In 1986, Team Holdings Limited (THL) bought Signetics.

THL later changed its

name to Technology Electronics Assembly and Management Pacific Corp. (TEAM).

In March 1987, Fruehauf filed an unlawful detainer case against TEAM. In an effort
to amicably settle the dispute, both parties executed a Memorandum of
SECOND DIVISION Agreement (MOA)  on June 9, 1988.3 Under the MOA, TEAM undertook to pay
Fruehauf 14.7 million pesos as unpaid rent (for the period of December 1986 to
June 1988).
November 23, 2016
They also entered a 15-year lease contract 4 (expiring on June 9, 2003) that was
G.R. No. 204197 renewable for another 25 years upon mutual agreement. The contract included an
arbitration agreement:5
FRUEHAUF ELECTRONICS PHILIPPINES CORPORATION, Petitioner,
vs. 17. ARBITRATION
TECHNOLOGY ELECTRONICS ASSEMBLY AND MANAGEMENT PACIFIC
CORPORATION, Respondent.
In the event of any dispute o~ disagreement between the parties
hereto involving the interpretation or implementation of any
DECISION provision of this Contract of Lease, the dispute or disagreement
shall be referred to arbitration by a three (3) member arbitration
BRION, J.: committee, one member to be appointed by the LESSOR, another
member to be appointed by the LESSEE, and the third member to
The fundamental importance of this case lies in its delineation of the extent of be appointed by these two members. The arbitration shall be
permissible judicial review over arbitral awards. We make this determination from conducted in accordance with the Arbitration Law (R.A. No. 876).
the prism of our existing laws on the subject and the prevailing state policy to uphold
the autonomy of arbitration proceedings. The contract also authorized TEAM to sublease the property. TEAM subleased the
property to Capitol Publishing House (Capitol) on December 2, 1996 after notifying
This is a petition for review on certiorari  of the Court of Appeals' (CA)  decision Fruehauf.
in CA-G.R. SP. No. 112384 that reversed an arbitral award and dismissed the
arbitral complaint for: lack of merit.1 The CA breached the bounds of its jurisdiction On May 2003, TEAM informed Fruehauf that it would not be renewing the lease. 6
when it reviewed the substance of the arbitral award outside of the permitted
grounds under the Arbitration Law.2 On May 31, 2003, the sublease between TEAM and Capitol expired. However,
Capitol only vacated the premises on March 5, 2005. In the meantime, the master
Brief Factual Antecedents lease between TEAM and Fruehauf expired on June 9, 2003.

In 1978, Fruehauf Electronics Philippines Corp. (Fruehauf) leased several parcels of On March 9, 2004, Fruehauf instituted SPProc. No.11449 before the Regional Trial
land in Pasig City to Signetics Filipinas Corporation (Signetics) for a period of 25 Court (RTC) for "Submission of an Existing Controversy for Arbitration." 7 It alleged:
years (until May 28, 2003). Signetics constructed a semiconductor assembly factory (1) that when the lease expired, the property suffered from damage that required
on the land on its own account. extensive renovation; (2) that when the lease expired, TEAM failed to turn over the
premises and pay rent; and (3) that TEAM did not restore the property to its original
In 1983, Signetics ceased its operations after the Board of condition as required in the contract. Accordingly, the parties are obliged to submit
Investments (BOI)  withdrew the investment incentives granted to electronic the dispute to arbitration pursuant to the stipulation in the lease contract.
industries based in Metro Manila.
The RTC granted the petition and directed the parties to comply with the arbitration The tribunal found that Fruehauf made several demands for the return of the leased
clause of the contract. 8 premises before and after: the expiration of the lease14 and that there was no
express or implied renewal of the lease after June 9, 2003. It recognized that the
Pursuant to the arbitration agreement, the dispute was referred to a three-member sub-lessor, Capitol, remained in possession of the lease. However, relying on the
arbitration tribunal. TEAM and Fruehauf appointed one member each while the commentaries of Arturo Tolentino on the subject, the tribunal held that it was not
Chairman was appointed by the first two members. The tribunal was formally enough for lessor to simply vacate the leased property; it is necessary that he place
constituted ion September 27, 2004 with retired CA Justice Hector L. Hofileña, as the thing at the disposal of the lessor, so that the latter can receive it without any
chairman, retired CA Justice Mariano M. Umali and Atty. Maria Clara B. Tankeh- obstacle.  15
Asuncion as members.9
For failing to return the property' to Fruehauf, TEAM remained liable for the payment
The parties initially submitted the following issues to the tribunal for resolution:  10 of rents. However, if it can prove that Fruehauf received rentals from Capitol, TEAM
can deduct these from its liability. 16 Nevertheless, the award of rent and damages
was without prejudice to TEAM's right to seek redress from its sub-lessee, Capitol. 17
1. Whether or not TEAM had complied with its obligation to return
the leased premises to Fruehauf after the expiration of the lease on
June 9, 2003. With respect to the improvements on the land, the tribunal viewed the situation from
two perspectives:
1.1. What properties should be returned and in what condition?
First,  while the Contract admitted that Fruehauf was only leasing the land and not
the buildings and improvements thereon, it nevertheless obliged TEAM to deliver the
2. Is TEAM liable for payment of rentals after June 9, 2003?
buildings, installations and other improvements existing at the inception of the lease
uponits expiration. 18
2.1. If so, how much and for what period?
The other view,  is that the MOA and the Contract recognized that TEAM owned the
3. Is TEAM liable for payment of real estate taxes, insurance, and existing improvements on the property and considered them as separate from the
other expenses on the leased premises after June 9, 2003? land for the initial 15-year term of the lease. 19 However, Fruehauf had a vested right
to become the owner of these improvements at the end of the 15-year term.
4. Who is liable for payment of damages and how much? Consequently, the contract specifically obligated TEAM not to remove, transfer,
destroy, or in any way alienate or encumber these improvements without prior
5. Who is liable for payment of attorney's fees and how much? written consent from Fruehauf. 20

