G.R. No. 175048 February 10, 2009
EXCELLENT QUALITY APPAREL, INC., Petitioner, vs. WIN MULTI RICH BUILDERS, INC., represented by its President, WILSON G. CHUA, Respondent.

FACTS

On March 26, 1996, petitioner Excellent Quality Apparel, Inc., represented by its Vice-President and Treasurer, entered into a construction contract with Multi-Rich Builders, a sole proprietorship represented by Wilson G. Chua, for the construction of a garment factory. The contract contained an arbitration clause requiring disputes to be submitted to a three-member Arbitration Committee under Republic Act No. 876 . Construction was completed on November 27, 1996. Respondent Win Multi-Rich Builders, Inc. (Win) was incorporated on February 20, 1997, with Chua as its President. On January 26, 2004, Win filed a complaint for a sum of money against petitioner and its Vice-President, alleging an amount owed of ₱8,634,448.20, and obtained a writ of attachment. To prevent the sheriff from attaching its properties, petitioner issued a check for the claimed amount payable to the Clerk of Court. Petitioner filed an Omnibus Motion, denying any debt, asserting it had paid all obligations, and challenging the RTC’s jurisdiction due to the arbitration clause, arguing the dispute should be referred to the Construction Industry Arbitration Commission (CIAC). During a hearing, Win’s counsel moved to change the plaintiff’s name from “Win Multi-Rich Builders, Inc.” to “Multi-Rich Builders, Inc.” Petitioner then moved to dismiss, arguing Win was not a party to the contract. The SEC issued a Certificate of Non-Registration for “Multi-Rich Builders, Inc.,” and Win admitted in its Rejoinder that it was incorporated in 1997, while the contract was executed in 1996 by Multi-Rich, a registered sole proprietorship. The RTC denied petitioner’s motion to dismiss in an Order dated April 12, 2004, and later granted Win’s motion to deposit the garnished amount with the court, which was subsequently released to Win. Petitioner filed a petition for certiorari with the Court of Appeals, which annulled the RTC’s orders but ruled the RTC had jurisdiction as it was a collection case. Petitioner’s motion for reconsideration was denied.

ISSUE

1. Whether Win has the legal personality to institute the case.
2. Whether the RTC has jurisdiction over the case notwithstanding the arbitration clause.
3. Whether the issuance of the writ of attachment and the subsequent garnishment was proper.

RULING

1. On Legal Personality: No, Win is not a real party in interest. A real party in interest is defined under Section 2, Rule 3 of the Rules of Court as the party who stands to be benefited or injured by the judgment. The contract was executed between petitioner and Multi-Rich Builders, a sole proprietorship. A sole proprietorship does not possess a juridical personality separate from its owner and cannot file or defend an action in court. Win, a corporation, sought to change the plaintiff’s name to the sole proprietorship, which is not permissible. Win failed to present any evidence, such as a deed of assignment, to prove it had acquired the assets, liabilities, and receivables of the sole proprietorship Multi-Rich. Therefore, Win lacks standing to institute the collection suit.
2. On Jurisdiction: Assuming Win had legal personality, the RTC still lacked jurisdiction. The construction contract contained a valid arbitration clause. Under Executive Order No. 1008, the CIAC has original and exclusive jurisdiction over disputes arising from or connected with construction contracts in the Philippines, provided the parties agree to submit to voluntary arbitration. The arbitration clause in the contract constitutes such an agreement. The nature of the dispute (collection of a sum of money arising from the construction contract) falls within the CIAC’s jurisdiction. Therefore, pursuant to the arbitration clause and the law, the RTC should have dismissed the case and referred the parties to arbitration.
3. On the Writ of Attachment and Garnishment: The Supreme Court did not explicitly rule on this issue in the provided text, as the resolution of the first two issues was dispositive. The decision focused on the lack of legal personality of Win and the RTC’s lack of jurisdiction due to the arbitration agreement.
DISPOSITIVE: The petition was GRANTED. The Court of Appeals’ Decision and Resolution were REVERSED and SET ASIDE. The complaint in Civil Case No. 04-108940 was DISMISSED.