Aboitiz Transport v. Gothong Lines
REITERATIONFacts
The Antecedents: ASC, CAGLI, and WLI entered into an Agreement where ASC and CAGLI would transfer shipping assets to WLI in exchange for WLI shares. WLI would run the merged business and be renamed WG&A, Inc. The Agreement stipulated that all disputes arising from it would be settled by arbitration under Republic Act No. 876 (RA 876). A letter from respondent Chiongbian committed WLI to acquire spare parts and materials from CAGLI not exceeding P400 Million. A valuation showed CAGLI's inventory at P514 Million, but WLI received inventory valued at P558.89 Million and paid only P400 Million. CAGLI sent letters demanding payment or return of the excess inventory. Procedural History: In 2002, the Chiongbian and Gothong families sold their interests in WLI/WG&A to the Aboitiz family, leading to the change of WLI/WG&A's corporate name to ATSC. Six years later, in 2008, CAGLI demanded ATSC pay for the excess inventory (P158,399,700.00) and demanded that AEV and respondent Chiongbian refer their dispute to arbitration. AEV countered that the excess inventory was returned and it was a separate entity from ATSC. CAGLI filed a complaint before the RTC against Chiongbian, ATSC, ASC, and AEV to compel arbitration. ATSC and AEV moved for dismissal, arguing CAGLI had no cause of action for arbitration as the claim was paid or extinguished, and it had prescribed. The RTC dismissed the complaint against AEV for lack of cause of action but not against others. Subsequently, the RTC ordered CAGLI, respondent Chiongbian, ATSC, and ASC to proceed to arbitration. ATSC and ASC appointed arbitrators on an ad cautelam basis. ATSC moved to exclude respondent Chiongbian from arbitration, arguing he was not a party to the Agreement. CAGLI filed a Notice of Dismissal, withdrawing its complaint because the opposing parties had not filed responsive pleadings. The RTC confirmed the Notice of Dismissal, dismissing the case without prejudice. ATSC and ASC's motion for reconsideration was denied, with the RTC citing Section 1 of Rule 17 of the Rules of Court. The RTC also deemed ATSC's motion to exclude respondent Chiongbian moot and academic due to the dismissal. ATSC and ASC filed petitions for review on certiorari. The Petition: Petitioners Aboitiz Transport System Corporation (ATSC) and Aboitiz Shipping Corporation (ASC) assailed the RTC Orders confirming the notice of dismissal, dismissing the case without prejudice, denying their motion for reconsideration, and deeming the motion to exclude respondent Victor S. Chiongbian moot and academic.
Issue(s)
Whether or not the RTC was correct in confirming CAGLI’s notice of dismissal and, consequently, dismissing the case without prejudice. Whether or not respondent Chiongbian should be excluded from the arbitration proceedings.
Ruling
The petitions are GRANTED. The Orders dated August 13, 2010, April 15, 2011, and July 6, 2011 of the Regional Trial Court of Cebu City, Branch 20 (RTC) in Civil Case No. CEB-34951 are REVERSED and SET ASIDE. The Order dated February 26, 2010 of the RTC is REINSTATED with MODIFICATION excluding Victor S. Chiongbian from the arbitration proceedings.
Ratio Decidendi
On the propriety of CAGLI’s Notice of Dismissal: The Court held that the RTC erred in confirming CAGLI's notice of dismissal and dismissing the case without prejudice. The nature of CAGLI's complaint was for the enforcement of an arbitration agreement, governed by Section 6 of RA 876. This provision confines the court's authority to passing upon the issue of whether an agreement in writing for arbitration exists and whether there is a default in proceeding thereunder. Once the court is satisfied that such an agreement exists and there is a default, it shall issue an order directing the parties to proceed with arbitration. In this case, the RTC had already granted the primary relief sought by CAGLI through its Order dated February 26, 2010, directing the parties to proceed to arbitration. This Order partakes of a judgment on the merits of the complaint for the enforcement of the arbitration agreement. At this stage, the rules on appeal or other proceedings after the rendition of a judgment or final order apply, not the rules on notice of dismissal under Section 1 of Rule 17 of the Rules of Court. The period "before service of the answer or of a motion for summary judgment" mentioned in Section 1 of Rule 17 no longer applies once a judgment or final order has been rendered. Therefore, a notice of dismissal filed at such a stage should not be entertained or confirmed. On the parties covered by Arbitration Proceedings: The Court ruled that respondent Chiongbian should be excluded from the arbitration proceedings. Section 2 of RA 876 provides that only parties who have agreed to submit a controversy to arbitration may be compelled to submit to arbitration. The arbitration agreement is part of the contract, and contracts take effect only between the parties, their assigns, and heirs. In this case, the Agreement and the arbitration clause were entered into by ASC, CAGLI, and WLI. Respondent Chiongbian merely signed the Agreement as a representative of WLI. He is not a party to the Agreement, nor is he an assignee or heir of any of the parties to the arbitration agreement. Therefore, he cannot be compelled to participate in the arbitration proceedings.
Main Doctrine
A notice of dismissal filed by a plaintiff under Section 1 of Rule 17 of the Rules of Court can no longer be entertained or confirmed after a judgment or final order on the merits of the complaint has been rendered by the court, as the rules on appeal or other proceedings after rendition of a judgment or final order then come into play.