Subsequently, the following issues were also submitted for resolution after TEAM Either way, TEAM had the obligation to deliver the existing improvements on the
proposed 11 their inclusion: land upon the expiration of the lease. However, there was no obligation under the
lease to return the premises as a "complete, rentable, and fully facilitized electronics
1. Who is liable for the expenses of arbitration, including arbitration fees? plant."21Thus, TEAM's obligation was to vacate the leased property and deliver to
Fruehauf the buildings, improvements, and installations (including the machineries
and equipment existing thereon) in the same condition as when the lease
2. Whether or not TEAM has the obligation to return the premises to Fruehauf as a
commenced, save for what had been lost or impaired by 1the lapse of time, ordinary
"complete, rentable, and fully facilitized electronic plant."
wear and tear, or any other inevitable cause. 22

The Arbitral Award12

The tribunal found TEAM negligent in the maintenance of the premises,
machineries, and equipment it was obliged to deliver to Fruehauf. 23 For this failure
On December 3, 2008, the arbitral tribunal awarded Fruehauf: (1) 8.2 million pesos to conduct the necessary repairs or to notify Fruehauf of their necessity, the tribunal
as (the balance of) unpaid rent from June 9, 2003 until March 5, 2005; and (2) 46.8 held TEAM accountable for damages representing the value of the repairs
million pesos as damages. 13
necessary to restore the premises to a condition "suitable for the use to which it has to instances when it was filed out of time or when the appellant fails to pay the
been devoted'  less their depreciation expense.24 docket fees within the reglementary period.43

On the other issues, the tribunal held that TEAM had no obligation to pay real estate TEAM further maintained that the RTC gravely abused its discretion by confirming
taxes, insurance, and other expenses on the leased premises considering these the Arbitral Tribunal's award when it evidently had legal and factual errors,
obligations can only arise from a renewal of the contract.25 Further, the tribunal miscalculations, and ambiguities. 44
refused: to award attorney's fees, finding no evidence that either party acted in bad
faith. 26 For the same reason, it held both parties equally liable for the expenses of The petition was docketed as CA-G.R. SP. No.112384.
litigation, including the arbitrators' fees. 27
The CA decision  45
TEAM moved for reconsideration28 which the tribunal denied. 29 Thus, TEAM
petitioned the RTC to partially vacate or modify the arbitral award. 30 It argued that The CA initially dismissed the petition. 46 As the RTC did, it cited Section 29 of the
the tribunal failed to properly appreciate the facts and the terms of the lease Arbitration Law:
contract.
Section 29. Appeals. - An appeal may be taken from an order
The RTC Ruling made in a proceeding under this Act, or from a judgment entered
upon an award through certiorari proceedings, but such appeals
On April 29, 2009, the RTC31 found insufficient legal grounds  under Sections 24 shall be limited to questions of law. The proceedings upon such
and 25 of the Arbitration Law to modify or vacate the award.32 It denied the petition appeal, including the judgment thereon shall be governed by the
and CONFIRMED, the arbitral award. 33 TEAM filed a Notice of Appeal. Rules of Court in so far as they are applicable.

On July 3, 2009,34 the RTC refused to give due course to the Notice of Appeal It concluded that the appeal contemplated under the law is an appeal
because according to Section 29 35 of the Arbitration Law, an ordinary appeal under by certiorari  limited only to questions of law.47
Rule 41 is not the proper mode of appeal against an order confirming an arbitral
award. 36 The CA continued that TEAM failed to substantiate its claim as to the "evident
miscalculation of figures." It further held that disagreement with the arbitrators'
TEAM moved for reconsideration but the R TC denied the motion on November 15, factual determinations and legal conclusions does not empower courts to amend or
2009.37 Thus, TEAM filed a petition for certiorari38before the CA arguing that the RTC overrule arbitral judgments.48
gravely abused its discretion in: (1) denying due course to its notice of appeal; and
(2) denying the motion to partially vacate and/or modify the arbitral award.39 However, the CA amended its decision on October 25, 2012 upon a motion for
reconsideration.49
TEAM argued that an ordinary appeal under Rule 41 was the proper remedy against
the RTC's order confirming, modifying, correcting, or vacating an arbitral award. 40 It The CA held that Section 29 of the Arbitration Law does not preclude the aggrieved
argued that Rule 42 was not available because the order denying its motion to party from resorting to other judicial remedies.50 Citing Asset Privatization
vacate was not rendered in the exercise of the RTC's appellate jurisdiction. Further, Trust v. Court of Appeals,51the CA held that the aggrieved party may resort to a
Rule 43 only applies to decisions of quasi-judicial bodies. Finally, an appeal under petition for certiorari  when the R TC to which the award was submitted for
Rule 45 to the Supreme Court would preclude it from raising questions of fact or confirmation Has acted without jurisdiction, or with grave abuse of discretion and
mixed questions of fact and law.41 there is no appeal, nor any plain, speedy remedy in the course of law.52

