JOHN PAUL T.

ROMERO
ALTERNATIVE DISPUTE RESOLUTION CASE DIGEST
CASES 6-10

RIZAL COMMERCIAL BANKING CORPORATION vs MAGWIN MARKETING

CORPORATION

FACTS:
Petitioner RCBC filed a complaint for recovery of a sum of money against Magwin Marketing
Corporation, Nelson Tiu, Benito Sy and Anderson Uy. Discussions between petitioner and respondents
were undertaken to restructure the indebtedness of respondent. Petitioner approved a debt payment
scheme for the corporation which was communicated to the latter by means of a letter for the conformity
of its officers and respondent. Only respondent Nelson Tiu affixed his signature on the letter to signify his
agreement to the terms and conditions of the restructuring.

The trial court dismissed the case for failure to prosecute its action for an unreasonable length of time.
Petitioner moved for reconsideration and filed a Manifestation and Motion to Set Case for Pre-Trial
Conference alleging that only defendant Nelson Tiu had affixed his signature on the letter which informed
the defendants that petitioner already approved defendant Magwin Marketing Corporations request for
restructuring of its loan obligations. The trial court denied petitioner's motion to calendar the Case for pre-
trial.

ISSUE:
Whether or not failure to compromise warrants procedural sanction.

HELD:
A compromise agreement or amicable settlement is a remedy strongly encouraged under our jurisdiction.
However, the failure to consummate one does not warrant any procedural sanction, much less provide an
authority for the court to jettison the case.

This Court's ruling is pursuant to the case of Goldloop Properties, Inc. v. Court of Appeals, where it was
held that the trial court cannot dismiss a complaint for failure of the parties to submit a compromise
agreement.
JOHN PAUL T. ROMERO
ALTERNATIVE DISPUTE RESOLUTION CASE DIGEST
CASES 6-10

METRO CONSTRUCTION INC. vs CATHAM PROPERTIES, INC

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. 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. The preliminary
conference before the CIAC started in June 1998 and was concluded a month after with the signing of the
Terms of Reference (TOR) of the Case. In the meantime, the TOR was amended and finalized on 19
August 1998. The facts, as admitted by the parties before the CIAC and incorporated in the original TOR,
are as follows :

1. On 21 April 1994, the parties formally entered into a contract for the construction of the
"Chatham House" . . . for the contract price of price of P50,000,000.00

2. 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, etc.

3. Under Section I.04 of the Supplemental Contract, 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.

4. In the course of the construction, Change Orders No. 1, 4, 8A, 11, 12 and 13 were implemented,

5. CHATHAM reimbursed MCI the amount of P60,000.00 corresponding to bonuses advanced to its
workers by the latter for the 14th, 16th, and 17th floors.

6. CHATHAM's payments to MCI totaled P104,875,792.37, representing payments for portions of

MCI's progress billings and x x x additional charges..

In the resolution of these issues, the CIAC discovered significant data, which were not evident or explicit
in the documents and records but otherwise revealed or elicited during the hearings, which the CIAC
deemed material and relevant to the complete adjudication of the case

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.

CIAC rendered JUdgement in favor of the Claimant [MCI] directing Respondent [CHATHAM] to pay
Claimant [MCI] the net sum of SIXTEEN MILLION ONE HUNDRED TWENTY SIX 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.

In upholding the decision of the CIAC, the Court of Appeals confirmed the jurisprudential principle that
absent any showing of arbitrariness, the CIAC's 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 CIAC's disquisition of Issue No.9 on the matter of liquidated damages.

ISSUE :
JOHN PAUL T. ROMERO
ALTERNATIVE DISPUTE RESOLUTION CASE DIGEST
CASES 6-10

Whether or not under existing law and rules the Court of Appeals can also review findings of facts of the
Construction Industry Arbitration Commission (CIAC).

HELD :
EO. No. 1008 vest 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.
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 CISC awards are
no longer confined to questions of law.

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. The Circular
designated the Court of Appeals as 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. 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. 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 RA. 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.". In view of all the foregoing, The Supreme Court
rejects MCI's submission that Circular No. 1-91, B.P. Blg. 129, as amended by RA. 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.

