Ponente: Leonen, J.
FACTS:
·
In 1996, Aboitiz Shipping Corporation (ASC),
Carlos A. Gothong Lines, Inc. (CAGLI), and William Lines, Inc. (WLI) entered
into an agreement (Agreement) whereby ASC and CAGLI would transfer their
shipping assets to WLI in exchange for WLI’s shares of stock. WLI, in turn, would
run their merged shipping businesses and, henceforth, be known as WG&A,
Inc. Part of the Agreement was that any dispute arising out of it which cannot
be settled amicably shall be settled by arbitration.
·
Attached to the Agreement was Annex SL-V,
which confirmed WLI’s commitment to acquire certain inventories of CAGLI in the
amount of P400M. Pursuant to said Annex, inventories worth P558M were
transferred from CAGLI to WLI. CAGLI was paid P400M plus WG&A shares with a
book value of P38.5M.
·
Since there was still balance, CAGLI sent
WG&A (formerly WIL) demand letters in 2001 for the return of or the payment
for the excess inventories. Aboitiz Equity Ventures (AEV) alleged that to
satisfy CAGLI’s demand, WLI/WG&A returned inventories amounting to P120.04M.
·
Subsequently, in 2002, the Chiongbian family
(of WLI) and the Gothong family (of CAGLI) decided to leave the WG&A
enterprise and sell their interest in WG&A to the Aboitiz family. As such,
a share purchase agreement (SPA) was entered into by AEV and the respective
shareholders groups of the Chiongbians and Gothongs, where AEV agreed to
purchase the latter's shares. The SPA included a provision for arbitration in
case disputes are not settled amicably, and another provision terminating the
aforecited Agreement except Annex SL-V.
·
As part of the SPA, the parties entered into
an Escrow Agreement whereby ING Bank N.V.-Manila Branch was to take custody of
the shares subject of the SPA. The Escrow Agreement provided that all disputes
arising from it shall be settled through arbitration
·
.As a result of the SPA, AEV became a
stockholder of WG&A. Subsequently, WG&A was renamed Aboitiz Transport
Shipping Corporation (ATSC).
·
In 2008, CAGLI resumed making demands despite
having already received P120.04M worth of excess inventories. These demand
letters were addressed to AEV and another company affiliated with the
Chiongbian family.
AEV
responded to CAGLI’s demands through several letters, stating that:
1.
CAGLI already received the excess inventories;
2.
AEV was not a party to CAGLI's claim as it had
a personality distinct from WLI/WG&A/ATSC; and
3.
CAGLI's claim was already barred by
prescription.
·
CAGLI threatened to pursue arbitration against
AEV unless receipts for the purported deliveries were made available. AEV
responded by providing a listing and/or samples of the corresponding delivery
receipts showing that in fact, it is AEV which should demand for a refund
because it made a payment of P120.04M when the amount of excess inventoriess
was only worth P119.89M.
·
Its claims left unsatisfied, CAGLI filed two
applications for arbitration against AEV before the Cebu City RTC. The first
application was filed before Branch 20 and the second one before Branch
10.
FIRST APPLICATION FOR ARBITRATION
·
Filed before the Cebu City RTC Branch 20 to
demand AEV to return the excess inventories. It was dismissed as to AEV (but
not as to the other parties) because:
1.
AEV was never a party to the 1996 Agreement or
to its Annex SL-V; and
2.
while AEV is a party to the SPA and Escrow
Agreement, CAGLI's claim had no connection to either agreement.
·
In sum, the dismissal of the complaint was
based on the court's findings that no contract or document exists binding CAGLI
and AEV to arbitrate the former’s claim. The WLI Letter upon which the claim is
based confirms only the commitment of WLI to purchase certain material
inventories from CAGLI. It does not involve AEV.
SECOND APPLICATION FOR ARBITRATION
·
While the first application for arbitration
was pending, CAGLI, now joined by its EVP for Engineering Benjamin D. Gothong,
filed a second application for arbitration before Branch 10 of the Cebu City
RTC. This complaint was also in view of the return of the same excess
inventories subject of the first complaint.
·
AEV filed a motion to dismiss the second
complaint on the following grounds: (1) forum shopping; (2) failure to state a
cause of action; (3) res judicata; and (4) litis pendentia. The said motion was
denied. MR likewise denied.
·
Hence, the instant petition.
RULING:
Whether
the complaint in the second application for arbitration constitutes forum
shopping and/or is barred by res judicata and/or litis pendentia. – YES.
CAGLI engaged in forum shopping
·
Forum shopping is committed by a party who
institutes two or more suits in different courts, either simultaneously or
successively, in order to ask the courts to rule on the same or related causes
or to grant the same or substantially the same reliefs, on the supposition that
one or the other court would make a favorable disposition or increase a party's
chances of obtaining a favorable decision or action. It is an act of
malpractice for it trifles with the courts, abuses their processes, degrades
the administration of justice and adds to the already congested court dockets.
