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ADR CASE DOCTRINESCase No. 1Koppel, Inc. v. Makati Rotary Club Foundation, Inc. G. no. 198075 – 2013The JDR framework is based on the processes of mediation, conciliation or early neutral evaluation which entails the submission of a dispute before a “JDR judge” who shall merely “facilitate settlemen...

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ADR CASE DOCTRINES Case No. 1 Koppel, Inc. v. Makati Rotary Club Foundation, Inc. G.R. no. 198075 – 2013 The JDR framework is based on the processes of mediation, conciliation or early neutral evaluation which entails the submission of a dispute before a “JDR judge” who shall merely “facilitate settlement” between the parties in conflict or make a “non-binding evaluation or assessment of the chances of each party’s case.” Thus in JDR, the JDR judge lacks the authority to render a resolution of the dispute that is binding upon the parties in conflict. In arbitration, on the other hand, the dispute is submitted to an arbitrator/s — a neutral third person or a group of thereof — who shall have the authority to render a resolution binding upon the parties.

Under the doctrine of separability, an arbitration agreement is considered as independent of the main contract. Being a separate contract in itself, the arbitration agreement may thus be invoked regardless of the possible nullity or invalidity of the main contract. Once again instructive is Cargill, wherein this Court held that, as a further consequence of the doctrine of separability, even the very party who repudiates the main contract may invoke its arbitration clause.

Case No. 2 J. PLUS ASIA DEVELOPMENT CORPORATION V. UTILITY ASSURANCE CORPORATION – G.R. NO. 199650 – 2013 Article 1374 of the Civil Code requires that the various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly. Here, the work schedule approved by petitioner was intended, not only to serve as its basis for the payment of monthly progress billings, but also for evaluation of the progress of work by the contractor. The Construction Agreement provided that the contractor shall be deemed in default, if among others, it had delayed without justifiable cause the completion of the project by more than 30 calendar days based on official work schedule duly approved by the owner. The plain and unambiguous terms of the Construction Agreement authorize petitioner to confiscate the Performance Bond to answer for all

kinds of damages it may suffer as a result of the contractor’s failure to complete the building. Having elected to terminate the contract and expel the contractor from the project site under Article 13 of the said Agreement, petitioner is clearly entitled to the proceeds of the bond as indemnification for damages it sustained due to the breach committed by Mabunay. Such stipulation allowing the confiscation of the contractor’s performance bond partakes of the nature of a penalty clause. A penalty clause, expressly recognized by law, is an accessory undertaking to assume greater liability on the part of the obligor in case of breach of an obligation. It functions to strengthen the coercive force of obligation and to provide, in effect, for what could be the liquidated damages resulting from such a breach. The obligor would then be bound to pay the stipulated indemnity without the necessity of proof on the existence and on the measure of damages caused by the breach. It is well-settled that so long as such stipulation does not contravene law, morals, or public order, it is strictly binding upon the obligor.

Case No. 3 PUROMINES INC. V. CA G.R. 91228 – 1993 ln any case, whether the liability of respondent should be based on the sales contract or that of the bill of lading, the parties are nevertheless obligated to respect the arbitration provisions on 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. Going back to the main subject of this case, arbitration has been held valid and constitutional. Even before the enactment of Republic Act No. 876, this Court has countenanced the settlement of disputes through arbitration. The rule now is that 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. The rule now is that 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.

