ADR Case Digests | SET 1
Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
LM POWER ENGINEERING CORPORATION vs. CAPITOL
INDUSTRIAL CONSTRUCTION GROUPS, INC.| G.R. No.
141833 | March 26, 2003 |
JAVIER
FACTS:
POWER ENGINEERING CORP and CAPITOL
INDUSTRIAL CONSTRUCTION GROUPS entered into a
Subcontract Agreement involving electrical work.
2 years thereafter, Capitol Industrial took over some
of the work contracted to LM Power which the latter
allegedly failed to finish it because of its inability to
procure materials.
Upon completing its task under the Contract, LM
Power billed Capitol Industrial for the amount of
P6.7M.
Capitol Industrial, however, refused to pay and
contested the accuracy of the amount of advances
and billable accomplishments as listed. It also took
refuge in the termination clause of the
Agreement. That clause allowed it to set off the cost
of the work that LM Power had failed to undertake
due to termination or take-over against the
amount it owed the latter.
Because of the dispute, LM Power filed with the RTC
of Makati a Complaint for Collection of the amount
representing the alleged balance due it under the
Subcontract.
Capitol Industrial filed a Motion to Dismiss, alleging
that the Complaint was premature because there
was no prior recourse to arbitration.
RTC denied the Motion to Dismiss on the ground
that the dispute did not involve the interpretation or
the implementation of the Agreement and was,
therefore, not covered by the arbitral clause.
CA reversed the RTC and ordered the referral of the
case to arbitration. The CA held as arbitrable the
issue of whether Capitol Industrials take-over of
some work items had been intended to be a
termination of the original contract *under Letter K
of the Subcontract].
ARGUMENTS:
LM Power claims that there is no conflict regarding
the interpretation or the implementation of the
Agreement. Thus, without having to resort to prior
arbitration, it is entitled to collect the value of the
services it rendered through an ordinary action for
the collection of a sum of money from Capitol
Industrial.
Capitol Industrial contends that there is a need for
prior arbitration as provided in the Agreement. This
is because there are some disparities between the
parties positions regarding the extent of the work
done, the amount of advances and billable
accomplishments, and the set off of expenses
incurred by Capitol Industrial in its take-over of LM
Powers work.
According to LM Power, assuming arguendo that the
dispute is arbitrable, the failure to file a formal
request for arbitration with the CIAC precluded the
latter from acquiring jurisdiction over the question.
ISSUES:
1. WON there exists a dispute between them regarding
the interpretation and implementation of the
Subcontract Agreement that requires prior recourse
to voluntary arbitration? YES. The instant case
involves technical discrepancies that are better left
to an arbitral body that has expertise in those
areas.
2. In the affirmative, WON there is a need to file a
request first with the CIAC in order to vest it with
jurisdiction to decide a construction dispute? NO.
Section 1 of Article III of the NEW Rules of
Procedure Governing Construction Arbitration has
dispensed with the requirement to submit a
request for arbitration. Recourse to the CIAC may
now be availed of whenever a contract contains a
clause for the submission of a future controversy to
arbitration.
SC RULING: Petition was DENIED. The assailed CA
decision is AFFIRMED.
1. The Subcontract has the following arbitral clause:
6. The Parties hereto agree that any dispute or
conflict as regards to interpretation and
implementation of this Agreement which cannot
be settled between [respondent] and
[petitioner] amicably shall be settled by means
of arbitration x x x.
Clearly, the resolution of the dispute between the
parties herein requires a referral to the provisions of
their Agreement. Within the scope of the arbitration
clause are discrepancies as to the amount of
advances and billable accomplishments, the
application of the provision on termination, and the
consequent set-off of expenses.
A review of the factual allegations of the parties
reveals that they differ on the following questions,
the resolutions of which lies in the interpretation of
the provisions of the Subcontract Agreement:
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
a) Did a take-over/termination occur?
b) May the expenses incurred by Respondent in
the take-over be set off against the amounts it
owed Petitioner?
c) How much were the advances and billable
accomplishments?
Being an inexpensive, speedy and amicable method
of settling disputes, arbitration along with
mediation, conciliation and negotiation is
encouraged by the SC. Aside from unclogging
judicial dockets, arbitration also hastens the
resolution of disputes, especially of the commercial
kind. It is thus regarded as the wave of the future
in international civil and commercial disputes.
Brushing aside a contractual agreement calling for
arbitration between the parties would be a step
backward.
Consistent with the above-mentioned policy of
encouraging alternative dispute resolution methods,
courts should liberally construe arbitration clauses.
Provided such clause is susceptible of an
interpretation that covers the asserted dispute, an
order to arbitrate should be granted. Any doubt
should be resolved in favor of arbitration.
2. Section 1 of Article III of the NEW Rules of Procedure
Governing Construction Arbitration provides:
SECTION 1. Submission to CIAC Jurisdiction
An arbitration clause in a construction contract
or a submission to arbitration of a construction
dispute shall be deemed an agreement to
submit an existing or future controversy to CIAC
jurisdiction, notwithstanding the reference to a
different arbitration institution or arbitral body
in such contract or submission. When a contract
contains a clause for the submission of a future
controversy to arbitration, it is not necessary for
the parties to enter into a submission
agreement before the claimant may invoke the
jurisdiction of CIAC.
As clearly explained in China Chang Jiang Energy
Corporation v. Rosal Infrastructure Builders and
National Irrigation Administration v. Court of
Appeals:
Under the present Rules of Procedure, for a
particular construction contract to fall within
the jurisdiction of CIAC, it is merely required
that the parties agree to submit the same to
voluntary arbitration unlike in the original
version of Section 1, as applied in the Tesco
case, the law as it now stands does not provide
that the parties should agree to submit disputes
arising from their agreement specifically to the
CIAC for the latter to acquire jurisdiction over
the same. Rather, it is plain and clear that as
long as the parties agree to submit to voluntary
arbitration, regardless of what forum they may
choose, their agreement will fall within the
jurisdiction of the CIAC, such that, even if they
specifically choose another forum, the parties
will not be precluded from electing to submit
their dispute before the CIAC because this right
has been vested upon each party by law, i.e.,
E.O. No. 1008.
Clearly, there is no more need to file a request with
the CIAC in order to vest it with jurisdiction to decide
a construction dispute.
The arbitral clause in the Agreement is a
commitment on the part of the parties to submit to
arbitration the disputes covered therein. Because
that clause is binding, they are expected to abide by
it in good faith. And because it covers the dispute
between the parties in the present case, either of
them may compel the other to arbitrate.
ASSET PRIVATIZATION TRUST VS. CA
ASPILLA
FACTS:
On July 3, 1968, the Republic of the Philippines thru
the Surigao Mineral Reservation Board, granted MMIC
the exclusive right to explore, develop and exploit
nickel, cobalt and other minerals in the Surigao
mineral reservation.
The Philippine Government undertook to support the
financing of MMIC by purchase of MMIC debenture
bonds and extension of guarantees. Further, the
Philippine Government obtained a firm commitment
form the DBP and/or other government financing
institutions to subscribe in MMIC and issue guarantee/s
for foreign loans or deferred payment arrangements
MMIC, PNB and DBP executed a Mortgage Trust
Agreement whereby MMIC, as mortgagor, agreed to
constitute a mortgage in favor or PNB and DBP as
mortgagees, over all MMIC's assets; subject of real estate
and chattel mortgage executed by the mortgagor.
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
As the various loans and advances made by DBP and PNB
to MMIC had become overdue and since any
restructuring program relative to the loans was no longer
feasible, and in compliance with the directive of
Presidential Decree No. 385, DBP and PNB as mortgagees
of MMIC assets, decided to exercise their right to
extrajudicially foreclose the mortgages in accordance
with the Mortgage Trust Agreement.
The foreclosed assets were sold to PNB as the lone
bidder and were assigned to three newly formed
corporations, namely, Nonoc Mining Corporation,
Maricalum Mining and Industrial Corporation, and Island
Cement Corporation. In 1986, these assets were
transferred to the Asset Privatization Trust (APT).
On February 28, 1985, Jesus S. Cabarrus, Sr. filed a
derivative suit against DBP and PNB before the RTC of
Makati, Branch 62, for Annulment of Foreclosures,
Specific Performance and Damages.
In the course of the trial, private respondents and
petitioner APT, as successor of the DBP and the PNB's
interest in MMIC, mutually agreed to submit the case to
arbitration by entering into a "Compromise and
Arbitration Agreement".
The Compromise and Arbitration Agreement limited the
issues to the following:
5. Issues The issues to be submitted for the
Committee's resolution shall be (a) Whether PLAINTIFFS
have the capacity or the personality to institute this
derivative suit in behalf of the MMIC or its directors, (b)
Whether or not the actions leading to, and including,. the
PNB-DBP foreclosure of the MMIC assets were proper,
valid and in good faith.
Private respondents filed in the same Civil Case No. 9900
an "Application/Motion for Confirmation of Arbitration
Award." Petitioner countered with an "Opposition and
Motion to Vacate Judgment" on the ground that the
arbitration award sought to be confirmed herein, far
exceeded the issues submitted and even granted moral
damages.
ISSUE: Whether or not the arbitrators exceeded their
power.
HELD:
Yes. The decision of the Arbitration Committee is hereby
VACATED.
The nature and limits of the Arbitrators' power.
As a rule, the award of an arbitrator cannot be set aside
for mere errors of judgment either as to the law or as to
the facts. Courts are without power to amend or overrule
merely because of disagreement with matters of law or
facts determined by the arbitrators. They will not review
the findings of law and fact contained in an award, and
will not undertake to substitute their judgment for that
of the arbitrators, since any other rule would make an
award the commencement, not the end, of litigation.
Errors of law and fact, or an erroneous decision of
matters submitted to the judgment of the arbitrators,
are insufficient to invalidate an award fairly and honestly
made. Judicial review of an arbitration is thus, more
limited than judicial review of a trial.
Nonetheless, the arbitrators' award is not absolute and
without exceptions. The arbitrators cannot resolve issues
beyond the scope of the submission agreement. The
parties to such an agreement are bound by the
arbitrators' award only to the extent and in the manner
prescribed by the contract and only if the award is
rendered in conformity thereto. Thus, Sections 24 and 25
of the Arbitration Law provide grounds for vacating,
rescinding or modifying an arbitration award. Where the
conditions described in Articles 2038, 2039, and 1040 of
the Civil Code applicable to compromises and arbitration
are attendant, the arbitration award may also be
annulled.
According, Section 20 of R.A. 876 provides:
Sec. 20. Form and contents of award. The award must
be made in writing and signed and acknowledge by a
majority of the arbitrators, if more than one; and by the
sole arbitrator, if there is only only. Each party shall be
furnished with a copy of the award. The arbitrators in
their award may grant any remedy or relief which they
deem just and equitable and within the scope of the
agreement of the parties, which shall include, but not be
limited to, the specific performance of a contract.
xxx xxx xxx
The arbitrators shall have the power to decide only those
matters which have been submitted to them. The terms
of the award shall be confined to such disputes.
(Emphasis ours).
xxx xxx xxx
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
Sec. 24 of the same law enumerating the grounds for
vacating an award states:
Sec. 24. Grounds for vacating award. In any one of the
following cases, the court must make an order vacating
the award upon the petition of any party to the
controversy when such party proves affirmatively that in
the arbitration proceeding:
(a) The award was procured by corruption, fraud, or
other undue means; or
(b) That there was evident partiality or corruption
in the arbitrators or any of them; or
(c) That the arbitrators were guilty of misconduct in
refusing to postpone the hearing upon sufficient cause
shown, or in refusing to hear evidence pertinent and
material to the controversy; that one or more of the
arbitrators was disqualified to act as such under section
nine hereof, and willfully refrained from disclosing such
disqualifications or any other misbehavior by which the
rights of any party have been materially prejudiced; or
(d) That the arbitrators exceeded their powers, or
so imperfectly executed them, that a mutual, final and
definite award upon the subject matter submitted to
them was not made. (Emphasis ours)
xxx xxx xxx.
Section 25 which enumerates the grounds for modifying
the award provides:
Sec. 25. Grounds for modifying or correcting award In
anyone of the following cases, the court must make an
order modifying or correcting the award, upon the
application of any party to the controversy which was
arbitrated:
(a) Where there was an evident miscalculation of
figures, or an evident mistake in the description of any
person, thing or property referred to in the award; or
(b) Where the arbitrators have awarded upon a
matter not submitted to them, not affecting the merits of
the decision upon the matter submitted; or
(c) Where the award is imperfect in a matter of
form not affecting the merits of the controversy, and if it
had been a commissioner's report, the defect could have
been amended or disregarded by the court.
xxx xxx xxx
Finally, it should be stressed that while a court is
precluded from overturning an award for errors in the
determination of factual issues, nevertheless, if an
examination of the record reveals no support whatever
for the arbitrators determinations, their award must be
vacated. 40 in the same manner, an award must be
vacated if it was made in "manifest disregard of the law."
Against the backdrop of the foregoing provisions and
principles, we find that the arbitrators came out with an
award in excess of their powers and palpably devoid of
factual and legal basis.
Additional issues (xx)
The arbiters overstepped their powers by declaring as
valid the proposed Financial Restructuring Program.
The Arbitration Committee went beyond its mandate and
thus acted in excess of its powers when it ruled on the
validity of, and gave effect to, the proposed FRP.
In submitting the case to arbitration, the parties had
mutually agreed to limit the issue to the "validity of the
foreclosure" and to transform the relief prayed for
therein into pure money claims.
There is absolutely no evidence that the DBP and PNB
agreed, expressly or impliedly, to the proposed FRP. It
cannot be overemphasized that a FRP, as a contract,
requires the consent of the parties thereto. The contract
must bind both contracting parties.
The arbiters exceeded their authority in awarding
damages to MMIC, which is not impleaded as a party to
the derivative suit.
Civil Case No. 9900 filed before the RTC being a
derivative suit, MMIC should have been impleaded as a
party. It was not joined as a party plaintiff or party
defendant at any stage of the proceedings. As it is, the
award of damages to MMIC, which was not a party
before the Arbitration Committee, is a complete nullity.
Settled is the doctrine that in a derivative suit, the
corporation is the real party in interest while the
stockholder filing suit for the corporation's behalf is only
a nominal party. The corporation should be included as a
party in the suit.
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
The arbiters, likewise, exceeded their authority in
awarding moral damages to Jesus Cabarrus, Sr.
It is perplexing how the Arbitration Committee can in one
breath rule that the case before it is a derivative suit, in
which the aggrieved party or the real party in interest is
supposedly the MMIC, and at the same time award moral
damages to an individual stockholder.
It is a basic postulate that a corporation has a personality
separate and distinct from its stockholders. 63 The
properties foreclosed belonged to MMIC, not to its
stockholders. Hence, if wrong was committed in the
foreclosure, it was done against the corporation. The
Arbitration Committee, therefore, passed upon matters
nor submitted to it.
VICENTE SAN JOSE, petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION and OCEAN TERMINAL
SERVICES, INC., respondents.
[G.R. No. 121227. August 17, 1998]
DELA CRUZ
FACTS:
Vicente San Jose, in his position paper, states that he
was hired sometime in July 1980 as a stevedore
continuously until he was advised in April 1991 to
retire from service considering that he already reached
65 years old.
That accordingly, he did apply for retirement and was
paid P3,156.39 for retirement pay.
