VOL.

778, JANUARY 217

11, 2016
Bases Conversion
G.R. No. 173137. January 11, 2016.* Development Authority vs.
 
DMCI Project Developers,
BASES CONVERSION DEVELOPMENT AUTHORITY,
petitioner, vs. DMCI PROJECT DEVELOPERS, INC. Inc.
facts.” The question must involve the examination of probative
respondent.
value of the evidence presented.
Civil Law; Alternative Dispute Resolution; Arbitration; Like
many alternative dispute resolution processes, arbitration is a
G.R. No. 173170. January 11, 2016.* product of the meeting of minds of parties submitting a predefined
set of disputes.—Arbitration is a mode of settling disputes between
 
parties. Like many alternative dispute resolution processes, it is a
NORTH LUZON RAILWAYS CORPORATION, product of the meeting of minds of parties submitting a predefined
petitioner, vs. DMCI PROJECT DEVELOPERS, INC. set of disputes. They agree among themselves to a process of dispute
respondent. resolution that avoids extended litigation. The state adopts a policy in
Remedial Law; Civil Procedure; Appeals; Petition for Review favor of arbitration. Republic Act No. 9285 expresses this policy:
on Certiorari; Rule 45 is applicable when the issues raised before SEC. 2. Declaration of Policy.—It is hereby declared the policy of
the Supreme Court (SC) involved purely questions of law.—At the the State to actively promote party autonomy in the resolution of
outset, we must state that BCDA and Northrail invoked the correct disputes or the freedom of the parties to make their own
remedy. Rule 45 is applicable when the issues raised before this arrangements to resolve their disputes. Towards this end, the State
court involved purely questions of law. In Villamor, Jr. v. shall encourage and actively promote the use of Alternative Dispute
Umale, 736 SCRA 325 (2014): [t]here is a question of law “when Resolution (ADR) as an important means to achieve speedy and
there is doubt or controversy as to what the law is on a certain [set] impartial justice and declog court dockets. As such, the State shall
of facts.” The test is “whether the appellate court can determine the provide means for the use of ADR as an efficient tool and an
issue raised without reviewing or evaluating the evidence.” alternative procedure for the resolution of appropriate cases.
Meanwhile, there is a question of fact when there is “doubt . . . as to Likewise, the State shall enlist active private sector participation in
the truth or falsehood of the settlement of disputes through ADR. This Act shall be without
prejudice to the adoption by the Supreme Court of any ADR system,
_______________ such as mediation, conciliation, arbitration, or any combination
thereof as a means of achieving speedy and efficient means of
*  SECOND DIVISION. resolving cases pending before all courts in the Philippines which
  shall be governed by such rules as the Supreme Court may approve
from time to time.
 
217

1|Page
 Same; Contracts; At any time during the lifetime of an taken effect. Provisions that are not affected by the changes usually
agreement, circumstances may arise that may cause the parties to remain effective.
change or add to the terms they previously agreed upon. Thus,  Same; Same; Supplemented Contracts; When a contract is
amendments or supplements to the agreement may be executed by supplemented, new provisions that are not inconsistent with the old
contracting parties to address the circumstances or issues that arise provisions are added.—When a contract is supplemented, new
while a contract subsists.—There is no rule that a contract should be provisions that are not inconsistent with the old provisions are added.
contained in a single document. A whole contract may be contained The nature, scope, and terms and conditions are expanded. In that
in several documents that are consistent with one other. Moreover, at case, the old and the new provisions form part of the contract.
any time during the lifetime of an agreement, circumstances may Same; Same; “Assignment” and “Nomination,” Distinguished.
arise that may cause the parties to change or add to the terms they —Assignment involves the transfer of rights after the perfection of a
previously agreed upon. Thus, amendments or supplements to the contract. Nomination pertains to the act of naming the party with
whom it has a relationship of trust or agency. In Philippine Coconut
  Producers Federation, Inc. (COCOFED) v. Republic, 663 SCRA
  514 (2012), this court defined “nominee” as follows: In its most
218 common signification, the term “nominee’’ refers to one who is
218 SUPREME COURT designated to act for another usually in a limited way; a person in
REPORTS whose name a stock or bond certificate is registered but who is not
ANNOTATED the actual owner thereof is considered a nominee.” Corpus Juris
Secundum describes a nominee as one: “. . . designated to act for
Bases Conversion another as his representative in a rather limited sense. It has no
Development Authority vs. connotation, however, other than that of acting for another, in
DMCI Project Developers, representation of another or as the grantee of another. In its
Inc. commonly accepted meaning the term connoted the delegation of
agreement may be executed by contracting parties to address authority to the nominee in a representative or nominal capacity
the circumstances or issues that arise while a contract subsists. only, and does not connote the transfer or assignment to the nominee
Same; Same; Amended Contracts; When an agreement is of any property in, or ownership of, the rights of the person
amended, some provisions are changed. Certain parts or provisions nominating him.” (Citations omitted) Contrary
may be added, removed, or corrected. These changes may cause
effects that are inconsistent with the wordings of the contract before  
the changes were applied.—When an agreement is amended, some  
provisions are changed. Certain parts or provisions may be added, 219
removed, or corrected. These changes may cause effects that are VOL. 778, JANUARY 219
inconsistent with the wordings of the contract before the changes 11, 2016
were applied. In that case, the old provisions shall be deemed to have Bases Conversion
lost their force and effect, while the changes shall be deemed to have Development Authority vs.
DMCI Project Developers,

2|Page
 Inc.  
to BCDA and Northrail’s position, therefore, the agreement’s  
prohibition against transfers, conveyance, and assignment of rights 220
without the consent of the other party does not apply to nomination. 220 SUPREME COURT
Same; Same; A beneficiary who communicated his or her REPORTS
acceptance to the terms of the agreement before its revocation may ANNOTATED
be compelled to abide by the terms of an agreement, including the
arbitration clause.—There is, therefore, merit to DMCI-PDI’s
Bases Conversion
argument that if the Civil Code gives third party beneficiaries to a Development Authority vs.
contract the right to demand the contract’s fulfillment in its favor, the DMCI Project Developers,
reverse should also be true. A beneficiary who communicated his or Inc.
her acceptance to the terms of the agreement before its revocation   Office of the Government Corporate Counsel for petitioner
may be compelled to abide by the terms of an agreement, including Northrail.
the arbitration clause. In this case, Northrail is deemed to have
  Aguirre, Aportadera & Sandico Law Offices for
communicated its acceptance of the terms of the agreements when it
accepted D.M. Consunji, Inc.’s funds.
respondent in both cases.
Multiplicity of Suits; Judicial efficiency and economy require a LEONEN, J.:
policy to avoid multiplicity of suits.—Judicial efficiency and  
economy require a policy to avoid multiplicity of suits. As we said An arbitration clause in a document of contract may extend
in Lanuza v. BF Corporation, 737 SCRA 275 (2014): Moreover,
to subsequent documents of contract executed for the same
in Heirs of Augusto Salas, Jr., this court affirmed its policy against
multiplicity of suits and unnecessary delay. This court said that “to purpose. Nominees of a party to and beneficiaries of a contract
split the proceeding into arbitration for some parties and trial for containing an arbitration clause may become parties to a
other parties would result in multiplicity of suits, duplicitous proceeding initiated based on that arbitration clause.
procedure and unnecessary delay.” This court also intimated that the On June 10, 1995, Bases Conversion Development
interest of justice would be best observed if it adjudicated rights in a Authority (BCDA) entered into a Joint Venture
single proceeding. While the facts of that case prompted this court to Agreement1 with Philippine National Railways (PNR) and
direct the trial court to proceed to determine the issues of that case, it other foreign corporations.2
did not prohibit courts from allowing the case to proceed to Under the Joint Venture Agreement, the parties agreed to
arbitration, when circumstances warrant. construct a railroad system from Manila to Clark with possible
PETITIONS for review on certiorari of the decision and order extensions to Subic Bay and La Union and later, possibly to
of the Regional Trial Court of Makati City, Branch 150. Ilocos Norte and Nueva Ecija. 3 BCDA shall establish North
The facts are stated in the opinion of the Court. Luzon Railways Corporation (Northrail) for purposes of
  Ongkiko, Manhit, Custodio & Acorda Law Office for constructing, operating, and managing the railroad system.4 The
petitioner BCDA. Joint Venture Agreement contained the following provision:

