Oil and Natural Gas Commission v CA (Constitution)

Oil and Natural Gas Commission v CA

GR No. 114323 July 23, 1998

Section 14. No decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is based.cralaw

No petition for review or motion for reconsideration of a decision of the court shall be refused due course or denied without stating the legal basis therefor.c

Martinez, J:

FACTS:

(1)  The  petitioner  is  a  foreign  corporation  owned  and  controlled  by  the  Government  of  India  while  the  private respondent is  a  private  corporation  duly  organized  and existing under  the  laws  of  the  Philippines. 

(2)  The present conflict between the petitioner and the private respondent has its roots in a contract entered into by and between both  parties  on  February  26,  1983  whereby  the  private  respondent  undertook  to  supply  the  petitioner  FOUR THOUSAND  THREE  HUNDRED  (4,300)  metric  tons of  oil  well cement.  In  consideration  therefor,  the  petitioner bound itself to pay the private respondent the amount of FOUR HUNDRED SEVENTY-SEVEN THOUSAND THREE HUNDRED  U.S.  DOLLARS  ($477,300.00)  by opening  an  irrevocable, divisible,  and  confirmed  letter  of  credit in favor of the latter.

(3)  The oil well cement was loaded on board the ship MV SURUTANA NAVA at the port of Surigao City, Philippines for delivery at Bombay and Calcutta, India. However, due to a dispute between the shipowner and the private respondent, the cargo was held up in Bangkok and did not reach its point destination. Notwithstanding the  fact that  the  private respondent had  already  received payment  and despite  several  demands  made  by  the petitioner, the private  respondent  failed to deliver the  oil  well cement.  Thereafter,  negotiations ensued between the parties and they agreed that the private respondent will replace the entire 4,300 metric tons of oil well cement with  Class  "G" cement  cost  free  at  the  petitioner's  designated  port.  However, upon  inspection, the  Class  "G" cement did not conform to the petitioner's specifications.

(4)  The petitioner then informed the private respondent that it was referring its claim to an arbitrator pursuant to Clause 16 of their contract which stipulates that an Indian Court in Dehra Dun should take cognizance of the case in case of dispute.

(5)  On July 23, 1988, the chosen arbitrator, one Shri N.N. Malhotra, resolved the dispute in petitioner's favor setting forth the arbitral award of US$ 899,603.77.

(6)  Despite notice sent  to the private  respondent of  the foregoing  order and  several  demands by the petitioner  for compliance therewith, the private respondent refused to pay the amount adjudged by the foreign court as owing to the  petitioner.  Accordingly, the  petitioner filed  a  complaint  with  Branch 30  of  the Regional  Trial Court (RTC) of Surigao City  for  the  enforcement of the  aforementioned  judgment  of  the  foreign court. 

(7)  Decisions:

RTC  found  the  referral of  the  dispute between the parties to the arbitrator under Clause 16 of their contract erroneous.

Court of Appeals which affirmed the dismissal of the complaint. In its decision,  the appellate court :

(a)   Concurred with the  RTC's ruling that the arbitrator did not have  jurisdiction over the dispute between the parties, thus, the foreign court could not validly adopt the arbitrator's award.

(b)  Observed that the full text of the judgment of the foreign court contains the dispositive portion only and indicates no findings of fact and law as basis for the award. Hence, the said judgment cannot be enforced by any  Philippine court  as it would  violate the constitutional  provision that  no decision shall  be rendered by any court without expressing therein clearly  and distinctly the facts and the law on  which it is based.

(c)   Dismissal of the private respondent's objections for non-payment of the required legal fees, without the foreign court first replying to the private respondent's query as to the amount of legal fees to be paid, constituted  want of  notice or violation  of due process.

(d)  the arbitration proceeding was defective because the arbitrator was appointed solely by the petitioner, and the fact that the arbitrator was a former employee of the latter gives rise to a presumed bias on his part in favor of the petitioner

ISSUE:

Whether or not the arbitrator had jurisdiction over the dispute between the petitioner and the private respondent under Clause 16 of the contract

HELD:

WHEREFORE, the instant petition is GRANTED, and the assailed decision of the Court of Appeals sustaining the trial  court's  dismissal of  the  OIL  AND  NATURAL  GAS  COMMISSION's complaint  in  Civil  Case No.  4006  before Branch  30 of the  RTC of Surigao City  is REVERSED,  and  another  in its stead is  hereby  rendered  ORDERING private  respondent PACIFIC  CEMENT COMPANY, INC. to pay to petitioner the  amounts adjudged  in the foreign judgment subject of said case.