Contentions of Ocean Terminal Services:
o San Jose only worked on rotation basis and not
seven days a week due to numerous stevedores
who cannot all be given assignments at the
same time;
o That he performed stevedoring job only on call,
so while he was connected with the company
for the past 11 years, he did not actually render
11 years of service;
o That the burden of proving that San Joses latest
salary was P200.00 rests upon him;
o That he already voluntarily signed a waiver of
quitclaim.
The Labor Arbiter decided the case solely on the merits
of the complaint.
LA arrived at the computation that the retirement
differential is P25,443.70.
NLRC reversed LA on the ground that the differential
being claimed by San Jose is based on their CBA and as
provided under the Labor Code, interpretation or
implementation of CBA should be referred by the LA to
the grievance machinery or voluntary arbitrator.
ISSUE: Who has jurisdiction over the dispute? VA
HELD:
VA has exclusive jurisdiction over unresolved grievances
As provided under the Labor Code, the NLRC correctly
ruled that the Labor Arbiter had no jurisdiction to hear
and decide petitioners money-claim underpayment of
retirement benefits, as the controversy between the
parties involved an issue arising from the interpretation
or implementation of a provision of the collective
bargaining agreement. The Voluntary Arbitrator or Panel
of Voluntary Arbitrators has original and exclusive
jurisdiction over the controversy under Article 261 of the
Labor Code, and not the Labor Arbiter.
The court, however, will no longer order the remand of
the case
The Court will not remand the case to the Voluntary
Arbitrator or Panel of Voluntary Arbitrators for
hearing. This case has dragged on far too long -
eight (8) years. Any further delay would be a denial of
speedy justice to an aged retired stevedore. There is
further the possibility that any Decision by the Voluntary
Arbitrator or Panel of Voluntary Arbitrators will be
appealed to the CA, and finally to this Court. Formula
adopted by LA will be followed.
To recapitulate; the Court hereby rules -
1. That the NLRC correctly ruled that the LA had no
jurisdiction over the case, because the case involved an
issue arising from the interpretation or implementation
of a Collective Bargaining Agreement;
2. That we adopt the computation formula for the
retirement benefits by the LA, and the basis thereof.
The respondent must therefore pay the petitioner the
additional amount of Twenty-Five Thousand Four
Hundred Forty-Three and Seventy Centavos P25,443.70)
Pesos.
SAN MIGUEL CORPORATION, ANGEL G. ROA and
MELINDA MACARAIG, petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION (Second Division), LABOR
ARBITER EDUARDO J. CARPIO, ILAW AT BUKLOD NG
MANGGAGAWA (IBM), ET AL., respondents. G.R. No.
108001 March 15, 1996
MUNOZ
FACTS: Private respondents, employed by petitioner San
Miguel Corporation (SMC) as mechanics, machinists, and
carpenters, were and still are, bona fide officers and
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
members of private respondent Ilaw at Buklod ng
Manggagawa.
July 31, 1990: private respondents were served a
Memorandum from petitioner Angel G. Roa, Vice-
President and Manager of SMC's Business Logistics
Division (BLD), to the effect that they had to be
separated from the service effective October 31, 1990 on
the ground of "redundancy or excess personnel."
Respondent union, in behalf of private respondents,
opposed the intended dismissal and asked for a dialogue
with management. Angel Roa issued another
Memorandum on October 1, 1990 informing private
respondents that they would be dismissed from work
effective as of the close of business hours on November
2, 1990. Private respondents were in fact purged on the
date aforesaid.
February 25, 1991: private respondents filed a complaint
against petitioners for Illegal Dismissal and Unfair Labor
Practices, with a prayer for damages and attorney's fees,
with the Arbitration Branch of respondent National Labor
Relations Commission. The complaint was assigned to
Labor Arbiter Eduardo F. Carpio for hearing and proper
disposition.
April 15, 1991: petitioners filed a motion to dismiss the
complaint, alleging that respondent Labor Arbiter had no
jurisdiction over the subject matter of the complaint, and
that respondent Labor Arbiter must defer consideration
of the unfair labor practice complaint until after the
parties have gone through the grievance procedure
provided for in the existing Collective Bargaining
Agreement (CBA). Labor Arbiter denied this motion. SMC
appealed the denial, Commission dismissed the appeal.
Petitioners promptly filed a Motion for Reconsideration
which, however, was denied.
ISSUES:
WON THE LABOR ARBITER CANNOT EXERCISE
JURISDICTION OVER THE ALLEGED ILLEGAL
TERMINATION AND ALLEGED ULP CASES WITHOUT PRIOR
RESORT TO GRIEVANCE AND ARBITRATION PROVIDED
UNDER THE CBA. (NO, respondents did not request for
reconsideration of managements decision in this case. LA
has jurisdiction over illegal dismissal and ULP.)
WON THE STRONG STATE POLICY ON 'THE PROMOTION
OF VOLUNTARY MODES OF SETTLEMENT OF LABOR
DISPUTES CRAFTED IN THE CONSTITUTION AND THE
LABOR CODE DICTATES THE SUBMISSION OF THE CBA
DISPUTE TO GRIEVANCE AND ARBITRATION. (NO, it
cannot arrogate into the powers of voluntary arbitrators
the original and exclusive jurisdiction of Labor Arbiters
over unfair labor practices, termination disputes, and
claims for damage in the absence of express agreement
of the parties.)
HELD:
FIRST
Petitioners' thesis is that the dispute as to the
termination of the union members and the unfair labor
practice should first be settled by arbitration, and not
directly by the labor arbiter, following the above
provision of the CBA, which ought to be treated as the
law between the parties thereto.
The argument is unmeritorious.
The law in point is Article 217 (a) of the Labor Code. It is
elementary that this law is deemed written into the CBA.
In fact, the law speaks in plain and unambiguous terms
that termination disputes, together with unfair labor
practices, are matters falling under the original and
exclusive jurisdiction of the Labor Arbiter, to wit:
Art. 217 Jurisdiction of Labor Arbiters and the
Commission (a) Except as otherwise provided under
this Code, the Labor Arbiters shall have original and
exclusive jurisdiction to hear and decide . . . the following
cases involving all workers, whether agricultural or non-
agricultural: (1) Unfair labor practice cases; (2)
Termination disputes;
xxx xxx xxx
The sole exception to the above rule can be found under
Article 262 of the same Code, which provides:
Art. 262. Jurisdiction over other labor disputes The
voluntary arbitrator or panel of voluntary arbitrators,
upon agreement of the parties, shall also hear and decide
all other labor disputes including unfair labor practices
and bargaining dead locks. (As added by RA 6715).
We subjected the records of this case, particularly the CA
to meticulous scrutiny and we find no agreement
between SMC and the respondent union that would
state in unequivocal language that petitioners and the
respondent union conform to the submission of
termination disputes and unfair labor practices to
voluntary arbitration. Section 1, Article V of the CBA,
cited by the herein petitioners, certainly does not
provide so. Hence, consistent with the general rule under
Article 217 (a) of the Labor Code, the Labor Arbiter
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
properly has jurisdiction over the complaint filed by the
respondent union on February 25, 1991 for illegal
dismissal and unfair labor practice.
Petitioners point however to Section 2, Article III of the
CBA, under the heading Job Security, to show that the
dispute is a proper subject of the grievance procedure,
viz:
. . . The UNION, however, shall have the right to
seek reconsideration of any discharge, lay-off or
disciplinary action, and such requests for
reconsideration shall be considered a dispute or
grievance to be dealt with in accordance with
the procedure outlined in Article IV hereof [on
Grievance Machinery] . . .(Emphasis ours)
Petitioners allege that respondent union requested
management for a "reconsideration and review" of the
company's decision to terminate the employment of the
union members. By this act, petitioners argue,
respondent union recognized that the questioned
dismissal is a grievable dispute by virtue of Section 2,
Article III of the CBA. This allegation was strongly denied
by the respondent union. In a Memorandum filed for the
public respondent NLRC, the Solicitor General supported
the position of the respondent union that it did not seek
reconsideration from the SMC management in regard to
the dismissal of the employees.
SMC fail miserably to prove that, indeed, the respondent
union requested for a reconsideration or review of the
management decision to dismiss the private
respondents.
A punctilious examination of the records indubitably
reveals that at no time did the respondent union exercise
its right to seek reconsideration of the company's move
to terminate the employment of the union members,
which request for reconsideration would have triggered
the application of Section 2, Article III of the CBA, thus
resulting in the treatment of the dispute as a grievance
to be dealt with in accordance with the Grievance
Machinery laid down in Article IV of the CBA. Stated
differently, the filing of a request for reconsideration by
the respondent union, which is the condition sine qua
non to categorize the termination dispute and the ULP
complaint as a grievable dispute, was decidedly absent in
the case at bench. Hence, the respondent union acted
well within their rights in filing their complaint for illegal
dismissal and ULP directly with the Labor Arbiter under
Article 217 (a) of the Labor Code.
SECOND
Petitioners insist that involved in the controversy is the
interpretation and implementation of the CBA which is
grievable and arbitrable by law under Article 217 (c) of
the Labor Code, viz:
Art. 217 (c). Cases arising from the interpretation or
implementation of collective bargaining agreements and
those arising from the interpretation or enforcement of
company personnel policies shall be disposed of by the
Labor Arbiter by referring the same to the grievance
machinery and voluntary arbitration as may be provided
in said agreements. (As amended by RA 6715).
Petitioners theorize that since respondents questioned
the discharges, the main question for resolution is
whether SMC had the management right or prerogative
to effect the discharges on the ground of redundancy,
and this necessarily calls for the interpretation or
implementation of Article III (Job Security) in relation to
Article IV (Grievance Machinery) of the CBA.
Petitioner's theory does not hold water.
The only relevant provision under Article III that may
need interpretation or implementation is Section 2 which
was cited herein. However, as patiently pointed out by
this court, said provision does not come into play
considering that the union never exercised its right to
seek reconsideration of the discharges effected by the
company. It would have been different had the union
sought reconsideration. Such recourse under Section 2
would have been treated as a grievance under Article IV
(Grievance Machinery) of the CBA, thus calling for the
possible interpretation or implementation of the entire
provision on Grievance Machinery as agreed upon by the
parties. This was not the case however. The union
brought the termination dispute directly to the Labor
Arbiter rendering Articles III and IV of the CBA
inapplicable for the resolution of this case.
The discharges, petitioners also contend, call for the
interpretation or enforcement of company personnel
policies, particularly SMC's personnel policies on lay-offs
arising from redundancy, and so, they may be considered
grievable and arbitrable by virtue of Article 217 (c). Not
necessarily so.
Company personnel policies are guiding principles stated
in broad, long-range terms that express the philosophy
or beliefs of an organization's top authority regarding
personnel matters. They deal with matters affecting
efficiency and well being of employees and include,
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
among others, the procedure in the administration of
wages, benefits, promotions, transfer and other
personnel movements which are usually not spelled out
in the collective agreement. The usual source of
grievances, however, is the rules and regulations
governing disciplinary actions. Judging therefrom, the
questioned discharges due to alleged redundancy can
hardly be considered company personnel policies and
therefore need not directly be subject to the grievance
machinery nor to voluntary arbitration.
THIRD
Petitioners would like to persuade us that respondents'
ULP claims are merely conclusory and cannot serve to
vest jurisdiction to the Labor Arbiters. (There is no
allegation of the existence of anti-union animus or of the
ultimate facts showing how the discharges affected the
rights to self-organization of individual respondents). In
short, petitioners maintain that respondents complaint
does not allege a genuine case for ULP.
The Court is not convinced.
The complaint alleges (see full text).
Short of pre-empting the proceedings before the Labor
Arbiter, the above complaint, makes out a genuine case
for ULP.
Cited these cases in the full text: -Manila Pencil Co. v. CIR
-People's Bank and Trust Co. v. People's Bank and Trust
Co. Employees Union -Bataan Shipyard and Engineering
Co., Inc. v. NLRC.
It matters not that the cause of termination in the above
cited cases was retrenchment while that in the instant
case was redundancy. The important fact is that in all of
these cases, including the one at bar, all of the dismissed
employees were officers and members of their
respective unions, and their employers failed to give a
satisfactory explanation as to why this group of
employees was singled out.
We however find that based on the circumstances
surrounding this case and settled jurisprudence on the
subject, the complaint filed by the private respondents
on February 25, 1991 alleges facts sufficient to constitute
a bona fide case of ULP, and therefore properly
cognizable by the Labor Arbiter under Article 217 (a) of
the Labor Code. This is consistent with the rule that
jurisdiction over the subject matter is determined by the
allegations of the complaint.
FINALLY
Petitioners (SMC) try to impress on this Court the strong
State policy on the promotion of voluntary modes of
settlement of labor disputes crafted in the Constitution
and the Labor Code which dictate the submission of the
CBA dispute to grievance and arbitration.
In this regard, the response of the Solicitor General is
apt:
Petitioners deserve commendation for divulging and
bringing to public respondents' attention the noble
legislative intent behind the law mandating the inclusion
of grievance and voluntary arbitration provisions in the
CBA. However, in the absence of an express legal
conferment thereof, jurisdiction cannot be appropriated
by an official or tribunal (sic) no matter how well-
intentioned it is, even in the pursuit of the dearest
substantial right.
In the same manner, petitioners cannot arrogate into the
powers of voluntary arbitrators the original and exclusive
jurisdiction of Labor Arbiters over unfair labor practices,
termination disputes, and claims for damages, in the
absence of an express agreement between the parties in
order for Article 262 of the Labor Law to apply in the case
at bar.
MARILOU GUANZON APALISOK, petitioner, vs. RADIO
PHILIPPINES NETWORK RADIO STATION DYKC and
STATION MANAGER GEORGE SUAZO, respondents.
TAN, J.
Facts:
On May 15, 1995, Marilou Gaunzon Apalisok,
then Production Chief of Radio Philippines
Network (RPN) Station DYKC, received a
3
Memorandum from Branches Operations
Manager Gilito Datoc asking her to submit a
written explanation why no disciplinary action
should be taken against her for performance of
acts hostile to RPN, and arrogant, disrespectful
and defiant behavior towards her superior
Station Manager George Suazo.
She submitted her answer to the memorandum.
However on May 31, 1995 Apalisok another
memo informing her of the termination of her
services.
By letter of June 5, 1995, Apalisok informed RPN
of her decision to waive her right to resolve her
case through the grievance machinery of RPN as
provided for in the CBA and to lodge her case
before the proper government forum.
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
She thereafter filed a complaint against RPN
DYKC and Suazo for illegal dismissal before the
National Labor Relations Commission, Regional
Arbitration Branch of Region 7 which referred it
to the National Conciliation and Mediation
Board.
By Submission Agreement dated June 20, 1995
signed by their respective counsels, petitioner
and respondents agreed to submit for voluntary
arbitration the issue of whether petitioner's
dismissal was valid and to abide by the decision
of the voluntary arbitrator.
In her position paper submitted before the
voluntary arbitrator, Apalisok prayed that her
dismissal be declared invalid and that she be
awarded separation pay, backwages and other
benefits.
Respondents on the other hand prayed for the
dismissal of the complaint, arguing that the
voluntary arbitrator had no jurisdiction over the
case and, assuming that he had, the complaint is
dismissible for lack of merit as petitioner was
not illegally dismissed.
CA ruling: Finding that the option of petitioner
not to subject the dispute to the grievance
machinery provided for in the CBA was
tantamount to relinquishing her right to avail of
the aid of a voluntary arbitrator in settling the
dispute which "likewise converted an
unresolved grievance into a resolved one," held
that the voluntary arbitrator did not have
jurisdiction over petitioner's complaint and
accordingly nullified and set aside, by Decision
of October 30, 1998, the voluntary arbitration
award.