3|Page
 BCDA organized and incorporated Northrail.6 Northrail was
registered with the Securities and Exchange Commission on
ARTICLE XVI August 22, 1995.7
ARBITRATION BCDA invited investors to participate in the railroad
  project’s financing and implementation. Among those invited
16. If any dispute arise hereunder which cannot be were D.M. Consunji, Inc. and Metro Pacific Corporation.8
settled by mutual accord between the parties to such On February 8, 1996, the Joint Venture Agreement was
dispute, then that dispute shall be referred to arbi- amended to include D.M. Consunji, Inc. and/or its nominee
_______________ as party.9 Under the amended Joint Venture Agreement, D.M.
Consunji, Inc. shall be an additional investor of Northrail. 10 It
1  Rollo (G.R. No. 173137), pp. 104-120.
2  Id., at p. 46. shall subscribe to 20% of the increase in Northrail’s authorized
3  Id., at p. 106. capital stock.11
4  Id., at p. 108. On February 8, 1996, BCDA and the other parties to the
  Joint Venture Agreement, including D.M. Consunji, Inc. and/or
  its nominee, entered into a Memorandum of
221 Agreement.12 Under this agreement, the parties agreed that the
_______________
VOL. 778, JANUARY 221
11, 2016 5   Id., at pp. 116-117.
Bases Conversion 6   Id., at p. 62.
7   Rollo (G.R. No. 173170), p. 74.
Development Authority vs. 8   Rollo (G.R. No. 173137), p. 47.
DMCI Project Developers, 9   Id., at pp. 122-123.
Inc. 10  Id., at pp. 47 and 123.
11  Id.
tration. The arbitration shall be held in whichever 12  Id., at pp. 48 and 126-132.
place the parties to the dispute decide and failing mutual
agreement as to a location within twenty-one (21) days  
after the occurrence of the dispute, shall be held in Metro  
222
Manila and shall be conducted in accordance with the
Philippine Arbitration Law (Republic Act No. 876) 222 SUPREME COURT
supplemented by the Rules of Conciliation and REPORTS
Arbitration of the International Chamber of Commerce. ANNOTATED
All award of such arbitration shall be final and binding Bases Conversion
upon the parties to the dispute.5 Development Authority vs.
 

4|Page
 DMCI Project Developers, 16  Id., at p. 134.
17  Id., at pp. 48 and 135.
Inc. 18  Id., at pp. 48, 64, and 135-136.
initial seed capital of P600 million shall be infused to 19  Id., at pp. 48, 65, and 136.
Northrail.13 Of that amount, P200 million shall be D.M. 20  Rollo (G.R. No. 173170), p. 37.
21  Rollo (G.R. No. 173137), p. 48.
Consunji, Inc.’s share, which shall be converted to equity upon 22  Id., at pp. 137-140.
Northrail’s privatization.14 Later, D.M. Consunji, Inc.’s share
was increased to P300 million.15  
Upon BCDA and Northrail’s request,16 DMCI Project  
Developers, Inc. (DMCI-PDI) deposited P300 million into 223
Northrail’s account with Land Bank of the Philippines. 17 The VOL. 778, JANUARY 223
deposit was made on August 7, 199618 for its “future 11, 2016
subscription of the Northrail shares of stocks.”19 In Northrail’s Bases Conversion
1998 financial statements submitted to the Securities and Development Authority vs.
Exchange Commission, this amount was reflected as “Deposits DMCI Project Developers,
For Future Subscription.”20 At that time, Northrail’s application Inc.
to increase its authorized capital stock was still pending with agreements that may be signed by the parties in
the Securities and Exchange Commission.21 furtherance of or in connection with the PROJECT. By
In letters22 dated April 4, 1997, D.M. Consunji, Inc. this nomination, all the rights, obligations, warranties
informed PNR and the other parties that DMCI-PDI shall and commitments of DMCI under the JVA and MOA
be its designated nominee for all the agreements it entered shall henceforth be assumed performed and delivered by
and would enter with them in connection with the railroad PDI.23 (Emphasis supplied)
project. Pertinent portions of the letters provide:  
Later, Northrail withdrew from the Securities and Exchange
Commission its application for increased authorized capital
[I]n order to formalize the inclusion of [DMCI Project stock.24 Moreover, according to DMCI-PDI, BCDA applied for
Developers, Inc.] as a party to the JVA and MOA, DMCI Official Development Assistance from Obuchi Fund of
would like to notify all the parties that it is designating Japan.25 This required Northrail to be a 100% government-
PDI as its nominee in both agreements and such other owned and -controlled corporation.26
  On September 27, 2000, DMCI-PDI started demanding
_______________
from BCDA and Northrail the return of its P300 million
13  Id., at p. 48. deposit.27 DMCI-PDI cited Northrail’s failure to increase its
14  Id., at pp. 48 and 129. authorized capital stock as reason for the demand.28 BCDA and
15  Id., at p. 48.

