3/4/2017 Jurisprudence:HeirsofAugustoL.Salas,Jr.vs.LaperalRealtyCorporation,etal.

[1999]|ItPaystoKnow

G.R.NO.135362(December13,1999)

DELEON,JR.,J.:
FACTS:
Augusto Salas, Jr. was the registered owner of a vast
tract of land in Lipa City, Batangas. He entered into
an OwnerContractor Agreement with Respondent Laperal Realty
Corporationtorenderandprovidecomplete(horizontal)
construction services on his land. Said agreement
containsanarbitrationclause,towit:
ARTICLEVI.ARBITRATION.
All cases of dispute between CONTRACTOR and
OWNERS representative shall be referred to the
committeerepresentedby:
1.OnerepresentativeoftheOWNER
2.OnerepresentativeoftheCONTRACTOR
3. One representative acceptable to both OWNER
andCONTRACTOR.
Salas, Jr. then executed a Special Power of Attorneyin favor of
Respondent Laperal Realty to exercise general control,
supervisionandmanagementofthesaleofhisland,for
cash or on installment basis. By virtue thereof,
Respondent Laperal Realty subdivided said land and
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sold portions thereof to Respondents Rockway Real

Estate Corporation and South Ridge Village, Inc. in
1990 to Respondent spouses Abrajano and Lava and
Oscar Dacillo in 1991 and to Respondents Eduardo
Vacuna,FlorantedelaCruzandJesusVicenteCapalan
in1996(RespondentLotBuyershereinafter).
Backin1989,Salas,Jr.lefthishomeinthemorningfor
a business trip to Nueva Ecija. He, however, never
returnedonthatunfaithfulmorning.Sevenyearslateror
in1996,hiswife,TeresitaDiazSalasfiledwiththeRTC
of Makati City a verified Petition for the Declaration of Presumptive
Death,whichPetitionwasgranted.

In 1998, Petitioners, as heirs of Salas, Jr. filed in the

RTC of Lipa City a Complaint for Declaration of Nullity of Sale,
Reconveyance, Cancellation of Contract, Accounting and Damages against
Respondents.
Respondent Laperal Realty filed a Motion to Dismiss on the
ground that Petitioners failed to submit their grievance
to arbitration as required under Article VI of the Owner
Contractor Agreement.RespondentspousesAbrajanoandLava
andRespondentDacillofiledaJointAnswerwithCounterclaimand
Crossclaim praying for dismissal of Petitioners Complaint
forthesamereason.

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The RTC then issued the herein assailed Order

dismissing Petitioners Complaint for noncompliance
withtheforegoingarbitrationclause.
HencethepresentPetitionforReviewonCertiorariunderRule45.
ISSUE:
WhetherornotthearbitrationclauseunderArticleVIof
the OwnerContractor Agreement is binding upon
theRespondentLotBuyers?
ARGUMENTS:
Petitioners argue that (1) their causes of action did not
emanate from the OwnerContractor Agreement, (2) that their
causes of action for cancellation of contract and
accounting are covered by the exception under the
ArbitrationLaw,and(3)thatfailuretoarbitrateisnota
groundfordismissal.
Petitionersclaimthattheysufferedlesionofmorethan
onefourth (1/4) of the value of Salas, Jr.s land when
Respondent Laperal Realty subdivided it and sold
portionsthereoftoRespondentLotBuyers.Thus,they
institutedactionagainstbothRespondentLaperalRealty
and Respondent Lot Buyers for rescission of the sale
transactionsandreconveyancetothemofthesubdivided
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lots. They argue that rescission, being their cause of

action,fallsundertheexceptionclauseinSec.2ofRepublic
Act No. 876 which provides that such submission [to] or
contract [of arbitration] shall be valid, enforceable and
irrevocable, save upon such grounds as exist at law
fortherevocationofanycontract.
RULING:
NO. Respondent Lot Buyers are neither parties to the
Agreement nor the latters assigns or heirs.
Consequently, the right to arbitrate as provided in
Article VI of the Agreement was never vested in
RespondentLotBuyers.
Respondent Laperal Realty, on the other hand, 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 Realty and trial for
theRespondentLotBuyers,ortoholdtrialinabeyance
pendingarbitrationbetweenPetitionersandRespondent
LaperalRealty,wouldineffectresultinmultiplicityof
suits,duplicitousprocedureandunnecessarydelay.On
the other hand, it would be in the interest of justice if
the trial court hears the complaint against all herein

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Respondents and adjudicates Petitioners rights as

againsttheirsinasingleandcompleteproceeding.
Petition is GRANTED. The assailed Order of RTC of
LipaCityisNULLIFIEDandSETASIDE.
RATIODECIDENDI:
In a catena of cases inspired by Justice Malcolms
provocativedissentin Vega v. San Carlos Milling Co. [1924],theSC
hasrecognizedarbitrationagreementsasvalid,binding,
enforceable and not contrary to public policy so much
so that when there obtains a written provision for
arbitration which is not complied with, the trial court
shouldsuspendtheproceedingsandorderthepartiesto
proceed to arbitration in accordance with the terms of
theiragreement.Arbitrationisthewaveofthefuture
in dispute resolution. To brush aside a contractual
agreementcallingforarbitrationincaseofdisagreement
betweenpartieswouldbeastepbackward.
A submission to arbitration is a contract. As such, the
Agreement, containing the stipulation on arbitration,
binds the parties thereto, as well as their assigns and
heirs. But only they. Petitioners, as heirs of Salas, Jr.,
and Respondent Laperal Realty are certainly bound by
the Agreement. If Respondent Laperal Realty, had
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assigneditsrightsundertheAgreementtoathirdparty,
making the former, the assignor, and the latter, the
assignee, such assignee would also be bound by the
arbitration provision since assignment involves such
transferofrightsastovestintheassigneethepowerto
enforce them to the same extent as the assignor could
have enforced them against the debtor or, in this case,
againsttheheirsoftheoriginalpartytotheAgreement.
However,RespondentLotBuyersareNOTassigneesof
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 Civil Code which provides that contracts take
effectonlybetweentheparties,theirassignsandheirs.
Inthesamevein,Petitionerscontentionthatrescission,
being their cause of action, falls under the exception
clauseinSec.2of Republic Act No. 876iswithoutmerit.For
while rescission, as a general rule, is an arbitrable
issue, they impleaded in the suit for rescission the
Respondent Lot Buyers who are neither parties to the
Agreement nor the latters assigns or heirs.
Consequently, the right to arbitrate as provided in
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Article VI of the Agreement was never vested in

RespondentLotBuyers.

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