G.R. No. 160071, June 06, 2016
ANDREW D. FYFE, RICHARD T. NUTTALL, AND RICHARD J. WALD, Petitioners, v. PHILIPPINE AIRLINES, INC., Respondent.
D E C I S I O N
This case concerns the order issued by the Regional Trial Court granting the respondent's application to vacate the adverse arbitral award of the panel of arbitrators, and the propriety of the recourse from such order.
For and in consideration of the services to be faithfully performed by Regent Star in accordance with the terms and conditions of the Agreement, the Company agrees to pay Regent Star as follows:
chanRoblesvirtualLawlibrary1.1 Upon execution of the Agreement, Four Million Seven Hundred Thousand US Dollars (US$4,700,000.00), representing advisory fees for two (2) years from the date of signature of the Agreement, with an additional amount of not exceeding One Million Three Hundred Thousand US Dollars (US$1,300,000.00) being due and demandable upon Regent Star's notice to the Company of its engagement of an individual to assume the position of CCA under the Agreement;
x x x x
In addition to the foregoing, the Company agrees as follows:
x x x x
In the event of a full or partial termination of the Agreement for whatever reason by either the Company or a Senior Technical Adviser/Regent Star prior to the end of the term of the Agreement, the following penalties are payable by the terminating party:
A. During the first 2 years
1. Senior Company Adviser (CCA) - US$800,000.00 2. Senior Commercial Adviser (SCA) - 800,000.00 3. Senior Financial Adviser (FSA) - 700,000.00 4. Senior Ground Services and Training Adviser (SAG) - 500,000.00 5. Senior Engineering and Maintenance Adviser (SAM) - 500,000.00
x x x x
For the avoidance of doubt, it is understood and agreed that in the event that the terminating party is an individual Senior Technical Adviser the liability to pay such Termination Amount to the Company shall rest with that individual party, not with RSS. Similarly, if the terminating party is the Company, the liability to the aggrieved party shall be the individual Senior Technical Adviser, not to RSS.12
The side letter stipulates that "[i]n the event of a full or partial termination of the Agreement for whatever reason by either the Company or a Senior Technical Adviser/Regent Star prior to the end of the term of the Agreement, the following penalties are payable by the terminating party:"
During the first 2 years: Senior Company Adviser - US$800,000.00 Senior Commercial Adviser - 800,000.00 Senior Financial Adviser - 700,000.00 Senior Ground Services and Training Adviser - 500.000.00 Senior Engineering and Maintenance Adviser - 500,000.00 TOTAL US$3,300,000.00
There is, therefore, due to RSS from PAL the amount of US$3,300,000.00 by way of stipulated penalties.
However, RSS has been paid by PAL advance "advisory fee for two (2) years from date of signature of the Agreement" the amount of US$5,700,000. Since RSS has rendered advisory services from 4 January to 31 July 1999, or a period of seven months, it is entitled to retain only the advisory fees for seven months. This is computed as follows:US$5,700.000 - US$237,500/month x7 = US$1,662,500
The remaining balance of the advance advisory fee, which corresponds to the unserved period of 17 months, or US$4,037,500, should be refunded by RSS to PAL.
Off-setting the amount of US$3,300,000 due from PAL to RSS against the amount of US$4,037,500 due from RSS to PAL, there remains a net balance of US$737,500 due and payable to PAL. Please settle this amount at your early convenience, but not later than August 15, 1999.17ChanRoblesVirtualawlibrary
On issue No. 1 we rule that the Complainants are entitled to their claim for termination penalties.
When the PAL, terminated the Technical Services Agreement on July 26, 1999 which also resulted in the termination of the services of the senior technical advisers including those of the Complainants it admitted that the termination penalties in the amount of US$3,300,000.00 as provided in the Letter dated January 4, 1999 are payable to the Senior Technical Advisers by PAL. Xxx. PAL's admission of its liability to pay the termination penalties to the complainants was made also in its Answer. PAIAs counsel even stipulated during the hearing that the airline company admits that it is liable to pay Complainants the termination penalties.xxx.