TEAM maintained that it was appealing the RTC's order denying its petition to The CA further held that the mere filing of a notice of appeal is sufficient as the
partially vacate/modify the award, not the arbitral award itself. 42 Citing Rule 41, issues raised in the appeal were not purely questions of law. 53 It further cited
Section 13 of the Rules of Court, the RTC's authority to dismiss the appeal is limited Section 46 of the Alternative Dispute Resolution
(ADR)  Law:54 Fruehauf argues that courts do riot have the power to substitute their judgment for
that of the arbitrators.61 It also insists that an ordinary appeal is not the proper
SEC. 46. Appeal from Court Decisions on Arbitral Awards. - A remedy against an RTC's order confirming, vacating, correcting or modifying an
decision of the regional trial court confirming, vacating, setting arbitral &ward but a petition for review on certiorari  under Rule 45. 62
aside, modifying or correcting an arbitral award may be appealed to
the Court of Appeals in accordance with the rules of procedure to be Furthermore, TEAM's petition before the CA went beyond the permissible scope
promulgated by the Supreme Court. of certiorari  - the existence of grave abuse of discretion or errors jurisdiction - by
including questions of fact and law that challenged the merits of the arbitral award.63
The losing party who appeals from the judgment of the court
confirming an arbitral award shall be required by the appellant court However, Fruehauf inconsistently argues that the remedies against an arbitral
to post counterbond executed in favor of the prevailing party equal award are (1) a petition to vacate the award, (2) a petition for review under Rule 43
to the amount of the award in accordance with the rules to be raising questions of fact, of law, or mixed questions of fact and law, or (3) a petition
promulgated by the Supreme Court. 55 for certiorari  under Rule 65.64 Fruehauf cites an article from the Philippine Dispute
Resolution Center65 and Insular Savings Bank v. Far East Bank and Trust,  Co.66
However, the CA made no further reference to A.M. No. 07-11-08-SC, the Special
Rules of Court on Alternative Dispute Resolution (Special ADR Rules)  which govern TEAM counters that the CA correctly resolved the substantive issues of the case
the appeal procedure. and that the arbitral tribunal's errors were sufficient grounds to vacate or modify the
award.67 It insists that the RTC's misappreciation of the facts from a patently
The CA further revisited the merits of the arbitral award and found several errors in erroneous award warranted an appeal under Rule 41.68
law and in fact. It held: (1) that TEAM was not obliged to pay rent because it was
Capitol, not TEAM, that remained in possession of the property upon the expiration I
of the lease;56 and (2) that Fruehauf was not entitled to compensation for the repair$
on the buildings because it did not become the owner of the building until after the TEAM reiterates that it "disagreed with the arbitral award mainly on questions
expiration of the lease. 57 of fact and not only on questions of law," specifically, "on factual matters
relating to specific provisions in the contract on ownership of structures and
Also citing Tolentino, the CA opined: (1) that a statement by the lessee that he has improvements thereon, and the improper award of rentals and
abandoned the premises should, as a general rule, constitute sufficient compliance penalties."69Even assuming that it availed of the wrong mode of appeal, TEAM
with his duty to return the leased premises; and (2) that any new arrangement made posits that its appeal should still have been given due course in the interest of
by the lessor with another person, such as the sub-lessor, operates as a resumption substantial justice. 70
of his possession.58
TEAM assails the inconsistencies of Fruehauf’s position as to the available legal
On the issue of damages, the CA held that TEAM can never be liable for the remedies against an arbitral award.71 However, it maintains that Section 29 of the
damages for the repairs of the improvements on the premises because they were Arbitration Law does not foreclose other legal remedies (aside from an appeal
owned by TEAM itself (through its predecessor, Signetics) when the lease by certiorari) against the RTC's order confirming or vacating an arbitral award
commenced. 59 pursuant to Insular Savings Bank WINS) Japan Co., Ltd.  72

The CA REVERSED AND SET ASIDE the arbitral award and DISMISSED the The Issues
arbitral complaint for lack of merit.60
This case raises the following questions:
This CA action prompted Fruehauf to file the present petition for review.
1. What are the remedies or the modes of appeal against an unfavorable arbitral
The Arguments award?
2. What are the available remedies from an RTC decision confirming, vacating, flexibility to arbitration ; proceedings as compared to court I litigation governed by
modifying, or correcting an arbitral award? the Rules of Court.

3. Did the arbitral tribunal err in awarding Fruehauf damages for the repairs of the The parties likewise appoint the arbitrators based on agreement. There are no
building and rental fees from the expiration of the lease? other legal requirements as to the competence or technical qualifications of an
arbitrator. Their only legal qualifications are: (1) being of legal age; (2) full-enjoyment
Our Ruling of their civil rights; and (3) the ability to read and write.77 The parties can tailor-fit
the tribunal's composition to the nature of their dispute. Thus, a specialized
dispute can  be resolved by experts on the subject.
The petition is meritorious.

