Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-9090 September 10, 1957
EASTBOARD NA!GAT!ON, LTD., plaintiff-appellant,
vs.
"UAN #SMAEL $%& COMPAN#, !NC., defendant-appellant.
Ross, Selph, Carrascoso & Janda and Delfin L. Gonzales for the plaintiff and appellant.
Claro M. Recto for the defendant and appellant.
BAUT!STA ANGELO, J.:
This is an appeal from a decision of the Court of irst !nstance of Manila orderin" defendant
to pa# to plaintiff the sum of $%&,'&(.)* as a+arded b# board of arbitrators on ,une -',
.*%' and confirmed b# the /istrict Court of Ne+ 0or1, 2.3.A. on Au"ust .%, .*%', +ith the
le"al interest thereon from /ecember %, .*%' until its pa#ment, and the costs of suit.
The facts involved in this case +hich are necessar# to be considered in this appeal are
stated b# the trial court in its decision +hich +e find to be substantiall# correct. The# are4
56n ,ul# -%, .*7*, At1ins, 8roll 9 Co., !nc., Manila, +rote defendant ,uan 0smael 9 Co.,
!nc., :letter of Toronto, Canada, o+ners of the 3;3 East+ater, <have accepted #our terms of
pa#ment and are a"reed to charter the 3;3 East+ater to ,uan 0smael 9 Co., !nc., Manila,
:to load car"o of scrap iron in the Philippines for Buenos Aires=under the follo+in" terms
and conditions4 . . :.'= Clause Paramount4 Terms and conditions for this Charter Part# not
e>plicitl# or other+ise stated in this letter of confirmation are to be as per "eneral conditions
of re"ular Charter Part# form. ?ill #ou 1indl# si"nif# confirmation of the above terms b#
si"nin" the ori"inal and four copies of this letter@ A formal cop# of the Charter Part#
document +ill be for+arded to #ou +ithin a fe+ da#s. At1ins, 8roll 9 Co., !nc., Manila, actin"
solel# as a"ents for and in behalf of the o+ners of the 3;3 East+ater b# cable or letter to all
parties concerned and that the car"o +ill "o for+ard as scheduled in a satisfactor# manner,<
/efendant si"ned said letter thus, <or Charter Part#4 ,uan 0smael 9 Co., !nc., 8. A.
Aemad#, President.< 6n the same date, ,ul# -%, .*7*, charter part# a"reement :E>hibit A=
+as e>ecuted containin", besides the re"ular charter part# printed from a t#pe+ritten clause
readin"4 <Clauses Nos. .B to &. inclusive and 2.3.A. Clause Paramount, +ar Ris1s Clauses
. and -, No+ ,ason Clause and Both-to-Blame Collision Clauses, as attached, to be
considered as full# incorporated herein and to form part of this Charter Part#.< Clause No.
-* reads as follo+s4
5!t is mutuall# a"reed that should an# dispute arise bet+een 6+ners and Charterers,
the matter in dispute shall be referred to three persons at Ne+ 0or1 for arbitration,
one to be appointed b# each of the parties hereto, and the third b# the t+o so
chosenC their decision or that of an# t+o of them, shall be final, and for the purpose
of enforcin" an# a+ard, this a"reement ma# be made a rule of the Court. The
arbitrators shall be commercial men. should the t+o so chosen not be able to a"ree
+ho the third arbitrator should be, then the Ne+ 0or1 Produce E>chan"e is to
appoint such third arbiter, The amount in dispute shall be placed in escro+ at Ne+
0or1 subDect to the decision of the arbitrators.5
6n 3eptember ), .*7*, At1ins, 8roll 9 Co., !nc., Manila a"ain +rote defendant
compan# as follo+s :letter E>hibit &=4
5?e are toda# in receipt of the follo+in" cable instructions from our principals the
Eastboard Navi"ation Etd., re"ardin" the release of #our scrap iron loaded at ManilaC
<Re 0ours si>th release bladin"s a"ainst full pa#ment of frei"ht and b# !rvin" Trust
Ne+ 0or1 fifteen thousand dollars coverin" possible demurra"e to be settled in
accordance +ith the rulin" of arbitration board Ne+ 0or1 please have 0smael
immediatel# their arbitrator<
5!n order to facilitate #our ne"otiations of #our document +ith the Ban1 of America
+e shall appreciate ver# much #our puttin" up a "uarantee b# !rvin" Trust Ne+ 0or1
for the sum of 23 $.%,'''.'' and to nominate the name of #our arbitrator
immediatel#.5
6n 6ctober ., .*7*, the Ban1 of America, Manila 6ffice +rote defendant compan#
:letter E>hibit &-A= as follo+s4
5!n accordance +ith verbal instructions of #our President, Mr. 8. A. Aemad# #our
draft for $(B,&%7.%% and attached documents +ere airmailed this mornin" to the
above ban1 to"ether +ith the relative bills of ladin" +hich +ere surrendered to us b#
At1ins 8roll 9 Co., !nc., for account and b# order of Eastboard Navi"ation, Etd. of
Toronto.
