MUSTANG LUMBER v. CA

MUSTANG LUMBER v. CA

G.R Nos. 104988, 106424, 123784

Ponente: J. Davide Jr.

FACTS:

On 1 April 1990, acting on an information that a huge stockpile of narra flitches, shorts, and slabs were seen inside the lumberyard of the petitioner in Valenzuela, Metro Manila, DENR organized a team of foresters and policemen and sent it to conduct surveillance at the said lumberyard. In the course thereof, the team members saw coming out from the lumberyard the petitioner's truck, loaded with lauan and almaciga lumber of assorted sizes and dimensions. Since the driver could not produce the required invoices and transport documents, the team seized the truck together with its cargo and impounded them at the DENR compound at Visayas Avenue, Quezon City. The team was not able to gain entry into the premises because of the refusal of the owner.

On 3 April 1990, the team was able to secure a search warrant from Executive Judge Adriano R. Osorio of the Regional Trial Court (RTC) of Valenzuela, Metro Manila. By virtue thereof, the team seized on that date from the petitioner's lumberyard four truckloads of narra shorts, trimmings, and slabs; a negligible number of narra lumber; and approximately 200,000 board feet of lumber and shorts of various species including almaciga and supa.

On 4 April 1990, the team returned to the premises of the petitioner's lumberyard in Valenzuela and placed under administrative seizure the remaining stockpile of almaciga, supa, and lauan lumber with a total volume of 311,000 board feet because the petitioner failed to produce upon demand the corresponding certificate of lumber origin, auxiliary invoices, tally sheets, and delivery receipts from the source of the invoices covering the lumber to prove the legitimacy of their source and origin.

The petitioner's question the seizure contending that the possession of lumber, as opposed to timber, is not penalized in Section 68 of P.D. No. 705, as amended, and even granting arguendo that lumber falls within the purview of the said section, the same may not be used in evidence against him for they were taken by virtue of an illegal seizure.

ISSUE:
Whether the contention of the petitioner is correct that lumber is different from timber

HELD:

No,

The Supreme Court held that the Revised Forestry Code contains no definition of either timber or lumber.

While the former is included in forest products as defined in paragraph (q) of Section 3, the latter is found in paragraph (aa) of the same section in the definition of "Processing plant."

Lumber is a processed log or processed forest raw material.

The Code uses the term lumber in its ordinary or common usage. In the 1993 copyright edition of Webster's Third New International Dictionary, lumber is defined, inter alia, as "timber or logs after being prepared for the market."

Simply put, lumber is a processed log or timber. It is settled that in the absence of legislative intent to the contrary, words and phrases used in a statute should be given their plain, ordinary, and common usage meaning.

And insofar as possession of timber without the required legal documents is concerned, Section 68 of P.D. No. 705, as amended, makes no distinction between raw or processed timber. Neither should we.

TECHNO DEVELOPERS v. CA

TECHNOLOGY DEVELOPERS, INC., v. CA

G.R. No. 94759; January 21, 1991

Ponente: J. Gancayco

FACTS:

Petitioner, a domestic private corporation engaged in the manufacture and export of charcoal briquette, received a letter from acting mayor Pablo N. Cruz, ordering the full cessation of the operation of the petitioner's plant located at Guyong, Sta. Maria, Bulacan, until further order. 

The letter likewise requested the Plant Manager to bring with him to the office of the mayor on February 20, 1989 the following: 

a) Building permit; 

b) Mayor's permit; 

c) Region III-Pollution of Environment and Natural Resources Anti-Pollution Permit; and of other document.

At the requested conference, petitioner, through its representative, undertook to comply with respondent's request for the production of the required documents.

Petitioner's attention having been called to its lack of mayor's permit, it sent its representatives to the office of the mayor to secure the same but were not entertained.

On April 6, 1989, without previous and reasonable notice upon petitioner, respondent acting mayor ordered the Municipality's station commander to padlock the premises of petitioner's plant, thus effectively causing the stoppage of its operation.

Left with no recourse, petitioner instituted an action for certiorari, prohibition, mandamus with preliminary injunction against private respondent

ISSUE:

Whether the action for preliminary injunction will prosper

HELD:

No.

The Supreme Court held in this case that No mayor's permit had been secured. It must also be recognized that the mayor of a town has as much responsibility to protect its inhabitants from pollution, and by virtue of his police power, he may deny the application for a permit to operate a business or otherwise close the same unless appropriate measures are taken to control and/or avoid injury to the health of the residents of the community from the emissions in the operation of the business,

 The closure order of the Acting Mayor was issued only after an investigation was made and it was observed that the fumes emitted by the plant of petitioner goes directly to the surrounding houses and that no proper air pollution device has been installed. Petitioner also failed to produce a building permit from the municipality of Sta. Maria, but instead presented a building permit issued by an official of Makati on March 6, 1987. 

While petitioner was able to present a temporary permit to operate by the then National Pollution Control Commission on December 15, 1987, the permit was good only up to May 25, 1988. 

Petitioner had not exerted any effort to extend or validate its permit much less to install any device to control the pollution and prevent any hazard to the health of the residents of the community.

FRENZEL v. CATITO

FRENZEL v. CATITO

G.R. No. 143958. July 11, 2003

Ponente: J. CALLEJO Sr.

DOCTRINE:

A contract that violates the Constitution and the law, is null and void and vests no rights and creates no obligations. It produces no legal effect at all. The petitioner, being a party to an illegal contract, cannot come into a court of law and ask to have his illegal objective carried out

FACTS:

Petitioner Alfred Fritz Frenzel is an Australian citizen of German descent. He was so enamored with Ederlina that he bought her numerous properties such as house and lot in Quezon City and in Davao City. He also put up a beauty parlor business in the name of Ederlina. Alfred was unaware that Ederlina was married until her spouse Klaus Muller wrote a letter to Alfred begging the latter to leave her wife alone.

When Alfred and Ederlinas relationship started deteriorating. Ederlina had not been able to secure a divorce from Klaus. The latter could charge her for bigamy and could even involve Alfred, who himself was still married. To avoid complications, Alfred decided to live separately from Ederlina and cut off all contacts with her.

