016 Magellan Capital MGMT Corp Vs Zosa

2/3/2020 SUPREME COURT REPORTS ANNOTATED VOLUME 355
VOL. 355, MARCH 26, 2001 157

Magellan Capital Management Corporation vs. Zosa
*
G.R. No. 129916. March 26, 2001.
MAGELLAN CAPITAL MANAGEMENT CORPORATION

and MAGELLAN CAPITAL HOLDINGS CORPORATION,
petitioners, vs. ROLANDO M. ZOSA and HON. JOSE P.
SOBERANO, JR., in his capacity as Presiding Judge of
Branch 58 of the Regional Trial Court of Cebu, 7th Judicial
Region, Respondents.
Arbitration; Courts; Jurisdiction; Under Republic Act No. 876,

otherwise known as the “Arbitration Law,” it is the regional trial
court which exercises jurisdiction over questions relating to
arbitration.—It is error for the petitioners to claim that the case
should fall under the jurisdiction of the Securities and Exchange
Commission [SEC, for brevity]. The controversy does not in
anyway involve the election/appointment of officers of petitioner
MCHC, as claimed by petitioners in their assignment of errors.
Respondent Zosa’s amended complaint focuses heavily on the
illegality of the Employment Agreement’s “Arbitration Clause”
initially invoked by him in seeking his termination benefits under
Section 8 of the employment contract. And under Republic Act No.
876, otherwise known as the “Arbitration Law,” it is the regional
trial court which exercises jurisdiction over questions relating to
arbitration.
Actions; Judgments; “Law of the Case” Doctrine; Words and
Phrases; The “law of the case” doctrine has been defined as “a term
applied to an established rule that when an appellate court passes
on a question and remands the cause to the lower court for further
proceedings, the question there settled becomes the law of the case
upon subsequent appeal.”—The decision of the Court of Appeals in
CA-G.R. SP No. 43059 affirming the
_______________
* SECOND DIVISION.
www.central.com.ph/sfsreader/session/00000170090f6fab8c55e899003600fb002c009e/t/?o=False 1/17
158
158 SUPREME COURT REPORTS ANNOTATED
trial court’s assumption of jurisdiction over the case has become

the “law of the case” which now binds the petitioners. The “law of
the case” doctrine has been defined as “a term applied to an
established rule that when an appellate court passes on a
question and remands the cause to the lower court for further
proceedings, the question there settled becomes the law of the
case upon subsequent appeal.” To note, the CA’s decision in CA-
G.R. SP No. 43059 has already attained finality as evidenced by a
Resolution of this Court ordering entry of judgment of said case.
Same; Appeals; Petition for Review; The jurisdiction of the
Supreme Court in a petition for review on certiorari under Rule 45
of the Revised Rules of Court is limited to reviewing only errors of
law, not of fact, unless the factual findings complained of are
devoid of support by the evidence on record, or the assailed
judgment is based on misapprehension of facts.—Equally
unavailing for the petitioners is the review by this Court, via the
instant petition, of the factual findings made by the trial court
that the composition of the panel of arbitrators would, in all
probability, work injustice to respondent Zosa. We have
repeatedly stressed that the jurisdiction of this Court in a petition
for review on certiorari under Rule 45 of the Revised Rules of
Court is limited to reviewing only errors of law, not of fact, unless
the factual findings complained of are devoid of support by the
evidence on record, or the assailed judgment is based on
misapprehension of facts.
Same; Same; Pleadings and Practice; Issues not raised below
cannot be resolved on review in higher courts.—In this connection,
petitioners’ attempt to put respondent in estoppel in assailing the
arbitration clause must be struck down. For one, this issue of
estoppel, as likewise noted by the Court of Appeals, found its way
for the first time only on appeal. Well-settled is the rule that
issues not raised below cannot be resolved on review in higher
courts.
Contracts; Employment Agreements; Contracts of Adhesion;
Employment agreements are usually contracts of adhesion, and
any ambiguity in its provisions is generally resolved against the
party who drafted the document.—Employment agreements such
as the one at bar are usually contracts of adhesion. Any ambiguity
in its provisions is generally resolved against the party who
drafted the document. Thus, in the relatively recent case of Phil.