5The documents, +hich +ere sent for collection, covered the third and last under the
assi"nment made to #ou b# Mr. Aector Corvera under the terms of the subDect credit
and cover451!ph"l.n#t
> > > > > > > > >
</eposit account /emurra"e under Arbitration - $.%,'''.1!ph"l.n#t
> > > > > > > > >
5?e have reFuested the !rvin" Trust Compan# to advise us b# cable +hen the above
amounts have been paid. !n the event of non-pa#ment, +e have reFuested that the#
deliver the bills of ladin" to the Eastboard Navi"ation Etd., under advice.
5?e e>pect to be able to report to #ou on the above-described collection sometime
ne>t +ee1.5
6n /ecember &, .*7*, defendant Compan# +rote the Ban1 of America :Manila=
:letter E>hibit &-B= as follo+s4
5Please transmit b# tele"raphic transfer to !rvin" Trust Compan#, Ne+ 0or1, the
amount of Ten Thousand /ollars :$.','''=, for the account of Eastboard Navi"ation
Etd., Toronto, Canada, to be held as deposit for demurra"e due the 33 East+ater,
to"ether +ith the $.%,''' previousl# remitted to them. The amount shall be held
pendin" result of the arbitration of the dispute bet+een this Compan# and Eastboard
Navi"ation.5
The dispute mentioned in its precedin" letter havin" arisen, under date of April %,
.*%', the defendant cabled Att#s. Mannin", Aarnish and Aolin"er of Ne+ 0or1 Cit#
as follo+s4 <Throu"h recommendation of Mr. Morris Eipsett +e reFuest #ou 1indl#
present our case before Arbitration Board re charter vessel 3;3$ast!ater ?ritin"5
:E>hibit -=. And in its letter E>hibit --B of the same date to said attorne#s, defendant
confirmed its reFuest as follo+s4
56ur "ood friend, Mr. Morris E. Eipsett Pacific Corporation, )' ?all 3treet Ne+ 0or1,
has hi"hl# recommended #our la+ firm to us to present our case to arbitration in a
case +e have +ith the Eastboard Navi"ation Co., !nc., in connection +ith our charter
of their vessel the 3;3 East+ater. Ma# +e, therefore, reFuest #ou to act as such
attorne# for us, and #ou ma# bill us accordin"l# for #our services in matter.
5?e have alread# spent a considerable sum of this case, not to mention the
inconvenience it has caused us, and +e are most an>ious to the matter be
terminated as soon as possible.
5Pertinent papers and documents re"ardin" the matter have been turned over to Mr.
Eipsett, and +e have reFuested him to turn those over to #ou for #our purposes.
3hould #ou, ho+ever, need further information re"ardin" the matters, or should #ou
need our assistance at this end, please fee to as1 us.5
6n Ma# -&, .*%*, Messrs, Mannin", Aarnisch, and Aolin"er, actin" as attorne#s for
defendant ,uan !smael 9 Co., !nc., e>ecuted for plaintiff Eastboard Navi"ation Etd.,
arbitration a"reement :E>hibit B= +hich reads4
5?e, the undersi"ned, hereb# mutuall# covenant and a"ree to submit, and hereb#
do submit to Charles E. Eambert, Richard Nathan and /onald E. 3immons, as
Arbitrators, for their adDudication and a+ard, a controvers# e>istin" bet+een us
relatin" to the liabilit# if an#, of the undersi"ned, ,uan 0smael 9 Co., !nc., charterers
to the undersi"ned, Eastboard Navi"ation, Etd., o+ners of the 3;3 East+ater , for
demurra"e, dischar"in" e>penses, +harfa"e, e>tra meals a"enc# fees, cre+
overtime and miscellaneous e>penses under charter part# of the 3;3 East+ater
dated ,ul# -%th, .*7*.
