BENGSON vs CHAN 1977
Bengson also argues that if arbitration is
FACTS:
Bengson and Chan entered into a contract for the construction of a 6-story
building on Bengsons lot. In that contract, Bengson found herself to pay
Chan, the contractor, P352k for the materials labor and construction
expenses.
They stipulated that:
a) Construction starts on July 5, 1955
b) 1st and 2nd stories, as well as the theater should be completed for use
within 5 months
c) Construction should be finished within 12 calendar months
The arbitration clause provides that any disputes arising between the
parties relative to the construction of the building shall be determined by
arbitration of 2 persons, each chosen by the parties themselves. The
determination of the arbitration shall be final, conclusive and binding
upon the parties UNLESS they choose to go to court, in which case the
determination by arbitration is a condition precedent for taking any court
action. Expense shall be borne equally by the parties.
Bengson filed an action for damages against Chan alleging that Chan violated
the contract when it failed to finish the 1st and 2nd stories within the 5 month
period.
Chan and his sureties (Leoncio Chan owner of Universal Construction
Supply and Mutual Security Insurance Corp) alleged that:
a) They stopped the construction because Bengson refused to pay for
the 90% of the work already accomplished
b) Construction really started in Feb because of the changes requested
by Bengson
c) The 5 month period was novated by the parties
They also alleged as an affirmative defense that complaint states no
cause of action since Bengson did not submit the controversy for
arbitration as stipulated in their contract.
TC ruled that the COAs were embraced under the contract hence they
shouldve brought it up to the arbitration first. TC dimissed! So P Bengson
appealed.
P Bengson argues that the contract refers to disputes as to the technical
process of putting up the building and that her causes of action for damages
do not involve question as to the construction but it is based on violation of
the contract for construction.
proper, TC should have required the parties to proceed to arbitration (not
dismissal)
R argues that it is not restricted to disputes relative to the technical process of
putting up the building.
ISSUES: WON the failure to resort to arbitration warrants the dismissal
of a complaint NO
HELD:
Bengsons distinction between the contract for the construction of the building
and the construction of the building is not convincing. So its still covered.
SC ruled that although the causes of action in the complaint are covered by
the clause, her failure to resort to arbitration does not warrant the
dismissal of her complaint. Arbitration may be resorted to during the
pendency of the case. Arbitration Law Sec 6 provides that an aggrieved
party by the failure, neglect or refusal of another to perform under an
agreement in writing providing for arbitration may petition the court for an
order directing the such arbitration proceed in the manner agreed upon. Sec 7
provides that in any suit brought upon an issue arising out of an agreement
providing for the arbitration, the court in which such suit is pending, upon
being satisfied that the issue involved in such suit is referable to arbitration,
shall stay the action or proceeding until an arbitrary has been had.
Provided, that the applicant for the stay is not in default in proceeding with
such arbitration.
In this case, the failure of Bengson to resort to arbitration may be regarded as
a refusal to comply with the stipulation for arbitration. Defendants defense that
arbitration is a condition precedent of a court action may be interpreted as a
petition for an order that arbitration should proceed.
Instead of dismissing the case, the proceedings should be suspended
and parties should be directed to go through the motions of arbitration
atleast within 60 days. With the consent of the parties, TC may appoint a
3rd arbitrator to prevent a deadlock between the 2 arbitrators. If the
dispute could not be settled by such, then the hearing of the instant
case should be resumed.
END!
Provision just in case lang
The Arbitration Law provides:
SEC. 6. Hearing by court. A party aggrieved by the failure, neglect or refusal of another to
perform under an agreement in writing providing for arbitration may petition the court for an order The court shall decide all motions, petitions or applications filed under the provisions of this Act,
directing that such arbitration proceed in the manner provided for in such agreement. Five days within ten days after such motions, petitions, or applications have been heard by it.
notice in writing of the hearing of such application shall be served either personally or by
registered mail upon the party in default. The court shall hear the parties, and upon being satisfied
SEC. 7. Stay of civil action. If any suit or proceeding be brought upon an issue arising out of an
that the making of the agreement or such failure to comply therewith is not in issue, shall make an
agreement providing for the arbitration thereof, the court in which such quit or proceeding is
order directing the parties to proceed to arbitration in accordance with the terms of the agreement.
pending, upon being satisfied that the issue involved in such suit or proceeding is referable to
If the making of the agreement or default be in issue the court shall proceed to summarily hear
arbitration, shall stay the action or proceeding until an arbitration has been had in accordance
such issue. If the finding be that no agreement in writing providing for arbitration was made, or
with the terms of the agreement: Provided, That the applicant for the stay is not in default in
that there is no default in the proceeding thereunder, the proceeding shall be dismissed. If the
proceeding with such arbitration.
finding be that a written provision for arbitration was made and there is a default in proceeding
thereunder, an order shall be made summarily directing the parties to proceed with arbitration in
accordance with the terms thereof.