On October 15, 1985, Alfred wrote to Ederlinas father, complaining that Ederlina had taken all his life savings and because of this, he was virtually penniless. He further accused the Catito family of acquiring for themselves the properties he had purchased with his own money. He demanded the return of all the amounts that Ederlina and her family had stolen and turn over all the properties acquired by him and Ederlina during their coverture.

ISSUE:

Whether the petitioner could recover the money used in purchasing the several properties

HELD:

No, even if, as claimed by the petitioner, the sales in question were entered into by him as the real vendee, the said transactions are in violation of the Constitution; hence, are null and void ab initio. A contract that violates the Constitution and the law, is null and void and vests no rights and creates no obligations. It produces no legal effect at all. The petitioner, being a party to an illegal contract, cannot come into a court of law and ask to have his illegal objective carried out. One who loses his money or property by knowingly engaging in a contract or transaction which involves his own moral turpitude may not maintain an action for his losses. To him who moves in deliberation and premeditation, the law is unyielding.  The law will not aid either party to an illegal contract or agreement; it leaves the parties where it finds them

PHILIPPINE BANKING CORPORATION v. LUI SHE

PHILIPPINE BANKING CORPORATION v. LUI SHE

G.R. No. L-17587. September 12, 1967

Ponente: J. Castro

DOCTRINE:

            Even if the contract appears to be valid, if the provisions is against a constitutional prohibition, the same should be considered null and void.  

FACTS:

Justina Santos executed on a contract of lease in favor of Wong, covering the portion then already leased to him and another portion fronting Florentino Torres street. The lease was for 50 years, although the lessee was given the right to withdraw at any time from the agreement.

On December 21 she executed another contract giving Wong the option to buy the leased premises for P120,000, payable within ten years at a monthly installment of P1,000. The option, written in Tagalog, imposed on him the obligation to pay for the food of the dogs and the salaries of the maids in her household, the charge not to exceed P1,800 a month. The option was conditioned on his obtaining Philippine citizenship, a petition for which was then pending in the Court of First Instance of Rizal.

It appears, however, that this application for naturalization was withdrawn when it was discovered that he was not a resident of Rizal. On October 28, 1958 she filed a petition to adopt him and his children on the erroneous belief that adoption would confer on them Philippine citizenship. The error was discovered and the proceedings were abandoned.

In two wills executed on August 24 and 29, 1959, she bade her legatees to respect the contracts she had entered into with Wong, but in a codicil of a later date (November 4, 1959) she appears to have a change of heart. Claiming that the various contracts were made by her because of machinations and inducements practiced by him, she now directed her executor to secure the annulment of the contracts.

ISSUE:

            Whether the contracts involving Wong were valid

HELD:

            No, the contracts show nothing that is necessarily illegal, but considered collectively, they reveal an insidious pattern to subvert by indirection what the Constitution directly prohibits. To be sure, a lease to an alien for a reasonable period is valid. So is an option giving an alien the right to buy real property on condition that he is granted Philippine citizenship.

            But if an alien is given not only a lease of, but also an option to buy, a piece of land, by virtue of which the Filipino owner cannot sell or otherwise dispose of his property, this to last for 50 years, then it becomes clear that the arrangement is a virtual transfer of ownership whereby the owner divests himself in stages not only of the right to enjoy the land but also of the right to dispose of it— rights the sum total of which make up ownership. If this can be done, then the Constitutional ban against alien landholding in the Philippines, is indeed in grave peril.

RELLOSA v. GAW CHEE HUN

RELLOSA v. GAW CHEE HUN

G.R. No. L-1411. September 29, 1953

Ponente: J. Bautista Angelo

DOCTRINE:

The “In Pari Delicto” doctrine provides that the proposition is universal that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or the money agreed to be paid, or damages for its violation.

FACTS:

On February 2, 1944, Dionisio Rellosa sold to Gaw Chee Hun a parcel of land, together with the house erected thereon, situated in the City of Manila, Philippines, for the sum of P25,000. The vendor remained in possession of the property under a contract of lease entered into on the same date between the same parties.

Alleging that the sale was executed subject to the condition that the vendee, being a Chinese citizen, would obtain the approval of the Japanese Military Administration in accordance with (seirei) No. 6 issued on April 2, 1943, by the Japanese authorities, and said approval has not been obtained, and that, even if said requirement were met, the sale would at all events be void under article XIII, section 5, of our Constitution.

The vendor instituted the present action in the Court of First Instance of Manila seeking the annulment of the sale

ISSUES:

1.    Whether the sale was void because it is against the constitution

2.  Whether the petitioner have the sale declared null and void and recover the property considering the effect of the law governing rescission of contracts

HELD:

1) Yes, the court held that under the Constitution, aliens may not acquire private or public agricultural lands, including residential lands. This matter has been once more submitted to the court for deliberation, but the ruling was reaffirmed. This ruling fully disposes of the question touching on the validity of the sale of the property herein involved.

2) No, even if the plaintiffs can still invoke the Constitution to set aside the sale in question, they are now prevented from doing so if their purpose is to recover the lands that they have voluntarily parted with, because of their guilty knowledge that what they were doing was in violation of the Constitution. They cannot escape this conclusion because they are presumed to know the law.

            

UNIWIDE SALES REALTY v. TITAN-IKEDA

UNIWIDE SALES REALTY AND RESOURCES CORP v. TITAN-IKEDA CONSTRUCTION

G.R. No. 126619; December 20, 2006

Ponente: J. Tinga

FACTS:

The case originated from an action for a sum of money filed by Titan-Ikeda Construction and Development Corporation (Titan) against Uniwide Sales Realty and Resources Corporation (Uniwide) with the Regional Trial Court (RTC), Branch 119, Pasay City arising from Uniwide’s non-payment of certain claims billed by Titan after completion of three projects covered by agreements they entered into with each other. 

