SECOND DIVISION
G.R. No. 173137, January 11, 2016
BASES CONVERSION DEVELOPMENT AUTHORITY, Petitioner, v. DMCI PROJECT DEVELOPERS, INC., Respondent.
G.R. NO. 173170
NORTH LUZON RAILWAYS CORPORATION, Petitioner, v. DMCI PROJECT DEVELOPERS, INC. Respondent.
D E C I S I O N
LEONEN, J.:
An arbitration clause in a document of contract may extend to subsequent documents of contract executed for the same purpose. Nominees of a party to and beneficiaries of a contract containing an arbitration clause may become parties to a proceeding initiated based on that arbitration clause.
On June 10, 1995, Bases Conversion Development Authority (BCDA) entered into a Joint Venture Agreement1 with Philippine National Railways (PNR) and other foreign corporations.2chanroblesvirtuallawlibrary
Under the Joint Venture Agreement, the parties agreed to construct a railroad system from Manila to Clark with possible extensions to Subic Bay and La Union and later, possibly to Ilocos Norte and Nueva Ecija.3 BCDA shall establish North Luzon Railways Corporation (Northrail) for purposes of constructing, operating, and managing the railroad system.4 The Joint Venture Agreement contained the following provision:
ARTICLE XVI
ARBITRATION
- If any dispute arise hereunder which cannot be settled by mutual accord between the parties to such dispute, then that dispute shall be referred to arbitration. The arbitration shall be held in whichever place the parties to the dispute decide and failing mutual agreement as to a location within twenty-one (21) days after the occurrence of the dispute, shall be held in Metro Manila and shall be conducted in accordance with the Philippine Arbitration Law (Republic Act No. 876) supplemented by the Rules of Conciliation and Arbitration of the International Chamber of Commerce. All award of such arbitration shall be final and binding upon the parties to the dispute.5
[I]n order to formalize the inclusion of [DMCI Project Developers, Inc.] as a party to the JVA and MOA, DMCI would like to notify all the parties that it is designating PDI as its nominee in both agreements and such other agreements that may be signed by the parties in furtherance of or in connection with the PROJECT. By this nomination, all the rights, obligations, warranties and commitments of DMCI under the JVA and MOA shall henceforth be assumed performed and delivered by PDI.23 (Emphasis supplied)
a) At the outset, DMCI PDI/FBDC's participation in Northrail was as a joint venture partner and co-investor in the Manila Clark Rapid Railway Project, and as such, was granted corresponding representation in the Northrail Board.
b) DMCI PDI/FBDC was privy to all the deliberations of the Northrail Board and participated in the decisions made and policies adopted to pursue the project.
c) DMCI PDI/FBDC had full access to the financial statements of Northrail and was regularly informed of the corporation's financial condition.30chanrobleslaw
We regret to say that we are of the position that the P300 [million] contribution should not be returned to DMCI for the following reasons:
- the P300 million was in the nature of a contribution, not deposits for future subscription; and
- DMCI, as a joint venture partner, must share in profits and losses.35
WHEREFORE, the petition is granted. The parties are ordered to present their dispute to arbitration in accordance with Article XVI of the Joint Agreement.