5And +e mutuall# covenant and promise that the a+ard to be made b# said
Arbitrators or b# a maDorit# of them, shall be +ell and faithfull# 1ept and observed b#
us, and b# each of us.
5And it is hereb# further mutuall# a"reed that a Dud"ment the 2nited 3tates /istrict
Court for the 3outhern /istrict of Ne+ 0or1 shall be rendered upon the a+ard made
pursuant to this submission.1!ph"l .n#t
5?!TNE33, our hands this -&rd da# of Ma#, .*%'.51!ph"l .n#t
Pursuant to said arbitration a"reement, the three arbitrators in Ne+ 0or1 Cit# passed
upon the difference bet+een the plaintiff and the defendant after havin" heard and
received evidence submitted b# both sides,< ands rendered their arbitration decision
:E>hibit C=. This arbitration decision +as presented b# plaintiff to the 2.3 /istrict
Court, 3outhern /istrict of Ne+ 0or1, for confirmation, :Admiralt# No. A.B%-&B-= and
said Court confirmed the said arbitration decision in its 6rder and inal /ecree of
Au"ust .%, .*%', :E>hibit /= orderin" that the aforesaid a+ard of arbitrators be and
the same hereb# is in all respects confirmed<, and 5that the said movant, Eastboard
Navi"ation, Etd., recover of and from the said respondent ,uan 0smael 9 Compan#,
!nc., the sum of $%&,'&(.)*, +ith interest thereon from the -'th da# of ,une, .*%',
amountin" to $7)).-7, to"ether the movant<s cost ta>ed in the sum of $7'.'' and
amountin" in all to the sum of $%&,%BB..& +ith interest thereon until paid.<
Plaintiff brou"ht this action to enforce the aforesaid 56rder and inal /ecree5 pursuant to
3ection 7), Rule &* of the Rules of Court +hich, amon" others, provides 5!n case of a
Dud"ment is presumptive evidence of a ri"ht as bet+een the parties and their successors in
interest b# a subseFuent titleC but the Dud"ment ma# be repelled b# evidence of a +ant of
Durisdiction, +ant of notice to the part#, collusion, fraud or clear mista1e of la+ or fact.5
/efendant, in its ans+er, set up the defense that said Dud"ment cannot been forced in this
Durisdiction because.
:a= +hen the Ne+ 0or1 /istrict Court acted on the case it did not have Durisdiction over the
person of defendantC and :b= the proceedin" +here said Dud"ment +as rendered +as
summar#, there +as no trial on the merits and defendant did not "ive its consent thereto.
/efendant contends that Dud"ment does come +ith the purvie+ of 3ection 7), of the Rules
of Court.
/urin" the hearin", the parties a"reed as to the follo+in" facts. That defendant is a
corporation the stoc1 of +hich is held as follo+s4 Ma"dalena Aemad#, ),7%* sharesC 8. A.
Aemad#, B,*&* sharesC elipe 0smael, ((' sharesC Carlos 8omel 0smael, )&' sharesC
,uan 0smael # Cortes, . shareC and Gabriel 0smael, . share or a total of .(,''' sharesC
that plaintiff, durin" that time material to this case, +as not licensed to transact business in
the PhilippinesC that this is the first business transaction made locall# b# plaintiff althou"h
previousl# plaintiff<s vessel +as chartered b# the National Rice and Corn Corporation to
carr# rice Car"o to the Philippines, the charter part# thereto bein" dated April %, .*7*C that
the charter part# E>hibit A is on approved b# the /ocumentar# Council of the Baltic and
?hite 3ea Conference and that one of its standard stipulation is a clause re"ardin"
arbitration4 that 8. A. Aemad#, no+ deceased, as president and "eneral mana"er of
defendant, for -%, #ears had entered into numerous other contracts +ith third parties in
representation of defendant all of +hich +here ratified b# its Board of /irectorsC that one of
the arbitrators Richard Nathan +as appointed b# defendant corporation, another one
/onald E. 3immons +as appointed b# plaintiff, and these t+o appointed a third one Charles
P. EambertC and that the defense that 8. A. Aemad# +as not authoriHed b# the Board of
/irectors of defendant corporation to enter into the arbitration a"reement +as raised for the
first time in these proceedin"s, +hich means that it +as not raised in the arbitration
proceedin"s in Ne+ 0or1, nor in the proceedin"s held to confirm the a+ard in the 2.3.