Federation of Credit Cooperatives, Inc. (PFCCI) and Fr. Benedicto
Jayoma vs. NLRC and Victoria Abril, we had the occasion to
stress that “where a contract of employment, being a contract of
adhesion, is ambiguous, any ambiguity therein should be
construed strictly against the party who prepared it.”
159
VOL. 355, MARCH 26, 2001 159
Arbitration; Arbitration proceedings are designed to level the

playing field among the parties in pursuit of a mutually acceptable
solution to their conflicting claims, and any arrangement or
scheme that would give undue advantage to a party in the
negotiating table is anathema to the very purpose of arbitration
and should, therefore, be resisted.—We need only to emphasize in
closing that arbitration proceedings are designed to level the
playing field among the parties in pursuit of a mutually
acceptable solution to their conflicting claims. Any arrangement
or scheme that would give undue advantage to a party in the
negotiating table is anathema to the very purpose of arbitration
and should, therefore, be resisted.
PETITION for review on certiorari of a decision of the

Regional Trial Court of Cebu City, Br. 58.
The facts are stated in the opinion of the Court.

Marifel G. Gaerlan and Carpio, Villaraza & Cruz for
petitioners.
Francis M. Zosa for respondents.
BUENA, J.:
Under a management agreement entered into on March
18, 1994, Magellan Capital Holdings Corporation [MCHC]
appointed Magellan Capital Management Corporation
[MCMC] 1
as manager for the operation of its business and
affairs. Pursuant thereto, on the same month, MCHC,
MCMC, and private respondent Rolando M. Zosa entered
into an “Employment Agreement” designating Zosa as
President and Chief Executive Officer of MCHC.
Under the “Employment Agreement,” the term of
respondent Zosa’s employment shall be co-terminous 2
with
the management agreement, or until March 1996, unless
sooner terminated pursuant 3
to the provisions of the
Employment Agreement, The grounds
_______________
1 Section 1 of Amended and Restated Management Agreement, Annex

“B,” Rollo, p. 74.
2 par. 2 of the Pre-Trial Order dated October 21, 1996, Annex “BB,”
Rollo, p. 241.
3 Annex “C” of Petition, Rollo, pp. 89-101; 217-229.
160

for termination of employment are also provided in the

Employment Agreement.
On May 10, 1995, the majority of MCHC’s Board of
Directors decided not to re-elect respondent Zosa as
President and Chief Executive Officer 4
of MCHC on account
of loss of trust and confidence arising from alleged
violation of the resolution issued by MCHC’s board of
directors and of the 5non-competition clause of the
Employment Agreement. Nevertheless, respondent Zosa
was elected to a new position as MCHC’s 6 Vice-
Chairman/Chairman for New Ventures Development.
On September 26, 1995, respondent Zosa communicated
his resignation for good reason from the position of Vice-
Chairman under paragraph 7 of the Employment
Agreement on the ground that said position had less
responsibility and scope than President and Chief
Executive Officer. He demanded that he be given
termination benefits as provided for in7 Section 8 (c) (i) (ii)
and (iii) of the Employment Agreement.
In a letter dated October 20, 1995, MCHC
communicated its non-acceptance of respondent Zosa’s
resignation for good reason, but instead informed him that
the Employment Agreement is terminated for cause,
effective November 19, 1995, in accordance with Section 7
(a) (v) of the said agreement, on account of his breach of
Section 12 thereof. Respondent Zosa was further advised
that he shall have no further rights under the said
Agreement or any claims against the Manager or the
Corporation except the right to receive within thirty (30)
days from November 19, 1995, the 8
amounts stated in
Section 8 (a) (i) (ii) of the Agreement.
Disagreeing with the position taken by petitioners,
respondent Zosa invoked the Arbitration Clause of the
Employment Agreement, to wit:
_______________
4 par. 5 of Petitioner’s Memorandum, Rollo, p. 560.

5 par. 5.1-6.4, ibid., Rollo, pp. 560-562.
6 par. 4, ibid., Rollo, p. 559.
7 par. 6-7, Amended Complaint, Rollo, pp. 173-174; p. 562.
8 Annex “O” of Petition, Rollo, p. 130.
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VOL. 355, MARCH 26, 2001 161

