G.R. No. L-8933 February 28, 1957 SILVERIO UMBAO, Plaintiff-Appellee, vs. SANTIAGO YAP, Defendant-Appellant. Bengzon, J.

EN BANC G.R. No.
L-8933 February 28, 1957
SILVERIO UMBAO, Plaintiff-Appellee, vs. SANTIAGO YAP, Defendant-Appellant. BENGZON, J.: This is an appeal from the judgment of the Manila Court of First Instance "ordering the defendant to pay to the plaintiff the sum of P2,298.97, representing plaintiff's unpaid overtime pay while in defendant's employ, plus P300 as attorney's fees, with interest on the amount first mentioned at the rate of 6 per cent per annum from the date of the filing of the complaint on November 4, 1954, until said amount has been paid in full. With costs against the defendant."
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The complaint sought enforcement of an arbitration award rendered by the Wage Administration Service in pursuance of the arbitration agreement signed by Silverio Umbao and Santiago Yap to settle their dispute regarding unpaid wages claimed by the first as employee from the second as employer.
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The complaint alleged that in June 1954 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." It also alleged, that 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 in the amount of P2,998.97; that the award had been approved by Ruben Santos, Acting Chief of the Service; and that Yap had refused to abide by and comply with it. The pleading included a copy of the arbitration agreement and of the award.
The defendant's answer did not deny the existence of the covenant and of the award. But it questioned the enforceability of both, 1 contending mainly that the Service had no legal authority to act as arbitration, 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.
In view of the answer, the plaintiff asked for judgment on the pleadings. And the Court, nothing 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 Arts. 2042 et seq. Consequently he rendered judgment against defendant, the dispositive part of which has been quoted above. Hence this appeal.
Defendant argues that the New Civil Code does not apply, because arbitration only takes place where a covenant is entered into "whereby parties litigant by making reciprocal concessions or agreements of facts, avoid a litigation or put an end to one already commenced" which was not the case at bar. 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.
Again appellant argues that the award should not be executed because the arbitration had not been appointed in accordance with rules promulgated by the Supreme Court, pursuant to Article 2046 of the New Civil Code. ART. 2046. The appointment of arbitrators and the procedure for arbitration shall be governed by the provisions of such rules of court as the Supreme Court shall promulgate. 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.
The question then is: has this arbitration by the Service conformed with the Act? This brings up the appellant's first assignment of error he points out that no application had been filed in court for the appointment of the arbitrator under Republic Act No. 876, and the court had appointed Severo Puncan as such.
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.
True, there is section 5 of the Act which provides: SEC. 5. Preliminary procedure. - An arbitration shall be instituted by:
(a) In the case of a contract to arbitrate future controversies by the service by either party upon the other of a demand for arbitration in accordance with the contract. Such demand shall set forth the nature of the controversy, the amount involved, if any, and the relief sought, together with a true copy of the contract providing for arbitration. . . .
(b) In the event that one party defaults in answering the demand, the aggrieved party may file with the Clerk of Court of First Instance having jurisdiction over the parties, a copy of the demand for arbitration under the contract to arbitrate, . . . .
(c) In the case of the submission of an existing controversy by the filing with the clerk of the Court of First Instance having jurisdiction, of the submission agreement, setting forth the nature of the controversy, and the amount involved, if any. Such submission may be filed by any party and shall be duly executed by both parties.
(d) In the event that one party neglets, fails or refuses to arbitrate under a submission agreement, the aggrieved party shall follow the procedure prescribed in subparagraphs (a) and (b) of this section. Paragraph (c) seems, at first glance, to require the institution of court proceedings. But on second thought it will be preceived that court action is needed when one party, after entering into the contract to arbitrate, neglets, fails or refuses to arbitrate as provided in paragraph (d) It may also be applied where the arbitrator has not been selected by the parties who have agreed to arbitrate. 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 Service2 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.3
So much for court initiative, and arbitrator's appointment. 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: SEC. 23. Confirmation of award. - At any time within one month after the award is made, any party to the controversy which was arbitrated may apply to the court having jurisdiction, as provided thereupon the court must grant such order unless the award is vacated, modified or corrected, as prescribed herein. . . .