/istrict Court of the 3outhern /istrict of Ne+ 0or1. !n addition this stipulation of facts,
plaintiff and defendant submitted documentar# evidence.
The lo+er court rendered Dud"ment affirmin" the decree of the Ne+ 0or1 /istrict Court and
orderin" that it be enforced from +hich defendant appealed. Plaintiff li1e+ise appealed but
onl# on the score that the court did not declare defendant liable for the amount of the
forei"n e>chan"e ta> due on the Dud"ment and for the fees it a"reed to pa# to its counsel for
this liti"ation. ?e +ill discuss separatel# the issues involved in this Doint appeal.
!t is plaintiff-appellant<s contention that, if the decision of the lo+er court is affirmed, it +ill
have to pa# the forei"n e>chan"e ta> on the amount a+arded therein if the same is to be
remitted to its home office at 6ntario, CanadaC that it should have been e>empted from said
ta> had defendant paid the a+ard immediatel# after it had been confirmed b# the 2.3. Ne+
0or1 /istrict Court because at that time Republic Act No. B'. had not #et been actedC and
that because defendant<s undue refusal to pa# the same +hich "ave ris1 to said ta> liabilit#,
plaintiff +ill have to shoulder the same. This is a loss +hich defendant shall pa#, plaintiff
contends, under Article ..'( of the 6ld Civil Code.
!n the first place, there is no clear proof on record that defendant<s refusal to pa# the a+ard
is due to fraud or bad faith. Plaintiff failed to present an# evidence in this re"ard. 6n the
contrar#, the stand of defendant does not seem to be entirel# "roundless as evidence b#
the several defenses it set up in its ans+er +hich "ive a clear perspective of the reasons
+h# it declined to pa# the a+ard +hich plaintiff demands. !n the second place, it +ould
appear that, if there is an# a"reement to pa# the instant obli"ation in a currenc# other than
the Philippine currenc#, the same is null polic# :Republic Act No. %-*=, and the most it could
be demanded is to pa# said obli"ation in Philippine currenc# to be measured in the
prevailin" rate of e>chan"e at the time the obli"ation +as incurred :section ., !dem.= inall#
in as much as the decree of Ne+ 0or1 /istrict Court +hich no+ sou"ht to be enforced does
not specif# the place +here the obli"ation should be paid, the Dud"ment debtor, herein
defendant, ma# dischar"e the same here in Manila +hich is its domicile. ?e find therefore
no valid reason for upholdin" the claim that defendant, should it be ordered to pa# the
a+ard, pa# the forei"n e>chan"e ta> reFuired b# la+ at the time the obli"ation fell due. At
an# rate, this Fuestion +ould appear no+ to be moot for the reason that said ta> has
alread# been abolished :Republic Act No. .&*7=.
The ne>t issue raised b# plaintiff-appellant refers to the failure of the lo+er court to a+ard to
it the fees +hich a"reed to pa# to its counsel in connection +ith the present liti"ation under
Article --'), sub-para"raph %, of the ne+ Civil Code. The alle"ed sub-para"raph allo+s a
+innin" part# to recover attorne#<s fees 5+here the defendant acted in "ross and evident
bad faith in refusin" to satisf# the plaintiff<s plainl# valid, Dust and demandable claim.5 rom
this it +ould appear that to the entitle plaintiff to Attorne#<s fee on this "round, it is necessar#
that it be proven that defendant acted 5in "ross and evident bad faith5 in refusin" plaintiff<s
claim. 3ince, as +e have alread# stated, plaintiff did not present an# evidence on this point,
the lo+er court did not err in den#in" plaintiff<s claim on this score.