SO ORDERED.48chanrobleslaw
[t]here is a question of law "when there is doubt or controversy as to what the law is on a certain [set] of facts." The test is "whether the appellate court can determine the issue raised without reviewing or evaluating the evidence." Meanwhile, there is a question of fact when there is "doubt ... as to the truth or falsehood of facts." The question must involve the examination of probative value of the evidence presented.74chanroblesvirtuallawlibrary
SEC. 2. Declaration of Policy. - It is hereby declared the policy of the State to actively promote party autonomy in the resolution of disputes or the freedom of the parties to make their own arrangements to resolve their disputes. Towards this end, the State shall encourage and actively promote the use of Alternative Dispute Resolution (ADR) as an important means to achieve speedy and impartial justice and declog court dockets. As such, the State shall provide means for the use of ADR as an efficient tool and an alternative procedure for the resolution of appropriate cases. Likewise, the State shall enlist active private sector participation in the settlement of disputes through ADR. This Act shall be without prejudice to the adoption by the Supreme Court of any ADR system, such as mediation, conciliation, arbitration, or any combination thereof as a means of achieving speedy and efficient means of resolving cases pending before all courts in the Philippines which shall be governed by such rules as the Supreme Court may approve from time to time. (Emphasis supplied)
Consistent with the above-mentioned policy of encouraging alternative dispute resolution methods, courts should liberally construe arbitration clauses. Provided such clause is susceptible of an interpretation that covers the asserted dispute, an order to arbitrate should be granted. Any doubt should be resolved in favor of arbitration.83chanrobleslaw
SEC. 25. Interpretation of the Act.-In interpreting the Act, the court shall have due regard to the policy of the law in favor of arbitration. Where action is commenced by or against multiple parties, one or more of whom are parties to an arbitration agreement, the court shall refer to arbitration those parties who are bound by the arbitration agreement although the civil action may continue as to those who are not bound by such arbitration agreement.
JOINT VENTURE AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This Joint Venture Agreement (JVA) made and executed at Makati, Metro Manila, this__ day of June 1995 by and between:
The BASES CONVERSION DEVELOPMENT AUTHORITY
. . . hereinafter referred to as BASECON;
The PHILIPPINE NATIONAL RAILWAYS ...;
The following corporations collectively referred to as the Foreign Group:
a) CONSTRUCCIONES Y AUXILIAR DE FERROCARRILES, S.A... .;
b) ENTRECANALES Y TAVORA, SA . . .;
c) CUBIERTAS MZOV, S.A. . . .;
d) COBRA, S.A....; and
e) Others who may later participate in the JVA.chanRoblesvirtualLawlibrary-and-
EUROMA DEVELOPMENT CORPORATION . . .
WITNESSETH:
. . . .
WHEREAS, a project identified pursuant to the aforesaid policy is the establishment of a Premier International Airport Complex located at the former Clark Air Base as expressed in Executive Order 174 s. 1994 in order to accommodate the expected heavy flow of passenger and cargo traffic to and from the Philippines, to start the development of the Northern Luzon Grid and to accelerate the development of Central Luzon and finally to decongest Metro Manila of its vehicular traffic;
WHEREAS, in order to implement and provide such a mass transit and access system, the parties hereto agreed to construct a double-trac[k] railway system from Manila to Clark with a possible extension to Subic Bay and later to San Fernando, La Union, as the second phase, and finally to Laoag, Ilocos Norte and to San Jose, Nueva Ecija, as the third phase of the project, hereinafter referred to as the PROJECT;ARTICLE I
DEFINITION OF TERMS
. . . .
1.5 "PROJECT" means the construction, operation and management of a double-track railway system from Manila to Clark with an extension to Subic Bay, and a possible extension to San Fernando, La Union, as the second phase, and finally to Laoag, Ilocos Norte and to San Jose, Nueva Ecija, as the third phase of the PROJECT.
1.6 "North Luzon Railways Corporation (NORTHRAIL)["] means the joint venture corporation to be established in accordance with Article II hereof.
. . . .chanRoblesvirtualLawlibraryARTICLE II
THE NORTH LUZON RAILROAD CORPORATION
2.1 BASECON shall establish and incorporate in accordance with the laws of the Republic of the Philippines a corporation to be known as NORTH LUZON RAILWAYS CORPORATION (NORTHRAIL) with an initial capitalization of one hundred million pesos (PI 00,000,000.00).
2.2 NORTHRAIL shall eventually have an authorized capital stock of FIVE BILLION FIVE HUNDRED MILLION PESOS (P 5.5 Billion) divided into 55,000,000 shares with par value of P 100 per share.