However, because arbitrators do not necessarily have a background in law, they

Arbitration is an alternative mode of dispute resolution outside of the regular court
cannot be expected to have the legal mastery of a magistrate. There is a greater risk
system. Although adversarial in character, arbitration is technically not litigation. It is
that an arbitrator might misapply the law or misappreciate the facts en route to an
a voluntary process in which one or more arbitrators - appointed according to the
erroneous decision.
parties' agreement or according to the applicable rules of the Alternative Dispute
Resolution (ADR) Law - resolve a dispute by rendering an award. 73 While arbitration
carries many advantages over court litigation, in :many ways these advantages also I
translate into its disadvantages.
This risk of error is compounded by the absence of an effective appeal
Resort to arbitration is voluntary. It requires consent from both parties in the form mechanism. The errors of an; arbitral tribunal are not subject to correction by the
of an arbitration clause that pre-existed the dispute  or a subsequent submission judiciary. As a private alternative to court proceedings, arbitration is meant to be
agreement. This written arbitration agreement is an independent and legally an end, not the beginning,  of litigation. 78Thus, the arbitral award is final and
enforceable contract that must be complied with in good faith. By entering into an binding on the parties by reason of their contract - the arbitration agreement. 79
arbitration agreement, the parties agree to submit their dispute to an arbitrator
(ortribunal) of their own choosing and be bound by the latter's resolution. An Arbitral Tribunal does not exercise
quasi-judicial powers
However, this contractual and consensual character means that the parties cannot
implead a third-party in the proceedings even if the latter's participation is necessary Quasi-judicial or administrative adjudicatory power is the power: (1) to hear and
for a complete settlement of the dispute. The determine questions of fact to which legislative policy is to apply, and (2) to decide
in accordance with the standards laid down by the law itself in enforcing and
tribunal does not have the power to compel a person to participate in the arbitration administering the same law.80Quasi-judicial power is only exercised by
proceedings without that person's consent. It also has no authority to decide on administrative agencies - legal organs of the government.
issues that the parties did not submit (or agree to submit) for its resolution.
Quasi-judicial bodies can only exercise such powers and jurisdiction as are
As a purely private mode of dispute resolution, arbitration proceedings, including expressly or by necessary implication conferred upon them by their enabling
the records, the evidence, and the arbitral award, are confidential 74 unlike court statutes.81 Like courts, a quasi-judicial body's jurisdiction over a subject matter is
proceedings which are generally public. This allows the parties to avoid negative conferred by law and exists independently from the will of the parties. As
publicity and protect their privacy. Our law highly regards the confidentiality of government organs necessary for an effective legal system, a quasi-judicial
arbitration proceedings that it devised a judicial remedy to prevent or prohibit the tribunal's legal existence, continues beyond the resolution of a specific dispute. In
unauthorized disclosure of confidential information obtained therefrom. 75 other words, quasi-judicial bodies are creatures of law.

The contractual nature of arbitral proceedings affords the parties I As a contractual and consensual: body, the arbitral tribunal does not have any
substantial autonomy over the proceedings. The parties are free to agree on the inherent powers over the parties. It has no power to issue coercive writs or
procedure to be observed  during the proceedings. 76 This lends considerable compulsory processes. Thus, there is a need to resort to the regular courts for
interim measures of protection 82 and for the recognition or enforcement of the Citing Insular Savings Bank v. Far East Bank and Trust Co.,  94 the ABS-CBN
arbitral award. 83 Case  pronounced that the losing party in an arbitration proceeding may avail of
three alternative remedies: (1) a petition to vacate the arbitral award before the RTC;
The arbitral tribunal acquires jurisdiction over the parties and the subject matter (2) a petition for review with the CA under Rule 43 of the Rules of Court raising
through stipulation. Upoh the rendition of the final award, the tribunal questions of fact, of law, or of both; and (3) a I petition for certiorari  under Rule 65
becomes functus officio  and - save for a few exceptions84 - ceases to have any should the arbitrator act beyond its jurisdiction or with grave abuse of discretion. 95
further jurisdiction over the dispute.85 The tribunal's powers (or in the case of ad
hoc  tribunals, their very existence) stem from the obligatory force of the arbitration At first glance, the logic of this position appears to be sound. However, a critical
agreement and its ancillary stipulations.86 Simply put, an arbitral tribunal is examination of the supporting authorities would show that the conclusion is wrong.
a creature of contract.
First, the pronouncements made in the ABS-CBN Case and in the Insular Savings
Deconstructing the view that arbitral Bank Case (which served as the authority for the ABS-CBN Case) were both obiter
tribunals are quasi-judicial agencies dicta.

