GR 159586; (July, 2004) (Digest)
G.R. No. 159586 , July 26, 2004
EUROPEAN RESOURCES AND TECHNOLOGIES, INC. and DELFIN J. WENCESLAO, petitioners, vs. INGENIEUBURO BIRKHAHN + NOLTE, INGENIURGESELLSCHAFT mbh and HEERS & BROCKSTEDT GMBH & CO., respondents.
FACTS
Respondents, collectively the German Consortium, were awarded a contract by Clark Development Corporation (CDC) to construct, operate, and manage an Integrated Waste Management Center at the Clark Special Economic Zone (CSEZ) for 25 years. The Contract for Services required the Consortium to organize a local corporation. Pursuant to this, the Consortium entered into a Memorandum of Understanding (MOU) with D.M. Wenceslao and Associates, Inc. (DMWAI) and Ma. Elena B. Villarama to jointly form petitioner European Resources and Technologies, Inc. (ERTI). The MOU stipulated that a Shareholders’ Agreement would be finalized within one month, failing which the MOU would be null and void. No such Shareholders’ Agreement was executed. Nevertheless, on August 1, 2000, the German Consortium and ERTI entered into a Memorandum of Agreement (MOA) whereby the Consortium ceded its rights under the CDC contract to ERTI. The MOA contained an arbitration clause for disputes. On December 11, 2000, the German Consortium, citing CDC’s disapproval of the assignment and the failure to finalize the Shareholders’ Agreement, terminated its agreements with ERTI. Subsequently, the German Consortium filed a complaint for injunction against petitioners (ERTI and Delfin J. Wenceslao) before the Regional Trial Court (RTC) of Angeles City to stop ERTI from misrepresenting it had rights to the waste management project. Petitioners objected to the RTC’s jurisdiction, arguing the German Consortium was doing business in the Philippines without a license and that the dispute was governed by the MOA’s arbitration clause. The RTC overruled the objections and granted a writ of preliminary injunction. The Court of Appeals sustained the RTC.
ISSUE
1. Whether the German Consortium was doing business in the Philippines without a license, thus lacking capacity to sue.
2. Whether the dispute between the parties is covered by the arbitration clause in the MOA.
3. Whether the grant of the writ of preliminary injunction was proper.
RULING
1. On the capacity to sue: The Supreme Court held that the German Consortium was doing business in the Philippines without the required license. Participating in the public bidding and subsequently entering into the Contract for Services with CDC for a 25-year operation constituted “doing business,” as these were acts for which the foreign corporation was created. Consequently, under Section 133 of the Corporation Code, the Consortium had no capacity to maintain the suit for injunction in Philippine courts. The Court rejected the appellate court’s finding of estoppel, as the lack of capacity to sue is a jurisdictional issue that can be raised at any time.
2. On the arbitration clause: The Supreme Court ruled that the dispute is primarily covered by the arbitration clause in the MOA. The injunction suit concerned the parties’ rights and obligations under the MOA and the related Contract for Services, which are precisely the matters the parties agreed to refer to arbitration under Section 17 of the MOA. The existence of the arbitration clause did not automatically oust the RTC of jurisdiction, but it mandated the court to suspend its proceedings and refer the parties to arbitration pursuant to Republic Act No. 876 (The Arbitration Law). The RTC erred in proceeding with the hearing on the injunction.
3. On the propriety of the injunction: Given the rulings on the German Consortium’s lack of capacity to sue and the existence of a binding arbitration agreement, the writ of preliminary injunction issued by the RTC was null and void. The Court emphasized that an injunction is a preservative remedy, and the RTC’s grant of the injunction, under the circumstances, effectively decided the main case on the merits without a full trial, which was improper.
DISPOSITIVE:
The Petition was GRANTED. The Decision of the Court of Appeals was REVERSED and SET ASIDE. The Orders of the Regional Trial Court dated June 28, 2001 and November 21, 2001 were ANNULLED and SET ASIDE. The complaint for injunction in Civil Case No. 10049 was DISMISSED.