Aboitiz Equity Ventures, Inc. v.

Chiongbian
G.R. No. 197530, Date: July 9, 2014

FACTS:
Aboitiz Shipping Corporation (ASC), Carlos A. Gothong Lines, Inc (CAGLI), principally owned by
the Chiongbian family and William Lines, Inc. (WLI) entered into an agreement whereby ASC
and CAGLI would transfer their shipping assets to WLI in exchange for WLI's shares of stock.
WLI, in turn, would run their merged shipping businesses which will be known as WG&A, Inc.
They also executed an arbitration agreement requiring that all disputes arising out of or in
connection with their agreement shall be settled by arbitration. The said agreement includes, as
embodied in Annex SL-V, WLI’s commitment to acquire certain inventories of CAGLI which
were assessed to have a value of P514 million and were later adjusted to P558.89 million.
However, CAGLI was paid the amount P400 million only which prompted the latter to demand
the remaining balance from WG&A.
In the meantime, principal owners of CAGLI and WLI decided to leave the WG&A enterprise
and sell their interest in WG&A to petitioner Aboitiz Equity Ventures (AEV), which resulted to
WG&A renaming to Aboitiz Transport Shipping Corporation (ATSC). The share purchase
agreement (SPA) between the parties included another arbitration agreement providing
arbitration as the mode of setting any dispute that may arise from the purchase agreement.
Consequently, CAGLI resumed its demand for the excess inventories delivered, this time
against ATSC. ATSC claimed that the demand was already satisfied as WG&A already returned
the inventories amounting to PhP120.04 million.
The claim not being satisfied, CAGLI filed an application for arbitration with the trial court
against ATSC, ASC, AEV and respondent Chiongbian. AEV filed a motion to dismiss on the
ground that CAGLI failed to state a cause of action as there was no agreement to arbitrate
between them. The trial court dismissed the case with respect to AEV and for the remaining
parties to arbitrate. However, CAGLI filed a notice of dismissal, withdrawing the application
which was allowed by the trial court. ATSC filed a motion for reconsideration. Pending said
motion of reconsideration, CAGLI and Gothong filed another application for arbitration asking for
the return of the excess inventories which was the subject of the first complaint. Petitioner filed a
motion to dismiss on the grounds of forum shopping, failure to state a cause of action, res
judicata and litis pendentia. The trial court denied the motion.

ISSUE/S:
Is the second application for arbitration of respondents is barred by res judicata and constitute
forum shopping?

RULING:
Yes. The Court ruled the complaint is barred by res judicata and constitutes forum shopping.
Forum shopping is committed by a party who institutes two or more suits in different courts,
either simultaneously or successively, in order to ask the courts to rule on the same or related
causes or to grant the same or substantially the same reliefs, on the supposition that one or the
other court would make a favorable disposition or increase a party's chances of obtaining a
favorable decision or action.
To determine whether a party violated the rule against forum shopping, the most important
factor to ask is whether the elements of litis pendentia are present, or whether a final judgment
in one case will amount to res judicata in another; otherwise stated, the test for determining
forum shopping is whether in the two (or more) cases pending, there is identity of parties, rights
or causes of action, and reliefs sought.
Litis pendentia refers to that 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. It requires the concurrence of three (3) requisites: (1) the identity of parties, or at
least such as representing the same interests in both actions; (2) the identity of rights asserted
and relief prayed for, the relief being founded on the same facts; and (3) the identity of the two
cases such that judgment in one, regardless of which party is successful, would amount to res
judicata in the other.
In turn, prior judgment or res judicata bars a subsequent case when 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; (4) there is —
between the first and the second actions — identity of parties, of subject matter, and of causes
of action.
The dismissal of the first complaint with respect to AEV was a judgment on the merits. Dismissal
on the ground of "failure to state a cause of action" may operate as res judicata on a
subsequent case involving the same parties, subject matter, and causes of action, provided that
the order of dismissal actually ruled on the issues raised. What appears to be essential to a
judgment on the merits is that it be a reasoned decision, which clearly states the facts and the
law on which it is based.