“23. Arbitration. In the event that any dispute, controversy or

claim arises out of or under any provisions of this Agreement,
then the parties hereto agree to submit such dispute, controversy
or claim to arbitration as set forth in this Section and the
determination to be made in such arbitration shall be final and
binding. Arbitration shall be effected by a panel of three
arbitrators. The Manager, Employee and Corporation shall
designate one (1) arbitrator who shall, in turn, nominate and elect
who among them shall be the chairman of the committee. Any
such arbitration, including the rendering of an arbitration award,
shall take place in Metro Manila. The arbitrators shall interpret
this Agreement in accordance with the substantive laws of the
Republic of the Philippines. The arbitrators shall have no power
to add to, subtract from or otherwise modify the terms of
Agreement or to grant injunctive relief of any nature. Any
judgment upon the award of the arbitrators may be entered in
any court having jurisdiction thereof, with costs of the arbitration
to be borne equally by the parties, except that each party shall
pay the fees and expenses of its own counsel in the arbitration.”
On November 10, 1995, respondent Zosa designated his

brother, Atty. Francis
9
Zosa, as his representative in the
arbitration
10
panel while MCHC designated Atty. Inigo11 S.
Fojas and MCMC nominated Atty. Enrique I. Quiason as
their respective representatives in the arbitration panel.
However, instead of submitting the dispute to arbitration,
respondent Zosa, on April 17, 1996, filed an action for
damages against12 petitioners before the Regional Trial
Court of Cebu to enforce his benefits under the
Employment Agreement. 13
On July 3, 1996, petitioners filed a motion to dismiss
arguing that (1) the trial court has no jurisdiction over the
instant case since respondent Zosa’s claims should be
resolved through arbitration pursuant to Section 23 of the
Employment Agreement with petitioners; and (2) the venue
is improperly laid since respondent Zosa, like the

petitioners, is a resident of Pasig City and thus, the venue
of this case, granting without admitting that the
respondent
_______________
9 Annex “P” of Petition, Rollo, p. 131.

10 Annex “R” of Petition, Rollo, p. 133
11 Annex “Q” of Petition, Rollo, p. 132.
12 Annex “BB,” Rollo, p. 241.
13 Annex “S,” Rollo, pp. 134-145.
162

has a cause of action against the petitioners cognizable

14
by
the RTC, should be limited only to RTC-Pasig City.
Meanwhile, respondent Zosa filed an amended
complaint dated July 5, 1996.
On August 1, 1996, the RTC Branch 58 of Cebu City
issued an Order denying petitioners’ motion to dismiss
upon the findings that (1) the validity and legality of the
arbitration provision can only be determined after trial on
the merits; and (2) the amount of damages claimed, which
is over
15
P100,000.00, falls within the jurisdiction of the
RTC. Petitioners filed a motion for reconsideration which
was denied
16
by the RTC in an order dated September 5,
1996.
In the interim, on August 22, 1996, in compliance with
the earlier order of the court directing petitioners to file
responsive pleading to the amended complaint, petitioners
filed their Answer Ad Cautelam with counterclaim
reiterating their position that the dispute should be settled
through arbitration and17the court had no jurisdiction over
the nature of the action.
On October 21, 1996, the trial court issued its pre-trial
order declaring the pre-trial stage terminated and setting
the case for hearing. The order states:
“ISSUES:
“The Court will only resolve one issue in so far as this case is
concerned, to wit:
“Whether or not the Arbitration Clause contained in Sec. 23 of
the Employment Agreement is void and of no effect: and, if it is
void and of no effect, whether or not the plaintiff is entitled to
damages in accordance with his complaint and the defendants in

accordance with their counter-claim.
“It is understood, that in the event the arbitration clause is
valid and binding between the parties, the parties shall submit
their respective
______________
14 Annex “U,” Rollo, p. 179.

15 Annex “X,” Rollo, pp. 185-186.
16 Annex “AA,” Rollo, p. 240,
17 Par. 9, Petitioner’s Memorandum, Rollo, p. 566.
163
VOL. 355, MARCH 26, 2001 163

claim to the Arbitration Committee in accordance with the said

arbitration 18clause, in which event, this case shall be deemed
dismissed.”
On November 18, 1996, petitioners filed their Motion Ad

Cautelam for the Correction, Addition and Clarification
19
of
the Pre-trial Order dated November 15 1996, which was 20
denied by the court in an order dated November 28, 1996.
Thereafter, petitioners MCMC and MCHC filed a Motion
Ad Cautelam for the parties to file their Memoranda to
support their respective stand on the issue of the validity of
the “arbitration clause” contained in the Employment
Agreement. In an order dated December 13, 1996, the trial
court denied the motion of petitioners MCMC and MCHC.
On January 17, 1997, petitioners MCMC and MCHC
filed a petition for certiorari and prohibition under Rule 65
of the Rules of Court with the Court of Appeals,
questioning the trial court orders dated August
21
1, 1996,
September 5, 1996, and December 13, 1996.
_______________
18 Pre-trial Order, Annex “BB,” Rollo, pp. 241-243.

