REPUBLIC OF THE PHILIPPINES, Represented by the POLLUTION the CBRP the amount of P30,000.
ount of P30,000.00 per day, computed from the
ADJUDICATIONBOARD (DENR) vs. MARCOPPER MINING CORPORATION
July 10, 2000
FACTS: Respondent MMC was issued a temporary permit to operate
a tailings sea disposal system for the period from October 31, 1985
to October 21, 1986. Before it expired, MMC filed an application for
the renewal thereof with the National Pollution Control Commission
(NPCC). On September 20, 1986, MMC received a telegraphic
order from the NPCC directing the former to "(i)mmediately cease
and desist from discharging mine tailings into Calancan Bay." The
directive was brought about through the efforts of certain religious
groups which had been protesting MMC’s tailings sea disposal
system. MMC requested the NPCC to refrain from implementing the
aforesaid directive until its adoption of an alternative tailings
disposal system.
The NPCC granted MMC’s request and called a conference to
discuss possible alternative disposal systems. In the meantime, the
National Pollution Control Commission (NPCC) was abolished by EO
No. 192dated June 10, 1987, and its powers and functions were
integrated into the Pollution Adjudication Board. On April 11, 1988,
the DENR Secretary, in his capacity as Chairman of the PAB, issued
another order directing MMC to "cease and desist from discharging
mine tailings into Calancan Bay." This was appealed by the MMC
with the Office of the President (OP), requesting for the issuance of
a restraining order enjoining PAB from enforcing its order.
The Office of the President granted MMC’s appeal; thus, Pollution
Adjudication Board, are hereby enjoined from enforcing its cease
and desist order of April 15, 1988 pending resolution by this Office of
respondent-appellant’s appeal from said orders. It is further
directed that the status quo obtaining prior to the issuance of said
cease and desist order be maintained until further orders from this
Office.
It is understood, however that during the restraining order’s efficacy
the Calancan Bay Rehabilitation Project (CBRP) was created, and
MMC is required to remit the undertaking of the amount of
P30,000.00 a day, starting from May 13, 1988 to the ETF thereof.
MMC started paying until on June 30, 1991, it stopped from making
further deposits in the ETF alleging by reason of its stop in
discharging its tailings in the Calancan Bay. On February 5, 1993,
the Office of the President rendered a decision in O.P. Case
actually dismissing the appeal; affirming the cease and desist Order
issued by the PAB; and lifting the TRO.
In a letter dated January 22, 199712 , Municipal Mayor Wilfredo A.
Red of Sta. Cruz, Marinduque informed the PAB that MMC stopped
remitting the amount of 30,000.00 per day as of July 1, 1991 to the
ETF of the CBRP. April 23, 1997, the PAB ruled that the obligation of
MMC to deposit P30,000.00 per day to the ETF of the CBRP subsists,
as provided for in the Order of the Office of the President dated
May 13, 1988, during the "efficacy of said order restraining the PAB
from enforcing its cease and desist order against MMC".
Since the Order was lifted only on February 5, 1993, the obligation of
MMC to remit was likewise extinguished only on said date and not
earlier as contended by MMC from the time it ceased dumping
tailings into the Bay on July 1, 1991. MMC is hereby ordered to pay
1
date Marcopper Mining Corporation stopped paying on 01 July
1991, up to the formal lifting of the subject Order from the Office of
the President on 05 February 1993.
MMC assailed the aforequoted Order dated April 23, 1997 of the
PAB as null and void for having been issued without jurisdiction or
with grave abuse of discretion in a petition for Certiorari and
Prohibition (with prayer for temporary restraining order and
preliminary injunction) before the Court of Appeals which was
docketed as CA-G.R. No. SP-44656. The Court of Appeals ruled in
favor of MMC ratiocinating that PAB’s jurisdiction to try pollution
cases is transferred to the mines regional director by virtue of RA
7942 otherwise known as the Philippine Mining Act of 1995
amending the PAB’s jurisdiction given under PD 984.
ISSUE: WON the Pollution Adjudication Board has retained its
jurisdiction over the issuance, renewal or denial of permits for the
discharge of mine tailings.