SEC. 27. Judgment. - Upon the granting of an order confirming, modifying or correcting an award, judgment maybe entered in conformity therewith in the court wherein said application was filed. . . . (Republic Act 876.) . 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, with costs. So ordered.
Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador, Reyes, J.B.L., Endencia and Felix, JJ., concur.
SECOND DIVISION [G.R. No. 115412. November 19, 1999] HOME BANKERS SAVINGS AND TRUST COMPANY, petitioner v. COURT OF APPEALS and FAR EAST BANK & TRUST COMPANY, Respondents. DECISION BUENA , J.:
This appeal by certiorari under Rule 45 of the Rules of Court seeks to annul and set aside the decisioni[1 of the Court of Appealsii[2 dated January 21, 1994 in CA-G.R. SP No. 29725, dismissing the petition for certiorari filed by petitioner to annul the two (2) orders issued by the Regional Trial Court of Makatiiii[3 in Civil Case No. 92-145, the first, dated April 30, 1992, denying petitioner's motion to dismiss and the second, dated October 1, 1992 denying petitioner's motion for reconsideration thereof. The pertinent facts may be briefly stated as follows: Victor Tancuan, one of the defendants in Civil Case No. 92-145, 0issued Home Bankers Savings and Trust Company (HBSTC) check No. 193498 for P25,250,000.00 while Eugene Arriesgado issued Far East Bank and Trust Company (FEBTC) check Nos. 464264, 464272 and 464271 for P8,600,000.00, P8,500,000.00 and P8,100,000.00, respectively, the three checks amounting to P25,200,000.00. Tancuan and Arriesgado exchanged each other's checks and deposited them with their respective banks for collection. When FEBTC presented Tancuan's HBSTC check for clearing, HBSTC dishonored it for being "Drawn Against Insufficient Funds." On October 15, 1991, HBSTC sent Arriesgado's three (3) FEBTC checks through the Philippine Clearing House Corporation (PCHC) to FEBTC but was returned on October 18, 1991 as "Drawn Against Insufficient Funds." HBSTC received the notice of dishonor on October 21, 1991 but refused to accept the checks and on October 22, 1991, returned them to FEBTC through the PCHC for the reason "Beyond Reglementary Period," implying that HBSTC already treated the three (3) FEBTC checks as cleared and allowed the proceeds thereof to be withdrawn.iv[4 FEBTC demanded reimbursement for the returned checks and inquired
from HBSTC whether it had permitted any withdrawal of funds against the unfunded checks and if so, on what date. HBSTC, however, refused to make any reimbursement and to provide FEBTC with the needed information.
Thus, on December 12, 1991, FEBTC submitted the dispute for arbitration before the PCHC Arbitration Committee,v[5 under the PCHC's Supplementary Rules on Regional Clearing to which FEBTC and HBSTC are
bound as participants in the regional clearing operations administered by the PCHC.vi[6
On January 17, 1992, while the arbitration proceedings was still pending, FEBTC filed an action for sum of money and damages with preliminary attachmentvii[7 against HBSTC, Robert Young, Victor Tancuan and Eugene Arriesgado with the Regional Trial Court of Makati, Branch 133. A motion to dismiss was filed by HBSTC claiming that the complaint stated no cause of action and accordingly should be dismissed because it seeks to enforce an arbitral award which as yet does not exist.viii[8 The trial court issued an omnibus order dated April 30, 1992 denying the motion to dismiss and an order dated October 1, 1992 denying the motion for reconsideration. On December 16, 1992, HBSTC filed a petition for certiorari with the respondent Court of Appeals contending that the trial court acted with grave abuse of discretion amounting to lack of jurisdiction in denying the motion to dismiss filed by HBSTC. In a Decisionix[9 dated January 21, 1994, the respondent court dismissed the petition for lack of merit and held that "FEBTC can reiterate its cause of action before the courts which it had already raised in the arbitration case"x[10 after finding that the complaint filed by FEBTC "seeks to collect a sum of money from HBT [HBSTC] and not to enforce or confirm an arbitral award."xi[11 The respondent court observed that "[i]n the Complaint, FEBTC applied for the issuance of a writ of preliminary attachment over HBT's [HBSTC] property"xii[12 and citing section 14 of Republic Act No. 876, otherwise known as the Arbitration Law, maintained