Comin" no+ to the appeal of defendant, +e ma# restate the main issues raised in its
assi"nment of errors as follo+s4 :a= +hether or not defendant a"reed to submit to
compulsor# arbitration its dispute +ith plaintiff in the charter part# a"reement e>ecuted
bet+een them, and, in the affirmative, +hether such a"reement is valid in the DurisdictionC
:b= +hether or not the arbitration a"reement E>hibit B, is bindin" on defendant and, in the
affirmative, +hether or not the arbitration proceedin"s as +ell as the arbitrators< decision,
are valid and bindin" on defendantC :c= +hether or not, on the assumption that said
proceedin"s and decisions are valid, the decree of the 2.3. /istrict Court, 3outhern /istrict
of Ne+ 0or1, sittin" as Admiralt# Court, is valid and enforceable in this DurisdictionC and :d=
+hether or not plaintiff, bein" a forei"n corporation +ithout license to transact business in
the Philippines, has capacit# to sue in this Durisdiction.
:a= it should be recalled that as a confirmation of the correspondence had bet+een plaintiff<s
a"ents in the Philippines and defendant, prescribed b# its President 8. A. Aemad#, the
former sent a letter advisin" the letter that plaintiff had accepted its offer to charter plaintiff<s
vessel 3;3 $ast!ater to load car"o of scrap iron in the Philippines for Buenos Aires under
certain terms and conditions therein enumerated :E>hibit .=. !n this letter it is stated that the
terms and conditions for this charter of confirmation are to be as per "eneral conditions of
re"ular charter part# form5, a formal cop# of +hich +ould be for+arded to defendant. This
+as done, and the form above referred to is E>hibit A +hich +as dul# si"ned b# plaintiff,
throu"h its president, and b# defendant, throu"h its president and "eneral mana"er, 8. A.
Aemad#. This document is in printed in form +ith the blan1s properl# filled out, at the
bottom of +hich appears a t#pe+ritten clause +hich states, 5Clauses Nos. .B to &. inclusive
and 2. 3. A. Clause Paramount, ?ar Ris1s Clauses . and -, No+ ,ason Clause and Both-
to-Blame Collision Clauses, as attached, to %e considered as full& incorporated herein and
to form part of this Charter Part&.5 :Emphasis supplied= Both the printed form and the
t#pe+ritten sheet containin" Clauses Nos. .B to &. inclusive, +ere si"ned b# the
contractin" parties. Clause -* in the t#pe+ritten form refers to the arbitration a"reement,
and reads as follo+s4
-*. !t is mutuall# a"reed that should an# dispute arise bet+een 6+ners and the
Charterers, the matter in dispute shall be referred to three persons at Ne+ 0or1 for
arbitration, one to be appointed b# each of the parties hereto, and the third b# the
t+o so chosenC their decision or that of an# t+o of them shall be final, and for the
purpose of enforcin" an# a+ard, this a"reement ma# be a rule of the Court. The
Arbitrators shall be commercial men. 3hould the t+o so chosen not be able to a"ree
+ho the third Arbitrator should be, then the Ne+ 0or1 Produce E>chan"e is to
appoint such third Arbiter. The amount in dispute shall be placed in escro+ Ne+
0or1, subDect to the decision of the arbitrators.1!ph"l.n#t
!t is no+ contended that +hile 8. A. Aemad# had si"ned E>hibit A +hich contains a
t#pe+ritten clause at the end of the document, as +ell as the t#pe+ritten sheets attached
thereto, +herein is embodied Clause -* +hich refers to the arbitration a"reement, the fact
ho+ever is that Aemad# si"ned said papers +ithout readin" the same and solel# on the
assumption that the# merel# formaliHed the terms and conditions alread# a"reed upon in
the letter of confirmation E>hibit .. !t is emphasiHed that Aemad# never intended to submit
an# dispute that ma# arise out of its charter part# to compulsor# arbitration, much less to
reco"niHe the findin"s or a+ard of the arbitrators that ma# be appointed b# the parties as
final and not subDect to revie+ b# our courts. !t is further contended that Aemad# si"ned the
document E>hibit A that the same +ould merel# +ith its 5"eneral conditions5 the terms and
conditions stated in the letter of confirmation E>hibit ., and the t#pe+ritten clause attached
to the document E>hibit A, speciall# that +hich provides for forei"n arbitration, refers to
special conditions +hich +ere not intended b# the parties nor included in the preliminar#
ne"otiation conducted bet+een them. This stand of Aemad# corroborated b# the fact that
+hen he received from his la+#ers the arbitration a"reement E>hibit B, he refused to si"n it
because it +as never dispute +ith plaintiff to compulsor# arbitration.
There are man# circumstances on record +hich discredit this claim 6f defendant-appellant.