. . . .chanRoblesvirtualLawlibraryARTICLE III
PURPOSE OF NORTHRAIL
A. PRIMARY PURPOSE
3.1 To construct, operate and manage a railroad system to serve Northern and Central Luzon; and to develop, construct, manage, own, lease, sublease and operate establishments and facilities of all kinds related to the railroad system;
. . . .chanRoblesvirtualLawlibraryARTICLE IV
PARTICIPATION/TRANSFER/ENCUMBRANCE OF SHARES
4.1 NORTHRAIL shall increase its authorized capital stock upon the subscription thereon by the parties to this JVA in accordance with the following equity proportion/participation:Foreign Group up to 20%
Euroma/Filipino partners 50%
BASECON/PNR 30%
. . . .
4.4 The shares owned by Filipino stockholders including BASECON, PNR, EUROMA Development Corporation and hereinafter to be owned by Filipino corporations shall not be less than sixty percent (60%) at any given time.
. . . .chanRoblesvirtualLawlibraryARTICLE XVI
ARBITRATION
16. If any dispute arise hereunder which cannot be settled by mutual accord between the parties to such dispute, then that dispute shall be referred to arbitration. The arbitration shall be held in whichever place the parties to the dispute decide and failing mutual agreement as to a location within twenty-one (21) days after the occurrence of the dispute, shall be held in Metro Manila and shall be conducted in accordance with the Philippine Arbitration Law (Republic Act No. 876) as supplemented by the Rules of Conciliation and Arbitration of the International Chamber of Commerce. All award of such arbitration shall be final and binding upon the parties to the dispute.ARTICLE XVII
ASSIGNMENT
17.1 No party to this Agreement may assign, transfer or convey this Agreement, create or incur any encumbrance of its rights or any part of its rights and obligations hereunder or any shares of stocks of NORTHRAIL to any person, firm or corporation without the prior written consent of the other parties or except as provided in the Articles of Incorporation and By-Laws of NORTHRAIL and this Agreement.
17.2 This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assignees and designees or nominees whenever possible.89chanrobleslaw
This Amendment to the Joint Venture Agreement dated 10th of June 1995 (the Agreement) made and executed at_____________ , Metro Manila, on this 8th day of February 1996 by and among:chanRoblesvirtualLawlibraryBASES CONVERSION DEVELOPMENT AUTHORITY . . . hereinafter referred to as BASECON;
with
PHILIPPINE NATIONAL RAILWAYS ...
and
The following corporations collectively referred to as the FOREIGN GROUP:CONSTRUCCIONES Y AUXILIAR DE FERROCARRILES, S.A.. . .;
ENTRECANALES Y TAVORA, S.A....; CUBIERTAS Y MZOV, S.A. . . .;
COBRA INSTALACIONES Y SERVICIOS, S.A.. . .; and
Other investors who may later participate in the Joint Venture;chanRoblesvirtualLawlibraryand
Other local investors to be represented by EUROMA DEVELOPMENT CORPORATION . . .
and
P.M. CONSUNJI. INC. and/or its nominee . . .WITNESSETH THAT
WHEREAS, a Joint Venture Agreement (JVA) was executed on the 10th of June 1995 between BASECON, PNR, FOREIGN GROUP, and EUROMA;
. . . .
NOW, THEREFORE, for and in consideration of the foregoing premises and of the mutual covenant contained therein, THE PARTIES HEREBY AGREE that the JVA should be amended as follows:
- In Article 1.3, D.M. CONSUNJI, INC. shall be included as strategic partner, being one of the Philippine registered companies selected by BASECON, PNR and the Lead Group on the basis of its qualifications for the implementation of the Project.
- Article 4.1 should read as follows:
"NORTHRAIL shall increase its authorized capital stock upon the subscription thereon by the Parties to this JVA in accordance with the following equity proportion/participation:SRG.............................................. up to 10%
DMCI..................................................... 20%
BASECON/PNR............................. up to 30%
Others..................................................... 40%- In Article 4.4, the Filipino corporations whose total shares in NORTHRAIL's capital stock, which should not be less than sixty percent (60%) at any given time, shall include D.M. CONSUNJI, INC.93 (Underscoring supplied)
WITNESSETH THAT
WHEREAS, the Manila - Clark Rapid Railway System Project, hereinafter referred to as the Project, was identified as one of the major infrastructure projects to accelerate the development of Central Luzon, particularly the former U.S. bases at Clark and Subic;
. . . .