Upon Uniwide’s motion to dismiss/suspend proceedings and Titan’s open court manifestation agreeing to the suspension, Civil Case No. 98-0814 was suspended for it to undergo arbitration. Titan’s complaint was thus re-filed with the CIAC. Before the CIAC, Uniwide filed an answer which was later amended and re-amended, denying the material allegations of the complaint, with counterclaims for refund of overpayments, actual and exemplary damages, and attorney’s fees. 

An Arbitral Tribunal consisting of a chairman and two members was created in accordance with the CIAC Rules of Procedure Governing Construction Arbitration. It conducted a preliminary conference with the parties and thereafter issued a Terms of Reference (TOR) which was signed by the parties. The tribunal also conducted an ocular inspection, hearings, and received the evidence of the parties consisting of affidavits which were subject to cross-examination. 

On 17 April 1995, the Arbitral Tribunal promulgated a Decision, the decretal portion of which is as follows:

 “WHEREFORE, judgment is hereby rendered as follows:

On Project 1 – Libis:

            [Uniwide] is absolved of any liability for the claims made by [Titan] on this Project.

Project 2 – Edsa Central:

            [Uniwide] is absolved of any liability for VAT payment on this project, the same being for the account of the [Titan]. On the other hand, [Titan] is absolved of any liability on the counterclaim for defective construction of this project.

            [Uniwide] is held liable for the unpaid balance in the amount of P6,301,075.77 which is ordered to be paid to the [Titan] with 12% interest per annum commencing from 19 December 1992 until the date of payment.

On Project 3 – Kalookan:

            [Uniwide] is held liable for the unpaid balance in the amount of P5,158,364.63 which is ordered to be paid to the [Titan] with 12% interest per annum commencing from 08 September 1993 until the date of payment.

            [Uniwide] is held liable to pay in full the VAT on this project, in such amount as may be computed by the Bureau of Internal Revenue to be paid directly thereto. The BIR is hereby notified that [Uniwide]  Sales Realty and Resources Corporation has assumed responsibility and is held liable for VAT payment on this project. This accordingly exempts Claimant Titan-Ikeda Construction and Development Corporation from this obligation.

ISSUE:

Whether the award given by CIAC is final

HELD:

As a rule, findings of fact of administrative agencies and quasi-judicial bodies, which have acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not only respect, but also finality, especially when affirmed by the Court of Appeals. In particular, factual findings of construction arbitrators are final and conclusive and not reviewable by this Court on appeal. This rule, however admits of certain exceptions.

In David v. Construction Industry and Arbitration Commission, we ruled that, as exceptions, factual findings of construction arbitrators may be reviewed by this Court when the petitioner proves affirmatively that: 

(1) the award was procured by corruption, fraud or other undue means; 

(2) there was evident partiality or corruption of the arbitrators or of any of them; (3) the arbitrators were guilty of misconduct in refusing to hear evidence pertinent and material to the controversy; 

(4) one or more of the arbitrators were disqualified to act as such under Section nine of Republic Act No. 876 and willfully refrained from disclosing such disqualifications or of any other misbehavior by which the rights of any party have been materially prejudiced; or 

(5) the arbitrators exceeded their powers, or so imperfectly executed them, that a mutual, final and definite award upon the subject  matter submitted to them was not made. 

Other recognized exceptions are as follows: 

(1) when there is a very clear showing of grave abuse of discretion resulting in lack or loss of jurisdiction as when a party was deprived of a fair opportunity to present its position before the Arbitral Tribunal or when an award is obtained through fraud or the corruption of arbitrators,

 (2) when the findings of the Court of Appeals are contrary to those of the CIAC, and 

(3) when a party is deprived of administrative due process. 

FIESTA WORLD MALL CORP v. LINDBERG PHILS Inc.

G.R 152471; August 18, 2006

Ponente: Sandoval-Guiterrez

FACTS:

Fiesta World Mall Corporation, petitioner, owns and operates Fiesta World Mall located 

at Barangay Maraouy, Lipa City;while Linberg Philippines,Inc., respondent, is a corporation that builds and operates power plants.

On January 19, 2000, respondent filed with the Regional Trial Court (RTC), Branch 267, Pasig City, a Complaint for Sum of Money against petitioner.

The complaint alleges that on November 12, 1997, petitioner and respondent executed a build-own-operate agreement, entitled “Contract Agreement for Power Supply Services, 3.8 MW Base Load Power Plant” (the Contract).  

Under this Contract, respondent will construct, at its own cost, and operate as owner a power plant,and to supply petitioner power/electricity at its shopping mall in Lipa City.   

Petitioner, on the other hand, will pay respondent “energy fees” to be computed in accordance with the Seventh Schedule of the Contract

The complaint further alleges that respondent constructed the power plant in Lipa City at a cost of about P130,000,000.00.   In November 1997, the power plant became operational and started supplying power/electricity to petitioner’s shopping mall in Lipa City.   In December 1997, respondent started billing petitioner.

As of May 21, 1999, petitioner’s unpaid obligation amounted to P15,241,747.58, exclusive of interest.   However, petitioner questioned the said amount and refused to pay despite respondent’s repeated demands.

In its Answer with Compulsory Counterclaim, petitioner specifically denied the allegations in the complaint, claiming that respondent failed to fulfill its obligations under the Contract by failing to supply all its power/fuel needs.   

From November 10, 1998 until May 21, 1999, petitioner personally shouldered the cost of fuel.   Petitioner also disputed the amount of energy fees specified in the billings made by respondent because the latter failed to monitor, measure, and record the quantities of electricity delivered by taking photographs of the electricity meter reading prior to the issuance of its invoices and billings, also in violation of the Contract.  

Moreover, in the computation of the electrical billings, the minimum off-take of energy (E2) was based solely on the projected consumption as computed by respondent. 

However, based onpetitioner’s actual experience, it could not consume the energy pursuant to the minimum off-take even if it kept open all its lights and operated all its machinery and equipment for twenty-four hours a day for a month.   This fact was admitted by respondent.   While both parties had discussions on the questioned billings, however, “there were no earnest efforts to resolve the differences in accordance with the arbitration clause provided for in the Contract.”             

