Case Summary (G.R. No. 135362)
Petitioners
Heirs of Augusto L. Salas, Jr., seeking rescission of sales, reconveyance of subdivided lots, cancellation of contract, accounting, and damages.
Respondents
Primary: Laperal Realty Corporation.
Co-respondents: the ten lot buyers listed above.
Also named: Register of Deeds for Lipa City.
Key Dates
• May 15, 1987 – Owner-Contractor Agreement executed.
• September 23, 1988 – Special Power of Attorney granted to Laperal Realty.
• June 10, 1989 – Salas, Jr. disappears.
• August 6, 1996 – Petition for presumptive death filed; granted December 12, 1996.
• February 22, 1990 – Subdivided portions sold to Rockway and South Ridge.
• June 27, 1991 – Sale to spouses Abrajano and Lava, Oscar Dacillo.
• June 4, 1996 – Sale to Vacuna, de la Cruz, and Capellan.
• February 3, 1998 – Complaint filed in R.T.C. Lipa (Civil Case No. 98-0047).
• April 24, 1998 – Laperal Realty’s Motion to Dismiss for failure to arbitrate.
• August 9, 1998 – R.T.C. Lipa dismisses complaint.
• December 13, 1999 – Supreme Court decision.
Applicable Law
• 1987 Constitution of the Philippines.
• Civil Code, Article 1311 (contracts binding on parties, heirs, and assigns).
• Republic Act No. 876 (Arbitration Law).
• Jurisprudence enforcing written arbitration agreements as valid and binding.
Background of the Dispute
Salas, Jr. engaged Laperal Realty to provide horizontal construction services and to manage and sell his land. After his disappearance and presumption of death, Laperal Realty subdivided and sold large tracts of the property to various corporate and individual buyers. The heirs challenged these transactions as void for lesion beyond one-fourth, seeking nullity of sale and reconveyance.
Lower Court Proceedings
The heirs’ complaint named both Laperal Realty and the lot buyers. Laperal Realty and some buyers moved to dismiss, invoking the Agreement’s Article VI arbitration clause, which required disputes between “owner’s representative” and contractor to be referred to a three-member committee. The R.T.C. Lipa granted the motion and dismissed the suit for non-compliance with the arbitration requirement.
Petitioners’ Arguments
- Their causes of action do not arise from the Owner-Contractor Agreement.
- Claims for cancellation and accounting fall within arbitration-contract exceptions.
- Failure to arbitrate cannot justify dismissal.
Supreme Court’s Analysis on Arbitration Agreements
The Court reaffirmed that written arbitration agreements are valid, binding, and enforceable under the Arbitration Law and Civil Code. Upon a proper arbitration clause, courts must suspend proceedings and compel arbitration. Arbitration promotes efficient dispute resolution and is favored by public policy.
Binding Nature of the Clause and Scope of Application
The arbitration stipulation binds the original parties to the Agreement (Salas, Jr. and Laperal Realty) and their heirs or assigns. However, assignment of rights under a contract differs from a sale of property developed under that contract. A purchaser of land is not an “assignee” of contractual rights to compel arbitration.
Non-Assignment to Lot Buyers
The lot buyers acquired title to subdivided land but did not step into Lape
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Facts of the Case
- Augusto L. Salas, Jr. was the registered owner of a 1,484,354-square-meter tract of land in Lipa City, Batangas.
- On May 15, 1987, Salas, Jr. entered into an Owner-Contractor Agreement with Laperal Realty Corporation for horizontal construction services on the land.
- On September 23, 1988, Salas, Jr. executed a Special Power of Attorney in favor of Laperal Realty, granting general control, supervision, and management over the sale of his land, whether for cash or in installments.
- Salas, Jr. disappeared on June 10, 1989, during a business trip to Nueva Ecija and never returned.
- On August 6, 1996, his spouse, Teresita Diaz Salas, filed a petition in the Regional Trial Court of Makati City for a declaration of his presumptive death; the petition was granted on December 12, 1996.
- Meanwhile, Laperal Realty subdivided the property and sold portions to various buyers between February 22, 1990, and June 4, 1996, including Rockway Real Estate, South Ridge Village, spouses Abrajano, spouses Lava, Oscar Dacillo, Eduardo Vacuna, Florante de la Cruz, and Jesus Vicente Capellan.
Procedural History
- February 3, 1998: Petitioners, as heirs of Salas, Jr., filed a Complaint in Lipa City (Civil Case No. 98-0047) seeking nullity of sale, reconveyance, contract cancellation, accounting, and damages.
- April 24, 1998: Laperal Realty moved to dismiss, invoking the arbitration clause in Article VI of the Owner-Contractor Agreement.
- May 5, 1998: Spouses Abrajano, spouses Lava, and Oscar Dacillo filed a joint answer with counterclaim and cross-claim, also seeking dismissal for lack of arbitration.
- August 9, 1998: Branch 85 of the Regional Trial Court of Lipa City dismissed the Complaint for failure to submit to arbitration.
- December 13, 1999: