G.R. No. 197530, July 9, 2014.
ABOITIZ EQUITY VENTURES, INC., Petitioner, vs. VICTOR S. CHIONGBIAN, BENJAMIN D. GOTHONG, and CARLOS A. GOTHONG LINES, INC. (CAGLI), Respondents.

FACTS

On January 8, 1996, Aboitiz Shipping Corporation (ASC), Carlos A. Gothong Lines, Inc. (CAGLI), and William Lines, Inc. (WLI) entered into an Agreement to merge their shipping assets into WLI (later renamed WG&A, Inc.). Annex SL-V to this Agreement was a letter from WLI (through its President, Victor S. Chiongbian) to CAGLI, confirming WLI’s commitment to acquire certain inventories from CAGLI for a value not exceeding ₱400 Million. The Agreement contained an arbitration clause (Sec. 11.06). In 2002, the Chiongbian and Gothong families decided to sell their shares in WG&A to the Aboitiz family through a Share Purchase Agreement (SPA) with petitioner Aboitiz Equity Ventures, Inc. (AEV). The SPA also contained an arbitration clause (Sec. 6.5) and provided that the 1996 Agreement was terminated, except for the rights and obligations under Annex SL-V (Sec. 6.8). An Escrow Agreement related to the SPA also had an arbitration clause (Sec. 14.7). CAGLI claimed that after the initial ₱400 Million payment for inventories, a balance remained. It made demands for payment, which AEV rebuffed, asserting that excess inventories worth ₱120.04 Million had already been returned to CAGLI, and that AEV was not a party to the original Agreement or Annex SL-V. CAGLI filed an application for arbitration (first complaint) against Chiongbian, ATSC (successor of WG&A), ASC, and AEV. The Regional Trial Court (RTC) dismissed the complaint as against AEV, finding no arbitration agreement between CAGLI and AEV. CAGLI did not contest this dismissal. Subsequently, respondents (CAGLI, Benjamin D. Gothong, and Victor S. Chiongbian) filed a second complaint for specific performance and damages against AEV before the RTC, alleging that AEV assumed the liability for the unpaid inventories under the SPA. AEV moved to dismiss, arguing that the claim was subject to arbitration under the SPA and Escrow Agreement, and that the complaint violated the rule against forum-shopping. The RTC denied the motion to dismiss. AEV filed the present petition.

ISSUE

Whether the Regional Trial Court committed grave abuse of discretion in denying AEV’s motion to dismiss the second complaint, which AEV argues should be referred to arbitration pursuant to the arbitration clauses in the Share Purchase Agreement and the Escrow Agreement.

RULING

Yes. The Supreme Court granted the petition and reversed the RTC orders. The Court ruled that the respondents’ second complaint should be dismissed for being subject to arbitration. The cause of action in the complaint was intrinsically connected to and founded on the Share Purchase Agreement (SPA). Since the SPA contained a valid arbitration clause (Sec. 6.5), and the Escrow Agreement (also containing an arbitration clause, Sec. 14.7) was an implementation of the SPA, the dispute fell within the scope of these arbitration agreements. The principle of separability mandates that an arbitration clause is treated as a separate agreement, which remains effective even if the main contract is alleged to be invalid. Furthermore, the respondents were estopped from denying the applicability of arbitration. Respondent Chiongbian, as a signatory to the SPA, was bound by its arbitration clause. Respondents Benjamin Gothong and CAGLI, while not signatories to the SPA, were members of the “Gothong Group” that was a party to it. By actively participating in the transaction, demanding fulfillment of obligations under the SPA, and filing the complaint based on rights they claimed were assigned or assumed under the SPA, they effectively adopted the contract and were bound by its arbitration clause. The Court also found that the complaint constituted forum-shopping, as it involved the same transactions, rights, and reliefs sought in the previously dismissed arbitration complaint against AEV. The RTC’s denial of the motion to dismiss, which would have compelled arbitration, was a violation of the parties’ contractual agreement and the policy favoring arbitration, constituting grave abuse of discretion.