RULING: Yes.
PAB was created and granted under the same EO 192 broad
powers to adjudicate pollution cases in general. Thus,
SEC. 19. Pollution Adjudication Board. – There is hereby created a
Pollution Adjudication Board under the Office of the Secretary. The
Board shall be composed of the Secretary as Chairman, two (2)
Undersecretaries as may be designated by the Secretary, the
Director of Environmental management, and three (3) others to be
designated by the Secretary as members. The Board shall assume
the powers and functions of the Commission/Commissioners of the
National Pollution Control Commission with respect to the
adjudication of pollution cases under Republic Act 3931 and
Presidential Decree 984, particularly with respect to Section 6 letters
e, f, g, j, k, and p of P.D. 984. The Environmental Management
Bureau shall serve as the Secretariat of the Board. These powers
and functions may be delegated to the regional offices of the
Department in accordance with rules and regulations to be
promulgated by the Board.20
SEC. 6. Powers and Functions.
(f) Make, alter or modify orders requiring the discontinuance of
pollution specifying the conditions and the time within which such
discontinuance must be accomplished.
(g) Issue, renew, or deny permits, under such conditions as it may
determine to be reasonable, for the prevention and abatement of
pollution, for the discharge of sewage, industrial waste, or for the
installation or operation of sewage works and industrial disposal
system or parts thereof: Provided, however, That the Commission, by
rules and regulations, may require subdivisions, condominium,
hospitals, public buildings and other similar human settlements to
put up appropriate central sewerage system and sewage
treatment works, except that no permits shall be required to any
sewage works or changes to or extensions of existing works that
discharge only domestic or sanitary wastes from a singles residential
building provided with septic tanks or their equivalent. The
Commission may impose reasonable fees and charges for the
issuance or renewal of all permits required herein.
Section 7(a) of P.D. No. 984 further provides in part:
"Sec. 7(a) Public Hearing. – Public hearing shall be conducted by
the Commissioner, Deputy Commissioner or any senior official duly
designated by the Commissioner prior to issuance or promulgation
of any order or decision by the Commissioner requiring the
discontinuance of discharge of sewage, industrial wastes and other
wastes into the water, air or land resources of the Philippines as
provided in the Decree: provided, that whenever the Commission
finds a prima facie evidence that the discharged sewage or wastes
are of immediate threat to life, public health, safety or Welfare, or
to animal or plant life, or exceeds the allowable standards set by
the Commission, the Commissioner may issue and ex-parte order
directing the discontinuance of the same or the temporary
suspension or cessation of operation of the establishment or person
generating such sewage or wasteswithout the necessity of a prior
public hearing. x x x . (underscoring supplied).
RA 7942 (Philippine Mining Act of 1995):
SEC. 67. Power to Issue Orders. – The mines regional director shall, in
consultation with the Environmental Management Bureau, forthwith
or within such time as specified in his order, require the contractor
to remedy any practice connected with mining or quarrying
operations, which is not in accordance with safety and anti-
pollution laws and regulations. In case of imminent danger to life or
property, the mines regional director may summarily suspend the
mining or quarrying operations until the danger is removed, or
appropriate measures are taken by the contractor or permittee.
There is no irreconcilable conflict between the two laws. Section 19
of EO 192 vested the PAB with the specific power to adjudicate
pollution cases in general. Sec. 2, par. (a) of PD 984 defines the term
"pollution" as referring to any alteration of the physical, chemical
and biological properties of any water, air and/or land resources of
the Philippines , or any discharge thereto of any liquid, gaseous or
solid wastes as will or is likely to create or to render such water, air
and land resources harmful, detrimental or injurious to public health,
safety or welfare or which will adversely affect their utilization for
domestic, commercial, industrial, agricultural, recreational or other
legitimate purposes.