However, PAL argued that although it is liable to pay termination penalties the Complainants are not entitled to their respective claims because considering that PAL had paid RSS advance "advisory fees for two (2) years" in the total amount of US$5,700,000.00 and RSS had rendered advisory services for only seven (7) months from January 4, 1999 to July 31, 1999 that would entitle RSS to an (sic) advisory fees of only US$1,662,500.00 and therefore the unserved period of 17 months equivalent to US$4,037,500.00 should be refunded. And setting off the termination penalties of US$3,300,000.00 due RSS from PAL against the amount of US$4,037,500.00 still due PAL from RSS there would remain a net balance of US$737,500.00 still due PAL from RSS and/or the Senior Technical Advisers which the latter should pay pro-rata as follows: Peter W. Forster, the sum of US$178,475.00; Richard T. Nuttall, the sum of US$178,475.00; Michael R. Scantlebury; the sum of US$156,350.00, Andrew D. Fyfe, the sum of US$111,362.50; and Richard J. Wald the sum of US$111,362.50. RSS is a special company which the Senior Technical Advisers had utilized for the specific purpose of providing PAL with technical advisory services they as a group had contracted under the Agreement. Hence when PAL signed the Agreement with RSS, it was for all intents and purposes an Agreement signed individually with the Senior Technical Advisers including the Complainants. The RSS and the five (5) Senior Technical Advisers should be treated as one and the same,
The Arbitration Tribunals is not convinced.
x x x x
PAL cannot refuse to pay Complainants their termination penalties by setting off against the unserved period of seventeen (17) months of their advance advisory fees as the Agreement and the Side Letter clearly do not allow refund. This Arbitration Tribunal cannot read into the contract, which is the law between the parties, what the contract docs not provide or what the parties did not intend. It is basic in contract interpretation that contracts that are not ambiguous are to be interpreted according to their literal meaning and should not be interpreted beyond their obvious intendment. x x x. The penalties work as security for the Complainants against the uncertainties of their work at PAL whose closure was a stark reality they were facing. (TSN Hearing on April 27, 2000, pp. 48-49) This would not result in unjust enrichment for the Complainants because the termination of the services was initiated by PAL itself without cause. In feet, PAL admitted that at the time their services were terminated the Complainants were performing well in their respective assigned works,22 x x x.
PAL also presented hypothetical situations and certain computations that it claims would result to an "injustice" to PAL which would then "lose a very substantial amount of money" if the claimed refund is not allowed. PAL had chosen to prc-terminate the services of the complainants and must therefore pay the termination penalties provided in the Side Letter. If it finds itself losing "substantial" sums of money because of its contractual commitments, there is nothing this Arbitration Tribunal can do to remedy the situation. Jurisprudence teaches us that neither the law nor the courts will extricate a party from an unwise or undesirable contract that he or she entered into with all the required formalities and with full awareness of its consequences. (Opulencia vs. Cowl of Appeals, 293 SCRA 385 (1998)23
WHEREFORE, the subject arbitral award dated September 29, 2000 is hereby vacated and set aside, without prejudice to the complainants' filing with the SEC rehabilitation receiver of PAL their subject claim for appropriate adjudication. The panel of arbitrators composed of lawyers Beda Fajardo, Arturo de Castro and Bienvenido Magnaye is hereby ordered discharged on the ground of manifest partiality.
No pronouncement as to cost and attorney's fees.
On the objection that the Court has not acquired jurisdiction over the person of the complainants because summonses were not issued and served on them, the Court rules that complainants have voluntarily submitted themselves to the jurisdiction of the Court by praying the Court to grant them affirmative relief, i.e., that the Court confirm and declare final and executory the subject arbitral award. Moreover, under Sections 22 and 26 of the Arbitration Law (R.A. 876), an application or petition to vacate arbitral award is deemed a motion and service of such motion on the adverse party or his counsel is enough to confer jurisdiction upon the Court over the adverse party.
It is not disputed that complainants were duly served by personal delivery with copies of the application to vacate. In feet, they have appeared through counsel and have filed pleadings. In line with this ruling, the objection that the application to vacate does not state a cause of action against complainants must necessarily fall inasmuch as this present case is a special proceeding (Sec. 22, Arbitration Law), and Section 3(a), Rule 1 of the 1997 Rules of Civil Procedure is inapplicable here.30
The rationale for the suspension is to enable the rehabilitation receiver to exercise his powers without any judicial or extra-judicial interference that might unduly hinder the rescue of the distressed corporation, x x x. PD No. 902-A does not provide for the duration of the suspension; therefore, it is deemed to be effective during the entire period that the corporate debtor is under SEC receivership.
