Umbao v. Yap (G.R. No. L-8933)


Petitioner Umbao and respondent Yap both had agreed in writing to “submit their case to the Wage Administration Service for investigation” and “to abide by whatever decision (said) office may render on the case” which “they recognized . . . to be final and conclusive.” After proper investigation had been conducted by Severo Puncan of the same Service, who after hearing the parties and considering their evidence, declared in a written report, respondent Yap to be liable for unpaid wages; that the award had been approved by Ruben Santos, Acting Chief of the Service; and that respondent had refused to abide by and comply with it.  Respondent’s answer did not deny the existence of the covenant and of the award but questioned the enforceability of both, contending mainly that the Service had no legal authority to act as arbitrator, that the procedural requirements of Republic Act No. 602 had not been followed, and that the provisions of Republic Act No. 876 known as the Arbitration Law had been disregarded. Petitioner then asked for judgment on the pleadings. The Court, noting non-observance of the procedure outlined in Republic Act No. 876, gave judgment for defendant. However upon motion to reconsider, the judge seeing differently, held the arbitration agreements to be a contract obligatory on the parties under the provisions of the New Civil Code. Consequently, he rendered judgment against defendant. Hence this appeal.


Whether or not the arbitration by the Service conformed with the Act.


The argument evidently assumes that a compromise agreement is the same as an arbitration agreement. Such assumption is error: one is different from the other; they are treated in two separate chapters of the Code.

No rules have been promulgated by this Court. However the Legislature adopted such rules in Republic Act No. 876 known as “The Arbitration Law’ effective December 1953. Said act was obviously adopted to supplement-not to supplant-the New Civil Code on arbitration. It expressly declares that “the provisions of chapters one and two, Title XIV, Book of the Civil Code the parties may select the arbitrator without court intervention. And section 8 of the Act impliedly permits them to do so. There is nothing in Republic Act 876 requiring court permission of knowledge or intervention before the arbitrator selected by the parties may perform his assigned work. The section does not mean there can be no arbitration without a previous court actuation.

The case between herein litigants has not required court intervention from the beginning, because they had named the arbitrator: the Administration Service and necessarily the proper officer, thereof, Severo Puncan. And this defendant should not be permitted to question the authority of said officer now, because he voluntarily submitted his evidence to him; and he only turned around to deny such authority when the resultant verdict adversely affected his pocket. He even appealed to the Secretary of Labor, and without questioning Puncan’s authority, pleaded for exoneration on the merits.

As to the arbitration proceedings, Republic Act No. 876 contains provisions about the procedure to be adopted by arbitrators, their oath, the hearings, and the form and content of the award. Even so, herein appellant asserted no prejudicial departure therefrom. As already stated, Republic Act No. 876 did not require court intervention (in the case at bar) prior to the award of the arbitrator, no ground for it having arisen, as the parties voluntarily took steps to carry out the settlement process down to the arbiter’s decision. It was only after such award, when defendant refused to comply that judicial action became necessary, thru the means afforded by the statute: confirmation of award and judgment.

These provisions, we believe, apply whether or not the court intervened from the very beginning. Now then, examining the complaint and the judgment entered herein in the light of the above directions, we find substantial conformity therewith; so much so that defendant raised no issue on the same.

Wherefore, the judgment should be, and is hereby affirmed.


Chung Fu Industries v. CA (G.R. No. 96283)