PHILROCK VS CONSTRUCTION INDUSTRY ARBITRATION COMMISSION (CIAC)

JOHN PAUL T. ROMERO
ALTERNATIVE DISPUTE RESOLUTION CASE DIGEST
CASES 6-10

FACTS :
Private respondents, filed a Complaint for damages against Philrock and seven of its officers and
engineers with the Regional Trial Court of Quezon City, Branch 82. The trial court issued an Order
dismissing the case and referring the same to the CIAC because the Cid spouses and Philrock had filed an
Agreement to Arbitrate with the CIAC. Preliminary conferences were held among the parties and their
appointed arbitrators. At these conferences, disagreements arose as to:

1) whether moral and exemplary damages and tort should be included as an issue along with breach
of contract, and

2) whether the seven officers and engineers of Philrock who are not parties to the Agreement to
Arbitrate should be included in the arbitration proceedings.

No common ground could be reached by the parties, hence, on April 2, 1994, both the Cid spouses and
Philrock requested that the case be remanded to the trial court.

On June 13, 1995, The trial court declared that it no longer had jurisdiction over the case and ordered the
records of the case to be remanded anew to the CIAC for arbitral proceedings. the CIAC resumed
conducting preliminary conferences. On August 21, 1995, herein [P]etitioner Philrock requested to
suspend the proceedings until the court clarified its ruling in the Order dated June 13, 1995

Petioner, Philrock, argued that said Order was based on a mistaken premise that 'the proceedings in the
CIAC fell through because of the refusal of Philrock to include the issue of damages therein,' whereas the
true reason for the withdrawal of the case from the CIAC was due to Philrock's opposition to the inclusion
of its seven officers and engineers, who did not give their consent to arbitration, as party defendants

Respondent, manifested that she was willing to exclude the seven officers and engineers of Philrock as
parties to the case so as to facilitate or expedite the proceedings.

The Arbitral Tribunal denied Philrock's request for the suspension of the proceedings. The parties then
proceeded to finalize, approve and sign the Terms of Reference. Philrock's counsel and representative,
Atty. Pericles C. Consunji affixed his signature to said Terms of Reference which stated that 'the parties
agree that their differences be settled by an Arbitral Tribunal.

On September 12, 1995, [P]etitioner Philrock filed its Motion to Dismiss, alleging therein that the CIAC
had lost jurisdiction to hear the arbitration case due to the parties' withdrawal of their consent to arbitrate.
The motion was denied. public respondent ordered the parties to appear before it on November 28, 1995
for the continuation of the arbitral proceedings, and on February 7, 1996, public respondent directed
[P]etitioner Philrock to set two hearing dates in the month of February to present its evidence and to pay
all fees assessed by it, otherwise Philrock would be deemed to have waived its right to present evidence.

Judgment is rendered in favor of the Claimant, directing Respondent to pay.

Before the CA, petitioner filed a Petition for Review, docketed as CA-GR SP No. 42443, contesting the
jurisdiction of the CIAC and assailing the propriety of the monetary awards in favor of respondent
spouses. This Petition was consolidated by the CA with CA-GR SP No. 39781, a Petition for Certiorari
earlier elevated by petitioner questioning the jurisdiction of the CIAC.
JOHN PAUL T. ROMERO
ALTERNATIVE DISPUTE RESOLUTION CASE DIGEST
CASES 6-10

ISSUE :
Whether or not the CIAC could take jurisdiction over the case of Respondent Cid spouses against
Petitioner Philrock after the case had been dismissed by both the RTC and the CIAC.

HELD :
Section 4 of Executive Order 1008 expressly vests in the CIAC original and exclusive jurisdiction over
disputes arising from or connected with construction contracts entered into by parties that have agreed to
submit their dispute to voluntary arbitration. It is undisputed that the parties submitted themselves to the
jurisdiction of the Commission by virtue of their Agreement to Arbitrate dated November 24, 1993.
Signatories to the Agreement were Atty. Ismael J. Andres and Perry Y. Uy (president of Philippine Rock
Products, Inc.) for petitioner, and Nelia G. Cid and Atty. Esteban A. Bautista for respondent spouses.