19 Annex “CC,” Rollo, pp. 248; 566-567.
20 Annex “DD,” Rollo, p. 252.
21 The issues submitted to the Court of Appeals are as follows:
“I.
RESPONDENT COURT ACTED WITH GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OF JURISDICTION WHEN IT ISSUED THE
QUESTIONED ORDERS DATED 1 AUGUST 1996 (ANNEX ‘A’), 05 SEPTEMBER

1996 (ANNEX ‘B’) AND 13 DECEMBER 1996 (ANNEX ‘C’) WHICH DEFERRED
THE RESOLUTION OF THE ISSUE REGARDING THE VALIDITY OF THE
ARBITRATION CLAUSE IN THE EMPLOYMENT AGREEMENT UNTIL AFTER
TRIAL ON THE MERITS.
“II.

AMOUNTING TO LACK OF JURISDICTION WHEN IT FAILED TO RULE
THAT THE ARBITRATION CLAUSE UNDER THE EMPLOYMENT
AGREEMENT IS VALID AND BINDING ON THE PARTIES THERETO.
164

On March 21, 1997, the Court of Appeals rendered a

decision, giving due course to the petition, the decretal
portion of which reads:
“WHEREFORE, the petition is GIVEN DUE COURSE. The

respondent court is directed to resolve the issue on the validity or
effectivity of the arbitration clause in the Employment
Agreement, and to suspend further proceedings in the trial on the
merits until the said issue is re-
_______________
“III.
RESPONDENT COURT ALTED WITHOUT OR IN EXCESS OF JURISDICTION

WHEN IT TOOK COGNIZANCE OF RESPONDENT ZOSA’S AMENDED
COMPLAINT INSTEAD OF REFERRING THE SAME IMMEDIATELY TO
ARBITRATION PURSUANT TO THE EMPLOYMENT AGREEMENT BETWEEN
PETITIONERS AND RESPONDENT ZOSA.
“IV.
IN ANY EVENT, RESPONDENT COURT ACTED AND IS CONTINUING TO

ACT WITHOUT JURISDICTION IN HEARING THE CASE BELOW,
CONSIDERING THAT IT HAS NO JURISDICTION OVER THE NATURE OF
THE ACTION OR SUIT SINCE CONTROVERSIES IN THE ELECTION OR
APPOINTMENT OF OFFICERS OR MANAGERS OF A CORPORATION, SUCH
AS THE ACTION BROUGHT BY RESPONDENT ZOSA, FALL WITHIN THE
ORIGINAL AND EXCLUSIVE JURISDICTION OF THE SECURITIES AND
EXCHANGE COMMISSION.
“V.

AMOUNTING TO LACK OF JURISDICTION WHEN IT REFUSED TO DISMISS
THE ACTION BELOW FOR IMPROPER VENUE.
“VI.

AMOUNTING TO LACK OF JURISDICTION WHEN IT FAILED TO DISMISS
THE AMENDED COMPLAINT FOR LACK OF THE REQUISITE
CERTIFICATION OF NON-FORUM SHOPPING.”
Court of Appeals’ Decision, pp. 5-6; Rollo, pp. 316-317.
165
VOL. 355, MARCH 26, 2001 165

solved. The questioned orders are set aside insofar as they

contravene this Court’s resolution of the issues raised as herein
pronounced.
“The petitioner is required to remit to this Court the sum of
P81.80 for cost within
22
five (5) days from notice.
“SO ORDERED.”
Petitioners filed a motion for partial reconsideration of the