There is no dispute that PAL is under receivership (Exhibits "1" and "2"). In its Order dated 1 July 1998, the SEC declared that "all claims for payment against PAL are deemed suspended."' This Order effectively deprived all other tribunals of jurisdiction to hear and decide all actions for claims against PAL for the duration of the receivership.
x x x x
Unless and until the SEC lifts the Order dated 1 July 1998, the Panel of Arbitrators cannot take cognizance of complainant' claims against PAL without violating the exclusive jurisdiction of the SEC. The law has granted SEC the exclusive jurisdiction to pursue the rehabilitation of a private corporation through the appointment of a rehabilitation receiver (Sec 6 (d), PD No. 902-A, as amended by PD 1799). "exclusive jurisdiction precludes the idea of co-existence and refers to jurisdiction possessed to the exclusion of others, x x x. Thus, "(I)nstead of vexing the courts with suits against the distressed firm, they are directed to file their claims with the receiver who is the duly appointed officer of the SEC.
x x x.31ChanRoblesVirtualawlibrary
The term "certiorari" in the aforequoted provision refers to an ordinary appeal under Rule 45, not the special action of certiorari under Rule 65. As Section 29 proclaims, it is an "appeal." This being the case, the proper forum for this action is, under the old and the new rules of procedure, the Supreme Court. Thus, Section 2(c) of Rule 41 of the 1997 Rules of Civil Procedure states that,"In all cases where only questions of law are raised or involved, the appeal shall be to the Supreme Court by petition for review on certiorari in accordance with Rule 45. "Furthermore, Section 29 limits the appeal to "questions of law," another indication that it is referring to an appeal by certiorari under Rule 45 which, indeed, is the customary manner of reviewing such issues.
Based on the foregoing, it is clear that complainants-in-arbitration/appellants filed the wrong action with the wrong forum.
WHEREFORE, premises considered, the Motion to Dismiss Appeal (Without Prejudice to the Filing of Appellee's Brief) is GRANTED and the instant appeal is hereby ordered DISMISSED.
SECTION 29 OF THE ARBITRATION LAW, WHICH LIMITS THE MODE OF APPEAL FROM THE ORDER OF A REGIONAL TRIAL COURT IN A PROCEEDING MADE UNDER THE ARBITRATION LAW TO A PETITION FOR REVIEW ON CERTIORARI UNDER RULE 45 OF THE RULES, IS UNCONSTITUTIONAL FOR UNDULY EXPANDING THE JURISDICTION OF THIS HONORABLE COURT WITHOUT THIS HONORABLE COURT'S CONCURRENCE;
THE COURT OF APPEALS HAD JURISDICTION OVER THE CA APPEAL BECAUSE:
THIS HONORABLE COURT HAS PREVIOUSLY UPHELD THE EXERCISE BY THE COURT OF APPEALS OF JURISDICTION OVER AN APPEAL INVOLVING QUESTIONS OF FACT OR OF MIXED QUESTIONS OF FACT AND LAW FROM A REGIONAL TRIAL COURT'S ORDER VACATING AN ARBITRAL AWARD
WHERE, AS IN THIS CASE, TFIE ISSUES ON APPEAL CONCERNED THE ABSENCE OF EVIDENCE AND LACK OF LEGAL BASIS TO SUPPORT THE REGIONAL TRIAL COURT'S ORDER VACATING THE ARBITRAL AWARD, GRAVE MISCHIEF WOULD RESULT IF THE REGIONAL TRIAL COURT'S BASELESS FINDINGS OF FACT OR MIXED FINDINGS OF FACT ARE PLACED BEYOND APPELLATE REVIEW; AND
THE COURT OF APPEALS' DISMISSAL OF THE CA APPEAL V/OULD IN EFFECT RESULT IN THE AFFIRMATION OF THE REGIONAL TRIAL COURT'S EXERCISE OF JURISDICTION, OVER PERSONS UPON WHOM IT FAILED TO VALIDLY ACQUIRE SUCH JURISDICTION AND OF APPELLATE JURISDICTION OVER THE PDRCI ARBITRAL AWARD EVEN IF SUCH APPELLATE POWER IS EXCLUSIVELY LODGED WITH THE COURT OF APPEALS UNDER RULE 43 OF THE RULES
INSTEAD OF DISMISSING THE CA APPEAL OUTRIGHT, THE COURT OF APPEALS SHOULD HAVE SHORTENED THE PROCEEDINGS AND EXPEDITED JUSTICE BY EXERCISING ORIGINAL JURISDICTION OVER THE APPLICATION TO VACATE PURSUANT TO RULE 43 OF THE RULES, ESPECIALLY CONSIDERING THAT THE PARTIES HAD IN FACT ALREADY FILED THEIR RESPECTIVE BRIEFS AND THE COMPLETE RECORDS OF BOTH THE RTC APPLICATION TO VACATE AND THE PDRCI ARBITRATION WERE ALREADY IN ITS POSSESSION; AND
IN THE EVENT THAT AN APPEAL FROM AN ORDER VACATING AN ARBITRAL AWARD MAY BE MADE ONLY IN CERTIORARI PROCEEDINGS AND ONLY TO THE SUPREME COURT, THE COURT OF APPEALS SHOULD NOT HAVE DISMISSED THE CA APPEAL, BUT IN THE HIGHER INTEREST OF JUSTICE, SHOULD HAVE INSTEAD ENDORSED THE SAME TO THIS HONORABLE COURT, AS WAS DONE IN SANTIAGO V. GONZALES.40
2. Petitioners caused the preparation of the foregoing Petition for Review on Certiorari, and have read and understood all the allegations contained therein. Further, said allegations are true and correct based on their own knowledge and authentic records in their and the Finn's possession.44