We are aware of the contrary view expressed by the late Chief Justice Renato In the ABS-CBN Case,  we sustained the CA's dismissal of the petition because it
Corona in ABS-CBN Broadcasting Corporation v. World Interactive Network was filed as an "alternative petition for review under Rule 43 or petition
Systems (WINS)Japan Co., Ltd.  87 for  certiorari under Rule 65."  96 We held that it was an inappropriate  mode of appeal
because, a petition for review and a petition for certiorari  are mutually exclusive and
The ABS-CBN Case opined that a voluntary arbitrator is a "quasi-judicial not alternative or successive.
instrumentality" of the government 88 pursuant to Luzon Development Bank v.
Association of Luzon Development Bank Employees,  89 Sevilla Trading Company v. In the Insular Savings Bank case,  the lis mota of the case was the RTC's
Sernana,  90 Manila Midtown Hotel v. Borromeo,  91 and Nippon Paint Employees jurisdiction over an appeal from an arbitral award. The parties to the arbitration
Union-Olalia v. Court of Appeals.  92 Hence, voluntary arbitrators are included in the agreement agreed that the rules of the arbitration provider97 - which stipulated that
Rule 43 jurisdiction of the Court of Appeals: the R TC shall have jurisdiction to review arbitral awards - will govern the
proceedings.98 The Court ultimately held that the RTC does not have jurisdiction to
SECTION 1. Scope.-This  Rule shall apply to appeals from review the merits of the award because legal jurisdiction is conferred by law, not by
judgments or final orders of the Court of Tax Appeals and from mere agreement of the parties.
awards, judgments, final orders or resolutions of or authorized by
any quasi-judicial agency in the exercise of its quasi-judicial In both cases, the pronouncements as to the remedies against an arbitral award
functions. Among these agencies are the Civil Service Commission, were unnecessary for their resolution. Therefore, these are obiter dicta  - judicial
Central: Board of Assessment Appeals, Securities and Exchange comments made, in passing which are not essential to the resolution of the case and
Commission, Office of the President, Land Registration Authority, cannot therefore serve as precedents.99
Social Security Commission, Civil Aeronautics Board, Bureau of
Patents, Trademarks and Technology Transfer, National Second, even if we disregard the obiter dicta character of both pronouncements, a
Electrification Administration, Energy Regulatory Board, National more careful scrutiny deconstructs their legal authority.
Telecommunications Commission, Department of Agrarian Reform
under Republic Act No. 6657, Government Service Insurance The ABS-CBN Case committed the classic fallacy of equivocation.  It equated the
System, Employees Compensation Commission, Agricultural term "voluntary arbitrator" used in Rule 43, Section 1 and in the cases of Luzon
Inventions Board, Insurance Commission, Philippine Atomic Energy Development Bank v. Association of Luzon Development Bank Employees, Sevilla
Commission, Board of Investments, Construction Industry Trading Company v. Semana, Manila Midtown Hotel v. Borromeo,  and Nippon Paint
Arbitration Commission, and voluntary arbitrators authorized by Employees Union-Olalia v. Court of Appeals  with the term "arbitrator/arbitration
law.93 (emphasis supplied) tribunal."
The first rule of legal construction, verba legis, requires that, wherever possible, the Department of Trade and Industry. 108 Its jurisdiction is likewise conferred by
words used in the Constitution or in the statute must be given their ordinary statute. 109 By contrast, the subject-matter jurisdiction of commercial arbitrators is
meaning except where technical terms are employed.  100Notably, all of the cases stipulated by the parties.
cited in the ABS-CBN Case  involved labor disputes.
These account for the legal differences between "ordinary" or "commercial"
The term "Voluntary Arbitrator" does not refer to an ordinary "arbitrator" who arbitrators under the Arbitration Law and the ADR Law, and "voluntary arbitrators"
voluntarily agreed to: resolve a dispute. It is a technical term with a specific definition under the Labor Code. The two terms are not  synonymous with each other.
under the Labor Code: Interchanging them with one another results in the logical fallacy of equivocation -
using the same word with different meanings.
Art. 212 Definitions. xxx
Further,  Rule 43, Section 1 enumerates quasi-judicial tribunals whose decisions are
14. "Voluntary Arbitrator" means any' person accredited by the appealable to the CA instead of the RTC. But where legislation provides for an
Board as such or any person named or designated in the Collective appeal from decisions of certain administrative bodies to the CA, it means that such
Bargaining Agreement by the parties to act as their Voluntary bodies are co-equal with the RTC in terms of rank and stature, logically placing them
Arbitrator, or one chosen with or without the assistance of the beyond the control of the latter.  110
National Conciliation and Mediation Board, pursuant to a selection
procedure agreed upon in the Collective Bargaining Agreement, or However, arbitral tribunals and the RTC are not co-equal bodies because the RTC
any official that may be authorized by the Secretary of Labor and is authorized to confirm or to vacate (but not reverse) arbitral awards. 111 If we were
Employment to act as Voluntary Arbitrator upon the written request to deem arbitrators as included in the scope of Rule 43, we would effectively place it'
and agreement of the parties to a labor dispute. 101 on equal footing with the RTC and remove arbitral awards from the scope of RTC
review.
Voluntary Arbitrators resolve labor disputes and grievances arising from the
interpretation of Collective Bargaining Agreements. 102 These disputes were All things considered, there is no legal authority supporting the position that
specifically excluded: from the coverage of both the Arbitration Law103 and the ADR commercial arbitrators are quasi-judicial bodies.
Law. 104
What are remedies from a final domestic
Unlike purely commercial relationships, the relationship between capital and labor arbitral award?
are heavily impressed with public interest.  105Because of this, Voluntary Arbitrators
authorized to resolve labor disputes have been clothed with quasi-judicial authority. The right to an appeal is neither' a natural right nor an indispensable component of
due process; it is a mere statutory privilege that cannot be invoked in the absence of
On the other hand, commercial relationships covered by our commercial arbitration an enabling statute. Neither the Arbitration Law nor the ADR Law allows a losing
laws are purely private and contractual in nature. Unlike labor relationships, they do party to appeal from the arbitral award. The statutory absence of an appeal
not possess the same compelling state interest that would justify state interference mechanism reflects the State's policy of upholding the autonomy of arbitration
into the autonomy of contracts. Hence, commercial arbitration is a purely private proceedings and their corresponding arbitral awards.
system of adjudication facilitated by private citizens instead of government
instrumentalities wielding quasi-judicial powers. This Court recognized this when we enacted the Special Rules of Court on
Alternative Dispute Resolution  in 2009: 112
Moreover,  judicial or quasi-judicial jurisdiction cannot be conferred upon a tribunal
by the parties alone. The Labor Code itself confers subject-matter jurisdiction to Rule 2.1. General policies.  -- It is the policy of the State to actively
Voluntary Arbitrators. 106 promote the use of various modes of ADR and to respect party
autonomy or the freedom of the parties to make their own
Notably, the other arbitration body listed in Rule 43 - the Construction Industry arrangements in the resolution of disputes with the greatest
Arbitration Commission (CIAC)  - is also a government agency107 attached to the cooperation of and the least intervention from the courts. xxx
 The Court shall exercise the power of judicial review as provided by If the Regional Trial Court is asked to set aside an arbitral award in
these Special ADR Rules. Courts shall intervene only in the a domestic or international arbitration on any ground other than
cases allowed by law or these Special ADR Rules. 113 those provided in the Special ADR Rules, the court shall
entertain such ground for the setting aside or non-recognition of the
xxxx arbitral award only if the same amounts to a violation of public
policy.
Rule 19.7. No appeal or  certiorari on the merits of an arbitral
award - An agreement to refer a dispute to arbitration shall mean The court shall not set aside or vacate the award of the arbitral
that the arbitral award shall be final and binding. Consequently, a tribunal merely on the ground that the arbitral tribunal
party to an arbitration is precluded from filing an appeal or a committed errors of fact, or of law, or of fact and law, as the
petition for certiorari questioning the merits of an arbitral court cannot substitute its judgment for that of the arbitral
award. 114 (emphasis supplied) tribunal.116