On the other hand, the authority of the mines regional director is
complementary to that of the PAB. Section 66 of RA 7942 gives the
mines regional director exclusive jurisdiction over the safety
inspection of all installations, surface or underground in mining
operations. Section 67 thereof vests upon the regional director
power to issue orders requiring a contractor to remedy any practice
connected with mining or quarrying operations which is not in
accordance with safety and anti-pollution laws and regulations;
and to summarily suspend mining or quarrying operations in case of
imminent danger to life or property.
In addition, an environmental clearance certificate is required
based on an environment impact assessment. The law also requires
contractors and permittees to rehabilitate the mined-out areas,
and set up a mine rehabilitation fund. Significantly, the law allows
and encourages people’s organizations and non-governmental
organizations to participate in ensuring that contractors/permittees
shall observe all the requirements of environmental protection.
From the foregoing, it readily appears that the power of the mines
regional director does not foreclose PAB’s authority to determine
and act on complaints filed before it. The power granted to the
mines regional director to issue orders requiring the contractor to
2
remedy any practice connected with mining or quarrying
operations or to summarily suspend the same in cases of violation of
pollution laws is for purposes of effectively regulating and
monitoring activities within mining operations and installations
pursuant to the environmental protection and enhancement
program undertaken by contractors and permittees in procuring
their mining permit. While the mines regional director has express
administrative and regulatory powers over mining operations and
installations, it has no adjudicative powers over complaints for
violation of pollution control statutes and regulations. There is no
genuine conflict between RA 7942 and RA 3931 as amended by PD
984 that precludes their co-existence.
in Laguna Lake Development Authority vs. Court of Appeals,23 this
Court held that adjudication of pollution cases generally pertains to
the Pollution Adjudication Board (PAB) except where the special
law provides for another forum. However, contrary to the ruling of
the Court of Appeals, RA 7942 does not provide for another forum
inasmuch as RA 7942 does not vest quasi-judicial powers in the
Mines Regional Director. The authority is vested and remains with
the PAB.
Ruling that PAB has jurisdiction however, the records reveal that
witness for PAB, Mr. Edel Genato, who is the Technical Resource
person of the PAB for the project admitted that the funds in the ETF
amounting to about Fourteen Million Pesos are more than sufficient
to cover the costs of rehabilitation. Hence, MMC must be declared
not to have arrears in deposits as admittedly, the ETF already has
more than sufficient funds to undertake the rehabilitation of
Calancan Bay.
G.R. No. 167994 January 22, 2007
JORGE GONZALES and PANEL OF ARBITRATORS, Petitioners,
vs.
CLIMAX MINING LTD., CLIMAX-ARIMCO MINING CORP., and
AUSTRALASIAN PHILIPPINES MINING INC.,Respondents.
Vs. HON. OSCAR B. PIMENTEL, in his capacity as PRESIDING JUDGE of
BR. 148 of the REGIONAL TRIAL COURT of MAKATI CITY, and CLIMAX-
ARIMCO MINING CORPORATION, Respondents.
FACTS: This is a consolidation of two petitions rooted in the same
disputed Addendum Contract entered into by the parties.
G.R. No. 167994. It stemmed from the petition to compel arbitration
filed by respondent Climax-Arimco before the RTC of Makati City on
31 March 2000 while the complaint of the GR 161957 for the
nullification of the Addendum Contract was pending before the
DENR Panel of Arbitrators. On March 23, 2000 Climax-Arimco had
sent Gonzales a Demand for Arbitration pursuant to Clause 19.111 of
the Addendum Contract and also in accordance with Sec. 5 of
R.A. No. 876. The petition for arbitration was subsequently filed
before the RTC of Makaki City and Climax-Arimco sought an order
to compel the parties to arbitrate pursuant to the said arbitration
clause.
April 14, 2000, Gonzales filed a motion to dismiss which he however
failed to set for hearing. On 15 May 2000, he filed an Answer with
Counterclaim,12 questioning the validity of the Addendum Contract
containing the arbitration clause. Gonzales alleged that the
Addendum Contract containing the arbitration clause is void in
view of Climax-Arimco’s acts of fraud, oppression and violation of
the Constitution. Thus, the arbitration clause, Clause 19.1, contained
in the Addendum Contract is also null and void ab initio and legally
inexistent. Gonzales RTC issued an order declaring Gonzales’s
motion to dismiss moot and academic in view of the filing of his
Answer with Counterclaim.13
On 31 May 2000, Gonzales asked the RTC to set the case for pre-
trial. on 7 July 2000, the RTC granted Gonzales’s motion and set the
case for pre-trial. Climax-Arimco then filed a motion to resolve its
pending motion to compel arbitration. On 23 August 2000, Climax-
Arimco filed a motion for reconsideration of the 24 July 2000 Order.
