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Magellan Vs Zosa Digest
Magellan Vs Zosa Digest
March 26, 2001] one (1) arbitrator who shall, in turn, nominate and elect who
MAGELLAN CAPITAL MANAGEMENT CORPORATION and MAGELLAN among them shall be the chairman of the committee. Any such
CAPITAL HOLDINGS CORPORATION, petitioners, vs. ROLANDO M. arbitration, including the rendering of an arbitration award, shall take
ZOSA and HON. JOSE P. SOBERANO, JR., in his capacity as place in Metro Manila. The arbitrators shall interpret this Agreement in
Presiding Judge of Branch 58 of the Regional Trial Court Of Cebu, accordance with the substantive laws of the Republic of the
7th Judicial Region, respondents. 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
FACTS: March 18, 1994 – a management agreement were entered entered in any court having jurisdiction thereof, with costs of the
between Magellan Capital Holdings Corporation [MCHC] and Magellan arbitration to be borne equally by the parties, except that each party shall
Capital Management Corporation [MCMC] the latter being appointed as the pay the fees and expenses of its own counsel in the arbitration.
manager for the operation of its business and affairs of the prior.
November 10, 1995 - respondent Zosa designated his brother, Atty.
MCHC, MCMC, and private respondent Rolando M. Zosa entered into an
Francis Zosa, as his representative while MCHC designated Atty. Inigo S.
"Employment Agreement" designating Zosa as President and Chief
Fojas[10] and MCMC nominated Atty. Enrique I. Quiason[11] as their
Executive Officer of MCHC.
respective representatives in the arbitration panel.
Under the "Employment Agreement", the term of respondent Zosa's
employment shall be co-terminous with the management agreement, or But instead of submitting the dispute to arbitration, respondent Zosa, on
until March 1996,[2] unless sooner terminated pursuant to the provisions of April 17, 1996, filed an action for damages against petitioners before the
the Employment Agreement. RTC OF CEBU[12] to enforce his benefits under the Employment Agreement.
May 10, 1995 - majority of MCHCs Board of Directors decided not to re- July 3, 1996 - petitioners filed a motion to dismiss[13] arguing that (1) the
elect respondent Zosa as President and Chief Executive Officer of MCHC on trial court has no jurisdiction over the instant case since respondent Zosa's
account of loss of trust and confidence[4] arising from alleged violation of claims should be resolved through arbitration pursuant to Section 23 of
the resolution issued by MCHC's board of directors and of the non- the Employment Agreement with petitioners; and (2) the venue is
competition clause of the Employment Agreement.[5] Nevertheless, improperly laid since respondent Zosa, like the petitioners, is a resident of
respondent Zosa was elected to a new position as MCHC's Vice- Pasig City thus the case is cognizable by RTC of PASIG.
Chairman/Chairman for New Ventures Development.
July 5, 1996 - respondent Zosa filed an amended complaint
September 26, 1995 - Zosa communicated his resignation for good reason
from the position of Vice-Chairman under paragraph 7 of the Employment August 1, 1996 - RTC Branch 58 of Cebu City issued an Order denying
Agreement on the ground that said position had less responsibility and petitioners motion to dismiss upon the findings that (1) the validity and
scope than President and Chief Executive Officer. He demanded that he be legality of the arbitration provision can only be determined after trial on
given termination benefits. the merits; and (2) the amount of damages claimed, which is over
P100,000.00, falls within the jurisdiction of the RTC.
October 20, 1995 - MCHC communicated its non-acceptance of respondent
Zosa's resignation for good reason, but instead terminated him for cause. MR: Denied
He was further advised that he shall have no further rights under the said
August 22, 1996 - in compliance with the earlier order of the court
Agreement or any claims against the Manager or the Corporation except
directing petitioners to file responsive pleading to the amended complaint,
the right to receive within thirty (30) days from November 19, 1995.
petitioners filed their Answer Ad Cautelam with counterclaim reiterating
Disagreeing with the position taken by petitioners, respondent Zosa their position that the dispute should be settled through arbitration and
invoked the Arbitration Clause of the Employment Agreement. the court had no jurisdiction over the nature of the action.
October 21, 1996 - the trial court issued its pre-trial order declaring the
23. Arbitration. In the event that any dispute, controversy or claim arises pre-trial stage terminated and setting the case for hearing. The order
out of or under any provisions of this Agreement, then the parties hereto states:
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
ISSUES:
shall be final and binding. Arbitration shall be effected by a panel of three
arbitrators. The Manager, Employee and Corporation shall designate
The Court will only resolve one issue in so far as this case is concerned, to arbitrators, and directing the parties to proceed to arbitration in
wit: accordance with the Employment Agreement under the panel of three (3)
arbitrators, one for the plaintiff, one for the defendants, and the third to
Whether or not the Arbitration Clause contained in Sec.23 of the be chosen by both the plaintiff and defendants. The other terms,
Employment Agreement is void and of no effect: and, if it is void and of no conditions and stipulations in the arbitration clause remain in force and
effect, whether or not the plaintiff is entitled to damages in accordance effect."[23]
with his complaint and the defendants in accordance with their
counterclaim. Hence the current petition for review on certiorari, under Rule 45 of the.