Case No. 4 CHUNG FU INDUSTRIES (PH.), INC. V. CA G.R. 96283 1992 It is stated explicitly under Art. 2044 of the Civil Code that the finality of the arbitrators’ award is not absolute and without exceptions. Where the conditions described in Articles 2038, 2039 and 2040 applicable to both compromises and arbitrations are obtaining, the arbitrators’ award may be annulled or rescinded. Additionally, under Sections 24 and 25 of the Arbitration Law, there are grounds for vacating, modifying or rescinding an arbitrator’ award. Thus, if and when the factual circumstances referred to in the above-cited provisions are present, judicial review of the award is properly warranted. It should be stressed too, that voluntary arbitrators, by the nature of their functions, act in a quasi- judicial capacity. It stands to reason, therefore, that their decisions should not be beyond the scope of the power of judicial review of this Court. Case No. 5 CALIFORNIA AND HAWAIIAN SUGAR COMPANY, ET AL. V. PIONEER INSURANCE AND SURETY CORPORATION G.R. 139273, 2000 The arbitration clause was not binding on respondent. Court reiterates that the crux of this case is whether the trial court committed grave abuse of discretion in denying the aforecited Motion. There was neither need nor reason to rule on the applicability of the arbitration clause. Be that as it may, we find the CA’s reasoning on this point faulty. Citing Pan Malayan Insurance Corporation v. CA,17 it ruled that the right of respondent insurance company as subrogee was not based on the charter party or any other contract; rather, it accrued upon the payment of the insurance claim by private respondent to the insured consignee. There was nothing in Pan Ma- layan, however, that prohibited the applicability of the arbitration clause to the subrogee. That case merely discussed, inter alia, the accrual of the right of subrogation and the legal basis therefor. 18 This issue is completely different from that of the consequences of such subrogation; that is, the rights that the insurer acquires from the insured upon payment of the indemnity. Case No. 6 ASSET PRIVATIZATION TRUST V. CA G.R. NO. 121171, 1998 As a general 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. As an exception 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. A court makes a fatal mistake if it dismisses a case instead of merely suspending it to await the outcome of arbitration proceedings: Admittedly, the correct procedure was for the parties to go back to the court where the case was pending to have the award confirmed by said court. However, Branch 62 made the fatal mistake of issuing a final order dismissing the case. While Branch 62 should have merely suspended the case and not dismissed it, neither of the parties questioned said dismissal. Thus, both parties as well as said court are bound by such error. It is erroneous then to argue, as private respondents do, that petitioner APT was charged with the knowledge that the “case was merely stayed until arbitration finished,” as again, the order of Branch 62 in very clear terms stated that the “complaint was dismissed.” By its own action, Branch 62 had lost jurisdiction over the case. It could not have validly reacquired jurisdiction over the said case on mere motion of one of the parties. The Rules of Court is specific on how a new case may be initiated and such is not done by mere motion in a particular branch of the RTC. Consequently, as there was no “pending action” to speak of, the petition to confirm the arbitral award should have been filed as a new case and raffled accordingly to one of the branches of the Regional Trial Court. A party’s prayer for the setting aside of the arbitral award is not inconsistent with its disavowal of the court’s jurisdiction where, from the outset, it has consistently held that the court has no jurisdiction to confirm the arbitral award:

Petitioner’s situation is different because from the outset, it has consistently held the position that the RTC, Branch 62 had no jurisdiction to confirm the arbitral award; consequently, it cannot be said that it was estopped from questioning the RTC’s jurisdiction. Petitioner’s prayer for the setting aside of the arbitral award was not inconsistent with its disavowal of the court’s jurisdiction. A party aggrieved by an arbitral award is not precluded from resorting to the extraordinary remedy of certiorari under Rule 65 where the court to which the award was submitted for confirmation has acted without jurisdiction, or with grave abuse of discretion: The aforequoted provision, however, does not preclude a party aggrieved by the arbitral award from resorting to the extraordinary remedy of certiorari under Rule 65 of the Rules of Court where, as in this case, the Regional Trial Court to which the award was submitted for confirmation has acted without jurisdiction, or with grave abuse of discretion and there is no appeal, nor any plain, speedy remedy in the course of law. 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. In the same manner, an award must be vacated if it was made in “manifest disregard of the law.”

Case No. 7 AGAN, JR. ET. AL. V. PHILIPPINENINTERNATIONAL AIR TERMINALS CO., INC., ET. AL G.R. 155001 2003 It is established that petitioners in the present cases who have presented legitimate interests in the resolution of the controversy are not parties to the PIATCO Contracts. Accordingly, they cannot be bound by the arbitration clause provided for in the ARCA and hence, cannot be compelled to submit to arbitration proceedings. A speedy and decisive resolution of all the critical issues in the present controversy, including those raised by petitioners, cannot be made before an arbitral tribunal. The object of arbitration is precisely to allow an expeditious determination of a dispute. This objective would not be met if this Court were to allow the parties to settle the cases by arbitration as there are certain issues involving nonparties to the PIATCO Contracts which the arbitral tribunal will not be equipped to resolve. In addition, the rule on hierarchy of courts may be relaxed when the redress desired cannot be obtained in the appropriate courts or where exceptional

and compelling circumstances justify availment of a remedy within and calling for the exercise of the Supreme Court’s primary jurisdiction.

Case No. 8 ASSOCIATED BANK V. CA GR. 107918 1994 A party cannot invoke the jurisdiction of the courts over disputes and controversies which fall under the PCHC Rules and Regulations without first going through the arbitration processes laid out by the body. Since claims relating to the regularity of checks cleared by banking institutions are among those claims which should first be submitted for resolution by the PCHC’s Arbitration Committee, petitioner Associated Bank, having voluntarily bound itself to abide by such rules and regulations, is estopped from seeking relief from the Regional Trial Court on the coattails of a private claim and in the guise of a third party complaint without first having obtained a decision adverse to its claim from the said body. It cannot bypass the arbitration process on the basis of its averment that its third party complaint is inextricably linked to the original complaint in the Regional Trial Court. Clearly therefore, petitioner Associated Bank, by its voluntary participation and its consent to the arbitration rules cannot go directly to the Regional Trial Court when it finds it convenient to do so. The jurisdiction of the PCHC under the rules and regulations is clear, undeniable and is particularly applicable to all the parties in the third party complaint under their obligation to first seek redress of their disputes and grievances with the PCHC before going to the trial court.