WHEREAS, the North Luzon Railways Corporation (NORTHRAIL) was organized and incorporated to implement the development, construction, operation and maintenance of the railway system in Northern Luzon;
WHEREAS, NORTHRAIL is wholly owned and controlled by BASECON;
WHEREAS, the privatization of NORTHRAIL is necessary in order to accelerate the implementation of the Project by tapping the financial resources and expertise of the private sector;
. . . .
WHEREAS, the Parties of the Joint Venture Agreement (JVA) of 10 June 1995, namely BASECON, PNR, SPANISH RAILWAY GROUP and EUROMA, agreed to invite other private investors to help in the financing and implementation of the Project, and to raise the required equity in order to accelerate the privatization of NORTHRAIL;
WHEREAS, DMCI and other private investors. . . have manifested their desire to be strategic partners in implementing the Project;
WHEREAS, DMCI and other private investors have the financial capability to implement the Project;
WHEREAS, Phase I of the Project covers the Manila - Clark section of the North Luzon railway network as defined by the JVA of 10 June 1995 . . .[;]
. . . .chanRoblesvirtualLawlibraryARTICLE I
PURPOSE
1.1 Purpose. This Agreement is entered into by the Parties in order to set up the mechanics for raising the seed capitalization needed by NORTHRAIL to accelerate the implementation of the Project.
. . . .chanRoblesvirtualLawlibraryARTICLE II
TERMS OF AGREEMENT
. . . .
2.1 The Parties agree to put up the necessary seed capitalization needed by NORTHRAIL to fast-track the implementation of the Rapid Rail Transit System Project according to the following schedule:BCDA/PNR...................... PHP 300 Million. . . .
DMCI..................................................... PHP 200 Million
SRG...................................................... PHP 100 Million
TOTAL................................................... PHP 600 Million
2.3 The amounts contributed by BCDA/PNR, DMCI, SRG, and others are committed to be converted to equity when NORTHRAIL is privatized.96chanroblesvirtuallawlibrary
17.1 No party to this Agreement may assign, transfer or convey this Agreement, create or incur any encumbrance of its rights or any part of its rights and obligations hereunder or any shares of stocks of NORTHRAIL to any person, firm or corporation without the prior written consent of the other parties or except as provided in the Articles of Incorporation and By-Laws of NORTHRAIL and the Agreement.101chanroblesvirtuallawlibrary
17.2 This Agreement shall inure to the benefit of and be binding upon the parties . . . and their respective successors and permitted assignees and designees or nominees whenever applicable.102 (Emphasis supplied)
AMENDMENT TO THE JOINT VENTURE AGREEMENT
This Amendment to the Joint Venture Agreement dated 10th of June 1995 (the Agreement) made and executed at _____________ , Metro Manila, on this 8th day of February 1996 by and among:
BASES CONVERSION DEVELOPMENT AUTHORITY . . .with
PHILIPPINE NATIONAL RAILWAYS . . .chanRoblesvirtualLawlibraryand
. . . .
