Case Summary (G.R. No. 87958)
RTC Proceedings and Motion to Dismiss/Suspend
As subrogee of the Shipper, the Insurer filed suit in the RTC for recovery of the indemnified amount. The Carrier moved to dismiss or suspend, invoking the arbitration clause in the Charter Party. The Insurer opposed, contending that the clause was not incorporated into the Bill of Lading and was unreasonable. The RTC initially denied the motion but later deferred its resolution until trial on November 19, 1987.
Appeal to the Court of Appeals by Certiorari and Prohibition
The Carrier petitioned the Court of Appeals for certiorari and prohibition to annul the RTC’s interlocutory deferral order. The Court of Appeals found the dispute clearly within the arbitration agreement and set aside the RTC order, directing referral to arbitration and suspension of civil proceedings.
Jurisdictional Excess and Prohibition Remedy
Although interlocutory orders are generally not appealable, the Supreme Court recognized an exception when a lower court acts in excess of jurisdiction. A cursory reading of the Bill of Lading and Charter Party revealed the RTC’s lack of jurisdiction to resolve the dispute on the merits without first enforcing the arbitration agreement.
Incorporation of the Arbitration Clause
The Bill of Lading’s reference to the Charter Party incorporated all its terms “except the rate and payment of freight.” The arbitration clause provided that any dispute “arising from the making, performance or termination” of the Charter Party would be arbitrated in New York under the U.S. Arbitration Act. Established jurisprudence permits full incorporation of charter terms into a bill of lading by reference.
Subrogation and Privity to the Charter Party
By subrogation, the Insurer stepped into the Shipper’s shoes and acquired only the rights governed by the Bill of Lading, including incorporated charter terms. The Insurer was charged with notice of the arbitration clause and could have obtained the Charter Party with ordinary diligence. It thus could not avoid arbitration.
Recognition of Arbitration Under Philippine Law an
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Facts
- On January 9, 1985, United Coconut Chemicals, Inc. (Shipper) shipped 404.774 metric tons of C6–C18 distilled fatty acid aboard MT “Stolt Sceptre,” owned by Stolt-Nielsen Philippines, Inc. (Carrier), from Bauan, Batangas to Rotterdam, Netherlands.
- The shipment was covered by Tanker Bill of Lading No. BAT-1 and insured under a marine cargo policy with National Union Fire Insurance Company of Pittsburg (Insurer) through its Philippine agent, American International Underwriters (Phil.), Inc.
- The Bill of Lading incorporated by reference the terms of a Charter Party dated December 21, 1984, between the Shipper and Parcel Tankers, Inc., allowing the charter to govern the shipment except as to freight rates.
- Upon discharge in the Netherlands, the cargo was found discolored and contaminated. The Shipper’s claim was denied by the Carrier.
- The Insurer indemnified the Shipper and, as subrogee, filed suit on April 21, 1986, in the Regional Trial Court (RTC) of Makati Branch 58 to recover ₱1,619,469.21 plus interest.
Procedural History
- The Carrier moved to dismiss or suspend the RTC proceedings on the ground that the dispute was arbitrable under the Charter Party’s arbitration clause.
- The Insurer opposed, arguing the clause was not incorporated into the Bill of Lading and was void as unreasonable.
- On July 28, 1987, the RTC denied the motion, but on November 19, 1987, it deferred resolution of the dismissal motion until trial on the merits.
- The Carrier petitioned the Court of Appeals for certiorari and prohibition, seeking annulment of the RTC’s November 19 order.
- On April 12, 1989, the Court of Appeals set aside the RTC order, ordered the Insurer to refer its claim to arbitration, and directed the RTC to suspend proceedings pending the arbitral award.
- The Supreme Court required memoranda and, after consideration, resolved the petition on October 23, 1989.