More than a decade earlier in Asset  Privatization Trust v. Court of Appeals, we The grounds for vacating a domestic arbitral award under Section 24 of the
likewise defended the autonomy of arbitral awards through our policy of non- Arbitration Law contemplate the following scenarios:
intervention on their substantive merits:
(a) when the award is procured by corruption, fraud, or other undue means; or
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 (b) there was evident partiality or corruption in the arbitrators or any of them; or
are without power to amend or overrule merely because of
disagreement with matters of law or facts determined by the (c) the arbitrators were guilty of misconduct that materially prejudiced the rights of
arbitrators. They will not review the findings of law and fact any party; or
contained in an award, and will not undertake to substitute their
judgment for that of the arbitrators, since any other rule would (d) the arbitrators exceeded their powers, or so imperfectly executed them, that a
make an award the commencement, not the end, of litigation. Errors mutual, final and definite award upon the subject matter submitted to them was not
of law and fact, or an erroneous decision of matters submitted to the made. 117
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. 115 The award may also be vacated if an arbitrator who was disqualified to act willfully
refrained from disclosing his disqualification to the parties. 118 Notably, none of these
grounds pertain to the correctness of the award but relate to the misconduct of
Nonetheless, an arbitral award is not absolute. Rule 19.10 of the Special ADR Rules arbitrators.
- by referring to Section 24 of the Arbitration Law and Article 34 of the 1985 United
Nations Commission on International Trade Law (UNCITRAL) Model Law -
recognizes the very limited exceptions to the autonomy of arbitral awards: The RTC may also set aside the arbitral award based on Article 34 of the
UNCITRAL Model Law. These grounds are reproduced in Chapter 4 of
the Implementing Rules and Regulations (IRR) of the 2004 ADR Act:
Rule 19.10. Rule on judicial review on arbitration in the
Philippines.  - As a general rule, the court can only vacate or set
aside the decision of an arbitral tribunal upon a clear showing' that (i) the party making the application furnishes proof that:
the award suffers from any of the infirmities or grounds for vacating
an arbitral award under Section 24 of Republic Act No. 876 or (aa) a party to the arbitration agreement was under some
under Rule 34 of the Model Law in a domestic arbitration, or for incapacity; or the said agreement is not valid under the law to which
setting aside an award in an international arbitration under Article 34 the parties have subjected it or, failing any indication thereon, under
of the Model Law, or for such other grounds provided under these the law of the Philippines; or
Special Rules.
 (bb) the party making the application was not given proper notice of domestic arbitral award shall be disregarded by the regional
the appointment of an arbitrator or of the arbitral proceedings or was trial court. 121
otherwise unable to present his case; or
Consequently, the winning party can generally expect the enforcement of the award.
(cc) the award deals with a dispute not contemplated by or not This is a stricter rule that makes Article 2044122 of the Civil Code regarding the
falling within the terms of the submission to arbitration, or contains finality of an arbitral award redundant.
decisions on matters beyond the scope of the submission to
arbitration, provided that, if the decisions on matters submitted to As established earlier, an arbitral: award is not appealable via Rule 43 because: (1)
arbitration can be separated from those not so submitted, only the there is no statutory basis for an appeal from the final award of arbitrators; (2)
part of the award which contains decisions on matters not submitted arbitrators are not quasi-judicial bodies; and (3) the Special ADR Rules specifically
to arbitration may be set aside; or prohibit the filing of an appeal to question the merits of an arbitral award.

