to file her is it not just logical and valid to assume that he can take cognizance of and
comment thereon. A copy thereof, attached as Annex L in the instant petition, bears a mark competently act on a motion for reconsideration, belatedly filed it might have
that the comment was duly received by the Prosecution Staff, Docket Section of the been, dealing with probable cause? And is it not a grievous error on the part of
the CA if it virtually orders the filing of an information, as here, despite a
categorical statement from the Secretary of Justice about the lack of evidence the court's duty in an appropriate case is confined to a determination of whether the assailed
to proceed with the prosecution of the petitioner? The answer to both posers executive or judicial determination of probable cause was done without or in excess of
should be in the affirmative. As we said in Santos v. Go: jurisdiction or with grave abuse of discretion amounting to want of jurisdiction.

[C]ourts cannot interfere with the discretion of the But while prosecutors are given sufficient latitude of discretion in the determination of
public prosecutor in evaluating the offense charged. He may probable cause, their findings are still subject to review by the Secretary of Justice.Surely, this
dismiss the complaint forthwith, if he finds the charge power of the Secretary of Justice to review includes the discretion to accept additional evidence
insufficient in form or substance, or without any ground. Or, from the investigating prosecutor or from herein respondent Genabe, evidence which
he may proceed with the investigation if the complaint in his nonetheless appears to have already been submitted to the investigating prosecutor but
view is sufficient and in proper form. The decision whether to inadvertently omitted by her when she filed her petition.
dismiss a complaint or not, is dependent upon the sound
discretion of the prosecuting fiscal and, ultimately, that of the 3. Coming now to the DOJ's finding that the complaint fails to state a cause of action,
Secretary of Justice. Findings of the Secretary of Justice are the CA held that the DOJ committed no grave abuse of discretion in causing the dismissal
not subject to review unless made with grave abuse of thereof on the ground of non-compliance with the provisions of the Local Government Code of
discretion. 1991, on the Katarungang Pambarangay conciliation procedure.

xxx Undeniably, both petitioner Agbayani and respondent Genabe are residents of Las Pias
City and both work at the RTC, and the incident which is the subject matter of the case
[T]o strike down the April 20, 2006 DOJ Secretary's Resolution as happened in their workplace.[25] Agbayanis complaint should have undergone the
absolutely void and without effect whatsoever, as the assailed CA decision did, mandatory barangay conciliation for possible amicable settlement with respondent Genabe,
for having been issued after the Secretary had supposedly lost jurisdiction over pursuant to Sections 408 and 409 of Republic Act No. 7160 or the Local Government Code of
the motion for reconsideration subject of the resolution may be reading into 1991 which provide:
the aforequoted provision a sense not intended. For, the irresistible thrust of
the assailed CA decision is that the DOJ Secretary is peremptorily barred from Sec. 408. Subject Matter for Amicable Settlement; Exception
taking a second hard look at his decision and, in appropriate cases, reverse or thereto. The lupon of each barangay shall have authority to bring together the
modify the same unless and until a motion for reconsideration is timely parties actually residing in the same city or municipality for amicable
interposed and pursued. The Court cannot accord cogency to the posture settlement of all disputes, except: x x x
assumed by the CA under the premises which, needless to stress, would deny
the DOJ the authority to motu proprio undertake a review of his own decision Sec. 409. Venue. x x x (d) Those arising at the workplace where the
with the end in view of protecting, in line with his oath of office, innocent contending parties are employed or x x x shall be brought in
persons from groundless, false or malicious prosecution. As the Court pointed the barangay where such workplace or institution is located.
out in Torres, Jr. v. Aguinaldo, the Secretary of Justice would be committing a
serious dereliction of duty if he orders or sanctions the filing of an information
based upon a complaint where he is not convinced that the evidence warrants Administrative Circular No. 14-93,[26] issued by the Supreme Court on July 15, 1993
the filing of the action in court.[22] (Citations omitted and underscoring states that:
supplied)
xxx

The Court further stated in Guy that when the DOJ Secretary took cognizance of the I. All disputes are subject to Barangay conciliation pursuant to the Revised
petitioner's motion for reconsideration, he effectively excepted such motion from the operation Katarungang Pambarangay Law [formerly P.D. 1508, repealed and now
of the aforequoted Section 13 of DOJ Circular No. 70, s. 2000. This show of liberality is, to us, replaced by Secs. 399-422, Chapter VII, Title I, Book III, and Sec. 515, Title I,
within the competence of the DOJ Secretary to make. The Court is not inclined to disturb the Book IV, R.A. 7160, otherwise known as the Local Government Code of 1991],
same absent compelling proof, that he acted out of whim and that petitioner was out to delay and prior recourse thereto is a pre-condition before filing a complaint in court
the proceedings to the prejudice of respondent in filing the motion for reconsideration. [23] or any government offices, except in the following disputes:

