ALTERNATIVE DISPUTE RESOLUTION DIGEST

S.Y. 2020-2021

MODULE 1

Heirs of Salas vs. Laperal Realty

G.R. No. 13532
Facts:
Petitioners filed a complaint for rescission of several sale transactions involving land
owned by Augusto L. Salas, Jr., their predecessor-in-interest, claiming they suffered lesion of
more than one-fourth (1/4) of the value of Salas, Jr.'s land when respondent Laperal Realty
subdivided it and sold portions thereof to respondent lot buyers. The trial court dismissed the
case because they failed to resort to arbitration which was required in the original agreement
entered into by and between Salas, Jr. and Laperal Realty Corporation.
Issue:
Whether the petitioners could rescind the sale transactions and reconveyance to them of
the subdivided lots
Ruling:
The petitioners' contention is without merit. For while rescission, as a general rule, is an
arbitrable issue, they impleaded in the suit for rescission the respondent lot buyers who are
neither parties to the Agreement nor the latter's assigns or heirs. Consequently, the right to
arbitrate as provided in Article VI of the Agreement was never vested in respondent lot buyers.
Respondent Laperal Realty, as a contracting party to the Agreement, has the right to petitioners
to first arbitrate before seeking judicial relief. However, to split the proceedings into arbitration
for respondent Laperal Realty and trial for the respondent lot buyers, or to hold trial in abeyance
pending arbitration between petitioners and respondent Laperal Realty, would in effect result in
multiplicity of suits, duplicitous procedure and unnecessary delay. On the other hand, it would be
in the interest of justice if the trial court hears the complaint against all herein respondents and
adjudicates petitioners' rights as against theirs in a single and complete proceeding.

Home Bankers Savings vs. Court of Appeals

G.R. No. 115412
Facts:
While an arbitration proceeding was pending between Far East Bank Trust Company
(FEBTC) and the Home Bankers Savings and Trust Company (HBSTC), FEBTC filed an action
for sum of money and damages with preliminary attachment against HBSTC. A motion to
dismiss was filed by the latter claiming that the complaint sought to enforce an arbitral award
which did not exist yet. The trial court denied this motion and the subsequent motion for
reconsideration.
Issue:
Whether respondent may file a separate case in court over the same subject matter of
arbitration despite the pendency of that arbitration
Ruling:
Section 14 of the Arbitration Law allows any party to the arbitration proceeding to
petition the court to take measures to safeguard and/or conserve any matter which is the subject
of the dispute in arbitration. Private respondent filed an action for a sum of money with prayer

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for a writ of preliminary attachment. Undoubtedly, such action involved the same subject matter
as that in arbitration. However, the civil action was not a simple case of a money claim since
private respondent has included a prayer for a writ of preliminary attachment, which is
sanctioned by the Arbitration Law.

LM Power Engineering Corp. vs. Capitol Industrial Construction Corp.

G.R. No. 141883
Facts:
Petitioner LM Power Engineering Corporation and respondent Capitol Industrial
Construction Groups, Inc. entered into a subcontract agreement involving electrical work at the
Third Port of Zamboanga. Due to petitioner's failure to complete the work on schedule,
respondent took over some of petitioner's work items. Thus, when petitioner completed its task
under the contract, respondent refused to pay petitioner's billings, and contested the billable
accomplishments. The petitioner sued the respondent for collection of sum of money with the
RTC.
Issue:
Whether the requirements provided in Article III [1] of CIAC Arbitration Rules regarding
request for arbitration have been complied with
Ruling:
The Supreme Court affirmed the CA decision, ruling: that any doubt should be
resolved in favor of arbitration because aside from unclogging judicial dockets, arbitration
also hastens the resolution of disputes; that the instant case involves technical discrepancies in
the application of their agreement that are better left to an arbitral body that has expertise in
those areas; that under Sec. 1 Art. III of the new Rules of Procedure, there is no more need to
file a request with the Construction Industry Arbitration Commission (CIAC) in order to
vest it with jurisdiction to decide a construction dispute. As long as the parties agree to
submit to voluntary arbitration, regardless of what forum they may choose, they may invoke the
CIAC jurisdiction; that parties are expected to abide by the arbitral clause in the agreement in
good faith; and that since petitioner has already filed a complaint with the RTC without prior
recourse to arbitration, the proper procedure is to request the suspension of such action as
provided under RA 876 (the Arbitration Law) to enable the CIAC to decide on the dispute.

