GR 135362; (December, 1999) (Digest)
G.R. No. 135362 , December 13, 1999
HEIRS OF AUGUSTO L. SALAS, JR., petitioners, vs. LAPERAL REALTY CORPORATION, et al., respondents.
FACTS
Augusto L. Salas, Jr. was the registered owner of a large tract of land in Lipa City. On May 15, 1987, he entered into an Owner-Contractor Agreement with respondent Laperal Realty Corporation, authorizing Laperal to develop and provide construction services on the land. A subsequent Special Power of Attorney granted Laperal control and management over the sale of the property. Salas went missing on June 10, 1989, and was later declared presumptively dead. During his absence, Laperal subdivided the land and sold portions to various respondent lot buyers.
On February 3, 1998, petitioners, as heirs of Salas, filed a complaint in the Regional Trial Court (RTC) of Lipa City for declaration of nullity of sale, reconveyance, accounting, and damages against Laperal and the lot buyers. They alleged lesion of more than one-fourth of the land’s value. Respondents moved to dismiss, citing an arbitration clause in the Owner-Contractor Agreement requiring disputes between the contractor and owner’s representative to be referred to arbitration. The RTC dismissed the complaint for non-compliance with this clause.
ISSUE
Whether the trial court correctly dismissed the complaint for petitioners’ failure to resort to arbitration as stipulated in the Agreement.
RULING
The Supreme Court granted the petition, nullified the RTC’s order, and directed the trial court to proceed with the case. The Court affirmed that arbitration agreements are valid, binding, and enforceable, and generally, a court should suspend proceedings and order arbitration when such an agreement exists and is not complied with. However, this rule applies only to the parties to the agreement, their assigns, and heirs.
Here, petitioners, as heirs of Salas, and respondent Laperal, as a contracting party, are bound by the arbitration clause. However, the respondent lot buyers—purchasers of the subdivided lots—are not parties to the Owner-Contractor Agreement, nor are they assigns of Laperal’s rights under that contract. An “assign” refers to one who steps into the rights of a party, enabling enforcement of the contract’s terms. The lot buyers are merely buyers of the property subject to the Agreement, not transferees of Laperal’s contractual position. Consequently, the arbitration clause does not extend to them, and they cannot invoke it.
While Laperal could compel petitioners to arbitrate disputes arising from the Agreement, compelling arbitration only as to Laperal while proceeding to trial against the lot buyers would result in multiplicity of suits, duplicitous procedures, and undue delay. In the interest of justice and judicial efficiency, the complaint should be heard in a single proceeding against all respondents. Thus, the trial court erred in dismissing the case outright for non-compliance with arbitration.