that "[n]ecessarily, it has to reiterate its main cause of action for sum of money against HBT [HBSTC],"xiii[13 and that "[t]his prayer for conservatory relief [writ of preliminary attachment] satisfies the requirement of a cause of action which FEBTC may pursue in the courts."xiv[14 Furthermore, the respondent court ruled that based on section 7 of the Arbitration Law and the cases of National Union Fire Insurance Company of Pittsburg vs. Slolt-Nielsen Philippines, Inc.,xv[15 and Bengson vs. Chan,xvi[16 "when there is a condition requiring prior submission to arbitration before the institution of a court action, the complaint is not to be dismissed but should be suspended for arbitration."xvii[17 Finding no merit in HBSTC's contention that section 7 of the Arbitration Law "contemplates a situation in which a party to an arbitration agreement has filed a court action without first resorting to arbitration, while in the case at bar, FEBTC has initiated arbitration proceedings before filing a court action," the respondent court held that "if the absence of a prior arbitration may stay court action, so too and with more reason, should an arbitration already pending as obtains in this case stay the court action. A party to a pending arbitral proceeding may go to court to obtain conservatory reliefs in connection with his cause of action although the disposal of that action on the merits cannot as yet be obtained."xviii[18 The respondent court discarded Puromines, Inc. vs. Court of Appeals,xix[19 stating that "perhaps Puromines may have been decided on a different factual basis."xx[20 In the instant petition,xxi[21 petitioner contends that first, "no party litigant can file a non-existent complaint,"xxii[22 arguing that "one cannot file a complaint in court over a subject that is undergoing arbitration."xxiii[23 Second, petitioner submits that "[s]ince arbitration is a special proceeding by a clear provision of law,xxiv[24 the civil suit filed below is, without a shadow of doubt, barred by litis pendencia and should be dismissed de plano insofar as HBSTC is concerned."xxv[25 Third, petitioner insists that "[w]hen arbitration is agreed upon and suit is filed without arbitration having been held and terminated, the case that is filed should be dismissed,"xxvi[26 citing Associated Bank vs. Court of Appeals,xxvii[27 Puromines, Inc. vs. Court of Appeals,xxviii[28 and Ledesma vs. Court of Appeals.xxix[29 Petitioner demurs that the Puromines ruling was deliberately not followed by the respondent court which claimed that:
"xxx xxx. It would really be much easier for Us to rule to dismiss the complainant as the petitioners here seeks to do, following Puromines. But with utmost deference to the Honorable Supreme Court, perhaps Puromines may have been decided on a different factual basis. xxx xxx."xxx[30
Petitioner takes exception to FEBTC's contention that Puromines cannot modify or reverse the rulings in National Union Fire Insurance Company of Pittsburg vs. Stolt-Nielsen Philippines, Inc.,xxxi[31 and Bengson
vs. Chan,xxxii[32 where this Court suspended the action filed pending arbitration, and argues that "[s]ound policy requires that the conclusion of whether a Supreme Court decision has or has not reversed or modified [a] previous doctrine, should be left to the Supreme Court itself; until then, the latest pronouncement should prevail."xxxiii[33 Fourth, petitioner alleges that the writ of preliminary attachment issued by the trial court is void considering that the case filed before it "is a separate action which cannot exist,"xxxiv[34 and "there is even no need for the attachment as far as HBSTC is concerned because such automatic debit/credit procedurexxxv[35 may be regarded as a security for the transactions involved and, as jurisprudence confirms, one requirement in the issuance of an attachment [writ of preliminary attachment] is that the debtor has no sufficient security."xxxvi[36 Petitioner asserts further that a writ of preliminary attachment is unwarranted because no ground exists for its issuance. According to petitioner, "the only allegations against it [HBSTC] are that it refused to refund the amounts of the checks of FEBTC and that it knew about the fraud perpetrated by the other defendants,"xxxvii[37 which, at best, constitute only "incidental fraud" and not causal fraud which justifies the issuance of the writ of preliminary attachment.