5|Page
Northrail refused to return the deposit29 for the following c) DMCI-PDI/FBDC had full access to the financial
reasons: statements of Northrail and was regularly informed of
the corporation’s financial condition.30
 
a) At the outset, DMCI-PDI/FBDC’s participation in Upon BCDA’s request, the Office of the Government
Northrail was as a joint venture partner and co-investor Corporate Counsel (OGCC) issued Opinion No. 116, Series of
in the Manila Clark Rapid Railway Project, and as such, 200131
was granted corresponding representation in the on June 27, 2001. The OGCC stated that “since no increase in
Northrail Board. capital stock was implemented, it is but proper to return the
b) DMCI-PDI/FBDC was privy to all the investments of both FBDC and DMCI[.]”32
deliberations of the Northrail Board and participated in In a January 19, 2005 letter, 33 DMCI-PDI reiterated the
the decisions made and policies adopted to pursue the request for the refund of its P300 million deposit for future
project. Northrail subscription. On March 18, 2005, BCDA
_______________ denied34 DMCI-PDI’s request:
 
23  Id., at pp. 137 and 139.
24  Id., at pp. 48 and 65. We regret to say that we are of the position that the
25  Id., at p. 66. P300 [million] contribution should not be returned to
26  Id. DMCI for the following reasons:
27  Id., at pp. 48 and 146-147.
a. the P300 million was in the nature of a
28  Id., at pp. 146-147.
29  Id., at p. 48. contribution, not deposits for future subscription;
and
  b. DMCI, as a joint venture partner, must share
  in profits and losses.35
224
 
224 SUPREME COURT On August 17, 2005,36 DMCI-PDI served a demand for
REPORTS arbitration to BCDA and Northrail, citing the arbitration clause
ANNOTATED in the June 10, 1995 Joint Venture Agreement. 37 BCDA and
Bases Conversion Northrail failed to respond.38
Development Authority vs. _______________
DMCI Project Developers, 30  Id., at pp. 151-152 and 467.
Inc. 31  Id., at pp. 150-154.
  32  Id., at p. 153.
33  Id., at pp. 175-176.
34  Id., at pp. 177-180.

6|Page
 35  Id., at p. 177. WHEREFORE, the petition is granted. The parties
36  Id., at p. 49.
37  Id., at pp. 49, 59, and 76.
are ordered to present their dispute to arbitration in
38  Id., at pp. 49 and 70. accordance with Article XVI of the Joint Agreement.
SO ORDERED.48
 
 
225 The trial court ruled that the arbitration clause in the Joint
VOL. 778, JANUARY 225 Venture Agreement should cover all subsequent docu-
11, 2016 _______________
Bases Conversion
39  Id., at p. 46. The petition was raffled to Branch 150, Judge Elmo M.
Development Authority vs. Alameda.
DMCI Project Developers, 40  Id., at pp. 58-74.
Inc. 41  Id., at p. 15.
42  Id., at p. 49.
DMCI-PDI filed before the Regional Trial Court of 43  Id., at pp. 218-223.
Makati39 a Petition to Compel Arbitration40 against BCDA and 44  Id., at p. 221.
Northrail, pursuant to the alleged arbitration clause in the Joint 45  Rollo (G.R. No. 173170), pp. 66-73.
46  Id., at pp. 17 and 67-68.
Venture Agreement.41 DMCI-PDI prayed for “an order 47  Rollo (G.R. No. 173137), pp. 46-54.
directing the parties to proceed to arbitration in accordance 48  Id., at p. 54.
with the terms and conditions of the agreement.”42
BCDA filed a Motion to Dismiss43 on the ground that there  
was no arbitration clause that DMCI-PDI could enforce since  
226
DMCI-PDI was not a party to the Joint Venture Agreement
containing the arbitration clause.44 Northrail filed a separate 226 SUPREME COURT
Motion to Dismiss45 on the ground that the court did not have REPORTS
jurisdiction over it and that DMCI-PDI had no cause for ANNOTATED
arbitration against it.46 Bases Conversion
In the Decision47 dated February 9, 2006, the trial court Development Authority vs.
denied BCDA’s and Northrail’s Motions to Dismiss and DMCI Project Developers,
granted DMCI-PDI’s Petition to Compel Arbitration. The Inc.
dispositive portion of the decision reads: ments including the amended Joint Venture Agreement and
  the Memorandum of Agreement. The three (3) documents
constituted one contract for the formation and funding of
Northrail.49

7|Page
 The trial court also ruled that even though DMCI-PDI was 227
not a signatory to the Joint Venture Agreement and the VOL. 778, JANUARY 227
Memorandum of Agreement, it was an assignee of D.M. 11, 2016
Consunji, Inc.’s rights. Therefore, it could invoke the Bases Conversion
arbitration clause in the Joint Venture Agreement.50 Development Authority vs.
In an Order51 dated June 9, 2006, the trial court denied DMCI Project Developers,
BCDA and Northrail’s Motion for Reconsideration of the Inc.
February 9, 2006 trial court Decision.
assignee had no basis.57 In BCDA’s view, DMCI-PDI had
BCDA filed a Rule 45 Petition before this court, assailing
no right to compel BCDA to submit to arbitration.58
the February 9, 2006 trial court Order granting DMCI-PDI’s
BCDA also argued that the trial court decided the Motion to
Petition to Compel Arbitration and the June 9, 2006 Order
Dismiss in violation of the parties’ right to due process. The
denying BCDA and Northrail’s Motion for Reconsideration.52
trial court should have conducted a hearing so that the parties
The issue in this case is whether DMCI-PDI may compel
could have presented their respective positions on the issue of
BCDA and Northrail to submit to arbitration.
assignment. The trial court merely accepted DMCI-PDI’s
BCDA argued that only the parties to an arbitration
allegations, without basis.59
agreement can be bound by that agreement.53 The arbitration
In a separate Petition for Review, 60 Northrail argued that it
clause that DMCI-PDI sought to enforce was in the Joint
cannot be compelled to submit itself to arbitration because it
Venture Agreement, to which DMCI-PDI was not a
was not a party to the arbitration agreement.61
party.54 There was also no evidence that the right to compel
Northrail also argued that DMCI-PDI cannot initiate an
arbitration under the Joint Venture Agreement was assigned to
action to compel BCDA and Northrail to arbitration because
DMCI-PDI.55 Assuming that there was such an assignment,
DMCI-PDI itself was not a party to the arbitration agreement.
BCDA did not consent to or recognize it.56 Therefore, the trial
DMCI-PDI was not D.M. Consunji, Inc.’s assignee because
court’s conclusion that DMCI-PDI was D.M. Consunji, Inc.’s
_______________
BCDA did not consent to that assignment.62
In its Comment63 on BCDA’s Petition, DMCI-PDI argued
49  Id., at p. 52. that Rule 45 was a wrong mode of appeal. 64 The issues raised
50  Id. by BCDA did not involve questions of law.65
51  Id., at pp. 55-56.
52  Id., at pp. 12-13.
DMCI-PDI pointed out that BCDA breached their
53  Id., at p. 24. agreement when it failed to apply the P300 million deposit to
54  Id., at p. 25. Northrail subscriptions. It turned out that such application was
55  Id., at pp. 25-26. rendered impossible by the alleged loan requirement that
56  Id., at p. 31.
Northrail be wholly owned by the government and by
  Northrail’s withdrawal from the Securities and Exchange
  Commis-

