Title
Pang-et vs. Dao-as
Case
G.R. No. 167261
Decision Date
Mar 2, 2007
Dispute over land possession led to arbitration; refusal to sign agreement and English-written award deemed void, rendering arbitration invalid.
real property dispute
failed arbitration attempt
court proceedings

Case Summary (G.R. No. L-32599)

Origin of the Dispute and Referral to the Lupon for Arbitration

Pang-et filed the action for recovery of possession on 9 November 1994 before the MCTC against Leoncio and Florentina Manacnes. During pre-trial, on 23 February 1995, the parties, through their respective counsels, agreed to refer the matter to the Barangay Lupon (Lupon) of Dagdag, Sagada for arbitration under the Katarungang Pambarangay framework. As a result, the MCTC suspended its proceedings and remanded the case to the Lupon for resolution.

Subsequently, on 26 February 1995, the Lupon issued a Certification to File Action because of the refusal of the Manacnes spouses to enter into an Agreement for Arbitration and their insistence that the dispute proceed in court. The certification, along with the case records, was forwarded to the MCTC on 8 March 1995. The MCTC then issued an Order on 7 April 1995 remanding the matter again for conciliation by the Lupon and directing the Lupon to render an arbitration award. The MCTC explained that it found that an agreement for arbitration had been executed, yet the Lupon failed to issue the required arbitration award under the applicable Katarungang Pambarangay provisions.

In compliance with the MCTC directive, the Lupon issued an Arbitration Award on 10 May 1995, ordering Pang-et to retrieve the land upon payment to the spouses Manacnes of P8,000.00 for improvements. Leoncio’s widow, Florentina, repudiated the award, but her repudiation was rejected by the Lupon. Copies of the award were furnished to the MCTC.

Post-Award Actions and the Enforcement Petition

On 1 June 1995, Pang-et filed with the Lupon a Motion for Execution of the Arbitration Award. Florentina filed with the MCTC a motion to resume the original proceedings for recovery of possession and asked the court to consider her repudiation. The MCTC heard her motion despite her failure to appear despite notice, and denied repudiation on the ground that she had not acted within the ten-day reglementary period under the Katarungang Pambarangay law, rendering the award final and executory. Upon Pang-et’s motion, the MCTC then remanded the records to the Lupon for execution. On 31 August 1995, the then Punong Barangay issued a Notice of Execution, which, however, was never implemented.

Accordingly, on 16 October 2001, Pang-et filed with the MCTC an action for enforcement of the arbitration award. The heir of the Manacnes spouses moved to dismiss, asserting that both the agreement to arbitrate and the arbitration award were void. The grounds advanced were that the agreement to arbitrate was not personally signed by the spouses Manacnes and that the arbitration award was written in English, a language allegedly not understood by the parties.

MCTC Resolution: Inefficacy of the Arbitration Agreement and Award

In its Resolution dated 20 August 2002, the MCTC dismissed the enforcement petition. It first rejected the claim of estoppel and ruled that a null and void act may be questioned at any time and is imprescriptible. It then addressed the validity of the agreement to arbitrate. The MCTC relied on Section 413 and Section 415 of RA 7160, emphasizing that personal appearance before the Lupon and the personal execution of the agreement are mandatory. It concluded that the agreement was not signed by the spouses Manacnes themselves; instead, another person had signed the agreement, in a manner it found inconsistent with the statutory requirements. The MCTC reasoned that even assuming arguendo that Catherine had signed in the presence or by instruction of the spouses Manacnes, such conduct would not cure the defect because assistance under the law is allowed only for minors or incompetents, and the law does not authorize substitution for purposes of signing arbitration agreements.

Finally, the MCTC held that the arbitration award could not stand because it was an offshoot of an inefficacious arbitration agreement. It further found that even the award itself violated the statutory requirement regarding the language of settlement and award, citing Section 411 of RA 7160 and corresponding implementing rules. The MCTC held that the parties were natives of Sagada who spoke Kankanaey, so the award should have been written in Kankanaey. It observed that the award was written in English, a further ground rendering it inefficacious. The MCTC dismissed the case.

RTC Proceedings: Waiver, Estoppel, and Finality of the Award

Pang-et moved for reconsideration, which the MCTC denied. She then appealed to the RTC, Branch 36, Bontoc, Mountain Province. The RTC reversed and remanded for further proceedings. The RTC stated that the agreement for arbitration, dated 6 February 1995 and found on the expediente, appeared on its face to have been signed by the spouses Manacnes and attested by the Pangkat Chairman of the Barangay Lupon.