To be"in +ith, it appears that the charter part# a"reement E>hibit A is one the ori"inal of
+hich +as approved b# the /ocumentar# Council of the Baltic ?hit 3ea Conference in
.*-- and one of its standard clauses is the arbitration clause and as much as the latter,
thou"h in t#pe+ritten form, is considered as inte"ral part of the a"reement. This fact +as
admitted b# defendant<s counsel. !n the second place, Aemad# as it +ould appear, si"ned
not onl# the printed portion of the charter part# a"reement, but the t#pe+ritten portions as
+ell, +hich contains the arbitration clause, and it cannot be believed that a businessman of
lon" e>perience as he +as, +ould affi> his si"nature to the document involvin" a ver#
important transaction +ithout 1no+in" its contents and +ould do onl# on the assumption
that it contained mere formaliHed statements of the terms and conditions of the letter of
confirmation E>hibit .. Moreover, if Aemad# did not intend to submit his dispute +ith plaintiff
to arbitration Messrs. Mannin", Aarnisch and Aolin"er as la+#er to represent defendant
corporation in the arbitration proceedin"s to be held in Ne+ 0or1@ :E>hibits - and --B= ?h#
did he instruct the Ban1 of America on t+o different occasions to transmit to the !rvin" Trust
Compan# of Ne+ 0or1 the total sum of $-%,''' to be 5held pendin" result of the arbitration
of the dispute bet+een this compan# :0smael= and Eastboard Navi"ation, Etd.@5 :E>hibit &-
B= !f defendant corporation did not reall# intend to submit its dispute +ith the plaintiff to
arbitration the lo"ical step it should have ta1en +ould be to repudiate the act of its President
Aemad#, but far from doin" so, it approved and ratified it b# subseFuent that it +as
a"reeable to said arbitration.
b= The claim that the arbitration proceedin"s conducted in Ne+ 0or1 as +ell as the a+ard of
the arbitrators cannot bind defendant corporation for the reason that the same +ere +ithout
its authorit# or contrar# to its instructions is also untenable. !t is true that +hen defendant<s
counsel sent the document E>hibit B to its President 8. A. Aemad# for his si"nature, the
latter returned it but that defendant<s counsel nevertheless si"ned the document in behalf of
defendant and submitted it to the Board of Arbitrators, and this act is no+ alle"ed as one
+ould indicate that defendant did not a"ree to submit the dispute to arbitrations. But there is
one circumstance +hich Dustifies the action ta1en b# defendants counsel in Ne+ 0or1. Note
that said document E>hibit B is mista'enl& termed 5arbitration a"reement5, for it is not so. A
perusal thereof +ould sho+ that it is a mere a"reement to submit the dispute to the
arbitrators for arbitration and a+ard. 3uch is necessar# for there could be no valid
arbitration and a+ard if the arbitrators +ould not 1no+ +hat to arbitrate and decide. The
arbitration a"reement is Clause -* of the charter Part# E>hibit A. The fact that Aemad#
returned said document E>hibit B is of no si"nificance for such is previousl# "iven b#
defendant to its counsel Messrs. Mannin", Aarnisch and Aolin"er 5to present our case to
the arbitrators in a case +e have the Eastboard Navi"ation Co., Etd., in connection +ith our
charter of their vessel the 3;3 East+ater.5 contained in its letter dated April %, .*%' :E>hibit
--B=. The si"nin" of said document E>hibit B b# defendant<s counsel is therefore perfectl#
+ithin the scope of the authorit# "iven them b# defendant corporation.
But defendant insists that the decision of the arbitrators is not bindin" upon it because :.=
none of the arbitrators +ho acted thereon in accordance +ith the arbitration a"reement had
been appointed b# defendant, and :-= even if the appointment of Att#s. Mannin", Aarnisch
and Aolin"er to represent defendant before the arbitration boar +ould be considered as an
authorit# to submit their dispute to arbitration board is nevertheless void because it +as not
in accordance +ith the condition of said submission I that the arbitrators consider onl#
claims or a+ards not in e>cess of $-%,'''.
The claim that none of the three arbitrators +ho acted on the dispute +as appointed b#
defendant, or under its authorit#, is untenable, for the same is disproved b# the evidence.