Sea-Land vs. Court of Appeals

G.R. No. 126212
Facts:
On 18 May 1991, Florex International, Inc. delivered to private respondent AMML cargo
of various foodstuffs, with Oakland, California as port of discharge and San Francisco as place
of delivery. Pursuant to the Agreement, respondent AMML loaded the subject cargo on MS
Sealand Pacer, a vessel owned by petitioner. Under this arrangement, therefore, respondent
AMML was the principal carrier while petitioner was the containership operator. The consignee
refused to pay for the cargo, alleging that delivery thereof was delayed. Thus, on June 26, 1992,
Florex filed a complaint against respondent Maersk- Tabacalera Shipping Agency (Filipinas),
Inc. for reimbursement of the value of the cargo and other charges. According to Florex, the
cargo was received by the consignee only on June 28, 1991, since it was discharged in Long
Beach, California, instead of in Oakland, California on June 5, 1991 as stipulated.
Issue:

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 Whether the parties should go to arbitration
Ruling:
To begin with, allowing respondent AMML's Third Party Claim against petitioner to
proceed would be in violation of Clause 16.2 of the Agreement. As summarized, the clause
provides that whatever dispute there may be between the Principal Carrier and the Containership
Operator arising from contracts of carriage shall be governed by the provisions of the bills of
lading deemed issued to the Principal Carrier by the Containership Operator. On the other hand,
to sustain the Third Party Complaint would be to allow private respondent to hold petitioner
liable under the provisions of the bill of lading issued by the Principal Carrier to Florex, under
which the latter is suing in its Complaint, not under the bill of lading petitioner, as containership
operator, issued to respondent AMML, as Principal Carrier, contrary to what is contemplated in
Clause 16.2.All told, when the text of a contract is explicit and leaves no doubt as to its intention,
the court may not read into it any other intention that would contradict its plain import.
Arbitration being the mode of settlement between the parties expressly provided for by their
Agreement, the Third Party Complaint should have been dismissed.

Magellan Capital vs. Zosa

G.R. No. 129916
Facts:
On September 26, 1995, respondent Zosa communicated his resignation for good reason from
the position of Vice-Chairman under paragraph 7 of the Employment Agreement 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 Section 8 (c) (i) (ii) and
(iii) of the Employment Agreement. In a letter dated October 20, 1995, MCHC communicated its
non-acceptance of respondent Zosa's resignation for good reason, but instead informed him that
the Employment Agreement is terminated for cause, effective November 19, 1995, in accordance
with Section 7 (a) (v) of the said agreement, on account of his breach of Section 12 thereof.
Respondent Zosa was further advised that he shall have no further rights under the said
Agreement or any claims against the Manager or the Corporation except the right to receive
within thirty (30) days from November 19, 1995, the amounts stated in Section 8 (a) (i) (ii) of the
Agreement.
Issue:
Whether the arbitration clause under the employment agreement is partially void and of no effect
Ruling:
Petitioners' attempt to put respondent in estoppel in assailing the arbitration clause must
be struck down. For one, this issue of estoppel, as likewise noted by the Court of Appeals, found
its way for the first time only on appeal. Well-settled is the rule that issues not raised below
cannot be resolved on review in higher courts. Secondly, employment agreements such as the
one at bar are usually contracts of adhesion. Any ambiguity in its provisions is generally resolved
against the party who drafted the document. Thus, in the relatively recent case of Phil.
Federation of Credit Cooperatives, Inc. (PFCCI) and Fr. Benedicto Jayoma vs. NLRC and
Victoria Abril, we had the occasion to stress that "where a contract of employment, being a
contract of adhesion, is ambiguous, any ambiguity therein should be construed strictly
against the party who prepared it." And, finally, respondent Zosa never submitted himself to
arbitration proceedings (as there was none yet) before bewailing the composition of the panel of
arbitrators. He in fact, lost no time in assailing the "arbitration clause" upon realizing the

