SECOND DIVISION
[G.R. No. 129916. March 26, 2001]
MAGELLAN CAPITAL MANAGEMENT CORPORATION and MAGELLAN CAPITAL HOLDINGS CORPORATION, petitioners, vs. ROLANDO M. ZOSA and HON. JOSE P. SOBERANO, JR., in his capacity as Presiding Judge of Branch 58 of the Regional Trial Court Of Cebu, 7th Judicial Region, respondents.
D E C I S I O N
BUENA,
J.:
Under a management
agreement entered into on March 18, 1994, Magellan Capital Holdings Corporation
[MCHC] appointed Magellan Capital Management Corporation [MCMC] as manager for
the operation of its business and affairs.[1] Pursuant thereto,
on the same month, MCHC, MCMC, and private respondent Rolando M. Zosa entered
into an "Employment Agreement" designating Zosa as President and
Chief Executive Officer of MCHC.
Under the
"Employment Agreement", the term of respondent Zosa's employment
shall be co-terminous with the management agreement, or until March 1996,[2] unless sooner
terminated pursuant to the provisions of the Employment Agreement.[3] The grounds for
termination of employment are also provided in the Employment Agreement.
On May 10, 1995, the majority
of MCHC’s Board of Directors decided not to re-elect respondent Zosa as
President and Chief Executive Officer of MCHC on account of loss of trust and
confidence[4] arising from
alleged violation of the resolution issued by MCHC's board of directors and of
the non-competition clause of the Employment Agreement.[5] Nevertheless,
respondent Zosa was elected to a new position as MCHC's Vice-Chairman/Chairman for
New Ventures Development.[6]
On September 26, 1995,
respondent Zosa communicated his resignation for good reason from the position
of Vice-Chairman under paragraph 7 of the Employment Agreement on the
ground that said position had less responsibility and scope than President and
Chief Executive Officer. He demanded
that he be given termination benefits as provided for in Section 8 (c) (i) (ii)
and (iii) of the Employment Agreement.[7]
In a letter dated October
20, 1995, MCHC communicated its non-acceptance of respondent Zosa's resignation
for good reason, but instead informed him that the Employment Agreement
is terminated for cause, effective November 19, 1995, in accordance with
Section 7 (a) (v) of the said agreement, on account of his breach of Section 12
thereof. Respondent Zosa was further
advised that he shall have no further rights under the said Agreement or any
claims against the Manager or the Corporation except the right to receive
within thirty (30) days from November 19, 1995, the amounts stated in Section 8
(a) (i) (ii) of the Agreement.[8]
Disagreeing with the
position taken by petitioners, respondent Zosa invoked the Arbitration Clause
of the Employment Agreement, to wit:
“23. Arbitration. In the event that any dispute, controversy or claim arises out of or under any provisions of this Agreement, then the parties hereto agree to submit such dispute, controversy or claim to arbitration as set forth in this Section and the determination to be made in such arbitration shall be final and binding. Arbitration shall be effected by a panel of three arbitrators. The Manager, Employee and Corporation shall designate one (1) arbitrator who shall, in turn, nominate and elect who among them shall be the chairman of the committee. Any such arbitration, including the rendering of an arbitration award, shall take place in Metro Manila. The arbitrators shall interpret this Agreement in accordance with the substantive laws of the Republic of the Philippines. The arbitrators shall have no power to add to, subtract from or otherwise modify the terms of Agreement or to grant injunctive relief of any nature. Any judgment upon the award of the arbitrators may be entered in any court having jurisdiction thereof, with costs of the arbitration to be borne equally by the parties, except that each party shall pay the fees and expenses of its own counsel in the arbitration.”
On November 10, 1995,
respondent Zosa designated his brother, Atty. Francis Zosa, as his
representative in the arbitration panel[9] while MCHC
designated Atty. Inigo S. Fojas[10] and MCMC nominated
Atty. Enrique I. Quiason[11] as their
respective representatives in the arbitration panel. However, instead of submitting the dispute to arbitration,
respondent Zosa, on April 17, 1996, filed an action for damages against
petitioners before the Regional Trial Court of Cebu[12] to enforce his
benefits under the Employment Agreement.