Issue:
Whether or not the Voluntary Arbitrator had jurisdiction
over petitioner's complaint. YES
Ruling:
Apalisok cites Article 262 of the Labor Code:
ARTICLE 262. JURISDICTION OVER OTHER LABOR
DISPUTES. The Voluntary Arbitrator or panel of Voluntary
Arbitrators, upon agreement of the parties, shall hear
and decide all other labor disputesincluding unfair labor
practices and bargaining deadlocks.
She contends that her option not to subject the dispute
to the grievance machinery of RPN did not amount to her
relinquishing of her right to avail of voluntary arbitration
as a mode of settling it for she and respondents in fact
agreed to have the dispute settled by a voluntary
arbitrator when they freely executed the above-said
Submission Agreement. She thus concludes that the
voluntary arbitrator has jurisdiction over the controversy.
She also contends in any event that even assuming that
the voluntary arbitrator had no jurisdiction over the case,
it would not be in keeping with settled jurisprudence to
allow a losing party to question the authority of the
voluntary arbitrator after it had freely submitted itself to
its authority.
The above quoted Article 262 of the Labor Code provides
that upon agreement of the parties, the voluntary
arbitrator can hear and decide all other labor disputes.
Contrary to the finding of the Court of Appeals, voluntary
arbitration as a mode of settling the dispute was not
forced upon respondents. Both parties indeed agreed to
submit the issue of validity of the dismissal of petitioner
to the jurisdiction of the voluntary arbitrator by the
Submission Agreement duly signed by their respective
counsels.
LUDO & LUYM CORPORATION, petitioner,
vs. FERDINAND SAORNIDO as voluntary arbitrator and
LUDOEMPLOYEES UNION (LEU) representing 214 of its
officers and members, respondents.
LUMANAG
FACTS:
Petitioner LUDO & LUYM CORPORATION (LUDO for
brevity) is a domestic corporation engaged in the
manufacture of coconut oil, corn starch, glucose and
related products.
In the course of its business operations, LUDO
engaged the arrastre services of Cresencio Lu
Arrastre Services (CLAS) for the loading and
unloading of its finished products at the wharf.
These arrastre workers were subsequently hired, on
different dates, as regular rank-and-file employees
of LUDO every time the latter needed additional
manpower services.
On April 13, 1992, respondent union entered into a
collective bargaining agreement with LUDO which
provides certain benefits to the employees, the
amount of which vary according to the length of
service rendered by the availing employee.
Thereafter, the union requested LUDO to include in
its members period of service the time during which
they rendered arrastre services to LUDO through the
CLAS so that they could get higher benefits. LUDO
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
failed to act on the request. Thus, the matter was
submitted for voluntary arbitration.
The parties accordingly executed a submission
agreement raising the sole issue of the date of
regularization of the workers for resolution by the
Voluntary Arbitrator.
Voluntary Arbitrator finds the claims of the
complainants meritorious
IMPORTANT: VA awarded the ff:
a. the 214 complainants, as listed in the Annex A,
shall be considered regular employees of the
respondents six (6) months from the first day of
service at CLAS;
b. the said complainants, being entitled to the CBA
benefits during the regular employment, are
awarded a) sick leave, b) vacation leave & c) annual
wage and salary increases during such period in the
amount of FIVE MILLION SEVEN HUNDRED SEVEN
THOUSAND TWO HUNDRED SIXTY ONE PESOS AND
SIXTY ONE CENTAVOS (P5,707,261.61) as computed
in Annex A;
c. the respondents shall pay attorneys fees of ten
(10) percent of the total award;
d. an interest of twelve (12) percent per annum or
one (1) percent per month shall be imposed to the
award from the date of promulgation until fully paid
if only to speed up the payment of these long over
due CBA benefits deprived of the complaining
workers.
Accordingly, all separation and/or retirement
benefits shall be construed from the date of
regularization aforementioned subject only to the
appropriate government laws and other social
legislation.
ISSUE:
W/N a voluntary arbitrator can award benefits not
claimed in the submission agreement. YES
HELD:
Petitioner contends that the appellate court gravely
erred when it upheld the award of benefits which
were beyond the terms of submission
agreement. Petitioner asserts that the arbitrator
must confine its adjudication to those issues
submitted by the parties for arbitration, which in this
case is the sole issue of the date of regularization of
the workers. Hence, the award of benefits by the
arbitrator was done in excess of jurisdiction.
Respondents, for their part, argue that the arbitrator
is empowered to award the assailed benefits
because notwithstanding the sole issue of the date
of regularization, standard companion issues on
reliefs and remedies are deemed
incorporated. Otherwise, the whole arbitration
process would be rendered purely academic and the
law creating it inutile.
The jurisdiction of Voluntary Arbitrator or Panel of
Voluntary Arbitrators and Labor Arbiters is clearly
defined and specifically delineated in the Labor
Code. The pertinent provisions of the Labor Code,
read:
Art. 217. Jurisdiction of Labor Arbiters and the
Commission. --- (a) Except as otherwise
provided under this Code the Labor Arbiters
shall have original and exclusive jurisdiction to
hear and decide, within thirty (30) calendar days
after the submission of the case by the parties
for decision without extension, even in the
absence of stenographic notes, the following
cases involving all workers, whether agricultural
or non-agricultural:
1. Unfair labor practice cases:
2. Termination disputes;
3. If accompanied with a claim for
reinstatement, those cases that workers may
file involving wage, rates of pay, hours of work
and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other
forms of damages arising from the employer-
employee relations;
xxx
Art. 261. Jurisdiction of Voluntary Arbitrators
or panel of Voluntary Arbitrators. The
Voluntary Arbitrator or panel of Voluntary
Arbitrators shall have original and exclusive
jurisdiction to hear and decide all unresolved
grievances arising from the interpretation or
implementation of the Collective Bargaining
Agreement and those arising from the
interpretation or enforcement of company
personnel policies referred to in the
immediately preceding article. Accordingly,
violations of a Collective Bargaining Agreement,
except those which are gross in character, shall
no longer be treated as unfair labor practice and
shall be resolved as grievances under the
Collective Bargaining Agreement. For purposes
of this article, gross violations of Collective
Bargaining Agreement shall mean flagrant
and/or malicious refusal to comply with the
economic provisions of such agreement.
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
The Commission, its Regional Offices and the
Regional Directors of the Department of Labor
and Employment shall not entertain disputes,
grievances or matters under the exclusive and
original jurisdiction of the Voluntary Arbitrator
or panel of Voluntary Arbitrators and shall
immediately dispose and refer the same to the
Grievance Machinery or Voluntary Arbitration
provided in the Collective Bargaining
Agreement.
Art. 262. Jurisdiction over other labor
disputes. The Voluntary Arbitrator or panel of
Voluntary Arbitrators, upon agreement of the
parties, shall also hear and decide all other labor
disputes including unfair labor practices and
bargaining deadlocks.
In construing the above provisions, we held in San
Jose vs. NLRC, that the jurisdiction of the Labor
Arbiter and the Voluntary Arbitrator or Panel of
Voluntary Arbitrators over the cases enumerated in
the Labor Code, Articles 217, 261 and 262, can
possibly include money claims in one form or
another. Comparatively, in Reformist Union of R.B.
Liner, Inc. vs. NLRC, compulsory arbitration has been
defined both as the process of settlement of labor
disputes by a government agency which has the
authority to investigate and to make an
award which is binding on all the parties, and as a
mode of arbitration where the parties are compelled
to accept the resolution of their dispute through
arbitration by a third party (emphasis
supplied). While a voluntary arbitrator is not part of
the governmental unit or labor departments
personnel, said arbitrator renders arbitration
services provided for under labor laws.
Generally, the arbitrator is expected to decide only
those questions expressly delineated by the
submission agreement. Nevertheless, the arbitrator
can assume that he has the necessary power to
make a final settlement since arbitration is the final
resort for the adjudication of disputes. The succinct
reasoning enunciated by the CA in support of its
holding, that the Voluntary Arbitrator in a labor
controversy has jurisdiction to render the
questioned arbitral awards, deserves our
concurrence, thus:
In general, the arbitrator is expected to decide those
questions expressly stated and limited in the
submission agreement. However, since arbitration is
the final resort for the adjudication of disputes, the
arbitrator can assume that he has the power to
make a final settlement. Thus, assuming that the
submission empowers the arbitrator to decide
whether an employee was discharged for just cause,
the arbitrator in this instance can reasonable assume
that his powers extended beyond giving a yes-or-no
answer and included the power to reinstate him
with or without back pay.
In one case, the Supreme Court stressed that xxx the
Voluntary Arbitrator had plenary jurisdiction and
authority to interpret the agreement to arbitrate
and to determine the scope of his own authority
subject only, in a proper case, to the certiorari
jurisdiction of this Court. The Arbitrator, as already
indicated, viewed his authority as embracing not
merely the determination of the abstract question of
whether or not a performance bonus was to be
granted but also, in the affirmative case, the amount
thereof.
By the same token, the issue of regularization should
be viewed as two-tiered issue. While the submission
agreement mentioned only the determination of the
date or regularization, law and jurisprudence give
the voluntary arbitrator enough leeway of authority
as well as adequate prerogative to accomplish the
reason for which the law on voluntary arbitration
was created speedy labor justice. It bears stressing
that the underlying reason why this case arose is to
settle, once and for all, the ultimate question of
whether respondent employees are entitled to
higher benefits. To require them to file another
action for payment of such benefits would certainly
undermine labor proceedings and contravene the
constitutional mandate providing full protection to
labor.
In case i-ask: RE: PRESCRIPTION
As regards petitioners contention that the money claim in
this case is barred by prescription, we hold that this contention
is without merit. So is petitioners stance that the benefits
claimed by the respondents, i.e., sick leave, vacation leave and
th
13 -month pay, had already prescribed, considering the three-
year period for the institution of monetary claims. Such
determination is a question of fact which must be ascertained
based on the evidence, both oral and documentary, presented
by the parties before the Voluntary Arbitrator. In this case, the
Voluntary Arbitrator found that prescription has not as yet set
in to bar the respondents claims for the monetary benefits
awarded to them.
Basic is the rule that findings of fact of administrative
and quasi-judicial bodies, which have acquired expertise
because their jurisdiction is confined to specific matters, are
generally accorded not only great respect but even
finality. Here, the Voluntary Arbitrator received the evidence of
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
the parties first-hand. No compelling reason has been shown
for us to diverge from the findings of the Voluntary Arbitrator,
especially since the appellate court affirmed his findings, that it
took some time for respondent employees to ventilate their
claims because of the repeated assurances made by the
petitioner that it would review the company records and
determine therefrom the validity of the claims, without
expressing a categorical denial of their claims. As elucidated by
the Voluntary Arbitrator:
The respondents had raised prescription as defense. The
controlling law, as ruled by the High Court, is:
The cause of action accrues until the party obligated
refuses xxx to comply with his duty. Being warded off by
promises, the workers not having decided to assert [their]
right[s], [their] causes of action had not accrued (Citation
omitted.)
Since the parties had continued their negotiations even
after the matter was raised before the Grievance
Procedure and the voluntary arbitration, the respondents
had not refused to comply with their duty. They just
wanted the complainants to present some proofs. The
complainants cause of action had not therefore accrued
yet. Besides, in the earlier voluntary arbitration case
aforementioned involving exactly the same issue and
employees similarly situated as the complainants, the
same defense was raised and dismissed by Honorable
Thelma Jordan, Voluntary Arbitrator.
In fact, the respondents promised to correct their length of
service and grant them the back CBA benefits if the
complainants can prove they are entitled rendered the former
in estoppel, barring them from raising the defense of laches or
prescription. To hold otherwise amounts to rewarding the
respondents for their duplicitous representation and abet them
in a dishonest scheme against their workers
CELESTINO VIVIERO, petitioner,
vs.
COURT OF APPEALS, HAMMONIA MARINE SERVICES,
and HANSEATIC SHIPPING CO., LTD. respondents.
TAN, K.
Facts:
Celestino Vivero, a licensed seaman, is a member of
the Associated Marine Officers and Seamen's Union
of the Philippines (AMOSUP). A collective bargaining
agreement was enetered into by AMOSUP and
respondents which contains the procedure for
grievance. (*see full text for the details of the
Grievance Procedure under their CBA).
Viviero was hired by respondent as chief officer of
MV Sunny Prince on June 10, 1994. However, on the
grounds of very poor performance and conduct as
well as refusal to perform his job and to report to
the Captain or the vessel's engineers or cooperate
with other ship officers about the proble in cleeaning
the cargo holds or of the shipping pump and his
dismal relations with the vessel's captain, Viviero
was repatriated on July 15, 1994.
on August 1, 1994, Viviero filed a complaint for
illegal dismissal at Associated Marine Officers' and
seaman's Union of the Philippines (AMOSUP) of
which he was a member. Pursuant to Article XII of
the CBA, grievance proceedings were conducted.
However, the parties failed to reach and settle he
dispute amicably. So, on November 28, 1994, Viviero
filed a complaint with the POEA.
While the case was pending before the POEA,
private respondents filed a Motion to Dismiss on the
ground that the POEA had no jurisdiction over the
case considering petitioner Vivero's failure to refer it
to a Voluntary Arbitration Committee in accordance
with the CBA between the parties. Upon the
enactment of RA 8042, the Migrant Workers and
Overseas Filipinos Act of 1995, the case was
transferred to the Adjudication Branch of the
National Labor Relations Commission.
The Labor Arbiter dismissed the Complaint.
Reason: the CBA of the parties provided for the
referral to a Voluntary Arbitration Committee
should the Grievance Committee fail to settle
the dispute, and considering the mandate of Art.
261 of the Labor Code on the original and
exclusive jurisdiction of Voluntary Arbitrators,
the Labor Arbiter clearly had no jurisdiction over
the case.
Viviero appealed the dismissal to the NLRC. NLRC
reversed the Labor Arbiter's decision.
Reason: the record was clear that petitioner had
exhausted his remedy by submitting his case to
the Grievance Committee of AMOSUP.
Considering however that he could not obtain
any settlement he had to ventilate his case
before the proper forum, i.e., the Philippine
Overseas Employment Administration.
Respondents raised the matter before the CA
contending that the provision in the CBA requiring a
dispute which remained unresolved by the
Grievance Committee to be referred to a Voluntary
Arbitration Committee, was mandatory in character
in view of the CBA between the parties. The CA ruled
in their favor stating that:
the CBA "is the law between the parties and
compliance therewith is mandated by the
express policy of the law." Hence, petitioner
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
should have followed the provision in the CBA
requiring the submission of the dispute to the
Voluntary Arbitration Committee once the
Grievance Committee failed to settle the
controversy. According to the Court of Appeals,
the parties did not have the choice to
"volunteer" to refer the dispute to the Voluntary
Arbitrator or a Panel of Arbitrators when there
was already an agreement requiring them to do
so. "Voluntary Arbitration" means that it is
binding because of a prior agreement or
contract, while "Compulsory Arbitration" is
when the law declares the dispute subject to
arbitration, regardless of the consent or desire
of the parties.
That the Labor Code itself enumerates the
original and exclusive jurisdiction of the
Voluntary Arbitrator or Panel of Voluntary
Arbitrators, and prohibits the NLRC and the
Regional Directors of the Department of Labor
and Employment (DOLE) from entertaining cases
falling under the same.
Issue: whether the NLRC is deprived of jurisdiction over
illegal dismissal cases whenever a CBA provides for
grievance machinery and voluntary arbitration
proceedings. Or, phrased in another way, does the
dismissal of an employee constitute a "grievance
between the parties," as defined under the provisions of
the CBA, and consequently, within the exclusive original
jurisdiction of the Voluntary Arbitrators, thereby
rendering the NLRC without jurisdiction to decide the
case?