Finally, as a special affirmative defense in its answer, petitioner alleged that respondent’s filing of the complaint is premature and should be dismissed on the ground of non-compliance with paragraph 7.4 of the Contract which provides:

                   
7.4       Disputes
If  FIESTA WORLD disputes the amount specified by any invoice, it shall pay the undisputed amount on or before such date(s), and the disputed amount shall be resolved by arbitration of three (3) persons, one (1) by mutual choice, while the other two (2) to be each chosen by the parties themselves, within fourteen (14) days after the due date for such invoice and all or any part of the disputed amount paid to LINBERG shall be paid together with interest pursuant to Article XXV from the due date of the invoice.   It is agreed, however, that both parties must resolve the disputes within thirty (30) days, otherwise any delay in payment resulting to loss to LINBERG when converted to $US as a result of depreciation of the Pesos shall be for the account of FIESTA WORLD.   Corollarily, in case of erroneous billings, however, LINBERG shall be liable to pay FIESTA WORLD for the cost of such deterioration, plus interest computed pursuantto Art. XXV from the date FIESTA WORLD paid for the erroneous billing.  (Underscoring supplied)      

 Thereafter, petitioner filed a Motion to Set Case for Preliminary Hearing on the ground that respondent violated the arbitration clause provided in the Contract, thereby rendering its cause of action premature.  

This was opposed by respondent, claiming that paragraph 7.4 of the Contract on arbitration is not the provision applicable to this case; and that since the parties failed to settle their dispute, then respondent may resort to court action pursuant to paragraph 17.2 of the same Contract which provides:

17.2          Amicable Settlement
The parties hereto agree that in the event there is any dispute or difference between them arising out of this Agreement or in the interpretation of any of the provisions hereto, they shall endeavor to meet together in an effort to resolve such dispute by discussion between them but failing such resolution the Chief Executives of LINBERG and FIESTA WORLD shall meet to resolve such dispute or difference and the joint decision of such shall be binding upon the parties hereto, and in the event that a settlement of any such dispute or difference is not reached, then the provisions of Article XXI shall apply.
 

 In its Order dated October 3, 2000, the trial court denied petitioner’s motion for lack of merit.

Petitioner then filed a Motion for Reconsideration but it was denied in an Order dated January 11, 2001.       

Dissatisfied, petitioner elevated the matter to the Court of Appeals via a Petition for Certiorari. 

On December 12, 2001, the appellate court rendered its Decision dismissing the petition and affirming the challenged Orders of the trial court.

Petitioner’s Motion for Reconsideration of the above Decision was likewise denied by the appellate.

Hence, the instant Petition for Review on Certiorari.

ISSUE:
Whether the filing with the trial court of respondent’s complaint is premature

HELD:

YES, the filing with the trial court of the complaint is premature.

Paragraph 7.4 of the Contract, quoted earlier, mandates that should petitioner dispute any amount of energy fees in the invoice and billings made by respondent, the same“shall be resolved by arbitration of three (3) persons, one (1) by mutual choice, while the other two (2) to be each chosen by the parties themselves.”   The parties, in incorporating such agreement in their Contract, expressly intended that the said matter in dispute must first be resolved by an arbitration panel before it reaches the court.  They made such arbitration mandatory.  

It is clear from the records that petitioner disputed the amount of energy fees demanded by respondent.  However, respondent, without prior recourse to arbitration as required in the Contract, filed directly with the trial court its complaint, thus violating the arbitration clause in the Contract.  

It bears stressing that such arbitration agreement is the law between the parties.   Since that agreement is binding between them, they are expected to abide by it in good faith.  And because it covers the dispute between them in the present case, either of them may compel the other to arbitrate. Thus, it is well within petitioner’s right to demand recourse to arbitration.          

We cannot agree with respondent that it can directly seek judicial recourse by filing an action against petitioner simply because both failed to settle their differences amicably.   Suffice it to state that there is nothing in the Contract providing that the parties may dispense with the arbitration clause.   Article XXI on jurisdiction cited by respondent, i.e., that “the parties hereto submit to the exclusive jurisdiction of the proper courts of Pasig City” merely provides for the venue of any action arising out of or in connection with the stipulations of the parties in the Contract.

Moreover, we note that the computation of the energy fees disputed by petitioner also involves technical matters that are better left to an arbitration panel who has expertise in those areas.  Alternative dispute resolution methods or ADRs – like arbitration, mediation, negotiation and conciliation – are encouraged by this Court.   By enabling the parties to resolve their disputes amicably, they provide solutions that are less time-consuming, less tedious, less confrontational, and more productive of goodwill and lasting relationships

INSULAR SAVINGS BANK v. FAR EAST BANK and TRUST COMPANY

INSULAR SAVINGS BANK v. FAR EAST BANK AND TRUST COMPANY

G.R No. 141818; June 22, 2006

Ponente: J. Ynares-Santiago

FACTS:

 On December 11, 1991, Far East Bank and Trust Company (Respondent) filed a complaint against Home Bankers Trust and Company (HBTC) with the Philippine Clearing House Corporation’s (PCHC) Arbitration Committee.

 Respondent sought to recover from the petitioner, the sum of P25,200,000.00 representing the total amount of the three checks drawn and debited against its clearing account.  HBTC sent these checks to respondent for clearing by operation of the PCHC clearing system.  Thereafter, respondent dishonored the checks for insufficiency of funds and returned the checks to HBTC.  However, the latter refused to accept them since the checks were returned by respondent after the reglementary regional clearing period.

Meanwhile, on January 17, 1992, before the termination of the arbitration proceedings, respondent filed another complaint but this time with the Regional Trial Court (RTC) in Makati City for Sum of Money and Damages with Preliminary Attachment.  

The complaint was filed not only against HBTC but also against Robert Young, Eugene Arriesgado and Victor Tancuan (collectively known as Defendants), who were the president and depositors of HBTC respectively. Aware of the arbitration proceedings between respondent and petitioner, the RTC, in an Omnibus Order suspended the proceedings in the case against all the defendants pending the decision of the Arbitration Committee

           

On February 2, 1998, the PCHC Arbitration Committee rendered its decision in favor of respondent. The motion for reconsideration filed by petitioner was denied by the Arbitration Committee. 