(dd) the composition of the arbitral tribunal or the arbitral procedure The Special ADR Rules allow, the RTC to correct or modify an arbitral award
was not in accordance with the agreement of the parties, unless pursuant to Section 25 of the Arbitration Law. However, this authority cannot be
such agreement was in conflict with a provision of ADR Act from interpreted as jurisdiction to review the merits of the award. The RTC can modify or
which the parties cannot derogate, or, failing such agreement, was correct the award only in the following cases:
not in accordance with ADR Act; or
a. Where there was an evident miscalculation of figures or an evident mistake in the
(ii) The Court finds that: description of any person, thing or property referred to in the award;

(aa) the subject-matter of the dispute is not capable of settlement b. Where the arbitrators have awarded upon a matter not submitted to them, not
by arbitration under the law of the Philippines; or affecting the merits of the decision upon the matter submitted;

(bb) the award is in conflict with the public policy  of the c. Where the arbitrators have omitted to resolve an issue submitted to them for
Philippines. 119 resolution; or

Chapter 4 of the IRR of the, ADR Act applies particularly to International Commercial d. Where the award is imperfect in a matter of form not affecting the merits of the
Arbitration. However, the abovementioned grounds taken from the UNCITRAL, controversy, and if it had been a commissioner's report, the defect could have been
Model Law are specifically made applicable to domestic arbitration by the Special amended or disregarded by the Court. 123
ADR Rules. 120
A losing party is likewise precluded from resorting to certiorari  under Rule 65 of the
Notably, these grounds are not concerned with the correctness of the award; they go Rules of Court. 124 Certiorari is a prerogative writ designed to correct errors of
into the validity of the arbitration agreement or the regularity of the arbitration jurisdiction committed by a judicial or quasi-judicial body. 125 Because an arbitral
proceedings. tribunal is not a government organ  exercising judicial or quasi-judicial powers, it is
removed from the ambit of Rule 65.
These grounds for vacating an arbitral award are exclusive. Under the ADR Law,
courts are obliged to disregard any other grounds invoked to set aside an award: Not even the Court's expanded certiorari jurisdiction under the Constitution 126 can
justify judicial intrusion into the merits of arbitral awards. While the Constitution
SEC. 41. Vacation Award.  - A party to a domestic arbitration may expanded the scope of certiorari  proceedings, this power remains limited to a
question the arbitral award with the appropriate regional trial court in review' of the acts of "any branch or instrumentality of the Government." As a purely
accordance with the rules of procedure to be promulgated by the private creature of contract, an arbitral tribunal remains outside the scope
Supreme Court only on those grounds enumerated in Section 25 of of certiorari.
Republic Act No. 876. Any other ground raised against a
Lastly, the Special ADR Rules are a self-contained body of rules. The parties cannot The Arbitration Law did not specify which Court had jurisdiction to entertain the
invoke remedies and other provisions from the Rules of Court unless they were appeal but left the matter to be governed by the Rules of Court. As the appeal was
incorporated in the Special ADR Rules: limited to questions of law and was described as "certiorari proceedings," the mode
of appeal can be interpreted as an Appeal By Certiorari to this Court under Rule 45.
Rule 22.1. Applicability of Rules of Court.  - The provisions of the
Rules of Court that are applicable to the proceedings enumerated When the ADR Law was enacted in 2004, it specified that the appeal shall be
in Rule 1.1 of these Special ADR Rules have either been included made to the CA in accordance with the rules of procedure to be promulgated by this
and incorporated in these Special ADR Rules or specifically Court. 131 The Special ADR Rules provided that the mode of appeal from the RTC's
referred to herein. order confirming, vacating, or correcting/modifying a domestic arbitral award was
through a petition for review with the CA. 132 However, the Special ADR Rules only
In Connection with the above proceedings, the Rules of Evidence took effect on October 30, 2009.
shall be liberally construed to achieve the objectives of the Special
ADR Rules. 127 In the present case, the R TC disallowed TEAM' s notice of appeal from the former's
decision confirming the arbitral award on July 3, 2009. TEAM moved for
Contrary to TEAM's position, the Special ADR Rules actually forecloses against reconsideration which was likewise denied on November 15, 2009. In the interim,
other remedies outside of itself. Thus, a losing party cannot assail an arbitral award the Special ADR Rules became effective. Notably, the Special ADR Rules apply
through; a petition for review under Rule 43 or a petition for certiorari under Rule 65 retroactively in light of its procedural character. 133 TEAM filed its petition
because these remedies are not specifically permitted in the Special ADR Rules. for certiorari  soon after.

