Magellan capital mngt corp vs.

zosa 355 scra 157

-Under a management agreement, Magellan Capital Holdings (MCHC) appointed Magellan Capital Management Corp (MCMC) as manager for the
operation of its business and affairs. Pursant thereto, Zosa, MCHC and MCMC entered into an "EMPLOYMENT AGREEMENT" where Zosa was
designated as President and CEO of MCMC, and which provided that his term is co-terminous w/ the management agreement (until March 1996)
unless sooner terminated.

DISPUTE: Zosa's was not re-elected by MCHC's Board of Directors on May 1995 for account of loss of trust and confidence arising from alleged
violation of the resolution issued by MCHC's board of directors and of the non-competition clause of the Employment Agreement. Nevertheless,
respondent Zosa was elected to a new position as MCHC's Vice-Chairman/Chairman for New Ventures Development.

-September 1995: Zosa resigned for good reason from VChair position under PAR7, EMPLOYMENT AGREEMENT: position had less responsibility and
scope than President and Chief Executive Officer. Demanded that he be given termination benefits as provided in the Employment Agreement.
Instead, he was terminated for cause (breach of SECTION 12) and was further advised that he shall have no further rights under the EMPLOYMENT
AGREEMENT. His demand for termination benefits were granted however.

RESORT TO ARBITRATION: Disagreeing with the position taken by petitioners, respondent Zosa invoked the Arbitration Clause of the Employment
Agreement, to wit:

"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."

-Zosa, MCMC and MCHC each designated their nominees for the arbitration panel BUT Zosa ABANDONED RESORT TO ARBITRATION AND FILED AN
ACTION FOR DAMAGES TO ENFORCE BENEFITS UNDER THE EMPLOYMENT AGREEMENT before RTC Cebu.
-MTD:

RTC had no jurisdiction: should resort to Arbitration

Venue improperly laid: all the parties are residents of Pasig City so the proper venue should be RTC Pasig, w/o admitting that Zosa had a COA.

*Zosa filed Amended Complaint

*RTC: MTD DISMISSED

Validity and legality of the arbitration provision can only be determined after trial on the merits

Amount of damages claimed (P100k) falls w/n jurisdiction of RTC

*MR DENIED. So MCMC and MCHC filed ANSWER AD CAUTELAM (w/ same arguments as MTD)

*PRETRIAL ORDER: limited the issue to be resolved on the VALIDITY OF THE ARBITRATION CLAUSE

>>>if void: WON Zosa entitled to damages as prayed for in his complaint or MCMC and MCHC for their counterclaim.

-mejo magulo, basta, from what I understood, MCMC and MCHC still insisted that the dispute is arbitrable, thus the RTC should

Dismiss it. As the RTC denied their motions and wanted to proceed with trial on the merits, they filed a R65 Petition for Certiorari before CA

*CA: RTC directed to resolve the issue on the validity or effectivity of the arbitration clause + suspend trial on the merits until the validity of the
arbitration clause is resolved. MCMC and MCHC filed MOTIONS FOR PARTIAL RECON. Denied for lack of merit.

*RTC: rendered arbitration clause PARTIALLY VOID insofar as it concerns the composition of the panel of arbitrators (each of the parties elect 1
arbitrator); directed the parties to proceed w/ arbitration with 3 arbitrators, 1 for Zosa, 1 for MCMC and MCHC, and the 3rd to be selected by both
parties.

-to appeal, MCMC and MCHC filed R45 Petition: RTC erred in ruling that the manner of selection of the panel arbitrators is void insofar as MCMC
and MCHC represent the same interest and that Zosa is estopped from questioning the validity of the arbitration agreement as he already
designated his own arbitrator.
ISSUES: WON the case should fall under SEC jurisdiction (apparently, this was raised as an issue before the CA).

RULING: NO. The controversy does not in anyway involve the election/appointment of officers of petitioner MCHC BUT THE ILLEGALITY OF THE
ARBITRATION CLAUSE IN THE EMPLOYMENT AGREEMENT.

IT FALLS UNDER RTC. 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. Although the dispute stems from 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.

LAW OF THE CASE DOCTRINE: 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. MCMC and MCHC are
therefore barred from challenging anew the authority of the RTC to resolve the validity of the arbitration clause, or else guilty of forum shopping.

WON TC erred in voiding the arbitration clause as it would work injustice (in all probability) to Zosa? NO.

-R45 Petition is limited to reviewing errors of law.

-even if we review facts, RTC still correct:

*MCMC and MCHC represent the same interest. Though they are 2 corporations w/ distinct personalities, they represent the same interest. Thus, it
would be expected that they would protect and preserve their own interest and neither would favor Zosa's interest during arbitration. If the
arbitration clause would be followed, MCMC would have 1 arbitrator, MCHC would have another arbitrator, and Zosa would have 1. But MCMC is
the manager of MCHC, MCHC would naturally favor its employer. Thus, their 2 votes would win vs. Zosa's lone vote.

-A2045, NCC: "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).

WON Zosa is estopped from assailing the validity of the arbitration clause? NO

Issue of estoppel raised for the 1st time on appeal. Issues not raised in the pleadings cannot be resolved on review in higher courts.

Employment agreements are contracts of adhesion. Any ambiguity in its provision is generally resolved against the party who drafted the
document.

CHA: But nothing is ambiguous in the arbitration clause. It may be unfair but it's not ambiguous.

Zosa never submitted himself to arbitration proceedings, immediately assailed the arbitration clause upon realizing the inequities that may mar the
arbitration proceedings...