Private respondent FEBTC, on the other hand, contends that "the cause of action for collection [of a sum of money] can coexist in the civil suit and the arbitration [proceeding]"xxxviii[38 citing section 7 of the Arbitration Law which provides for the stay of the civil action until an arbitration has been had in accordance with the terms of the agreement providing for arbitration. Private respondent further asserts that following section 4(3), article VIIIxxxix[39of the 1987 Constitution, the subsequent case of Puromines does not overturn the ruling in the earlier cases of National Union Fire Insurance Company of Pittsburg vs. Stolt-Nielsen Philippines, Inc.xl[40 and Bengson vs. Chan,xli[41 hence, private respondents concludes that the prevailing doctrine is that the civil action must be stayed rather than dismissed pending arbitration. In this petition, the lone issue presented for the consideration of this Court is:
WHETHER OR NOT PRIVATE RESPONDENT WHICH COMMENCED AN ARBITRATION PROCEEDING UNDER THE AUSPICES OF THE PHILIPPINE CLEARING HOUSE CORPORATION (PCHC) MAY SUBSEQUENTLY FILE A SEPARATE CASE IN COURT OVER THE SAME SUBJECT MATTER OF ARBITRATION DESPITE THE PENDENCY OF THAT ARBITRATION, SIMPLY TO OBTAIN THE PROVISIONAL REMEDY OF ATTACHMENT AGAINST THE BANK, THE ADVERSE PARTY IN THE ARBITRATION PROCEEDINGS."xlii[42
We find no merit in the petition. Section 14 of Republic Act 876, otherwise known as 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, thus:
Section 14. Subpoena and subpoena duces tecum. - Arbitrators shall have the power to require any person to attend a hearing as a witness. They shall have the power to subpoena witnesses and documents when the relevancy of the testimony and the materiality thereof has been demonstrated to the arbitrators. Arbitrators may also require the retirement of any witness during the testimony of any other witness. All of the arbitrators appointed in any controversy must attend all the hearings in that matter and hear all the allegations and proofs of the parties; but an award by the majority of them is valid unless the concurrence of all of them is expressly required in the submission or contract to arbitrate. The arbitrator or arbitrators shall have the power at any time, before rendering the award, without prejudice to the rights of any party to petition the court to take measures to safeguard and/or conserve any matter which is the subject of the dispute in arbitration. (emphasis supplied)
Petitioner's exposition of the foregoing provision deserves scant consideration. Section 14 simply grants an arbitrator the power to issue subpoena and subpoena duces tecum at any time before rendering the award. The exercise of such power is without prejudice to the right of a party to file a petition in court to safeguard any matter which is the subject of the dispute in arbitration. In the case at bar, private respondent filed an action for a sum of money with prayer for a writ of preliminary attachment. Undoubtedly, such action involved the same subject matter as that in arbitration, i.e., the sum of P25,200,000.00 which was allegedly deprived from private respondent in what is known in banking as a "kiting scheme." 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 section 14 of the Arbitration Law. Petitioner cites the cases of Associated Bank vs. Court of Appeals,xliii[43 Puromines, Inc. vs. Court of Appeals,xliv[44 and Ledesma vs. Court of Appealsxlv[45 in contending that "[w]hen arbitration is agreed upon and suit is filed without arbitration having been held and terminated, the case that is filed should be dismissed."xlvi[46 However, the said cases are not in point. In Associated Bank, we affirmed the dismissal of the third-party complaint filed by Associated Bank against Philippine Commercial International Bank, Far East Bank & Trust Company, Security Bank and Trust Company and Citytrust Banking Corporation for lack of jurisdiction, it being shown that the said parties were bound by the Clearing House Rules and Regulations on Arbitration of the Philippine Clearing House Corporation. In Associated Bank, we declared that:
"xxx xxx. Under the rules and regulations of the Philippine Clearing House Corporation (PCHC), the mere act of participation of the parties concerned in its operations in effect amounts to a manifestation of agreement by the parties to abide by its rules and regulations. As a consequence of such participation, 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."xlvii[47 (emphasis supplied)
And thus we concluded:
"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."xlviii[48
(emphasis supplied)
Simply put, participants in the regional clearing operations of the Philippine Clearing House Corporation cannot bypass the arbitration process laid out by the body and seek relief directly from the courts. In the case at bar, undeniably, private respondent has initiated arbitration proceedings as required by the PCHC rules and regulations, and pending arbitration has sought relief from the trial court for measures to safeguard and/or conserve the subject of the dispute under arbitration, as sanctioned by section 14 of the Arbitration Law, and otherwise not shown to be contrary to the PCHC rules and regulations. Likewise, in the case of Puromines, Inc. vs. Court of Appeals,xlix[49 we have ruled that:
"In 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 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."