Case No. 9 HEIRS OF AUGUSTO L. SALAS JR. V. LAPERAL REALTY CORPORATION, ET AL. GR. 135362 – 1999 The Court has recognized arbitration agreements as valid, binding, enforceable and not contrary to public policy so much that when there obtains a written provision for arbitration which is not complied with, the trial court should suspend the proceedings and order the parties to proceed to arbitration in accordance with the terms of their agreement. Arbitration is the “wave of the future” in dispute resolution. To brush aside a contractual agreement calling for arbitration in case of disagreement between parties would be a step backward.

A submission to arbitration is a contract. As such, the Agreement, containing the stipulation on arbitration, binds the parties thereto, as well as their assigns and heirs. But only they. Petitioners, as heirs of Salas, Jr., and respondent Laperal Realty are certainly bound by the Agreement. If respondent Laperal Realty had assigned its rights under the Agreement to a third party, making the former, the assignor, and the latter, the assignee, such assignee would also be bound by the arbitration provision since assignment involves such transfer of rights as to vest in the assignee the power to enforce them to the same extent as the assignor could have enforced them against the debtor or in this case, against the heirs of the original party to the Agreement.

Case No. 10 COCA-C0LA BOTTLERS PHILIPPINES, INC. SALES NFORCE UNIONPTGWO-BALAIS V. COCA-COLA BOTTLERS PH. INC. GR. 155651 – 2005 Rule VII, Section 1 of the “Procedural Guidelines in the Conduct of Voluntary Arbitration Proceedings” provides the key. Therein, what constitutes the voluntary arbitrator’s decision is defined with precision, to wit: Section 1. Decision Award. -- The final arbitral disposition of issue/s submitted to voluntary arbitration is the Decision. The disposition may take the form of a dismissal of a claim or grant of specific remedy, either by way of prohibition of particular acts or specific performance of particular acts. In the latter case the decision is called an Award.

Decisions of the Panel of Voluntary Arbitrators would become final and executory after ten (10) calendar days from receipt of copies of the decision by the parties even without receipt of the dissenting opinion unless, in the meantime, a motion for reconsideration or a petition for review to the Court of Appeals under Rule 43 of the Rules of Court is filed within the same 10-day period; A dissenting opinion is not binding on the parties as it is a mere expression of the individual view of the dissenting member from the conclusion held by the majority of the Court. In herein case, the Decision of the Panel was in the form of a dismissal of petitioner’s complaint. Naturally, this dismissal was contained in the main decision and not in the dissenting opinion. Thus, under Section 6, Rule VII of the same guidelines implementing Article 262-A of the Labor Code, this Decision, as a matter of course, would become final and executory after ten (10) calendar days from receipt of copies of the decision by the parties even

without receipt of the dissenting opinion unless, in the meantime, a motion for reconsideration or a petition for review to the Court of Appeals under Rule 43 of the Rules of Court is filed within the same 10-day period. As correctly pointed out by the Court of Appeals, a dissenting opinion is not binding on the parties as it is a mere expression of the individual view of the dissenting member from the conclusion held by the majority of the Court, following our ruling in Garcia v. Perez as reiterated in National Union of Workers in Hotels, Restaurants and Allied Industries v. NLRC.

Case No. 11 NATIONAL STEEL CORPORATION V. TRC LANAO DEL NORTE BRANCH 2, ILIGAN CITY GR. 127004 – 1999 A stipulation to refer all future disputes or to submit an ongoing dispute to an arbitrator is valid. Republic Act 876, otherwise known as the Arbitration Law, was enacted by Congress since there was a growing need for a law regulating arbitration in general. It should be stressed that voluntary arbitrators, by the nature of their functions, act in a quasijudicial capacity. As a rule, findings of facts by quasijudicial bodies, which have acquired expertise because their jurisdiction is confined to specific matters, are accorded not only respect but even finality if they are supported by substantial evidence, even if not overwhelming or preponderant. As the petitioner has availed of Rule 65, the Court will not review the facts found nor even of the law as interpreted or applied by the arbitrator unless the supposed errors of facts or of law are so patent and gross and prejudicial as to amount to a grave abuse of discretion or an excess de pouvoir on the part of the arbitrators. In a Petition to Vacate Arbitrator’s Decision before the trial court, regularity in the performance of official functions is presumed and the complaining party has the burden of proving the existence of any of the grounds for vacating the award. Sec. 24 GROUNDS FOR VACATING THE 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 proceedings: a) The award was procured by corruption, fraud or other undue means; b) That there was evident partiality or corruption in the arbitrators of 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 wilfully refrained from disclosing such disqualification or of 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. Case No. 12 DEL MONTE CORPORATION-USA V. CA GR. 136154, 2001 To effect a speedy and efficient resolution of the issues and claims of the parties, a full blown trial must be had. Only then can the interest of justice be served. The Court ruled the validity of the arbitration clause in the Contract between the contracting partie...