Case digest for Puromines vs Court of Appeals

Nocon, J:
Facts:
Pursuant to a contract of sale executed between Puromines Inc (petitioner) and Philipp Brothers
Oceanic, Inc., (private respondent) as charterer of M/V Liliana Dimitrova, 3 Bills of Lading were executed
bound for the Iloilo and Manila of 15,000 metric tons of prilled urea.
However, upon reaching the port of Manila it was found out that the shipment (urea) were already
contaminated with rust and dirt.
This prompted petitioner to file an action for breach of contract of carriage against Maritime
Factors, Inc as ship agent here in the Philippines for the owners of M/V Liliana in the complaint moreover
private respondent Philipp Brothers Oceanic Inc., was impleaded as charterer of the said vessel.
Private respondent, Philipp Brothers, instead of filing its answer filed a motion to dismiss on the
ground of no cause of action. Private respondent also avers that Puromines Inc. should comply with the
arbitration clause provided for in the sales contract.
Facts show that the sales contract executed between Puromines Inc., and Philipp Brothers
Oceanic, Inc., provides for an arbitration clause wherein it states that:
Any disputes arising under this contract shall be settled by arbitration in London in accordance
with the Arbitration Act 1950 and any statutory amendment or modification thereof. Each party is to
appoint an Arbitrator, and should they be unable to agree, the decision of an Umpire appointed by the them
be final. The Arbitrators and Umpire are all to be commercial men and resident in London. This
submission may be made a rule of the High Court of Justice in England by either party.
Petitioner moved to oppose the said motion to dismiss alleging that the arbitration clause is not
applicable on the case because the complaint did not arise from the violation of the terms and conditions of
the sales contract but rather for claims of cargo agreement.
The trial court ruled in favor of the petitioner. On appeal, the CA reversed the decision of the trial
court and found that the arbitration clause is applicable.
Hence this petition.
Issue: whether petitioner is bound by the arbitration clause in the sales contract.
RATIO:
Yes, petitioner is bound by the arbitration clause provided for in the contract. Arbitration has been
held valid and constitutional. Even before the enactment of RA no. 876, the Supreme Court has
countenanced the settlement of disputes through arbitration. The rule now is that unless the agreement is
such absolutely close the doors of the courts against the parties, which agreement would be void, the courts
will look with favor upon such amicable arrangements and will only interfere with great reluctance to
anticipate or nullify the action of the arbitrator.
At the case at bar, the sales contract is comprehensive enough to include claims for damages
arising from carriage and delivery of the goods. Puromines, Inc derived his right to the cargo from the bill
of lading which is the contract of affreihtment together with the sales contract. Consequently, Puromines is
bound by the provisions and terms of the bill of lading and of the arbitration clause.

Moreover the court also ruled that, whether the liability of respondent should be based on the sales
contract or that of the bill of lading, the parties are nevertheless obligated to respect the arbitration
provisions on sales contract and/or the bill of lading. Petitioner being a signatory and party to the sales
contract cannot escape from his obligation under the arbitration clause as stated therein.
As pointed out in the case of Mindanao Portland Cement Corp. vs Mc Donough Construction
Company of Florida the court ruled:
With a written provision for arbitration as well as failure on respondent's part to comply, parties must
proceed to their arbitration in accordance with the terms of their agreement (Sec. 6, RA 876). Proceeding in
court is merely a summary remedy to enforce the agreement to arbitrate. The duty of the court in this case
is not to resolve the merits of the parties' claims but only to determine if they should proceed to arbitration
or not . And although it has been ruled that a frivolous or patently baseless claim should not be ordered to
arbitration it is also recognized that the mere fact that a defense exist against a claim does not make it
frivolous or baseless.
WHEREFORE, the decision of the CA is affirmed, petition is dismissed.