CA decision praying (1) for the dismissal of the case in the
trial court, on the ground of lack of jurisdiction, and (2)
that the parties be directed to submit their dispute to
arbitration in accordance with the Employment Agreement
dated March 1994. The CA, in a resolution promulgated on
June 20, 1997, denied the motion for partial
reconsideration for lack of merit.
In compliance with the CA decision, the trial court, on
July 18, 1997, rendered a decision declaring the
“arbitration clause” in the Employment Agreement partially
void and of no effect. The dispositive portion of the decision
reads:
‘WHEREFORE, premises considered, judgment is hereby

rendered partially declaring the arbitration clause of the
Employment Agreement void and of no effect, only insofar as it
concerns the composition of the panel of arbitrators, and directing
the parties to proceed to arbitration in accordance with the
Employment Agreement under the panel of three (3) arbitrators,
one for the plaintiff, one for the defendants, and the third to be
chosen by both the plaintiff and defendants. The other terms,
conditions and stipulations
23
in the arbitration clause remain in
force and effect.”
In view of the trial court’s decision, petitioners filed this

petition for review on certiorari, under Rule 45 of the Rules
of Court, assigning the following errors for the Court’s
resolution:
“I. The trial court gravely erred when it ruled that the
arbitration clause under the employment
agreement is partially void and of no effect,
considering that:
_______________
22 Ibid., pp. 329-330.

23 Annex “A,” RTC Decision, pp. 72-73.
166

“A. The arbitration clause in the employment

agreement dated March 1994 between respondent
Zosa and defendants MCHC and MCMC is valid
and binding upon the parties thereto.
“B. In view of the fact that there are three parties to
the employment agreement, it is but proper that
each party be represented in the arbitration panel.
“C. The trial court grievously erred in its conclusion
that petitioners MCMC and MCHC represent the
same interest.
“D. Respondent Zosa is estopped from questioning the
validity of the arbitration clause, including the
right of petitioner MCMC to nominate its own
arbitrator, which he himself has invoked.
“II. In any event, the trial court acted without

jurisdiction in hearing the case below, considering
that it has no jurisdiction over the nature of the
action or suit since controversies in the election or
appointment of officers or managers of a
corporation, such as the action brought by
respondent Zosa, fall within the original and
exclusive jurisdiction of the Securities and
Exchange Commission.
“III, Contrary to respondent Zosa’s allegation, the issue
of the trial court’s jurisdiction over the case below
has not yet been resolved with finality considering
that petitioners have expressly reserved their right

to raise said issue in the instant petition. Moreover,
the principle of the law of the case is not applicable
in the instant case.
“IV. Contrary to respondent Zosa’s allegation,
petitioners MCMC and MCHC are not guilty of
forum shopping.
“V. Contrary to respondent Zosa’s allegation, the
instant petition for review
24
involves only questions
of law and not of fact.”
We rule against the petitioners.

It is error for the petitioners to claim that the case
should fall under the jurisdiction of the Securities and
Exchange Commission [SEC, for brevity]. The controversy
does not in anyway involve the election/appointment of
officers of petitioner MCHC, as claimed by petitioners in
their assignment of errors. Respondent Zosa’s amended
complaint focuses heavily on the illegality of the
Employment Agreement’s “Arbitration Clause” initially
invoked by him
_______________
24 Rollo, pp. 571-573.
167
VOL. 355, MARCH 26, 2001 167

in seeking his termination benefits under Section 8 of the

employment contract. And under Republic Act No. 876,
otherwise known as the “Arbitration Law,” it is the
regional trial court which exercises jurisdiction over
questions relating to arbitration. We thus advert to the
following discussions made by the Court of 25Appeals,
speaking thru Justice Minerva P. Gonzaga-Reyes, in CA.-
G.R. S.P. No. 43059, viz.:
“As regards the fourth assigned error, asserting that jurisdiction

lies with the SEC, which is raised for the first time in this
petition, suffice it to state that the Amended Complaint squarely
put in issue the question whether the Arbitration Clause is valid
and effective between the parties. Although the controversy which
spawned the action concerns the validity of the termination of the
service of a corporate officer, the issue on the validity and
effectivity of the arbitration clause is determinable by the regular
courts, and do not fall within the exclusive and original

jurisdiction of the SEC.
“The determination and validity of the agreement is not a
matter intrinsically connected with the regulation and internal
affairs of corporations (see Pereyra vs. IAC, 181 SCRA 244; Sales
vs. SEC, 169 SCRA 121); it is rather an ordinary case to be
decided in accordance with the general laws, and do not require
any particular expertise26or training to interpret and apply (Viray
vs. CA, 191 SCRA 308).”
Furthermore, the decision of the Court of Appeals in CA-G-

R. SP No. 43059 affirming the trial court’s assumption of
jurisdiction over the case has become the “law of the case”
which now binds the petitioners. The “law of the case”
doctrine has been defined as “a term applied to an
established rule that when an appellate court passes on a
question and remands the cause to the lower court for
further proceedings, the question there settled
27
becomes the
law of the case upon subsequent appeal.” To note, the CA’s
decision in CA-G.R. SP No. 43059 has already attained
finality as evidenced by a Resolution of this Court ordering
entry of judgment of said case, to wit:
_______________
25 Now Associate Justice of this Court.