Ruling: NO.
The case is primarily a termination dispute.
It is clear from the claim/assistance request form
submitted by petitioner to AMOSUP that he was
challenging the legality of his dismissal for lack of cause
and lack of due process. The issue of whether there was
proper interpretation and implementation of the CBA
provisions comes into play only because the grievance
procedure provided for in the CBA was not observed
after he sought his Unions assistance in contesting his
termination. Thus, the question to be resolved
necessarily springs from the primary issue of whether
there was a valid termination; without this, then there
would be no reason to invoke the need to interpret and
implement the CBA provisions properly.
While the parties did agree to make termination
disputes the proper subject of voluntary arbitration,
such submission remains discretionary upon the parties.
A perusal of the CBA provisions shows that Sec. 6, Art. XII
(Grievance Procedure) of the CBA is the general
agreement of the parties to refer grievances, disputes or
misunderstandings to a grievance committee, and
henceforth, to a voluntary arbitration committee. In the
agreement, the use of the word "may" shows the
intention of the parties to reserve the right to submit the
illegal termination dispute to the jurisdiction of the Labor
Arbiter, rather than to a Voluntary Arbitrator. Petitioner
validly exercised his option to submit his case to a Labor
Arbiter when he filed his Complaint before the proper
government agency.
In the case at bar, the dispute was never brought to a
Voluntary Arbitrator for resolution; in fact, petitioner
precisely requested the Court to recognize the
jurisdiction of the Labor Arbiter over the case. The Court
had held in San Miguel Corp. v. NLRC that neither officials
nor tribunals can assume jurisdiction in the absence of an
express legal conferment. In the same manner, petitioner
cannot arrogate into the powers of Voluntary Arbitrators
the original and exclusive jurisdiction of Labor Arbiters
over unfair labor practices, termination disputes, and
claims for damages, in the absence of an express
agreement between the parties in order for Art. 262 of
the Labor Code to apply in the case at bar. In other
words, the Court of Appeals is correct in holding that
Voluntary Arbitration is mandatory in character if there is
a specific agreement between the parties to that effect.
It must be stressed however that, in the case at bar, the
use of the word "may" shows the intention of the parties
to reserve the right of recourse to Labor Arbiters.
Policy Instruction No. 56 does not apply in the case at
bar.
It may be observed that under Policy Instruction No.
56 of the Secretary of Labor, dated 6 April 1993,
"Clarifying the Jurisdiction Between Voluntary Arbitrators
and Labor Arbiters Over Termination Cases and Providing
Guidelines for the Referral of Said Cases Originally Filed
with the NLRC to the NCMB," termination cases arising in
or resulting from the interpretation and implementation
of collective bargaining agreements and interpretation
and enforcement of company personnel policies which
were initially processed at the various steps of the plant-
level Grievance Procedures under the parties' collective
bargaining agreements fall within the original and
exclusive jurisdiction of the voluntary arbitrator pursuant
to Art. 217 (c) and Art. 261 of the Labor Code; and, if filed
before the Labor Arbiter, these cases shall be dismissed
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
by the Labor Arbiter for lack of jurisdiction and referred
to the concerned NCMB Regional Branch for appropriate
action towards an expeditious selection by the parties of
a Voluntary Arbitrator or Panel of Arbitrators based on
the procedures agreed upon in the CBA.
However, as earlier stated, the instant case is a
termination dispute falling under the original and
exclusive jurisdiction of the Labor Arbiter, and does not
specifically involve the application, implementation or
enforcement of company personnel policies
contemplated in Policy Instruction No. 56.
Consequently, Policy Instruction No. 56 does not apply in
the case at bar. In any case, private respondents never
invoked the application of Policy Instruction No. 56 in
theirPosition Papers, neither did they raise the question
in their Motion to Dismiss which they filed nine (9)
months after the filing of their Position Papers. At this
late stage of the proceedings, it would not serve the ends
of justice if this case is referred back to a Voluntary
Arbitrator considering that both the AMOSUP and private
respondents have submitted to the jurisdiction of the
Labor Arbiter by filing their respective Position
Papers and ignoring the grievance procedure set forth in
their CBA.
[G.R. No. 127598. January 27, 1999]
MANILA ELECTRIC COMPANY, petitioner, vs. THE
HONORABLE SECRETARY OF LABOR LEONARDO
QUISUMBING AND MERALCO EMPLOYEES AND
WORKERS ASSOCIATION (MEWA), respondents.
EVIOTA
MEWA is the duly recognized labor organization of the
rank-and-file employees of MERALCO.
MEWA informed MERALCO of its intention to re-
negotiate the terms and conditions of their existing
1992-1997 CBA covering the remaining period of two
years starting from December 1, 1995 to November 30,
1997.
MERALCO signified its willingness to re-negotiate and
formed a CBA negotiating panel for the purpose. MEWA
submitted its proposal which, in turn, presented a
counter-proposal. Thereafter, collective bargaining
negotiations proceeded. However, despite the series of
meetings between the negotiating panels of MERALCO
and MEWA, the parties failed to arrive at terms and
conditions acceptable to both of them. (deadlock)
MEWA filed a Notice of Strike with the NCMB on the
grounds of bargaining deadlock and unfair labor
practices. The NCMB then conducted a series of
conciliation meetings but the parties failed to reach an
amicable settlement. MERALCO filed an Urgent Petition
with the DOLE praying that the Secretary assume
jurisdiction over the labor dispute and to enjoin the
striking employees to go back to work. (granted)
Thereafter, the parties submitted their respective
memoranda containing their demands (wage increase,
bonus, benefits, etc.)
MERALCO filed a supplement to the motion for
reconsideration on September 18, 1995, alleging that the
Secretary of Labor did not properly appreciate the effect
of the awarded wages and benefits on MERALCOs
financial viability.
MEWA likewise filed a motion asking the Secretary
of Labor to reconsider its Order on the wage increase,
leaves, decentralized filing of paternity and maternity
leaves, bonuses, retirement benefits, optional
retirement, medical, dental and hospitalization benefits,
short swing and payroll treatment. On its political
demands, MEWA asked the Secretary to rule its proposal
to institute a Code of Discipline for its members and the
unions representation in the administration of the
Pension Fund.
On December 28, 1996, the Secretary issued an
Order resolving the parties separate motions, the
modifications of the August 19, 1996 Order being
highlighted hereunder:
1) Effectivity of Agreement - December 1, 1995 to
November 30, 1997.
MERALCO also assails the Secretarys order that the
effectivity of the new CBA shall retroact to December 1,
1995, the date of the commencement of the last two
years of the effectivity of the existing CBA.
On the other hand, MEWA supports the ruling of
the Secretary on the theory that he has plenary power
and discretion to fix the date of effectivity of his arbitral
award. MEWA also contends that if the arbitral award
takes effect on the date of the Secretary Labors ruling on
the parties motion for reconsideration (i.e., on December
28, 1996), an anomaly situation will result when CBA
would be more than the 5-year term mandated by Article
253-A of the Labor Code.
ISSUE: What is the reckoning point of an arbitral award?
HELD:
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
RETROACTIVITY OF THE CBA
Article 253-A serves as the guide in determining when
the effectivity of the CBA at bar is to take effect. It
provides that the representation aspect of the CBA is to
be for a term of 5 years, while
x x x [A]ll other provisions of the Collective
Bargaining Agreement shall be re-negotiated not later
than 3 years after its execution. Any agreement on such
other provisions of the Collective Bargaining Agreement
entered into within 6 months from the date of expiry of
the term of such other provisions as fixed in such
Collective Bargaining Agreement shall retroact to the day
immediately following such date. If such agreement is
entered into beyond 6 months, the parties shall agree on
the duration of the effectivity thereof. x x x.
Under these terms, it is clear that the 5-year term
requirement is specific to the representation aspect.
What the law additionally requires is that a CBA must be
re-negotiated within 3 years after its execution. It is in
this re-negotiation that gives rise to the present CBA
deadlock.
If no agreement is reached within 6 months from
the expiry date of the 3 years that follow the CBA
execution, the law expressly gives the parties - not
anybody else - the discretion to fix the effectivity of the
agreement.
Consequently, we find no sufficient legal ground on
the other justification for the retroactive application of
the disputed CBA, and therefore hold that the CBA
should be effective for a term of 2 years counted from
December 28, 1996 (the date of the Secretary of Labors
disputed order on the parties motion for
reconsideration) up to December 27, 1999.
FROM THE TRANSCRIPT
Labor laws are silent as to when an arbitral award in a
labor dispute where the Secretary had assumed
jurisdiction by virtue of Article 263 (g) of the Labor Code
shall retroact. In general, a CBA negotiated within six
months after the expiration of the existing CBA retroacts
to the day immediately following such date and if agreed
thereafter, the effectivity depends on the agreement of
the parties.18 On the other hand, the law is silent as to
the retroactivity of a CBA arbitral award or that granted
not by virtue of the mutual agreement of the parties but
by intervention of the government. Despite the silence of
the law, the Court rules herein that CBA arbitral awards
granted after six months from the expiration of the last
CBA shall retroact to such time agreed upon by both
employer and the employees or their union. Absent such
an agreement as to retroactivity, the award shall retroact
to the first day after the six-month period following the
expiration of the last day of the CBA should there be one.
In the absence of a CBA, the Secretary's determination
of the date of retroactivity as part of his discretionary
powers over arbitral awards shall control.
[G.R. No. 119293. June 10, 2003]
SAN MIGUEL CORPORATION, petitioner, vs. NATIONAL
LABOR RELATIONS COMMISSION, Second Division,
ILAW AT BUKLOD NG MANGGAGAWA
(IBM), respondents.
MONTEFOLCA
FACTS: Petitioner San Miguel Corporation (SMC) and
respondent Ilaw at Buklod ng Manggagawa (IBM),
exclusive bargaining agent of petitioners daily-paid rank
and file employees, executed a Collective Bargaining
Agreement (CBA) under which they agreed to submit all
disputes to grievance and arbitration proceedings. The
CBA also included a mutually enforceable no-strike no-
lockout agreement.
On April 11, 1994, IBM, through its vice-president
Alfredo Colomeda, filed with the National Conciliation
and Mediation Board (NCMB) a notice of strike, docketed
as NCMB-NCR-NS-04-180-94, against petitioner for
allegedly committing: (1) illegal dismissal of union
members, (2) illegal transfer, (3) violation of CBA, (4)
contracting out of jobs being performed by union
members, (5) labor-only contracting, (6) harassment of
union officers and members, (7) non-recognition of duly-
elected union officers, and (8) other acts of unfair labor
practice.
The next day, IBM filed another notice of strike, this
time through its president Edilberto Galvez, raising
similar grounds.The Galvez group subsequently
requested the NCMB to consolidate its notice of strike
with that of the Colomeda groupto which the latter
opposed, alleging Galvezs lack of authority in filing the
same.
Petitioner thereafter filed a Motion for Severance
of Notices of Strike with Motion to Dismiss, on the
grounds that the notices raised non-strikeable issues and
that they affected four corporations (San Miguel
Corporation, MAGNOLIA-NESTLE CORPORATION, the SAN
MIGUEL FOODS, INC., and the SAN MIGUEL JUICES, INC.)
which are separate and distinct from each other.
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
After several conciliation meetings, NCMB Director
Reynaldo Ubaldo found that the real issues involved are
non-strikeable. Hence on May 2, 1994, he issued
separate letter-orders to both union groups, converting
their notices of strike into preventive mediation.
On May 16, 1994, while separate preventive
mediation conferences were ongoing, the Colomeda
group filed with the NCMB a notice of holding a strike
vote. Petitioner opposed by filing a Manifestation and
Motion to Declare Notice of Strike Vote Illegal invoking
the case of PAL v. Drilon, which held that no strike could
be legally declared during the pendency of preventive
mediation. NCMB Director Ubaldo in response issued
another letter to the Colomeda Group reiterating the
conversion of the notice of strike into a case of
preventive mediation and emphasizing the findings that
the grounds raised center only on an intra-union conflict,
which is not strikeable. The basic point to be resolved
entails the question of as to who between the two (2)
groups shall represent the workers for collective
bargaining purposes.
On May 27, 1994, the Colomeda group notified the
NCMB of the results of their strike vote, which favored
the holding of a strike. In reply, NCMB issued a letter
again advising them that by virtue of the PAL v.
Drilon ruling, their notice of strike is deemed not to have
been filed, consequently invalidating any subsequent
strike for lack of compliance with the notice
requirement. Despite this and the pendency of the
preventive mediation proceedings, on June 4, 1994, IBM
went on strike. The strike paralyzed the operations of
petitioner, causing it losses allegedly worth P29.98
million in daily lost production.
Two days after the declaration of strike, or on June
6, 1994, petitioner filed with public respondent NLRC an
amended Petition for Injunction with Prayer for the
Issuance of Temporary Restraining Order, Free Ingress
and Egress Order and Deputization Order. After due
hearing and ocular inspection, the NLRC on June 13, 1994
resolved to issue a temporary restraining order (TRO)
directing free ingress to and egress from petitioners
plants, without prejudice to the unions right to peaceful
picketing and continuous hearings on the injunction case.
To minimize further damage to itself, petitioner on
June 16, 1994, entered into a Memorandum of
Agreement (MOA) with the respondent-union, calling for
a lifting of the picket lines and resumption of work in
exchange of good faith talks between the management
and the labor management committees. The MOA,
signed in the presence of Department of Labor and
Employment (DOLE) officials, expressly stated that cases
filed in relation to their dispute will continue and will not
be affected in any manner whatsoever by the
agreement. The picket lines ended and work was then
resumed.
Respondent thereafter moved to reconsider the
issuance of the TRO, and sought to dismiss the injunction
case in view of the cessation of its picketing activities as a
result of the signed MOA. It argued that the case had
become moot and academic there being no more
prohibited activities to restrain, be they actual or
threatened. Petitioner, however, opposed and submitted
copies of flyers being circulated by IBM, as proof of the
unions alleged threat to revive the strikeThe NLRC did
not rule on the opposition to the TRO and allowed it to
lapse.
On November 29, 1994, the NLRC issued the
challenged decision, denying the petition for injunction
for lack of factual basis. It found that the circumstances
at the time did not constitute or no longer constituted an
actual or threatened commission of unlawful acts. It
likewise denied petitioners motion for reconsideration in
its resolution dated February 1, 1995.
ISSUE: THE NLRC GRAVELY ABUSED ITS DISCRETION
WHEN IT FAILED TO ENFORCE, BY INJUNCTION, THE
PARTIES RECIPROCAL OBLIGATIONS TO SUBMIT TO
ARBITRATION AND NOT TO STRIKE.
HELD: YES. Article 254 of the Labor Code provides that
no temporary or permanent injunction or restraining
order in any case involving or growing out of labor
disputes shall be issued by any court or other
entity except as otherwise provided in Articles 218 and
264 of the Labor Code. Under the first exception, Article
218 (e) of the Labor Code expressly confers upon the
NLRC the power to enjoin or restrain actual and
threatened commission of any or all prohibited or
unlawful acts, or to require the performance of a
particular act in any labor dispute which, if not restrained
or performed forthwith, may cause grave or irreparable
damage to any party or render ineffectual any decision in
favor of such party x x x. The second exception, on the
other hand, is when the labor organization or the
employer engages in any of the prohibited activities
enumerated in Article 264.
