2/9/2017 G.R.No.

135362

TodayisThursday,February09,2017

RepublicofthePhilippines
SUPREMECOURT
Manila

SECONDDIVISION

G.R.No.135362December13,1999

HEIRSOFAUGUSTOL.SALAS,JR.,namely:TERESITAD.SALASforherselfandaslegalguardianofthe
minorFABRICECYRILLD.SALAS,MA.CRISTINAS.LESACA,andKARINATERESAD.SALAS,petitioners,
vs.
LAPERAL REALTY CORPORATION, ROCKWAY REAL ESTATE CORPORATION, SOUTH RIDGE VILLAGE,
INC., MAHARAMI DEVELOPMENT CORPORATION, Spouses THELMA D. ABRAJANO and GREGORIO
ABRAJANO, OSCAR DACILLO, Spouses VIRGINIA D. LAVA and RODEL LAVA, EDUARDO A. VACUNA,
FLORANTE DE LA CRUZ, JESUS VICENTE B. CAPELLAN, and the REGISTER OF DEEDS FOR LIPA CITY,
respondents.

DELEON,JR.,J.:

BeforeusisapetitionforreviewoncertiorarioftheOrder 1 of Branch 85 of the Regional Trial Court of Lipa City 2

dismissingpetitioners'complaint3forrescissionofseveralsaletransactionsinvolvinglandownedbyAugustoL.Salas,Jr.,
theirpredecessorininterest,onthegroundthattheyfailedtofirstresorttoarbitration.

Salas, Jr. was the registered owner of a vast tract of land in Lipa City, Batangas spanning 1,484,354 square
meters.

OnMay15,1987,heenteredintoanOwnerContractorAgreement 4(hereinafterreferredtoastheAgreement)with
respondentLaperalRealtyCorporation(hereinafterreferredtoasLaperalRealty)torenderandprovidecomplete(horizontal)
constructionservicesonhisland.

OnSeptember23,1988,Salas,Jr.executedaSpecialPowerofAttorneyinfavorofrespondentLaperalRealtyto
exercisegeneralcontrol,supervisionandmanagementofthesaleofhisland,forcashoroninstallmentbasis.

OnJune10,1989,Salas,Jr.lefthishomeinthemorningforabusinesstriptoNuevaEcija.Heneverreturned.

OnAugust6,1996,TeresitaDiazSalasfiledwiththeRegionalTrialCourtofMakatiCityaverifiedpetitionforthe
declarationofpresumptivedeathofherhusband,Salas,Jr.,whohadthenbeenmissingformorethanseven(7)
years.ItwasgrantedonDecember12,1996.5

Meantime, respondent Laperal Realty subdivided the land of Salas, Jr. and sold subdivided portions thereof to
respondents Rockway Real Estate Corporation and South Ridge Village, Inc. on February 22, 1990 to
respondent spouses Abrajano and Lava and Oscar Dacillo on June 27, 1991 and to respondents Eduardo
Vacuna,FlorantedelaCruzandJesusVicenteCapalanonJune4,1996(allofwhomarehereinafterreferredto
asrespondentlotbuyers).

OnFebruary3,1998,petitionersasheirsofSalas,Jr.filedintheRegionalTrialCourtofLipaCityaComplaint 6
for declaration of nullity of sale, reconveyance, cancellation of contract, accounting and damages against herein
respondentswhichwasdocketedasCivilCaseNo.980047.

OnApril24,1998,respondentLaperalRealtyfiledaMotionto
Dismiss 7 on the ground that petitioners failed to submit their grievance to arbitration as required under Article VI of the
Agreementwhichprovides:

Art.VI.ARBITRATION.

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All cases of dispute between CONTRACTOR and OWNER'S representative shall be referred to the
committeerepresentedby:

a.OnerepresentativeoftheOWNER

b.OnerepresentativeoftheCONTRACTOR

c.OnerepresentativeacceptabletobothOWNERandCONTRACTOR.8

On May 5, 1998, respondent spouses Abrajano and Lava and respondent Dacillo filed a Joint Answer with
CounterclaimandCrossclaim9prayingfordismissalofpetitioners'Complaintforthesamereason.

On August 9, 1998, the trial court issued the herein assailed Order dismissing petitioners' Complaint for non
compliancewiththeforegoingarbitrationclause.

Hencethispetition.

Petitionersargue,thus:

Thepetitioners'causesofactiondidnotemanatefromtheOwnerContractorAgreement.

The petitioners' causes of action for cancellation of contract and accounting are covered by the
exceptionundertheArbitrationLaw.

Failuretoarbitrateisnotagroundfordismissal.10

Inacatenaofcases11inspiredbyJusticeMalcolm'sprovocativedissentinVegav.SanCarlosMillingCo.12,thisCourt
hasrecognizedarbitrationagreementsasvalid,binding,enforceableandnotcontrarytopublicpolicysomuchsothatwhen
thereobtainsawrittenprovisionforarbitrationwhichisnotcompliedwith,thetrialcourtshouldsuspendtheproceedingsand
orderthepartiestoproceedtoarbitrationinaccordancewiththetermsoftheir
agreement13.Arbitrationisthe"waveofthefuture"indisputeresolution. 14Tobrushasideacontractualagreementcalling
forarbitrationincaseofdisagreementbetweenpartieswouldbeastepbackward.15

Nonetheless,wegrantthepetition.