Petitioner Chung Fu Industries (Philippines) and private respondent Roblecor Philippines, Inc. forged a construction agreement whereby respondent contractor committed to construct and finish petitioner corporation’s industrial/factory complex. In the event of disputes arising from the performance of subject contract, it was stipulated therein that the issue(s) shall be submitted for resolution before a single arbitrator chosen by both parties. Roblecor filed a petition for Compulsory Arbitration with prayer for Temporary Restraining Order before respondent RTC to claim the unsatisfied account and unpaid progress billings. Chung Fu moved to dismiss the petition and further prayed for the quashing of the restraining order. Subsequent negotiations between the parties eventually led to the formulation of an arbitration agreement which, among others, provides: The parties mutually agree that the decision of the arbitrator shall be final and unappealable. Therefore, there shall be no further judicial recourse if either party disagrees with the whole or any part of the arbitrator’s award. Respondent RTC approved the arbitration agreement and thereafter, Engr. Willardo Asuncion was appointed as the sole arbitrator. Arbitrator Asuncion ordered petitioner to immediately pay respondent contractor and further declared the award as final and unappealable. Roblecor then moved for the confirmation of said award which was accordingly confirmed and a writ of execution granted to it. Meanwhile, Chung Fu moved to remand the case for further hearing and asked for a reconsideration of the judgment award claiming that Arbitrator Asuncion committed twelve (12) instances of grave error by disregarding the provisions of the parties’ contract. Chung Fu’s Motion was denied and similarly its motion for reconsiderationn. Chung Fu elevated the case via a petition for certiorari to respondent CA. The respondent appellate court concurred with the findings and conclusions of respondent trial court. A motion for reconsideration of said resolution was filed by petitioner, but was similarly denied.


Whether or not petitioners are estopped from questioning the arbitration award allegedly in view of the stipulations in the parties’ arbitration agreement that “the decision of the arbitrator shall be final and unappealable” and that “there shall be no further judicial recourse if either party disagrees with the whole or any part of the arbitrator’s award.”


We rule in the negative. 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’s 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.

This is where the proper remedy is certiorari under Rule 65 of the Revised Rules of Court. It is to be borne in mind, however, that this action will lie only where a grave abuse of discretion or an act without or in excess of jurisdiction on the part of the voluntary arbitrator is clearly shown. 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.

In the case at bar, petitioners assailed the arbitral award on the following grounds, most of which allege error on the part of the arbitrator in granting compensation for various items which apparently are disputed by said petitioners. After closely studying the list of errors, as well as petitioners’ discussion of the same in their Motion to Remand Case For Further Hearing and Reconsideration and Opposition to Motion for Confirmation of Award, we find that petitioners have amply made out a case where the voluntary arbitrator failed to apply the terms and provisions of the Construction Agreement which forms part of the law applicable as between the parties, thus committing a grave abuse of discretion. Furthermore, in granting unjustified extra compensation to respondent for several items, he exceeded his powers — all of which would have constituted ground for vacating the award under Section 24 (d) of the Arbitration Law.

Wherefore, the petition is granted. The Resolutions of the CA as well as the Orders of respondent RTC are hereby SET ASIDE. Accordingly, this case is REMANDED to the court of origin for further hearing on this matter. All incidents arising therefrom are reverted to the status quo ante until such time as the trial court shall have passed upon the merits of this case.

Toyota Motor Philippines Corporation v. CA (G.R. No. 102881)


This case involves a boundary dispute between petitioner Toyota Motor Phil. Corporation (Toyota) and private respondent Sun Valley Manufacturing and Development Corporation (Sun Valley). Both Toyota and Sun Valley are the registered owners of two (2) adjoining parcels of land which they purchased from the Asset Privatization Trust (APT). The properties in question formerly belonged to Delta Motors Corporation (DMC) which were foreclosed by the Philippine National Bank (PNB) and later transferred to the national government through the APT for disposition. APT then proceeded to classify the DMC properties, called the GC III-Delta Motors Corporation, and divided into Delta I, Delta II, and Delta III. Further subdivisions for the separate catalogues were made for each division e.g. Delta I into Lots 1, 2 and 3. After this classification, APT parcelled out and catalogued the properties for bidding and sale.