Pursuant to Article 218 (e), the coercive measure of
injunction may also be used to restrain an actual or
threatened unlawful strike. In the case of San Miguel
[
Corporation v. NLRC, where the same issue of NLRCs
duty to enjoin an unlawful strike was raised, we ruled
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
that the NLRC committed grave abuse of discretion when
it denied the petition for injunction to restrain the union
from declaring a strike based on non-strikeable grounds.
Further, in IBM v. NLRC, we held that it is the legal duty
and obligation of the NLRC to enjoin a partial strike
staged in violation of the law. Failure promptly to issue
an injunction by the public respondent was likewise held
therein to be an abuse of discretion.
In the case at bar, petitioner sought a permanent
injunction to enjoin the respondents strike. A strike is
considered as the most effective weapon in protecting
the rights of the employees to improve the terms and
conditions of their employment. However, to be valid, a
strike must be pursued within legal bounds. One of the
procedural requisites that Article 263 of the Labor Code
and its Implementing Rules prescribe is the filing of a
valid notice of strike with the NCMB. Imposed for the
purpose of encouraging the voluntary settlement of
disputes, this requirement has been held to be
mandatory, the lack of which shall render a strike illegal.
In the present case, NCMB converted IBMs notices
into preventive mediation as it found that the real issues
raised are non-strikeable. Such order is in pursuance of
the NCMBs duty to exert all efforts at mediation and
conciliation to enable the parties to settle the dispute
amicably and in line with the state policy of favoring
voluntary modes of settling labor disputes. In accordance
with the Implementing Rules of the Labor Code, the said
conversion has the effect of dismissing the notices of
strike filed by respondent. A case in point is PAL v.
[
Drilon, where we declared a strike illegal for lack of a
valid notice of strike, in view of the NCMBs conversion of
the notice therein into a preventive mediation case. We
ruled, thus:
The NCMB had declared the notice of strike as
appropriate for preventive mediation. The effect of that
declaration (which PALEA did not ask to be reconsidered
or set aside) was to drop the case from the docket of
notice of strikes, as provided in Rule 41 of the NCMB
Rules, as if there was no notice of strike. During the
pendency of preventive mediation proceedings no strike
could be legally declared... The strike which the union
mounted, while preventive mediation proceedings were
ongoing, was aptly described by the petitioner as an
ambush. (Emphasis supplied)
Clearly, therefore, applying the aforecited ruling to
the case at bar, when the NCMB ordered the preventive
mediation on May 2, 1994, respondent had thereupon
lost the notices of strike it had filed. Subsequently,
however, it still defiantly proceeded with the strike while
mediation was ongoing, and notwithstanding the letter-
advisories of NCMB warning it of its lack of notice of
strike.
Such disregard of the mediation proceedings was a
blatant violation of the Implementing Rules, which
explicitly oblige the parties to bargain collectively in good
faith and prohibit them from impeding or disrupting the
proceedings.
Also noteworthy is public respondents disregard of
petitioners argument pointing out the unions failure to
observe the CBA provisions on grievance and arbitration.
In the case of San Miguel Corp. v. NLRC, we ruled that the
union therein violated the mandatory provisions of the
CBA when it filed a notice of strike without availing of the
remedies prescribed therein. Thus we held:
x x x For failing to exhaust all steps in the grievance
machinery and arbitration proceedings provided in the
Collective Bargaining Agreement, the notice of strike
should have been dismissed by the NLRC and private
respondent union ordered to proceed with the grievance
and arbitration proceedings. In the case of Liberal Labor
Union vs. Phil. Can Co., the court declared as illegal the
strike staged by the union for not complying with the
grievance procedure provided in the collective bargaining
agreement. . . (Citations omitted)
As in the abovecited case, petitioner herein evinced its
willingness to negotiate with the union by seeking for an
order from the NLRC to compel observance of the
grievance and arbitration proceedings. Respondent
however resorted to force without exhausting all
available means within its reach. Such infringement of
the aforecited CBA provisions constitutes further
justification for the issuance of an injunction against the
strike. As we said long ago: Strikes held in violation of the
terms contained in a collective bargaining agreement are
illegal especially when they provide for conclusive
arbitration clauses. These agreements must be strictly
adhered to and respected if their ends have to be
achieved.
BENGUET CORPORATION vs DENR
GIDO
Facts:
Benguet and J.G. Realty entered into a RAWOP, wherein
J.G. Realty was acknowledged as the owner of four
mining claims respectively named as Bonito-I, Bonito-II,
Bonito-III, and Bonito-IV,
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
However, on February 9, 1999, J.G. Realty sent a letter to
the President of Benguet informing the latter that it was
terminating the RAWOP mainly for allegedly failing and
violating some of the provisions in the contract and taht
no stipulation was provided with respect to the term
limit of the RAWOP.
In response, Benguets Manager for Legal
Services, wrote J.G. Realty a letter, therein alleging that
Benguet complied with its obligations under the RAWOP.
Thus, Benguet posited that there was no valid ground for
the termination of the RAWOP. It also reminded J.G.
Realty that it should submit the disagreement to
arbitration rather than unilaterally terminating the
RAWOP.
J.G. Realty filed a Petition for Declaration of
[9]
Nullity/Cancellation of the RAWOP with the Legaspi
City POA, Region V
On March 19, 2001, the POA issued a Decision, declaring
the [RAWOP] and its Supplemental Agreement cancelled
and without effect. Therefrom, Benguet filed a Notice of
Appeal with the MAB. Thereafter, the MAB issued the
assailed December 2, 2002 Decision. Benguet then filed a
Motion for Reconsideration of the assailed Decision
which was denied in the March 17, 2004Resolution of the
MAB. Hence, Benguet filed the instant petition.
Issue:
(1) Should the controversy have first been
submitted to arbitration before the POA took
cognizance of the case?
Note: Before we dwell on the substantive issues, we find
that the instant petition can be denied outright as
Benguet resorted to an improper remedy.
The last paragraph of Section 79 of Republic Act No. (RA)
7942 or the Philippine Mining Act of 1995 states, A
petition for review by certiorari and question of law may
be filed by the aggrieved party with the Supreme Court
within thirty (30) days from receipt of the order or
decision of the [MAB].
However, this Court has already invalidated such
provision in Carpio v. Sulu Resources Development
Corp. ruling that a decision of the MAB must first be
appealed to the Court of Appeals (CA) under Rule 43 of
the Rules of Court, before recourse to this Court may be
had.
Petitioner having failed to properly appeal to the
CA under Rule 43, the decision of the MAB has become
final and executory. On this ground alone, the instant
petition must be denied.
Even if we entertain the petition although
Benguet skirted the appeal to the CA via Rule 43, still, the
December 2, 2002 Decision and March 17, 2004
Resolution of the DENR-MAB in MAB Case No. 0124-01
should be maintained.
Ruling:
The case should have first been brought to voluntary
arbitration before the POA
Secs. 11.01 and 11.02 of the RAWOP pertinently provide:
11.01 Arbitration
Any disputes, differences or
disagreements between BENGUET and
the OWNER with reference to anything
whatsoever pertaining to this
Agreement that cannot be amicably
settled by them shall not be cause of
any action of any kind whatsoever in
any court or administrative agency but
shall, upon notice of one party to the
other, be referred to a Board of
Arbitrators consisting of three (3)
members, one to be selected by
BENGUET, another to be selected by
the OWNER and the third to be
selected by the aforementioned two
arbitrators so appointed.
xxxx
11.02 Court Action
No action shall be instituted in court as
to any matter in dispute as
hereinabove stated, except to enforce
the decision of the majority of the
Arbitrators.
Thus, Benguet argues that the POA should have first
referred the case to voluntary arbitration before taking
cognizance of the case, citing Sec. 2 of RA 876 on persons
and matters subject to arbitration.
On the other hand, in denying such argument, the POA
ruled that:
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
While the parties may establish such
stipulations clauses, terms and
conditions as they may deem
convenient, the same must not be
contrary to law and public policy. At a
glance, there is nothing wrong with the
terms and conditions of the agreement.
But to state that an aggrieved party
cannot initiate an action without going
to arbitration would be tying ones hand
even if there is a law which allows him
to do so.
The MAB, meanwhile, denied Benguets contention on
the ground of estoppel, stating:
Benguet is in estoppel from questioning
the competence of the Panel of
Arbitrators to hear and decide in the
summary proceedings J.G. Realtys
petition, when Benguet itself did not
merely move for the dismissal of the
case but also filed an Answer with
counterclaim seeking affirmative reliefs
from the Panel of Arbitrators.
Moreover, the MAB ruled that the contractual provision
on arbitration merely provides for an additional forum or
venue and does not divest the POA of the jurisdiction to
[
hear the case.
In its July 20, 2004 Comment, J.G. Realty reiterated the
above rulings of the POA and MAB. It argued that RA
7942 or the Philippine Mining Act of 1995 is a special law
which should prevail over the stipulations of the parties
and over a general law, such as RA 876. It also argued
that the POA cannot be considered as a court under the
contemplation of RA 876 and that jurisprudence saying
that there must be prior resort to arbitration before filing
a case with the courts is inapplicable to the instant case
as the POA is itself already engaged in arbitration.
On this issue, we rule for Benguet.
Sec. 2 of RA 876 elucidates the scope of arbitration:
Section 2. Persons and matters
subject to arbitration.Two or more
persons or parties may submit to the
arbitration of one or more arbitrators
any controversy existing between
them at the time of the submission
and which 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 irrevocable, save
upon such grounds as exist at law for
the revocation of any contract.
Such submission or contract
may include question[s] arising out of
valuations, appraisals or other
controversies which may be collateral,
incidental, precedent or subsequent to
any issue between the parties.
In RA 9285 or the Alternative Dispute Resolution Act of
2004, the Congress reiterated the efficacy of arbitration
as an alternative mode of dispute resolution by stating in
Sec. 32 thereof that domestic arbitration shall still be
governed by RA 876. Clearly, a contractual stipulation
that requires prior resort to voluntary arbitration before
the parties can go directly to court is not illegal and is in
fact promoted by the State. Thus, petitioner correctly
cites several cases whereby arbitration clauses have been
upheld by this Court.
Moreover, the contention that RA 7942 prevails over RA
876 presupposes a conflict between the two laws. Such is
not the case here. To reiterate, availment of voluntary
arbitration before resort is made to the courts or quasi-
judicial agencies of the government is a valid contractual
stipulation that must be adhered to by the parties. As
stated in Secs. 6 and 7 of RA 876:
Section 6. Hearing by court.A
party aggrieved by the failure, neglect
or refusal of another to perform under
an agreement in writing providing for
arbitration may petition the court for
an order directing that such
arbitration proceed in the manner
provided for in such agreement. Five
days notice in writing of the hearing of
such application shall be served either
personally or 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 parties to proceed
to arbitration in accordance with the
terms of the agreement. If the making
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
of the agreement or default be in issue
the court shall proceed to summarily
hear such issue. If the finding be that
no agreement in writing providing for
arbitration was made, or that there is
no default in the proceeding
thereunder, the proceeding shall be
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 with the terms thereof.
xxxx
Section 7. Stay of civil action.If
any suit or proceeding be brought upon
an issue arising out of an agreement
providing for the arbitration thereof,
the court in which such suit or
proceeding is pending, upon being
satisfied that the issue involved in such
suit or proceeding is referable to
arbitration, shall stay the action or
proceeding until an arbitration has
been had in accordance with the terms
of the agreement: Provided, That the
applicant, for the stay is not in default
in proceeding with such arbitration.
In other words, in the event a case that should properly
be the subject of voluntary arbitration is erroneously
filed with the courts or quasi-judicial agencies, on motion
of the defendant, the court or quasi-judicial agency shall
determine whether such contractual provision for
arbitration is sufficient and effective. If in affirmative, the
court or quasi-judicial agency shall then order the
enforcement of said provision. Besides, in BF Corporation
v. Court of Appeals, we already ruled:
In this connection, it bears
stressing that the lower court has not
lost its jurisdiction over the case.
Section 7 of Republic Act No. 876
provides that proceedings therein have
only been stayed. After the special
proceeding of arbitration has been
pursued and completed, then the lower
court may confirm the award made by
the arbitrator.
J.G. Realtys contention, that prior resort to arbitration is
unavailing in the instant case because the POAs mandate
is to arbitrate disputes involving mineral agreements, is
misplaced. A distinction must be made between
voluntary and compulsory arbitration. In Ludo and Luym
Corporation v. Saordino, the Court had the occasion to
distinguish between the two types of arbitrations:
Comparatively, in Reformist Union of
R.B. Liner, Inc. vs. NLRC, compulsory
arbitration has been defined both as
the process of settlement of labor
disputes by a government
agencywhich has the authority to
investigate and to make an
award which is binding on all the
parties, and as a mode of arbitration
where the parties are compelled to
accept the resolution of their dispute
through arbitration by a third party.
While a voluntary arbitrator is not part
of the governmental unit or labor
departments personnel, said arbitrator
renders arbitration services provided
for under labor laws.
There is a clear distinction between compulsory and
voluntary arbitration. The arbitration provided by the
POA is compulsory, while the nature of the arbitration
provision in the RAWOP is voluntary, not involving any
government agency. Thus, J.G. Realtys argument on this
matter must fail.
As to J.G. Realtys contention that the provisions of RA
876 cannot apply to the instant case which involves an
administrative agency, it must be pointed out that
Section 11.01 of the RAWOP states that:
[Any controversy with regard to the
contract] shall not be cause of any
action of any kind whatsoever in any
court or administrative agency but
shall, upon notice of one party to the
other, be referred to a Board of
Arbitrators consisting of three (3)
members, one to be selected by
BENGUET, another to be selected by
the OWNER and the third to be
selected by the aforementioned two
arbiters so appointed.
There can be no quibbling that POA is a quasi-judicial
body which forms part of the DENR, an administrative
agency. Hence, the provision on mandatory resort to
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
arbitration, freely entered into by the parties, must be
held binding against them.
In sum, on the issue of whether POA should have
referred the case to voluntary arbitration, we find that,
indeed, POA has no jurisdiction over the dispute which is
governed by RA 876, the arbitration law.
However, we find that Benguet is already estopped from
questioning the POAs jurisdiction. As it were, when J.G.
Realty filed DENR Case, Benguet filed its answer and
participated in the proceedings before the POA, Region
V. Secondly, when the adverse POA Decision was
rendered, it filed an appeal with the MAB and again
participated in the MAB proceedings. When the adverse
December 2, 2002 MAB Decision was promulgated, it
filed a motion for reconsideration with the MAB. When
the adverse March 17, 2004 MAB Resolution was issued,
Benguet filed a petition with this Court pursuant to Sec.
79 of RA 7942 impliedly recognizing MABs jurisdiction. In
this factual milieu, the Court rules that the jurisdiction of
POA and that of MAB can no longer be questioned by
Benguet at this late hour. What Benguet should have
done was to immediately challenge the POAs jurisdiction
by a special civil action for certiorari when POA ruled that
it has jurisdiction over the dispute. To redo the
proceedings fully participated in by the parties after the
lapse of seven years from date of institution of the
original action with the POA would be anathema to the
speedy and efficient administration of justice.
CHINA CHANG VS ROSAL INFRASTRUCTURE
ESCOVILLA
DOCTRINE: Principle of Party Autonomy - That the parties
can agree on the terms and conditions of the contract
provided tis not contrary to law, orders, public policy or
morals. Take note that this was the ruling decided
BEFORE the effectivity of RA 9285. If the parties agree to
submit to arbitration their construction dispute under the
CIAC, it is allowed under this case.