Consequently, to appeal the decision of the Arbitration Committee, petitioner filed a petition for review in the earlier case filed by respondent in Branch 135 of the RTC of Makati. 

In an order dated January 20, 1999, the RTC directed both petitioner and respondent to file their respective memoranda, after which, said petition would be deemed submitted for resolution.

Both parties filed several pleadings.  On February 8, 1999, respondent filed a Motion to Dismiss Petition for Review for Lack of Jurisdiction, which was opposed by the petitioner.   

On November 9, 1999, the RTC dismissed the petition for review.

The RTC denied petitioner’s motion for reconsideration, hence, this petition.

ISSUE:

Whether the Regional Trial Court erred in dismissing the Petition of Petitioner for lack of jurisdiction on the ground that it should have been docketed as a separate case.

HELD:

No, As provided in the PCHC Rules, the findings of facts of the decision or award rendered by the Arbitration Committee shall be final and conclusive upon all the parties in said arbitration dispute.  Under Article 2044 of the New Civil Code, the validity of any stipulation on the finality of the arbitrators’ award or decision is recognized. However, 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.  Consequently, the decision of the Arbitration Committee is subject to judicial review.

Furthermore, petitioner had several judicial remedies available at its disposal after the Arbitration Committee denied its Motion for Reconsideration.  

It may petition the proper RTC to issue an order vacating the award 

• Invoking the grounds provided for under Section 24 of the Arbitration Law;  

• Filing a petition for review under Rule 43 of the Rules of Court with the Court of Appeals  on questions of fact, of law, or mixed questions of fact and law; and   Lastly, 

• Petitioner may file a petition for certiorari under Rule 65 of the Rules of Court on the  ground that the Arbitrator Committee acted without or in excess of its jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction.  

Since this case involves acts or omissions of a quasi-judicial agency, the petition should be filed in and cognizable only by the Court of Appeals.

In this instance, petitioner did not avail of any of the abovementioned remedies available to it.  Instead it filed a petition for review with the RTC where Civil Case No. 92-145 is pending pursuant to Section 13 of the PCHC Rules to sustain its action.  Clearly, it erred in the procedure it chose for judicial review of the arbitral award.

Jurisdiction over the subject matter is conferred by law and not by the consent or acquiescence of any or all of the parties or by erroneous belief of the court that it exists. 

In the instant case, petitioner and respondent have agreed that the PCHC Rules would govern in case of controversy.  However, since the PCHC Rules came about only as a result of an agreement between and among member banks of PCHC and not by law, it cannot confer jurisdiction to the RTC.  Thus, the portion of the PCHC Rules granting jurisdiction to the RTC to review arbitral awards, only on questions of law, cannot be given effect. 

Consequently, the proper recourse of petitioner from the denial of its motion for reconsideration by the Arbitration Committee is to file either a motion to vacate the arbitral award with the RTC, a petition for review with the Court of Appeals under Rule 43 of the 

Rules of Court, or a petition for certiorari under Rule 65 of the Rules of Court.

Alternative dispute resolution methods or ADRs – like arbitration, mediation, negotiation and conciliation – are encouraged by the Supreme Court.  By enabling parties to resolve their disputes amicably, they provide solutions that are less time-consuming, less tedious, less confrontational, and more productive of goodwill and lasting relationships. It must be borne in mind that arbitration proceedings are mainly governed by the Arbitration Law and suppletorily by the Rules of Court

BALTAZAR v. OMBUDSMAN

BALTAZAR v. OMBUDSMAN

G.R. No. 136433; December 6, 2006

Ponente: Velasco Jr.

FACTS:

Paciencia Regala owns a seven (7)-hectare fishpond located at Sasmuan, Pampanga. Her Attorney-in-Fact Faustino R. Mercado leased the fishpond for PhP 230,000.00 to Eduardo Lapid for a three (3)-year period.  Lessee Eduardo Lapid in turn sub-leased the fishpond to Rafael Lopez for PhP 50,000.00 during the last seven (7) months of the original lease. Respondent Ernesto Salenga was hired by Eduardo Lapid as fishpond watchman (bante-encargado). In the sub-lease, Rafael Lopez rehired respondent Salenga.

Meanwhile, on March 11, 1993, respondent Salenga, through a certain Francis Lagman, sent his January 28, 1993 demand letter to Rafael Lopez and Lourdes Lapid for unpaid salaries and non-payment of the 10% share in the harvest.

On June 5, 1993, sub-lessee Rafael Lopez wrote a letter to respondent Salenga informing the latter that for the last two (2) months of the sub-lease, he had given the rights over the fishpond to Mario Palad and Ambit Perez for PhP 20,000.00.  This prompted respondent Salenga to file a Complaint before the Provincial Agrarian Reform Adjudication Board (PARAB).

On November 24, 1994, pending resolution of the agrarian case, the instant case was instituted by petitioner Antonio Baltazar, an alleged nephew of Faustino Mercado, through a Complaint-Affidavit against private respondents before the Office of the Ombudsman.

Petitioner charged private respondents of conspiracy through the issuance of the TRO in allowing respondent Salenga to retain possession of the fishpond, operate it, harvest the produce, and keep the sales under the safekeeping of other private respondents

Petitioner asserts that he is duly authorized by Faustino Mercado to institute the suit and presented a Special Power of Attorney (SPA) from Faustino Mercado.

ISSUE:

Whether Faustino Mercado can delegate his agency to his nephew Antonio Baltazar

HELD:

No, Faustino Mercado cannot delegate his agency to his nephew Antonio Baltazar.

The Supreme Court held that petitioner's principal, Faustino Mercado, is an agent himself and as such cannot further delegate his agency to another. Otherwise put, an agent cannot delegate to another the same agency. The legal maxim potestas delegata non delegare potest; a power once delegated cannot be re-delegated, while applied primarily in political law to the exercise of legislative power, is a principle of agency.  For another, a re-delegation of the agency would be detrimental to the principal as the second agent has no privity of contract with the former. 

