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Grounds to dismiss (Rule 16) Forum shopping, litis pendentia, and res judicata

G.R. No. 197530 Aboitiz v. Chiongbian (July 9, 2014)


Leonen, J.

ASC, CAGLI, and WLI agreed to pool their resources and merge businesses under WG&A. Their
agreement stipulated arbitration as a means of settling disputes. CAGLI gave more than what was
stipulated, but the excess was returned. Later on, CAGLI claimed that the excess was not yet
returned. AEV acquired the shares of ASC and WLI and renamed the business to ATSC. CAGLI filed
an application for arbitration with RTC-Cebu against Chiongbian, ATSC, ASC, and AEV for the return
of the excess inventories. AEV filed a MTD arguing that there was no cause of action against it as
there was no agreement to arbitrate between CAGLI and AEV. RTC discharged AEV and ordered the
other parties to proceed with arbitration. CAGLI filed another application for arbitration in view of the
return of the same excess inventories. AEV filed an MTD on the grounds of forum shopping, failure to
state cause of action, res judicata, and litis pendentia. RTC denied MTD and subsequent MR hence
this petition to the SC. SC ruled that there was no agreement binding AEV and CAGLI to arbitrate.
Also, CAGLI engaged in forum shopping and the second complaint was barred by res judicata, but
not by litis pendentia.

DOCTRINE
Forum shopping is committed by instituting two or more suits in different courts, either
simultaneously or successively, to ask them to rule on the same issues and to grant the same reliefs,
on the supposition that one of the courts would grant the instituting party/ies a favorable decision.
The test for determining whether there has been forum shopping is to ask if there is identity of
parties, rights or causes of action, and reliefs sought in the two or more cases pending.
Litis pendentia refers to the situation wherein another action is pending between the same
parties for the same cause of action, such that the second action becomes unnecessary and
vexatious.
The requisites are:
(1) identity of the parties, or at least such representing the same interests in both
actions;
(2) identity of rights asserted and reliefs prayed for; and
(3) identity of the two cases such that judgment in one, regardless of which party is
successful, would amount to res judicata on the other.
Res judicata or prior judgment bars a subsequent case when all the following requisites
concur:
(1) former judgment is final;
(2) it is rendered by a court having jurisdiction over the subject matter and the parties;
(3) itis a judgment or an order on the merits; and
(4) there is an identity of parties, subject matter, and cause/s of action between the first
and second actions.

IMPORTANT PEOPLE
Aboitiz Shipping Corporation (ASC) owned by Aboitiz family
Aboitiz Equity Ventures (AEV)
Carlos A. Gothong Lines, Inc. (CAGLI) owned by Gothong family
William Lines, Inc. (WLI), later renamed WG&A owned by Chiongbian family

FACTS
1. ASC, CAGLI, and WLI entered into an Agreement.
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a. ASC and CAGLI would transfer their shipping assets to WLI in exchange for WLIs shares
of capital stock;
b. WLI would run their merged shipping businesses, to be known as WG&A, Inc.
2. It was stipulated that that all disputes in connection with the Agreement be settled by arbitration
pursuant to the Arbitration Law (RA 876).
a. An arbitration tribunal shall be formed composed of four arbitrators. Each party shall
appoint one arbitrator. The three appointees shall appoint the fourth arbitrator and the latter
shall act as Chairman.
b. The award of the tribunal shall be binding on the parties and shall be enforced by Cebu or
Metro Manila courts.
3. Attached to the Agreement was Annex SL-V, a letter from WLI President to CAGLI.
a. Confirmed WLIs commitment to acquire certain spare parts and material inventories of
CAGLI, totaling an amount of P400M at most, pursuant to the Agreement.
4. Pursuant to Annex SL-V, inventories were transferred from CAGLI to WLI, now WG&A.
a. Assessed to have value of P514M, later adjusted to P558.89M
b. CAGLI was paid the amount of P400M; and
c. WG&A shares worth P38.5M were also transferred to CAGLI
5. There was still a balance so CAGLI sent WG&A demand letters for the payment or return of
excess inventories.
6. The Chiongbians and the Gothongs decided to leave WG&A and sell their interest to the Aboitiz
family so a Share Purchase Agreement (SPA) was entered into.
a. Aboitiz Equity Ventures (AEV) agreed to purchase the shares of the Chiongbian and
Gothong groups.
b. The SPA provided for arbitration in Cebu Sity as the mode of settling disputes arising from
the SPA pursuant to the Arbitration Law.
c. The SPA also provided that the Agreement shall be deemed terminated except Annex
SL-V.
d. The parties also entered into an Escrow Agreement as part of the SPA where ING Bank
was to take custody of the shares subject of the SPA and that disputes arising from it would
be settled through arbitration.
7. AEV became stockholder of WG&A, which was renamed Aboitiz Transport Shipping Corp.
(ATSC).
8. CAGLI made demands to ATSC (the corporation) for the return or payment of the excess
inventories.
a. AEV alleged that inventories worth P120.04M were returned evidenced by delivery
receipts.
9. CAGLI continued demanding and eventually addressed its demand letters directly to AEV (the
stockholder).
10. AEV rebuffed the demands alleging:
a. CAGLI already received the excess inventories;
b. It was not a party to CAGLIs claim because it had a personality distinct from
WLI/WG&A/ATSC.
c. CAGLIs claim was barred by prescription.
11. In a reply-letter, CAGLI claimed that it was unaware of the return of the excess inventories and
asked for copies of the delivery receipts.
12. In letters written for AEV by its counsels, it was noted that the excess inventories were
delivered to GT Ferry Warehouse.
a. Attached were delivery receipts of the return
b. The supposed unreturned inventories were only P119.89M but P120.04M was returned so
CAGLI was actually the one liable to return the difference.
13. Not satisfied, CAGLI filed two applications for arbitration before RTC-Cebu.
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a. First complaint
i. Filed against Chiongbian, ATSC, ASC, and AEV for the return of the excess
inventories
ii. AEV filed MTD alleging that CAGLI had no cause of action against it.
1. AEV and CAGLI did not agree to arbitrate since it was not a party to Annex
SL-V.
2. It was only a party to the SPA and Escrow Agreement but the claim was not
related to these agreements.
3. The obligation to return was with WLI/WG&A/ATSC and CAGLI failed to state
how it can be charged to AEV.
iii. RTC dismissed the order with respect to AEV and ordered the other parties to
proceed with arbitration.
iv. CAGLI did not contest this dismissal.
v. CAGLI filed a notice of dismissal withdrawing the first complaint which the RTC
allowed.
vi. ATSC filed an MR of the allowance of the withdrawal, which was denied.
b. Second complaint
i. While the MR in the first complaint was still pending, CAGLI filed a second
complaint, now joined by Benjamin Gothong, against Chiongbian and AEV also for
the return of the excess inventories.
ii. AEV filed MTD on the following grounds:
1. Forum shopping
2. Failure to state a cause of action because there was no agreement to
arbitrate
3. Res judicata
4. Litis pendentia
iii. RTC denied MTD.
1. When the second complaint was filed, the first complaint was already
dismissed with respect to AEV so there was no litis pendentia.
2. Dismissal without prejudice of the first complaint left the parties free to litigate
the matter in a subsequent action so there was no res judicata.
3. Since there was no litis pendentia nor res judicata, there was not forum
shopping.
4. On the matter of lack of cause of action, the SPA provided that all disputes be
settled by arbitration. To rule on AEVs claim that it was not a party to the
agreement would be beyond its duty to determine if they should proceed with
arbitration or not.
iv. AEV filed and MR which was denied.
14. AEV filed a petition for review on certiorari (45) with SC assailing denial of its motion to
dismiss and subsequent MR in the second complaint.