8|Page
_______________ participation as being the “joint venture partner . . . and co-
investor in the Manila Clark Rapid Railway Project[.]” 71 Hence,
57  Id., at p. 27.
58  Id., at p. 25. it is now estopped from denying its personality in this case.72
59  Id., at pp. 34-35. We rule for DMCI-PDI.
60  Rollo (G.R. No. 173170), pp. 13-30.  
61  Id., at p. 24. I 
62  Id., at pp. 25-26.
63  Rollo (G.R. No. 173137), pp. 291-375. The state has a policy in favor of arbitration
64  Id., at pp. 293-294.  
65  Id. At the outset, we must state that BCDA and Northrail
  invoked the correct remedy. Rule 45 is applicable when the
  issues raised before this court involved purely questions of law.
228 In Villamor, Jr. v. Umale:73
_______________
228 SUPREME COURT
REPORTS 66  Id., at pp. 317-318.
ANNOTATED 67  Id., at pp. 336-337.
68  Id., at p. 339.
Bases Conversion 69  Id., at pp. 339 and 364-365.
Development Authority vs. 70  Id., at p. 345.
DMCI Project Developers, 71  Id., at p. 346.
72  Id., at p. 349.
Inc. 73  G.R. No. 172843, September 24, 2014, 736 SCRA 325 [Per J. Leonen,
sion of its application for an increase in authorized capital Second Division].
stock.66
 
DMCI-PDI also argued that it is an assignee and nominee of
 
D.M. Consunji, Inc., which is a party to the contracts. 229
Therefore, it is also a party to the arbitration clause.67 VOL. 778, JANUARY 229
DMCI-PDI contended that the arbitration agreement
11, 2016
extended to all documents relating to the project.68 Even though
the agreement was expressed only in the Joint Venture Bases Conversion
Agreement, its effect extends to the amendment to the Joint Development Authority vs.
Venture Agreement and Memorandum of Agreement.69 DMCI Project Developers,
DMCI-PDI emphasized that BCDA had always recognized Inc.
it as D.M. Consunji’s assignee in its correspondences with the [t]here is a question of law “when there is doubt or
OGCC and with the President of DMCI, Mr. Isidro controversy as to what the law is on a certain [set] of
Consunji.70 In those letters, BCDA described DMCI-PDI’s facts.” The test is “whether the appellate court can

9|Page
 determine the issue raised without reviewing or 76  An Act to Institutionalize the Use of an Alternative Dispute Resolution
System in the Philippines and to Establish the Office for Alternative Dispute
evaluating the evidence.” Meanwhile, there is a question Resolution, and for Other Purposes (2004).
of fact when there is “doubt . . . as to the truth or
falsehood of facts.” The question must involve the  
examination of probative value of the evidence  
presented.74 230
  230 SUPREME COURT
BCDA and Northrail primarily ask us to construe the REPORTS
arbitration clause in the Joint Venture Agreement. They assert ANNOTATED
that the clause does not bind DMCI-PDI and Northrail. This Bases Conversion
issue is a question of law. It does not require us to examine the Development Authority vs.
probative value of the evidence presented. The prayer is DMCI Project Developers,
essentially for this court to determine the scope of an Inc.
arbitration clause.
their disputes. Towards this end, the State shall
Arbitration is a mode of settling disputes between
encourage and actively promote the use of Alternative
parties.75 Like many alternative dispute resolution processes, it
Dispute Resolution (ADR) as an important means to
is a product of the meeting of minds of parties submitting a
achieve speedy and impartial justice and declog court
predefined set of disputes. They agree among themselves to a
dockets. As such, the State shall provide means for the
process of dispute resolution that avoids extended litigation.
use of ADR as an efficient tool and an alternative
The state adopts a policy in favor of arbitration. Republic
procedure for the resolution of appropriate cases.
Act No. 928576 expresses this policy:
Likewise, the State shall enlist active private sector
participation in the settlement of disputes through ADR.
This Act shall be without prejudice to the adoption by
SEC. 2. Declaration of Policy.—It is hereby
the Supreme Court of any ADR system, such as
declared the policy of the State to actively promote party
mediation, conciliation, arbitration, or any combination
autonomy in the resolution of disputes or the freedom of
thereof as a means of achieving speedy and efficient
the parties to make their own arrangements to resolve
_______________ means of resolving cases pending before all courts in the
Philippines which shall be governed by such rules as the
74  Id., at p. 339, citing Central Bank of the Philippines v. Castro, 514 Phil. Supreme Court may approve from time to time.
425, 434; 478 SCRA 235, 243-244 (2005) [Per J. Puno, Second Division]. (Emphasis supplied)
75  Lanuza, Jr. v. BF Corporation, G.R. No. 174938, October 1, 2014, 737
SCRA 275, 293 [Per J. Leonen, Second Division].
 
Our policy in favor of party autonomy in resolving disputes
has been reflected in our laws as early as 1949 when our Civil

10 | P a g e
Code was approved.77 Republic Act No. 87678 later explicitly that covers the asserted dispute, an order to arbitrate
recognized the validity and enforceability of parties’ decision should be granted. Any doubt should be resolved in favor
to submit disputes and related issues to arbitration.79 of arbitration.83
Arbitration agreements are liberally construed in favor of
proceeding to arbitration.80 We adopt the interpretation that
would render effective an arbitration clause if the terms of the This manner of interpreting arbitration clauses is made
agreement allow for such interpretation.81 In LM Power Engi- explicit in Section 25 of Republic Act No. 9285:
_______________  
SEC. 25. Interpretation of the Act.—In interpreting
77  Civil Code, Arts. 2028-2046.
78  An Act to Authorize the Making of Arbitration and Submission the Act, the court shall have due regard to the policy of
Agreements, to Provide for the Appointment of Arbitrators and the Procedure the law in favor of arbitration. Where action is
for Arbitration in Civil Controversies, and for Other Purposes (1953). commenced by or against multiple parties, one or more
79  Supra note 75 at p. 292. of whom are parties to an arbitration agreement, the
80  Id., at p. 293. See also LM Power Engineering Corporation v. Capitol
Industrial Construction Groups, Inc., 447 Phil. 705, 714; 399 SCRA 562, 569- court shall refer to arbitration those parties who are
570 (2003) [Per J. Panganiban, Third Division]. bound by the arbitration agreement although the civil
81  Id., at p. 295. See also LM Power Engineering Corporation v. Capitol action may continue as to those who are not bound by
Industrial Construction Groups, Inc., id., at p. 714; pp. 560-570. such arbitration agreement.
   