The case of First Women's Credit Corporation v. Perez,[24] succinctly summarizes the
general rules relative to criminal prosecution: that criminal prosecution may not be restrained [1] Where one party is the government, or any subdivision
or stayed by injunction, preliminary or final, albeit in extreme cases, exceptional circumstances or instrumentality thereof;
have been recognized; that courts follow the policy of non-interference in the conduct of
preliminary investigations by the DOJ, and of leaving to the investigating prosecutor sufficient [2] Where one party is a public officer or employee and the dispute
latitude of discretion in the determination of what constitutes sufficient evidence as will relates to the performance of his official functions;
establish probable cause for the filing of an information against a supposed offender; and, that
[3] Where the dispute involves real properties located in different [12] Actions to annul judgment upon a compromise which may be filed
cities and municipalities, unless the parties thereto agree to submit directly in court [See Sanchez vs. [Judge] Tupaz, 158 SCRA 459].
their difference to amicable settlement by an appropriate Lupon;
xxx
[4] Any complaint by or against corporations, partnerships or juridical
entities, since only individuals shall be parties to Barangay conciliation
proceedings either as complainants or respondents [Sec. 1, Rule VI, The compulsory process of arbitration is a pre-condition for the filing of the complaint in
Katarungang Pambarangay Rules]; court. Where the complaint (a) did not state that it is one of excepted cases, or (b) it did not
allege prior availment of said conciliation process, or (c) did not have a certification that no
[5] Disputes involving parties who actually reside in barangays of conciliation had been reached by the parties, the case should be dismissed. [27]
different cities or municipalities, except where such barangay units
adjoin each other and the parties thereto agree to submit their Here, petitioner Agbayani failed to show that the instant case is not one of the
differences to amicable settlement by an appropriate Lupon; exceptions enumerated above. Neither has she shown that the oral defamation caused on her
was so grave as to merit a penalty of more than one year. Oral defamation under Article 358 of
[6] Offenses for which the law prescribes a maximum penalty of the Revised Penal Code, as amended, is penalized as follows:
imprisonment exceeding one [1] year or a fine of over five thousand
pesos ([P]5,000.00); Article 358. Slander. Oral defamation shall be punished by arresto
mayor in its maximum period to prision correccional in its minimum period if it
[7] Offenses where there is no private offended party; is of a serious and insulting nature; otherwise, the penalty shall be arresto
menor or a fine not exceeding 200 pesos.
[8] Disputes where urgent legal action is necessary to prevent
injustice from being committed or further continued, specifically the
following: Apparently, the DOJ found probable cause only for slight oral defamation. As defined
in Villanueva v. People,[28] oral defamation or slander is the speaking of base and defamatory
[a] Criminal cases where accused is under police custody or detention words which tend to prejudice another in his reputation, office, trade, business or means of
[See Sec. 412(b)(1), Revised Katarungang Pambarangay livelihood. It is grave slander when it is of a serious and insulting nature.The gravity depends
Law]; upon: (1) the expressions used; (2) the personal relations of the accused and the offended
party; and (3) the special circumstances of the case, the antecedents or relationship between
[b] Petitions for habeas corpus by a person illegally deprived of his the offended party and the offender, which may tend to prove the intention of the offender at
rightful custody over another or a person illegally deprived of the time. In particular, it is a rule that uttering defamatory words in the heat of anger, with
or on acting in his behalf; some provocation on the part of the offended party constitutes only a light felony. [29]

[c] Actions coupled with provisional remedies such as preliminary We recall that in the morning of December 27, 2006 when the alleged utterances were
injunction, attachment, delivery of personal property and made, Genabe was about to punch in her time in her card when she was informed that she had
support during the pendency of the action; and been suspended for failing to meet her deadline in a case, and that it was Agbayani who
informed the presiding judge that she had missed her deadline when she left to attend a
[d] Actions which may be barred by the Statute of Limitations. convention in Baguio City, leaving Agbayani to finish the task herself. According to
Undersecretary Pineda, the confluence of these circumstances was the immediate cause of
[9] Any class of disputes which the President may determine in the respondent Genabe's emotional and psychological distress. We rule that his determination that
interest of justice or upon the recommendation of the Secretary of the defamation was uttered while the respondent was in extreme excitement or in a state of
Justice; passion and obfuscation, rendering her offense of lesser gravity than if it had been made with
cold and calculating deliberation, is beyond the ambit of our review. [30] The CA concurred that
[10] Where the dispute arises from the Comprehensive Agrarian the complained utterances constituted only slight oral defamation, having been said in the heat
Reform Law (CARL) [Secs. 46 & 47, R. A. 6657]; of anger and with perceived provocation from Agbayani. Respondent Genabe was of a highly
volatile personality prone to throw fits (sumpongs), who thus shared a hostile working
[11] Labor disputes or controversies arising from employer-employee environment with her co-employees, particularly with her superiors, Agbayani and Hon.
relations [Montoya vs. Escayo, 171 SCRA 442; Art. 226, Labor Code, Bonifacio Sanz Maceda, the Presiding Judge of Branch 275, whom she claimed had committed
as amended, which grants original and exclusive jurisdiction over against her grievous acts that outrage moral and social conduct. That there had been a long-
conciliation and mediation of disputes, grievances or problems to standing animosity between Agbayani and Genabe is not denied.
certain offices of the Department of Labor and Employment];
4. Lastly, petitioner Agbayani insists that the DOJ should have dismissed respondent
Genabe's petition for review outright pursuant to Sections 5 and 6 of DOJ Circular No. 70. It is
true that the general rule in statutory construction is that the words shall, must, ought, or All told, we find that the CA did not commit reversible error in upholding the Resolution
should are words of mandatory character in common parlance and in their in ordinary dated May 17, 2007 of the DOJ as we, likewise, find the same to be in accordance with law and
signification,[31] yet, it is also well-recognized in law and equity as a not absolute and inflexible jurisprudence.
criterion.[32] Moreover, it is well to be reminded that DOJ Circular No. 70 is a mere tool designed
to facilitate, not obstruct, the attainment of justice through appeals taken with the National WHEREFORE, premises considered, the petition for review is
Prosecution Service. Thus, technical rules of procedure like those under Sections 5 and 6 hereby DENIED. Accordingly, the Decision dated March 27, 2008 and the Resolution dated July
thereof should be interpreted in such a way to promote, not frustrate, justice. 3, 2008 of the Court of Appeals in CA-G.R. SP No. 99626 are AFFIRMED in toto.

Besides, Sections 7 and 10 of DOJ Circular No. 70 clearly give the Secretary of Justice, SO ORDERED.
or the Undersecretary in his place, wide latitude of discretion whether or not to dismiss a
petition. Section 6 of DOJ Circular No. 70, invoked by petitioner Agbayani, is clearly
encompassed within this authority, as shown by a cursory reading of Sections 7 and 10, to wit:

SECTION 7. Action on the petition. The Secretary of


Justice may dismiss the petition outright if he finds the same to be patently
without merit or manifestly intended for delay, or when the issues raised
therein are too unsubstantial to require consideration.

