Soledad Bengson vs. Mariano M. Chan GR No.

L-27283

Aquino, J.: July 29, 1977

FACTS :
 On June 21, 1965 Soledad F. Bengson and Mariano M. Chan entered into a contract for the construction of a six-story
building on Bengson's lot located at Rizal Avenue, San Fernando, La Union.
 On June 21, 1965 Soledad F. Bengson and Mariano M. Chan entered into a contract for the construction of a six-story
building on Bengson's lot located at Rizal Avenue, San Fernando, La Union.
 In their contract, the agreed that construction would start on July 1965 and that the first two floors of the building
including the theatre would be completed within 5 months while the whole of construction in twelve months. The
contract contained an arbitration clause:
 "15. Any and all questions, disputes or differences arising between the parties hereto relative to the construction of
the BUILDING shall be determined by arbitration of two persons, each chosen by the parties themselves. The
determination of said arbitration shall be final, conclusive and binding upon both parties hereto, unless they choose
to go to court, in which case the determination by arbitration is a condition precedent for taking any court action.
The expenses of arbitration shall be borne by both parties equally."
 On May 24, 1966, petitioner filed an action for damages against Mariano M. Chan and the sureties on his performance
bond. She alleged that Mariano violated the terms of their contract for not completing the construction within the dates
stipulated among others.
 Mariano countered that the delay on the project is due to the fault of petitioner such that the construction started on
February 1966 due to the changes requested by Bengson. They stopped the construction because Bengson refused to
pay for 90% of the work already completed. They further argued that the stipulation for the construction of the first two
stories was novated by the parties. He then filed counterclaims against Bengson.
 On November 16, 1966, defendants filed an amended answer alleging that complaint has no cause of action because
Bengson did not submit the issue for arbitration as required in their contract.
 After holding a hearing, the trial court in its order of November 24, 1966 sustained that new defense and dismissed the
complaint. Bengson appealed
 Bengson: argues that paragraph 15 refers to disputes as to "the technical process of putting up the building", meaning
whether there was an adherence to the plans and specifications, and that her causes of action for damages do not involve
questions as to the construction of the building but refer to disputes "based on violation of the contract for construction."
Alternatively argues that if arbitration is proper, then the trial court in conformity with section 6 of the Arbitration Law,
Republic Act No. 876, should have required the parties to proceed to arbitration
 Defendants: argue that the broad and inclusive terms of paragraph 15 embrace all breaches of the contract regarding
submission to arbitration of the contractor's request for extensions shows that arbitration is not restricted to disputes
relative to "the technical process of putting up the building".
ISSUE: Whether or not the issue should have been submitted to arbitration
HELD: YES
 We hold that the terms of paragraph 15 clearly express the intention of the parties that all disputes between them should
first be arbitrated before court action can be taken by the aggrieved party. However, although the causes of action in
Bengson's complaint are covered by paragraph 15, her failure to resort to arbitration does not warrant the dismissal of
her complaint. We agree with her alternative contention that arbitration may be resorted to during the pendency of the
case.
 Within the meaning of section 6, the failure of Soledad F. Bengson to resort to arbitration may be regarded as a refusal
to comply with the stipulation for arbitration. And defendants' interposition of the defense that arbitration is a condition
precedent to the institution of a court action may be interpreted as a petition for an order that arbitration should proceed
as contemplated in section 15.
 SEC. 6. Hearing by court.— A party aggrieved by the failure, neglect or refusal of another to perform under an
agreement in writing providing for arbitration may petition the court for an order directing that such arbitration
proceed in the manner provided for in such agreement. Five days notice in writing of the hearing of such
 application shall be served either personally or by registered mail upon the party in default. The court shall hear
the parties, and upon being satisfied that the making of the agreement or such failure to comply therewith is not
in issue, shall make an order directing the parties to proceed to arbitration in accordance with the terms of the
agreement. If the making of the agreement or default be in issue the court shall proceed to summarily hear such
issue. If the finding be that no agreement in writing providing for arbitration was made, or that there is no default
in the proceeding thereunder, the proceeding shall be dismissed. If the finding he that a written provision for
arbitration was made and there is a default in proceeding thereunder, an order shall be made summarily directing
the parties to proceed with arbitration in accordance with the terms thereof.

"The court shall decide all motions, petitions or applications filed under the provisions of this Act, within ten
days after such motions, petitions, or applications have been heard by it.

 Therefore, instead of dismissing the case, the proceedings therein should be suspended and the parties should be
directed to go through the motions of arbitration at least within a sixty-day period. With the consent of the parties, the
trial court may appoint a third arbitrator to prevent a deadlock between the two arbitrators. In the event that the disputes
between the parties could not be settled definitively by arbitration, then the hearing of the instant case should be
resumed.
 The trial court's order of dismissal is reversed and set aside. If the parties cannot reach an amicable settlement at this
late hour, then the trial court should give them at least sixty days from notice within which to settle their disputes by
arbitration and, if no settlement is finalized within that period, it should hold a pre-trial and try the case. No costs.