On July 3, 1996,
petitioners filed a motion to dismiss[13] arguing that (1)
the trial court has no jurisdiction over the instant case since respondent
Zosa's claims should be resolved through arbitration pursuant to Section 23 of
the Employment Agreement with petitioners; and (2) the venue is
improperly laid since respondent Zosa, like the petitioners, is a resident of Pasig City and thus, the venue
of this case, granting without admitting that the respondent has a cause of
action against the petitioners cognizable by the RTC, should be limited only to
RTC-Pasig City.[14]
Meanwhile, respondent
Zosa filed an amended complaint dated July 5, 1996.
On August 1, 1996,
the RTC Branch 58 of Cebu City issued an Order denying petitioners motion to
dismiss upon the findings that (1) the validity and legality of the arbitration
provision can only be determined after trial on the merits; and (2) the amount
of damages claimed, which is over P100,000.00, falls within the jurisdiction of
the RTC.[15] Petitioners filed
a motion for reconsideration which was denied by the RTC in an order dated September
5, 1996.[16]
In the interim, on August
22, 1996, in compliance with the earlier order of the court directing
petitioners to file responsive pleading to the amended complaint, petitioners
filed their Answer Ad Cautelam with counterclaim reiterating their
position that the dispute should be settled through arbitration and the court
had no jurisdiction over the nature of the action.[17]
On October 21, 1996, the
trial court issued its pre-trial order declaring the pre-trial stage terminated
and setting the case for hearing. The
order states:
“ISSUES:
“The Court will only resolve one issue in so far as this case is concerned, to wit:
“Whether or not the Arbitration Clause contained in Sec.23 of the Employment Agreement is void and of no effect: and, if it is void and of no effect, whether or not the plaintiff is entitled to damages in accordance with his complaint and the defendants in accordance with their counterclaim.
“It is understood, that in the event the arbitration clause is
valid and binding between the parties, the parties shall submit their
respective claim to the Arbitration Committee in accordance with the said
arbitration clause, in which event, this case shall be deemed dismissed.”[18]
On November 18, 1996,
petitioners filed their Motion Ad Cautelam for the Correction, Addition
and Clarification of the Pre-trial Order dated November 15 1996,[19] which was denied
by the court in an order dated November 28, 1996.[20]
Thereafter, petitioners
MCMC and MCHC filed a Motion Ad Cautelam for the parties to file their
Memoranda to support their respective stand on the issue of the validity of the
“arbitration clause” contained in the Employment Agreement. In an order dated December 13, 1996,
the trial court denied the motion of petitioners MCMC and MCHC.
On January 17, 1997,
petitioners MCMC and MCHC filed a petition for certiorari and prohibition under
Rule 65 of the Rules of Court with the Court of Appeals, questioning the trial
court orders dated August 1, 1996, September 5, 1996, and December 13, 1996.[21]
On March 21, 1997, the
Court of Appeals rendered a decision, giving due course to the petition, the
decretal portion of which reads:
“WHEREFORE, the petition is GIVEN DUE COURSE. The respondent court is directed to resolve the issue on the validity or effectivity of the arbitration clause in the Employment Agreement, and to suspend further proceedings in the trial on the merits until the said issue is resolved. The questioned orders are set aside insofar as they contravene this Court’s resolution of the issues raised as herein pronounced.
“The petitioner is required to remit to this Court the sum of P81.80 for cost within five (5) days from notice.
“SO ORDERED.”[22]
Petitioners filed a
motion for partial reconsideration of the CA decision praying (1) for the
dismissal of the case in the trial court, on the ground of lack of
jurisdiction, and (2) that the parties be directed to submit their dispute to
arbitration in accordance with the Employment Agreement dated March
1994. The CA, in a resolution
promulgated on June 20, 1997, denied the motion for partial reconsideration for
lack of merit.