  Hence, we resolve the issue of whether DMCI-PDI may
231 compel BCDA and Northrail to submit to arbitration
VOL. 778, JANUARY 231 proceedings in light of the policy in favor of arbitration.
11, 2016 BCDA and Northrail assail DMCI-PDI’s right to compel
Bases Conversion them to submit to arbitration based on the assumption that
Development Authority vs. DMCI-PDI was not a party to the agreement containing the
arbitration clause.
DMCI Project Developers,
Three documents — (a) Joint Venture Agreement, (b)
Inc. amended Joint Venture Agreement, and (c) Memorandum of
neering Corporation v. Capitol Industrial Agreement — represent the agreement between BCDA,
Construction Groups, Inc.,  this court said:
82
Northrail, and D.M. Consunji, Inc. Among the three docu-
  _______________
Consistent with the above mentioned policy of
encouraging alternative dispute resolution methods, 82  Id.
83  Id., at p. 714; pp. 569-570.
courts should liberally construe arbitration clauses.
Provided such clause is susceptible of an interpretation  

11 | P a g e
  
232 This Joint Venture Agreement (JVA) made and
232 SUPREME COURT executed at Makati, Metro Manila, this __ day of June
REPORTS 1995 by and between:
ANNOTATED _______________

Bases Conversion 84  Rollo (G.R. No. 173137), p. 105. The foreign corporations are
Development Authority vs. Construcciones Y Auxiliar De Ferrocarriles, S.A., Entrecanales Y Tavora, S.A.,
DMCI Project Developers, Cubiertas Y Mzov, S.A., and Cobra Instalaciones Y Servicios, S.A.
85  Id., at p. 106.
Inc. 86  Id., at p. 108.
ments, only the Joint Venture Agreement contains the 87  Id., at p. 110.
arbitration clause. DMCI-PDI was allegedly not a party to the 88  Id.
Joint Venture Agreement.  
To determine the coverage of the arbitration clause, the  
relation among the three documents and DMCI-PDI’s 233
involvement in the execution of these documents must first be VOL. 778, JANUARY 233
understood. 11, 2016
The Joint Venture Agreement was executed by BCDA, Bases Conversion
PNR, and some foreign corporations.84 The purpose of the Joint
Development Authority vs.
Venture Agreement was for the construction of a railroad
system from Manila to Clark with a possible extension to Subic DMCI Project Developers,
Bay and later to San Fernando, La Union, Laoag, Ilocos Norte, Inc.
and San Jose, Nueva Ejica.85 Under the Joint Venture The BASES CONVERSION DEVELOPMENT
Agreement, BCDA agreed to incorporate Northrail, which shall AUTHORITY . . . hereinafter referred to as BASECON;
have an authorized capital stock of P5.5 billion. 86 The parties The PHILIPPINE NATIONAL RAILWAYS . . .;
agreed that BCDA/PNR shall have a 30% equity with The following corporations collectively referred to as
Northrail.87 Other Filipino partners shall have a total of 50% the Foreign Group:
equity, while foreign partners shall have at most 20% a)  CONSTRUCCIONES Y AUXILIAR DE
equity.88 Pertinent provisions of the Joint Venture Agreement FERROCARRILES, S.A. . . . ;
are as follows: b) ENTRECANALES Y TAVORA, S.A. . . .;
  c)  CUBIERTAS MZOV, S.A. . . .;
JOINT VENTURE AGREEMENT d)  COBRA, S.A. . . .; and
e) Others who may later participate in the JVA.
KNOW ALL MEN BY THESE PRESENTS:  

12 | P a g e
 -and- DMCI Project Developers,
EUROMA DEVELOPMENT CORPORATION . . Inc.
.  ARTICLE I
WITNESSETH: DEFINITION OF TERMS
.... ....
 WHEREAS, a project identified pursuant to the 1.5 “PROJECT” means the construction, operation
aforesaid policy is the establishment of a Premier and management of a double-track railway system from
International Airport Complex located at the former Manila to Clark with an extension to Subic Bay, and a
Clark Air Base as expressed in Executive Order 174, S. possible extension to San Fernando, La Union, as the
1994 in order to accommodate the expected heavy flow second phase, and finally to Laoag, Ilocos Norte and to
of passenger and cargo traffic to and from the San Jose, Nueva Ecija, as the third phase of the
Philippines, to start the development of the Northern PROJECT.
Luzon Grid and to accelerate the development of Central 1.6 “North Luzon Railways Corporation
Luzon and finally to decongest Metro Manila of its (NORTHRAIL)[”] means the joint venture corporation
vehicular traffic; to be established in accordance with Article II hereof.
....  
WHEREAS, in order to implement and provide such ....
a mass transit and access system, the parties hereto  
agreed to construct a double-trac[k] railway system from ARTICLE II 
Manila to Clark with a possible extension to Subic Bay THE NORTH LUZON RAILROAD
and later to San Fernando, La Union, as the second CORPORATION
phase, and finally to Laoag, Ilocos Norte and to San Jose,  
Nueva Ecija, as the third phase of the project, hereinafter 2.1 BASECON shall establish and incorporate in
referred to as the PROJECT; accordance with the laws of the Republic of the
.... Philippines a corporation to be known as NORTH
  LUZON RAILWAYS CORPORATION
  (NORTHRAIL) with an initial capitalization of one
234
hundred million pesos (P100,000,000.00).
234 SUPREME COURT 2.2  NORTHRAIL shall eventually have an
REPORTS authorized capital stock of FIVE BILLION FIVE
ANNOTATED HUNDRED MILLION PESOS (P5.5 Billion) divided
Bases Conversion into 55,000,000 shares with par value of P100 per share.
Development Authority vs.  

13 | P a g e
 .... BASECON/PNR                                30%
  ....
  4.4  The shares owned by Filipino stockholders
235 including BASECON, PNR, EUROMA Development
VOL. 778, JANUARY 235 Corporation and hereinafter to be owned by Filipino
11, 2016 corporations shall not be less than sixty percent (60%) at
Bases Conversion any given time.
Development Authority vs.  
DMCI Project Developers, ....
Inc.  
ARTICLE XVI
ARTICLE III
ARBITRATION
PURPOSE OF NORTHRAIL
 
A. PRIMARY PURPOSE
16 If any dispute arise hereunder which cannot be
 
settled by mutual accord between the par-
3.1 To construct, operate and manage a railroad
 
system to serve Northern and Central Luzon; and to
 
develop, construct, manage, own, lease, sublease and 236
operate establishments and facilities of all kinds related
236 SUPREME COURT
to the railroad system;
 
REPORTS
.... ANNOTATED
  Bases Conversion
ARTICLE IV Development Authority vs.
PARTICIPATION/TRANSFER/ENCUMBRANC DMCI Project Developers,
E Inc.
OF SHARES ties to such dispute, then that dispute shall be referred
  to arbitration. The arbitration shall be held in whichever
4.1  NORTHRAIL shall increase its authorized place the parties to the dispute decide and failing mutual
capital stock upon the subscription thereon by the parties agreement as to a location within twenty-one (21) days
to this JVA in accordance with the following equity after the occurrence of the dispute, shall be held in Metro
proportion/participation: Manila and shall be conducted in accordance with the
Foreign Group                          up to 20% Philippine Arbitration Law (Republic Act No. 876) as
Euroma/Filipino partners                 50% supplemented by the Rules of Conciliation and