5. Significantly, Petitioners are foreign residents who reside and are presently abroad. Further, the Firm is Petitioners' sole legal counsel in the Philippines, and hence, is in a position to know that Petitioners have no other cases before any court o[r] tribunal in the Philippines;47
Rule 19.12 Appeal to the Court of Appeals. - An appeal to the Court of Appeals through a petition for review under this Special Rule shall only be allowed from the following orders of the Regional Trial Court:
- Granting or denying an interim measure of protection;
- Denying a petition for appointment of an arbitrator;
- Denying a petition for assistance in taking evidence;
- Enjoining or refusing to enjoin a person from divulging confidential information;
- Confirming, vacating or correcting/modifying a domestic arbitral award;
- Setting aside an international commercial arbitration award;
- Dismissing the petition to set aside an international commercial arbitration award even if the court does not decide to recognize or enforce such award;
- Recognizing and/or enforcing an international commercial arbitration award;
- Dismissing a petition to enforce an international commercial arbitration award;
- Recognizing and/or enforcing a foreign arbitral award;
- Refusing recognition and/or enforcement of a foreign arbitral award;
- Granting or dismissing a petition to enforce a deposited mediated settlement agreement; and
- Reversing the ruling of the arbitral tribunal upholding its jurisdiction.
Jurisprudence is settled that the suspension of proceedings referred to in the law uniformly applies to all actions for claims filed against a corporation, partnership or association under management or receivership, without distinction, except only those expenses incurred in the ordinary course of business. In the oft-cited case of Rubberworld (Phils.) Inc. v. NLRC, the Court noted that aside from the given exception, the law is clear and makes no distinction as to the claims that are suspended once a management committee is created or a rehabilitation receiver is appointed. Since the law makes no distinction or exemptions, neither should this Court. Ubi lex non dislinguit nee nos distinguere debemos. Philippine Airlines, Inc. v. Zamora declares that the automatic suspension of an action for claims against a corporation under a rehabilitation receiver or management committee embraces all phases of the suit, that is, the entire proceedings of an action or suit and not just the payment of claims.
The reason behind the imperative nature of a suspension or stay order in relation to the creditors claims cannot be downplayed, for indeed the indiscriminate suspension of actions for claims intends to expedite the rehabilitation of the distressed corporation by enabling the management committee or the rehabilitation receiver to effectively exercise its/his powers free from any judicial or extrajudicial interference that might unduly hinder or prevent the rescue of the debtor company. To allow such other actions to continue would only add to the burden of the management committee or rehabilitation receiver, whose time, effort and resources would be wasted in defending claims against the corporation, instead of being directed toward its restructuring and rehabilitation.
At this juncture, it must be conceded that the date when the claim arose, or when the action was filed, has no bearing at all in deciding whether the given action or claim is covered by the stay or suspension order. What matters is that as long as the corporation is under a management committee or a rehabilitation receiver, all actions for claims against it, whether for money or otherwise, must yield to the greater imperative of corporate revival, excepting only, as already mentioned, claims for payment of obligations incurred by the corporation in the ordinary course of business.55 (Bold emphasis supplied)
Section 30. No law shall be passed increasing the appellate jurisdiction of the Supreme Court as provided in this Constitution without its advice and concurrence.
** Acting Chairperson per Special Order No. 2355 dated June 2, 2016.
1Rollo (Vol. I), pp. 75-77; penned by Associate Justice Amelita G. Tolentino (retired), concurred in by Associate Justice Buenaventura J. Guerrero (retired/deceased) and Associate Justice Mariano C. del Castillo (now a Member of this Court).
2 Id. at 79.
3 SEC Case No. 06-98-6004
4Rollo (Vol. I), pp. 149-150, 150.
5Rollo (Vol. II), pp. 1387-1388.
6Rollo (Vol. I), pp. 421-422.
7 Id. at 422.
8 Id. at 286-296.
9 Id. at 288.
10 6. Remuneration
The Company shall pay to Regent Star certain fees in an amount and on the dates agreed upon by way of a side letter with the Company."
