Aboitiz v Chiongbian

Grounds to dismiss (Rule 16) – Forum shopping, litis pendentia, and res judicata G.R. No. 197530 – Aboitiz v. Chiongbian (July 9, 2014) Leonen, J. ASC, CAGLI, and WLI agreed to pool their resources and merge businesses under WG&A. Their agreement stipulated arbitration as a means of settling disputes. CAGLI gave more than what was stipulated, but the excess was returned. Later on, CAGLI claimed that the excess was not yet returned. AEV acquired the shares of ASC and WLI and renamed the business to ATSC. CAGLI filed an application for arbitration with RTC-Cebu against Chiongbian, ATSC, ASC, and AEV for the return of the excess inventories. AEV filed a MTD arguing that there was no cause of action against it as there was no agreement to arbitrate between CAGLI and AEV. RTC discharged AEV and ordered the other parties to proceed with arbitration. CAGLI filed another application for arbitration in view of the return of the same excess inventories. AEV filed an MTD on the grounds of forum shopping, failure to state cause of action, res judicata, and litis pendentia. RTC denied MTD and subsequent MR hence this petition to the SC. SC ruled that there was no agreement binding AEV and CAGLI to arbitrate. Also, CAGLI engaged in forum shopping and the second complaint was barred by res judicata, but not by litis pendentia. DOCTRINE Forum shopping is committed by instituting two or more suits in different courts, either simultaneously or successively, to ask them to rule on the same issues and to grant the same reliefs, on the supposition that one of the courts would grant the instituting party/ies a favorable decision. The test for determining whether there has been forum shopping is to ask if there is identity of parties, rights or causes of action, and reliefs sought in the two or more cases pending. Litis pendentia refers to the situation wherein another action is pending between the same parties for the same cause of action, such that the second action becomes unnecessary and vexatious. The requisites are: (1) identity of the parties, or at least such representing the same interests in both actions; (2) identity of rights asserted and reliefs prayed for; and (3) identity of the two cases such that judgment in one, regardless of which party is successful, would amount to res judicata on the other. Res judicata or prior judgment bars a subsequent case when all the following requisites concur: (1) former judgment is final; (2) it is rendered by a court having jurisdiction over the subject matter and the parties; (3) itis a judgment or an order on the merits; and (4) there is an identity of parties, subject matter, and cause/s of action between the first and second actions. IMPORTANT PEOPLE Aboitiz Shipping Corporation (ASC) owned by Aboitiz family Aboitiz Equity Ventures (AEV) Carlos A. Gothong Lines, Inc. (CAGLI) owned by Gothong family William Lines, Inc. (WLI), later renamed WG&A owned by Chiongbian family FACTS 1. ASC, CAGLI, and WLI entered into an Agreement. 1

a. ASC and CAGLI would transfer their shipping assets to WLI in exchange for WLI’s shares of capital stock; b. WLI would run their merged shipping businesses, to be known as WG&A, Inc. 2. It was stipulated that that all disputes in connection with the Agreement be settled by arbitration pursuant to the Arbitration Law (RA 876). a. An arbitration tribunal shall be formed composed of four arbitrators. Each party shall appoint one arbitrator. The three appointees shall appoint the fourth arbitrator and the latter shall act as Chairman. b. The award of the tribunal shall be binding on the parties and shall be enforced by Cebu or Metro Manila courts. 3. Attached to the Agreement was Annex SL-V, a letter from WLI President to CAGLI. a. Confirmed WLI’s commitment to acquire certain spare parts and material inventories of CAGLI, totaling an amount of P400M at most, pursuant to the Agreement. 4. Pursuant to Annex SL-V, inventories were transferred from CAGLI to WLI, now WG&A. a. Assessed to have value of P514M, later adjusted to P558.89M b. CAGLI was paid the amount of P400M; and c. WG&A shares worth P38.5M were also transferred to CAGLI 5. There was still a balance so CAGLI sent WG&A demand letters for the payment or return of excess inventories. 6. The Chiongbians and the Gothongs decided to leave WG&A and sell their interest to the Aboitiz family so a Share Purchase Agreement (SPA) was entered into. a. Aboitiz Equity Ventures (AEV) agreed to purchase the shares of the Chiongbian and Gothong groups. b. The SPA provided for arbitration in Cebu Sity as the mode of settling disputes arising from the SPA pursuant to the Arbitration Law. c. The SPA also provided that the Agreement shall be deemed terminated except Annex SL-V. d. The parties also entered into an Escrow Agreement as part of the SPA where ING Bank was to take custody of the shares subject of the SPA and that disputes arising from it would be settled through arbitration. 7. AEV became stockholder of WG&A, which was renamed Aboitiz Transport Shipping Corp. (ATSC). 8. CAGLI made demands to ATSC (the corporation) for the return or payment of the excess inventories. a. AEV alleged that inventories worth P120.04M were returned evidenced by delivery receipts. 9. CAGLI continued demanding and eventually addressed its demand letters directly to AEV (the stockholder). 10. AEV rebuffed the demands alleging: a. CAGLI already received the excess inventories; b. It was not a party to CAGLI’s claim because it had a personality distinct from WLI/WG&A/ATSC. c. CAGLI’s claim was barred by prescription. 11. In a reply-letter, CAGLI claimed that it was unaware of the return of the excess inventories and asked for copies of the delivery receipts. 12. In letters written for AEV by its counsels, it was noted that the excess inventories were delivered to GT Ferry Warehouse. a. Attached were delivery receipts of the return b. The supposed unreturned inventories were only P119.89M but P120.04M was returned so CAGLI was actually the one liable to return the difference. 13. Not satisfied, CAGLI filed two applications for arbitration before RTC-Cebu. 2