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inequities that may mar the arbitration proceedings if the existing line-up of arbitrators remained
unchecked.
We need only to emphasize in closing that arbitration proceedings are designed to level
the playing field among the parties in pursuit of a mutually acceptable solution to their
conflicting claims. Any arrangement or scheme that would give undue advantage to a party
in the negotiating table is anathema to the very purpose of arbitration and should,
therefore, be resisted.

Del Monte Corp. vs. Court of Appeals

G.R. No. 136154
Facts:
Petitioner DMC-USA and its Managing Director for Export Sales Paul Derby, Jr.
appointed respondent MMI as the sole and exclusive distributor of its Del Monte products in the
Philippines. The contract provided for arbitration of all disputes to be held in San Francisco,
California under the Rules of the American Arbitration Association. MMI, thru its Managing
Director Lily Sy, appointed Sabrosa Foods, Inc. (SFI) as its marketing arm. Despite the
agreement, Del Monte products were brought into the country by parallel importers. Thus, the
complaint for damages with prayer for the issuance of a writ of preliminary attachment for
violations of Articles 20, 21 and 23 of the Civil Code filed against DMC-USA, its Managing
Director Derby, its Regional Director Collins, its Head of credit Services, Hidalgo and Dewey,
Ltd., owner by assignment of its trademark here. Petitioners moved to suspend proceedings
invoking the arbitration clause in their contract. The trial court originally deferred consideration
on the motion but later denied the same on the ground that to allow suspension will only delay
the determination of the issues and delay the parties' rights to seek redress.
Issue:
Whether the dispute between the parties warrants an order compelling them to submit to
arbitration
Ruling:
Arbitration in this jurisdiction is valid and constitutional and that the provision to submit
to arbitration any dispute arising therefrom and the relationship of the parties is part of the
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. However, where
other persons, not bound by the arbitration clause, are impleaded as parties to a case, the splitting
of the proceedings to arbitration as to some parties on one hand and trial for the others should not
be allowed as it would result in multiplicity of suit, duplicitous procedure and unnecessary delay.

Cargill Phils. Inc. vs. San Fernando Regala Trading Inc.

G.R. No. 175404
Facts:
Respondent alleged that it entered into a contract dated July 11, 1996 with petitioner,
wherein it was agreed upon that respondent would purchase from petitioner 12,000 metric tons
of Thailand origin cane blackstrap molasses at the price of US$192 per metric ton; that the
delivery of the molasses was to be made in January/February 1997 and payment was to be made
by means of an Irrevocable Letter of Credit payable at sight, to be opened by September 15,
1996; that sometime prior to September 15, 1996, the parties agreed that instead of
January/February 1997, the delivery would be made in April/May 1997 and that payment would

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be by an Irrevocable Letter of Credit payable at sight, to be opened upon petitioner's advice.
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.
Issue:
Whether the CA erred in finding that this case cannot be brought under the arbitration
law for the purpose of suspending the proceedings in the RTC
Ruling:
A contract is required for arbitration to take place and to be binding. 20 Submission to
arbitration is a contract and a clause in a contract providing that all matters in dispute between
the parties shall be referred to arbitration is a contract. The provision to submit to arbitration any
dispute arising therefrom and the relationship of the parties is part of the contract and is itself a
contract.
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.
Moreover, it is worthy to note that respondent filed a complaint for rescission of contract
and damages with the RTC. In so doing, respondent alleged that a contract exists between
respondent and petitioner. It is that contract which provides for an arbitration clause which states
that "any dispute which the Buyer and Seller may not be able to settle by mutual agreement shall
be settled before the City of New York by the American Arbitration Association. The arbitration
agreement clearly expressed the parties' intention that any dispute between them as buyer and
seller should be referred to arbitration. It is for the arbitrator and not the courts to decide whether
a contract between the parties exists or is valid.