Part of the duly parcelled Delta I property (Lot 2) was sold to Toyota through public bidding. After its purchase, Toyota constructed a concrete hollow block (CHB) perimeter fence around its alleged property. Another part of the parcelled Delta I (Lot 1) was purchased by Sun Valley from APT. Petitioner then filed a case against APT for the reformation of the Deed of Sale executed between them alleging that the instrument failed to reflect the true intention of the parties as the title failed to include 723 square meters strip of land. On the other hand, Sun Valley, filed a case for recovery of possession of the disputed 723 square meters relying upon the title description of its property and the surveys it has commissioned. Through legal maneuverings, the parties have succeeded in muddling up the vital issues of the case and getting the lower courts embroiled in numerous appeals over technicalities. Hence, the three appellate decisions/resolutions before the Court for review and conflicting orders issued by lower courts as a result of the separate cases filed by the parties.


Whether or not Judge Tensuan had jurisdiction to take cognizance of the case for reformation of instrument.


Attention must first be brought to the fact that the contract of sale executed between APT and Toyota provides an arbitration clause which states that:

  1. In case of disagreement or conflict arising out of this Contract, the parties hereby undertake to submit the matter for determination by a committee of experts, acting as arbitrators, the composition of which shall be as follows: a) One member to be appointed by the VENDOR; b) One member to be appointed by the VENDEE; c) One member, who shall be a lawyer, to be appointed by both of the aforesaid parties;

The contention that the arbitration clause has become dysfunctional because of the presence of third parties is untenable.

Toyota filed an action for reformation of its contract with APT, the purpose of which is to look into the real intentions/agreement of the parties to the contract and to determine if there was really a mistake in the designation of the boundaries of the property as alleged by Toyota. Such questions can only be answered by the parties to the contract themselves. This is a controversy which clearly arose from the contract entered into by APT and Toyota. Inasmuch as this concerns more importantly the parties APT and Toyota themselves, the arbitration committee is therefore the proper and convenient forum to settle the matter as clearly provided in the deed of sale. Having been apprised of the presence of the arbitration clause in the motion to dismiss filed by APT, Judge Tensuan should have at least suspended the proceedings and directed the parties to settle their dispute by arbitration. Judge Tensuan should have not taken cognizance of the case.

In view of all the foregoing, the petition is hereby dismissed for failure to show reversible error, much less grave abuse of discretion, on the part of the respondent court.

Magellan Capital Management Corporation v. Zosa (G.R. No. 129916)


Under a management agreement entered into, MCHC appointed MCMC as manager for the operation of its business and affairs. Pursuant thereto, petitioners and private respondent Rolando Zosa entered into “Employment Agreement” designating the latter as President and CEO of MCHC. Respondent Zosa then was elected to a new position as MCHC’s Vice-Chairman/Chairman New Ventures Development to which he communicated his resignation on the ground that it had less responsibility and scope and demanded that he be given termination benefits as provided in the Employment Agreement. MCHC communicated its non-acceptance to the resignation and advised respondent that the agreement is terminated on account of the latter’s breach thereof. Respondent invoked the Arbitration Clause of the agreement and both parties designated their arbitrators in the panel. However, instead of submitting the dispute to arbitration, respondent filed an action for damages against petitioners before the RTC. Petitioners’s motion to dismiss was denied. Petitioners filed a petition for certiorari and prohibition in the CA to which it was given due course. The RTC in compliance with the decision, declared the arbitration clause in the agreement partially void and of no effect insofar as it concerns the composition of arbitrators. Petitioners then filed this petition for review on certiorari.


Whether or not the arbitration clause in the Employment Agreement is partially void and of no effect.


We rule against the petitioners.

Even if procedural rules are disregarded, and a scrutiny of the merits of the case is undertaken, this Court finds the trial court’s observations on why the composition of the panel of arbitrators should be voided, incisively correct so as to merit our approval. Thus,

“From the memoranda of both sides, the Court is of the view that the defendants [petitioner] MCMC and MCHC represent the same interest. There is no quarrel that both defendants are entirely two different corporations with personalities distinct and separate from each other and that a corporation has a personality distinct and separate from those persons composing the corporation as well as from that of any other legal entity to which it may be related.  But as the defendants [herein petitioner] represent the same interest, 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. In fact, what is being challenged by the plaintiff herein is not the law itself but the provision of the Employment Agreement based on the said law, which is the arbitration clause but only as regards the composition of the panel of arbitrators.

