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Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-9090 September 10, 1957

EASTBOARD NA!GAT!ON, LTD.,plaintiff-appellant,vs."UAN #SMAEL $%& COMPAN#, !NC.,defendant-appellant.

Ross, Selph, Carrascoso & Janda and Delfin L. Gonzales for the plaintiff and appellant.Claro M. Recto for the defendant and appellant.

BAUT!STA ANGELO, J.:

This is an appeal from a decision of the Court of irst !nstance of Manila orderin" defendantto pa# to plaintiff the sum of $%&,'&(.)* as a+arded b# board of arbitrators on une ',*%' and confirmed b# the /istrict Court of Ne+ 0or1, 2.3.A. on Au"ust %, *%', +ith thele"al interest thereon from /ecember %, *%' until its pa#ment, and the costs of suit.

The facts involved in this case +hich are necessar# to be considered in this appeal arestated b# the trial court in its decision +hich +e find to be substantiall# correct. The# are456n ul# %, *7*, At1ins, 8roll 9 Co., !nc., Manila, +rote defendant uan 0smael 9 Co.,!nc., :letter of Toronto, Canada, o+ners of the 3;3 East+ater,


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arbitrators shall be commercial men. should the t+o so chosen not be able to a"ree+ho the third arbitrator should be, then the Ne+ 0or1 Produce E>chan"e is toappoint such third arbiter, The amount in dispute shall be placed in escro+ at Ne+0or1 subDect to the decision of the arbitrators.5

6n 3eptember ), *7*, At1ins, 8roll 9 Co., !nc., Manila a"ain +rote defendantcompan# as follo+s :letter E>hibit &=4

5?e are toda# in receipt of the follo+in" cable instructions from our principals theEastboard Navi"ation td., re"ardin" the release of #our scrap iron loaded at Manila

th release bladin"s a"ainst full pa#ment of frei"ht and b# !rvin" TrustNe+ 0or1 fifteen thousand dollars coverin" possible demurra"e to be settled inaccordance +ith the rulin" of arbitration board Ne+ 0or1 please have 0smaelimmediatel# their arbitratorchan"e ta> reFuired b# la+ at the time the obli"ation fell due. Atan# rate, this Fuestion +ould appear no+ to be moot for the reason that said ta> hasalread# been abolished :Republic Act No. &*7=.

The ne>t issue raised b# plaintiff-appellant refers to the failure of the lo+er court to a+ard toit the fees +hich a"reed to pa# to its counsel in connection +ith the present liti"ation under

Article '), sub-para"raph %, of the ne+ Civil Code. The alle"ed sub-para"raph allo+s a+innin" part# to recover attorne#


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claim. 3ince, as +e have alread# stated, plaintiff did not present an# evidence on this point,the lo+er court did not err in den#in" plaintiffecutedbet+een them, and, in the affirmative, +hether such a"reement is valid in the Durisdiction:b= +hether or not the arbitration a"reement E>hibit B, is bindin" on defendant and, in theaffirmative, +hether or not the arbitration proceedin"s as +ell as the arbitrators< decision,are valid and bindin" on defendant :c= +hether or not, on the assumption that saidproceedin"s and decisions are valid, the decree of the 2.3. /istrict Court, 3outhern /istrictof Ne+ 0or1, sittin" as Admiralt# Court, is valid and enforceable in this Durisdiction and :d=+hether or not plaintiff, bein" a forei"n corporation +ithout license to transact business inthe Philippines, has capacit# to sue in this Durisdiction.

