Rcbc v. Bdo
NEW DOCTRINEFacts
The Antecedents: RCBC Capital Corporation (RCBC) entered into a Share Purchase Agreement (SPA) with Equitable-PCI Bank, Inc. (EPCIB) and others for the sale of shares in Bankard, Inc. RCBC later claimed an overpayment due to alleged misrepresentation of Bankard's financial statements, violating warranties under the SPA. This led RCBC to commence arbitration proceedings with the International Chamber of Commerce-International Court of Arbitration (ICC-ICA). Procedural History: The arbitration involved disputes over advance costs, partial awards, and the final award. The Arbitration Tribunal issued a First Partial Award confirming RCBC's claim was not time-barred and it was entitled to damages, but not rescission. Subsequently, a Second Partial Award ordered BDO (which assumed EPCIB's obligations) to pay RCBC US$290,000 for advance costs and considered BDO's counterclaim withdrawn. The Regional Trial Court (RTC) confirmed both partial awards. BDO appealed the Second Partial Award to the Court of Appeals (CA), which reversed and set aside the Second Partial Award due to evident partiality of the Tribunal Chairman. The RTC also confirmed the Final Award, which BDO sought to vacate. BDO also sought injunctive relief against the execution of the Final Award, which the CA denied. The Supreme Court consolidated two petitions: RCBC's appeal from the CA's reversal of the Second Partial Award, and BDO's appeal from the CA's denial of its injunctive relief. The Petition: RCBC sought to reverse the CA's decision vacating the Second Partial Award, arguing the CA erred in finding evident partiality and in disturbing the arbitral tribunal's findings. BDO sought to overturn the CA's denial of its application for a stay order and/or TRO/preliminary injunction, arguing its rights were violated and it suffered irreparable damage.
Issue(s)
Whether the Court of Appeals erred in vacating the Second Partial Award on the ground of evident partiality of the Arbitration Tribunal Chairman. Whether BDO is entitled to injunctive relief against the execution proceedings.
Ruling
The Supreme Court denied RCBC's petition (G.R. No. 196171) and affirmed the Court of Appeals' decision vacating the Second Partial Award due to evident partiality. The Court also denied BDO's petition (G.R. No. 199238) and affirmed the Court of Appeals' resolution denying the application for a stay order, TRO, and preliminary injunction.
Ratio Decidendi
On the issue of vacating the Second Partial Award due to evident partiality: The Court affirmed the Court of Appeals' finding that Chairman Barker exhibited evident partiality. The Court adopted the standard that evident partiality exists when a reasonable person would have to conclude that an arbitrator was partial to one party. Chairman Barker's act of furnishing the parties with a copy of Matthew Secomb's article, which discussed the possibility of issuing awards for advance costs and favored RCBC's position, was deemed indicative of bias. This act, coupled with his interpretation of RCBC's letter as an application for a partial award despite his earlier pronouncements, signaled a preconceived course of action and destroyed the fundamental fairness required in arbitration. The Court emphasized that while courts should not substitute their judgment for that of arbitrators on matters of fact or law, evident partiality is a legal ground for vacating an award. On the issue of injunctive relief against execution: The Court denied BDO's petition for injunctive relief, affirming the CA's finding that BDO failed to establish a clear legal right to enjoin the execution. The Court noted that BDO had already paid the monetary award under protest, rendering the prayer for injunctive relief moot and academic, as the act sought to be enjoined had already been consummated. The Court reiterated that injunctive reliefs are preservative remedies and will not issue to restrain acts already done.
Main Doctrine
The Court affirmed the Court of Appeals' finding of evident partiality on the part of the Chairman of the Arbitration Tribunal due to his act of furnishing parties with a specific article that favored one party's position, thereby violating the principle of impartiality and fairness in arbitration. The Court also denied the petition for injunctive relief as the act sought to be enjoined had already been consummated.