The RTC granted the motion and directed the parties to arbitration.
On 13 February 2001, Judge Pimentel issued the first assailed order
requiring Gonzales to proceed with arbitration proceedings and
appointing retired CA Justice as a sole arbitrator.20 Gonzales thus
filed the Rule 65 petition assailing the Orders dated 13 February
2001 and 7 March 2005 of Judge Pimentel. Gonzales contends that
public respondent Judge Pimentel acted with grave abuse of
discretion in immediately ordering the parties to proceed with
arbitration despite his proper, valid, and timely raised argument in
latter’s Answer with Counterclaim that the Addendum Contract,
containing the arbitration clause, is null and void. Gonzales sought
a temporary restraining order to prevent the enforcement of the
assailed orders directing the parties to arbitrate, and to direct
Judge Pimentel to hold a pre-trial conference and the necessary
hearings on the determination of the nullity of the Addendum
Contract.
ISSUE: WON whether it was proper for the RTC, in the proceeding to
compel arbitration under R.A. No. 876, to order the parties to
arbitrate even though the defendant therein has raised the twin
issues of validity and nullity of the Addendum Contract and,
consequently, of the arbitration clause therein.
RULING: Yes. Arbitration, as an alternative mode of settling disputes,
has long been recognized and accepted in our jurisdiction. The
Civil Code is explicit on the matter.33 R.A. No. 876 expressly
authorizes such. The enactment of R.A. No. 9285 on 2 April 2004
further institutionalized the use of alternative dispute resolution
systems, including arbitration, in the settlement of disputes.
Necessarily, a contract is required for arbitration to take place and
to be binding. R.A. No. 876 recognizes the contractual nature of the
arbitration agreement.
Sec. 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.
Thus, we held in Manila Electric Co. v. Pasay Transportation
Co.35 that a submission to arbitration is a contract. A clause in a
contract providing that all matters in dispute between the parties
shall be referred to arbitration is a contract,36 and in Del Monte
Corporation-USA v. Court of Appeals37 that "[t]he provision to submit
to arbitration any dispute arising therefrom and the relationship of
the parties is part of that contract and is itself a contract. As a rule,
contracts are respected as the law between the contracting
parties and produce effect as between them, their assigns and
heirs."38
3
Sec. 6 of R.A. No. 876 recognizes the contractual nature of
arbitration clauses or agreements. It provides:
Sec. 6. Hearing by court.—A party aggrieved by the failure, neglect
or refusal of another to perform under an agreement in writing
providing for 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 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.
This special proceeding is the procedural mechanism for the
enforcement of the contract to arbitrate. The jurisdiction of the
courts in relation to Sec. 6 of R.A. No. 876 as well as the nature of
the proceedings therein was expounded upon in La Naval Drug
Corporation v. Court of Appeals.39 There it was held that R.A. No.
876 explicitly confines the court's authority only to the determination
of whether or not there is an agreement in writing providing for
arbitration. In the affirmative, the statute ordains that the court shall
issue an order "summarily directing the parties to proceed with the
arbitration in accordance with the terms thereof." If the court, upon
the other hand, finds that no such agreement exists, "the
proceeding shall be dismissed."40 The cited case also stressed that
the proceedings are summary in nature.41
Implicit in the summary nature of the judicial proceedings is the
separable or independent character of the arbitration clause or
agreement. This was highlighted in the cases of Manila Electric Co.
v. Pasay Trans. Co.44and Del Monte Corporation-USA v. Court of
Appeals.45
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.47
There is reason, therefore, to rule against Gonzales when he alleges
that Judge Pimentel acted with grave abuse of discretion in
ordering the parties to proceed with arbitration. Gonzales’s
argument that the Addendum Contract is null and void and,
therefore the arbitration clause therein is void as well, is not tenable.
