G.R. No. 229956, June 14, 2021
DR. BENJAMIN D. ADAPON, FOR HIMSELF AND ON BEHALF OF THE COMPUTERIZED IMAGING INSTITUTE, INC., FORMERLY KNOWN AS THE COMPUTED TOMOGRAPHY CENTER, INC., PETITIONERS, VS. MEDICAL DOCTORS, INC., RESPONDENT.

FACTS

Dr. Benjamin D. Adapon, a neuroradiology expert, and Medical Doctors, Inc. (MDI), owner of Makati Medical Center, incorporated the Computed Tomography Center, Inc. (later CII) in 1978, with MDI owning 60% and Dr. Adapon 40% of the stock. Dr. Adapon operated the facility for the hospital. In 1988, a Letter of Intent (LOI) was executed containing a non-compete clause (paragraph 4), wherein MDI and Makati Medical Center agreed not to compete with CII in CT and MRI work and to channel all such work to CII, and Dr. Adapon agreed not to compete with CII. Paragraph 11 provided for arbitration of disputes. Dr. Adapon signed in November 1988; Drs. Manahan, Gustilo, and Fores signed for MDI. In 1998, MDI acquired a CT scanner for its X-Ray Department, and later an MRI machine, and began referring patients to its own department instead of CII. In 2011, Dr. Adapon filed a Complaint for violation of the non-compete agreement. The Regional Trial Court (RTC) suspended proceedings and ordered arbitration per the LOI. The parties voluntarily arbitrated before the Philippine Dispute Resolution Center, Inc. A three-person tribunal issued a Final Award on May 8, 2015, finding the non-compete clause binding and enforceable, and that MDI violated it in bad faith. It awarded Dr. Adapon actual/compensatory damages (P71,349,157.45), moral damages (P5M), exemplary damages (P2M), and attorney’s fees (P9M) to Dr. Adapon and CII, and dismissed MDI’s counterclaims. Justice Dante Tinga dissented. MDI filed a Petition to Vacate the Arbitral Award with the RTC. The RTC confirmed the award. The Court of Appeals reversed the RTC and vacated the award. Dr. Adapon filed a Petition for Review with the Supreme Court.

ISSUE

Whether the Court of Appeals erred in vacating the arbitral tribunal’s Final Award.

RULING

Yes. The Supreme Court granted the petition, reversed the Court of Appeals Decision, and reinstated the RTC Resolution confirming the arbitral award. The grounds for vacating a domestic arbitral award under Section 25 of Republic Act No. 876 (The Arbitration Law) are exclusive and limited. A court cannot review the merits of the award or substitute its judgment for that of the arbitrators. The arbitral tribunal did not exceed its powers or manifestly disregard the law. The tribunal’s findings—that the LOI’s non-compete clause was a binding, complete, and enforceable agreement; that MDI’s incorporators/directors had apparent authority to sign it; that the claim was not entirely prescribed; that the clause was not an unreasonable restraint of trade; that the clean hands doctrine and rebus sic stantibus were inapplicable; and that the damages awarded had factual and legal basis—were all made within the tribunal’s jurisdiction and power to resolve the dispute submitted by the parties. The dissent of one arbitrator does not establish that the majority manifestly disregarded the law. The Court of Appeals improperly re-examined the factual and legal determinations of the arbitral tribunal, which is prohibited in a petition to vacate an arbitral award. The RTC correctly confirmed the award.