a. First complaint i. Filed against Chiongbian, ATSC, ASC, and AEV for the return of the excess inventories ii. AEV filed MTD alleging that CAGLI had no cause of action against it. 1. AEV and CAGLI did not agree to arbitrate since it was not a party to Annex SL-V. 2. It was only a party to the SPA and Escrow Agreement but the claim was not related to these agreements. 3. The obligation to return was with WLI/WG&A/ATSC and CAGLI failed to state how it can be charged to AEV. iii. RTC dismissed the order with respect to AEV and ordered the other parties to proceed with arbitration. iv. CAGLI did not contest this dismissal. v. CAGLI filed a notice of dismissal withdrawing the first complaint which the RTC allowed. vi. ATSC filed an MR of the allowance of the withdrawal, which was denied. b. Second complaint i. While the MR in the first complaint was still pending, CAGLI filed a second complaint, now joined by Benjamin Gothong, against Chiongbian and AEV also for the return of the excess inventories. ii. AEV filed MTD on the following grounds: 1. Forum shopping 2. Failure to state a cause of action because there was no agreement to arbitrate 3. Res judicata 4. Litis pendentia iii. RTC denied MTD. 1. When the second complaint was filed, the first complaint was already dismissed with respect to AEV so there was no litis pendentia. 2. Dismissal without prejudice of the first complaint left the parties free to litigate the matter in a subsequent action so there was no res judicata. 3. Since there was no litis pendentia nor res judicata, there was not forum shopping. 4. On the matter of lack of cause of action, the SPA provided that all disputes be settled by arbitration. To rule on AEV’s claim that it was not a party to the agreement would be beyond its duty to determine if they should proceed with arbitration or not. iv. AEV filed and MR which was denied. 14. AEV filed a petition for review on certiorari (45) with SC assailing denial of its motion to dismiss and subsequent MR in the second complaint. ISSUE with HOLDING 1. W/N petition for review on certiorari (45) is the proper remedy – NO a. AEV was erroneous in seeking relief under Rule 45, but since the actions or RTC-Cebu are tainted with GAOD, the Court will treat the petition as petition for certiorari under Rule 65. b. An order denying a motion to dismiss is an interlocutory order which neither terminates not finally disposes of a case, as it leaves something to be done by the court before the case is decided on its merits. i. No appeal may be taken from an interlocutory order hence 45 is improper. 3

ii. The proper recourse is for the movant to file an answer, but if the order denying the MTD is tainted with GAOD, this may be assailed under Rule 65. 2. W/N the second complaint constitutes forum shopping and/or is barred by res judicata and/or litis pendentia a. Forum Shopping as explained in Top Rate Construction & Gen. Services, Inc. v. Paxton Dev’t Corp: (p. 599 if gusto niya ipabasa) i. committed by a party/ies who institutes two or more suits in different courts, either simultaneously or successively, to ask them to rule on the same issues and to grant the same reliefs, on the supposition that one of the courts would grant a favorable decision b. Test for determining if rule against forum shopping has been violated i. Ask whether the elements of litis pendentia are present, or whether a final judgment in one case will amount to res judicata in another. ii. Whether in the two or more cases pending, there is identity of parties, rights or causes of action, and reliefs sought. c. Litis pendentia (p. 600) i. A situation wherein another action is pending between the same parties for the same cause of action, such that the second action becomes unnecessary and vexatious. ii. Three requisites: 1. The identity of the parties, or at least such representing the same interests in both actions; 2. The identity of rights asserted and reliefs prayed for; and 3. The identity of the two cases such that judgment in one, regardless of which party is successful, would amount to res judicata on the other. d. Res judicata (p. 600) i. Prior judgment bars a subsequent case when all the following requisites concur: 1. The former judgment is final; 2. It is rendered by a court having jurisdiction over the subject matter and the parties; 3. It is a judgment or an order on the merits; and 4. There is an identity of parties, subject matter, and cause/s of action between the first and second actions e. In this case: (1) CAGLI engaged in forum shopping, (2) the second complaint was barred by res judicata; but (3) the second complaint was not barred by litis pendentia i. Between the first and second complaints, there is identity of parties. 1. CAGLI solely brought the first complaint against Chiongbian, ATSC, and AEV; Gothong was joined as co-plaintiff in the second complaint and ATSC was deleted as defendant. 2. Even though the parties are not absolutely identical, substantial identity of parties is enough to constitute forum shopping. 3. What is ultimately at stake is the extent to which CAGLI may compel AEV and Chiongbian to arbitrate for the former’s recovery of inventories. a. Gothong is not a necessary party to the case as he signed the Annex SL-V only in a representative capacity for CAGLI so his inclusion in the second complaint was a superfluity. ii. There is an identity in subject matter and cause of action. 1. Both applications are: a. For the same relief of arbitration so CAGLI may recover the value of the supposed unreturned inventories; 4

