BF CORP

VS
CA
GR 120105, March 27, 1998

Presented by: CHING, RAQUEL

Larana, Inc. Page 1 of 24

 PARTIES:
Petitioner: BF Corporation

Respondents: COURT OF
APPEALS, SHANGRI-LA
PROPERTIES, INC., RUFO B.
COLAYCO, ALFREDO C. RAMOS,
MAXIMO G. LICAUCO III and
BENJAMIN C. RAMOS

Larana, Inc. Page 2 of 24

 BF Corporation (BF) and
respondent Shangri-La Properties,
Inc. (SPI) entered into an
agreement whereby Shang
engaged BF to construct the main
structure of the EDSA Plaza
Project, the EDSA Shangri-La Mall
in Mandaluyong City.

Petitioner and respondent Shangri-la Properties, Inc. (SPI) entered into an agreement
whereby the latter engaged the former to construct the main structure of the "EDSA Plaza
Project which is a shopping mall complex in Mandaluyong City

Larana, Inc. Page 3 of 24

 SPI once again hired BF for the
expansion of the project. BF
incurred delay in the
construction work that SPI
considered as serious and
substantial.

The construction work was in progress when SPI decided to expand the project by
engaging the services of petitioner again. Thus, the parties entered into an agreement for
the main contract works after which construction work began.

BF contended that they had faithfully complied with the first agreement until a fire broke
out on Nov 30, 1990 damaging phase 1 of the project, hence SPI proposed the
renegotiation of the agreement between them.

Larana, Inc. Page 4 of 24

 May 30, 1991, Parties entered into
another agreement named
“Agreement for the Execution of
Builders Work for the EDSA Plaza
Project” that would cover the
construction work.

on May 30, 1991, petitioner and SPI entered into a written agreement denominated as
"Agreement for the Execution of Builder's Work for the EDSA Plaza Project." Said
agreement would cover the construction work on said project as of May 1, 1991 until its
eventual completion.

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 On July 12, 1993, upon SPI's initiative,
the parties' respective
representatives met in conference
but they failed to come to an
agreement.

1st
According to SPI, petitioner "failed to complete the construction works and abandoned
the project."This resulted in disagreements between the parties as regards their
respective liabilities under the contract.

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 July 14, 1993 BF filed with the RTC
of Pasig a complaint for the
collection of the balance due under
the construction agreement.

Barely two days later or on July 14, 1993, BF filed with the Regional Trial Court of Pasig a
complaint for collection of the balance due under the construction agreement. Named
defendants therein were SPI and members of its board of directors

Larana, Inc. Page 7 of 24

 Aug 3, 1993 Shang and its co-defendants
filed a motion to suspend proceedings
instead of filing an answer. Motion was
anchored on the defendants allegation that
the formal trade contract of the the
construction project provided for a clause
requiring prior resort to arbitration before
judicial intervention.

On August 3, 1993, SPI and its co-defendants filed a motion to suspend proceedings
instead of filing an answer based on the allegation that the formal trade contract for the
construction of the project provided for a clause requiring prior resort to arbitration
before judicial intervention could be invoked in any dispute arising from the contract.

Larana, Inc. Page 8 of 24

 Aug 4, 1993 BF opposed said motion
stating that there was no formal
contract between the parties
although they entered into an
agreement. They emphasized that the
agreement did not provide for an
arbitration thus cannot deprive the
court of its jurisdiction.

Larana, Inc. Page 9 of 24

 Shang insisted that there was an arbitration
clause in the existing contract between
them. It alleged that the suspension would
not deprive the court of its jurisdiction and
would expedite the settlement proceedings
rather than delay it.

Larana, Inc. Page 10 of 24

 The RTC found that the arbitration clause
did exist, however the lower court denied
motion to suspend proceedings and ruled
in favor of BF

RTC RULING: The lower court then ruled that, assuming

that the arbitration clause was valid and
binding, still, it was "too late in the day for
defendants to invoke arbitration.

This was because despite the fact there was an arbitration agreement, the Conditions of
Contract only the initials of Bayani Fernando was present, while no signature on the part
of Shang.

because the demand should have been made before the time of final payment except as
otherwise expressly stipulated in the contract 

Larana, Inc. Page 11 of 24

 The court found that the project
was to be completed on Oct 31,
1991 and any delays would incur
80K for each day of delay from Nov
RTC RULING: 1,1991.