“From the foregoing arbitration clause, it appears that the two (2) defendants [petitioners] (MCMC and MCHC) have one (1) arbitrator each to compose the panel of three (3) arbitrators. As the defendant MCMC is the Manager of defendant MCHC, its decision or vote in the arbitration proceeding would naturally and certainly be in favor of its employer and the defendant MCHC would have to protect and preserve its own interest; hence, the two (2) votes of both defendants (MCMC and MCHC) would certainly be against the lone arbitrator for the plaintiff [herein defendant]. Hence, apparently, plaintiff [defendant] would never get or receive justice and fairness in the arbitration proceedings from the panel of arbitrators as provided in the aforequoted arbitration clause. In fairness and justice to the plaintiff [defendant], the two defendants (MCMC and MCHC) [herein 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. Accordingly, the arbitration clause, insofar as the composition of the panel of arbitrators is concerned should be declared void and of no effect, because the law says, “Any clause giving one of the parties power to choose more arbitrators than the other is void and of no effect” (Article 2045, Civil Code).

“The dispute or controversy between the defendants (MCMC and MCHC) [herein petitioners] and the plaintiff [herein defendant] should be settled in the arbitration proceeding in accordance with the Employment Agreement, but under the panel of three (3) arbitrators, one (1) arbitrator to represent the plaintiff, one (1) arbitrator to represent both defendants (MCMC and MCHC) [herein petitioners] and the third arbitrator to be chosen by the plaintiff [defendant Zosa] and defendants [petitioners].

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. Wherefore, premises considered, the petition is hereby dismissed and the decision of the trial court is affirmed.

Bloomfield Academy v. CA (G.R. No. 99042)


Private respondent, the association of parents and guardians of students enrolled in petitioner Bloomfield Academy, a non-stock, non-profit educational institution, filed a complaint for injunction against the latter. The complaint alleged that petitioner decided to increase its tuition fees in lieu of RA 6727 granting mandatory increase of minimum wage of the teachers without prior consultation to the parents which is a requirement before any increase should be made effective. Respondent court ordered the issuance of writ of preliminary injunction. In the petition for certiorari attributing to the court a quo grave abuse of discretion in the issuance of the writ, the appellate court held the petition to be without merit.


Whether or not the court a quo has acted within its jurisdiction in issuing the questioned order and, in the affirmative, whether or not it has committed grave abuse of discretion specifically in granting private respondent’s application for a writ of preliminary injunction.


We see merit in the petition.

The pertinent provisions of Republic Act No. 6728, also commonly known as “An Act Providing Government Assistance to Students and Teachers in Private Education, And Appropriating Funds Therefor,” provide: Sec. 10. Consultation. — In any proposed increase in the rate of tuition fee, there shall be appropriate consultations conducted by the school administration with the duly organized parents and teachers associations and faculty associations with respect to secondary schools, and with students governments or councils, alumni and faculty associations with respect to colleges. For this purpose, audited financial statements shall be made available to authorized representatives of these sectors. Every effort shall be exerted to reconcile possible differences. In case of disagreement, the alumni association of the school or any other impartial body of their choosing shall act as arbitrator.

In passing, we also observe that the parties have both remained silent on the provisions of Republic Act No. 6728 to the effect that in case of disagreement on tuition fee increases (in this instance by herein private parties), the issue should be resolved through arbitration. Although the matter has not been raised by the parties, it is an aspect, nevertheless, in our view that could have well been explored by them instead of immediately invoking, such as they apparently did, the administrative and judicial relief to resolve the controversy.

All told, we hold that the court a quo has been bereft of jurisdiction in taking cognizance of private respondent’s complaint. We see no real justification, on the basis of the factual and case settings here obtaining, to permit a deviation from the long standing rule that the issue of jurisdiction may be raised at any time even on appeal.

Wherefore, conformably with our above opinion, the instant petition is granted and the questioned ordered of the court a quo and the decision of the appellate court are set aside.