G.R. No. 197530 - Aboitiz Equity Ventures, Inc. vs. Chiongbian

Case Summary (G.R. No. 197530)

Background and Relevant Agreements

On January 8, 1996, Aboitiz Shipping Corporation (ASC), Carlos A. Gothong Lines, Inc. (CAGLI), and William Lines, Inc. (WLI) entered into a tripartite shareholders’ agreement (the "Agreement") wherein ASC and CAGLI transferred their shipping assets to WLI in exchange for shares. Subsequently, WLI operated the merged shipping business under the name WG&A, Inc.

Section 11.06 of the Agreement mandated arbitration for all disputes connected with the Agreement, to be conducted by a tribunal composed of four arbitrators (one appointed by each party and a fourth appointed by the three arbitrators who serves as chairman).

Annex SL-V, attached to the Agreement, consisted of a letter dated January 8, 1996, from WLI’s President Victor S. Chiongbian to CAGLI’s representatives, confirming WLI’s commitment to acquire certain inventories of CAGLI valued up to P400 million, according to a special examination. Annex SL-V did not contain an arbitration clause but stated the acquisition was "pursuant to the Agreement."

After transferring inventories valued at about P558.89 million, CAGLI was paid P400 million plus shares with a book value of P38.5 million. The balance was the subject of later demands for return or payment of excess inventories.

Subsequent Transactions and Arbitration Clauses

In 2002, the Chiongbian and Gothong families decided to exit WG&A, leading to a Share Purchase Agreement (SPA) whereby petitioner AEV agreed to purchase their shares, becoming a stockholder of WG&A, later renamed Aboitiz Transport Shipping Corporation (ATSC).

Section 6.5 of the SPA provided for arbitration of disputes relating to the SPA, while Section 6.8 stated that the original January 8, 1996 Agreement was terminated except for obligations under Annex SL-V, which survived under the applicable statute of limitations.

An Escrow Agreement was executed simultaneously, also providing for arbitration of disputes arising therefrom.

The Disputes and Proceedings

CAGLI resumed demands in 2008 for the value of alleged unreturned excess inventories, addressing letters to ATSC, AEV, and other related entities. AEV denied liability, citing that: (1) it was not a party to the January 8, 1996 Agreement or Annex SL-V; (2) the claims were barred by prescription; and (3) it had a distinct legal personality from ATSC.

CAGLI filed two successive arbitration applications before different branches of the Regional Trial Court (RTC) in Cebu City regarding the same claim on the excess inventories.

The first complaint (CEB-34951) filed in 2008 was dismissed with respect to AEV on December 4, 2009, by RTC Branch 20, ruling that there was no arbitration agreement binding AEV to CAGLI concerning Annex SL-V claims.
Despite dismissal, CAGLI filed a second complaint (CEB-37004) in 2010 before RTC Branch 10 on the same subject, which AEV moved to dismiss citing forum shopping, res judicata, litis pendentia, and lack of an arbitration agreement. The RTC Branch 10 denied the motion to dismiss, an interlocutory order later affirmed on reconsideration.

Jurisdiction and Proper Mode of Review

AEV filed a petition for review on certiorari (Rule 45) with the Supreme Court to challenge the RTC Branch 10’s interlocutory orders denying dismissal. The Supreme Court emphasized that interlocutory orders are generally not appealable under Rule 45 because they are not final judgments. The proper remedy is an answer or a Rule 65 petition (certiorari) if there is grave abuse of discretion.

The Court found that the RTC Branch 10’s orders were tainted with grave abuse of discretion amounting to lack or excess of jurisdiction, thus treating the Rule 45 petition as a Rule 65 petition, allowing full consideration of the issues raised.

Forum Shopping, Res Judicata, and Litis Pendentia

Forum shopping constitutes the filing of multiple suits in different courts or branches involving the same parties, causes of action, or reliefs, for the purpose of obtaining a favorable judgment, which the courts discourage to prevent abuse of process and conflicting rulings.

Res judicata bars a party from relitigating a case upon same cause of action, subject matter, parties, and relief, after a final judgment on the merits by a competent court. Litis pendentia precludes the filing of a new case when another case involving the same parties and causes of action is pending.

Applying these tenets, the Supreme Court found:

The first and second complaints involved substantial identity of parties (AEV and CAGLI), subject matter (claims on excess inventories), and relief sought (compelling arbitration and recovery).
The December 4, 2009 RTC Branch 20 order dismissing the first complaint with respect to AEV was a final judgment on the merits after full consideration of facts and law and had attained finality as CAGLI did not appeal or move for reconsideration.
Accordingly, the second complaint was barred by res judicata and constituted forum shopping as it sought to litigate the same issue that was previously resolved adversely to CAGLI with regard to AEV.
Litis pendentia did not apply because AEV was already dismissed from the first case before the second complaint was filed.