Asubmissiontoarbitrationisacontract. 16Assuch,theAgreement,containingthestipulationonarbitration,bindsthe
parties thereto, as well as their assigns and heirs. 17 But only they. Petitioners, as heirs of Salas, Jr., and respondent
Laperal Realty are certainly bound by the Agreement. If respondent Laperal Realty had assigned its rights under the
Agreementtoathirdparty,makingtheformer,theassignor,andthelatter,theassignee,suchassigneewouldalsobebound
bythearbitrationprovisionsinceassignmentinvolvessuchtransferofrightsastovestintheassigneethepowertoenforce
themtothesameextentastheassignorcouldhaveenforcedthemagainstthedebtor18orinthiscase,againsttheheirsof
the original party to the Agreement. However, respondents Rockway Real Estate Corporation, South Ridge Village, Inc.,
MaharamiDevelopmentCorporation,spousesAbrajano,spousesLava,OscarDacillo,EduardoVacuna,FlorantedelaCruz
and Jesus Vicente Capellan are not assignees of the rights of respondent Laperal Realty under the Agreement to develop
Salas, Jr.'s land and sell the same. They are, rather, buyers of the land that respondent Laperal Realty was given the
authority to develop and sell under the Agreement. As such, they are not "assigns" contemplated in Art. 1311 of the New
CivilCodewhichprovidesthat"contractstakeeffectonlybetweentheparties,theirassignsandheirs".

Petitioners claim that they suffered lesion of more than onefourth (1/4) of the value of Salas, Jr.'s land when
respondentLaperalRealtysubdivideditandsoldportionsthereoftorespondentlotbuyers.Thus,theyinstituted
action 19 against both respondent Laperal Realty and respondent lot buyers for rescission of the sale transactions and
reconveyance to them of the subdivided lots. They argue that rescission, being their cause of action, falls under the
exception clause in Sec. 2 of Republic Act No. 876 which provides that "such submission [to] or contract [of arbitration]
shallbevalid,enforceableandirrevocable,saveuponsuchgroundsasexistatlawfortherevocationofanycontract".

Thepetitioners'contentioniswithoutmerit.Forwhilerescission,asageneralrule,isanarbitrableissue, 20 they
impleaded in the suit for rescission the respondent lot buyers who are neither parties to the Agreement nor the latter's
assigns or heirs. Consequently, the right to arbitrate as provided in Article VI of the Agreement was never vested in
respondentlotbuyers.

Respondent Laperal Realty, as a contracting party to the Agreement, has the right to compel petitioners to first
arbitrate before seeking judicial relief. However, to split the proceedings into arbitration for respondent Laperal
Realtyandtrialfortherespondentlotbuyers,ortoholdtrialinabeyancependingarbitrationbetweenpetitioners
and respondent Laperal Realty, would in effect result in multiplicity of suits, duplicitous procedure and
unnecessarydelay.Ontheotherhand,itwouldbeintheinterestofjusticeifthetrialcourthearsthecomplaint
against all herein respondents and adjudicates petitioners' rights as against theirs in a single and complete
proceeding.
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WHEREFORE, the instant petition is hereby GRANTED. The Order dated August 19, 1998 of Branch 85 of the
RegionalTrialCourtofLipaCityisherebyNULLIFIEDandSETASIDE.Saidcourtisherebyorderedtoproceed
withthehearingofCivilCaseNo.980047.

Costsagainstprivaterespondents.

SOORDERED.

Bellosillo,Mendoza,QuisumbingandBuena,JJ.,concur.

Footnotes

1Annex"A"ofthePetition,Rollo,pp.1920.

2PresidedbyHon.JudgeAvelinoG.Demetria.

3Rollo,p.32.

4Annex"B"ofthePetition,Rollo,p.22.

5 Decision of Branch 59 of the Regional Trial Court of Makati City in SP. PROC. No. M4394 marked as
Annex"C"ofthePetition,Rollo,pp.2931.

6Annex"D"ofthePetition,Rollo,pp.3249.

7Annex"E"ofthePetition,Rollo,pp.5056.

8OwnerContractorAgreement,p.6,Rollo,p.27.

9Annex"F"ofthePetition,Rollo,pp.5873.

10Petition,pp.7,910,Rollo,pp.9,1112.

11MindanaoPortlandCementCorporationv.McDonoughConstructionCompanyofFlorida,19SCRA808,
815 (1967) Bengson v. Chan, 78 SCRA 113, 119 (1977) Chung Fu Industries (Phils.), Inc. v. Court of
Appeals, 206 SCRA 545, 549552 (1992) Puromines, Inc. v. Court of Appeals, 220 SCRA 281, 289290
(1993)NationalPowerCorporationv.CourtofAppeals,254SCRA116,125(1996).

1251Phil.908,916920(1924).

13Bengsonv.Chan,supra.

14B.F.Corporationv.CourtofAppeals,etal.,288SCRA267,286(1998).

15Ibid.

16ManilaElectricCompanyv.PasayTransportationCo.,57Phil.600,603(1932).

17Art.1311,CivilCode.

18 Tolentino, Arturo M., Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. 5
(1992),p.188.

19ComplaintdatedFebruary2,1998markedasAnnex"D"ofthePetition,Rollo,pp.3248.

20Santiagov.Gonzalez,79SCRA494,500(1977).

TheLawphilProjectArellanoLawFoundation

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