D.M. CONSUNJI, INC. and/or its nominee, a domestic corporation duly organized and created pursuant to the laws of the Republic of the Philippines . . .103 (Emphasis supplied)chanRoblesvirtualLawlibraryMEMORANDUM OF AGREEMENT
This Agreement made and executed at Pasig, Metro Manila, Philippines on this 8[th] day of February 1996 by and among:
BASES CONVERSION DEVELOPMENT AUTHORITY . . .chanRoblesvirtualLawlibrarywith
PHILIPPINE NATIONAL RAILWAYS ...chanRoblesvirtualLawlibraryand
D.M. CONSUNJI, INC. and/or its nominee, a domestic corporation duly organized and created pursuant to the laws of the Republic of the Philippines . . .104 (Emphasis supplied)
[I]n order to formalize the inclusion of [DMCI Project Developers, Inc.] as a party to the JVA and MOA, DMCI would like to notify all the parties that it is designating PDI as its nominee in both agreements and such other agreements that may be signed by the parties in furtherance of or in connection with the PROJECT. By this nomination, all the rights, obligations, warranties and commitments of DMCI under the JVA and MOA shall henceforth be assumed performed and delivered by PDI.105 (Emphasis supplied)
17.2 This Agreement shall inure to the benefit of and be binding upon the parties . . . and their respective successors and permitted assignees and designees or nominees whenever applicable.106 (Emphasis supplied)
In its most common signification, the term "nominee'' refers to one who is designated to act for another usually in a limited way; a person in whose name a stock or bond certificate is registered but who is not the actual owner thereof is considered a nominee." Corpus Juris Secundum describes a nominee as one:". . . designated to act for another as his representative in a rather limited sense. It has no connotation, however, other than that of acting for another, in representation of another or as the grantee of another. In its commonly accepted meaning the term connoted the delegation of authority to the nominee in a representative or nominal capacity only, and does not connote the transfer or assignment to the nominee of any property in, or ownership of, the rights of the person nominating him."108 (Citations omitted)
ARTICLE III
PURPOSE OF NORTHRAIL
A. PRIMARY PURPOSE
3.1. To construct, operate and manage a railroad system to serve Northern and Central Luzon; and to develop, construct, manage, own, lease, sublease and operate establishments and facilities of all kinds related to the railroad system[.]112chanrobleslaw
Moreover, in Heirs ofAugusto Salas, this court affirmed its policy against multiplicity of suits and unnecessary delay. This court said that "to split the proceeding into arbitration for some parties and trial for other parties would "result in multiplicity of suits, duplicitous procedure and unnecessary delay." This court also intimated that the interest of justice would be best observed if it adjudicated rights in a single proceeding. While the facts of that case prompted this court to direct the trial court to proceed to determine the issues of that case, it did not prohibit courts from allowing the case to proceed to arbitration, when circumstances warrant.115chanrobleslaw
Endnotes:
1Rollo (G.R. No. 173137), pp. 104-120.
2 Id. at 46.
3 Id. at 106.
4 Id. at 108.
5 Id. at 116-117.
6 Id. at 62.
7Rollo (G.R. No. 173170), p. 74.
8Rollo (G.R. No. 173137), p. 47.
9 Id. at 122-123.
10 Id. at 47 and 123.
11 Id.
12 Id. at 48 and 126-132.
13 Id. at 48.
14 Id. at 48 and 129.
15 Id. at 48.
16 Id. at 134.
17 Id. at 48 and 135.
18 Id. at 48, 64, and 135-136.
19 Id. at 48, 65, and 136.
20Rollo (G.R. No. 173170), p. 37.
21Rollo (G.R. No. 173137), p. 48.
22 Id. at 137-140.
23 Id. at 137 and 139.
24 Id. at 48 and 65.
25 Id. at 66.
26 Id.
27 Id. at 48 and 146-147.
28 Id. at 146-147.
29 Id. at 48.
30 Id. at 151-152 and 467.
31 Id. at 150-154.
32 Id. at 153.
33 Id. at 175-176.
34 Id. at 177-180.
35 Id. at 177.
36 Id. at 49.
37 Id. at 49, 59, and 76.
38 Id. at 49 and 70.
39 Id. at 46. The petition was raffled to Branch 150, Judge Elmo M. Alameda.
40 Id. at 58-74.
41 Id. at 15.
42 Id. at 49.
43 Id. at 218-223.
44 Id. at 221.
45Rollo (G.R. No. 173170), pp. 66-73.
46 Id. at 17 and 67-68.
47Rollo (G.R. No. 173137), pp. 46-54.