First, the proceeding in a petition for arbitration under R.A. No. 876 is
limited only to the resolution of the question of whether the
arbitration agreement exists. Second, the separability of the
arbitration clause from the Addendum Contract means that validity
or invalidity of the Addendum Contract will not affect the
enforceability of the agreement to arbitrate. 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. Hence, Gonzales’s petition for certiorari should be
dismissed.
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURG,
PA/AMERICAN INTERNATIONAL UNDERWRITER (PHIL.)
INC., petitioners,
vs.
STOLT-NIELSEN PHILIPPINES, INC. and COURT OF
APPEALS, respondents.
FACTS:
The United Coconut Chemicals, Inc. (hereinafter referred to as
SHIPPER) shipped 404.774 metric tons of distilled C6-C18 fatty acid
on board MT "Stolt Sceptre," a tanker owned by Stolt-Nielsen
Philippines Inc. (hereinafter referred to as CARRIER), from Bauan,
Batangas, Philippines, consigned to "Nieuwe Matex" at Rotterdam,
Netherlands, covered by Tanker Bill of Lading BL No. BAT-1. The
shipment was insured under a marine cargo policy with Petitioner
National Union Fire Insurance Company of Pittsburg (hereinafter
referred to as INSURER), a non-life American insurance corporation.
Upon receipt of the cargo by the CONSIGNEE in the Netherlands, it
was found to be discolored and totally contaminated. The claim
filed by the SHIPPER-ASSURED with the CARRIER having been
denied, the INSURER indemnified the SHIPPER pursuant to the
stipulation in the marine cargo policy covering said shipment.
On April 21, 1986 as subrogee of the SHIPPER-ASSURED, the INSURER
filed suit against the CARRIER, before the Regional Trial Court of
Makati, Branch 58 (RTC), for recovery of the sum of P1,619,469.21,
with interest, representing the amount the INSURER had paid the
SHIPPER-ASSURED. The CARRIER moved to dismiss/suspend the
proceedings on the ground that the RTC had no jurisdiction over
the claim the same being an arbitrable one. As subrogee of the
SHIPPER-ASSURED, the INSURER is subject to the provisions of the Bill
of Lading, which includes a provision that the shipment is carried
under and pursuant to the terms of the Charter Party between the
SHIPPER-ASSURED and the CARRIER providing for arbitration. The
INSURER opposed the dismissal/suspension of the proceedings on
the ground that it was not legally bound to submit the claim for
arbitration inasmuch as the arbitration clause provided in the
Charter Party was not incorporated into the Bill of Lading, and that
the arbitration clause is void for being unreasonable and unjust.
ISSUE:
WON the claim of the petitioner-insurer in this case against
respondent-carrier is arbitrable.
RULING
Yes. The claim of petitioner against respondent is arbitrable.
The pertinent portion of the Bill of Lading in issue provides in part:
This shipment is carried under and pursuant to the terms of
the Charter dated December 21st 1984 at Greenwich,
Connecticut, U.S.A. between Parcel Tankers. Inc. and
United Coconut Chemicals, Ind. as Charterer and all the
terms whatsoever of the said Charter except the rate and
payment of freight specified therein apply to and govern
the rights of the parties concerned in this shipment. Copy
4
of the Charter may be obtained from the Shipper or
Charterer. (Emphasis supplied)
While the provision on arbitration in the Charter Party reads:
H. Special Provisions.
xxx xxx xxx
4. Arbitration. Any dispute arising from the making,
performance or termination of this Charter Party shall be
settled in New York, Owner and Charterer each
appointing an arbitrator, who shall be a merchant, broker
or individual experienced in the shipping business; the two
thus chosen, if they cannot agree, shall nominate a third
arbitrator who shall be an admiralty lawyer. Such
arbitration shall be conducted in conformity with the
provisions and procedure of the United States arbitration
act, and a judgment of the court shall be entered upon
any award made by said arbitrator. Nothing in this clause
shall be deemed to waive Owner's right to lien on the
cargo for freight, deed of freight, or demurrage.