FACTS: Petitioner China Chang is the operator of the
Binga Hydroelectric Plant in Itogon, Benguet, which is
under a Rehabilitate Operate and Leaseback Contract
(ROL Contract) with the NaPoCOr and engaged in the
rehabilitation of the power plant, including the
construction of check dams.
On February 1994, petitioner China Chang engaged the
services of Rosal Infrustructure Builders (RIB) for the
construction of a Dam in Itogon, Benguet. In this
contract, the parties agreed to submit disputes arising
therefrom to arbitration before the Arbitration of the
International Chamber of Commerce.
When a dispute arose between the parties, respondent
RIB filed a complaint before respondent CIAC for
arbitration. China Chang filed its answer with compulsory
counterclaim and raised therein the issue of lack of
jurisdiction on the part of CIAC. In August 1995,CIAC
considered the question of jurisdiction merely as a
special defense which can be included as part of the
issues of the Terms of Reference. China Chang filed a
motion for reconsideration which was denied by CIAC in
October 1995.
China Chang raised the issue of lack of jurisdiction withth
CA. In February 1996, CA dismissed the petition. China
Chang filed an MR, but denied by CA . China Chang
questions the validity of Construction Industry
Arbitration Commission (CIAC) Resolution 3- 93
amending Section 1, Article III of CIAC Rules of Procedure
Governing Construction Arbitration promulgated by the
CIAC pursuant to its rule-making power granted under
Section 21 of Executive Order No. 1008, which
pertinently provides as follows:
Article III Effect of the Agreement to Arbitrate
Section 1. Submission to CIAC Jurisdiction An
arbitration clause in a construction contract or a
submission to arbitration of a construction
dispute shall be deemed an agreement to
submit an existing or future controversy to the
CIAC jurisdiction, notwithstanding the reference
to a different arbitral institution or arbitral body
in such contract or submission
ISSUE 1: W/N the CIAC have acquire jurisdiction over the
dispute.
ISSUE 2:Can parties in the case at bar agree to submit to
arbitration their construction dispute under the CIAC.
Ruling 1: Yes
Ruling 2: Yes
No restriction whatsoever on any party from submitting
a dispute for arbitration to an arbitral body other than
the CIAC. On the contrary, the new rule, as amended
merely implements the letter and the spirit of its
enabling law, E.O. No. 1008, which vests jurisdiction
upon the CIAC:
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
Section 4: Jurisdiction - The CIAC shall have the
original and exclusive jurisdiction over disputes
arising from, or connected with, contracts
entered into by the parties involved in the
construction in the Philippines, whether the
dispute arises before or after the completion of
the contracts, or after the abandonment or
breach thereof. These disputes may involve
government or private contracts. For the Board
to acquire jurisdiction, the parties to a dispute
must agree to submit the same to voluntary
arbitration. (Emphasis supplied)
What the law merely requires for a particular
construction contract to fall within the jurisdiction of
CIAC is for the parties to agree to submit the same to
voluntary arbitration.
Now that Section 1, Article III, as amended, is submitted
to test in the present petition, the Supreme Court ruled
to uphold its validity with full certainty.
However, this should not be understood to mean that
the parties may no longer stipulate to submit their
disputes to a different forum or arbitral boy. Parties may
continue to stipulate as regards their preferred forum in
case of voluntary arbitration, but in so doing, they may
not divest the CIAC of jurisdiction as provided by law.
Under the elementary principle on the law on contracts
that laws obtaining in a jurisdiction form part of all
agreements, when the law provides that the Board
acquires jurisdiction when the parties to the contract
agree to submit the same to voluntary arbitration, the
law in effect, automatically gives the parties an
alternative forum before whom they may submit their
disputes. That alternative forum is the CIAC.
Other Matters: Also important ang defintion on voluntary
arbitration as defined in the case Hi-Precision Steel
Center vs Lim Kim Steel Builders.
"Voluntary arbitration involves the reference of a dispute
to an impartial body, the members of which are chosen
by the parties themselves which parties freely consent in
advance to abide by the arbitral award issued after
proceedings where both parties had the opportunity to
be heard. The basic objective is to provide a speedy and
inexpensive method of settling disputes by allowing the
parties to avoid the formalities, delay, expenses and
aggravation which commonly accompany ordinary
litigation, especially litigation which goes through the
entire hierarchy of courts. Executive Order No. 1008
created an arbitration facility to which the construction
industry in the Philippines can have recourse. The
executive order was enacted to encourage the early and
expeditious settlement of disputes in the construction
industry, a public policy the implementation of which is
necessary and important for the realization of national
development goals. "
G.R. No. 129169 November 17, 1999 NATIONAL
IRRIGATION ADMINISTRATION (NIA), petitioner,
vs.HONORABLE COURT OF APPEALS (4th Division),
CONSTRUCTION INDUSTRY ARBITRATION COMMISSION,
and HYDRO RESOURCES CONTRACTORS CORPORATION,
respondents.
CUTAMORA
In a competitive bidding held by NIA in August 1978,
Hydro Resources Contractors Corporation (hereafter
HYDRO) was awarded Contract MPI-C-2 for the
construction of the main civil works of the Magat
River Multi-Purpose Project. The contract provided
that HYDRO would be paid partly in Philippine pesos
and partly in U.S. dollars.
HYDRO substantially completed the works under the
contract in 1982 and final acceptance by NIA was
made in 1984. HYDRO thereafter determined that it
still had an account receivable from NIA representing
the dollar rate differential of the price escalation for
the contract.
After unsuccessfully pursuing its case with NIA,
HYDRO, on 7 December 1994, filed with the CIAC a
Request for Adjudication of the aforesaid claim.
HYDRO nominated six arbitrators for the arbitration
panel, from among whom CIAC appointed Engr.
Lauro M. Cruz.
On 6 January 1995, NIA filed its Answer wherein it
questioned the jurisdiction of the CIAC alleging lack
of cause of action, laches and estoppel in view of
HYDRO's alleged failure to avail of its right to submit
the dispute to arbitration within the prescribed
period as provided in the contract. On the same
date, NIA filed a Compliance wherein it nominated
six arbitrators, from among whom CIAC appointed
Atty. Custodio O. Parlade, and made a counterclaim.
At the preliminary conference, NIA through its
counsel Atty. Joy C. Legaspi of the Office of the
Government Corporate Counsel, manifested that it
could not admit the genuineness of HYDRO's
evidence since NIA's records had already been
destroyed. NIA requested an opportunity to examine
the originals of the documents which HYDRO agreed
to provide.
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
On 13 March 1995, NIA filed a Motion to Dismiss
alleging lack of jurisdiction over the disputes. NIA
contended that there was no agreement with
HYDRO to submit the dispute to CIAC for arbitration
considering that the construction contract was
executed in 1978 and the project completed in 1982,
whereas the Construction Industry Arbitration Law
creating CIAC was signed only in 1985; and that
while they have agreed to arbitration as a mode of
settlement of disputes, they could not have
contemplated submission of their disputes to CIAC.
NIA further argued that records show that it had not
voluntarily submitted itself to arbitration by CIAC
citing TESCO Services, Inc. v. Hon. Abraham Vera, et
al., wherein it was ruled:
CIAC did not acquire jurisdiction over the
dispute arising from the sub-contract agreement
between petitioner TESCO and private
respondent LAROSA. The records do not show
that the parties agreed to submit the disputes to
arbitration by the CIAC . . . . While both parties
in the sub-contract had agreed to submit the
matter to arbitration, this was only between
themselves, no request having been made by
both with the CIAC. Hence, as already stated,
the CIAC, has no jurisdiction over the dispute. . .
. . Nowhere in the said article (sub-contract)
does it mention the CIAC, much less, vest
jurisdiction with the CIAC.
On 11 April 1995, the arbitral body issued an order
which deferred the determination of the motion to
dismiss and resolved to proceed with the hearing of
the case on the merits as the grounds cited by NIA
did not seem to be "indubitable." NIA filed a motion
for reconsideration of the aforesaid Order. CIAC in
denying the motion for reconsideration ruled that it
has jurisdiction over the HYDRO's claim over NIA
pursuant to E.O 1008 and that the hearing should
proceed as scheduled.
Issue:
Whether or not CIAC has jurisdiction.
Held:
Yes. CIAC has jurisdiction.
Contrary to the claim of NIA, the CIAC has
jurisdiction over the controversy. Executive Order
No. 1008, otherwise known as the "Construction
Industry Arbitration Law" which was promulgated on
4 February 1985, vests upon CIAC original and
exclusive jurisdiction over disputes arising from, or
connected with contracts entered into by parties
involved in construction in the Philippines, whether
the dispute arises before or after the completion of
the contract, or after the abandonment or breach
thereof. The disputes may involve government or
private contracts. For the Board to acquire
jurisdiction, the parties to a dispute must agree to
submit the same to voluntary arbitration.
The complaint of HYDRO against NIA on the basis of
the contract executed between them was filed on 7
December 1994, during the effectivity of E.O. No.
1008. Hence, it is well within the jurisdiction of CIAC.
The jurisdiction of a court is determined by the law
in force at the time of the commencement of the
action.
NIA's argument that CIAC had no jurisdiction to
arbitrate on contract which preceded its existence is
untenable. E.O. 1008 is clear that the CIAC has
jurisdiction over all disputes arising from or
connected with construction contract whether the
dispute arises before or after the completion of the
contract. Thus, the date the parties entered into a
contract and the date of completion of the same,
even if these occurred before the constitution of the
CIAC, did not automatically divest the CIAC of
jurisdiction as long as the dispute submitted for
arbitration arose after the constitution of the CIAC.
Stated differently, the jurisdiction of CIAC is over the
dispute, not the contract; and the instant dispute
having arisen when CIAC was already constituted,
the arbitral board was actually exercising current,
not retroactive, jurisdiction.
NIA also contended that the CIAC did not acquire
jurisdiction over the dispute since it was only HYDRO
that requested for arbitration. It asserts that to
acquire jurisdiction over a case, as provided under
E.O. 1008, the request for arbitration filed with CIAC
should be made by both parties, and hence the
request by one party is not enough. It is undisputed
that the contracts between HYDRO and NIA
contained an arbitration clause wherein they agreed
to submit to arbitration any dispute between them
that may arise before or after the termination of the
agreement.
Consequently, the claim of HYDRO having arisen
from the contract is arbitrable. NIA's reliance with
the ruling on the case of Tesco Services Incorporated
v. Vera, is misplaced.
The 1988 CIAC Rules of Procedure which were
applied by this Court in Tesco case had been duly
amended by CIAC Resolutions No. 2-91 and 3-93,
Section 1 of Article III of which read as follows:
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
Submission to CIAC Jurisdiction An arbitration
clause in a construction contract or a submission to
arbitration of a construction contract or a
submission to arbitration of a construction dispute
shall be deemed an agreement to submit an existing
or future controversy to CIAC jurisdiction,
notwithstanding the reference to a different
arbitration institution or arbitral body in such
contract or submission. When a contract contains a
clause for the submission of a future controversy to
arbitration, it is not necessary for the parties to
enter into a submission agreement before the
claimant may invoke the jurisdiction of CIAC.
Under the present Rules of Procedure, for a
particular construction contract to fall within the
jurisdiction of CIAC, it is merely required that the
parties agree to submit the same to voluntary
arbitration. Unlike in the original version of Section
1, as applied in the Tesco case, the law as it now
stands does not provide that the parties should
agree to submit disputes arising from their
agreement specifically to the CIAC for the latter to
acquire jurisdiction over the same. Rather, it is plain
and clear that as long as the parties agree to submit
to voluntary arbitration, regardless of what forum
they may choose, their agreement will fall within the
jurisdiction of the CIAC, such that, even if they
specifically choose another forum, the parties will
not be precluded from electing to submit their
dispute before the CIAC because this right has been
vested upon each party by law, i.e., E.O. No. 1008.
Moreover, it is undeniable that NIA agreed to submit
the dispute for arbitration to the CIAC. NIA through
its counsel actively participated in the arbitration
proceedings by filing an answer with counterclaim,
as well as its compliance wherein it nominated
arbitrators to the proposed panel, participating in
the deliberations on, and the formulation of, the
Terms of Reference of the arbitration proceeding,
and examining the documents submitted by HYDRO
after NIA asked for the originals of the said
documents.
PHILIPPINE COMMERCIAL INTERNATIONAL
BANK, petitioner, vs. COURT OF APPEALS, WILLIAM
GOLANGCO CONSTRUCTION CORP., Chairman ERNESTO
S. DE CASTRO, and members LAURO M. CRUZ and
VICTOR P. LAZATIN of the ARBITRAL TRIBUNAL of the
CONSTRUCTION INDUSTRY ARBITRATION
COMMISSION, respondents.
LUMANAG
FACTS:
PCIB contracted WGCC to construct the 5th to 21st
floors of PCIB Tower II in Makati. Alleging that the
granite finish [of the tower] proved to be defective
such that after all efforts at negotiations proved
futile it hired another contractor to redo the
defective finish, but that WGCC refused to pay it
actual damages incurred in the process, PCIB filed a
request for arbitration with the Construction
Industry Arbitration Commission (CIAC)
WGCC denied PCIBs claim.
The CIAC, by Decision of June 21, 1996, found that
PCIB was entitled to recover from WGCC.
WGCC filed a Motion to Dismiss with Motion to Cite
PCIB Counsel for Contempt on the ground that it was
filed beyond the 15-day reglementary period for
filing an appeal, in support of which it alleged that,
contrary to the allegation of counsel for PCIB that he
acquired actual knowledge of the CIAC decision on
June 28, 1996, PCIB actually received a copy thereof
on June 24, 1996, hence, it had only until July 9,
1996 within which to file before the CA a petition for
review. Since PCIB filed before the CA its petition for
Certiorari and/or Partial Review on July 12, 1996,
WGCC concluded that it was late by 3 days. WGCC
[6]
attached to its motion a certified photocopy of the
pertinent entry in the CIAC logbook showing that
Engineer Bong Nuno received a copy of the decision
for PCIB on June 24, 1996.
CA granted WGCCs Motion to Dismiss PCIBs petition
upon a finding that indeed PCIB received a copy of
the CIAC decision on June 24, 1996 and, therefore,
its petition was belatedly filed.
PCIBs counsel disclaims that Engineer Bong Nuno is
his employee but submits anyway that he was not
authorized to receive the CIAC decision for him in his
(counsels) capacity as, by his claim, the authorized
representative of PCIB.
PCIBs counsel further argued as follows,
quoted verbatim:
Inasmuch as the undersigned counsel ha[s] not
officially received its copy of the Decision sought
to be reviewed because the Arbitral Tribunal
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]

had such copy served only on [PCIB], the counsels jarring complaint that he was not officially
reglementary period should be reckoned from served with a copy of the CIAC decision.
the date when the undersigned counsel actually In fine, copy of the CIAC decision having admittedly
acquired knowledge thereof which was on 28 been served on and received by PCIB on June 24,
June 1996 when it filed [PCIBs] Motion for 1996, PCIBs counsel cannot assail the validity of such
Partial Reconsideration. Accordingly, treated as service by now claiming that the same was
a Petition for Review, pursuant to resolution No. ineffective as it was not served on him (counsel) as
2-95, this petition is seasonable. the duly authorized representative of PCIB.
It is an elementary rule of procedure that perfection
ISSUE: of an appeal within the reglementary period is not
W/N a partys counsel need to be notified of the text of only mandatory but also jurisdictional so that failure
the CIAC decision. NO. to do so renders the questioned decision final and
executory, and deprives an appellate court of
HELD: jurisdiction to alter the final judgment, much less to
entertain the appeal.