SECTION 12. Disposition of the appeal. The Secretary may reverse,


affirm or modify the appealed resolution. He may, motu proprio or upon
motion, dismiss the petition for review on any of the following grounds:

That the petition was filed beyond the period prescribed


in Section 3 hereof;
That the procedure or any of the requirements
herein provided has not been complied with;
That there is no showing of any reversible error;
That the appealed resolution is interlocutory in
nature, except when it suspends the proceedings based
on the alleged existence of a prejudicial question;
That the accused had already been arraigned when the
appeal was taken;
That the offense has already prescribed; and
That other legal or factual grounds exist to warrant a
dismissal.

We reiterate what we have stated in Yao v. Court of Appeals[33] that:

In the interest of substantial justice, procedural rules of the most


mandatory character in terms of compliance, may be relaxed. In other words,
if strict adherence to the letter of the law would result in absurdity and
manifest injustice, or where the merit of a party's cause is apparent and
outweighs consideration of non-compliance with certain formal requirements,
procedural rules should definitely be liberally construed. A party-litigant is to
be given the fullest opportunity to establish the merits of his complaint or
defense rather than for him to lose life, liberty, honor or property on mere
technicalities.[34] (Citations omitted)
SPECIAL SECOND DIVISION motions for reconsideration. Gonzales avers in his Motion for Reconsideration[2] that the Court
erred in holding that the DENR Panel of Arbitrators was bereft of jurisdiction, reiterating its
argument that the case involves a mining dispute that properly falls within the ambit of the
JORGE GONZALES and G.R. No. 161957 Panels authority. Gonzales adds that the Court failed to rule on other issues he raised relating
PANEL OF ARBITRATORS, to the sufficiency of his complaint before the DENR Panel of Arbitrators and the timeliness of its
Petitioners, Present: filing.

PUNO, C. J., Respondents Climax Mining Ltd., et al., (respondents) filed their Motion for Partial
Chairperson, Reconsideration and/or Clarification[3] seeking reconsideration of that part of the Decision
- versus AUSTRIA-MARTINEZ, holding that the case should not be brought for arbitration under Republic Act (R.A.) No. 876,
CALLEJO, SR., also known as the Arbitration Law.[4] Respondents, citing American jurisprudence[5] and the
TINGA, and UNCITRAL Model Law,[6] argue that the arbitration clause in the Addendum Contract should be
NAZARIO, JJ. treated as an agreement independent of the other terms of the contract, and that a claimed
CLIMAX MINING LTD., rescission of the main contract does not avoid the duty to arbitrate. Respondents add that
CLIMAX-ARIMCO MINING CORP., Gonzaless argument relating to the alleged invalidity of the Addendum Contract still has to be
and AUSTRALASIAN PHILIPPINES Promulgated: proven and adjudicated on in a proper proceeding; that is, an action separate from the motion
MINING INC., to compel arbitration. Pending judgment in such separate action, the Addendum Contract
Respondents. January 22, 2007 remains valid and binding and so does the arbitration clause therein. Respondents add that the
holding in the Decision that the case should not be brought under the ambit of the Arbitration
x--------------------------------------------------------------------------------- x Law appears to be premised on Gonzaless having impugn[ed] the existence or validity of the
addendum contract. If so, it supposedly conveys the idea that Gonzaless unilateral repudiation
of the contract or mere allegation of its invalidity is all it takes to avoid arbitration. Hence,
JORGE GONZALES, G.R. No. 167994 respondents submit that the courts holding that the case should not be brought under the ambit
Petitioner, of the Arbitration Law be understood or clarified as operative only where the challenge to the
arbitration agreement has been sustained by final judgment.

- versus Both parties were required to file their respective comments to the other partys motion for
reconsideration/clarification.[7] Respondents filed their Comment on 17 August 2005,[8] while
Gonzales filed his only on 25 July 2006.[9]
HON. OSCAR B. PIMENTEL, in his
capacity as PRESIDING JUDGE of BR. 148 On the other hand, G.R. No. 167994 is a Rule 65 petition filed on 6 May 2005, or while the
of the REGIONAL TRIAL COURT of motions for reconsideration in G.R. No. 161957[10] were pending, wherein Gonzales challenged
MAKATI CITY, and CLIMAX-ARIMCO the orders of the Regional Trial Court (RTC) requiring him to proceed with the arbitration
MINING CORPORATION, proceedings as sought by Climax-Arimco Mining Corporation (Climax-Arimco).
Respondents.
x-------------------------- --------------------------------------------------- x On 5 June 2006, the two cases, G.R. Nos. 161957 and 167994, were consolidated upon the
recommendation of the Assistant Division Clerk of Court since the cases are rooted in the same
Addendum Contract.

We first tackle the more recent case which is G.R. No. 167994. It stemmed from the petition to
compel arbitration filed by respondent Climax-Arimco before the RTC of Makati City on 31 March
R E S O L U T I ON 2000 while the complaint for the nullification of the Addendum Contract was pending before the
DENR Panel of Arbitrators. On 23 March 2000, Climax-Arimco had sent Gonzales a Demand for
TINGA, J.: Arbitration pursuant to Clause 19.1[11] of the Addendum Contract and also in accordance with
Sec. 5 of R.A. No. 876. The petition for arbitration was subsequently filed and Climax-Arimco
This is a consolidation of two petitions rooted in the same disputed Addendum Contract entered sought an order to compel the parties to arbitrate pursuant to the said arbitration clause. The
into by the parties. In G.R. No. 161957, the Court in its Decision of 28 February 2005[1] denied case, docketed as Civil Case No. 00-444, was initially raffled to Br. 132 of the RTC of Makati
the Rule 45 petition of petitioner Jorge Gonzales (Gonzales). It held that the DENR Panel of City, with Judge Herminio I. Benito as Presiding Judge. Respondent Climax-Arimco filed on 5
Arbitrators had no jurisdiction over the complaint for the annulment of the Addendum Contract April 2000 a motion to set the application to compel arbitration for hearing.
on grounds of fraud and violation of the Constitution and that the action should have been
brought before the regular courts as it involved judicial issues. Both parties filed separate
On 14 April 2000, Gonzales filed a motion to dismiss which he however failed to set for SEC. 6. Hearing by court.A party aggrieved by the failure, neglect or
hearing. On 15 May 2000, he filed an Answer with Counterclaim,[12] questioning the validity of refusal of another to perform under an agreement in writing providing for
the Addendum Contract containing the arbitration clause. Gonzales alleged that the Addendum arbitration may petition the court for an order directing that such arbitration
Contract containing the arbitration clause is void in view of Climax-Arimcos acts of fraud, proceed in the manner provided for in such agreement. Five days notice in
oppression and violation of the Constitution. Thus, the arbitration clause, Clause 19.1, writing of the hearing of such application shall be served either personally or
contained in the Addendum Contract is also null and void ab initioand legally inexistent. by registered mail upon the party in default. The court shall hear the parties,
and upon being satisfied that the making of the agreement or such failure to
On 18 May 2000, the RTC issued an order declaring Gonzaless motion to dismiss moot and comply therewith is not in issue, shall make an order directing the parties to
academic in view of the filing of his Answer with Counterclaim. [13] proceed to arbitration in accordance with the terms of the agreement. If the
making of the agreement or default be in issue the court shall proceed to
On 31 May 2000, Gonzales asked the RTC to set the case for pre-trial. [14] This the RTC denied summarily hear such issue. If the finding be that no agreement in writing
on 16 June 2000, holding that the petition for arbitration is a special proceeding that is providing for arbitration was made, or that there is no default in the
summary in nature.[15] However, on 7 July 2000, the RTC granted Gonzaless motion for proceeding thereunder, the proceeding shall be dismissed. If the finding be
reconsideration of the 16 June 2000 Order and set the case for pre-trial on 10 August 2000, it that a written provision for arbitration was made and there is a default in
being of the view that Gonzales had raised in his answer the issue of the making of the proceeding thereunder, an order shall be made summarily directing the
arbitration agreement.[16] parties to proceed with the arbitration in accordance with the terms thereof.

Climax-Arimco then filed a motion to resolve its pending motion to compel arbitration. The RTC The court shall decide all motions, petitions or applications filed
denied the same in its 24 July 2000 order. under the provisions of this Act, within ten (10) days after such motions,
petitions, or applications have been heard by it.
On 28 July 2000, Climax-Arimco filed a Motion to Inhibit Judge Herminio I. Benito for not
possessing the cold neutrality of an impartial judge.[17] On 5 August 2000, Judge Benito issued
an Order granting the Motion to Inhibit and ordered the re-raffling of the petition for arbitration.
[18]
The case was raffled to the sala of public respondent Judge Oscar B. Pimentel of Branch 148.
Gonzales also cites Sec. 24 of R.A. No. 9285 or the Alternative Dispute Resolution Act
On 23 August 2000, Climax-Arimco filed a motion for reconsideration of the 24 July 2000 Order.
[19]
Climax-Arimco argued that R.A. No. 876 does not authorize a pre-trial or trial for a motion to of 2004:
compel arbitration but directs the court to hear the motion summarily and resolve it within ten
days from hearing. Judge Pimentel granted the motion and directed the parties to
arbitration. On 13 February 2001, Judge Pimentel issued the first assailed order requiring SEC. 24. Referral to Arbitration.A court before which an action is
Gonzales to proceed with arbitration proceedings and appointing retired CA Justice Jorge Coquia brought in a matter which is the subject matter of an arbitration agreement
as sole arbitrator.[20] 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
Gonzales moved for reconsideration on 20 March 2001 but this was denied in the Order dated 7 unless it finds that the arbitration agreement is null and void, inoperative or
March 2005.[21] incapable of being performed.

Gonzales thus filed the Rule 65 petition assailing the Orders dated 13 February
2001 and 7 March 2005 of Judge Pimentel. Gonzales contends that public respondent Judge
Pimentel acted with grave abuse of discretion in immediately ordering the parties to proceed According to Gonzales, the above-quoted provisions of law outline the procedure to be followed
with arbitration despite the proper, valid, and timely raised argument in his Answer with in petitions to compel arbitration, which the RTC did not follow. Thus, referral of the parties to
Counterclaim that the Addendum Contract, containing the arbitration clause, is null and arbitration by Judge Pimentel despite the timely and properly raised issue of nullity of the
void. Gonzales has also sought a temporary restraining order to prevent the enforcement of the Addendum Contract was misplaced and without legal basis. Both R.A. No. 876 and R.A. No.
assailed orders directing the parties to arbitrate, and to direct Judge Pimentel to hold a pre-trial 9285 mandate that any issue as to the nullity, inoperativeness, or incapability of performance of
conference and the necessary hearings on the determination of the nullity of the Addendum the arbitration clause/agreement raised by one of the parties to the alleged arbitration
Contract. agreement must be determined by the court prior to referring them to arbitration. They require
that the trial court first determine or resolve the issue of nullity, and there is no other venue for
this determination other than a pre-trial and hearing on the issue by the trial court which has
In support of his argument, Gonzales invokes Sec. 6 of R.A. No. 876: jurisdiction over the case. Gonzales adds that the assailed 13 February 2001 Order also violated
his right to procedural due process when the trial court erroneously ruled on the existence of
the arbitration agreement despite the absence of a hearing for the presentation of evidence on
the nullity of the Addendum Contract.
Respondent Climax-Arimco, on the other hand, assails the mode of review availed of by controversy existing, between them at the time of the submission and which
Gonzales. Climax-Arimco cites Sec. 29 of R.A. No. 876: may be the subject of an action, or the parties to any contract may in such
contract agree to settle by arbitration a controversy thereafter arising
between them.Such submission or contract shall be valid, enforceable and
SEC. 29. Appeals.An appeal may be taken from an order made in a irrevocable, save upon such grounds as exist at law for the revocation of any
proceeding under this Act, or from a judgment entered upon an award contract.
through certiorari proceedings, but such appeals shall be limited to questions
of law. The proceedings upon such an appeal, including the judgment thereon xxxx
shall be governed by the Rules of Court in so far as they are applicable.

The grounds Gonzales invokes for the revocation of the Addendum Contractfraud and
Climax-Arimco mentions that the special civil action for certiorari employed by Gonzales is oppression in the execution thereofare also not grounds for the revocation of the arbitration
available only where there is no appeal or any plain, speedy, and adequate remedy in the clause in the Contract, Climax-Arimco notes. Such grounds may only be raised by way of
ordinary course of law against the challenged orders or acts. Climax-Arimco then points out that defense in the arbitration itself and cannot be used to frustrate or delay the conduct of
R.A. No. 876 provides for an appeal from such orders, which, under the Rules of Court, must be arbitration proceedings. Instead, these should be raised in a separate action for rescission, it
filed within 15 days from notice of the final order or resolution appealed from or of the denial of continues.
the motion for reconsideration filed in due time.Gonzales has not denied that the relevant 15-
day period for an appeal had elapsed long before he filed this petition for certiorari. He cannot Climax-Arimco emphasizes that the summary proceeding to compel arbitration under Sec. 6 of
use the special civil action of certiorari as a remedy for a lost appeal. R.A. No. 876 should not be confused with the procedure in Sec. 24 of R.A. No. 9285. Sec. 6 of
R.A. No. 876 refers to an application to compel arbitration where the courts authority is limited
Climax-Arimco adds that an application to compel arbitration under Sec. 6 of R.A. No. 876 to resolving the issue of whether there is or there is no agreement in writing providing for
confers on the trial court only a limited and special jurisdiction, i.e., a jurisdiction solely to arbitration, while Sec. 24 of R.A. No. 9285 refers to an ordinary action which covers a matter
determine (a) whether or not the parties have a written contract to arbitrate, and (b) if the that appears to be arbitrable or subject to arbitration under the arbitration agreement. In the
defendant has failed to comply with that contract. Respondent cites La Naval Drug Corporation latter case, the statute is clear that the court, instead of trying the case, may, on request of
v. Court of Appeals,[22] which holds that in a proceeding to compel arbitration, [t]he arbitration either or both parties, refer the parties to arbitration, unless it finds that the arbitration
law explicitly confines the courts authority only to pass upon the issue of whether there is or agreement is null and void, inoperative or incapable of being performed. Arbitration may even
there is no agreement in writing providing for arbitration, and [i]n the affirmative, the statute be ordered in the same suit brought upon a matter covered by an arbitration agreement even
ordains that the court shall issue an order summarily directing the parties to proceed with the without waiting for the outcome of the issue of the validity of the arbitration agreement. Art. 8
arbitration in accordance with the terms thereof.[23] Climax-Arimco argues that R.A. No. 876 of the UNCITRAL Model Law[24]states that where a court before which an action is brought in a
gives no room for any other issue to be dealt with in such a proceeding, and that the court matter which is subject of an arbitration agreement refers the parties to arbitration, the arbitral
presented with an application to compel arbitration may order arbitration or dismiss the same, proceedings may proceed even while the action is pending.
depending solely on its finding as to those two limited issues. If either of these matters is
disputed, the court is required to conduct a summary hearing on it. Gonzaless proposition Thus, the main issue raised in the Petition for Certiorari is whether it was proper for the RTC, in
contradicts both the trial courts limited jurisdiction and the summary nature of the proceeding the proceeding to compel arbitration under R.A. No. 876, to order the parties to arbitrate even
itself. though the defendant therein has raised the twin issues of validity and nullity of the Addendum
Contract and, consequently, of the arbitration clause therein as well.The resolution of both
Climax-Arimco further notes that Gonzaless attack on or repudiation of the Addendum Contract Climax-Arimcos Motion for Partial Reconsideration and/or Clarification in G.R. No. 161957 and
also is not a ground to deny effect to the arbitration clause in the Contract. The arbitration Gonzaless Petition for Certiorari in G.R. No. 167994 essentially turns on whether the question of
agreement is separate and severable from the contract evidencing the parties commercial or validity of the Addendum Contract bears upon the applicability or enforceability of the
economic transaction, it stresses. Hence, the alleged defect or failure of the main contract is not arbitration clause contained therein. The two pending matters shall thus be jointly resolved.
a ground to deny enforcement of the parties arbitration agreement. Even the party who has
repudiated the main contract is not prevented from enforcing its arbitration provision. R.A. No. We address the Rule 65 petition in G.R. No. 167994 first from the remedial law
876 itself treats the arbitration clause or agreement as a contract separate from the perspective. It deserves to be dismissed on procedural grounds, as it was filed in lieu of appeal
commercial, economic or other transaction to be arbitrated. The statute, in particular paragraph which is the prescribed remedy and at that far beyond the reglementary period. It is elementary
1 of Sec. 2 thereof, considers the arbitration stipulation an independent contract in its own right in remedial law that the use of an erroneous mode of appeal is cause for dismissal of the
whose enforcement may be prevented only on grounds which legally make the arbitration petition for certiorari and it has been repeatedly stressed that a petition for certiorari is not a
agreement itself revocable, thus: substitute for a lost appeal. As its nature, a petition for certiorari lies only where there is no
appeal, and no plain, speedy and adequate remedy in the ordinary course of law. [25] The
Arbitration Law specifically provides for an appeal by certiorari, i.e., a petition for review under
SEC. 2. Persons and matters subject to arbitration.Two or more persons or
certiorari under Rule 45 of the Rules of Court that raises pure questions of law. [26] There is no
parties may submit to the arbitration of one or more arbitrators any
merit to Gonzaless argument that the use of the permissive term may in Sec. 29, R.A. No. 876
in the filing of appeals does not prohibit nor discount the filing of a petition for certiorari under Arbitration, as an alternative mode of settling disputes, has long been recognized and accepted
Rule 65.[27] Proper interpretation of the aforesaid provision of law shows that the term may in our jurisdiction. The Civil Code is explicit on the matter.[33] R.A. No. 876 also expressly
refers only to the filing of an appeal, not to the mode of review to be employed. Indeed, the use authorizes arbitration of domestic disputes. Foreign arbitration, as a system of settling
of may merely reiterates the principle that the right to appeal is not part of due process of law commercial disputes of an international character, was likewise recognized when the Philippines
but is a mere statutory privilege to be exercised only in the manner and in accordance with law. adhered to the United Nations "Convention on the Recognition and the Enforcement of Foreign
Arbitral Awards of 1958," under the 10 May 1965 Resolution No. 71 of the Philippine Senate,
Neither can BF Corporation v. Court of Appeals[28] cited by Gonzales support his giving reciprocal recognition and allowing enforcement of international arbitration agreements
theory. Gonzales argues that said case recognized and allowed a petition for certiorari under between parties of different nationalities within a contracting state. [34] The enactment of R.A.
Rule 65 appealing the order of the Regional Trial Court disregarding the arbitration agreement No. 9285 on 2 April 2004 further institutionalized the use of alternative dispute resolution
as an acceptable remedy.[29] The BF Corporation case had its origins in a complaint for collection systems, including arbitration, in the settlement of disputes.
of sum of money filed by therein petitioner BF Corporation against Shangri-la Properties, Inc.
(SPI). SPI moved to suspend the proceedings alleging that the construction agreement or the Disputes do not go to arbitration unless and until the parties have agreed to abide by the
Articles of Agreement between the parties contained a clause requiring prior resort to arbitrators decision. Necessarily, a contract is required for arbitration to take place and to be
arbitration before judicial intervention. The trial court found that an arbitration clause was binding. R.A. No. 876 recognizes the contractual nature of the arbitration agreement, thus:
incorporated in the Conditions of Contract appended to and deemed an integral part of the
Articles of Agreement. Still, the trial court denied the motion to suspend proceedings upon a
finding that the Conditions of Contract were not duly executed and signed by the parties. The SEC. 2. Persons and matters subject to arbitration.Two or more persons or
trial court also found that SPI had failed to file any written notice of demand for arbitration parties may submit to the arbitration of one or more arbitrators any
within the period specified in the arbitration clause. The trial court denied SPI's motion for controversy existing, between them at the time of the submission and
reconsideration and ordered it to file its responsive pleading. Instead of filing an answer, SPI which may be the subject of an action, or the parties to any contract may in
filed a petition for certiorari under Rule 65, which the Court of Appeals, favorably acted upon. In such contract agree to settle by arbitration a controversy thereafter
a petition for review before this Court, BF Corporation alleged, among others, that the Court of arising between them. Such submission or contract shall be valid,
Appeals should have dismissed the petition for certiorari since the order of the trial court enforceable and irrevocable, save upon such grounds as exist at law
denying the motion to suspend proceedings is a resolution of an incident on the merits and for the revocation of any contract.
upon the continuation of the proceedings, the trial court would eventually render a decision on
the merits, which decision could then be elevated to a higher court in an ordinary appeal. [30] Such submission or contract may include question arising out of valuations,
appraisals or other controversies which may be collateral, incidental,
The Court did not uphold BF Corporations argument. The issue raised before the Court precedent or subsequent to any issue between the parties.
was whether SPI had taken the proper mode of appeal before the Court of Appeals.The question
before the Court of Appeals was whether the trial court had prematurely assumed jurisdiction
over the controversy. The question of jurisdiction in turn depended on the question of existence A controversy cannot be arbitrated where one of the parties to the
of the arbitration clause which is one of fact. While on its face the question of existence of the controversy is an infant, or a person judicially declared to be incompetent,
arbitration clause is a question of fact that is not proper in a petition for certiorari, yet since the unless the appropriate court having jurisdiction approve a petition for
determination of the question obliged the Court of Appeals as it did to interpret the contract permission to submit such controversy to arbitration made by the general
documents in accordance with R.A. No. 876 and existing jurisprudence, the question is likewise guardian or guardian ad litem of the infant or of the incompetent. [Emphasis
a question of law which may be properly taken cognizance of in a petition for certiorari under added.]
Rule 65, so the Court held.[31]