The RTC addressed the Manacnes heirs’ attack as one that effectively questioned the validity of the arbitration agreement on grounds of lack of consent and alleged fraud. It held that neither the original defendants nor the heirs had repudiated the arbitration agreement in accordance with the procedure within the time frame required by RA 7160 and the KP Rules. It treated this failure as a waiver to challenge the arbitration agreement based on fraud. The RTC also invoked principles of estoppel, citing Lopez vs. Ochoa, 103 Phil. 94, to prevent the heirs from raising the issue for the first time in the enforcement proceeding.

On the alleged English-language defect, the RTC concluded that the trial court below had acted on what it considered to be speculative and self-serving assertions. It stated that, as a matter of judicial notice, American missionaries had been in Sagada since 1902, continuously educating and interacting with the indigenous population, which it believed resulted in many natives, including those too old to attend school, learning English by ear and by association. It further held that, even if the spouses were ignorant of English, no petition to nullify the award on that ground had been filed within ten (10) days from the date of the award. Consequently, it ruled the arbitration award acquired the force and effect of a final judgment of a court under Section 416 of RA 7160, conclusive upon the original parties and those privy to them. The RTC characterized the heirs’ challenge as a collateral attack that should not have been entertained.

Court of Appeals Ruling: No Voluntary Submission, Flawed Katarungang Pambarangay Proceedings, and No Binding Award

The heir of the Manacnes spouses filed a petition before the Court of Appeals to set aside the RTC judgment. On 9 February 2005, the Court of Appeals reversed the RTC and reinstated the MCTC’s dismissal. It emphasized that nothing in the record showed that the spouses Manacnes were amenable to compromise with Pang-et.

The appellate court described the procedural record before the Lupon. It recognized that the civil case had been suspended and remanded due to the agreement to arbitrate allegedly not signed by the parties but allegedly agreed to by their counsels during pre-trial. It found that in the meeting before the Lupon, the spouses Manacnes did not sign the agreement. More particularly, when the Pangkat Chairman asked the spouses to sign or affix thumbmarks, they refused and insisted the case go to court. In view of this refusal, the Lupon issued a Certification to File Action. The court then noted that the matter was nonetheless remanded again to the Lupon for an arbitration award. It discussed minutes of hearings and concluded the spouses had remained firm in refusing to enter into any compromise.

The Court of Appeals also found defects in the arbitration process. It held there was no showing that the Pangkat ng Tagapagkasundo was duly constituted in accordance with the Katarungang Pambarangay Rules. It further noted absence of the Pangkat Chairman and another Pangkat member at a hearing, contrary to the required procedure. It also reasoned that the law required the Punong Barangay or Pangkat Chairman to attest that parties freely and voluntarily agreed to the settlement, but the minutes showed that the spouses did not freely or voluntarily agree to anything. For these reasons, the Court of Appeals concluded that there was no valid agreement to arbitrate to be repudiated within the statutory period, and therefore the periods for repudiation were not applicable.

The appellate court rejected the use of estoppel, holding that an action or defense against a null and void act does not prescribe. It agreed with the MCTC that the agreement to arbitrate was null and void, and it treated the arbitration award as equally void since it was the offspring of the invalid agreement.

The Parties’ Positions in the Supreme Court and the Core Issue Framed by the Court

Pang-et elevated the case, maintaining that the Court of Appeals overlooked material facts and committed reversible error. She asserted that the parties, through counsels, mutually agreed to submit the dispute for arbitration, and she argued that the parties were bound by the attorneys’ representations during pre-trial and that such representations should be deemed made with client conformity. She further contended that if the spouses Manacnes did not want arbitration, they should have raised their opposition at the earliest opportunity during pre-trial when the MCTC ordered remand to the Lupon.

The Supreme Court did not adopt Pang-et’s view. It stressed that the decisive fact was what happened when the spouses Manacnes personally appeared before the Lupon: they declined to sign the Agreement for Arbitration and insisted that the case continue in court. Relying on the minutes of the arbitration hearings, the Court described how the legality of Catherine’s signature—done as signatory for the spouses—had been assailed, and how the Pangkat Chairman asked the spouses to signify their intention using the required form. The spouses refused t

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