FACTS:

These consolidated petitions involve a complaint filed by petitioner Dale Strickland (Strickland) against respondents Ernst & Young LLP (EYLLP) and Punongbayan & Araullo (PA) for the collection of a sum of money. The dispute arises from the Financial Advisory Services Agreement (FASA) entered into by National Home Mortgage Finance Corporation (NHMFC) and PA for the liquidation of NHMFC's Unified Home Lending Program (UHLP). At the time of the engagement, PA was the Philippine member of EYLLP. Strickland, a partner of EYLLP seconded to Ernst & Young Asia Pacific Financial Solutions (EYAPFS), played a role in negotiating the FASA between PA and NHMFC. The working relationship between PA/EYLLP and EY/APFS was formalized through a letter, with PA designated as P&A/Ernst & Young. EYLLP terminated its membership in EYLLP but the working relationship among the parties continued. However, in July 2004, the relationship went awry when NHMFC was informed of PA's intention to remove Strickland from the UHLP Project and replace him with Mark Grinis. NHMFC expressed concerns regarding Strickland's removal, but EYLLP assured NHMFC of Grinis' qualifications and commitment to the project.

The case involves a dispute between Strickland, Ernst & Young Philippines (EYAPFS), P&A Grant Thornton (PA), and the National Home Mortgage Finance Corporation (NHMFC). Initially, Strickland was an employee of EYAPFS and PA was engaged as NHMFC's financial advisor for the Urban Housing Loan Program (UHLP) project. However, Strickland was subsequently separated from EYAPFS and engaged by PA as a consultant for the UHLP project. Strickland's continued participation in the project and his compensation became a point of conflict among the parties. PA and NHMFC exchanged letters proposing amendments to the original engagement letter but no final agreement was reached. Eventually, Strickland demanded compensation for his services rendered to NHMFC, but PA denied any contractual relationship with Strickland. Strickland filed a complaint seeking compensation, and EYAPFS filed a motion to refer the dispute to arbitration. The trial court denied EYAPFS' motion, prompting them to file a petition for certiorari, which was later granted by the Court of Appeals.

Dale Strickland engaged the services of Ernst & Young Law Basis PTE. Ltd. (EYLLP) for a project. However, due to certain disputes, Strickland filed a complaint for damages against EYLLP and Herrera and Villaroman Law Offices, formerly LaO Law, in Civil Case No. 05-692 before the Regional Trial Court (RTC) of Makati City. EYLLP filed a motion to dismiss, asserting that the dispute should be resolved through arbitration based on the Partnership Agreement between Strickland and EYLLP. The RTC granted EYLLP's motion and ordered the dispute to be referred to arbitration, dropping EYLLP from the case.

Subsequently, Poblador Bautista and Reyes Law Offices (PA) filed a motion to suspend the proceedings, arguing that any settlement during the arbitration between EYLLP and Strickland may prejudice PA as Strickland's cause of action against PA was incidental to that against EYLLP. The RTC denied PA's motion, stating that the decision to refer the dispute to arbitration only involved EYLLP and Strickland, and PA was not a party to it. PA's motion for reconsideration was also denied.

PA then filed a petition for certiorari before the Court of Appeals (CA), alleging grave abuse of discretion in the RTC's orders denying its motion to suspend proceedings. The CA annulled the orders and directed the RTC to suspend its proceedings in Civil Case No. 05-692 pending arbitration. Strickland filed consolidated petitions before the Supreme Court (SC) challenging the CA's ruling.

In G.R. No. 193782, Strickland raised issues regarding the authenticity of the Partnership Agreement and arbitrability of his claims against EYLLP.

In G.R. No. 210695, Strickland raised issues surrounding the suspension of proceedings, the alleged agency relationship between PA and EYLLP, and the suspension of proceedings against other defendants.

The SC simplified the issues in both cases, focusing on the referral of the dispute to arbitration, the authenticity of the Partnership Agreement, the arbitrability of Strickland's claims against EYLLP, and the suspension of proceedings in Civil Case No. 05-692.