The situation in B.F. Corporation is not availing in the present petition. The disquisition
Thus, we held in Manila Electric Co. v. Pasay Transportation Co.[35] that a submission to
in B.F. Corporation led to the conclusion that in order that the question of jurisdiction may be
arbitration is a contract. A clause in a contract providing that all matters in dispute between the
resolved, the appellate court had to deal first with a question of law which could be addressed
parties shall be referred to arbitration is a contract,[36] and in Del Monte Corporation-USA v.
in a certiorari proceeding. In the present case, Gonzaless petition raises a question of law, but
Court of Appeals[37] that [t]he provision to submit to arbitration any dispute arising therefrom
not a question of jurisdiction. Judge Pimentel acted in accordance with the procedure prescribed
and the relationship of the parties is part of that contract and is itself a contract. As a rule,
in R.A. No. 876 when he ordered Gonzales to proceed with arbitration and appointed a sole
contracts are respected as the law between the contracting parties and produce effect as
arbitrator after making the determination that there was indeed an arbitration agreement. It
between them, their assigns and heirs. [38]
has been held that as long as a court acts within its jurisdiction and does not gravely abuse its
discretion in the exercise thereof, any supposed error committed by it will amount to nothing
The special proceeding under Sec. 6 of R.A. No. 876 recognizes the contractual nature
more than an error of judgment reviewable by a timely appeal and not assailable by a special
of arbitration clauses or agreements. It provides:
civil action of certiorari.[32] Even if we overlook the employment of the wrong remedy in the
broader interests of justice, the petition would nevertheless be dismissed for failure of Gonzalez
to show grave abuse of discretion.
SEC. 6. Hearing by court.A party aggrieved by the failure, neglect or
refusal of another to perform under an agreement in writing providing for The doctrine of separability, or severability as other writers call it, enunciates that an
arbitration may petition the court for an order directing that such arbitration arbitration agreement is independent of the main contract. The arbitration agreement is to be
proceed in the manner provided for in such agreement. Five days notice in treated as a separate agreement and the arbitration agreement does not automatically
writing of the hearing of such application shall be served either personally or terminate when the contract of which it is part comes to an end. [46]
by registered mail upon the party in default. The court shall hear the parties,
and upon being satisfied that the making of the agreement or such
failure to comply therewith is not in issue, shall make an order directing The separability of the arbitration agreement is especially significant to the
the parties to proceed to arbitration in accordance with the terms of the determination of whether the invalidity of the main contract also nullifies the arbitration
agreement. If the making of the agreement or default be in issue the court clause.Indeed, the doctrine denotes that the invalidity of the main contract, also referred to as
shall proceed to summarily hear such issue. If the finding be that the container contract, does not affect the validity of the arbitration agreement. Irrespective of
no agreement in writing providing for arbitration was made, or that the fact that the main contract is invalid, the arbitration clause/agreement still remains valid
there is no default in the proceeding thereunder, the proceeding shall be and enforceable.[47]
dismissed. If the finding be that a written provision for arbitration was
made and there is a default in proceeding thereunder, an order shall be made
summarily directing the parties to proceed with the arbitration in accordance The separability of the arbitration clause is confirmed in Art. 16(1) of the UNCITRAL
with the terms thereof. Model Law and Art. 21(2) of the UNCITRAL Arbitration Rules.[48]