iii. iv.

v.

vi. vii. viii.

b. Are grounded on the right to be paid for or to receive the value of excess inventories; and c. Are founded on the same instrument, Annex SL-V. 2. Both also rely on the same factual averments: (pp.603-604) a. WLI and CAGLI entered into an agreement (Annex SL-V); b. That certain CAGLI inventories will be transferred to WLI; c. That the inventories transferred were in excess of that agreed upon; d. That WLI failed to return the excess; e. That demands have been made through letters and other communications but these did not elicit any response The order of RTC-Cebu which dismissed the complaint against AEV attained finality when CAGLI did not file an MR or appeal contesting the dismissal. The parties did not dispute that the aforementioned order was issued by a court having jurisdiction over the subject matter and the parties. 1. Jurisdiction was acquired over CAGLI as plaintiff when it filed the complaint, and jurisdiction over the defendants were acquired through service of summons. The dismissal of the first complaint with respect to AEV was a judgment on the merits. 1. Cabreza Jr. v. Cabreza: “A judgment may be considered as one rendered on the merits “when it determines the rights and liabilities of the parties based on the disclosed facts, irrespective of formal, technical or dilatory objections”; or when the judgment is rendered “after a determination of which party is right, as distinguished from a judgment rendered upon some preliminary or formal or merely technical point.” 2. Mendiola v. Court of Appeals: It is not necessary that there be a trial in order that a judgment be considered as one on the merits. 3. Prior to issuing dismissal with respect to AEV, RTC allowed the parties to fully establish the facts to ventilate their arguments relevant to the complaint admitting CAGLI’s opposition to the MTD, AEV’s reply and opposition, CAGLI’s rejoinder, and AEV’s surrejoinder. a. After going through the contentions and the arguments of the parties, RTC-Cebu made a definitive determination that CAGLI had not right to compel AEV to subject itself to arbitration vis-à-vis CAGLI’s claims under Annex SL-V. i. There was no contract or existing document that bound the two to arbitrate CAGLI’s claim 1. AEV was not a party involved in Annex SL-V. 2. If such other document existed, it should have been attached to the complaint but it was not. ii. There is no legal or factual basis for the application of arbitration with respect to AEV. The requisites for res judicata have been satisfied and the second complaint should have been dismissed. From this, it follows that CAGLI committed forum shopping in filing the second complaint asking for the same reliefs after obtaining an unfavorable judgment at least with respect to AEV. However, at the time of the filing of the second complaint, AEV had already been discharged from the proceedings relating to first complaint.

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1. The first complaint was no longer pending at the time of the filing of the second complaint with respect to AEV and CAGLI; thus, the second complaint could not have been barred by litis pendentia. 3. W/N Aboitiz is bound by an agreement to arbitrate with CAGLI with the latter’s claims of unreturned inventories – NO a. None of the parties alleged that the controversy is subject of compulsory arbitration as provided by statute so it must necessarily be founded on contract. b. Four contracts have been cited: The Agreement, Annex SL-V, the SPA, and the Escrow Agreement. c. The obligation for WLI to acquire CAGLI inventories is contained in Annex SL-V so this must be the one considered. i. The Agreement’s arbitration clause does not contemplate arbitration regarding disputes arising from Annex SL-V. ii. Annex SL-V is only between WLI and CAGLI, so it necessarily follows that WLI/WG&A/ATSC and CAGLI are the only ones bound by it. iii. SPA, which AEV entered into, has a clause on arbitration but it stipulates that disputes only arising from the SPA requires arbitration as a mode of settling disputes under that agreement. It made AEV a stockholder of WLI/AG&A/ATSC but did not render AEV personally liable for the obligations of the corporation. iv. AEV is a stockholder of ATSC, but it is basic that a corporation has a personality separate and distinct from its individual stockholders. Its status as a stockholder in itself is insufficient to make it liable for ATSC’s obligations. DISPOSITIVE PORTION WHEREFORE, the petition is GRANTED. The assailed orders of RTC-Cebu are declared VOID and RTC-Cebu is ordered to dismiss Civil Case No. CEB-37004. DIGESTER: Liana

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