Case Digest (G.R. No. 129916)
Facts:
Magellan Capital Management Corporation and Magellan Capital Holdings Corporation v. Rolando M. Zosa and Hon. Jose P. Soberano, Jr., G.R. No. 129916, March 26, 2001, Supreme Court Second Division, Buena, J., writing for the Court.Petitioners Magellan Capital Holdings Corporation (MCHC) and Magellan Capital Management Corporation (MCMC) entered into a Management Agreement on March 18, 1994, under which MCMC was appointed manager of MCHC; contemporaneously MCHC, MCMC and respondent Rolando M. Zosa executed an Employment Agreement naming Zosa as President and Chief Executive Officer, with his term co-terminous with the management agreement and subject to termination provisions in the Employment Agreement. The Employment Agreement contained an arbitration clause (Section 23) prescribing a three-arbitrator panel with one arbitrator to be designated by each of the Manager, Employee and Corporation.
On May 10, 1995 MCHC’s board declined to re-elect Zosa as President/CEO, citing loss of trust and alleged breaches; Zosa was instead elected Vice-Chairman for New Ventures Development. Zosa resigned for “good reason” on September 26, 1995, claiming the vice-chairmanship had less responsibility and demanded termination benefits under Section 8 of the Employment Agreement. MCHC rejected his resignation and, by letter dated October 20, 1995, terminated the Employment Agreement for cause effective November 19, 1995, limiting Zosa’s entitlements to certain amounts under Section 8(a).
Zosa invoked the Employment Agreement’s arbitration clause, designated his representative for the arbitration panel on November 10, 1995, and received designations from petitioners for their representatives; nonetheless, he filed suit for damages to enforce his claimed benefits against petitioners before the Regional Trial Court (RTC), Branch 58, Cebu, on April 17, 1996. Petitioners moved to dismiss arguing lack of jurisdiction because the dispute was subject to arbitration and arguing improper venue; the RTC denied the motion to dismiss on August 1, 1996 and denied reconsideration on September 5, 1996.
The RTC’s pre-trial order of October 21, 1996 framed the principal issue as the validity and effectivity of the arbitration clause and provided that, if valid, the case would be dismissed for arbitration. Petitioners sought clarification and to file memoranda but their motions were denied. On January 17, 1997 petitioners filed a petition for certiorari and prohibition under Rule 65 with the Court of Appeals (CA) contesting the RTC’s orders. On March 21, 1997 the CA gave due course to the petition, directed the RTC to resolve the validity/effectivity of the arbitration clause and to suspend further proceedings on the merits until that issue was resolved, and set aside the questioned orders insofar as they contravened that resolution. Petitioners’ motion for partial reconsideration was denied on June 20, 1997.
Complying with the CA’s directive, the RTC on July 18, 1997 declared the arbitration clause partially void only insofar as it concerned the composition of the arbitration panel (reasoning that MCMC and MCHC represented the same interest and thus could not each appoint an arbitrator), and directed the parties to proceed to arbitration under a three‑member panel with one arbitrator for plaintiff, one for both defendants, and a third jointly chosen. Petit...(Pro-only)
Issues:
- Did the trial court have jurisdiction to determine the validity and effectivity of the arbitration clause, such that the CA correctly directed the RTC to resolve that issue before proceeding to the merits?
- Is the arbitration clause — specifically the provision on composition of the three‑member panel giving each of Manager, Employee and Corporation the right to designate one arbitrator — valid and enforceable, or is it void insofar as it gives one side the practical power to outvote the other?
- Does the controversy fall within the original and exclusive jurisdiction of the SEC because it concerns the election or appointment of corporate officers?
- Are petitioners precluded by the law of the case or guilty of forum‑shopping from...(Pro-only)
Ruling:
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Ratio:
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Doctrine:
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