In the instant case, petitioner has no privity of contract with Paciencia Regala, owner of the fishpond and principal of Faustino Mercado.

LIM TANHU v. HON. JOSE R. RAMOLETE

LIM TANHU v. HON. JOSE R. RAMOLETE

G.R. No. L-40098; August 29, 1975

Ponente: J. Barredo

FACTS:

Tan alleged that she is the widow of Tee Hoon Lim Po Chuan, who was a partner in the commercial partnership, Glory Commercial Company with Antonio Lim Tanhu and Alfonso Ng Sua". 

Defendant Antonio Lim Tanhu, Alfonso Leonardo Ng Sua, Lim Teck Chuan, and Eng Chong Leonardo, through fraud and machination, took actual and active management of the partnership and although Tee Hoon Lim Po Chuan was the manager of Glory Commercial Company, defendants managed to use the funds of the partnership to purchase lands and buildings in the cities of Cebu, Lapulapu, Mandaue, and the municipalities of Talisay and Minglanilla.

She alleged in her complaint that after the death of Tee Hoon Lim Po Chuan, the defendants, without liquidation, continued the business of Glory Commercial Company, by purportedly organizing a corporation known as the Glory Commercial Company, Incorporated and sometime in the month of November, 1967, defendants, particularly Antonio Lim Tanhu, by means of fraud deceit, and misrepresentations did then and there, induce and convince her to execute a quitclaim of all her rights and interests, in the assets of the partnership of Glory Commercial Company.

Thereafter, in the year 1968-69, the defendants who had earlier promised to liquidate the aforesaid properties and assets in favor, among others of plaintiff and until the middle of the year 1970 when the plaintiff formally demanded from the defendants the accounting of real and personal properties of the Glory Commercial Company, defendants refused and stated that they would not give the share of the plaintiff.

ISSUE:

Whether Tan has a right over the liquidated properties of the partnership

HELD:

No, Tan has no right over the liquidated properties of the partnership

The Supreme Court held that there is no alternative but to hold that plaintiff Tan Put's allegation that she is the widow of Tee Hoon Lim Po Chuan has not been satisfactorily established and that, on the contrary, the evidence on record convincingly shows that her relation with said deceased was that of a common-law wife.

Moreover, the Supreme Court said that the lower courts committed an error by awarding 1/3 of the partnership properties to Tan because there has been no liquidation proceedings yet. And if there has not yet been any liquidation of the partnership, the only right plaintiff could have would be to what might result after much liquidation to belong to the deceased partner (her alleged husband) and before this is finished, it is impossible to determine, what rights or interest, if any the deceased had. 

In other words, no specific amounts or properties may be adjudicated to the heir or legal representative of the deceased partner without the liquidation being first terminated.

YU v. NLRC

YU v. NLRC

G.R. No. 97212; June 30, 1993

Ponente: J. Feliciano

FACTS:

Petitioner Benjamin Yu was formerly the Assistant General Manager of the marble quarrying and export business operated by a registered partnership with the firm name of "Jade Mountain Products Company Limited" ("Jade Mountain"). The partnership was originally organized on 28 June 1984 with Lea Bendal and Rhodora Bendal as general partners and Chiu Shian Jeng, Chen Ho-Fu and Yu Chang, all citizens of the Republic of China (Taiwan), as limited partners.

Sometime in 1988, without the knowledge of Benjamin Yu, the general partners Lea Bendal and Rhodora Bendal sold and transferred their interests in the partnership to private respondent Willy Co and to one Emmanuel Zapanta. Mr. Yu Chang, a limited partner, also sold and transferred his interest in the partnership to Willy Co. Between Mr. Emmanuel Zapanta and himself, private respondent Willy Co acquired the great bulk of the partnership interest. The partnership now constituted solely by Willy Co and Emmanuel Zapanta continued to use the old firm name of Jade Mountain, though they moved the firm's main office from Makati to Mandaluyong, Metropolitan Manila
Petitioner was informed by Willy Co that the latter had bought the business from the original partners and that it was for him to decide whether or not he was responsible for the obligations of the old partnership, including petitioner's unpaid salaries. Petitioner was in fact not allowed to work anymore in the Jade Mountain business enterprise. His unpaid salaries remained unpaid.
On 21 December 1988, Benjamin Yu filed a complaint for illegal dismissal and recovery of unpaid salaries accruing from November 1984 to October 1988

ISSUE:
Whether the partnership which had hired petitioner Yu as Assistant General Manager had been extinguished and replaced by a new partnership composed of Willy Co and Emmanuel Zapanta


HELD:

Yes, the partnership which hired Yu was extinguished and replaced by a new partnership.

In the case at bar, just about all of the partners had sold their partnership interests (amounting to 82% of the total partnership interest) to Mr. Willy Co and Emmanuel Zapanta. The record does not show what happened to the remaining 18% of the original partnership interest. The acquisition of 82% of the partnership interest by new partners, coupled with the retirement or withdrawal of the partners who had originally owned such 82% interest, was enough to constitute a new partnership

In the ordinary course of events, the legal personality of the expiring partnership persists for the limited purpose of winding up and closing of the affairs of the partnership.

In other words, the new partnership simply took over the business enterprise owned by the preceding partnership, and continued using the old name of Jade Mountain Products Company Limited, without winding up the business affairs of the old partnership, paying off its debts, liquidating and distributing its net assets, and then re-assembling the said assets or most of them and opening a new business enterprise.

The new partnership itself which continued the business of the old, dissolved, one, are liable for the debts of the preceding partnership.

