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  • Lanuza v. BF Corporation: G.R. No. 174938 October 1, 2014

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    Jerahmeel Cuevas
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    This case discusses whether members of a corporation's board of directors can be compelled to arbitrate a dispute when only the corporation signed an arbitration agreement. While directors are generally not bound by agreements signed only by the corporation, the court ruled that if they are alleged to have acted in bad faith or with malice regarding the corporation's actions, they can be considered necessary parties and compelled to participate in the arbitration to fully settle the claims. Here, the directors were alleged to have directed the corporation's affairs in a malicious way, so they could be included in the arbitration between the corporation and claimant.

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    Lanuza v

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    This case discusses whether members of a corporation's board of directors can be compelled to arbitrate a dispute when only the corporation signed an arbitration agreement. While directors are generally not bound by agreements signed only by the corporation, the court ruled that if they are alleged to have acted in bad faith or with malice regarding the corporation's actions, they can be considered necessary parties and compelled to participate in the arbitration to fully settle the claims. Here, the directors were alleged to have directed the corporation's affairs in a malicious way, so they could be included in the arbitration between the corporation and claimant.

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    30 views6 pages

    Lanuza v. BF Corporation: G.R. No. 174938 October 1, 2014

    Uploaded by

    Jerahmeel Cuevas
    This case discusses whether members of a corporation's board of directors can be compelled to arbitrate a dispute when only the corporation signed an arbitration agreement. While directors are generally not bound by agreements signed only by the corporation, the court ruled that if they are alleged to have acted in bad faith or with malice regarding the corporation's actions, they can be considered necessary parties and compelled to participate in the arbitration to fully settle the claims. Here, the directors were alleged to have directed the corporation's affairs in a malicious way, so they could be included in the arbitration between the corporation and claimant.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    of 6

    Lanuza v.

    BF Corporation
    G.R. No. 174938 October 1, 2014

    Jerahmeel u. Cuevas
    Facts

     A collection suit was filed by BF Corporation against Shangri-la Properties and the
    members of its board of directors (Lanuza et. Al.) for the construction cost of the Shangrila
    shopping mall and multi-level parking building.
     Pursuant to the arbitration clause in the construction contract between the parties, the
    dispute was eventually submitted to arbitration by the Construction Industry Arbitration
    Commission (CIAC).
     Lanuza argued that they cannot be compelled to submit to the arbitration proceedings as
    they are not signatories to the construction contract as it was between BF Corp. and
    Shangri-La. That the arbitration stipulations should bind only the parties.
     BF Corporation argued that they should be included in the arbitration as there was
    allegations of malice and bad faith against Lanuza.
    Issue

     What is the policy on arbitration?


     W/N Lanuza may be compelled to submit to arbitration even though the contract was
    between Shangri-La and BF Corp.
    Ruling

     What is the policy on arbitration?


     This jurisdiction adopts a policy in favor of arbitration. Arbitration allows the parties to
    avoid litigation and settle disputes amicably and more expeditiously by themselves and
    through their choice of arbitrators.
     In view of such policy to adopt arbitration as a manner of settling disputes, arbitration
    clauses are liberally construed to favor arbitration.
     Thus, if there is an interpretation that would render effective an arbitration clause for
    purposes of avoiding litigation and expediting resolution of the dispute, that interpretation
    shall be adopted.
    Ruling

     Can Lanuza be compelled to submit to arbitration?


     Corporation's representative who did not personally bind himself or herself to an
    arbitration agreement cannot be forced to participate in arbitration proceedings made
    pursuant to an agreement entered into by the corporation.
     He or she is generally not considered a party to that agreement.
    Ruling

     However, there are allegations of bad faith or malice against corporate directors or
    representatives, it becomes the duty of courts or tribunals to determine if these persons and the
    corporation should be treated as one.
     Hence, when the directors, as in this case, are impleaded in a case against a corporation,
    alleging malice or bad faith on their part in directing the affairs of the corporation,
    complainants are effectively alleging that the directors and the corporation are not acting as
    separate entities.
     Said directors became necessary parties that must be included in order to have complete
    adjudication of the controversy. 
     Further, excluding petitioners in the arbitration proceedings would be contrary to the policy
    against multiplicity of suits.
     As such, Lanuza may be compelled to submit to arbitration.

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