Clearly, the Bill of Lading incorporates by reference the terms of the
Charter Party. As the respondent Appellate Court found, the
INSURER "cannot feign ignorance of the arbitration clause since it
was already charged with notice of the existence of the charter
party due to an appropriate reference thereof in the bill of lading.
The insurer’s postulate that it cannot be bound by the Charter Party
because, as insurer, it is subrogee only with respect to the Bill of
Lading; that only the Bill of Lading should regulate the relation
among the INSURER, the holder of the Bill of Lading, and the
CARRIER and that in order to bind it, the arbitral clause in the
Charter Party should have been incorporated into the Bill of Lading
does not carry a meritorious consideration because the charter
may be made part of the contract under which the goods are
carried by an appropriate reference in the Bill of Lading. The entire
contract must be read together and its clauses interpreted in
relation to one another and not by parts. By subrogation, it became
privy to the Charter Party as fully as the SHIPPER before the latter
was indemnified, because as subrogee it stepped into the shoes of
the SHIPPER-ASSURED and is subrogated merely to the latter's rights.
It can recover only the amount that is recoverable by the assured.
And since the right of action of the SHIPPER-ASSURED is governed by
the provisions of the Bill of Lading, which includes by reference the
terms of the Charter Party, necessarily, a suit by the INSURER is
subject to the same agreements. These include the provision on
arbitration hence; the INSURER cannot avoid the binding effect of
the arbitration clause.
Arbitration, as an alternative mode of settling disputes, has long
been recognized and accepted in our jurisdiction (Chapter 2, Title
XIV, Book IV, Civil Code). Republic Act No. 876 (The Arbitration Law)
also expressly authorizes arbitration of domestic disputes. Foreign
arbitration as a system of settling commercial disputes of an
international character was likewise recognized when the
Philippines adhered to the United Nations "Convention on the
Recognition and the Enforcement of Foreign Arbitral Awards of
1958," under the 10 May 1965 Resolution No. 71 of the Philippine
Senate, giving reciprocal recognition and allowing enforcement of
international arbitration agreements between parties of different
nationalities within a contracting state. Thus, it pertinently provides:
 1. Each Contracting State shall recognize an agreement in
writing under which the parties undertake to submit to
arbitration all or any differences which have arisen or
which may arise between them in respect of a defined
legal relationship, whether contractual or not, concerning
a subject matter capable of settlement by arbitration.
2. The term "agreement in writing" shall include an arbitral
clause in a contract or an arbitration agreement, signed
by the parties or contained in an exchange of letters or
telegrams.
3. The court of a Contracting State, when seized of an
action in a matter in respect of which the parties have
made an agreement within the meaning of this article,
shall, at the request of one of the parties, refer the parties
to arbitration, unless it finds that the said agreement is null
and void, inoperative or incapable of being performed.
It has not been shown that the arbitral clause in question is null and
void, inoperative, or incapable of being performed. Nor has any
conflict been pointed out between the Charter Party and the Bill of
Lading.
In fine, referral to arbitration in New York pursuant to the arbitration
clause, and suspension of the proceedings in Civil Case No. 13498
below, pending the return of the arbitral award, is, indeed called
for.
PUROMINES, INC., petitioner, vs. COURT OF APPEAL and PHILIPP
BROTHERS OCEANIC, INC., respondents.
FACTS:
Puromines, Inc. (Puromines for brevity) and Makati Agro Trading,
Inc. (not a party in this case) entered into a contract with private
respondents Philipp Brothers Oceanic, Inc. for the sale of prilled
Urea in bulk. The Sales Contract No. S151.8.01018 provided, among
others an arbitration clause which states, thus:
"Any disputes arising under this contract shall be settled by
arbitration in London in accordance with the Arbitration Act 1950
and any statutory amendment or modification thereof. Each party
is to appoint an Arbitrator, and should they be unable to agree, the
decision of an Umpire appointed by them to be final. The Arbitrators
and Umpire are all to be commercial men and resident in London.