In compliance with the CA
decision, the trial court, on July 18, 1997, rendered a decision declaring the
“arbitration clause” in the Employment Agreement partially void and of
no effect. The dispositive portion of the decision reads:
“WHEREFORE, premises considered, judgment is hereby rendered
partially declaring the arbitration clause of the Employment Agreement void and
of no effect, only insofar as it concerns the composition of the panel of
arbitrators, and directing the parties to proceed to arbitration in accordance
with the Employment Agreement under the panel of three (3) arbitrators, one for
the plaintiff, one for the defendants, and the third to be chosen by both the
plaintiff and defendants. The other
terms, conditions and stipulations in the arbitration clause remain in force
and effect."[23]
In view of the trial
court’s decision, petitioners filed this petition for review on
certiorari, under Rule 45 of the Rules of Court, assigning the following errors
for the Court’s resolution:
“I. The trial court gravely erred when it ruled that the arbitration clause under the employment agreement is partially void and of no effect, considering that:
“A. The arbitration clause in the employment agreement dated March 1994 between respondent Zosa and defendants MCHC and MCMC is valid and binding upon the parties thereto.
“B. In view of the fact that there are three parties to the employment agreement, it is but proper that each party be represented in the arbitration panel.
“C. The trial court grievously erred in its conclusion that petitioners MCMC and MCHC represent the same interest.
“D. Respondent Zosa is estopped from questioning the validity of the arbitration clause, including the right of petitioner MCMC to nominate its own arbitrator, which he himself has invoked.
“II. In any event, the trial court acted without jurisdiction in hearing the case below, considering that it has no jurisdiction over the nature of the action or suit since controversies in the election or appointment of officers or managers of a corporation, such as the action brought by respondent Zosa, fall within the original and exclusive jurisdiction of the Securities and Exchange Commission.
“III. Contrary to respondent Zosa’s allegation, the issue of the trial court’s jurisdiction over the case below has not yet been resolved with finality considering that petitioners have expressly reserved their right to raise said issue in the instant petition. Moreover, the principle of the law of the case is not applicable in the instant case.
“IV. Contrary to respondent Zosa’s allegation, petitioners MCMC and MCHC are not guilty of forum shopping.
“V. Contrary to respondent Zosa’s allegation, the instant petition
for review involves only questions of law and not of fact.”[24]
We rule against the
petitioners.
It is error for the
petitioners to claim that the case should fall under the jurisdiction of the Securities
and Exchange Commission [SEC, for brevity].
The controversy does not in anyway involve the election/appointment of
officers of petitioner MCHC, as claimed by petitioners in their assignment of
errors. Respondent Zosa’s amended
complaint focuses heavily on the illegality of the Employment Agreement’s
“Arbitration Clause” initially invoked by him in seeking his termination
benefits under Section 8 of the employment contract. And under Republic Act No. 876, otherwise known as the
“Arbitration Law,” it is the regional trial court which exercises jurisdiction
over questions relating to arbitration.
We thus advert to the following discussions made by the Court of
Appeals, speaking thru Justice Minerva P. Gonzaga-Reyes,[25] in C.A.-G.R. S.P.
No. 43059, viz:
“As regards the fourth assigned error, asserting that jurisdiction lies with the SEC, which is raised for the first time in this petition, suffice it to state that the Amended Complaint squarely put in issue the question whether the Arbitration Clause is valid and effective between the parties. Although the controversy which spawned the action concerns the validity of the termination of the service of a corporate officer, the issue on the validity and effectivity of the arbitration clause is determinable by the regular courts, and do not fall within the exclusive and original jurisdiction of the SEC.