In the present petition before this Court, PCIBs
PCIB having filed its petition for Certiorari and/or
counsel now alleges that in the CIAC decision, he
Partial Review after the CIAC decision had become
was specifically named as the representative and
final and executory, the CA correctly granted WGCCs
counsel for [PCIB], but since the decision was not
Motion to Dismiss the same. This leaves it
served on him as the authorized representative of
unnecessary to pass upon PCIBs plaint about the CAs
PCIB but to an employee of [PCIB] on June 24, 1996,
refus[al] to allow [its] alternative reliefs for review
it was only on June 27 (sic), 1996 that [he] had actual
and/or certiorari. Suffice it to state that the
knowledge of the content of the decision.(Emphasis
following ruling of this Court instructs:
supplied). PCIBs counsels latest position may not be
We have time and again reminded members of the
entertained given his glaring admission that copy of
bench and bar that a special civil action for certiorari
the CIAC decision was duly served on June
under Rule 65 lies only when there is no appeal nor
24 1996 on PCIB, a party to the case which, as will
plain, speedy and adequate remedy in the ordinary
now be discussed, CIAC Rules mandates
course of law. Certiorari cannot be allowed when a
should be the one to be notified of the text of the
party to a case fails to appeal a judgment despite the
decision.
availability of that remedy, certiorari not being a
The CIAC Rules of Procedure does not contain a
substitute for lost appeal. The remedies of appeal
provision similar to Section 2, Rule 13 of the Revised
and certiorari are mutually exclusive and not
Rules of Court, reiterated in the 1997 Rules of Civil
alternative or successive (Emphasis supplied,
Procedure, which provides that service to any party
citations omitted.)
represented by counsel should be made upon his
PCIB, at all events, appeals for a relaxation of the
counsel, unless service upon the party himself is
Rules given the [substantial] issues and amounts
ordered by the court. Instead, Section 7, Article XV
involved. But even its present petition for certiorari
of the CIAC Rules of Procedure provides:
and mandamus is not the proper remedy from the
Section 7. Notification of Award to Parties Once
CA Resolution. What it should have filed was a
an award has been made, provided that the
petition for review under Rule 45 of the Rules of
costs of the arbitration have been fully paid to
Court. But even if, in accordance with the liberal
the Secretariat by the parties or by one of them,
spirit pervading the Rules of Court and in the interest
the Secretariat shall notify the parties of
of justice, this Court, in the exercise of its discretion,
the text signed by the Arbitrator or Arbitral
treats the present petition for certiorari as one for
Tribunal.
review under Rule 45, petitioner has failed to proffer
Additional copies certified true by the Executive
meritorious reasons or arguments for its allowance.
Director of the Secretariat shall be made
available, on request and at any time, to
the parties or their counsel but to no one
else. (Emphasis and underscoring supplied)
From the immediately-quoted provision of the CIAC
Rules, it is the parties who are to be notified of the
text of the CIAC decision. This answers PCIBs

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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]

F.F. CRUZ & CO., INC., vs HR Construction , GR 187521 / CIAC RULING

MARCH 14 2012 CIAC rendered a decision in favor of HRCC.
MILES
CA RULING
Facts: CA affirmed the decision.
Sometime in 2004, FFCCI entered into a contract with the
Issue: w/n decisions from the CIAC can be appealed via
Department of Public Works and Highways (DPWH) for
RULE 45 of the rules of court?
the construction of the Magsaysay Viaduct, known as the
Lower Agusan Development Project. On August 9, 2004,
HELD:
FFCCI, in turn, entered into a Subcontract Agreement[3]
Generally, the arbitral award of CIAC is final and may not
with HR Construction Corporation (HRCC) for the supply
be appealed except on questions of law.
of materials, labor, equipment, tools and supervision for
the construction of a portion of the said project called
Executive Order (E.O.) No. 1008[22] vests upon the CIAC
the East Bank Levee and Cut-Off Channel in accordance
original and exclusive jurisdiction over disputes arising
with the specifications of the main contract. The
from, or connected with, contracts entered into by
subcontract price agreed upon by the parties amounted
parties involved in construction in the Philippines. Under
to P31,293,532.72. Pursuant to the Subcontract
Section 19 of E.O. No. 1008, the arbitral award of CIAC
Agreement, HRCC would submit to FFCCI a monthly
"shall be final and inappealable except on questions of
progress billing which the latter would then pay, subject
law which shall be appealable to the Supreme Court."
to stipulated deductions, within 30 days from receipt
thereof.
We reiterate the rule that factual findings of construction
arbitrators are final and conclusive and not reviewable by
The parties agreed that the requests of HRCC for
this Court on appeal, except when the petitioner proves
payment should include progress accomplishment of its
affirmatively that: (1) the award was procured by
completed works as approved by FFCCI. Additionally,
corruption, fraud or other undue means; (2) there was
they agreed to conduct a joint measurement of the
evident partiality or corruption of the arbitrators or of
completed works of HRCC together with the
any of them; (3) the arbitrators were guilty of
representative of DPWH and consultants to arrive at a
misconduct in refusing to postpone the hearing upon
common quantity.
sufficient cause shown, or in refusing to hear evidence
pertinent and material to the controversy; (4) one or
Thereafter, HRCC commenced the construction of the
more of the arbitrators were disqualified to act as such
works pursuant to the Subcontract Agreement.
under section nine of Republic Act No. 876 and willfully
nd rd th refrained from disclosing such disqualifications or of any
However, FFCCI failed to pay the 2 , 3 and 4 progress
other misbehavior by which the rights of any party have
billings submitted by HRCC. HRCC, pursuant to the
been materially prejudiced; or (5) the arbitrators
arbitration clause in the Subcontract Agreement, filed
exceeded their powers, or so imperfectly executed them,
with the Construction Industry Arbitration Commission
that a mutual, final and definite award upon the subject
(CIAC) a Complaint[11] against FFCCI praying for the
matter submitted to them was not made.
payment of the following: (1) overdue obligation in the
reduced amount of P4,096,656.53 as of December 15,
Voluntary arbitration involves the reference of a dispute
2004 plus legal interest; (2) P1,500,000.00 as attorneys
to an impartial body, the members of which are chosen
fees; (3) P80,000.00 as acceptance fee and
by the parties themselves, which parties freely consent in
representation expenses; and (4) costs of litigation.
advance to abide by the arbitral award issued after
proceedings where both parties had the opportunity to
FFCCI maintained that HRCC failed to comply with the
be heard. The basic objective is to provide a speedy and
condition stated under the Subcontract Agreement for
inexpensive method of settling disputes by allowing the
the payment of the latters progress billings, i.e. joint
parties to avoid the formalities, delay, expense and
measurement of the completed works, and, hence, it was
aggravation which commonly accompany ordinary
justified in not paying the amount stated in HRCCs
litigation, especially litigation which goes through the
progress billings.
entire hierarchy of courts. Executive Order No. 1008
created an arbitration facility to which the construction
industry in the Philippines can have recourse. The

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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
Executive Order was enacted to encourage the early and
expeditious settlement of disputes in the construction
industry, a public policy the implementation of which is
necessary and important for the realization of national
development goals.
Aware of the objective of voluntary arbitration in the
labor field, in the construction industry, and in any other
area for that matter, the Court will not assist one or the
other or even both parties in any effort to subvert or
defeat that objective for their private purposes. The
Court will not review the factual findings of an arbitral
tribunal upon the artful allegation that such body had
"misapprehended the facts" and will not pass upon
issues which are, at bottom, issues of fact, no matter
how cleverly disguised they might be as "legal
questions." The parties here had recourse to arbitration
and chose the arbitrators themselves; they must have
had confidence in such arbitrators.
nd
2 issue: Issues on the proper interpretation of the
terms of the Subcontract Agreement involve questions of
law.
A question of law arises when there is doubt as to what
the law is on a certain state of facts, while there is a
question of fact when the doubt arises as to the truth or
falsity of the alleged facts. For a question to be one of
law, the same must not involve an examination of the
probative value of the evidence presented by the
litigants or any of them. The resolution of the issue must
rest solely on what the law provides on the given set of
circumstances. Once it is clear that the issue invites a
review of the evidence presented, the question posed is
one of fact.
On the surface, the instant petition appears to merely
raise factual questions as it mainly puts in issue the
appropriate amount that is due to HRCC. However, a
more thorough analysis of the issues raised by FFCCI
would show that it actually asserts questions of law.
[G.R. No. 141897. September 24, 2001]
METRO CONSTRUCTION, INC., petitioner, vs. CHATHAM
PROPERTIES, INC., respondent.
MUNCAL
FACTS:
Respondent Chatham Properties, Inc.
(CHATHAM) and petitioner Metro Construction, Inc.
(MCI) entered into a contract for the construction of a
multi-storey building known as the Chatham House
located at the corner of Herrera and Valero Streets,
Salcedo Village, Makati City, Metro Manila.
(Details: On 21 April 1994, the parties formally
entered into a contract for the construction of the
Chatham House for the contract price of P50,000,000.00
inclusive of value-added tax, subject to adjustments in
accordance with Article 9 of the contract. On 12 July
1994, a Supplemental Contract was executed by and
between the parties whereby CHATHAM authorized MCI
to procure in behalf of the former materials, equipment,
tools, fixtures, refurbishing, furniture, and accessories
necessary for the completion of the project. The total
amount of procurement and transportation cost[s] and
expenses which may be reimbursed by MCI from
CHATHAM shall not exceed the amount of
P75,000,000.00. CHATHAMs payments to MCI totaled
P104,875,792.37, representing payments for portions of
MCIs progress billings and xxx additional charges.)
In April 1998, MCI sought to collect from
CHATHAM a sum of money for unpaid progress billings
and other charges and instituted a request for
adjudication of its claims with the CIAC (Construction
Industry Arbitration Commission).
Ruling of CIAC: The CIAC disposed of the specific
money claims by either granting or reducing them. On
Issue No. 9, i.e., whether CHATHAM failed to complete
and/or deliver the project within the approved
completion period and, if so, whether CHATHAM is liable
for liquidated damages and how much, the CIAC ruled in
this wise:
This Tribunal holds that the provision of the
contract insofar as the Overall Schedule is concerned
cannot justifiably be applied in the instant case in view of
the implied take-over of the Chatham House project by
CHATHAM. Accordingly, this Tribunal finds no necessity
to resolve whether or not MCI complete[d] and/or
deliver[ed] the project within the approved completion
period. In fact, Mr. Mercado testified that it was
CHATHAM who ultimately completed the project, with
assistance of the construction managers. In any case, this
Tribunal finds merit in RKDCCIs (RK Development and
Construction Co., Inc.) claim that MCI was in delay in the
concreting milestone and that [it] is liable for liquidated
damages therefor. WHEREFORE, judgment is hereby
rendered in favor of the Claimant [MCI] directing
Respondent [CHATHAM] to pay Claimant [MCI] the net
sum of SIXTEEN MILLION ONE HUNDRED TWENTY SIX
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
THOUSAND NINE HUNDRED TWENTY TWO & 91/100
(16,126,922.91) PESOS
Impugning the decision of the CIAC, CHATHAM instituted
a petition for review with the Court of Appeals.
(Propriety of the factual findings and conclusions of CIAC)
Ruling of CA: In upholding the decision of the
CIAC, the Court of Appeals confirmed the jurisprudential
principle that absent any showing of arbitrariness, the
CIACs findings as an administrative agency and quasi-
judicial body should not only be accorded great respect
but also given the stamp of finality. However, the Court
of Appeals found exception in the CIACs disquisition of
Issue No. 9 on the matter of liquidated damages.
The Court of Appeals concluded that the interim
takeover was necessitated by CHATHAMs insistence to
meet its own turnover dates with the buyers of the
projects units. Thus, CHATHAM was constrained to hire
subcontractors with sufficient manpower and supervision
and incur various expenses to facilitate the completion of
the project and/or assist MCI in making up for its delay.
It is clear that [MCI] is liable for liquidated damages, as
per Article 13.5 of the Construction Contract, for its
failure to complete the project within the period
stipulated in the Construction Contract and even despite
an extension of 53 days from the original schedule or of
the overall schedule of completion.
MCI filed the instant petition for review to
challenge the decision of the Court of Appeals. MCI
alleges that the Court of Appeals erred in reviewing and
reversing the CIACs factual findings, that there was an
implied takeover by CHATHAM of the project, and that
MCI was not in delay in the overall schedule. In so doing,
the Court of Appeals contravened Section 19 of
Executive Order (E.O.) No. 1008, which limits the review
of an Arbitral Award to only questions of law, thus:
Section 19. Finality of Awards The arbitral award shall be
binding upon the parties. It shall be final and
inappealable (sic) except on questions of law which shall
be appealable to the Supreme Court.
For its part, CHATHAM avers that the evolution
on the rules governing appeals from judgments,
decisions, resolutions, orders or awards of the CIAC
convincingly discloses that E.O. No. 1008 has already
been superseded. With the power of the Supreme Court
to promulgate rules concerning the protection and
enforcement of constitutional rights, pleadings, practice,
and procedure in all courts, its issuances and
amendments to the Rules on Civil Procedure, not to
mention R.A. No. 7902, as enacted by Congress,
effectively modified E.O. No. 1008.
ISSUE: WON under existing law and rules the Court of
Appeals can also review findings of facts of the
Construction Industry Arbitration Commission (CIAC).
YES
HELD:
E.O. No. 1008 vests upon the CIAC original and
exclusive jurisdiction over disputes arising from, or
connected with, contracts entered into by parties
involved in construction in the Philippines, whether the
dispute arises before or after the completion of the
contract, or after the abandonment or breach
thereof.[19] By express provision of Section 19 thereof,
the arbitral award of the CIAC is final and unappealable,
except on questions of law, which are appealable to the
Supreme Court.
The parties, however, disagree on whether the
subsequent Supreme Court issuances on appellate
procedure and R.A. No. 7902 removed from the Supreme
Court its appellate jurisdiction in Section 19 of E.O. No.
1008 and vested the same in the Court of Appeals, and
whether appeals from CIAC awards are no longer
confined to questions of law.
On 27 February 1991, this Court issued Circular
No. 1-91, which prescribes the Rules Governing Appeals
to the Court of Appeals from Final Orders or Decisions of
the Court of Tax Appeals and Quasi-Judicial Agencies.
Subsequently, on 23 February 1995, R.A. No.
7902 was enacted. It expanded the jurisdiction of the
Court of Appeals and amended for that purpose Section
9 of B.P. Blg. 129, otherwise known as the Judiciary
Reorganization Act of 1980.
Then this Court issued Administrative Circular
No. 1-95,[21] which revised Circular No. 1-91. Thereafter,
this Court promulgated the 1997 Rules on Civil
Procedure. Sections 1, 2 and 3 of Rule 43.
Through Circular No. 1-91, the Supreme Court
intended to establish a uniform procedure for the review
of the final orders or decisions of the Court of Tax
Appeals and other quasi-judicial agencies provided that
an appeal therefrom is then allowed under existing
statutes to either the Court of Appeals or the Supreme
Court. The Circular designated the Court of Appeals as
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
the reviewing body to resolve questions of fact or of law
or mixed questions of fact and law.
It is clear that Circular No. 1-91 covers the CIAC.
In the first place, it is a quasi-judicial agency. A quasi-
judicial agency or body has been defined as an organ of
government other than a court and other than a
legislature, which affects the rights of private parties
through either adjudication or rule-making. The CIACs
primary function is that of a quasi-judicial agency, which
is to adjudicate claims and/or determine rights in
accordance with procedures set forth in E.O. No. 1008.