In Puromines, we found the arbitration clause stated in the sales contract to be valid and applicable, thus, we ruled that the parties, being signatories to the sales contract, are obligated to respect the arbitration provisions on the contract and cannot escape from such obligation by filing an action for breach of contract in court without resorting first to arbitration, as agreed upon by the parties. At this point, we emphasize that arbitration, as an alternative method of dispute resolution, is encouraged by this Court. Aside from unclogging judicial dockets, it also hastens solutions especially of commercial disputes.l[50 The Court looks with favor upon such amicable arrangement and
will only interfere with great reluctance to anticipate or nullify the action of the arbitrator.li[51
WHEREFORE, premises considered, the petition is hereby DISMISSED and the decision of the court a quo is AFFIRMED. SO ORDERED. Bellosillo, (Chairman), Mendoza, Quisumbing, and De Leon, Jr., JJ. concur.
i ii iii iv
vRepublic of the Philippines SUPREME COURT Manila THIRD DIVISION
G.R. No. 96283 February 25, 1992 CHUNG FU INDUSTRIES (PHILIPPINES) INC., its Directors and Officers namely: HUANG KUO-CHANG, HUANG AN-CHUNG, JAMES J.R. CHEN, TRISTAN A. CATINDIG, VICENTE B. AMADOR, ROCK A.C. HUANG, JEM S.C. HUANG, MARIA TERESA SOLIVEN and VIRGILIO M. DEL ROSARIO, Petitioners,
vs. COURT OF APPEALS, HON. FRANCISCO X. VELEZ (Presiding Judge, Regional Trail Court of Makati [Branch 57]) and ROBLECOR PHILIPPINES, INC., Respondents.
ROMERO, J.:
This is a special civil action for certiorari seeking to annul the Resolutions of the Court of Appeals* dated October 22, 1990 and December 3, 1990 upholding the Orders of July 31, 1990 and August 23, 1990 of the Regional Trial Court of Makati, Branch 57, in Civil Case No. 90-1335. Respondent Court of Appeals affirmed the ruling of the trial court that herein petitioners, after submitting themselves for arbitration and agreeing to the terms and conditions thereof, providing that the arbitration award shall be final and unappealable, are precluded from seeking judicial review of subject arbitration award.
It appears that on May 17, 1989, petitioner Chung Fu Industries (Philippines) (Chung Fu for brevity) and private respondent Roblecor Philippines, Inc. (Roblecor for short) forged a construction agreement 1 whereby respondent contractor committed to construct and finish on December 31, 1989, petitioner corporation's industrial/factory complex in Tanawan, Tanza, Cavite for and in consideration of P42,000,000.00. 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.
Apart from the aforesaid construction agreement, Chung Fu and Roblecor entered into two (2) other ancillary contracts, to wit: one dated June 23, 1989, for the construction of a dormitory and support
facilities with a contract price of P3,875,285.00, to be completed on or before October 31, 1989; 2 and the other dated August 12, 1989, for the installation of electrical, water and hydrant systems at the plant site, commanding a price of P12.1 million and requiring completion thereof one month after civil works have been finished. 3
However, respondent Roblecor failed to complete the work despite the extension of time allowed it by Chung Fu. Subsequently, the latter had to take over the construction when it had become evident that Roblecor was not in a position to fulfill its obligation.
Claiming an unsatisfied account of P10,500,000.00 and unpaid progress billings of P2,370,179.23, Roblecor on May 18, 1990, filed a petition for Compulsory Arbitration with prayer for Temporary Restraining Order before respondent Regional Trial Court, pursuant to the arbitration clause in the construction agreement. 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: 2. The parties mutually agree that the arbitration shall proceed in accordance with the following terms and conditions: xxx xxx xxx d. The parties mutually agree that they will abide by the decision of the arbitrator including any amount that may be awarded to either party as compensation, consequential damage and/or interest thereon;
e. 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. f. As an exception to sub-paragraph (e) above, the parties mutually agree that either party is entitled to seek judicial assistance for purposes of enforcing the arbitrator's award; xxx xxx xxx 4 (Emphasis supplied) Respondent Regional Trial Court approved the arbitration agreement thru its Order of May 30, 1990. Thereafter, Engr. Willardo Asuncion was appointed as the sole arbitrator.