:a= it should be recalled that as a confirmation of the correspondence had bet+een plaintiffchan"e is to

appoint such third Arbiter. The amount in dispute shall be placed in escro+ Ne+0or1, subDect to the decision of the arbitrators. 1!ph"l.n#t

!t is no+ contended that +hile 8. . emad# had si"ned E>hibit A +hich contains at#pe+ritten clause at the end of the document, as +ell as the t#pe+ritten sheets attachedthereto, +herein is embodied Clause * +hich refers to the arbitration a"reement, the factho+ever is that emad# si"ned said papers +ithout readin" the same and solel# on theassumption that the# merel# formaliHed the terms and conditions alread# a"reed upon in


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the letter of confirmation E>hibit . !t is emphasiHed that emad# never intended to submitan# dispute that ma# arise out of its charter part# to compulsor# arbitration, much less toreco"niHe the findin"s or a+ard of the arbitrators that ma# be appointed b# the parties asfinal and not subDect to revie+ b# our courts. !t is further contended that emad# si"ned thedocument E>hibit A that the same +ould merel# +ith its 5"eneral conditions5 the terms andconditions stated in the letter of confirmation E>hibit , and the t#pe+ritten clause attachedto the document E>hibit A, speciall# that +hich provides for forei"n arbitration, refers tospecial conditions +hich +ere not intended b# the parties nor included in the preliminar#ne"otiation conducted bet+een them. This stand of emad# corroborated b# the fact that+hen he received from his la+#ers the arbitration a"reement E>hibit B, he refused to si"n itbecause it +as never dispute +ith plaintiff to compulsor# arbitration.

There are man# circumstances on record +hich discredit this claim 6f defendant-appellant.To be"in +ith, it appears that the charter part# a"reement E>hibit A is one the ori"inal of+hich +as approved b# the /ocumentar# Council of the Baltic ?hit 3ea Conference in* and one of its standard clauses is the arbitration clause and as much as the latter,thou"h in t#pe+ritten form, is considered as inte"ral part of the a"reement. This fact +as

admitted b# defendanthibit . Moreover, if emad# did not intend to submit his dispute +ith plaintiffto arbitration Messrs. Mannin", arnisch and olin"er as la+#er to represent defendantcorporation in the arbitration proceedin"s to be held in Ne+ 0or1@ :E>hibits and -B= ?h#did he instruct the Ban1 of America on t+o different occasions to transmit to the !rvin" TrustCompan# of Ne+ 0or1 the total sum of $%,''' to be 5held pendin" result of the arbitrationof the dispute bet+een this compan# :0smael= and Eastboard Navi"ation, td.@5 :E>hibit &-B= !f defendant corporation did not reall# intend to submit its dispute +ith the plaintiff toarbitration the lo"ical step it should have ta1en +ould be to repudiate the act of its Presidentemad#, but far from doin" so, it approved and ratified it b# subseFuent that it +asa"reeable to said arbitration.

b= The claim that the arbitration proceedin"s conducted in Ne+ 0or1 as +ell as the a+ard ofthe arbitrators cannot bind defendant corporation for the reason that the same +ere +ithoutits authorit# or contrar# to its instructions is also untenable. !t is true that +hen defendanthibit B to its President 8. . emad# for his si"nature, thelatter returned it but that defendanthibit A. The fact that emad#returned said document E>hibit B is of no si"nificance for such is previousl# "iven b#


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defendant to its counsel Messrs. Mannin", arnisch and olin"er 5to present our case tothe arbitrators in a case +e have the Eastboard Navi"ation Co., td., in connection +ith ourcharter of their vessel the 3;3 East+ater.5 contained in its letter dated April %, *%' :E>hibit-B=. The si"nin" of said document E>hibit B b# defendanthibit /=. Note that Mr. Morris E. ipsett is the same person+ho, accordin" to 8. . emad#, recommended Messrs. Mannin", arnisch and olin"erto be his la+#ers in the arbitration casein Ne+ 0or1 and that because he +as his "oodfriend emad# accepted his recommendation :E>hibit -B=. 6n the stren"th of thisevidence, +e cannot therefore ta1e seriousl# that contention that the person, RichardNathan, +ho acted as arbitrator in behalf of respondent, did so +ithout the authorit# of thelatter.