Petitioner claims, on the other hand, that this Agreement was withdrawn by respondents on April 8, 1994,
because of the exclusion of the seven engineers of petitioners in the arbitration case. This contention is
untenable. First, private respondents removed the obstacle to the continuation of the arbitration, precisely
by withdrawing their objection to the exclusion of the seven engineers. Second, petitioner continued
participating in the arbitration even after the CIAC Order had been issued. Finally, as pointed out by the
solicitor general, petitioner maneuvered to avoid the RTCs final resolution of the dispute by arguing that
the regular court also lost jurisdiction after the arbitral tribunals April 13, 1994 Order referring the case
back to the RTC. After submitting itself to arbitration proceedings and actively participating therein,
petitioner is estopped from assailing the jurisdiction of the CIAC, merely because the latter rendered an
adverse decision.
JOHN PAUL T. ROMERO
ALTERNATIVE DISPUTE RESOLUTION CASE DIGEST
CASES 6-10

SEA-LAND SERVICE, INC. vs. COURT OF APPEALS, A.P. MOLLER/ MAERSK LINE

FACTS:
Sea-Land Services and private respondent A.P. Moller/ Maersk Line (AMML) entered into a vessel
sharing agreement whereby they mutually agreed to purchase, share and exchange needed space for cargo
in their respective containerships. Under the Agreement, they could be, depending on the occasion, either
a principal carrier or a containership operator.

Florex International delivered to AMML cargo. The corresponding Bill of Lading was issued to Florex by
respondent AMML. Pursuant to the Agreement, respondent AMML loaded the subject cargo on MS
Sealand Pacer. Therefore, respondent AMML was the principal carrier while petitioner was the
containership operator.

Consignee refused to pay for the cargo, alleging that delivery thereof was delayed. Florex filed a
complaint against respondent AMML for reimbursement of the value of the cargo and other charges.
AMML alleges that Sea-Land should be liable and filed a third-party complaint against petitioner.
Petitioner filed a motion to dismiss the third-party complaint on the ground that there exists an arbitration
agreement between it and respondent AMML. The petition was denied.

ISSUE:
Whether or not the CA erred in denying petitioner's prayer for arbitration

HELD:
Yes. For respondent Court of Appeals to say that the terms of the contract do not require arbitration as a
condition precedent to judicial action is erroneous. In the light of the Agreement clauses, it is clear that
arbitration is the mode provided by which respondent AMML as Principal Carrier can seek damages
and/or indemnity from petitioner, as Containership Operator.
JOHN PAUL T. ROMERO
ALTERNATIVE DISPUTE RESOLUTION CASE DIGEST
CASES 6-10

MAGELLAN CAPITAL MANAGEMENT CORPORATION vs. ROLANDO M. ZOSA

FACTS:
As appointed manager of Magellan Capital Holdings (MCHC), Magellan Capital Management
Corporation (MCMC) appointed respondent Zosa as President. The appointment was embodied in the
Employment Agreement which shall cease if the management agreement between MCHC and MCMC
ceases unless terminated pursuant to the Employment Agreement.

Majority of MCHC's Board of Directors decided not to re-elect Zosa on account of loss of trust and
confidence arising. Nevertheless, Zosa was elected to a new position as MCHC's Vice-
Chairman/Chairman for New Ventures Development. Zosa then filed his resignation to the company on
the ground that said position had less responsibility and scope than President and Chief Executive Officer.
He demanded that he be given termination benefits as provided for in the Employment Agreement.

MCHC did not accept respondent Zosa's resignation, but instead informed him that the Employment
Agreement is terminated for cause, in accordance with the said agreement. Disagreeing with the position
taken by petitioners, Zosa invoked the Arbitration Clause of the Employment Agreement. However,
instead of submitting the dispute to arbitration, Zosa, filed an action for damages against petitioners
before the Regional Trial Court of Cebu to enforce his benefits under the Employment Agreement.

ISSUE: Whether or not the arbitration clause is valid and effective.

HELD:

The Arbitration clause is invalid in so far as the composition of panel of arbitrators is concern.

Petitioners MCMC and MCHC represent the same interest. Thus, it could never be expected, in the
arbitration proceedings, that they would not protect and preserve their own interest, much less, would
both or either favor the interest of the plaintiff. The arbitration law, as all other laws, is intended for the
good and welfare of everybody.

The two petitioners have one arbitrator each to compose the panel of three arbitrators. Hence, respondent
would never get or receive justice and fairness in the arbitration proceedings from the panel of arbitrators.
In fairness and justice to the both petitioners which represent the same interest should be considered as
one and should be entitled to only one arbitrator to represent them in the arbitration proceedings.