14 | P a g e
 Arbitration of the International Chamber of Commerce. DMCI Project Developers,
All award of such arbitration shall be final and binding Inc.
upon the parties to the dispute. party.91 The participations of the parties in Northrail were
  also modified.92 Pertinent provisions of the amended Joint
ARTICLE XVII Venture Agreement are reproduced as follows:
ASSIGNMENT  
  This Amendment to the Joint Venture Agreement
17.1  No party to this Agreement may assign, transfer dated 10th of June 1995 (the Agreement) made and
or convey this Agreement, create or incur any executed at _____________, Metro Manila, on this
encumbrance of its rights or any part of its rights and 8th day of February 1996 by and among:
obligations hereunder or any shares of stocks of  
NORTHRAIL to any person, firm or corporation without BASES CONVERSION DEVELOPMENT
the prior written consent of the other parties or except as AUTHORITY
provided in the Articles of Incorporation and By-Laws of . . . hereinafter referred to as BASECON;
NORTHRAIL and this Agreement. with 
17.2  This Agreement shall inure to the benefit of and PHILIPPINE NATIONAL RAILWAYS . . .
be binding upon the parties hereto and their respective and
successors and permitted assignees and designees or The following corporations collectively referred to as
nominees whenever possible.89 the FOREIGN GROUP:
   
The Joint Venture Agreement was amended on February 8, CONSTRUCCIONES Y AUXILIAR DE
199690 to include D.M. Consunji, Inc. and/or its nominee as FERROCARRILES, S.A. . . .;
_______________
ENTRECANALES Y TAVORA, S.A. . . .;
89  Id., at pp. 105-117. CUBIERTAS Y MZOV, S.A. . . .;
90  Id., at p. 122. COBRA INSTALACIONES Y SERVICIOS,
S.A. . . .; and
 
Other investors who may later participate in the Joint
 
Venture;
237
and
VOL. 778, JANUARY 237
Other local investors to be represented by EUROMA
11, 2016 DEVELOPMENT CORPORATION . . .
Bases Conversion and 
Development Authority vs. D.M. CONSUNJI, INC. and/or its nominee . . .

15 | P a g e
_______________ “NORTHRAIL shall increase its authorized capital
stock upon the subscription thereon by the Parties to this
91  Id., at pp. 122-125.
92  Id., at pp. 122-123. JVA in accordance with the following equity
proportion/participation:
  SRG.............................................. up to 10%
  DMCI..................................................... 20%
238 BASECON/PNR............................up to 30%
238 SUPREME COURT Others.................................................... 40%
REPORTS 3. In Article 4.4, the Filipino corporations whose
ANNOTATED total shares in NORTHRAIL’s capital stock, which
Bases Conversion should not be less than sixty percent (60%) at any given
Development Authority vs. time, shall include D.M. CONSUNJI,
DMCI Project Developers, INC.  (Underscoring supplied)
93

_______________
Inc.
WITNESSETH THAT 93  Id.

WHEREAS, a Joint Venture Agreement (JVA) was  

executed on the 10th of June 1995 between BASECON,  
239
PNR, FOREIGN GROUP, and EUROMA;
VOL. 778, JANUARY 239
.... 11, 2016
Bases Conversion
NOW, THEREFORE, for and in consideration of the Development Authority vs.
foregoing premises and of the mutual covenant contained DMCI Project Developers,
therein, THE PARTIES HEREBY AGREE that the Inc.
JVA should be amended as follows: On February 8, 1996, the same date of the execution of the
1. In Article 1.3, D.M. CONSUNJI, INC. shall be amended Joint Venture Agreement, the same parties executed a
included as strategic partner, being one of the Philippine Memorandum of Agreement94 “to set up the mechanics for
registered companies selected by BASECON, PNR and raising the seed capitalization needed by
the Lead Group on the basis of its qualifications for the NORTHRAIL[.]”95 Pertinent provisions of the Memorandum of
implementation of the Project. Agreement are reproduced as follows:
2. Article 4.1 should read as follows:  
WITNESSETH THAT

16 | P a g e
 94  Id., at pp. 126-132.
95  Id., at p. 128.
WHEREAS, the Manila-Clark Rapid Railway System
Project, hereinafter referred to as the Project, was  
identified as one of the major infrastructure projects to  
accelerate the development of Central Luzon, 240
particularly the former U.S. bases at Clark and Subic; 240 SUPREME COURT
REPORTS
.... ANNOTATED
Bases Conversion
WHEREAS, the North Luzon Railways Corporation
Development Authority vs.
(NORTHRAIL) was organized and incorporated to
implement the development, construction, operation and
DMCI Project Developers,
maintenance of the railway system in Northern Luzon; Inc.

WHEREAS, NORTHRAIL is wholly owned and WHEREAS, DMCI and other private investors. . . have
controlled by BASECON; manifested their desire to be strategic partners in
implementing the Project;
WHEREAS, the privatization of NORTHRAIL is
necessary in order to accelerate the implementation of WHEREAS, DMCI and other private investors have the
the Project by tapping the financial resources and financial capability to implement the Project;
expertise of the private sector;
WHEREAS, Phase I of the Project covers the Manila-
. . . .  Clark section of the North Luzon railway network as
defined by the JVA of 10 June 1995 . . .[;]
WHEREAS, the Parties of the Joint Venture Agreement
(JVA) of 10 June 1995, namely BASECON, PNR, ....
SPANISH RAILWAY GROUP and EUROMA, agreed ARTICLE I
to invite other private investors to help in the financing PURPOSE
and implementation of the Project, and to raise the
required equity in order to accelerate the privatization of 1.1 Purpose. This Agreement is entered into by the
NORTHRAIL; Parties in order to set up the mechanics for raising the
  seed capitalization needed by NORTHRAIL to
_______________ accelerate the implementation of the Project.

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 There is no rule that a contract should be contained in a
.... single document.97 A whole contract may be contained in
ARTICLE II  several documents that are consistent with one other.98
TERMS OF AGREEMENT Moreover, at any time during the lifetime of an agreement,
circumstances may arise that may cause the parties to change
2.1  The Parties agree to put up the necessary seed or add to the terms they previously agreed upon. Thus,
capitalization needed by NORTHRAIL to fast-track the amendments or supplements to the agreement may be executed
implementation of the Rapid Rail Transit System Project by contracting parties to address the circumstances or issues
according to the following schedule: that arise while a contract subsists.
BCDA/PNR...................................... Php300 Million When an agreement is amended, some provisions are
DMCI................................................ Php200 Million changed. Certain parts or provisions may be added, removed,
SRG.................................................. Php100 Million or corrected. These changes may cause effects that are
--------------------------- inconsistent with the wordings of the contract before the
TOTAL............................................. Php600 Million changes were applied. In that case, the old provisions shall be
deemed to have lost their force and effect, while the changes
. . . .  shall be deemed to have taken effect. Provisions that are not
affected by the changes usually remain effective.
2.3  The amounts contributed by BCDA/PNR, DMCI, When a contract is supplemented, new provisions that are
SRG, and others are committed to be converted to equity not inconsistent with the old provisions are added. The nature,
when NORTHRAIL is privatized.96 scope, and terms and conditions are expanded. In that case, the
_______________ old and the new provisions form part of the contract.
A reading of all the documents of agreement shows that
96  Id., at pp. 127-129. they were executed by the same parties. Initially, the Joint
Venture Agreement was executed only by BCDA, PNR, and
 
the foreign corporations. When the Joint Venture Agreement
 
241 was amended to include D.M. Consunji, Inc. and/or its
VOL. 778, JANUARY 241 nominee, D.M. Consunji, Inc. and/or its nominee were deemed
to have been also a party to the original Joint Venture
11, 2016
Agreement executed by BCDA, PNR, and the foreign
Bases Conversion corporations. D.M. Consunji, Inc. and/or its nominee became
Development Authority vs. bound to the terms of both the Joint Venture Agreement and its
DMCI Project Developers, amendment.
Inc. _______________