26 Court of Appeals Decision, p. 16; Rollo, p. 321.
27 Loevillo C. Agustin vs. Court of Appeals and Filinvest Finance
Corporation, 271 SCRA 457 [1997].
168

“ENTRY OF JUDGMENT
This is to certify that on September 8, 1997 a decision/resolution

rendered in the above-entitled case was filed in this Office, the
dispositive part of which reads as follows:
‘G.R. No. 129615 (Magellan Capital Management Corporation, et al. vs.

Court of Appeals, Rolando Zosa, et al.).—Considering the petitioner’s
manifestation dated August 11, 1997 and withdrawal of intention to file
petition for review on certiorari, the Court Resolved to DECLARE THIS
CASE TERMINATED and DIRECT the Clerk of Court to INFORM the
parties that the judgment sought to be reviewed has become final and
executory, no appeal therefore having been timely perfected.’
and that the same has, on September 17, 1997, become final
and executory
28
and is hereby recorded in the Book of Entries of
Judgments.”
Petitioners, therefore, are barred from challenging anew,

through another remedial measure and in any other forum,
the authority of the regional trial court to resolve the
validity of the arbitration clause, lest they be truly guilty of
forum-shopping which the courts consistently consider as a
contumacious practice that derails the orderly
administration of justice.
Equally unavailing for the petitioners is the review by
this Court, via the instant petition, of the factual findings
made by the trial court that the composition of the panel of
arbitrators would, in all probability, work injustice to
respondent Zosa. We have repeatedly stressed that the
jurisdiction of this Court in a petition for review on
certiorari under Rule 45 of the Revised Rules of Court is
limited to reviewing only errors of law, not of fact, unless
the factual findings complained of are devoid of support by
the evidence on record, or the 29
assailed judgment is based
on misapprehension of facts.
Even if procedural rules are disregarded, and a scrutiny
of the merits of the case is undertaken, this Court finds the
trial court’s observations on why the composition of the
panel of arbitrators
_______________
28 Rollo, p. 350.
29 Congregation of the Religious of the Virgin Mary vs. CA, 291 SCRA
385 [1998].
169
VOL. 355, MARCH 26, 2001 169

should be voided, incisively correct so as to merit our

approval. Thus,
“From the memoranda of both sides, the Court is of the view that
the defendants [petitioner] MCMC and MCHC represent the same
interest. There is no quarrel that both defendants are entirely two
different corporations with personalities distinct and separate
from each other and that a corporation has a personality distinct
and separate from those persons composing the corporation as
well as from that of any other legal entity to which it may be

related.
“But as the defendants [herein petitioner] represent the same
interest, it could never be expected, in the arbitration
proceedings, that they would not protect and preserve their own
interest, much less, would both or either favor the interest of the
plaintiff. The arbitration law, as all other laws, is intended for the
good and welfare of everybody. In fact, what is being challenged
by the plaintiff herein is not the law itself but the provision of the
Employment Agreement based on the said law, which is the
arbitration clause but only as regards the composition of the panel
of arbitrators. The arbitration clause in question provides, thus:
‘In the event that any dispute, controversy or claim arise out of or under
any provisions of this Agreement, then the parties hereto agree to submit
such dispute, controversy or claim to arbitration as set forth in this
Section and the determination to be made in such arbitration shall be
final and binding. Arbitration shall be effected by a panel of three
arbitrators. The Manager, Employee, and Corporation shall designate one
(1) arbitrator who shall, in turn, nominate and elect as who among them
shall be the chairman of the committee. Any such arbitration, including
the rendering of an arbitration award, shall take place in Metro Manila.
The arbitrators shall interpret this Agreement in accordance with the
substantive laws of the Republic of the Philippines. The arbitrators shall
have no power to add to, subtract from or otherwise modify the terms of
this Agreement or to grant injunctive relief of any nature. Any judgment
upon the award of the arbitrators may be entered in any court having
jurisdiction thereof, with costs of the arbitration to be borne equally by
the parties, except that each party shall pay the fees and expenses of its
own counsel in the arbitration.’ (Emphasis supplied)
“From the foregoing arbitration clause, it appears that the two