RATIO:

(1)  According to the maxim  noscitur  a sociis,  where a particular word or phrase is  ambiguous in itself or  is  equally susceptible  of  various  meanings,  its  correct  construction  may  be  made  clear  and  specific  by  considering  the company of the words in which it is found or with which it is associated, or stated differently, its obscurity or doubt may be reviewed  by  reference to  associated words. Clause 16  reveals that  it  covers three matters which may be submitted to arbitration namely,

(1)  all questions  and  disputes,  relating to  the  meaning  of the  specification  designs,  drawings and  instructions herein before mentioned and as to quality of workmanship of the items ordered; or

(2)  any  other  question,  claim,  right  or  thing  whatsoever,  in  any  way  arising  out  of  or  relating  to  the  supply order/contract design, drawing, specification, instruction or these conditions; or

(3) otherwise concerning the materials or the execution or failure to execute the same during stipulated/extended period or after the completion/abandonment thereof.

When the 4,300 metric tons of oil well cement were not delivered to the petitioner, an agreement was forged between  the latter  and  the  private  respondent  that  Class  "G"  cement  would  be  delivered  to  the  petitioner  as replacement.  Upon  inspection,  however,  the  replacement  cement  was  rejected  as  it  did  not  conform  to  the specifications of  the  contract.  Only after  this latter  circumstance was  the  matter  brought  before  the arbitrator. Undoubtedly,  what  was  referred  to  arbitration  was  no  longer  the  mere  non-delivery  of  the  cargo  at  the  first instance but also  the failure  of  the replacement  cargo  to conform to the  specifications  of the  contract, a  matter clearly within the coverage of Clause 16.

(2)  Whether  or  not  the  private  respondent  was  able  to recover  the  cargo  is immaterial to its subsisting duty to make good its promise  to deliver the cargo at the stipulated place of delivery.

(3)  As specified in the order of the Civil Judge of Dehra Dun, "Award Paper No. 3/B-1 shall be a part of the decree". This is  a categorical  declaration that  the foreign  court adopted the findings  of facts and law of the  arbitrator as contained in the latter's Award Paper. Award Paper No. 3/B-1, contains an exhaustive discussion of the respective claims and  defenses  of  the  parties, and  the  arbitrator's  evaluation  of  the same.  Inasmuch  as the  foregoing  is deemed  to  have  been  incorporated  into  the  foreign  court's  judgment  the  appellate court  was  in  error  when  it described the latter to be a "simplistic decision containing literally, only the dispositive portion". Hence,  even  in  this  jurisdiction,  incorporation  by  reference  is  allowed  if  only  to  avoid  the  cumbersome reproduction of the decision of the lower courts, or portions thereof, in the decision of the higher court.

(4)  A foreign judgment is presumed to be valid and binding in the country from which it comes, until the contrary is shown. It is also proper to presume the regularity of the proceedings and the giving of due notice therein.

OTHER NOTES:

(1)  Clause 16 provides as follows:

Except  where  otherwise  provided  in  the  supply  order/contract  all  questions  and  disputes,  relating  to  the meaning of  the specification designs, drawings  and instructions herein before  mentioned and as to  quality of workmanship  of the  items ordered  or  as to  any  other question,  claim, right  or  thing whatsoever,  in any  way arising  out  of  or  relating  to  the  supply  order/contract  design,  drawing,  specification,  instruction  or  these conditions  or  otherwise  concerning  the  materials  or  the  execution  or  failure  to  execute  the  same  during stipulated/extended period or after the completion/abandonment thereof shall be referred to the sole arbitration of the persons appointed by  Member of the Commission at the time of dispute. It will be no objection to any such appointment that the arbitrator so appointed is a Commission employer ( sic) that he had to deal with the matter to which the supply or contract relates and that in the course of his duties as Commission's employee he had expressed views on all or any of the matter in dispute or difference.