11Rollo (Vol. I), pp. 100-103.
12 Id. at 100-102.
13 Id. at 103.
14 Id. at 104-105.
15 Id. at 14.
16 Id. at 106-107.
17 Id. at 106- 107.
18 Id. at 303.
19 14. Dispute Resolution and Arbitration
The parties shall use good faith efforts to settle all questions, disputes or other differences in any way arising out of or in relation to this Agreement. Any dispute should be clearly stated in writing by the aggrieved party to the other party. Both parties agree to use their best endeavours to resolve issues within 30 days of written notice of a dispute through good faith negotiations and discussions.
Upon failure of the foregoing, any dispute, controversy or claim arising out of or relating to this Agreement or the breach, termination or invalidity thereof, shall be finally settled by arbitration administered by the Philippine Dispute Resolution Center, Inc. (PDRCI) in accordance with its own International Commercial Arbitration Rules as at present in force, (see rollo, Vol. 1, p. 294)
20Rollo (Vol. I), p. 304.
21 Id. at 421-461.
22 Id. at 428-429, 447, 453.
23 Id. at 453.
24 Id. at 474-528.cralawred
25 Id. at 523-524.
26 Id. at 612-633.cralawred
27 Rollo (Vol. II), p. 1396.
28Rollo (Vol. I), pp. 1064-1069.
29 Id. at 1069.
30 Id. at 1064-1065.
31 Id. at 1066.
32 Id. at 1070-1085.
33 Id. at 1101-1102.
34 Id. at 1279-1285.
35 Id. at 28.
36 Id. at 75-77.
37 Id. at 77,
38 Id. at 1340-1357.
39 Id. at 79.cralawred
40 Id. at 30-31.
41 G.R. No, 121171, December 29, 1998, 300 SCRA 579
42 G.R. No. 106879, May 27, 1994, 232 SCRA 602.
43 Bank of the Philippine islands v. Court of Appeals, G.R. No. 146923, April 30 2003 402 SCRA 449 454.
44Rollo (Vol. I), p. 66.
45Navarro v. Court of Appeals, G.R. No. 141307, March 28, 2001, 355 SCRA 672, 679.
46Hydro Resources Contractors Corporation v. National Irrigation Administration, G.R. No. 160215 November 10, 2004, 441 SCRA 614, 636.
47Rollo (Vol. I), p. 66.
48Pilipnas Shell Petroleum Corporation v. John Bordman Ltd. of Iloilo, Inc., GR No 159831 October 14, 2005,473 SCRA 151, 162.
49 Sec. 2. Modes of appeal. —
(a) Ordinary appeal. — The appeal to the Court of Appeals in cases decided by the Regional Trial Court in the exercise of its original jurisdiction shall be taken by filing a notice of appeal with the court which rendered the judgment or final order appealed from and serving a copy thereof upon the adverse party. No record on appeal shall be required except in special proceedings and other cases of multiple or separate appeals where the law or these Rules so require. In such cases, the record on appeal shall be filed and served in like manner
(b) Petition for review. — The appeal to the Court of Appeals in cases decided by the Regional Trial Court in the exercise of its appellate jurisdiction shall be by petition for review in accordance with Rule 42.
(c) Appeal by certiorari. — In all cases where only questions of law are raised or involved, the appeal shall be to the Supreme Court by petition for review on certiorari in accordance with Rule 45 (n)
50 Supra, note 41, at 600-601
51 Celino, Sr. v. Court of Appeals, G.R. No. 170562, June 29, 2007, 526 SCRA 195, 200.
52 Supra, note 42.
53Boardwalk Business Ventures, Inc. v. Villareal, Jr., G.R. No. 181 182, April 10, 2013, 695 SCRA 468, 477; R Transport Corporation v. Philippine Hawk Transport Corporation, G.R. No 155737 October 19 2005, 473 SCRA 342, 348.
54 G.R. No, 169725, April 30, 2010, 619 SCRA 641.
55 Id. at 648-650.
56 Sec. 22. Arbitration deemed a special proceeding. - Arbitration under a contract or submission shall be deemed a special proceeding, of which the court specified in the contract or submission, or if none be specified, the Court of First Instance for the province or city in which one of the parties resides or is doing business, or in which the arbitration was held, shall have jurisdiction. Any application to the court, or a judge thereof, hereunder shall be made in manner provided for the making and hearing of motions, except as otherwise herein expressly provided.
57 Sec. 26. Motion to vacate, modify, or correct an award: when made. - Notice of a motion to vacate, modify or correct the award must be served upon the adverse party or his counsel within thirty days after the award is filed or delivered, as prescribed by law for the service upon an attorney in an action.