“The determination and validity of the agreement is not a matter
intrinsically connected with the regulation and internal affairs of
corporations (see Pereyra vs. IAC, 181 SCRA 244; Sales vs. SEC, 169 SCRA 121);
it is rather an ordinary case to be decided in accordance with the general
laws, and do not require any particular expertise or training to interpret and apply
(Viray vs. CA, 191 SCRA 308).”[26]
Furthermore, the decision
of the Court of Appeals in CA-G.R. SP No. 43059 affirming the trial court’s
assumption of jurisdiction over the case has become the “law of the case” which
now binds the petitioners. The “law of
the case” doctrine has been defined as “a term applied to an established rule
that when an appellate court passes on a question and remands the cause to the
lower court for further proceedings, the question there settled becomes the law
of the case upon subsequent appeal.”[27] To note, the CA’s
decision in CA-G.R. SP No. 43059 has already attained finality as evidenced by
a Resolution of this Court ordering entry of judgment of said case, to wit:
“ENTRY OF JUDGMENT
This is to certify that on September 8, 1997 a decision/resolution rendered in the above-entitled case was filed in this Office, the dispositive part of which reads as follows:
‘G.R. No. 129615 (Magellan Capital Management Corporation, et al. vs. Court of Appeals, Rolando Zosa, et al.).- Considering the petitioner’s manifestation dated August 11, 1997 and withdrawal of intention to file petition for review on certiorari, the Court Resolved to DECLARE THIS CASE TERMINATED and DIRECT the Clerk of Court to INFORM the parties that the judgment sought to be reviewed has become final and executory, no appeal therefore having been timely perfected.’
and that the same has, on September 17,
1997, become final and executory and is hereby recorded in the Book of Entries
of Judgments.” [28]
Petitioners,
therefore, are barred from challenging anew, through another remedial measure
and in any other forum, the authority of the regional trial court to resolve
the validity of the arbitration clause, lest they be truly guilty of
forum-shopping which the courts consistently consider as a contumacious
practice that derails the orderly administration of justice.
Equally unavailing for
the petitioners is the review by this Court, via the instant petition, of the
factual findings made by the trial court that the composition of the panel of
arbitrators would, in all probability, work injustice to respondent Zosa. We have repeatedly stressed that the
jurisdiction of this Court in a petition for review on certiorari under Rule 45
of the Revised Rules of Court is limited to reviewing only errors of law, not
of fact, unless the factual findings complained of are devoid of support by the
evidence on record, or the assailed judgment is based on misapprehension of
facts.[29]
Even if procedural rules
are disregarded, and a scrutiny of the merits of the case is undertaken, this
Court finds the trial court’s observations on why the composition of the panel
of arbitrators should be voided, incisively correct so as to merit our approval. Thus,
“From the memoranda of both sides, the Court is of the view that the defendants [petitioner] MCMC and MCHC represent the same interest. There is no quarrel that both defendants are entirely two different corporations with personalities distinct and separate from each other and that a corporation has a personality distinct and separate from those persons composing the corporation as well as from that of any other legal entity to which it may be related.
“But as the defendants [herein petitioner] represent the same interest, it could never be expected, in the arbitration proceedings, that they would not protect and preserve their own interest, much less, would both or either favor the interest of the plaintiff. The arbitration law, as all other laws, is intended for the good and welfare of everybody. In fact, what is being challenged by the plaintiff herein is not the law itself but the provision of the Employment Agreement based on the said law, which is the arbitration clause but only as regards the composition of the panel of arbitrators. The arbitration clause in question provides, thus:
‘In the event that any dispute, controversy or claim arise out of or under any provisions of this Agreement, then the parties hereto agree to submit such dispute, controversy or claim to arbitration as set forth in this Section and the determination to be made in such arbitration shall be final and binding. Arbitration shall be effected by a panel of three arbitrators. The Manager, Employee, and Corporation shall designate one (1) arbitrator who shall, in turn, nominate and elect as who among them shall be the chairman of the committee. Any such arbitration, including the rendering of an arbitration award, shall take place in Metro Manila. The arbitrators shall interpret this Agreement in accordance with the substantive laws of the Republic of the Philippines. The arbitrators shall have no power to add to, subtract from or otherwise modify the terms of this Agreement or to grant injunctive relief of any nature. Any judgment upon the award of the arbitrators may be entered in any court having jurisdiction thereof, with costs of the arbitration to be borne equally by the parties, except that each party shall pay the fees and expenses of its own counsel in the arbitration.’ (Emphasis supplied).