Thus durin" the trial of this case and parties a"reed sa# to certain facts +hich appear to be
not disputed amon" them bein" that one of the arbitrators +ho acted in Ne+ 0or1 on the
case, Richard Nathan, !as appointed %& authorit& of defendant corporation, and his
appears to be supported b# the decision of the Ne+ 0or1 /istrict Court. Thus, in said
decision it appears that +hen the case +as called for hearin" both parties +ere represented
b# counsel +ho submitted documentar# evidence amon" +hich :.= cop# of the authoriHation
si"ned b# the defendant corporation empo+erin" one Morris E, Eipsett to appoint a
substitute arbitrator in its behalf, :-= cop# of a letter of said Morris E. Eipsett desi"natin"
Richard Nathan as arbitrator, and :&= cop# of the letter of Richard Nathan acceptin" his
appointment as arbitrator :E>hibit /=. Note that Mr. Morris E. Eipsett is the same person
+ho, accordin" to 8. A. Aemad#, recommended Messrs. Mannin", Aarnisch and Aolin"er
to be his la+#ers in the arbitration casein Ne+ 0or1 and that because he +as his "ood
friend Aemad# accepted his recommendation :E>hibit --B=. 6n the stren"th of this
evidence, +e cannot therefore ta1e seriousl# that contention that the person, Richard
Nathan, +ho acted as arbitrator in behalf of respondent, did so +ithout the authorit# of the
latter.
6f course, defendant no+ contends that the decision of the arbitrators can have no bindin"
effect on it because it +as rendered +ithout first obtainin" its +ritten conformit# of approval,
or +ithout its la+#er havin" first submitted to the matter to it for consultation, in accordance
+ith the instruction it has "iven in its letter dated April -', .*%' :E>hibit --C=, but certainl#,
such instruction, if an#, is preposterous under the circumstances, for to allo+ that to prevail
+ould be to defeat the ver# purpose of the arbitration. The proceedin" +ould be
purposeless for no a+ard can be obtained if the same should be made dependent upon the
instruction or approval of an# of the parties.
The contention that defendant corporation has limited its a"reement to arbitrate to an
amount not e>ceedin" $-%,''' cannot also be sustained. 3uch claims is not borne out b#
the evidence for neither the cable nor the letter +hich defendant sent to its la+#ers in Ne+
0or1 contains an# statement limitin" their authorit# to represent it to disputes not e>ceedin"
$-%,'''. !n other +ords, there is no evidence +hatsoever in the record sho+in" that Mr.
Aemad# understood, or +as made to understand, that the arbitration proceedin" 5+ould be
conducted solel# for the purpose of friendl# adDustment of disputes limited to and not
e>ceedin" the amount of $-%,'''.5 Moreover, the aforesaid deposit merel# represents an
estimate of the amounts that ma# accrue to plaintiff for demurra"e pursuant to the charter
a"reement +hile the vessel +as in transit from Manila to Buenos Aires and does not include
an# additional demurra"e that ma# be incurred +hile the vessel is doc1ed in Buenos Aires
+aitin" for the unloadin" of the car"o. To sustain defendant<s contention +ould be to defeat
the purpose of the arbitration +hich is to settle all disputes that ma# arise out of the contract
in connection +ith the vo#a"e. !t cannot therefore be pretended that the arbitrators acted
be#ond the scope of their authorit#.
As a corollar# to the Fuestion re"ardin" to the e>istence of an arbitration a"reement,
defendant raises the issue that, even if it be "ranted that it a"reed to submit its dispute +ith
plaintiff to arbitration, said a"reement is void and +ithout effect for it amounts of removin"
said dispute from the Durisdiction of the courts in +hich the parties are domiciled or +here
the dispute occurred. !t is true that there are authorities +hich hold that 5a clause in contract
providin" that all maters in dispute bet+een the parties shall be referred to arbitrators and to
them alone, is contrar# to public polic# and cannot oust the courts of Durisdiction5 :Manila
Electric Co. vs. Pasa# Transportation Co., %( Phil., B'', B'&=, ho+ever, there are
authorities +hich favor 5the more intelli"ent vie+ that arbitration, as an e>pensive, speed#
and amicable method of settlin" disputes, and as a means of avoidin" liti"ation, should
receive ever# encoura"ement from the courts +hich ma# be e>tended +ithout contravenin"
sound public polic# or settled la+5:& Am. ,ur., p. )&%=. Con"ress has officiall# adopted the
modern vie+ +hen it reproduced in the ne+ Civil Code the provisions of the old Code on
Arbitration. And onl# recentl# it approved republic Act No. )(B e>pressl# authoriHin"
arbitration of future disputes. Thus section - of said Act provides4
3EC. -. Persons and matters su%(ect to ar%itration. I T+o or more Persons or
Parties ma# submit to the arbitration of one or more arbitrators an# controvers#
e>istin" bet+een them at the time of the submission and +hich ma# be the subDect of
an action, or the parties to an# contract ma# in such contract a"ree to settle b#
arbitration a controvers# thereafter arisin" bet+een them. 3uch submission or
contract shall be valid, enforceable and irrevocable, save upon such "rounds as
e>ist at la+ for the revocation of an# contract.5.
