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Case Digest Arbit

The Supreme Court ruled that the case should be subject to arbitration, overturning the lower courts. The case involved a dispute over a contract for the purchase of molasses between Cargill Philippines and San Fernando Regala Trading. San Fernando filed a case for rescission of contract in regular courts, but Cargill argued they were required to undergo arbitration first based on their agreement. The lower courts disagreed, finding the contract was disputed. However, the Supreme Court held that an arbitration clause is separable from the main contract and its validity does not depend on the validity of the main contract. Therefore, the issue of the contract's existence should be resolved through arbitration in accordance with the agreement, not the regular courts.

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115 views1 page

Case Digest Arbit

The Supreme Court ruled that the case should be subject to arbitration, overturning the lower courts. The case involved a dispute over a contract for the purchase of molasses between Cargill Philippines and San Fernando Regala Trading. San Fernando filed a case for rescission of contract in regular courts, but Cargill argued they were required to undergo arbitration first based on their agreement. The lower courts disagreed, finding the contract was disputed. However, the Supreme Court held that an arbitration clause is separable from the main contract and its validity does not depend on the validity of the main contract. Therefore, the issue of the contract's existence should be resolved through arbitration in accordance with the agreement, not the regular courts.

Uploaded by

Ennavy Yongkol
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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G.R. No. 175404, January 31, 2011 CARGILL PHILIPPINES, INC., petitioner, vs.

SAN FERNANDO REGALA TRADING, INC.,


respondent. PERALTA, J.:

FACTS: Respondent San Fernando Regala Trading filed with the RTC of Makati City a Complaint for Rescission of Contract
with Damages against petitioner Cargill. It alleged that it agreed that it would purchase from Cargill 12,000 metric tons of
Thailand origin cane blackstrap molasses and that the payment would be by an Irrevocable Letter of Credit payable at sight.
The parties agreed that the delivery would be made in April/May. Cargill failed to comply with its obligations despite
demands from respondent. The respondent then filed for rescission. The petitioner filed a Motion to Dismiss/Suspend
proceeding, arguing that they must first resort to arbitration as stated in their agreement before going to court. However,
the RTC ruled in favor of the respondent. The CA affirmed the RTC decision, adding that the case cannot be brought under
the Arbitration Law for the purpose of suspending the proceedings before the RTC, since in its Motion to Dismiss/Suspend
proceedings, petitioner alleged, as one of the grounds thereof,that the subjectcontract between the parties did not exist or it
was invalid; that the said contract bearing the arbitration clause was never consummated by the parties, thus, it was proper
that such issue be first resolved by the court through an appropriate trial; that the issue involved a question of fact that the
RTC should first resolve.

ISSUE: Whether the CA erred in finding that this case cannot be brought under the arbitration law for the purpose of
suspending the proceedings in the RTC.

HELD: The petition is meritorious. CIVIL LAW - Arbitration; alternative dispute resolution; contracts Arbitration, as an
alternative mode of settling disputes, has long been recognized and accepted in our jurisdiction. R.A. No. 876 authorizes
arbitration of domestic disputes. Foreign arbitration, as a system of settling commercial disputes of an international
character, is likewise recognized. The enactment of R.A. No. 9285 on April 2, 2004 further institutionalized the use of
alternative dispute resolution systems, including arbitration, in the settlement of disputes. A contract is required for
arbitration to take place and to be binding. Submission to arbitration is a contract and a clause in a contract providing that all
matters in dispute between the parties shall be referred to arbitration is a contract. The provision to submit to arbitration
any dispute arising therefrom and the relationship of the parties is part of the contract and is itself a contract. The validity of
the contract containing the agreement to submit to arbitration does not affect the applicability of the arbitration clause
itself. A contrary ruling would suggest that a party's mere repudiation of the main contract is sufficient to avoid arbitration.
That is exactly the situation that the separability doctrine, as well as jurisprudence applying it, seeks to avoid. Petition is
GRANTED.

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