(2) defendants [petitioners] (MCMC and MCHC) have one (1)
arbitrator each to compose the panel of three (3) arbitrators. As
the defendant MCMC is the Manager of defendant MCHC, its
decision or vote in the arbitration
170

proceeding would naturally and certainly be in favor of its

employer and the defendant MCHC would have to protect and
preserve its own interest; hence, the two (2) votes of both
defendants (MCMC and MCHC) would certainly be against the
lone arbitrator for the plaintiff [herein defendant]. Hence,
apparently, plaintiff [defendant] would never gpt or receive justice
and fairness in the arbitration proceedings from the panel of

arbitrators as provided in the aforequoted arbitration clause. In
fairness and justice to the plaintiff [defendant], the two
defendants (MCMC and MCHC) [herein petitioners] which
represent the same interest should be considered as one and
should be entitled to only one arbitrator to represent them in the
arbitration proceedings. Accordingly, the arbitration clause,
insofar as the composition of the panel of arbitrators is concerned
should be declared void and of no effect, because the law says,
“Any clause giving one of the parties power to choose more
arbitrators than the other is void and of no effect” (Article 2045,
Civil Code).
“The dispute or controversy between the defendants (MCMC
and MCHC) [herein petitioners] and the plaintiff [herein
defendant] should be settled in the arbitration proceeding in
accordance with the Employment Agreement, but under the panel
of three (3) arbitrators, one (1) arbitrator to represent the
plaintiff, one (1) arbitrator to represent both defendants (MCMC
and MCHC) [herein petitioners] and the third arbitrator to be
chosen by the plaintiff [defendant Zosa] and defendants
[petitioners]. 30
“x x x x x x x x x”
In this connection, petitioners’ attempt to put respondent

in estoppel in assailing the arbitration clause must be
struck down. For one, this issue of estoppel, as likewise
noted by the Court of Appeals, found its way for the first
time only on appeal. Well-settled is the rule that issues not
raised 31below cannot be resolved on review in higher
courts. Secondly, employment agreements such as the one
at bar are usually contracts of adhesion. Any ambiguity in
its provisions is generally resolved against the party who
drafted the document. Thus, in the relatively recent case of
Phil Federation of Credit Cooperatives, Inc. (PFCCI)32and
Fr. Benedicto Jayoma vs. NLRC and Victoria Abril, we
had the occasion to stress that
_______________
30 Rollo, pp. 71-72.

31 Casolita, Sr. vs. Court of Appeals, 275 SCRA 257 [1997]; Manalili vs.
Court of Appeals, 280 SCRA 400 [1997].
32 G.R. No. 121071, December 11, 1998, 300 SCRA 72.
171
VOL. 355, MARCH 26, 2001 171

“where a contract of employment, being a contract of

adhesion, is ambiguous, any ambiguity therein should be
construed strictly against the party who prepared it.” And,
finally, respondent Zosa submitted himself to arbitration
proceedings (as there was none yet) before bewailing the
composition of the panel of arbitrators. He in fact, lost no
time in assailing the “arbitration clause” upon realizing the
inequities that may mar the arbitration proceedings if the
existing line-up of arbitrators remained unchecked.
We need only to emphasize in closing that arbitration
proceedings are designed to level the playing field among
the parties in pursuit of a mutually acceptable solution to
their conflicting claims. Any arrangement or scheme that
would give undue advantage to a party in the negotiating
table is anathema to the very purpose of arbitration and
should, therefore, be resisted.
WHEREFORE, premises considered, the petition is
hereby DISMISSED and the decision of the trial court
dated July 18, 1997 is AFFIRMED.
SO ORDERED.
Bellosillo (Chairman), Mendoza and De Leon, Jr.,

JJ., concur.
Quisumbing, J., On leave.
Petition dismissed, judgment affirmed,
Notes.—Interpretation by the arbitrators which was a

faithful application of the provisions of the Agreement did
not have the effect of creating a new contract. (Adamson vs.
Court of Appeals, 232 SCRA 602 [1994])
A voluntary arbitrator commits grave abuse of discretion
in finding that an employee did not commit gross
negligence in the performance of her duty where the
evidence shows otherwise. (Citibank, N.A. vs. Gatchalian,
240 SCRA 212 [1995])
Absent an express stipulation in the CBA, the phrase
“all disputes” should be construed as limited to the areas of
conflict traditionally within the jurisdiction of Voluntary
Arbitrators, i.e., dis putes relating to contract-
interpretation, contract-implementation,
172