On June 30, 1990, Arbitrator Asuncion ordered petitioners to immediately pay respondent contractor, the sum of P16,108,801.00. He further declared the award as final and unappealable, pursuant to the Arbitration Agreement precluding judicial review of the award.
Consequently, Roblecor moved for the confirmation of said award. On the other hand, 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.
Respondent lower court denied Chung Fu's Motion to Remand thus compelling it to seek reconsideration therefrom but to no avail. The trial court granted Roblecor's Motion for Confirmation of Award and accordingly, entered judgment in conformity therewith. Moreover, it granted the motion for the issuance of a writ of execution filed by respondent.
Chung Fu elevated the case via a petition for certiorari to respondent Court of Appeals. On October 22,1990 the assailed resolution was issued. The respondent appellate court concurred with the findings and conclusions of respondent trial court resolving that Chung Fu and its officers, as signatories to the Arbitration Agreement are bound to observe the stipulations thereof providing for the finality of the award and precluding any appeal therefrom.
A motion for reconsideration of said resolution was filed by petitioner, but it was similarly denied by respondent Court of Appeals thru its questioned resolution of December 3, 1990.
Hence, the instant petition anchored on the following grounds: First

Respondents Court of Appeals and trial Judge gravely abused their discretion and/or exceeded their jurisdiction, as well as denied due process and substantial justice to petitioners, - (a) by refusing to exercise their judicial authority and legal duty to review the arbitration award, and (b) by declaring that 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." Second
Respondent Court of Appeals and trial Judge gravely abused their discretion and/or exceeded their jurisdiction, as well as denied due process and substantial justice to petitioner, by not vacating and annulling the award dated 30 June 1990 of the Arbitrator, on the ground that the Arbitrator grossly departed from the terms of the parties' contracts and misapplied the law, and thereby exceeded the authority and power delegated to him. (Rollo, p. 17) Allow us to take a leaf from history and briefly trace the evolution of arbitration as a mode of dispute settlement.
Because conflict is inherent in human society, much effort has been expended by men and institutions in devising ways of resolving the same. With the progress of civilization, physical combat has been ruled out and instead, more specific means have been evolved, such as recourse to the good offices of a disinterested third party, whether this be a court or a private individual or individuals.
Legal history discloses that "the early judges called upon to solve private conflicts were primarily the arbiters, persons not specially trained but in whose morality, probity and good sense the parties in conflict reposed full trust. Thus, in Republican Rome, arbiter and judge (judex) were synonymous. The magistrate or praetor, after noting down the conflicting claims of litigants, and clarifying the issues,
referred them for decision to a private person designated by the parties, by common agreement, or selected by them from an apposite listing (the album judicium) or else by having the arbiter chosen by lot. The judges proper, as specially trained state officials endowed with own power and jurisdiction, and taking cognizance of litigations from beginning to end, only appeared under the Empire, by the socalled cognitio extra ordinem." 5
Such means of referring a dispute to a third party has also long been an accepted alternative to litigation at common law. 6
Sparse though the law and jurisprudence may be on the subject of arbitration in the Philippines, it was nonetheless recognized in the Spanish Civil Code; specifically, the provisions on compromises made applicable to arbitrations under Articles 1820 and 1821. 7 Although said provisions were repealed by implication with the repeal of the Spanish Law of Civil Procedure, 8 these and additional ones were reinstated in the present Civil Code. 9
Arbitration found a fertile field in the resolution of labor-management disputes in the Philippines. Although early on, Commonwealth Act 103 (1936) provided for compulsory arbitration as the state policy to be administered by the Court of Industrial Relations, in time such a modality gave way to voluntary arbitration. While not completely supplanting compulsory arbitration which until today is practiced by government officials, the Industrial Peace Act which was passed in 1953 as Republic Act No. 875, favored the policy of free collective bargaining, in general, and resort to grievance procedure, in particular, as the preferred mode of settling disputes in industry. It was accepted and enunciated more explicitly in the Labor Code, which was passed on November 1, 1974 as Presidential Decree No. 442, with the amendments later introduced by Republic Act No. 6715 (1989).