Tuna Processing Inc. vs. Philippine Kingford Inc.

G.R. No. 185582
Facts:
On 14 January 2003, Kanemitsu Yamaoka (hereinafter referred to as the "licensor"), co-patentee
of U.S. Patent No. 5,484,619, Philippine Letters Patent No. 31138, and Indonesian Patent No.
ID0003911 (collectively referred to as the "Yamaoka Patent"), and five (5) Philippine tuna
processors, namely, Angel Seafood Corporation, East Asia Fish Co., Inc., Mommy Gina Tuna
Resources, Santa Cruz Seafoods, Inc., and respondent Kingford (collectively referred to as the
"sponsors"/"licensees") entered into a Memorandum of Agreement (MOA). Due to a series of
events not mentioned in the petition, the licensees, including respondent Kingford, withdrew
from petitioner TPI and correspondingly reneged on their obligations. Petitioner submitted the
dispute for arbitration before the International Centre for Dispute Resolution in the State of
California, United States and won the case against respondent.
Issue:
Whether the provisions of the Corporation Code or the Alternative Dispute Resolution
Act of 2004 would apply
Ruling:

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 The Alternative Dispute Resolution Act of 2004 shall apply in this case as the Act, as
itstitle — An Act to Institutionalize the Use of an Alternative Dispute Resolution System in the
Philippines and to Establish the Office for Alternative Dispute Resolution, and for Other
Purposes — would suggest, is a law especially enacted "to actively promote party autonomy in
the resolution of disputes or the freedom of the party to make their own arrangements to resolve
their disputes." It specifically provides exclusive grounds available to the party opposing an
application for recognition and enforcement of the arbitral award.
Sec. 45 of the Alternative Dispute Resolution Act of 2004 provides that the opposing
party in an application for recognition and enforcement of the arbitral award may raise only
those grounds that were enumerated under Article V of the New York Convention, to wit:
Article V
1. Recognition and enforcement of the award may be refused, at the request of the
party against whom it is invoked, only if that party furnishes to the competent
authority where the recognition and enforcement is sought, proof that:
a. The parties to the agreement referred to in article II were, under the law
applicable to them, under some incapacity, or the said agreement is not
valid under the law to which the parties have subjected it or, failing any
indication thereon, under the law of the country where the award was
made; or
b. The party against whom the award is invoked was not given proper notice
of the appointment of the arbitrator or of the arbitration proceedings or
was otherwise unable to present his case; or
c. The award deals with a difference not contemplated by or not falling
within the terms of the submission to arbitration, or it contains decisions
on matters beyond the scope of the submission to arbitration, provided
that, if the decisions on matters submitted to arbitration can be separated
from those not so submitted, that part of the award which contains
decisions on matters submitted to arbitration may be recognized and
enforced; or
d. The composition of the arbitral authority or the arbitral procedure was not
in accordance with the agreement of the parties, or, failing such
agreement, was not in accordance with the law of the country where the
arbitration took place; or
e. The award has not yet become binding on the parties, or has been set aside
or suspended by a competent authority of the country in which, or under
the law of which, that award was made.
2. Recognition and enforcement of an arbitral award may also be refused if the
competent authority in the country where recognition and enforcement is sought
finds that:
a. The subject matter of the difference is not capable of settlement by
arbitration under the law of that country; or
b. The recognition or enforcement of the award would be contrary to the
public policy of that country.
Clearly, not one of these exclusive grounds touched on the capacity to sue of the party seeking
the recognition and enforcement of the award.