In the second place, the language of Section 1 of
Circular No. 1-91 emphasizes the obvious inclusion of the
CIAC even if it is not named in the enumeration of quasi-
judicial agencies. The introductory words [a]mong these
agencies are preceding the enumeration of specific
quasi-judicial agencies only highlight the fact that the list
is not exclusive or conclusive.
In sum, under Circular No. 1-91, appeals from
the arbitral awards of the CIAC may be brought to the
Court of Appeals, and not to the Supreme Court alone.
The grounds for the appeal are likewise broadened to
include appeals on questions of facts and appeals
involving mixed questions of fact and law.
The jurisdiction of the Court of Appeals over
appeals from final orders or decisions of the CIAC is
further fortified by the amendments to B.P. Blg.129, as
introduced by R.A. No. 7902. With the amendments, the
Court of Appeals is vested with appellate jurisdiction
over all final judgments, decisions, resolutions, orders or
awards of Regional Trial Courts and quasi-judicial
agencies, instrumentalities, boards or commissions,
except those within the appellate jurisdiction of the
Supreme Court in accordance with the Constitution, the
Labor Code of the Philippines under Presidential Decree
No. 442, as amended, the provisions of this Act, and of
subparagraph (1) of the third paragraph and
subparagraph (4) of the fourth paragraph of Section 17 of
the Judiciary Act of 1948.
While, again, the CIAC was not specifically
named in said provision, its inclusion therein is
irrefutable. The CIAC was not expressly covered in the
exclusion. Further, it is a quasi-judicial agency or
instrumentality.
Any remaining doubt on the procedural
mutation of the provisions on appeal in E.O. No. 1008,
vis--vis Circular No. 1-91 and R.A. No. 7902, was
completely removed with the issuance by the Supreme
Court of Revised Administrative Circular No. 1-95 and the
1997 Rules of Civil Procedure. Both categorically include
the CIAC in the enumeration of quasi-judicial agencies
comprehended therein. Section 3 of the former and
Section 3, Rule 43 of the latter, explicitly expand the
issues that may be raised in an appeal from quasi-judicial
agencies or instrumentalities to the Court of Appeals
within the period and in the manner therein provided.
Indisputably, the review of the CIAC award may involve
either questions of fact, of law, or of fact and law.
In view of all the foregoing, we reject MCIs
submission that Circular No. 1-91, B.P. Blg. 129, as
amended by R.A. 7902, Revised Administrative Circular 1-
95, and Rule 43 of the 1997 Rules of Civil Procedure
failed to efficaciously modify the provision on appeals in
E.O. No. 1008. We further discard MCIs claim that these
amendments have the effect of merely changing the
forum for appeal from the Supreme Court to the Court of
Appeals.
G.R. No. 110434 December 13, 1993
HI-PRECISION STEEL CENTER, INC., petitioner, vs. LIM
KIM STEEL BUILDERS, INC., and CONSTRUCTION
INDUSTRY ARBITRATION COMMISSION,respondents.
BENIGA
FACTS:
Hi-Precision entered into a contract with Steel Builders
under which the latter as Contractor was to complete a
P21 Million construction project owned by the former
within a period of 153 days, i.e.from 8 May 1990 to 8
October 1990. The project completion date was first
moved to 4 November 1990. On that date, however, only
75.8674% of the project was actually completed.
Petitioner attributed this non-completion to Steel
Builders which allegedly had frequently incurred delays
during the original contract period and the extension
period. Upon the other hand, Steel Builders insisted that
the delays in the project were either excusable or due to
Hi-Precision's own fault and issuance of change orders.
The project was taken over on 7 November 1990, and
eventually completed on February 1991, by Hi-Precision.
Steel Builders filed a "Request for Adjudication" with
CIAC. In its Complaint filed with the CIAC, Steel Builders
sought payment of its unpaid progress buildings, alleged
unearned profits and other receivables. Hi-Precision,
upon the other hand, in its Answer and Amended
Answer, claimed actual and liquidated damages,
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reimbursement of alleged additional costs it had incurred
in order to complete the project and attorney's fees.
The CIAC formed an Arbitral Tribunal with three (3)
members, two (2) being appointed upon nomination of
Hi-Precision and Steel Builders, respectively; the third
member (the Chairman) was appointed by the CIAC as a
common nominee of the two (2) parties. On the
Chairman was a lawyer. After the arbitration proceeding,
the Arbitral Tribunal rendered a unanimous Award
ordering Hi-Precision to pay Steel Builders.
A preliminary point needs to be made. We note that the
Arbitral Tribunal has not been impleaded as a respondent
in the Petition at bar. The CIAC has indeed been
impleaded; however, the Arbitral Award was not
rendered by the CIAC, but rather by the Arbitral Tribunal.
Moreover, under Section 20 of Executive Order No. 1008,
dated 4 February 1985, as amended, it is the Arbitral
Tribunal, or the single Arbitrator, with the concurrence of
the CIAC, which issues the writ of execution requiring any
sheriff or other proper officer to execute the award. We
consider that the Arbitral Tribunal which rendered the
Award sought to be reviewed and set aside, should be
impleaded even though the defense of its Award would
presumably have to be carried by the prevailing party.
Petitioner Hi-Precision apparently seeks review of both
under Rule 45 and Rule 65 of the Rules of Court. We do
not find it necessary to rule which of the two: a petition
for review under Rule 45 or a petition for certiorari under
Rule 65 is necessary under Executive Order No. 1008,
as amended; this issue was, in any case, not squarely
raised by either party and has not been properly and
adequately litigated.
ISSUES:
(a) Petitioner asks this Court to correct legal errors
committed by the Arbitral Tribunal, which at the same
time constitute grave abuse of discretion amounting to
lack of jurisdiction on the part of the Arbitral Tribunal;
and
(b) Should the supposed errors petitioner asks us to
correct be characterized as errors of fact, such factual
errors should nonetheless be reviewed because there
was "grave abuse of discretion" in the misapprehension
of facts on the part of the Arbitral Tribunal.
RULING:
Executive Order No. 1008, as amended, provides, in its
Section 19, as follows:
Sec. 19. Finality of Awards. The arbitral award
shall be binding upon the parties. It shall be final
and inappealable except on questions of law
which shall be appealable to the Supreme Court.
Section 19 makes it crystal clear that questions of fact
cannot be raised in proceedings before the Supreme
Court which is not a trier of facts in respect of an
arbitral award rendered under the aegis of the CIAC.
Consideration of the animating purpose of voluntary
arbitration in general, and arbitration under the aegis of
the CIAC in particular, requires us to apply rigorously the
above principle embodied in Section 19 that the Arbitral
Tribunal's findings of fact shall be final and inappealable.
Voluntary arbitration involves the reference of a dispute
to an impartial body, the members of which are chosen
by the parties themselves, which parties freely consent in
advance to abide by the arbitral award issued after
proceedings where both parties had the opportunity to
be heard. The basic objective is to provide a speedy and
inexpensive method of settling disputes by allowing the
parties to avoid the formalities, delay, expense and
aggravation which commonly accompany ordinary
litigation, especially litigation which goes through the
entire hierarchy of courts. Executive Order No. 1008
created an arbitration facility to which the construction
industry in the Philippines can have recourse. The
Executive Order was enacted to encourage the early and
expeditious settlement of disputes in the construction
industry, a public policy the implementation of which is
necessary and important for the realization of national
development goals.
Aware of the objective of voluntary arbitration in the
labor field, in the construction industry, and in any other
area for that matter, the Court will not assist one or the
other or even both parties in any effort to subvert or
defeat that objective for their private purposes. The
Court will not review the factual findings of an arbitral
tribunal upon the artful allegation that such body had
"misapprehended the facts" and will not pass upon issues
which are, at bottom, issues of fact, no matter how
cleverly disguised they might be as "legal questions." The
parties here had recourse to arbitration and chose the
arbitrators themselves; they must have had confidence in
such arbitrators. The Court will not, therefore, permit the
parties to relitigate before it the issues of facts previously
presented and argued before the Arbitral Tribunal, save
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Atty.Catherine Guerzo-Barrion [3-MANRESA 2015-16]
only where a very clear showing is made that, in reaching
its factual conclusions, the Arbitral Tribunal committed an
error so egregious and hurtful to one party as to
constitute a grave abuse of discretion resulting in lack or
loss of jurisdiction. Prototypical examples would be
factual conclusions of the Tribunal which resulted in
deprivation of one or the other party of a fair
opportunity to present its position before the Arbitral
Tribunal, and an award obtained through fraud or the
corruption of arbitrators. Any other, more relaxed, rule
would result in setting at naught the basic objective of a
voluntary arbitration and would reduce arbitration to a
largely inutile institution.
Examination of the Petition at bar reveals that it is
essentially an attempt to re-assert and re-litigate before
this Court the detailed or itemized factual claims made
before the Arbitral Tribunal under a general averment
that the Arbitral Tribunal had "misapprehended the
facts" submitted to it. In the present Petition, too, Hi-
Precision claims that the Arbitral Tribunal had committed
grave abuse of discretion amounting to lack of
jurisdiction in reaching its factual and legal conclusions.
We consider that in asking this Court to go over each
individual claim submitted by it and each individual
countering claim submitted by Steel Builders to the
Arbitral Tribunal, petitioner Hi-Precision is asking this
Court to pass upon claims which are either clearly and
directly factual in nature or require previous
determination of factual issues. This upon the one hand.
Upon the other hand, the Court considers that petitioner
Hi-Precision has failed to show any serious errors of law
amounting to grave abuse of discretion resulting in lack
of jurisdiction on the part of the Arbitral Tribunal, in
either the methods employed or the results reached by
the Arbitral Tribunal, in disposing of the detailed claims
of the respective parties.
WHEREFORE, for all the foregoing, the Petition is hereby
DISMISSED for lack of merit. Costs against petitioner. SO
ORDERED.
CARGILL PHILIPPINES, INC. vs SAN FERNANDO REGALA
TRADING, INC.
BONIFACIO
FACTS:
On June 18, 1998, respondent San Fernando
Regala Trading, Inc. filed with the Regional Trial
Court (RTC) of Makati City a Complaint for
Rescission of Contract with Damages against
Cargill. In its Complaint, respondent alleged that
it was engaged in buying and selling of molasses
and petitioner was one of its various sources
from whom it purchased molasses.
Petitioner, as seller, failed to comply with its
obligations under the contract, despite demands
from respondent, thus, the latter prayed for
rescission of the contract and payment of
damages.
On July 24, 1998, petitioner filed a Motion to
Dismiss/Suspend Proceedings and To Refer
Controversy to Voluntary Arbitration,[4]
wherein it argued that the alleged contract
between the parties, dated July 11, 1996, was
never consummated because respondent never
returned the proposed agreement bearing its
written acceptance or conformity nor did
respondent open the Irrevocable Letter of
Credit at sight.
It (Cargill) claimed that the contract contained
an arbitration clause, to wit:
o Any dispute which the Buyer and Seller
may not be able to settle by mutual
agreement shall be settled by
arbitration in the City of New York
before the American Arbitration
Association. The Arbitration Award
shall be final and binding on both
parties.
o that respondent must first comply with
the arbitration clause before resorting
to court, thus, the RTC must either
dismiss the case or suspend the
proceedings and direct the parties to
proceed with arbitration, pursuant to
Sections 6 and 7[of Republic Act (R.A.)
No. 876, or the Arbitration Law.
Respondent (San Fernando) filed an Opposition,
wherein it argued that the RTC has jurisdiction
over the action for rescission of contract and
could not be changed by the subject arbitration
clause. It cited cases wherein arbitration
clauses, such as the subject clause in the
contract, had been struck down as void for
being contrary to public policy since it provided
that the arbitration award shall be final and
binding on both parties, thus, ousting the courts
of jurisdiction.
RTC DENIED Cargills Motion To
Dismiss/Suspend Proceedings and To Refer
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Controversy To Voluntary Arbitration. RTC did
not find the suspension of the proceedings
warranted, since the Arbitration Law
contemplates an arbitration proceeding that
must be conducted in the Philippines under the
jurisdiction and control of the RTC; and before
an arbitrator who resides in the country; and
that the arbitral award is subject to court
approval, disapproval and modification, and that
there must be an appeal from the judgment of
the RTC.
CA found that stipulation providing for
arbitration in contractual obligation is both valid
and constitutional; that arbitration as an
alternative mode of dispute resolution has long
been accepted in our jurisdiction and expressly
provided for in the Civil Code; that R.A. No. 876
(the Arbitration Law) also expressly authorized
the arbitration of domestic disputes.
Notwithstanding such findings, the CA still held
that the case cannot be brought under the
Arbitration Law for the purpose of suspending
the proceedings before the RTC, since in its
Motion to Dismiss/Suspend proceedings,
petitioner alleged, as one of the grounds
thereof, that the subject contract between the
parties did not exist or it was invalid; that the
said contract bearing the arbitration clause was
never consummated by the parties, thus, it was
proper that such issue be first resolved by the
court through an appropriate trial; that the issue
involved a question of fact that the RTC should
first resolve. Arbitration is not proper when one
of the parties repudiated the existence or
validity of the contract.
ISSUE:
WON CA erred in finding that this case cannot be
brought under the arbitration law for the purpose of
suspending the proceedings in the RTC? YES
(Doctrine of Separability/Severability applies)
RULING:
In the Gonzales case, which the CA relied upon for not
ordering arbitration, had been modified upon a motion
for reconsideration in this wise:
x x x The adjudication of the petition in G.R. No. 167994
effectively modifies part of the Decision dated 28
February 2005 in G.R. No. 161957. Hence, we now hold
that the validity of the contract containing the
agreement to submit to arbitration does not affect the
applicability of the arbitration clause itself. A contrary
ruling would suggest that a party's mere repudiation of
the main contract is sufficient to avoid arbitration. That
is exactly the situation that the separability doctrine, as
well as jurisprudence applying it, seeks to avoid. We
add that when it was declared in G.R. No. 161957 that
the case should not be brought for arbitration, it should
be clarified that the case referred to is the case actually
filed by Gonzales before the DENR Panel of Arbitrators,
which was for the nullification of the main contract on
the ground of fraud, as it had already been determined
that the case should have been brought before the
regular courts involving as it did judicial issues.
In so ruling that the validity of the contract containing
the arbitration agreement does not affect the
applicability of the arbitration clause itself, we then
applied the doctrine of separability, thus:
The doctrine of separability, or severability as other
writers call it, enunciates that an arbitration agreement is
independent of the main contract. The arbitration
agreement is to be treated as a separate agreement and
the arbitration agreement does not automatically
terminate when the contract of which it is a part comes
to an end.The separability of the arbitration
agreement is especially significant to the determination
of whether the invalidity of the main contract also
nullifies the arbitration clause. Indeed, the doctrine
denotes that the invalidity of the main contract, also
referred to as the "container" contract, does not affect
the validity of the arbitration agreement. Irrespective of
the fact that the main contract is invalid, the arbitration
clause/agreement still remains valid and enforceable.
Applying the Gonzales ruling, an arbitration agreement
which forms part of the main contract shall not be
regarded as invalid or non-existent just because the main
contract is invalid or did not come into existence, since
the arbitration agreement shall be treated as a separate
agreement independent of the main contract. To
reiterate. a contrary ruling would suggest that a party's
mere repudiation of the main contract is sufficient to
avoid arbitration and that is exactly the situation that the
separability doctrine sought to avoid. Thus, we find that
even the party who has repudiated the main contract is
not prevented from enforcing its arbitration clause.
32