Whether utilized in business transactions or in employer-employee relations, arbitration was gaining wide acceptance. A consensual process, it was preferred to orders imposed by government upon the disputants. Moreover, court litigations tended to be time-consuming, costly, and inflexible due to their scrupulous observance of the due process of law doctrine and their strict adherence to rules of evidence.
As early as the 1920's, this Court declared: In the Philippines fortunately, the attitude of the courts toward arbitration agreements is slowly crystallizing into definite and workable form. . . . 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 with great reluctance interfere to anticipate or nullify the action of the arbitrator. 10
That there was a growing need for a law regulating arbitration in general was acknowledged when Republic Act No. 876 (1953), otherwise known as the Arbitration Law, was passed. "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 IV of the Civil Code shall remain in force." 11
In recognition of the pressing need for an arbitral machinery for the early and expeditious settlement of disputes in the construction industry, a Construction Industry Arbitration Commission (CIAC) was created by Executive Order No. 1008, enacted on February 4, 1985.
In practice nowadays, absent an agreement of the parties to resolve their disputes via a particular mode, it is the regular courts that remain the fora to resolve such matters. However, the parties may opt for recourse to third parties, exercising their basic freedom to "establish such stipulation, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy." 12 In such a case, resort to the arbitration process may be spelled out by them in a contract in anticipation of disputes that may arise between them. Or this may be stipulated in a submission agreement when they are actually confronted by a dispute. Whatever be the case, such recourse to an extrajudicial means of settlement is not intended to completely deprive the courts of jurisdiction. In fact, the early cases on arbitration carefully spelled out the prevailing doctrine at the time, thus: ". . . a clause in a contract providing that all matters in dispute between the parties shall be referred to arbitrators and to them alone is contrary to public policy and cannot oust the courts of Jurisdiction." 13
But certainly, the stipulation to refer all future disputes to an arbitrator or to submit an ongoing dispute to one is valid. Being part of a contract between the parties, it is binding and enforceable in court in case one of them neglects, fails or refuses to arbitrate. Going a step further, in the event that they declare their intention to refer their differences to arbitration first before taking court action, this constitutes a condition precedent, such that where a suit has been instituted prematurely, the court shall suspend the same and the parties shall be directed forthwith to proceed to arbitration. 14
A court action may likewise be proven where the arbitrator has not been selected by the parties. 15
Under present law, may the parties who agree to submit their disputes to arbitration further provide that the arbitrators' award shall be final, unappealable and executory?
Article 2044 of the Civil Code recognizes the validity of such stipulation, thus: Any stipulation that the arbitrators' award or decision shall be final is valid, without prejudice to Articles 2038, 2039 and 2040. Similarly, the Construction Industry Arbitration Law provides that the arbitral award "shall be final and inappealable except on questions of law which shall be appealable to the Supreme Court." 16
Under the original Labor Code, voluntary arbitration awards or decisions were final, unappealable and executory. "However, voluntary arbitration awards or decisions on money claims, involving an amount exceeding One Hundred Thousand Pesos (P100,000.00) or forty-percent (40%) of the paid-up capital of the respondent employer, whichever is lower, maybe appealed to the National Labor Relations Commission on any of the following grounds: (a) abuse of discretion; and (b) gross incompetence." 17It is to be noted that the appeal in the instances cited were to be made to the National Labor Relations Commission and not to the courts.
With the subsequent deletion of the above-cited provision from the Labor Code, the voluntary arbitrator is now mandated to render an award or decision within twenty (20) calendar days from the date of submission of the dispute and such decision shall be final and executory after ten (10) calendar days from receipt of the copy of the award or decision by the parties. 18
Where the parties agree that the decision of the arbitrator shall be final and unappealable as in the instant case, the pivotal inquiry is whether subject arbitration award is indeed beyond the ambit of the
court's power of judicial review.
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. 19 Additionally, under Sections 24 and 25 of the Arbitration Law, there are grounds for vacating, modifying or rescinding an arbitrator's award. 20 Thus, if and when the factual circumstances referred to in the above-cited provisions are present, judicial review of the award is properly warranted.
What if courts refuse or neglect to inquire into the factual milieu of an arbitrator's award to determine whether it is in accordance with law or within the scope of his authority? How may the power of judicial review be invoked?