Considerin" this declared polic# of Con"ress in favor of arbitration of all 1inds of arbitration
of all 1inds of disputes, and the fact that, accordin" to the e>planator# note of Republic Act
No. )(B, 5to afford the public a cheap and e>peditious procedure of settin" not onl#
commercial but other 1inds of contro)ersies most of the states of the *merican +nion ha)e
adopted statutes pro)idin, for ar%itration, and American businessman are reported to have
enthusiasticall# accepted the innovation of its obvious advanta"es over the ordinar# court
procedure5, +e find no plausible reason for holdin" that the arbitration a"reement in
Fuestion, simpl# because it refers to a future dispute, is null and void as bein" a"ainst
public polic#. :Emphasis supplied.=
:c= !t is contended that the decision rendered b# the 2. 3. /istrict Court of Ne+ 0or1 sittin"
as an Admiralt# Court, +hich ratified the a+ard made b# the arbitrators, has no bindin"
effect on defendant corporation, nor can it be enforced in this Durisdiction, for the reason that
+hen said court acted on the case it did not acFuire Durisdiction over said defendant. And
this claim is predicated on the alle"ed fact that defendant +as never served +ith notice,
summons, or process relative to the submission of the a+ard of the arbitrators to said court,
invo1in" in support of this contention the 2. 3. Arbitration Act of ebruar# .-, .*-% under
+hich the Ne+ 0or1 /istrict Court confirmed the arbitrators< a+ard. But +e find that the la+
thus invo1ed does not sustain defendant<s pretense, for the same, in case of a non-resident,
does not necessaril# reFuire that service of notice of the application for confirmation be
made on the adverse part# himself, it bein" sufficient that it be made upon his attorne# :,ul#
&', .*7(, c. &*-, section ., B. 3tat. BB*, p. 7 E>hibit E=. This is precisel# +hat +as done in
this case. Cop# of the notice of submission of the a+ard to the /istrict Court of Ne+ 0or1
+as served upon defendant<s counsel +ho in due time of appearance and actuall#
appeared +hen the case +as heard. This is clearl# stated in the decision of said Court
:E>hibit /=. !t is si"nificant that respondent<s counsel never impu"ned the Durisdiction of the
defendant nor did ever plead before it that the# +ere bereft of authorit# to represent
defendant. /efendant cannot therefore in this instance defeat the effect of this decision b#
alle"in" +ant of Durisdiction, or +ant of notice, as provided for in section 7), Rule &* of our
Rules of Court.
:d= ?hile plaintiff is a forei"n corporation +ithout license to transact business in the
Philippines, it does not follo+ that it has no capacit# to brin" the present action. 3uch
license is not necessar# because it is in business in the Philippines. !n fact, the transaction
herein involved is the first business underta1en b# plaintiff in the Philippines, althou"h on a
previous occasion plaintiff<s vessel +as chartered b# the National Rice and Corn
Corporation to carr# rice car"o from abroad to the Philippines. These t+o isolated
transactions do not constitute en"a"in" in business in the Philippines +ithin the purvie+ of
3ections B) and B* of the Corporation Ea+ so as to bar plaintiff from see1in" redress in our
courts. :Marshall-?ells Co. vs. Aenr# ?. Elser 9 Co. 7* Phil., ('C Pacific Je"etable 6il
Corporation vs. An"el '. 3in"son, G. R. No. E-(*.(, April -*, .*%%.=1!ph"l .n#t
?herefore, the decision appealed from its affirmed, +ithout pronouncement as to costs.1!ph"l .n#t