In sum, the only remedy against; a final domestic arbitral award is to file petition to Nevertheless, whether we apply, Section 29 of the Arbitration Law, Section 46 of the
vacate or to modify/correct the award not later than thirty (30) days from the receipt ADR Law, or Rule 19.12 of the Special ADR Rules, there is no legal basis that an
of the award. 128 Unless a ground to vacate has been established, the RTC must ordinary appeal (via notice of appeal) is the correct remedy from an order
confirm the arbitral award as a matter of course. confirming, vacating, or correcting an arbitral award. Thus, there is no merit in the
CA's ruling that the RTC gravely abused its discretion when it refused to give due
course to the notice of appeal.
The remedies against an order
Confirming, vacating, correcting, or
modifying an arbitral award The correctness or incorrectness
of the arbitral award
Once the RTC orders the confirmation, vacation, or correction/modification of a
domestic arbitral award, the aggrieved party may move for reconsideration within a We have deliberately refrained from passing upon the merits of the arbitral award -
non-extendible period of fifteen (15) days from receipt of the order. 129 The losing not because the award was erroneous - but because it would be improper. None of
party may also opt to appeal from the RTC's ruling instead. the grounds to vacate an arbitral award are present in this case and as already
established, the merits  of the award cannot be reviewed by the courts.
Under the Arbitration Law, the mode of appeal was via petition for review
on certiorari: Our refusal to review the award is not a simple matter of putting procedural
technicalities over the substantive merits of a case; it goes into the very legal
substance of the issues. There is no law granting the judiciary authority to review the
Section 29. Appeals.  - An appeal may be taken from an order
merits of an arbitral award. If we were to insist on reviewing the correctness of the
made in a proceeding under this Act, or from a judgment entered
award: (or consent to the CA's doing so),  it would be tantamount to expanding our
upon an award through certiorari  proceedings, but such
jurisdiction without the benefit of legislation. This translates to judicial legislation - a
appeals shall be limited to questions of law. The proceedings
breach of the fundamental principle of separation of powers.
upon such appeal, including the judgment thereon shall be
governed by, the Rules of Court in so far as they are applicable.130
The CA reversed the arbitral award - an action that it has no power to do  - because that the award suffers from any of the infirmities or grounds for
it disagreed with the tribunal's factual findings and application of the law. However, vacating an arbitral award under Section 24 of Republic Act No.
the alleged incorrectness of the award is insufficient cause to vacate the award, 876 or under Rule 34 of the Model Law in a domestic
given the State's policy of upholding the autonomy of arbitral awards. arbitration, or for setting aside an award in an international
arbitration under Article 34 of the Model Law, or for such other
The CA passed upon questions such as: (1) whether or not TEAM effectively grounds provided under these Special Rules.
returned the property upon the expiration of the lease; (2) whether or not TEAM was
liable to pay rentals after the expiration of the lease; and (3) whether or not TEAM If the Regional Trial Court is asked to set aside an arbitral award in
was liable to pay Fruehauf damages corresponding to the cost of repairs. These a domestic or international arbitration on any ground other than
were the same questions that were specifically submitted to the arbitral tribunal for those provided in the Special ADR Rules, the court shall entertain
its resolution. 134 such ground for the setting aside or non-recognition of the arbitral
award only if thesame amounts to a violation of public policy.
The CA disagreed with the tribunal's factual determinations and legal interpretation
of TEAM's obligations under the contract - particularly, that TEAM's obligation to turn The court shall not set aside or vacate the award of the arbitral
over the improvements on the land at the end of the lease in the same condition as tribunal merely on the ground that the arbitral tribunal
when the lease commenced translated to an obligation to make ordinary repairs committed errors of fact, or of law, or of fact and law, as the
necessary for its preservation. 135 court cannot substitute its judgment for that of the arbitral
tribunal.
Assuming arguendo that the tribunal's interpretation of the contract was incorrect,
the errors would have been simple errors of law.1âwphi1 It was the tribunal - not In other words, simple errors of fact, of law, or of fact and law committed by the
the RTC or the CA - that had jurisdiction and authority over the issue by virtue of the arbitral tribunal are not justiciable errors in this jurisdiction. 139
parties' submissions; the CA's substitution of its own judgment for the arbitral award
cannot be more compelling than the overriding public policy to uphold the autonomy TEAM agreed to submit their disputes to an arbitral tribunal. It understood all the
of arbitral awards. Courts are precluded from disturbing an arbitral tribunal's factual risks - including the absence of an appeal mechanism  - and found that its benefits
findings and interpretations of law. 136 The CA's ruling is an unjustified judicial (both legal and economic) outweighed the disadvantages. Without a showing that
intrusion in excess of its jurisdiction - a judicial overreach. 137 any of the grounds to vacate the award exists or that the same amounts to a
violation of an overriding public policy, the award is subject to confirmation as a
Upholding the CA's ruling would weaken our alternative dispute resolution matter of course. 140
mechanisms by allowing the courts to "throw their weight around" whenever they
disagree with the results. It erodes the obligatory force of arbitration agreements by WHEREFORE, we GRANT the petition. The CA's decision in CA-G. R. SP. No.
allowing the losing parties to "forum shop" for a more favorable ruling from the 112384 is SET ASIDE and the RTC's order CONFIRMING the arbitral award in SP.
judiciary. Proc. No. 11449 is REINSTATED.

Whether or not the arbitral tribunal correctly passed upon the issues is irrelevant. SO ORDERED.
Regardless of the amount, of the sum involved in a case, a simple error of law
remains a simple error of law. Courts are precluded from revising the award in a
particular way, revisiting the tribunal's findings of fact or conclusions of law, or
otherwise encroaching upon the independence of an arbitral tribunal. 138At the risk of
redundancy, we emphasize Rule 19.10 of the Special ADR Rules promulgated by
this Court en banc:

Rule 19.10. Rule on judicial review on arbitration in the

Philippines. - As a general rule, the court can only vacate or set
aside the decision of an arbitral tribunal upon a clear showing