18 | P a g e
 97  See also BF Corporation v. Court of Appeals, 351 Phil. 507, 523; 288 Agreements. It assumes a prior knowledge of its terms. Thus, it
SCRA 267, 282 (1998) [Per J. Romero, Third Division].
98  Id.
referred to “North Luzon railway network as defined by the
JVA of 10 June 1995[.]”99
  In other words, each document of agreement represents a
  step toward the implementation of the project, such that the
242 three agreements must be read together for a complete
242 SUPREME COURT understanding of the parties’ whole agreement. The Joint
REPORTS Venture Agreement, the amended Joint Venture Agreement,
ANNOTATED and the Memorandum of Agreement should be treated as one
Bases Conversion contract because they all form part of a whole agreement.
Development Authority vs. Hence, the arbitration clause in the Joint Venture
DMCI Project Developers, Agreement should not be interpreted as applicable only to the
Inc. Joint Venture Agreement’s original parties. The succeeding
agree-
Moreover, each document was executed to achieve the _______________
single purpose of implementing the railroad project, such that
documents of agreement succeeding the original Joint Venture 99  Rollo (G.R. No. 173137), p. 128.
Agreement merely amended or supplemented the provisions of
 
the original Joint Venture Agreement.
 
The first agreement — the Joint Venture Agreement — 243
defined the project, its purposes, the parties, the parties’ equity
VOL. 778, JANUARY 243
participation, and their responsibilities. The second agreement
— the amended Joint Venture Agreement — only changed the
11, 2016
equity participation of the parties and included D.M. Consunji, Bases Conversion
Inc. and/or its nominee as party to the railroad project. The Development Authority vs.
third agreement — the Memorandum of Agreement — raised DMCI Project Developers,
the seed capitalization of Northrail from P100 million as Inc.
indicated in the first agreement to P600 million, in order to ments are deemed part of or a continuation of the Joint
accelerate the implementation of the same project defined in Venture Agreement. The arbitration clause should extend to all
the first agreement. the agreements and its parties since it is still consistent with all
The Memorandum of Agreement is an implementation of the terms and conditions of the amendments and supplements.
the Joint Venture Agreement and the amended Joint Venture  
Agreement. It could not exist without referring to the II
provisions of the original and amended Joint Venture  

19 | P a g e
 BCDA and Northrail argued that they did not consent to ANNOTATED
D.M. Consunji, Inc.’s assignment of rights to DMCI-PDI. Bases Conversion
Therefore, DMCI-PDI did not validly become a party to any of Development Authority vs.
the agreement. Section 17.1 of the Joint Venture Agreement DMCI Project Developers,
provides that rights under the agreement may not be assigned,
Inc.
transferred, or conveyed without the consent of the other
The principal parties to the agreement after its amendment
party.100 Thus:
include D.M. Consunji, Inc. and/or its nominee:
 
17.1  No party to this Agreement may assign, transfer
AMENDMENT TO THE JOINT VENTURE
or convey this Agreement, create or incur any
AGREEMENT
encumbrance of its rights or any part of its rights and
obligations hereunder or any shares of stocks of
This Amendment to the Joint Venture Agreement dated
NORTHRAIL to any person, firm or corporation without
10th of June 1995 (the Agreement) made and executed at
the prior written consent of the other parties or except as
_____________, Metro Manila, on this 8th day of
provided in the Articles of Incorporation and By-Laws of
February 1996 by and among:
NORTHRAIL and the Agreement.101
 
BASES CONVERSION DEVELOPMENT
However, Section 17.2 of the Joint Venture Agreement
AUTHORITY. . .
provides that the agreement shall be binding on nominees:
with
 
17.2  This Agreement shall inure to the benefit of and
PHILIPPINE NATIONAL RAILWAYS . . .
be binding upon the parties . . . and their respective
and
successors and permitted assignees and designees or
nominees whenever applicable.102 (Emphasis supplied)
_______________ . . . . 

100  Rollo (G.R. No. 173170), p. 96. D.M. CONSUNJI, INC. and/or its nominee, a domestic
101  Id. corporation duly organized and created pursuant to the
102  Id.
laws of the Republic of the Philippines . . . 103 (Emphasis
  supplied)
   
244 MEMORANDUM OF AGREEMENT
244 SUPREME COURT
REPORTS This Agreement made and executed at Pasig, Metro

20 | P a g e
 Manila, Philippines on this 8[th] day of February 1996  
by and among: [I]n order to formalize the inclusion of [DMCI Project
Developers, Inc.] as a party to the JVA and MOA, DMCI
BASES CONVERSION DEVELOPMENT would like to notify all the parties that it is designating
AUTHORITY . . . PDI as its nominee in both agreements and such other
  agreements that may be signed by the parties in
with furtherance of or in connection with the PROJECT. By
this nomination, all the rights, obligations, warranties
PHILIPPINE NATIONAL RAILWAYS . . . and commitments of DMCI under the JVA and MOA
  shall henceforth be assumed performed and delivered by
and PDI.105 (Emphasis supplied)

D.M. CONSUNJI, INC. and/or its nominee, a domestic

corporation duly organized and created pursuant to Thus, lack of consent to the assignment is irrelevant because
_______________ there was no assignment or transfer of rights to DMCI-PDI.
DMCI-PDI was D.M. Consunji, Inc.’s nominee.
103  Id., at pp. 101-102.
Section 17.2 of the Joint Venture Agreement clearly shows
  an intent to treat assignment and nomination differently.
   