DELUAO v. CASTEEL

DELUAO v. CASTEEL

G.R. No. L-21906; December 24, 1968

Ponente: J. Castro

FACTS:

In 1940 Nicanor Casteel unsuccessfully registered a fishpond in a big tract of swampy land, 178.76 hectares, in the then sitio of Malalag, municipality of Padada, Davao for 3 consecutive times because the Bureau of Fisheries did not act upon his previous applications.
  Despite the said rejection, Casteel did not lose interest. Because of the threat poised upon his position by the other applicants who entered upon and spread themselves within the area, Casteel realized the urgent necessity of expanding his occupation thereof by constructing dikes and cultivating marketable fishes. But lacking financial resources at that time, he sought financial aid from his uncle Felipe Deluao.
Moreover, upon learning that portions of the area applied for by him were already occupied by rival applicants, Casteel immediately filed a protest. Consequently, two administrative cases ensued involving the area in question.

However, despite the finding made in the investigation of the above administrative cases, the Director of Fisheries nevertheless rejected Casteel's application on October 25, 1949, required him to remove all the improvements which he had introduced on the land, and ordered that the land be leased through public auction

On November 25, 1949 Inocencia Deluao (wife of Felipe Deluao) as party of the first part, and Nicanor Casteel as party of the second part, executed a contract — denominated a "contract of service". On the same date the above contract was entered into, Inocencia Deluao executed a special power of attorney in favor of Jesus Donesa

On November 29, 1949 the Director of Fisheries rejected the application filed by Felipe Deluao on November 17, 1948. Unfazed by this rejection, Deluao reiterated his claim over the same area in the two administrative cases and asked for reinvestigation of the application of Nicanor Casteel over the subject fishpond.

The Secretary of Agriculture and Natural Resources rendered a decision ordering Casteel to be reinstated in the area and that he shall pay for the improvement made thereupon.
Sometime in January 1951 Nicanor Casteel forbade Inocencia Deluao from further administering the fishpond, and ejected the latter's representative (encargado), Jesus Donesa, from the premises.

ISSUE:
Whether the reinstatement of Casteel over the subject land constitute a dissolution of the partnership between him and Deluao

HELD:

Yes, the reinstatement of Casteel dissolved his partnership with Deluao.

The Supreme Court ruled that the arrangement under the so-called "contract of service" continued until the decision both dated Sept. 15, 1950 were issued by the Secretary of Agriculture and Natural Resources in DANR Cases 353 and 353-B. 

This development, by itself, brought about the dissolution of the partnership. Since the partnership had for its object the division into two equal parts of the fishpond between the appellees and the appellant after it shall have been awarded to the latter, and therefore it envisaged the unauthorized transfer of one half thereof to parties other than the applicant Casteel, it was dissolved by the approval of his application and the award to him of the fishpond.

The approval was an event which made it unlawful for the members to carry it on in partnership. Moreover, subsequent events likewise reveal the intent of both parties to terminate the partnership because each refused to share the fishpond with the other.

EUROTECH INDUSTRIAL TECHNOLOGIES, INC. v. CUIZON

EUROTECH INDUSTRIAL TECHNOLOGIES, INC. v.  CUIZON

G.R. No. 167552; April 23, 2007

Ponente: J. Chico-Nazario

FACTS:

From January to April 1995, petitioner sold to Impact Systems various products allegedly amounting to P91,338.00 pesos. Subsequently, respondents sought to buy from petitioner one unit of sludge pump valued at P250,000.00 with respondents making a down payment of P50,000.00.  When the sludge pump arrived from the United Kingdom, petitioner refused to deliver the same to respondents without their having fully settled their indebtedness to petitioner. Thus, on 28 June 1995, respondent EDWIN and Alberto de Jesus, general manager of petitioner, executed a Deed of Assignment of receivables in favor of petitioner. Impact systems is owed by ERWIN Cuizon.

Despite the existence of the Deed of Assignment, respondents proceeded to collect from Toledo Power Company the amount of P365,135.29.  Alarmed by this development, petitioner made several demands upon respondents to pay their obligations. As a result, respondents were able to make partial payments to petitioner. On 7 October 1996, petitioner's counsel sent respondents a final demand letter wherein it was stated that as of 11 June 1996, respondents' total obligations stood at P295,000.00 excluding interests and attorney's fees.  Because of respondents' failure to abide by said final demand letter, petitioner instituted a complaint for sum of money, damages, with application for preliminary attachment against herein respondents

By way of special and affirmative defenses, respondent EDWIN alleged that he is not a real party in interest in this case. According to him, he was acting as mere agent of his principal, which was the Impact Systems, in his transaction with petitioner and the latter was very much aware of this fact.

ISSUE:

Whether the act of Edwin in signing the Deed of Assignment binds his principal Impact Systems

HELD:

Yes, the act of Edwin in signing the Deed of Assignment binds Impact Systems

The Supreme Court held that in a contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another with the latter's consent. Its purpose is to extend the personality of the principal or the party for whom another acts and from whom he or she derives the authority to act. It is said that the basis of agency is representation, that is, the agent acts for and on behalf of the principal on matters within the scope of his authority and said acts have the same legal effect as if they were personally executed by the principal.

In this case at hand, the parties do not dispute the existence of the agency relationship between respondents ERWIN as principal and EDWIN as agent.

ONG v. CA

ONG v. CA

G.R. No. 119858; April 29, 2003

Ponente: J. Carpio

FACTS:

That on or about July 23, 1990, Benito Ong, representing ARMAGRI International Corporation, conspiring and confederating together did then and there willfully, unlawfully and feloniously defraud the SOLIDBANK Corporation represented by its Accountant, DEMETRIO LAZARO, in the following manner, to wit: the said accused received in trust from said SOLIDBANK Corporation, 10,000 bags of urea valued at P, 2,050,000 specified in a Trust Receipt Agreement and covered by a Letter of Credit No. DOM GD 90-009 in favor of the Fertiphil Corporation.

Under the express obligation on the part of the said accused to account for said goods to Solidbank Corporation and/or remit the proceeds of the sale thereof within the period specified in the Agreement or return the goods, if unsold immediately or upon demand. 

