LUZON IRON DEVELOPMENT GROUP CORP. vs.
BRIDESTONE MINING
AND DEVELOPMENT CORP
G.R. No. 220546. December 7, 2016
FACTS:
respondents Bridestone Mining and Development Corporation
(Bridestone) and Anaconda Mining and Development Corporation
(Anaconda) filed separate complaints before the RTC for
rescission of contract entitled “Tenement Partnership and
Acquisition Agreeement” (TPAA), and damages against
petitioners Luzon Iron Development Group Corporation ( Luzon
Iron) and Consolidated Iron Sands, Ltd.
Luzon Iron and Consolidated Iron filed their Motion to Dismiss
separately arguing that the RTC had no jurisdiction over the
subject matter because of the arbitration clause in the TPAA
RTC ruled that it had jurisdiction over the subject matter
because under clause 14.8 of the TPAA, the parties could go
directly to courts when a direct and/or blatant violation of the
provisions of the TPAA had been committed
Upon petition for review before the CA, it affirmed the RTC orders
ruling that the arbitration clause in the TPAA provided for an
exception where parties could directly go to court.
ISSUE: Whether the RTC has jurisdiction over the subject matter of the
consolidated cases despite the arbitration clause since the TPAA
allows direct resort to courts due to blatant violation of the provisions
RULING: No. Consistent with the state policy of favoring arbitration,
the present TPAA must be construed in such a manner that would give
life to the arbitration clause rather than defeat it, if such interpretation
is permissible. With this in mind, the Court views the interpretation
forwarded by the petitioners as more in line with the state policy
favoring arbitration. Paragraphs 14.8 and 15.1 of the TPAA should be
harmonized in such a way that the arbitration clause is given life,
especially since such construction is possible.
A synchronized reading of the TPAA provisions will show that a claim
or action raising the sufficiency, validity, legality or constitutionality
of: (a) the assignments of the EP to Luzon Iron; (b) any other
assignments contemplated by the TPAA; or (c) any agreement to which
the EPs may be converted, may be instituted only when there is a
direct and/or blatant violation of the TPAA. In turn, the said action or
claim is commenced by proceeding with arbitration, as espoused in
the TPAA.
The Court disagrees with the respondents that Paragraph 14.8 of the
TPAA should be construed as an exception to the arbitration clause
since if such were so, it would render the arbitration clause inutile as
practically all matters may be directly brought before the courts. Such
construction is anathema to the policy of favoring arbitration
A closer perusal of the TPAA will also reveal that paragraph 14 and all
its sub-paragraphs are general provisions, whereas paragraphs 15 and
all its sub-clauses specifically refer to arbitration. When general and
specific provisions are inconsistent, the specific provision shall be
paramount and govern the general provision.
The petitioners’ failure to refer the case for arbitration, however, does
not render the arbitration clause in the TPAA inoperative. In Koppel,
Inc. v. Makati Rotary Club Foundation, Inc. (Koppel), the Court
explained that an arbitration clause becomes operative,
notwithstanding the lack of a formal request, when a party has
appraised the trial court of the existence of an arbitration clause, viz.:
x x x The operation of the arbitration clause in this case is not at all
defeated by the failure of the petitioner to file a formal “ request” or
application therefor with the MeTC. We find that the filing of a
“request” pursuant to Section 24 of R.A. No. 9285 is not the sole
means by which an arbitration clause may be validly invoked in a
pending suit.
Generally, the action of the court is stayed if the matter raised before
it is subject to arbitration. In the case at bench, however, the
complaints filed before the RTC should have been dismissed
considering that the petitioners were able to establish the ground for
their dismissal, that is, violating the prohibition on forum shopping.
The parties, nevertheless, are directed to initiate arbitration
proceedings as provided under Paragraph 15.1 of the TPAA.