6f course, defendant no+ contends that the decision of the arbitrators can have no bindin"effect on it because it +as rendered +ithout first obtainin" its +ritten conformit# of approval,or +ithout its la+#er havin" first submitted to the matter to it for consultation, in accordance+ith the instruction it has "iven in its letter dated April ', *%' :E>hibit -C=, but certainl#,such instruction, if an#, is preposterous under the circumstances, for to allo+ that to prevail+ould be to defeat the ver# purpose of the arbitration. The proceedin" +ould bepurposeless for no a+ard can be obtained if the same should be made dependent upon the

instruction or approval of an# of the parties.

The contention that defendant corporation has limited its a"reement to arbitrate to anamount not e>ceedin" $%,''' cannot also be sustained. 3uch claims is not borne out b#the evidence for neither the cable nor the letter +hich defendant sent to its la+#ers in Ne+0or1 contains an# statement limitin" their authorit# to represent it to disputes not e>ceedin"$%,'''. !n other +ords, there is no evidence +hatsoever in the record sho+in" that Mr.emad# understood, or +as made to understand, that the arbitration proceedin" 5+ould be


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conducted solel# for the purpose of friendl# adDustment of disputes limited to and note>ceedin" the amount of $%,'''.5 Moreover, the aforesaid deposit merel# represents anestimate of the amounts that ma# accrue to plaintiff for demurra"e pursuant to the chartera"reement +hile the vessel +as in transit from Manila to Buenos Aires and does not includean# additional demurra"e that ma# be incurred +hile the vessel is doc1ed in Buenos Aires+aitin" for the unloadin" of the car"o. To sustain defendantpensive, speed#and amicable method of settlin" disputes, and as a means of avoidin" liti"ation, shouldreceive ever# encoura"ement from the courts +hich ma# be e>tended +ithout contravenin"sound public polic# or settled la+5:& Am. ur., p. )&%=. Con"ress has officiall# adopted themodern vie+ +hen it reproduced in the ne+ Civil Code the provisions of the old Code on

Arbitration. And onl# recentl# it approved republic Act No. )( e>pressl# authoriHin"arbitration of future disputes. Thus section of said Act provides4

3EC. . Persons and matters su%(ect to ar%itration. I T+o or more Persons orParties ma# submit to the arbitration of one or more arbitrators an# controvers#e>istin" bet+een them at the time of the submission and +hich ma# be the subDect ofan action, or the parties to an# contract ma# in such contract a"ree to settle b#arbitration a controvers# thereafter arisin" bet+een them. 3uch submission orcontract shall be valid, enforceable and irrevocable, save upon such "rounds ase>ist at la+ for the revocation of an# contract.5.

Considerin" this declared polic# of Con"ress in favor of arbitration of all 1inds of arbitrationof all 1inds of disputes, and the fact that, accordin" to the e>planator# note of Republic ActNo. )(, 5to afford the public a cheap and e>peditious procedure of settin" not onl#commercial but other 1inds of contro)ersies most of the states of the *merican +nion ha)eadopted statutes pro)idin for ar%itration, and American businessman are reported to haveenthusiasticall# accepted the innovation of its obvious advanta"es over the ordinar# court

procedure5, +e find no plausible reason for holdin" that the arbitration a"reement inFuestion, simpl# because it refers to a future dispute, is null and void as bein" a"ainstpublic polic#. :Emphasis supplied.=

:c= !t is contended that the decision rendered b# the 2. 3. /istrict Court of Ne+ 0or1 sittin"as an Admiralt# Court, +hich ratified the a+ard made b# the arbitrators, has no bindin"effect on defendant corporation, nor can it be enforced in this Durisdiction, for the reason that+hen said court acted on the case it did not acFuire Durisdiction over said defendant. And


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this claim is predicated on the alle"ed fact that defendant +as never served +ith notice,summons, or process relative to the submission of the a+ard of the arbitrators to said court,invo1in" in support of this contention the 2. 3. Arbitration Act of ebruar# , *% under+hich the Ne+ 0or1 /istrict Court confirmed the arbitrators< a+ard. But +e find that the la+thus invo1ed does not sustain defendant

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