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 Rule 13.1 of the Special Rules provides that "[a]ny party to a foreign arbitration may
petition the court to recognize and enforce a foreign arbitral award." The contents of such
petition are enumerated in Rule 13.5. Capacity to sue is not included. Oppositely, in the Rule on
local arbitral awards or arbitrations in instances where "the place of arbitration is in the
Philippines," it is specifically required that a petition "to determine any question concerning the
existence, validity and enforceability of such arbitration agreement" available to the parties
before the commencement of arbitration and/or a petition for "judicial relief from the ruling of
the arbitral tribunal on a preliminary question upholding or declining its jurisdiction" after
arbitration has already commenced should state "[t]he facts showing that the persons named as
petitioner or respondent have legal capacity to sue or be sued."

ABS-CBN Broadcasting Corp. vs. World Interactive Network System

G.R. No. 169332
Facts:
On September 27, 1999, petitioner ABS-CBN Broadcasting Corporation entered into a
licensing agreement with respondent World Interactive Network Systems (WINS) Japan Co.,
Ltd., a foreign corporation licensed under the laws of Japan. Under the agreement, respondent
was granted the exclusive license to distribute and sublicense the distribution of the television
service known as "The Filipino Channel" (TFC) in Japan. By virtue thereof, petitioner undertook
to transmit the TFC programming signals to respondent which the latter received through its
decoders and distributed to its subscribers. A dispute arose between the parties when petitioner
accused respondent of inserting nine episodes of WINS WEEKLY, a weekly 35-minute
community news program for Filipinos in Japan, into the TFC programming from March to May
2002. Petitioner claimed that these were "unauthorized insertions" constituting a material breach
of their agreement. Consequently, on May 9, 2002, petitioner notified respondent of its intention
to terminate the agreement effective June 10, 2002.
Issue:
Whether or not an aggrieved party in a voluntary arbitration dispute may avail of, directly
in the CA, a petition for review under Rule 43 or a petition for certiorari under Rule 65 of the
Rules of Court
Ruling:
The Court held that the proper remedy from the adverse decision of a voluntary
arbitrator, if errors of fact and/or law are raised, is a petition for review under Rule 43 of the
Rules of Court. Thus, petitioner's contention that it may avail of a petition for review under Rule
43 under the circumstances of this case is correct. As to petitioner's arguments that a petition for
certiorari under Rule 65 may also be resorted to, we hold the same to be in accordance with the
Constitution and jurisprudence.
As may be gleaned from the above stated provision, it is well within the power and
jurisdiction of the Court to inquire whether any instrumentality of the Government, such as a
voluntary arbitrator, has gravely abused its discretion in the exercise of its functions and
prerogatives. Any agreement stipulating that "the decision of the arbitrator shall be 􀁅nal and
unappealable" and "that no further judicial recourse if either party disagrees with the whole or
any part of the arbitrator's award may be availed of" cannot be held to preclude in proper cases
the power of judicial review which is inherent in courts. We will not hesitate to review a
voluntary arbitrator's award where there is a showing of grave abuse of authority or discretion

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and such is properly raised in a petition for certiorari 17 and there is no appeal, nor any plain,
speedy remedy in the course of law.
Significantly, Insular Savings Bank v. Far East Bank and Trust Company definitively
outlined several judicial remedies an aggrieved party to an arbitral award may undertake:
1) a petition in the proper RTC to issue an order to vacate the award on the grounds
provided for in Section 24 of RA 876;
2) a petition for review in the CA under Rule 43 of the Rules of Court on questions of fact,
of law, or mixed questions of fact and law; and
3) a petition for certiorari under Rule 65 of the Rules of Court should the arbitrator have
acted without or in excess of his jurisdiction or with grave abuse of discretion amounting
to lack or excess of jurisdiction.
Nevertheless, although petitioner's position on the judicial remedies available to it was correct,
we sustain the dismissal of its petition by the CA. The remedy petitioner availed of, entitled
"alternative petition for review under Rule 43 or petition for certiorari under Rule 65," was
wrong. Time and again, we have ruled that the remedies of appeal and certiorari are mutually
exclusive and not alternative or successive.

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