This case involves an arbitration dispute between Strickland, a foreign resident, and EYLLP, a Philippine law firm, regarding an alleged breach of contract. EYLLP filed a third-party complaint against PA and several other defendants, claiming that they should be held jointly and severally liable for any damages awarded to Strickland. The case was initially filed before the Regional Trial Court (RTC) and was later elevated to the Court of Appeals (CA).

In its decision, the CA ruled that EYLLP had substantially complied with the requirement to set forth actionable documents in its pleading. EYLLP initially quoted the provision of the Partnership Agreement on Dispute Resolution, including the section on Arbitration, in its answer. It later submitted a copy of the Partnership Agreement as an exhibit. The CA considered this as substantial compliance with the rule.

Strickland argued that EYLLP failed to properly allege and prove the existence of the Partnership Agreement, and thus, there was no arbitration clause to enforce. However, the CA rejected this argument, noting that Strickland did not deny the Partnership Agreement or the arbitration clause.

Citing the case of Cargill Philippines, Inc. v. San Fernando Regala Trading, Inc., the CA ruled that arbitration can still be ordered even if a party repudiates the main contract. The CA did not find any reversible error in its decision, and thus, denied the petitions.

ISSUES:

1. Whether EYLLP substantially complied with the requirement of attaching a copy of the Partnership Agreement in its pleading.

2. Whether arbitration can be ordered when one party alleges that the contract between the parties does not exist or is invalid.

3. Whether the dispute between the parties should be referred to arbitration despite Strickland's causes of action based on tortious conduct in refusing to compensate him for services rendered.

4. Whether the suspension of the proceedings in Civil Case No. 05-692 against respondent PA is proper pending resolution of the arbitration between Strickland and EYLLP.

5. Whether the disputes between the parties should be resolved through commercial arbitration as stipulated in the Partnership Agreement.

6. Whether there is sufficient proof and authentication of the Partnership Agreement containing the arbitration clause.

7. Whether the Court of Appeals (CA) should have ordered the trial court to conduct an evidentiary hearing on the factual assertions regarding the agency relationship between PA and EYLLP/EYAPFS, as well as the intertwined causes of action against the defendants.

8. Whether the suspension of the proceedings in the trial court is justified.

9. Whether or not P&A, as the agent of Ernst & Young Asia, can sue and be sued on the contract of employment between Strickland and Ernst & Young Asia.

10. Whether or not the arbitration clause in the Partnership Agreement applies to P&A, even if P&A is not a signatory to the Partnership Agreement.

11. Whether or not the Court of Appeals (CA) erred in suspending the proceedings pending arbitration.

12. Whether or not the Philippines is the law of the place of performance of the contract.

RULING:

1. The court held that EYLLP substantially complied with the requirement of attaching a copy of the Partnership Agreement in its pleading. While the initial answer only quoted the provision of the Partnership Agreement on Dispute Resolution, EYLLP eventually submitted a copy of the Partnership Agreement. The court further noted that the other party, Strickland, did not deny the existence of the Partnership Agreement and the arbitration clause.

2. The court ruled that arbitration can still be ordered even when one party alleges that the contract between the parties does not exist or is invalid. The court applied the doctrine of separability, which states that an arbitration agreement is independent of the main contract. The invalidity of the main contract does not affect the validity of the arbitration clause. In this case, the Partnership Agreement explicitly provides for alternative dispute resolution, including arbitration. Therefore, the court held that arbitration can still be ordered despite the allegation of invalidity of the contract.

3. Yes, the dispute between the parties should be referred to arbitration. Commercial relationships covered by arbitration laws are purely private and contractual in nature. Parties are free to stipulate on terms and conditions, subject to limitations imposed by law, morals, and public policy. Commercial arbitration has been recognized as valid, binding, and enforceable. The nature of the contract between Strickland and EYLLP is a partnership, and the dispute between them is of a commercial character. Strickland's alleged causes of action based on tortious conduct do not preclude arbitration.