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. For "the writ of certiorari is an extra-ordinary remedy and that certiorari jurisdiction is not to be equated with appellate jurisdiction. In a special civil action of certiorari, the Court will not engage in a review of the facts found nor even of the law as interpreted or applied by the arbitrator unless the supposed errors of fact or of law are so patent and gross and prejudicial as to amount to a grave abuse of discretion or an exces de pouvoir on the part of the arbitrator." 21
Even decisions of administrative agencies which are declared "final" by law are not exempt from judicial review when so warranted. Thus, in the case of Oceanic Bic Division (FFW), et al. v. Flerida Ruth P. Romero, et al., 22 this Court had occasion to rule that: . . . Inspite of statutory provisions making "final" the decisions of certain administrative agencies, we have taken cognizance of petitions questioning these decisions where want of jurisdiction, grave abuse of discretion, violation of due process, denial of substantial justice or erroneous interpretation of the law were brought to our attention . . . 23(Emphasis ours). It should be stressed, too, that voluntary arbitrators, by the nature of their functions, act in a quasijudicial capacity. 24 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: 1. The Honorable Arbitrator committed grave error in failing to apply the terms and conditions of the Construction Agreement, Dormitory Contract and Electrical Contract, and in using instead the "practices" in the construction industry;
2. The Honorable Arbitrator committed grave error in granting extra compensation to Roblecor for loss of productivity due to adverse weather conditions;
3. The Honorable Arbitrator committed grave error in granting extra compensation to Roblecor for loss due to delayed payment of progress billings;
4. The Honorable Arbitrator committed grave error in granting extra compensation to Roblecor for loss of productivity due to the cement crisis;
5. The Honorable Arbitrator committed grave error in granting extra compensation to Roblecor for losses allegedly sustained on account of the failed coup d'tat; 6. The Honorable Arbitrator committed grave error in granting to Roblecor the amount representing the alleged unpaid billings of Chung Fu;
7. The Honorable Arbitrator committed grave error in granting to Roblecor the amount representing the alleged extended overhead expenses;
8. The Honorable Arbitrator committed grave error in granting to Roblecor the amount representing expenses for change order for site development outside the area of responsibility of Roblecor;
9. The Honorable Arbitrator committed grave error in granting to Roblecor the cost of warehouse No. 2;
10. The Honorable Arbitrator committed grave error in granting to Roblecor extra compensation for airduct change in dimension;
11. The Honorable Arbitrator committed grave error in granting to Roblecor extra compensation for airduct plastering; and
12. The Honorable Arbitrator committed grave error in awarding to Roblecor attorney's fees. 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.
But the respondent trial court's refusal to look into the merits of the case, despite prima facie showing of the existence of grounds warranting judicial review, effectively deprived petitioners of their opportunity to prove or substantiate their allegations. In so doing, the trial court itself committed grave abuse of discretion. Likewise, the appellate court, in not giving due course to the petition, committed grave abuse of discretion. Respondent courts should not shirk from exercising their power to review, where under the applicable laws and jurisprudence, such power may be rightfully exercised; more so where the objections raised against an arbitration award may properly constitute grounds for annulling, vacating or modifying said award under the laws on arbitration.
WHEREFORE, the petition is GRANTED. The Resolutions of the Court of Appeals dated October 22, 1990 and December 3, 1990 as well as the Orders of respondent Regional Trial Court dated July 31, 1990 and August 23, 1990, including the writ of execution issued pursuant thereto, 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. No costs.
SO ORDERED. Gutierrez, Jr., Feliciano, Bidin and Davide, Jr., JJ., concur.
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G.R. No. L-8933 February 28, 1957 SILVERIO UMBAO, Plaintiff-Appellee, vs. SANTIAGO YAP, Defendant-Appellant. Bengzon, J.

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G.R. No. L-8933 February 28, 1957 SILVERIO UMBAO, Plaintiff-Appellee, vs. SANTIAGO YAP, Defendant-Appellant. Bengzon, J.

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EN BANC G.R. No.

L-8933 February 28, 1957

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vRepublic of the Philippines SUPREME COURT Manila THIRD DIVISION

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provisions of the parties' contract.

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Hence, the instant petition anchored on the following grounds: First

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court's power of judicial review.

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