·
The test for determining forum shopping is
whether in the two (or more) cases pending, there is identity of parties,
rights or causes of action, and reliefs sought.
·
In the present case, CAGLI committed an act of
forum shopping in filing the second complaint. CAGLI instituted two suits in
two regional trial court branches, albeit successively and not simultaneously.
It asked both branches to rule on the exact same cause and to grant the exact
same relief. CAGLI did so after it had obtained an unfavorable decision (at
least with respect to AEV) from Branch 20. These circumstances afford the
reasonable inference that the second complaint was filed in the hopes of a more
favorable ruling.
SECOND COMPLAINT IS BARRED BY RES JUDICATA
·
Prior judgment or res judicata bars a
subsequent case when the following requisites concur: (1) the former judgment
is final; (2) it is rendered by a court having jurisdiction over the subject
matter and the parties; (3) it is a judgment or an order on the merits; (4)
there is — between the first and the second actions — identity of parties, of
subject matter, and of causes of action.
·
In the present case, the dismissal of the
first application for arbitration filed by CAGLI attained finality when CAGLI
did not file a motion for reconsideration, appealed, or, in any other manner,
questioned the order.
·
More importantly, the dismissal of the first
complaint with respect to AEV was a judgment on the merits. A judgment may be
considered as one rendered on the merits when it determines the rights and
liabilities of the parties based on the disclosed facts, irrespective of
formal, technical or dilatoryobjections; or when the judgment is rendered after
a determination of which party is right, as distinguished from a judgment
rendered upon some preliminary or formal or merely technical point.
LITIS PENDENTIA
·
Litis pendentia refers to that situation
wherein another action is pending between the same parties for the same cause
ofaction, such that the second action becomes unnecessary and vexatious."
It requires the concurrence of three (3) requisites: (1)the identity of
parties, or at least such as representing the same interests in both actions;
(2) the identity of rights asserted and relief prayed for,the relief being
founded on the same facts; and (3) the identity of the two cases such that
judgment in one, regardless of which party issuccessful, would amount tores
judicatain the other.
Identity
of parties
·
As applied in the instant case, between the
first and second complaints, there is identity of parties. The first complaint
was brought by CAGLI as the sole plaintiff against Victor S. Chiongbian, ATSC,
and AEV as defendants. In the second complaint, CAGLI was joined by Benjamin D.
Gothong as (co-)plaintiff. As to the defendants, ATSC was deleted while
Chiongbian and AEV were retained.
·
While it is true that the parties to the first
and second complaints are not absolutely identical, this court has clarified
that, for purposes of forum shopping, absolute identity of parties is not
required and that it is enough that there is substantial identity of parties.
·
Even as the second complaint alleges that
Benjamin D. Gothong is suing in his personal capacity, Gothong failed to show
any personal interest in the reliefs sought by the second complaint.
Ultimately, what is at stake in the second complaint is the extent to which
CAGLI may compel AEV and Chiongbian to arbitrate in order that CAGLI may then
recover the value of its alleged unreturned inventories.
·
While it is true that Benjamin D. Gothong
signed Annex SL-V, he did so only as a representative of CAGLI, and not in a
personal, capacity. As such, Bhe cannot claim any right that personally accrues
to him on account of Annex SL-V. From this, it follows that Benjamin D. Gothong
is not a real party in interest and that his inclusion in the second complaint
is an unnecessary superfluity.
Identity
of subject matter and cause of action
·
There is identity in subject matter as both
complaints are applications for the same relief. There is identity in cause of
action as both complaints are grounded on the right to be paid for or to
receive the value of excess inventories (and the supposed corresponding breach
thereof) as spelled out in Annex SL-V.
·
Both complaints also rely on the same
instrument (i.e., Annex SL-V) and same factual averments.
Whether
Aboitiz Equity Ventures (AEV) is bound by an agreement to arbitrate with CAGLI
with respect to the latter’s claims for unreturned inventories delivered to
WLI/WG&A, Inc./Aboitiz Transport System Corporation. – NO.
·
Except where a compulsory arbitration is
provided by statute, the first step toward the settlement of a difference by
arbitration is the entry by the parties into a valid agreement to arbitrate. As
no statute is involved in the present case, a study of the contracts/agreements
entered into by the parties is proper.
·
Four distinct contracts are involved here:
1.
1996 Agreement in which ASC, CAGLI, and WLI
merged their shipping enterprises, with WLI (subsequently renamed WG&A) as
the surviving entity
·
SC: AEV was never a part of this
Agreement.