“From the foregoing arbitration clause, it appears that the two (2) defendants [petitioners] (MCMC and MCHC) have one (1) arbitrator each to compose the panel of three (3) arbitrators. As the defendant MCMC is the Manager of defendant MCHC, its decision or vote in the arbitration proceeding would naturally and certainly be in favor of its employer and the defendant MCHC would have to protect and preserve its own interest; hence, the two (2) votes of both defendants (MCMC and MCHC) would certainly be against the lone arbitrator for the plaintiff [herein defendant]. Hence, apparently, plaintiff [defendant] would never get or receive justice and fairness in the arbitration proceedings from the panel of arbitrators as provided in the aforequoted arbitration clause. In fairness and justice to the plaintiff [defendant], the two defendants (MCMC and MCHC)[herein petitioners] which represent the same interest should be considered as one and should be entitled to only one arbitrator to represent them in the arbitration proceedings. Accordingly, the arbitration clause, insofar as the composition of the panel of arbitrators is concerned should be declared void and of no effect, because the law says, “Any clause giving one of the parties power to choose more arbitrators than the other is void and of no effect” (Article 2045, Civil Code).
“The dispute or controversy between the defendants (MCMC and MCHC) [herein petitioners] and the plaintiff [herein defendant] should be settled in the arbitration proceeding in accordance with the Employment Agreement, but under the panel of three (3) arbitrators, one (1) arbitrator to represent the plaintiff, one (1) arbitrator to represent both defendants (MCMC and MCHC)[herein petitioners] and the third arbitrator to be chosen by the plaintiff [defendant Zosa] and defendants [petitioners].
“x x x x x x x x x”[30]
In this connection,
petitioners’ attempt to put respondent in estoppel in assailing the arbitration
clause must be struck down. For one,
this issue of estoppel, as likewise noted by the Court of Appeals, found its
way for the first time only on appeal.
Well-settled is the rule that issues not raised below cannot be resolved
on review in higher courts.[31] Secondly,
employment agreements such as the one at bar are usually contracts of
adhesion. Any ambiguity in its
provisions is generally resolved against the party who drafted the
document. Thus, in the relatively
recent case of Phil. Federation of Credit Cooperatives, Inc.
(PFCCI) and Fr. Benedicto Jayoma vs. NLRC and Victoria Abril,[32] we had the
occasion to stress that “where a contract of employment, being a contract of
adhesion, is ambiguous, any ambiguity therein should be construed strictly
against the party who prepared it.” And, finally, respondent Zosa never
submitted himself to arbitration proceedings (as there was none yet) before
bewailing the composition of the panel of arbitrators. He in fact, lost no time in assailing the
“arbitration clause” upon realizing the inequities that may mar the arbitration
proceedings if the existing line-up of arbitrators remained unchecked.
We need only to emphasize
in closing that arbitration proceedings are designed to level the playing field
among the parties in pursuit of a mutually acceptable solution to their
conflicting claims. Any arrangement or
scheme that would give undue advantage to a party in the negotiating table is
anathema to the very purpose of arbitration and should, therefore, be resisted.
WHEREFORE, premises considered, the petition is hereby
DISMISSED and the decision of the trial court dated July 18, 1997 is AFFIRMED.
SO ORDERED.
Bellosillo, (Chairman),
Mendoza, and De Leon, Jr., JJ., concur.
Quisumbing, J., on leave.
[1] Section 1 of Amended
and Restated Management Agreement, Annex, "B," Rollo p. 74.
[2] par. 2 of the
Pre-Trial Order dated October 21, 1996; Annex "BB," Rollo, p. 241.
[3] Annex "C"
of Petition, Rollo, pp.89-101; 217 - 229.
[4] par. 5 of
Petitioner's Memorandum, Rollo, p. 560.
[5] par. 5.1 - 6.4, ibid.,
Rollo, pp. 560-562.
[6] par. 4, ibid.,
Rollo, p. 559.
[7] par. 6-7, Amended
Complaint, Rollo, pp. 173-174; p. 562.
[8] Annex "O"
of Petition, Rollo, p. 130.
