Excellent Quality Apparel v. Win Multi Rich Builders
REITERATIONFacts
The Antecedents: Petitioner Excellent Quality Apparel, Inc. (EQA) entered into a contract with Multi-Rich Builders (Multi-Rich) for the construction of a garment factory. The contract included an arbitration clause. The construction was completed. Respondent Win Multi-Rich Builders, Inc. (Win), a corporation incorporated after the contract was executed, filed a collection suit against EQA, claiming a sum of money and seeking a writ of attachment. EQA contested the suit, arguing that Win lacked legal personality to sue, that Multi-Rich was a sole proprietorship, and that the case should be referred to the Construction Industry Arbitration Commission (CIAC) due to the arbitration clause. Procedural History: The Regional Trial Court (RTC) denied EQA's motion to dismiss and allowed the issuance of a writ of attachment and subsequent garnishment. EQA filed a petition for review with the Court of Appeals (CA), questioning the RTC's jurisdiction and orders. The CA annulled the RTC's orders, ruling that the RTC had jurisdiction as the case was a suit for collection of a sum of money. EQA filed a motion for reconsideration, which was denied. The Petition: EQA filed a petition for review on certiorari with the Supreme Court, raising issues on Win's legal personality to sue, the RTC's jurisdiction despite the arbitration clause, and the propriety of the writ of attachment and garnishment.
Issue(s)
Whether Win Multi-Rich Builders, Inc. has the legal personality to institute the collection case. Whether the Regional Trial Court has jurisdiction over the case despite the presence of an arbitration clause. Whether the issuance of the writ of attachment and subsequent garnishment was proper.
Ruling
The Supreme Court GRANTED the petition, MODIFIED the decision of the Court of Appeals, DISMISSED Civil Case No. 04-108940, and ORDERED Win Multi-Rich Builders, Inc. to return the garnished amount with legal interest.
Ratio Decidendi
On Win's legal personality to institute the case: The Court ruled in the negative. Win admitted that the contract was executed between EQA and Multi-Rich, a sole proprietorship. A sole proprietorship does not possess a juridical personality separate and distinct from its owner and cannot file suit in court. Win, a corporation, sought to change its name in the suit to Multi-Rich, a sole proprietorship, which cannot be countenanced as a corporation cannot simply assume the name of a sole proprietorship. Win failed to present proof that it had acquired the assets and liabilities of Multi-Rich, such as a deed of assignment, to establish its standing to sue for receivables of the sole proprietorship. Therefore, Win is not the real party in interest. On the RTC's jurisdiction despite the arbitration clause: The Court held that the RTC did not have jurisdiction. Executive Order (E.O.) No. 1008 vests the Construction Industry Arbitration Commission (CIAC) with original and exclusive jurisdiction over disputes arising from or connected with construction contracts in the Philippines, provided the parties agree to submit to voluntary arbitration. The contract between EQA and Multi-Rich contained an arbitration clause, signifying the parties' agreement to submit disputes to arbitration. This agreement vested jurisdiction in the CIAC, divesting the RTC of its authority to take cognizance of the collection suit. The law does not limit CIAC's jurisdiction to complex cases, and parties cannot divest CIAC of its jurisdiction by stipulating a preferred forum. On the propriety of the writ of attachment and garnishment: The Court found no need to discuss the propriety of the writ of attachment and garnishment in detail, as it had already determined that the RTC lacked jurisdiction to issue the questioned writ and order the release of the garnished funds. Since the RTC did not have jurisdiction over the main case, its subsequent orders, including the issuance of the writ of attachment and the garnishment of EQA's funds, were void. Consequently, Win was ordered to return the garnished amount to EQA.
Main Doctrine
A corporation that was incorporated after the execution of a contract entered into by a sole proprietorship cannot sue to collect receivables from that contract unless it proves acquisition of the sole proprietorship's assets and liabilities, as a sole proprietorship lacks juridical personality to file suit. Furthermore, an arbitration clause in a construction contract vests exclusive jurisdiction in the Construction Industry Arbitration Commission (CIAC) over disputes arising from it, divesting the Regional Trial Court (RTC) of jurisdiction.