It is understood, that in the event the arbitration clause is valid and ISSUE/S:
binding between the parties, the parties shall submit their respective claim
to the Arbitration Committee in accordance with the said arbitration WON SEC has jurisdiction over the case - Negative
clause, in which event, this case shall be deemed dismissed.[18] WON Article 23 of the Employment Agreement or the Arbitration Clause
Valid - Affirmative
November 18, 1996, - petitioners filed their Motion Ad Cautelam for the
Correction, Addition and Clarification of the Pre-trial Order dated HELD:
November 15 1996. The controversy does not in any way involve the
November 28, 1996 – the court denied the Motion Ad Cautelam. election/appointment of officers of petitioner MCHC, as claimed by
petitioners in their assignment of errors. Respondent Zosas amended
Petitioners MCMC and MCHC filed a Motion Ad Cautelam for the parties to complaint focuses heavily on the illegality of the Employment
file their Memoranda to support their respective stand on the issue of the Agreements Arbitration Clause initially invoked by him in seeking his
validity of the arbitration clause contained in the Employment Agreement.
termination benefits under Section 8 of the employment contract. And
December 13, 1996 - trial court denied the motion of petitioners MCMC under Republic Act No. 876, otherwise known as the Arbitration Law, it is
and MCHC. the regional trial court which exercises jurisdiction over questions relating
to arbitration.
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, That jurisdiction lies with the SEC, which is raised for the first time
September 5, 1996, and December 13, 1996. 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
CA: rendered a decision, RTC is directed to resolve the issue on the between the parties. Although the controversy which spawned the action
validity or effectivity of the arbitration clause in the Employment concerns the validity of the termination of the service of a corporate
Agreement, giving due course to the petition. 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
Petitioners filed a motion for partial reconsideration of the CA and original jurisdiction of the SEC.
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 The determination and validity of the agreement is not a matter
Agreement. intrinsically connected with the regulation and internal affairs of
corporations it is rather an ordinary case to be decided in accordance with
CA: denied the motion for partial reconsideration for lack of merit. the general laws, and do not require any particular expertise or training to
interpret and apply.
July 18, 1997 - In compliance with the CA decision, RTC rendered a
decision declaring the arbitration clause in the Employment
Agreement partially void and of no effect. Dispositive reads as. Decision of the CA affirming the trial courts assumption of
jurisdiction over the case has become the law of the case which now binds
WHEREFORE, premises considered, judgment is hereby rendered partially the petitioners. The law of the case doctrine has been defined as a term
declaring the arbitration clause of the Employment Agreement void and of applied to an established rule that when an appellate court passes on a
no effect, only insofar as it concerns the composition of the panel of question and remands the cause to the lower court for further
proceedings, the question there settled becomes the law of the case upon in the arbitration proceeding in accordance with the Employment
subsequent appeal.[27] CAs decision has already attained finality as Agreement, but under the panel of three (3) arbitrators, one (1) arbitrator
evidenced by a Resolution of this Court ordering entry of judgment of said to represent the plaintiff, one (1) arbitrator to represent both defendants
case. (MCMC and MCHC) [herein petitioners] and the third arbitrator to be
chosen by the plaintiff [defendant Zosa] and defendants [petitioners].
Petitioners, therefore, are barred from challenging anew, through
another remedial measure and in any other forum, the authority of the This issue of estoppel, well- settled is the rule that issues not raised below
regional trial court to resolve the validity of the arbitration clause. cannot be resolved on review in higher courts.[31] Secondly, employment
There is no quarrel that both defendants are entirely two different agreements such as the one at bar are usually contracts of adhesion. Any
corporations with personalities distinct and separate from each other and ambiguity in its provisions is generally resolved against the party who
that a corporation has a personality distinct and separate from those drafted the document.
persons composing the corporation as well as from that of any other legal
A contract of employment, being a contract of adhesion, is ambiguous, any
entity to which it may be related.
ambiguity therein should be construed strictly against the party who
But as the defendants [herein petitioner] represent the same interest, it prepared it. And, finally, respondent Zosa never submitted himself to
could never be expected, in the arbitration proceedings, that they would arbitration proceedings (as there was none yet) before bewailing the
not protect and preserve their own interest, much less, would both or composition of the panel of arbitrators. He in fact, lost no time in assailing
either favor the interest of the plaintiff. The arbitration law, as all other the arbitration clause upon realizing the inequities that may mar the
laws, is intended for the good and welfare of everybody. In fact, what is arbitration proceedings if the existing line-up of arbitrators remained
unchecked.
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 We need only to emphasize in closing that arbitration proceedings are
the arbitration clause but only as regards the composition of the panel of designed to level the playing field among the parties in pursuit of a
arbitrators. Arbitration Clause state: 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,
It appears that the two (2) defendants [petitioners] (MCMC and MCHC)
be resisted.
have one (1) arbitrator each to compose the panel of three (3)
arbitrators. As the defendant MCMC is the Manager of defendant MCHC, its WHEREFORE, premises considered, the petition is hereby
decision or vote in the arbitration proceeding would naturally and certainly DISMISSED and the decision of the trial court dated July 18, 1997 is
be in favor of its employer and the defendant MCHC would have to protect AFFIRMED.
and preserve its own interest; hence, the two (2) votes of both defendants SO ORDERED.
(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.