4. Yes, the suspension of the proceedings in Civil Case No. 05-692 against respondent PA is proper pending resolution of the arbitration between Strickland and EYLLP. The arbitration clause in the partnership agreement between Strickland and EYLLP covers the dispute between them, and the parties did not question the jurisdiction of the court to hear and decide the case. Thus, the court should defer to arbitration.

5. The Court held that the disputes between the parties should be resolved through commercial arbitration as stipulated in the Partnership Agreement. The Court also found that there is sufficient proof and authentication of the Partnership Agreement containing the arbitration clause. The CA was not required to order the trial court to conduct an evidentiary hearing on the factual assertions regarding the agency relationship between PA and EYLLP/EYAPFS, as well as the intertwined causes of action against the defendants. Finally, the Court upheld the suspension of the proceedings in the trial court.

6. P&A, as an agent of Ernst & Young Asia, cannot sue and be sued on the contract of employment between Strickland and Ernst & Young Asia. The liability of P&A is derived from that of Ernst & Young Asia, and any proceedings should be suspended pending the arbitration between P&A's principal, EYLLP, and Strickland.

7. The arbitration clause in the Partnership Agreement applies to P&A, even if it is not a signatory to the Partnership Agreement. The arbitration clause is applicable to P&A and effectively stays the proceedings against it.

8. The CA did not err in suspending the proceedings pending arbitration. The Partnership Agreement between the parties clearly applies to the dispute, and the arbitration clause in the agreement supports the suspension of the proceedings.

9. The Philippines is not automatically the law of the place of performance of the contract. The factual circumstances, including the global nature of the company and the foreign parties involved, indicate that the choice of law in the contract should be determined through a final choice-of-law analysis.

PRINCIPLES:

• A party substantially complies with the requirement of attaching a copy of a written instrument or document in its pleading when it eventually submits a copy of the instrument or document, even if the initial pleading only quoted the provision of the instrument or document.

• Arbitration is a recognized and accepted alternative mode of settling disputes in the Philippines.

• An arbitration clause is a contract in itself and is independent of the main contract.

• The doctrine of separability states that the invalidity of the main contract does not affect the validity of the arbitration agreement.

• Commercial relationships covered by arbitration laws are purely private and contractual in nature.

• Parties are free to stipulate on terms and conditions, except for those that go against law, morals, and public policy.

• Commercial arbitration is valid, binding, and enforceable in the Philippines.

• The arbitration clause in a contract may cover disputes even if they involve causes of action based on tortious conduct.

• Courts should defer to arbitration when the arbitration clause covers the dispute and the parties do not question the court's jurisdiction.

• Parties to a contract may agree to resolve their disputes through commercial arbitration as stipulated in their agreement.

• The choice of law provision in an assignment letter may be considered as an indication that the parties intended to resolve their disputes through the exclusive jurisdiction of another country's courts.

• The fact of agency relationship can be established through documents and evidence showing that the person acted on behalf of another with their consent or authority.

• A person who specially informs or publicly advertises that they have given a power of attorney to a third person makes the latter a duly authorized agent.

• An agent generally does not have rights or liabilities as against a third party. The agent cannot sue or be sued on a contract, as the contract may only be violated by the parties themselves. The real party-in-interest in an action upon a contract must generally be a party to said contract.

• A contract need not be contained in a single writing. It may be collected from several different writings as long as they do not conflict with each other and when connected, show the parties, subject matter, terms, and consideration. Unsigned instruments may be part of a contract as long as they are clearly identified or referred to and made part of the signed instrument or instruments.

• A stipulation in a contract in favor of a third person must be clearly and deliberately conferred, and the third person must have communicated acceptance to the obligor before its revocation. A mere incidental benefit or interest is not sufficient.

• The contracting parties must have clearly and deliberately conferred a favor upon a third person for that person to have standing.

• The object of arbitration is to expedite the determination of a dispute.

• The Philippines is not automatically the law of the place of performance of a contract in cases involving foreign elements. The choice of law should be determined through a final choice-of-law analysis.