Absence of Arbitration Agreement Binding AEV

Arbitration requires a valid agreement between parties to refer disputes to arbitration. In the absence of a clear, express, and binding arbitration agreement involving the parties and the subject matter, courts cannot compel arbitration.

The Court examined the contracts:

The January 8, 1996 Agreement contained an arbitration clause covering disputes connected to the Agreement among the three original parties (ASC, CAGLI, WLI), but Annex SL-V, a separate two-party agreement between WLI and CAGLI, lacked any arbitration clause.
Annex SL-V’s reference that the acquisition was pursuant to the Agreement did not incorporate the arbitration clause into Annex SL-V, which was a distinct contract.
The SPA, to which AEV is a party, provided for arbitration only of disputes relating to the SPA itself, not Annex SL-V.
Section 6.8 of the SPA preserved the obligations of Annex SL-V but did not extend or impose an arbitration obligation on AEV concerning Annex SL-V.
The Escrow Agreement’s arbitration clause similarly did not pertain to the specific dispute under Annex SL-V.

Moreover, AEV is a corporate entity distinct from WG&A/ATSC, and its status as shareholder does not make it liable for the corporation’s contractual obligations under Annex SL-V. The Court reaffirmed that corporate personality is separate and distinct, and stock ownership alone does not impose corporate liabilities on shareholders absent piercing of the corporate veil, which requires clear and convincing proof of fraud or wrongdoing, not present here.

Conclusion and Ruling

The Supreme Court h

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Case Syllabus (G.R. No. 197530)

Background and Parties Involved

This case is a petition for review on certiorari under Rule 45 of the Rules of Court questioning orders issued by the Regional Trial Court (RTC), Cebu City, Branch 10, in Civil Case No. CEB-37004.
The petitioner, Aboitiz Equity Ventures, Inc. (AEV), challenges the denial of its motion to dismiss the complaint filed by respondents Carlos A. Gothong Lines, Inc. (CAGLI) and Benjamin D. Gothong.
The case arises from a complex corporate relationship and agreements involving AEV, CAGLI, Victor S. Chiongbian (respondent, President of William Lines, Inc.), and Benjamin D. Gothong.
The dispute concerns claims for unreturned inventories delivered pursuant to contracts involving William Lines, Inc. (WLI), later renamed WG&A, Inc. and subsequently Aboitiz Transport Shipping Corporation (ATSC).

Facts and Contractual Background

On January 8, 1996, Aboitiz Shipping Corporation (ASC), CAGLI, and WLI entered into a shareholders' agreement merging their shipping assets in exchange for shares of WLI, which then operated under the name WG&A, Inc.
Section 11.06 of this Agreement provided for compulsory arbitration involving a tribunal of four arbitrators for disputes arising out of or in connection with the Agreement.
Annex SL-V, attached to the 1996 Agreement, was a letter confirming WLI’s commitment to acquire CAGLI’s inventories valued at a maximum of P400 million, subject to a special examination and payable over two years.
Annex SL-V was executed only by WLI and representatives of CAGLI and contained no arbitration clause.
Inventories delivered exceeded the P400 million cap, initially valued at P514 million and later adjusted to P558.89 million; CAGLI received P400 million payment and WG&A shares with a book value of P38.5 million.
A balance for excess inventories remained, leading CAGLI to demand payment or return of the excess inventories starting in 2001.
WLI/WG&A returned inventories valued at P120.04 million, with signed delivery receipts as proof.
In 2002, the Chiongbian and Gothong families sold their WG&A shares to the Aboitiz family through a Share Purchase Agreement (SPA) in which AEV purchased the shares of the former shareholders.

Agreements Governing Arbitration

The 2003 SPA included an arbitration clause in Section 6.5, providing that disputes relating to the SPA would be subject to arbitration in Cebu City under Philippine Arbitration Law.
Section 6.8 of the SPA expressly terminated the January 8, 1996 Agreement, except Annex SL-V, whose rights and obligations were to survive.
The Escrow Agreement between the parties’ bank afforded dispute resolution through arbitration, but with rights reserved to seek court redress in cases of misconduct or fraud.
AEV became a stockholder of WG&A (later ATSC) following the SPA.

Procedural History

In 2008, CAGLI resumed demands for the excess inventories, initially directed at ATSC, then broadened to include AEV and a related company FCLC.
AEV denied liability, positing it was not a party to the claims and that CAGLI’s claim was barred by prescription.
CAGLI filed two successive applications for arbitration:
- The first complaint (Civil Case No. CEB-34951) was filed against Chiongbian, ATSC, ASC, and AEV.
- AEV successfully moved to dismiss the first complaint relative to itself for lack of a binding arbitration agreement with CAGLI.
- CAGLI withdrew the first complaint voluntarily after the dismissal.
While the first complaint was still pending as to other parties, CAGLI filed a se