Case Digest (G.R. No. 161760)
Facts:
On April 25, 2011, Dr. Benjamin D. Adapon, for himself and as minority stockholder of Computerized Imaging Institute, Inc. (formerly Computed Tomography Center, Inc. or CII), filed a complaint against Medical Doctors, Inc. (“MDI”) with the Regional Trial Court (RTC) of Makati, Branch 149, alleging breach of a non-compete agreement and related damages. Dr. Adapon, a neuroradiology and computed tomography expert, had established the country’s first CT facility in 1978 in partnership with MDI, owner of Makati Medical Center. Although their initial arrangement was unwritten, MDI referred all tomography patients to CII, which billed and remitted collections. In November 1988, the parties executed a Letter of Intent containing (a) a non-compete clause obliging both sides not to compete in CT and MRI services and (b) an arbitration clause committing “any matter arising out of this Letter of Intent” to a three-member arbitral panel. In 1998, 2011, and 2012, MDI acquired and deployed CTCase Digest (G.R. No. 161760)
Facts:
- Formation and early operations
- In February 1978, Medical Doctors, Inc. (MDI) and Dr. Benjamin D. Adapon incorporated Computed Tomography Center, Inc. (CTCI), with MDI holding 60% and Dr. Adapon and his nominees 40% of the capital stock. Dr. Adapon served as president and head of operations.
- No formal written contract governed the venture; MDI referred CT work to CTCI, billed patients, and remitted payments.
- Letter of Intent and non-compete clause
- In 1988, the parties executed a Letter of Intent (LOI) providing (a) a non-compete agreement: MDI and Dr. Adapon would channel all CT and MRI work to CTCI, and (b) an arbitration clause: disputes “arising out of this LOI” were to be submitted to a three-member panel.
- Despite some provisional language, the parties adhered to the non-compete practice until 1997.
- Breach allegations and arbitration
- In 1997–1998, MDI acquired its own CT and later MRI scanners, diverting paying patients from CTCI. Dr. Adapon’s complaints were ignored.
- On April 25, 2011, Dr. Adapon (for himself and derivatively for CII) filed in the RTC a complaint for breach of the non-compete clause, praying for injunctive relief and damages. The RTC suspended proceedings and referred the dispute to arbitration pursuant to the LOI.
- Arbitral proceedings and award
- The Philippine Dispute Resolution Center, Inc. panel comprised Chief Justice Renato Puno (chair), Justice Dante Tinga (MDI nominee), and Atty. Jose Grapilon (Adapon nominee). Terms of Reference were signed, and the tribunal proceeded with evidence.
- Final Award (May 8, 2015): (a) validated the LOI’s non-compete and arbitration clauses; (b) found MDI in bad faith violative; (c) awarded PhP 71,349,157.45 actual damages to Dr. Adapon, PhP 5,000,000 moral damages, PhP 2,000,000 exemplary damages, PhP 9,000,000 attorneys’ fees; (d) dismissed MDI’s counterclaims; (e) apportioned costs. Justice Tinga dissented.
- Judicial review movements
- MDI petitioned the RTC (Branch 149, Makati) to vacate the award, alleging invalid LOI, prescription, failure to apply rebus sic stantibus and clean-hands doctrines, unreasonable restraint of trade, and speculative damages.
- The RTC denied vacation and confirmed the award (Feb 19, 2016; June 21, 2016). MDI then filed a petition for review with the CA.
- CA Decision (Feb 15, 2017): reversed the RTC, vacated the Final Award, holding the LOI non-binding, the cause of action prescribed, RTC lacked jurisdiction, and the tribunal exceeded its powers in awarding damages.
- Dr. Adapon and CII filed a petition for certiorari in the SC, contending CA disregarded the Special ADR Rules, the binding nature of the LOI, competence-competence, separability, and the limited grounds to vacate an award.
Issues:
- Did the Court of Appeals err in ruling that the LOI and its arbitration clause were not binding and enforceable?
- Was the cause of action for breach of the non-compete agreement already barred by prescription?
- Did the Regional Trial Court have jurisdiction to suspend proceedings and refer the dispute to arbitration?
- Did the arbitral tribunal exceed its powers in awarding damages to Dr. Adapon?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)