However, Ong, once in possession of said goods, far from complying with the aforesaid obligation failed and refused and still fails and refuses to do so despite repeated demands made upon him to that effect and with intent to defraud, willfully, unlawfully and feloniously misapplied, misappropriated and converted the same or the value thereof to his own personal use and benefit, to the damage and prejudice of the said Solidbank Corporation in the aforesaid amount of P2,050,000.00 Philippine Currency.
Petitioner contends that in signing the trust receipts, he merely acted as an agent of ARMAGRI. Petitioner asserts that nowhere in the trust receipts did he assume personal responsibility for the undertakings of ARMAGRI which was the entrustee.

ISSUE:
Whether ARMAGRI Corp. violated the Trust Receipts Law

HELD:
No, ARMGAGRI Corp. did not violate the Trust Receipts Law

The Supreme Court held that the Trust Receipts Law recognizes the impossibility of imposing the penalty of imprisonment on a corporation. Hence, if the entrustee is a corporation, the law makes the officers or employees or other persons responsible for the offense liable to suffer the penalty of imprisonment. The reason is obvious: corporations, partnerships, associations and other juridical entities cannot be put to jail. Hence, the criminal liability falls on the human agent responsible for the violation of the Trust Receipts Law.
In the instant case, the Bank was the entruster while ARMAGRI was the entrustee. Being the entrustee, ARMAGRI was the one responsible to account for the goods or its proceeds in case of sale. However, the criminal liability for violation of the Trust Receipts Law falls on the human agent responsible for the violation. 

Petitioner, who admits being the agent of ARMAGRI, is the person responsible for the offense for two reasons. First, petitioner is the signatory to the trust receipts, the loan applications and the letters of credit. Second, despite being the signatory to the trust receipts and the other documents, petitioner did not explain or show why he is not responsible for the failure to turn over the proceeds of the sale or account for the goods covered by the trust receipts. 

SEVILLA v. CA

SEVILLA v. CA

G.R. Nos. L-41182-3; April 15, 1988

Ponente: J. Sarmiento

FACTS:

On Oct. 19, 1960, the Tourist World Service, Inc. leased an office at Mabini St., Manila for the former's use as a branch office. When the branch office was opened, the same was run by the herein appellant Lina O. Sevilla payable to Tourist World Service Inc. by any airline for any fare brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3% was to be withheld by the Tourist World Service, Inc. 

On or about November 24, 1961, the Tourist World Service, Inc. appears to have been informed that Lina Sevilla was connected with a rival firm, the Philippine Travel Bureau, and, since the branch office was anyhow losing, the Tourist World Service considered closing down its office. 

This was firmed up by two resolutions of the board of directors of Tourist World Service, Inc. dated Dec. 2, 1961, the first abolishing the office of the manager and vice-president of the Tourist World Service, Inc., Ermita Branch, and the second, authorizing the corporate secretary to receive the properties of the Tourist World Service then located at the said branch office. It further appears that on Jan. 3, 1962, the contract with the appellees for the use of the Branch Office premises was terminated and while the effectivity thereof was Jan. 31, 1962, the appellees no longer used it. As a matter of fact appellants used it since Nov. 1961. Because of this, and to comply with the mandate of the Tourist World Service, the corporate secretary Gabino Canilao went over to the branch office, and, finding the premises locked, and, being unable to contact Lina Sevilla, he padlocked the premises on June 4, 1962 to protect the interests of the Tourist World Service. 

When neither the appellant Lina Sevilla nor any of her employees could enter the locked premises, a complaint was filed by the herein appellants against the appellees with a prayer for the issuance of mandatory preliminary injunction. Both appellees answered with counterclaims. For apparent lack of interest of the parties therein, the trial court ordered the dismissal of the case without prejudice.

ISSUE:
Whether the act of Tourist World Service in abolishing its Ermita branch proper


HELD:

No, the act of Tourist World Service in abolishing its Ermita branch is not proper.

The Supreme Court held that when the petitioner, Lina Sevilla, agreed to manage Tourist World Service, Inc.'s Ermita office, she must have done so pursuant to a contract of agency.

In the case at bar, Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist World Service, Inc. As compensation, she received 4% of the proceeds in the concept of commissions. And as we said, Sevilla herself, based on her letter of November 28, 1961, presumed her principal's authority as owner of the business undertaking. We are convinced, considering the circumstances and from the respondent Court's recital of facts, that the parties had contemplated a principal-agent relationship, rather than a joint management or a partnership.

But unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible with the intent of the parties, cannot be revoked at will. The reason is that it is one coupled with an interest, the agency having been created for the mutual interest of the agent and the principal. Accordingly, the revocation complained of should entitle the petitioner, Lina Sevilla, to damages

UYTENGSU III v. ATTY. BADUEL

UYTENGSU III v. ATTY. BADUEL

A.C. No. 5134; December 14, 2005

Ponente: J. Tinga

FACTS:

Complainant is one of the heirs of Tirso Uytengsu, Jr. He and his co-heirs had a pending patent application. He alleges that sometime in December 1998 respondent requested him to sign a special power of attorney (SPA) authorizing Luis Wee (Wee) and/or Thomas Jacobo (Jacobo) to claim, demand, acknowledge and receive on his behalf the certificates of title from the Register of Deeds, General Santos City, Department of Environment and Natural Resources and from any government office or agency due to complainant and his co-heirs by reason of their application for Homestead Patent.

Complainant refused to sign the SPA as he wanted to obtain the documents personally. 
In essence, complainant asserts that respondent caused Kokseng to execute an SPA in favor of Wee and/or Jacobo to the damage and prejudice of the heirs of Tirso Uytengsu, Jr. even if he knew that Kokseng had no authority to do so.

ISSUE:
Whether Atty. Baduel exceeded his authority as counsel when he asked Uytengsu to sign an SPA

HELD:

No, Atty. Baduel did not exceed his authority as counsel.

The Supreme Court held that the relation of attorney and client is in many respects one of agency and the general rules of ordinary agency apply to such relation.  The extent of authority of a lawyer, when acting on behalf of his client outside of court, is measured by the same test as that which is applied to an ordinary agent.  

Such being the case, even respondent himself can acquire the certificates of title and other documents without need of an SPA from complainant and his co-heirs.