ADR Case Digests 1

Equitable PCI Bank v. RCBC

FACTS: On May 24, 2000, petitioners Equitable PCI Bank, Inc. (EPCIB) and the individual shareholders of Bankard,
Inc., as sellers, and respondent RCBC Capital Corporation (RCBC), as buyer, executed a Share Purchase Agreement5
(SPA) for the purchase of petitioners’ interests in Bankard, representing 226,460,000 shares, for the price of PhP
1,786,769,400. To expedite the purchase, RCBC agreed to dispense with the conduct of a due diligence audit on the
financial status of Bankard.

On June 2, 2000, RCBC deposited the stipulated downpayment amount in an escrow account after which it was given
full management and operational control of Bankard. June 2, 2000 is also considered by the parties as the Closing Date
referred to in the SPA

RCBC informed petitioners of its having overpaid the purchase price of the subject shares, claiming that there was an
overstatement of valuation of accounts amounting to PhP 478 million, resulting in the overpayment of over PhP 616
million. Thus, RCBC claimed that petitioners violated their warranty, as sellers, embodied in Sec. 5(g) of the SPA

Following unsuccessful attempts at settlement, RCBC, in accordance with Sec. 10 of the SPA, filed a Request for
Arbitration dated May 12, 20048 with the ICC-ICA. In the request, RCBC charged Bankard with deviating from,
contravening and not following generally accepted accounting principles and practices in maintaining their books.

To the Request for Arbitration, petitioners filed an Answer dated July 28, 2004,9 denying RCBC’s inculpatory averments
and setting up the following affirmative allegations: the period for filing of the asserted claim had already lapsed by force
of Sec. 7 of the SPA; RCBC is not entitled to rescission having had ample opportunity and reasonable time to file a claim
against petitioners; RCBC is not entitled to its alternative prayer of damages, being guilty of laches and failing to set out
the details of the breach as required under Sec. 7.

ICC-ICA ruled in favour RCBC arguing that they are not barred from availing the remedies, has provided necessary
evidence to establish their claim but cannot rescind the agreement

On October 26, 2007, RCBC filed with the RTC a Motion to Confirm Partial Award. On the same day, petitioners
countered with a Motion to Vacate the Partial Award. On November 9, 2007, petitioners again filed a Motion to
Suspend and Inhibit Barker and Kaplan. On January 8, 2008, the RTC issued the first assailed order confirming the
Partial Award and denying the adverted separate motions to vacate and to suspend and inhibit. From this order,
petitioners sought reconsideration, but their motion was denied by the RTC in the equally assailed second order of
March 17, 2008.

ISSUE: Whether the proper recourse of the parties were to appeal before SC

RULING: NO, the proper recourse of the parties are to appeal the assailed decision of RTC regarding the
arbitral award

Rule 45 is not the remedy available to petitioners as the proper mode of appeal assailing the decision of the RTC
confirming as arbitral award is an appeal before the CA pursuant to Sec. 46 of Republic Act No. (RA) 9285, otherwise
known as the Alternative Dispute Resolution Act of 2004, or completely, An Act to Institutionalize the Use of an
Alternative Dispute Resolution System in the Philippines and to Establish the Office for Alternative Dispute Resolution,
and for other Purposes, promulgated on April 2, 2004 and became effective on April 28, 2004 after its publication on
April 13, 2004.

In Korea Technologies Co., Ltd v. Lerma, we explained, inter alia, that the RTC decision of an assailed arbitral award is
appealable to the CA and may further be appealed to this Court, thus:
 Sec. 46 of RA 9285 provides for an appeal before the CA as the remedy of an aggrieved party in cases where
the RTC sets aside, rejects, vacates, modifies, or corrects an arbitral award, thus:

SEC. 46. Appeal from Court Decision or Arbitral Awards.–A decision of the Regional Trial Court confirming,
vacating, setting aside, modifying or correcting an arbitral award may be appealed to the Court of Appeals in
accordance with the rules and procedure to be promulgated by the Supreme Court.

It is clear from the factual antecedents that RA 9285 applies to the instant case. This law was already effective at the time
the arbitral proceedings were commenced by RCBC through a request for arbitration filed before the ICC-ICA on May
12, 2004. Besides, the assailed confirmation order of the RTC was issued on March 17, 2008. Thus, petitioners clearly
took the wrong mode of appeal and the instant petition can be outright rejected and dismissed.