The court shall decide all motions, petitions or applications filed The separability doctrine was dwelt upon at length in the U.S. case of Prima Paint Corp.
under the provisions of this Act, within ten days after such motions, petitions, v. Flood & Conklin Manufacturing Co.[49] In that case, Prima Paint and Flood and Conklin (F & C)
or applications have been heard by it.[Emphasis added.] entered into a consulting agreement whereby F & C undertook to act as consultant to Prima
Paint for six years, sold to Prima Paint a list of its customers and promised not to sell paint to
these customers during the same period. The consulting agreement contained an arbitration
clause. Prima Paint did not make payments as provided in the consulting agreement,
This special proceeding is the procedural mechanism for the enforcement of the contract to contending that F & C had fraudulently misrepresented that it was solvent and able for perform
arbitrate. The jurisdiction of the courts in relation to Sec. 6 of R.A. No. 876 as well as the its contract when in fact it was not and had even intended to file for bankruptcy after executing
nature of the proceedings therein was expounded upon in La Naval Drug Corporation v. Court of the consultancy agreement. Thus, F & C served Prima Paint with a notice of intention to
Appeals.[39] There it was held that R.A. No. 876 explicitly confines the court's authority only to arbitrate. Prima Paint sued in court for rescission of the consulting agreement on the ground of
the determination of whether or not there is an agreement in writing providing for fraudulent misrepresentation and asked for the issuance of an order enjoining F & C from
arbitration. In the affirmative, the statute ordains that the court shall issue an order "summarily proceeding with arbitration. F & C moved to stay the suit pending arbitration. The trial court
directing the parties to proceed with the arbitration in accordance with the terms thereof." If granted F & Cs motion, and the U.S. Supreme Court affirmed.
the court, upon the other hand, finds that no such agreement exists, "the proceeding shall be
dismissed."[40] The cited case also stressed that the proceedings are summary in nature. [41] The The U.S. Supreme Court did not address Prima Paints argument that it had been
same thrust was made in the earlier case of Mindanao Portland Cement Corp. v. McDonough fraudulently induced by F & C to sign the consulting agreement and held that no court should
Construction Co. of Florida[42] which held, thus: address this argument. Relying on Sec. 4 of the Federal Arbitration Actwhich provides that if a
party [claims to be] aggrieved by the alleged failure x x x of another to arbitrate x x x, [t]he
court shall hear the parties, and upon being satisfied that the making of the agreement for
Since there obtains herein a written provision for arbitration as well arbitration or the failure to comply therewith is not in issue, the court shall make an order
as failure on respondent's part to comply therewith, the court a quo rightly directing the parties to proceed to arbitration x x x. If the making of the arbitration agreement
ordered the parties to proceed to arbitration in accordance with the terms of or the failure, neglect, or refusal to perform the same be in issue, the court shall proceed
their agreement (Sec. 6, Republic Act 876). Respondent's arguments summarily to the trial thereofthe U.S. High Court held that the court should not order the
touching upon the merits of the dispute are improperly raised herein. They parties to arbitrate if the making of the arbitration agreement is in issue. The parties should be
should be addressed to the arbitrators. This proceeding is merely a summary ordered to arbitration if, and only if, they have contracted to submit to arbitration. Prima Paint
remedy to enforce the agreement to arbitrate. The duty of the court in this was not entitled to trial on the question of whether an arbitration agreement was made because
case is not to resolve the merits of the parties' claims but only to determine if its allegations of fraudulent inducement were not directed to the arbitration clause itself, but
they should proceed to arbitration or not. x x x x[43] only to the consulting agreement which contained the arbitration agreement. [50] Prima
Paint held that arbitration clauses are separable from the contracts in which they are
embedded, and that where no claim is made that fraud was directed to the arbitration clause
Implicit in the summary nature of the judicial proceedings is the separable or itself, a broad arbitration clause will be held to encompass arbitration of the claim that the
independent character of the arbitration clause or agreement. This was highlighted in the cases contract itself was induced by fraud.[51]
of Manila Electric Co. v. Pasay Trans. Co.[44] and Del Monte Corporation-USA v. Court of
Appeals.[45]
There is reason, therefore, to rule against Gonzales when he alleges that Judge DENR Panel of Arbitrators. It should be pointed out that the DENR Panel of Arbitrators made a
Pimentel acted with grave abuse of discretion in ordering the parties to proceed with factual finding in its Order dated 18 October 2001, which it reiterated in its Order dated 25 June
arbitration. Gonzaless argument that the Addendum Contract is null and void and, therefore the 2002, that Gonzales had, through the various agreements, assigned his interest over the
arbitration clause therein is void as well, is not tenable. First, the proceeding in a petition for mineral claims all in favor of [Climax-Arimco] as well as that without the complainant
arbitration under R.A. No. 876 is limited only to the resolution of the question of whether the [Gonzales] assigning his interest over the mineral claims in favor of [Climax-Arimco], there
arbitration agreement exists. Second, the separability of the arbitration clause from the would be no FTAA to speak of.[52] This finding was affirmed by the Court of Appeals in its
Addendum Contract means that validity or invalidity of the Addendum Contract will not affect Decision dated 30 July 2003resolving the petition for certiorari filed by Climax-Arimco in regard
the enforceability of the agreement to arbitrate. Thus, Gonzaless petition for certiorari should to the 18 October 2001 Order of the DENR Panel.[53]
be dismissed.
The Court of Appeals likewise found that Gonzaless complaint alleged fraud but did not
This brings us back to G.R. No. 161957. The adjudication of the petition in G.R. No. provide any particulars to substantiate it. The complaint repeatedly mentioned fraud,
167994 effectively modifies part of the Decision dated 28 February 2005 in G.R. No. oppression, violation of the Constitution and similar conclusions but nowhere did it give any
161957. Hence, we now hold that the validity of the contract containing the agreement to ultimate facts or particulars relative to the allegations.[54]
submit to arbitration does not affect the applicability of the arbitration clause itself. A contrary
ruling would suggest that a partys mere repudiation of the main contract is sufficient to avoid Sec. 5, Rule 8 of the Rules of Court specifically provides that in all averments of fraud,
arbitration. That is exactly the situation that the separability doctrine, as well as jurisprudence the circumstances constituting fraud must be stated with particularity. This is to enable the
applying it, seeks to avoid. We add that when it was declared in G.R. No. 161957 that the case opposing party to controvert the particular facts allegedly constituting the same. Perusal of the
should not be brought for arbitration, it should be clarified that the case referred to is the case complaint indeed shows that it failed to state with particularity the ultimate facts and
actually filed by Gonzales before the DENR Panel of Arbitrators, which was for the nullification of circumstances constituting the alleged fraud. It does not state what particulars about Climax-
the main contract on the ground of fraud, as it had already been determined that the case Arimcos financial or technical capability were misrepresented, or how the misrepresentation was
should have been brought before the regular courts involving as it did judicial issues. done. Incorporated in the body of the complaint are verbatim reproductions of the contracts,
correspondence and government issuances that reportedly explain the allegations of fraud and
The Motion for Reconsideration of Gonzales in G.R. No. 161957 should also be misrepresentation, but these are, at best, evidentiary matters that should not be included in the
denied. In the motion, Gonzales raises the same question of jurisdiction, more particularly that pleading.
the complaint for nullification of the Addendum Contract pertained to the DENR Panel of
Arbitrators, not the regular courts. He insists that the subject of his complaint is a mining As to the issue of prescription, Gonzaless claims of fraud and misrepresentation
dispute since it involves a dispute concerning rights to mining areas, the Financial and Technical attending the execution of the Addendum Contract are grounds for the annulment of a voidable
Assistance Agreement (FTAA) between the parties, and it also involves claimowners. He adds contract under the Civil Code.[55] Under Art. 1391 of the Code, an action for annulment shall be
that the Court failed to rule on other issues he raised, such as whether he had ceded his claims brought within four years, in the case of fraud, beginning from the time of the discovery of the
over the mineral deposits located within the Addendum Area of Influence; whether the same. However, the time of the discovery of the alleged fraud is not clear from the allegations
complaint filed before the DENR Panel of Arbitrators alleged ultimate facts of fraud; and of Gonzaless complaint. That being the situation coupled with the fact that this Court is not a
whether the action to declare the nullity of the Addendum Contract on the ground of fraud has trier of facts, any ruling on the issue of prescription would be uncalled for or even unnecessary.
prescribed.
WHEREFORE, the Petition for Certiorari in G.R. No. 167994 is DISMISSED. Such
dismissal effectively renders superfluous formal action on the Motion for Partial Reconsideration
and/or Clarification filed by Climax Mining Ltd., et al. in G.R. No. 161957.

The Motion for Reconsideration filed by Jorge Gonzales in G.R. No. 161957 is DENIED
WITH FINALITY.
These are the same issues that Gonzales raised in his Rule 45 petition in G.R. No.
161957 which were resolved against him in the Decision of 28 February 2005. Gonzales does SO ORDERED.
not raise any new argument that would sway the Court even a bit to alter its holding that the
complaint filed before the DENR Panel of Arbitrators involves judicial issues which should
properly be resolved by the regular courts. He alleged fraud or misrepresentation in the
execution of the Addendum Contract which is a ground for the annulment of a voidable
contract. Clearly, such allegations entail legal questions which are within the jurisdiction of the
courts.

The question of whether Gonzales had ceded his claims over the mineral deposits in the
Addendum Area of Influence is a factual question which is not proper for determination before
this Court. At all events, moreover, the question is irrelevant to the issue of jurisdiction of the

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