[9] Annex "P"
of Petition, Rollo, p. 131.
[10] Annex "R"
of Petition, Rollo, p. 133.
[11] Annex "Q"
of Petition, Rollo, p. 132.
[12] Annex
"BB," Rollo, p. 241.
[13] Annex "S,"
Rollo, pp. 134- 145.
[14] Annex "U,"
Rollo, p. 179.
[15] Annex "X,"
Rollo, p. 185 - 186.
[16] Annex “AA,” Rollo,
p. 240.
[17] Par. 9, Petitioner’s
Memorandum, Rollo, p. 566.
[18] Pre-trial Order,
Annex “BB,” Rollo, pp. 241-243.
[19] Annex ”CC,” Rollo,
pp. 248; 566-567.
[20] Annex “DD,” Rollo,
p. 252.
[21] The issues submitted to the Court of Appeals are as
follows:
“I.
RESPONDENT COURT ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN IT ISSUED THE QUESTIONED ORDERS DATED 1 AUGUST 1996 (ANNEX ‘A’), 05 SEPTEMBER 1996 (ANNEX ‘B’) AND 13 DECEMBER 1996 (ANNEX ‘C’) WHICH DEFERRED THE RESOLUTION OF THE ISSUE REGARDING THE VALIDITY OF THE ARBITRATION CLAUSE IN THE EMPLOYMENT AGREEMENT UNTIL AFTER TRIAL ON THE MERITS.
“II.
RESPONDENT COURT ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN IT FAILED TO RULE THAT THE ARBITRATION CLAUSE UNDER THE EMPLOYMENT AGREEMENT IS VALID AND BINDING ON THE PARTIES THERETO.
“III.
RESPONDENT COURT ACTED WITHOUT OR IN EXCESS OF JURISDICTION WHEN IT TOOK COGNIZANCE OF RESPONDENT ZOSA’S AMENDED COMPLAINT INSTEAD OF REFERRING THE SAME IMMEDIATELY TO ARBITRATION PURSUANT TO THE EMPLOYMENT AGREEMENT BETWEEN PETITIONERS AND RESPONDENT ZOSA.
“IV.
IN ANY EVENT, RESPONDENT COURT ACTED AND IS CONTINUING TO ACT WITHOUT JURISDICTION IN HEARING THE CASE BELOW, CONSIDERING THAT IT HAS NO JURISDICTION OVER THE NATURE OF THE ACTION OR SUIT SINCE CONTROVERSIES IN THE ELECTION OR APPOINTMENT OF OFFICERS OR MANAGERS OF A CORPORATION, SUCH AS THE ACTION BROUGHT BY RESPONDENT ZOSA, FALL WITHIN THE ORIGINAL AND EXCLUSIVE JURISDICTION OF THE SECURITIES AND EXCHANGE COMMISSION.
“V.
RESPONDENT COURT ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN IT REFUSED TO DISMISS THE ACTION BELOW FOR IMPROPER VENUE.
“VI.
RESPONDENT COURT ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN IT FAILED TO DISMISS THE AMENDED COMPLAINT FOR LACK OF THE REQUISITE CERTIFICATION OF NON-FORUM SHOPPING.”
Court of Appeals’ Decision, pp. 5-6; Rollo, pp.
316-317.
[22] Ibid., pp.
329-330.
[23] Annex “A,” RTC
Decision, pp. 72-73.
[24] Rollo, pp.
571-573.
[25] Now Associate
Justice of this Court.
[26] Court of Appeals Decision, p. 16; Rollo, p.
321.
[27] Loevillo C. Agustin vs.
Court of Appeals and Filinvest Finance Corporation, 271 SCRA 457 [1997].
[28] Rollo, p.
350.
[29] Congregation of the
Religious of the Virgin Mary vs. CA, 291 SCRA 385 [1998].
[30] Rollo, pp.
71-72.
[31] Casolita, Sr. vs.
Court of Appeals, 275 SCRA 257 [1997]; Manalili vs. Court of Appeals,
280 SCRA 400 [1997].
[32] G.R. No. 121071,
December 11, 1998.