2.
Annex SL-V of the Agreement between CAGLI and
WLI.
·
SC: This contract is only between WLI
and CAGLI. Notably, it has no arbitration clause. Granted, neither WLI nor
CAGLI can compel arbitration under Annex SL-V. But even when considered in
light of the arbitration clause of the 1996 Agreement as a whole, said clause
does not contemplate disputes arising from Annex SL-V.
·
While the principle of privity or relativity
of contracts acknowledges that contractual obligations are transmissible to a
party’s assigns and heirs, AEV is not WLI’s successor-in-interest. If anything,
it is ATSC that is liable under Annex SL-V.
·
Pursuant to the SPA, the Gothong group and the
Chiongbian group transferred their shares to AEV. With the SPA, AEV became a
stockholder of WLI/WG&A, which was subsequently renamed ATSC. Nonetheless,
AEV’s status as ATSC’s stockholder does not subject it to ATSC’s obligations.
·
A corporation has a personality separate and
distinct from that of its individual stockholders. Thus, a stockholder does not
automatically assume the liabilities of the corporation of which he is a
stockholder.
·
A corporation is an artificial entity created
by operation of law. It possesses the right of succession and such powers, attributes,
and properties expressly authorized by law or incident to its existence. It has
a personality separate and distinct from that of its stockholders and from that
of other corporations to which it may be connected. As a consequence of its
status as a distinct legal entityand as a result of a conscious policy decision
to promote capital formation, a corporation incurs its own liabilities and is
legally responsible for payment of its obligations. In other words, by virtue
of the separate juridical personality ofa corporation, the corporate debt or
credit is not the debt or credit of the stockholder. This protection from
liability for shareholders is the principle of limited liability
·
A corporation is invested by law with a
personality separate from thatof its stockholders or members. It has a
personality separate and distinct from those of the persons composing it as
well as from that of any other entity to which it may be related. Mere
ownership by a single stockholder or by another corporation of all or nearly
all of the capital stock of a corporation is not in itself sufficient ground
for disregarding the separate corporate personality.A corporation’s authority
to act and its liability for its actions are separate and apart from the
individuals who own it.
·
All told, AEV’s status as ATSC’s stockholder
is, in and of itself, insufficient to make AEV liable for ATSC’s obligations.
3.
Share Purchase Agreement or SPA in which AEV
agreed to purchase the Chiongbian and Gothong groups' shares in WG&A’s
issued and outstanding stock.
·
SC: AEV was drawn into the present
controversy on account of its having entered into the SPA. This SPA made AEV a
stockholder of WLI/WG&A/ATSC. Even then, AEV retained a personality
separate and distinct from WLI/WG&A/ATSC. The SPA did not render AEV
personally liable for the obligations of the corporation whose stocks it held.
4
Escrow Agreement whereby ING Bank N.V.-Manila
Branch was to take custody of the shares subject of the SPA.
·
SC: Not relevant in the disposition of
the present case.
Whether
AEV availed of the proper remedy in challenging before the SC the orders of the
Cebu City RTC Branch 10. – NO.
Whether
AEV's petition should have been dismissed outright on the ground of procedural
infirmity. – YES, BUT...
·
AEV is in error in seeking relief from this
court via a petition for review on certiorari under Rule 45, which is a mode of
appeal on a judgment or final order that completely disposes of the case.
·
A motion to dismiss is a mere interlocutory
order which, by all counts, is not a final order. The general rule is that the
denial of a motion to dismiss cannot be questioned in a special civil action
for certiorari, which is a remedy designed to correct errors of jurisdiction
and not errors of judgment. Neither can a denial of a motion to dismiss be the
subject of an appeal unless and until a final judgment or order is rendered. In
order to justify the grant of the extraordinary remedy of certiorari, the
denial of the motion to dismiss must have been tainted with grave abuse of
discretion amounting to lack or excess of jurisdiction.
·
Since AEV availed of the improper remedy, this
court is well in a position to dismiss the present petition.
·
BUT...
·
There have been instances when a petition for
review on certiorari under Rule 45 was treated by the SC as a petition for
certiorari under Rule 65. These include cases where the subject of the recourse
was one of jurisdiction, or the act complained of was perpetrated by a court
with grave abuse of discretion amounting to lack or excess of jurisdiction.
·
In the present case, Cebu City RTC Branch 10’s
orders are assailed for having been made with grave abuse of discretion
amounting to lack or excess of jurisdiction in that the said court chose to
continue taking cognizance of the second complaint, despite there being
compelling reasons for its dismissal and the Cebu City RTC Branch 20’s
desistance.
·
Therefore, the present petition shall be
treated as a petition for certiorari under Rule 65 and shall be given due
course.