People vs. Medenilla
or interpretation or enforcement of company personnel

policies—illegal termination disputes do not fall within any
of these categories, within a special class of disputes that
are generally within the exclusive original jurisdiction of
Labor Arbiters by express provision of law. (Vivero vs.
Court of Appeals, 344 SCRA 268 [2000])
——o0o——
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016 Magellan Capital MGMT Corp Vs Zosa

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016 Magellan Capital MGMT Corp Vs Zosa

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2/3/2020 SUPREME COURT REPORTS ANNOTATED VOLUME 355

VOL. 355, MARCH 26, 2001 157

MAGELLAN CAPITAL MANAGEMENT CORPORATION

Arbitration; Courts; Jurisdiction; Under Republic Act No. 876,

158 SUPREME COURT REPORTS ANNOTATED

Magellan Capital Management Corporation vs. Zosa

trial court’s assumption of jurisdiction over the case has become

drafted the document. Thus, in the relatively recent case of Phil.

VOL. 355, MARCH 26, 2001 159

Magellan Capital Management Corporation vs. Zosa

Arbitration; Arbitration proceedings are designed to level the

PETITION for review on certiorari of a decision of the

The facts are stated in the opinion of the Court.

1 Section 1 of Amended and Restated Management Agreement, Annex

160 SUPREME COURT REPORTS ANNOTATED

for termination of employment are also provided in the

4 par. 5 of Petitioner’s Memorandum, Rollo, p. 560.

VOL. 355, MARCH 26, 2001 161

“23. Arbitration. In the event that any dispute, controversy or

On November 10, 1995, respondent Zosa designated his

is improperly laid since respondent Zosa, like the

9 Annex “P” of Petition, Rollo, p. 131.

162 SUPREME COURT REPORTS ANNOTATED

has a cause of action against the petitioners cognizable

damages in accordance with his complaint and the defendants in

14 Annex “U,” Rollo, p. 179.

VOL. 355, MARCH 26, 2001 163

claim to the Arbitration Committee in accordance with the said

On November 18, 1996, petitioners filed their Motion Ad

18 Pre-trial Order, Annex “BB,” Rollo, pp. 241-243.

RESPONDENT COURT ACTED WITH GRAVE ABUSE OF DISCRETION

QUESTIONED ORDERS DATED 1 AUGUST 1996 (ANNEX ‘A’), 05 SEPTEMBER

RESPONDENT COURT ACTED WITH GRAVE ABUSE OF DISCRETION

164 SUPREME COURT REPORTS ANNOTATED

On March 21, 1997, the Court of Appeals rendered a

“WHEREFORE, the petition is GIVEN DUE COURSE. The

RESPONDENT COURT ALTED WITHOUT OR IN EXCESS OF JURISDICTION

IN ANY EVENT, RESPONDENT COURT ACTED AND IS CONTINUING TO

RESPONDENT COURT ACTED WITH GRAVE ABUSE OF DISCRETION

RESPONDENT COURT ACTED WITH GRAVE ABUSE OF DISCRETION

Court of Appeals’ Decision, pp. 5-6; Rollo, pp. 316-317.

VOL. 355, MARCH 26, 2001 165

solved. The questioned orders are set aside insofar as they

Petitioners filed a motion for partial reconsideration of the

‘WHEREFORE, premises considered, judgment is hereby

In view of the trial court’s decision, petitioners filed this

22 Ibid., pp. 329-330.

166 SUPREME COURT REPORTS ANNOTATED

“A. The arbitration clause in the employment

“II. In any event, the trial court acted without

that petitioners have expressly reserved their right

We rule against the petitioners.

24 Rollo, pp. 571-573.

VOL. 355, MARCH 26, 2001 167

in seeking his termination benefits under Section 8 of the

“As regards the fourth assigned error, asserting that jurisdiction

courts, and do not fall within the exclusive and original

Furthermore, the decision of the Court of Appeals in CA-G-

25 Now Associate Justice of this Court.

168 SUPREME COURT REPORTS ANNOTATED

This is to certify that on September 8, 1997 a decision/resolution

‘G.R. No. 129615 (Magellan Capital Management Corporation, et al. vs.

Petitioners, therefore, are barred from challenging anew,