48 Id. at 54.
49 Id. at 52.
50 Id.
51 Id. at 55-56.
52 Id. at 12-13.
53 Id. at 24.
54 Id. at 25.
55 Id. at 25-26.
56 Id. at 31.
57 Id. at 27.
58 Id. at 25.
59 Id. at 34-35.
60Rollo (G.R. No. 173170), pp. 13-30.
61 Id. at 24.
62 Id. at 25-26.
63Rollo (G.R. No. 173137), pp. 291-375.
64 Id. at 293-294.
65 Id.
66 Id. at 317-318.
67 Id. at 336-337.
68 Id. at 339.
69 Id. at 339 and 364-365.
70 Id. at 345.
71 Id. at 346.
72 Id. at 349.
73 G.R. No. 172843, September 24, 2014 [Per J. Leonen, Second Division].
74 Id. at 8, citing Central Bank of the Philippines v. Castro, 514 Phil. 425, 434 (2005) [Per J. Puno, Second Division].
75Lanuza v. BF Corporation, G.R. No. 174938, October 1, 2014 p. 9 [Per J. Leonen, Second Division].
76 An Act to Institutionalize the Use of an Alternative Dispute Resolution System in the Philippines and to Establish the Office for Alternative Dispute Resolution, and for Other Purposes (2004).
77 Civil Code, arts. 2028-2046.
78 An Act to Authorize the Making of Arbitration and Submission Agreements, to Provide for the Appointment of Arbitrators and the Procedure for Arbitration in Civil Controversies, and for Other Purposes (1953).
79Lanuza v. BF Corporation, G.R. No. 174938, October 1, 2014 p. 9 [Per J. Leonen, Second Division].
80 Id. at 10. See also LM Power Engineering Corporation v. Capitol Industrial Construction Groups, Inc., 447 Phil. 705, 714 (2003) [Per J. Panganiban, Third Division].
81 Id. at 11. See also LM Power Engineering Corporation v. Capitol Industrial Construction Groups, Inc., 447 Phil. 705, 714 (2003) [Per J. Panganiban, Third Division].
82 447 Phil. 705 (2003) [Per J. Panganiban, Third Division].
83 Id. at 714.
84Rollo (G.R. No. 173137), p. 105. The foreign corporations are Construcciones Y Auxiliar De Ferrocarriles, S.A., Entrecanales Y Tavora, S.A., Cubiertas Y Mzov, S.A., and Cobra Instalaciones Y Servicios, S.A.
85 Id. at 106.
86 Id. at 108.
87 Id. at 110.
88 Id.
89 Id. at 105-117.
90 Id. at 122.
91 Id. at 122-125.
92 Id. at 122-123.
93 Id.
94 Id. at 126-132.
95 Id. at 128.
96 Id. at 127-129.
97See also BF Corporation v. Court of Appeals, 351 Phil. 507, 523 (1998) [Per J. Romero, Third Division].
98 Id.
99Rollo (G.R. No. 173137), p. 128.
100Rollo (G.R. No. 173170), p. 96.
101 Id.
102 Id.
103 Id. at 101-102.
104 Id. at 105.
105Rollo (G.R, No. 173137), pp. 137 and 139.
106Rollo (G.R. No. 173170), p. 96.
107 G.R. Nos. 177857-58, January 24, 2012, 663 SCRA 514 [Per J. Velasco, Jr., En Banc].
108 Id. at 580-581.
109 G.R. No. 174938, October 1, 2014 [Per J. Leonen, Second Division].
110 Id. at 16.
111See also Lanuza v. BF Corporation, G.R. No. 174938, October 1, 2014 [Per J. Leonen, Second Division].
112Rollo (G.R. No. 173170), p. 87.
113 CIVIL CODE, art. 1311 provides:
ART. 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent.
If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person.
114Rollo (G.R. No. 173170), pp. 571-574.
115Lanuza v. BF Corporation, G.R. No. 174938, October 1, 2014 pp. 16-17 [Per J. Leonen, Second Division], citing Heirs of Salas, Jr. v. Laperal Realty Corporation, 378 Phil. 369, 376 (1999) [Per J. De Leon, Jr., Second Division].