This was because despite the fact there was an arbitration agreement, the Conditions of
Contract only the initials of Bayani Fernando was present, while no signature on the part
of Shang.

because the demand should have been made before the time of final payment except as
otherwise expressly stipulated in the contract 

Larana, Inc. Page 12 of 24

 The lower court also found that after the project
was completed in accordance with the agreement
that contained a provision on "progress payment
billing," SPI "took possession and started operations
thereof by opening the same to the public in
November, 1991." SPI, having failed to pay for the
works, petitioner billed SPI in the total amount of
P110,883,101.52, contained in a demand letter sent
by it to SPI on February 17, 1993. Instead of paying
the amount demanded, SPI set up its own claim of
P220,000,000.00 and scheduled a conference on
that claim for July 12, 1993. The conference took
place but it proved futile.

Larana, Inc. Page 13 of 24

 The fact that said conditions of
contract containing the arbitration
clause bear only the initials of
respondent Corporation's
representatives, Bayani Fernando and
Reynaldo de la Cruz, without that of the
representative of petitioner Shangri-La
Properties, Inc. does not militate
against its effectivity.

Larana, Inc. Page 14 of 24

 Petitioners "are in default in proceeding
with such arbitration." It took note of
"the fact that under the supposed
Arbitration Clause invoked by
defendants, it is required that "Notice of
the demand for arbitration of a dispute
shall be filed in writing with the other
party in no case later than the time of
final payment," which apparently, had
elapsed.

because defendants had taken possession of the finished works and the plaintiff's billings
for the payment thereof had remained pending since November, 1991 up to the filing of
this case on July 14, 1993, but also for the reason that defendants have failed to file any
written notice of any demand for arbitration during the said long period of one year and
eight months

Larana, Inc. Page 15 of 24

 Hence, this petition before the
Supreme Court.

because defendants had taken possession of the finished works and the plaintiff's billings
for the payment thereof had remained pending since November, 1991 up to the filing of
this case on July 14, 1993, but also for the reason that defendants have failed to file any
written notice of any demand for arbitration during the said long period of one year and
eight months

Larana, Inc. Page 16 of 24

 ISSUE:
1.Whether or not the
parties entered into an
arbitration agreement.

2.Whether or not
respondents are in default
in invoking the agreement
to arbitrate.

Larana, Inc. Page 17 of 24

 1. Yes, according to Sec 4 of R.A. 876, a
contract to arbitrate a controversy
thereafter arising between the parties,
as well as a submission to arbitrate an
existing controversy, shall be in writing
and subscribed by the party sought to
be charged, or by his lawful agent.

Section 2. Persons and matters subject to arbitration. - Two or more persons or parties
may submit to the arbitration of one or more arbitrators any controversy existing between
them at the time of the submission and which may be the subject of an action, or the
parties to any contract may in such contract agree to settle by arbitration a controversy
thereafter arising between them. Such submission or contract shall be valid, enforceable
and irrevocable, save upon such grounds as exist at law for the revocation of any contract.

Section 4. Form of arbitration agreement. - A contract to arbitrate a controversy

thereafter arising between the parties, as well as a submission to arbitrate an existing
controversy shall be in writing and subscribed by the party sought to be charged, or by his
lawful agent.

The making of a contract or submission for arbitration described in section two hereof,
providing for arbitration of any controversy, shall be deemed a consent of the parties to
the jurisdiction of the Court of First Instance of the province or city where any of the
parties resides, to enforce such contract or submission.

Larana, Inc. Page 18 of 24

 The formal requirements of an
agreement to arbitrate are therefore
the following: (a) it must be in writing
and (b) it must be subscribed by the
parties or their representatives.

Larana, Inc. Page 19 of 24

 The Court finds that, upon a scrutiny of
the records of this case, these requisites
were complied with in the contract in
question. The Articles of Agreement,
which incorporates all the other
contracts and agreements between the
parties, was signed by representatives of
both parties and duly notarized.

Larana, Inc. Page 20 of 24

 The failure of the private respondents
representative to initial the Conditions of
Contract would therefore not affect
compliance with the formal requirements
for arbitration agreements.

because that particular portion of was included by reference in the Articles of Agreement.

Larana, Inc. Page 21 of 24

 2. No, respondents were not in default in
invoking the provisions of the arbitration
clause which states that "the demand for
arbitration shall be made within a
reasonable time after the dispute has
arisen and attempts to settle amicably
had failed.

Reasonableness" is a relative term and the question of whether the time within which an
act has to be done is reasonable depends on attendant circumstances.

Larana, Inc. Page 22 of 24

 The Court finds that under the
circumstances obtaining in this case, a
one-month period from the time the
parties held a conference on July 12, 1993
until private respondent SPI notified
petitioner that it was invoking the
arbitration clause, is a reasonable time.

Larana, Inc. Page 23 of 24

 END.

THANK YOU!

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