G.R. No.

163582

August 9, 2010

WILLIAM GOLANGCO CONSTRUCTION CORPORATION

vs.
RAY BURTON DEVELOPMENT CORPORATION

they are still cognizable by the CIAC as the arbitration clause mandates their
direct filing therewith.
Respondent's Motion to Dismiss is DENIED for lack of merit

ISSUE:
FACTS:

On July 20, 1995, petitioner Ray Burton Development Corporation [herein

respondent] (RBDC for brevity) and private respondent William Golangco
Construction Corporation [herein petitioner] (WGCC) entered into a Contract
for the construction of the Elizabeth Place (Office/Residential Condominium).
WGCC filed a complaint with a request for arbitration with the Construction
Industry Arbitration Commission (hereinafter referred to as CIAC for
petitioner to pay private respondent the amount of o P53,667,219.45 and
interest charges

THE COURT OF APPEALS ERRED GRAVELY IN NOT RULING THAT THE

CIAC HAS JURISDICTION OVER WGCC'S CLAIMS, WHICH ARE IN THE
NATURE OF ARBITRABLE DISPUTES

HELD:

The petition is with merit

On April 12, 2002, petitioner RBDC filed a Motion to Dismiss on the ground of
lack of jurisdiction. It is petitioner's contention that the CIAC acquires
jurisdiction over disputes arising from or connected with construction
contracts only when the parties to the contract agree to submit the same to
voluntary arbitration. In the contract between petitioner and private
respondent, petitioner claimed that only disputes by reason of differences in
interpretation of the contract documents shall be deemed subject to
arbitration.

Private respondent averred that the claims set forth in the complaint require
contract interpretation and are thus cognizable by the CIAC pursuant to the
arbitration clause in the construction contract between the parties. Moreover,
even assuming that the claims do not involve differing contract interpretation,

Under Section 1, Article III of the CIAC Rules, an arbitration clause in a

construction contract shall be deemed as an agreement to submit an existing
or future controversy to CIAC jurisdiction, "notwithstanding the reference to a
different arbitration institution or arbitral body in such contract x x x."
Elementary is the rule that when laws or rules are clear, it is incumbent on
the court to apply them. When the law (or rule) is unambiguous and
unequivocal, application, not interpretation thereof, is imperative.1avvphi1

It bears to emphasize that the mere existence of an arbitration clause in

the construction contract is considered by law as an agreement by the
parties to submit existing or future controversies between them to
CIAC jurisdiction, without any qualification or condition precedent
Moreover, the CIAC was created in recognition of the contribution of the
construction industry to national development goals. Realizing that delays in

the resolution of construction industry disputes would also hold up the

development of the country,

Thus, there is no question that in this case, the CIAC properly took
cognizance of petitioner's complaint as it had jurisdiction over the same.

G.R. No. 143581

January 7, 2008

KOREA TECHNOLOGIES CO., LTD.

vs.
HON. ALBERTO A. LERMA

FACTS:

Korea Technologies Co., Ltd. (KOGIES), a Korean corporation, entered into a

contract with Pacific General Steel Manufacturing Corp. (PGSMC), a
domestic corporation, for the supply and installation by KOGIES of Liquefied
Petroleum Gas Cylinder manufacturing plants in favor of PGSMC. The
Contracts arbitration clause provided that all disputes arising from the
contract or breach thereof shall be settled by arbitration in Seoul, Korea, in
accordance with the Commercial Arbitration Rules of the Korean Commercial
Arbitration Board (KCAB) and the award shall be final and binding on the
parties.
PGSMC subsequently informed KOGIES that it was canceling the contract
due to altered quantity and lowered quality of the machinery. It also
threatened to dismantle and transfer the installed machinery.
KOGIES contended that PGSMC cannot unilaterally rescind the contract nor
dismantle and transfer the machinery. It then commenced arbitration

proceedings before the KCAB in Seoul, Korea and filed a complaint for
specific performance with application for injunction before a Philippine trial
court to compel PGSMC to comply with the arbitration clause of the contract.

PGSMC, on the other hand, took the position that the arbitration clause,
which provided that the arbitral award shall be final and binding upon the
parties, was null and void for being against public policy as it ousted
Philippine courts of jurisdiction.
The trial court agreed with PGSMC and denied KOGIES application for
preliminary injunction. The Court of Appeals affirmed the trial courts Order.

ISSUE:

RULING THAT THE PETITION WAS FILED PREMATURELY WITHOUT

WAITING FOR THE RESOLUTION OF THE MOTION FOR
RECONSIDERATION OF THE ORDER DATED SEPTEMBER 21, 1998
OR WITHOUT GIVING THE TRIAL COURT AN OPPORTUNITY TO
CORRECT ITSELF;

HELD:
An arbitration clause that states that the arbitral award shall be final and
binding is valid.
The Supreme Court held that the law of the place where the contract is made
(i.e., the Philippines) governs the contract and that, under the Philippine Civil
Code, a stipulation that an arbitral award shall be final and binding is a valid
stipulation. The Supreme Court found that the arbitration clause was
mutually and voluntarily agreed upon by the parties and was not contrary to
any law, morals, good customs, public order, or public policy.
Republic Act No. 9285, otherwise known as the Alternative Dispute
Resolution Act of 2004 (the ADR Law), may be given retroactive effect.

The Supreme Court ruled that while the ADR Law was passed only in 2004, it
nonetheless applies to the case because it is a procedural law and,
therefore, may be given retroactive effect.
A final arbitral award is still subject to review by Philippine courts. The
Supreme Court held a final award may still be judicially reviewed.
Philippine courts may set aside foreign or international arbitral awards
under the grounds in Section 34 of the UNCITRAL Model Law on
International Commercial Arbitration. The Supreme Court also noted that the
ADR Law provides for an appeal to the Court of Appeals, and a further
appeal to the Supreme Court, as the remedy of an aggrieved party where the
trial court sets aside, rejects, vacates, modifies, or corrects an arbitral award.
The unilateral rescission of contracts with an arbitration clause is improper
and illegal.The Supreme Court had previously held that the rescission by the
non-defaulting party of a contract on account of breach by the other party is
valid (although such unilateral rescission may be questioned in court).

Significantly, the Supreme Court here held that where an arbitration clause
in a contract is availing, neither of the parties can unilaterally treat the
contract as rescinded since whatever infractions or breaches by a party or
differences arising from the contract must be brought first and resolved by
arbitration, and not through an extrajudicial rescission or judicial action.