This submission may be made a rule of the High Court of Justice in
England by either party." 2
On or about May 22, 1988, the vessel M/V "Liliana Dimitrova" loaded
on board at Yuzhny, USSR a shipment of 15,500 metric tons prilled
Urea in bulk complete and in good order and condition for
transport to Iloilo and Manila, to be delivered to petitioner. Three
bills of lading were issued by the ship-agent in the Philippines,
Maritime Factors Inc.
Shipments covered by Bill of Lading Nos. 1 and 3 were discharged
in Manila in bad order and condition, caked, hardened and lumpy,
discolored and contaminated with rust and dirt. Damages were
valued and assessed at some amount.
Petitioner filed a complaint 3 with the trial court 4 for breach of
contract of carriage against Maritime Factors Inc. (which was not
included as respondent in this petition) as ship-agent in the
Philippines for the owners of the vessel MV "Liliana Dimitrova," while
5
private respondent, Philipp Brothers Oceanic Inc., was impleaded
as charterer of the said vessel and proper party to accord
petitioner complete relief. Philip Brothers Oceanic private
respondent herein filed a motion to dismiss dated on the ground
that the petitioner, Puromines should comply with the arbitration
clause in the sales contract. The motion to dismiss was opposed by
petitioner contending the inapplicability of the arbitration clause
inasmuch as the cause of action did not arise from a violation of
the terms of the sales contract but rather for claims of cargo
damages where there is no arbitration agreement.
ISSUE:
WON Puromines action for breach of contract of carriage against
Maritime Factors and Puromines is subject to the arbitration
provided in the sales contract.
RULING:
Yes. The sales contract is comprehensive enough to include claims
for damages arising from carriage and delivery of the goods.
Provision on arbitrations provided in the sales contract is applicable
in action for damages arising from the breach of the contract of
carriage.
As a general rule the seller has the obligation to transmit the goods
to the buyer, and concomitant thereto, the contracting of a carrier
to deliver the same. Art. 1523 of the Civil Code provides:
"Art. 1523. Where in pursuance of a contract of sale, the seller in
authorized or required to send the goods to the buyer, delivery of
the goods to a carrier, whether named by the buyer or not, for the
purpose of transmission to the buyer is deemed to be a delivery of
the goods to the buyer, except in the cases provided for in article
1503, first, second and third paragraphs, or unless a contrary intent
appear.
"Unless otherwise authorized by the buyer, the seller must take such
contract with the carrier on behalf of the buyer as may be
reasonable, having regard to the nature of the goods and the
other circumstances of the case. X X X “
The disputed sales contact provides for conditions relative to the
delivery of goods, such as date of shipment, demurrage, weight as
determined by the bill of lading at load port and more particularly
other provisions.
Hence as argued by respondent on its motion to dismiss, "the
(petitioner) derives his right to the cargo from the bill of lading
which is the contract of affreightment together with the sales
contract. Puromines is therefore bound by the provisions and terms
of said bill of lading and of the arbitration clause incorporated in
the sales contract."
Whether the liability of respondent should be based on the same
contract or that of the bill of lading, the parties are nevertheless
obligated to respect the arbitration provisions on the sales contract
and/or the bill of lading. Petitioner being a signatory and party to
the sales contract cannot escape from his obligation under the
arbitration clause as stated therein.
Arbitration has been held valid and constitutional. Unless the
agreement is such as absolutely to close the doors of the courts
against the parties, which agreement would be void, the courts will
look with favor upon such amicable arrangements and will only
interfere with great reluctance to anticipate or nullify the action of
the arbitrator. 17 "Since there obtains herein a written provision for
arbitration as well as failure on respondent's part to comply
therewith, the court a quo should order the parties to proceed to
their arbitration in accordance with the terms of their agreement
(Sec. 6 Republic Act 876). The reason for this case is that Puromines’
arguments touching upon the merits of the dispute are improperly
raised herein. They should be addressed to the arbitrators first.
Hence Puromines’ action is premature.