G.R. No. 106879 May 27, 1994
DR. LUCAS G. ADAMSON and ADAMSON MANAGEMENT CORPORATION, petitioners, vs. HON. COURT OF APPEALS and APAC HOLDINGS LIMITED, respondents.

FACTS

Petitioners Dr. Lucas G. Adamson and Adamson Management Corporation and private respondent APAC Holdings Limited entered into a contract on June 15, 1990, whereby petitioners sold 99.97% of the outstanding common shares of Adamson and Adamson, Inc. to APAC for P24,384,600.00 plus the Net Asset Value (NAV) of the company as of June 19, 1990. The parties failed to agree on a reasonable NAV, prompting them to submit the case for arbitration under Republic Act No. 876 (The Arbitration Law). On May 15, 1991, the Arbitration Committee rendered a decision fixing the NAV at P167,118.00, computed based on a pro-forma balance sheet submitted by SGV. The Committee disregarded petitioners’ argument that the NAV should be P5,146,000.00 as of February 28, 1990, with additions for intangible assets, increment of tangible assets, tax savings, and estimated net income. The Committee held that the P5,146,000.00 was merely an estimate subject to adjustments up to the cut-off date of June 19, 1990, and that adding the value of intangible and tangible assets to this figure would constitute double counting. APAC filed a petition for confirmation of the arbitration award before the Regional Trial Court (RTC) of Makati. Petitioners opposed, alleging the arbitrators committed evident partiality and grave abuse of discretion. The RTC vacated the arbitration award and ordered APAC to pay a final NAV of P47,121,468.00. On appeal, the Court of Appeals reversed the RTC decision and confirmed the arbitration award. Petitioners then filed this petition for review on certiorari.

ISSUE

Did the Court of Appeals err in affirming the arbitration award and reversing the decision of the trial court?

RULING

No, the Court of Appeals did not err. The Supreme Court dismissed the petition and affirmed the decision of the Court of Appeals. The Court held that petitioners failed to prove any of the grounds for vacating an arbitration award under Section 24 of the Arbitration Law, specifically evident partiality or corruption in the arbitrators. The alleged circumstances from which petitioners inferred partiality—such as the material difference in NAV computation, the arbitrators’ interpretation of the Agreement, reliance on SGV’s reports, and the trial court’s finding on contract interpretation—did not constitute evident partiality. The arbitrators’ decision was based on their interpretation of the contract provisions, particularly Clause 3(B), Clause 1(A), Clause 7(A), and Clause 5(E) of the Agreement. The Court found the arbitrators’ interpretation to be consistent with accounting principles and the contract terms, noting that the P5,146,000.00 was a tentative estimate and that petitioners’ computation would result in double counting. The Court also emphasized that arbitration awards are subject to judicial review only on the grounds provided by law, and the Court of Appeals correctly found that the RTC had no legal basis to vacate the award. The object of arbitration is to avoid litigation, and courts cannot substitute their own findings for those of the arbitrators merely because they might interpret the contract differently.