FIESTA WORLD
MALL CORPORATION,
Petitioner, - versus - LINBERG PHILIPPINES, INC., Respondent. |
G.R.
NO. 152471 Present: PUNO, J., Chairperson, Sandoval-Gutierrez, *AZCUNA,
and GARCIA, JJ. Promulgated: August 18, 2006 |
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DECISION
SANDOVAL-GUTIERREZ,
J.:
For our resolution is the instant
Petition for Review on Certiorari[1] assailing the Decision[2] dated December
12, 2001 and Resolution[3] dated February 28, 2002 rendered by the Court of Appeals in CA-G.R. SP No. 63671, entitled “Fiesta World Mall Corporation, petitioner, versus Hon. Florito S. Macalino, Presiding Judge of the Regional Trial Court
(RTC), Branch 267, Pasig City, and Linberg Philippines, Inc., respondents.”
The facts of this
case are:
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
2.1 x x x
E1
– 988,888 kw-hr x
BER
E2 – (ED-988,888)
x BER
Where:
E1
& E2 – Energy fees in pesos for the billing
period. Where E1 is based on
the minimum energy off-take of 988,888 kw-hrs. per month and E2 is based on the actual meter reading less the
minimum off-take.
BER – Base energy rate
at Ps 2.30/Kw-Hr billing rate based on the exchange rate of Ps 26.20 to the US
dollar, and with fuel oil to
be supplied by LINBERG at its own cost.
The base energy rate is subject to exchange rate adjustment accordingly
to the formula as follows:
BER – 0.6426 + 0.3224 Pn + 1.345 Fn
26.40
4.00
WHERE:
Pn – is defined as the average of the Bangko Sentral ng Pilipinas’ published dealing rates for thirty
(30) trading days immediately prior to the new billing rate.
Fn – Weighted average of fuel price per liter based
on the average of the last three (3) purchases made by LINBERG as evidenced by
purchase invoices.
ED – Energy
delivered in kw-hrs per meter reading.
3. Minimum Energy
Off-Take
The energy fees payable to LINBERG
shall be on the basis of actual KWH generated by the plant. However, if the actual KWH
generated is less than the minimum energy off-take level, the calculation of
the energy fees shall be made as if LINBERG has generated the minimum energy
off-take level of 988,888 KW-HR per month.
The
complaint further alleges that respondent
constructed the power plant in P130,000,000.00. In November 1997, the power
plant became operational and started supplying power/electricity to
petitioner’s shopping mall in
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
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 pursuant to 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.
Article XXI, referred to in paragraph
17.2 above, reads:
ARTICLE XXI
JURISDICTION
The parties hereto submit to the exclusive
jurisdiction of the proper courts of
In its
Order dated
Petitioner then filed a Motion for
Reconsideration but it was denied in an Order dated
Dissatisfied,
petitioner elevated the matter to the Court of Appeals via a
Petition for Certiorari, docketed as CA-G.R. SP No. 63671. On
Petitioner’s Motion for
Reconsideration of the above Decision was likewise denied by the appellate
court in its Resolution[6] dated
Hence, the instant Petition for Review on
Certiorari.
The sole
issue for our resolution is whether the filing with the trial court of respondent’s
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.[7] And because it covers the dispute between
them in the present case, either of them may compel the other to arbitrate.[8] 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
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.[9] To brush aside such agreement
providing for arbitration in case of disputes between the parties would be a
step backward. As we
held in BF Corporation v. Court of
Appeals,[10]
It should be
noted that in this jurisdiction, arbitration has been held valid and
constitutional. Even before the
approval on
In this connection, since
respondent has already filed a complaint with the trial court
without prior recourse to arbitration, the proper procedure to enable an
arbitration panel to resolve the parties’ dispute pursuant to their Contract is
for the trial court to stay the proceedings.[11] After the arbitration proceeding has been
pursued and completed, then the trial
court may confirm the award made by the arbitration panel.[12]
In sum, we hold that
the Court of Appeals erred in disregarding the arbitration clause in the
parties’ Contract.
WHEREFORE, we GRANT the instant petition. The assailed Decision and
Resolution of the Court of Appeals in CA-G.R. SP No. 63671 are REVERSED.
The parties are ordered to submit their controversy to the arbitration
panel pursuant to paragraph 7.4 of the Contract. The Regional Trial Court, Branch 267,
Pasig City is directed
to suspend the proceedings in Civil Case No. 67755 until after
the Arbitration Panel shall have resolved the controversy and submitted its
report to the trial court. Costs against respondent.
SO ORDERED.
ANGELINA SANDOVAL-GUTIERREZ
Associate Justice
WE
CONCUR:
REYNATO S. PUNO
Associate Justice Chairperson |
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RENATO C. CORONA Associate Justice |
ADOLFO S. AZCUNA Associate Justice |
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CANCIO C. GARCIA Associate Justice |
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I
attest that the conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the Court's
Division.
REYNATO S. PUNO
Associate
Justice
Chairperson, Second
Division
ARTEMIO
V. PANGANIBAN
Chief Justice
* On official leave.
[1] Filed under Rule 45 of the 1997 Rules of Civil Procedure, as amended.
[2] Penned
by Associate Justice Jose L. Sabio, Jr. and concurred
in by Associate Justice Oswaldo D. Agcaoili (retired) and Associate Justice
Mariano C. Del Castillo, Annex “A,” Petition, Rollo, pp. 20-26.
[4] Annex “D,” id., pp. 30-51.
[5] Par. 59, petitioner’s Answer to the Complaint; Rollo, p. 157.
[6]
[7] LM Power Engineering Corporation v. Capitol Industrial Construction Groups, Inc., G.R. No. 141833, March 26, 2003, 399 SCRA 562, 571-572, citing Toyota Motor Philippines Corporation v. Court of Appeals, 216 SCRA 236 (1992).
[9]
[10] G.R. No. 120105,
[11] LM
Power Engineering Corporation v. Capitol Industrial Construction Groups, Inc.,
supra, citing
Section 7 of Republic Act No. 876.
[12] BF Corporation v. Court of Appeals, supra, citing Section 23 of Republic Act No. 876.