245 17.2  This Agreement shall inure to the benefit of and
VOL. 778, JANUARY 245 be binding upon the parties . . . and their respective
11, 2016 successors and permitted assignees and designees or
Bases Conversion nominees whenever applicable.106 (Emphasis supplied)
Development Authority vs.
DMCI Project Developers,
Assignment involves the transfer of rights after the
Inc.
perfection of a contract. Nomination pertains to the act of
the laws of the Republic of the Philippines . . .
naming the party with whom it has a relationship of trust or
104
 (Emphasis supplied)
agency.
  _______________
Based on DMCI-PDFs letter to BCDA and Northrail dated
April 4, 1997, D.M. Consunji, Inc. designated DMCI-PDI as its 104  Id., at p. 105.
nominee for the agreements it entered into in relation to the 105  Rollo (G.R. No. 173137), pp. 137 and 139.
106  Rollo (G.R. No. 173170), p. 96.
project:

21 | P a g e
   Contrary to BCDA and Northrail’s position, therefore, the
  agreement’s prohibition against transfers, conveyance, and
246 assignment of rights without the consent of the other party does
246 SUPREME COURT not apply to nomination.
REPORTS DMCI-PDI is a party to all the agreements, including the
ANNOTATED arbitration agreement. It may, thus, invoke the arbitration
Bases Conversion clause against all the parties.
Development Authority vs.  
DMCI Project Developers, III
 
Inc.
Northrail, although not a signatory to the contracts, is also
 
bound by the arbitration agreement.
In Philippine Coconut Producers Federation, Inc. (COCO- _______________
FED) v. Republic,107 this court defined “nominee” as follows:
  107  G.R. Nos. 177857-58, January 24, 2012, 663 SCRA 514
In its most common signification, the term [Per J. Velasco, Jr., En Banc].
108  Id., at pp. 580-581.
“nominee’’ refers to one who is designated to act for
another usually in a limited way; a person in whose name  
a stock or bond certificate is registered but who is not the  
actual owner thereof is considered a nominee. Corpus 247
Juris Secundum describes a nominee as one: VOL. 778, JANUARY 247
“. . . designated to act for another as his 11, 2016
representative in a rather limited sense. It has no Bases Conversion
connotation, however, other than that of acting for Development Authority vs.
another, in representation of another or as the DMCI Project Developers,
grantee of another. In its commonly accepted
Inc.
meaning the term connoted the delegation of
 In Lanuza v. BF Corporation,109 we recognized that there
authority to the nominee in a representative or
are instances when non-signatories to a contract may be
nominal capacity only, and does not connote the
compelled to submit to arbitration.110 Among those instances is
transfer or assignment to the nominee of any
when a non-signatory is allowed to invoke rights or obligations
property in, or ownership of, the rights of the
based on the contract.111
person nominating him.”108 (Citations omitted)
The subject of BCDA and D.M. Consunji, Inc.’s agreement
was the construction and operation of a railroad system.

22 | P a g e
Northrail was established pursuant to this agreement and its REPORTS
terms, and for the same purpose, thus: ANNOTATED
  Bases Conversion
ARTICLE III Development Authority vs.
PURPOSE OF NORTHRAIL
DMCI Project Developers,
A. PRIMARY PURPOSE
Inc.
and later accepted the latter’s funds, it proved that it was
3.1.  To construct, operate and manage a railroad system bound by the agreements’ terms. It is also deemed to have
to serve Northern and Central Luzon; and to develop, accepted the term that such funds shall be used for its
construct, manage, own, lease, sublease and operate privatization. It cannot choose to demand the enforcement of
establishments and facilities of all kinds related to the some of its provisions if it is in its favor, and then later by
railroad system[.]112 whim, deny being bound by its terms.
  Hence, when BCDA and Northrail decided not to proceed
Northrail’s capitalization and the composition of its with Northrail’s privatization and the transfer of subscriptions
subscribers are also subject to the provisions of the original and to D.M. Consunji, Inc., any obligation to return its supposed
amended Joint Venture Agreements, and the subsequent subscription attached not only to BCDA as party to the
Memorandum of Agreement. It was pursuant to the terms of agreement but primarily to Northrail as beneficiary that
these agreements that Northrail demanded from D.M. impliedly accepted the terms of the agreement and received
Consunji, Inc. the infusion of its share in subscription. D.M. Consunji, Inc.’s funds.
Therefore, Northrail cannot deny understanding that its There is, therefore, merit to DMCI-PDI’s argument that if
existence, purpose, rights, and obligations are tied to the the Civil Code113 gives third party beneficiaries to a contract the
agreements. When Northrail demanded for the amount of D.M. right to demand the contract’s fulfillment in its favor, the
Consunji, Inc.’s subscription based on the agreements reverse should also be true.114 A beneficiary who communicated
_______________ his or her acceptance to the terms of the agreement before its
revocation may be compelled to abide by the terms of an
109  Supra note 75. agreement, including the arbitration clause. In this case,
110  Id., at p. 302. Northrail is deemed to have communicated its acceptance of
111  Id.
112  Rollo (G.R. No. 173170), p. 87. the terms of the agreements when it accepted D.M. Consunji,
Inc.’s funds.
  _______________
 
248 113  Civil Code, Art. 1311 provides:
ART. 1311. Contracts take effect only between the parties, their assigns
248 SUPREME COURT and heirs, except in case where the rights and obligations arising from the

23 | P a g e
contract are not transmissible by their nature, or by stipulation or by provision WHEREFORE, the petitions are DENIED. The February
of law. The heir is not liable beyond the value of the property he received from
the decedent.
9, 2006 Regional Trial Court Decision and the June 9, 2006
If a contract should contain some stipulation in favor of a third person, he Regional Trial Court Order are AFFIRMED.
may demand its fulfillment provided he communicated his acceptance to the SO ORDERED.
obligor before its revocation. A mere incidental benefit or interest of a person is Carpio (Chairperson), Brion, Del Castillo  and Mendoza,
not sufficient. The contracting parties must have clearly and deliberately
conferred a favor upon a third person.
JJ., concur.
114  Rollo (G.R. No. 173170), pp. 571-574.
Petitions denied, judgment and order affirmed.
  Notes.—Except where a compulsory arbitration is provided
  by statute, the first step toward the settlement of a difference by
249
arbitration is the entry by the parties into a valid agreement to
VOL. 778, JANUARY 249
arbitrate. (Ormoc Sugarcane Planters’ Association, Inc.
11, 2016 [OSPA] vs. Court of Appeals, 596 SCRA 630 [2009])
Bases Conversion
_______________
Development Authority vs.
DMCI Project Developers, 115  Supra note 75 at p. 303, citing Heirs of Augusto Salas, Jr. v. Laperal
Inc. Realty Corporation, 378 Phil. 369, 376; 320 SCRA 610, 616 (1999) [Per J. De
Leon, Jr., Second Division].
Finally, judicial efficiency and economy require a policy to
avoid multiplicity of suits. As we said in Lanuza:  
   
Moreover, in Heirs of Augusto Salas, Jr., this court 250
affirmed its policy against multiplicity of suits and 250 SUPREME COURT
unnecessary delay. This court said that “to split the REPORTS
proceeding into arbitration for some parties and trial for ANNOTATED
other parties would result in multiplicity of suits, Bases Conversion
duplicitous procedure and unnecessary delay.” This court
Development Authority vs.
also intimated that the interest of justice would be best
observed if it adjudicated rights in a single proceeding. DMCI Project Developers,
While the facts of that case prompted this court to direct Inc.
the trial court to proceed to determine the issues of that The rule allowing consolidation is designed to avoid
case, it did not prohibit courts from allowing the case to multiplicity of suits, to guard against oppression or abuse, to
proceed to arbitration, when circumstances warrant.115 prevent delays, to clear congested dockets, and to simplify the
  work of the trial court. (Domdom vs. Third and Fifth Divisions
of the Sandiganbayan, 613 SCRA 528 [2010])
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