ISSUE: Whether the arbitral award should be overturned

RULING: NO, an arbitral award cannot be easily overturned

As a rule, the award of an arbitrator cannot be set aside for mere errors of judgment either as to the law or as to the
facts. Courts are without power to amend or overrule merely because of disagreement with matters of law or facts
determined by the arbitrators. They will not review the findings of law and fact contained in an award, and will not
undertake to substitute their judgment for that of the arbitrators, since any other rule would make an award the
commencement, not the end, of litigation. Errors of law and fact, or an erroneous decision of matters submitted to the
judgment of the arbitrators, are insufficient to invalidate an award fairly and honestly made. Judicial review of an
arbitration is, thus, more limited than judicial review of a trial.

Finally, it should be stressed that while a court is precluded from overturning an award for errors in determination of
factual issues, nevertheless, if an examination of the record reveals no support whatever for the arbitrators’
determinations, their award must be vacated. In the same manner, an award must be vacated if it was made in "manifest
disregard of the law."

In this case, there is no manifest disregard of the law: RCBC has two options of remedy provided under the agreement whereby
the records show that in its Request for Arbitration dated May 12, 2004, RCBC prayed for the rescission of the SPA,
restitution of the whole purchase price, and damages not for reduction of price or for the return of any overpayment.
Even in its May 5, 2000 letter,21 RCBC did not ask for the recovery of any overpayment or reduction of price, merely
stating in it that the accounts of Bankard, as reflected in its AFS for 1999, were overstated which, necessarily, resulted in
an overpayment situation. RCBC was emphatic and unequivocal that petitioners violated their warranty covered by Sec.
5(g) of the SPA.

Thus, RCBC has two distinct alternative remedies in case of an overvaluation of Bankard’s financial condition. It may
invoke Sec. 5(h) when the conditions of the threshold aggregate overvaluation and the claim made within the six-month
time-bar are present. In the alternative, it may invoke Sec. 5(g) when it finds that a claim for "curing the breach" and/or
damages will be more advantageous to its interests provided it is filed within three (3) years from closing date. Since it
has two remedies, RCBC may opt to exercise either one. Of course, the exercise of either one will preclude the other.

ISSUE: Whether petitioner were denied of due process in the arbitral proceedings

RULING: NO, they were not deprived of due process

In a catena of cases, we have ruled that "[t]he essence of due process is the opportunity to be heard. What the law
prohibits is not the absence of previous notice but the absolute absence thereof and the lack of opportunity to be heard.

The foregoing events unequivocally demonstrate ample opportunity for petitioners to verify and examine RCBC’s
summaries, accounting records, and reports. The pleadings reveal that RCBC granted petitioners’ requests for
production of documents and accounting records. More so, they had more than three (3) years to prepare for their
defense after RCBC’s submission of its brief of evidence. Finally, it must be emphasized that petitioners had the
opportunity to appeal the Partial Award to the RTC, which they in fact did. Later, petitioners even moved for the
reconsideration of the denial of their appeal. Having been able to appeal and move for a reconsideration of the assailed
rulings, petitioners cannot claim a denial of due process.

Sec. 15 of RA 876 or the Arbitration Law provides that: Arbitrators may, at the commencement of the hearing, ask both
parties for brief statements of the issues in controversy and/or an agreed statement of facts. Thereafter the parties may
offer such evidence as they desire, and shall produce such additional evidence as the arbitrators shall require or deem
necessary to an understanding and determination of the dispute. The arbitrators shall be the sole judge of the relevancy
and materiality of the evidence offered or produced, and shall not be bound to conform to the Rules of Court pertaining
to evidence. Arbitrators shall receive as exhibits in evidence any document which the parties may wish to submit and the
exhibits shall be properly identified at the time of submission.

In administrative proceedings, the essence of due process is simply an opportunity to be heard, or an opportunity to
explain one’s side or opportunity to seek a reconsideration of the action or ruling complained of. This constitutional
mandate is deemed satisfied if a person is granted an opportunity to seek reconsideration of an action or a ruling.