G.R. No. 224102 - Mariano y Garcia vs. People

On July 25, 1949, Atkins, Kroll & Co., Inc., Manila, acting as agents for Eastboard Navigation, Ltd. (plaintiff), informed Juan Ysmael & Company, Inc. (defendant) that Eastboard had accepted defendant's terms for chartering the S/S EASTWATER to carry scrap iron from the Philippines to Buenos Aires.
Defendant signed the letter confirming the agreed terms, including arbitration under a "Clause Paramount" that specified disputes be resolved per a regular charter party form.
On the same date, the formal charter party agreement (Exh. A) was executed, encompassing printed terms and a typewritten portion incorporating Clauses Nos. 16 to 31, including an arbitration Clause No. 29 specifying three arbitrators in New York, and that arbitration awards would be final and enforceable.

By September and October 1949, communications involved defendant guaranteeing $15,000 by the Irving Trust Company, New York, intended to cover possible demurrage pending arbitration.
Defendant instructed the Bank of America, Manila, to process drafts and transmit funds to the trust account in New York as part of the arbitration guarantee.
On April 5, 1950, defendant formally requested the legal firm of Manning, Harnisch and Hollinger in New York to represent it in arbitration against Eastboard, confirming the submission of the dispute for arbitration.
On May 23, 1950, the attorneys for both parties executed an arbitration submission agreement (Exh. B) agreeing to submit the controversy over charges under the charter party to three arbitrators in New York, whose award would be final and subject to confirmation by the U.S. District Court for the Southern District of New York.

After hearing evidence, the arbitrators rendered a decision awarding plaintiff $53,037.89 plus interest and costs.
Plaintiff obtained confirmation of the award by the U.S. District Court, Southern District of New York, on August 15, 1950, which ordered defendant to pay the sum with interest and costs.
Plaintiff commenced an action in the Philippines to enforce this U.S. court decree under Section 48, Rule 39 of the Philippine Rules of Court.

Defendant argued that the New York court lacked jurisdiction over it, as it was not properly served, that arbitration proceedings were summary and without its consent, and thus the award should not be enforced locally.
The parties stipulated several facts, including the shareholding of defendant, plaintiff’s status as a foreign corporation not licensed to do business in the Philippines, the longstanding role of K. H. Hemady as defendant's president and prior contracts he entered into, the proper appointment of arbitrators, and that the authorization defenses were first raised only in these enforcement proceedings.
The Court of First Instance ruled in favor of plaintiff, ordering enforcement of the U.S. court’s judgment.

Defendant appealed questioning the validity of arbitration agreement, its authority and effect, and enforceability of U.S. court decree.
Plaintiff appealed on grounds regarding the payment of foreign exchange tax and recovery of attorney’s fees, which the lower court had denied.

Was there a valid arbitration agreement between plaintiff and defendant, and did defendant consent to arbitration?
Are the arbitration proceedings and the arbitrators’ award valid and binding on defendant?
Is the order of the U.S. District Court of New York confirming the arbitration award valid and enforceable in the Philippines?
Can plaintiff, a foreign corporation not licensed to do business in the Philippines, maintain this enforcement action here?
Is defendant liable for the foreign exchange tax incurred on remittance of the award and for plaintiff’s attorneys’ fees for this litigation?