ISSUE with HOLDING

1. W/N petition for review on certiorari (45) is the proper remedy NO


a. AEV was erroneous in seeking relief under Rule 45, but since the actions or RTC-Cebu are
tainted with GAOD, the Court will treat the petition as petition for certiorari under Rule 65.
b. An order denying a motion to dismiss is an interlocutory order which neither terminates not
finally disposes of a case, as it leaves something to be done by the court before the case is
decided on its merits.
i. No appeal may be taken from an interlocutory order hence 45 is improper.

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ii. The proper recourse is for the movant to file an answer, but if the order denying the
MTD is tainted with GAOD, this may be assailed under Rule 65.

2. W/N the second complaint constitutes forum shopping and/or is barred by res judicata
and/or litis pendentia
a. Forum Shopping as explained in Top Rate Construction & Gen. Services, Inc. v. Paxton
Devt Corp: (p. 599 if gusto niya ipabasa)
i. committed by a party/ies who institutes two or more suits in different courts, either
simultaneously or successively, to ask them to rule on the same issues and to grant
the same reliefs, on the supposition that one of the courts would grant a favorable
decision
b. Test for determining if rule against forum shopping has been violated
i. Ask whether the elements of litis pendentia are present, or whether a final judgment
in one case will amount to res judicata in another.
ii. Whether in the two or more cases pending, there is identity of parties, rights or
causes of action, and reliefs sought.
c. Litis pendentia (p. 600)
i. A situation wherein another action is pending between the same parties for the same
cause of action, such that the second action becomes unnecessary and vexatious.
ii. Three requisites:
1. The identity of the parties, or at least such representing the same interests in
both actions;
2. The identity of rights asserted and reliefs prayed for; and
3. The identity of the two cases such that judgment in one, regardless of which
party is successful, would amount to res judicata on the other.
d. Res judicata (p. 600)
i. Prior judgment bars a subsequent case when all the following requisites concur:
1. The former judgment is final;
2. It is rendered by a court having jurisdiction over the subject matter and the
parties;
3. It is a judgment or an order on the merits; and
4. There is an identity of parties, subject matter, and cause/s of action between
the first and second actions
e. In this case: (1) CAGLI engaged in forum shopping, (2) the second complaint was
barred by res judicata; but (3) the second complaint was not barred by litis pendentia
i. Between the first and second complaints, there is identity of parties.
1. CAGLI solely brought the first complaint against Chiongbian, ATSC, and AEV;
Gothong was joined as co-plaintiff in the second complaint and ATSC was
deleted as defendant.
2. Even though the parties are not absolutely identical, substantial identity of
parties is enough to constitute forum shopping.
3. What is ultimately at stake is the extent to which CAGLI may compel AEV and
Chiongbian to arbitrate for the formers recovery of inventories.
a. Gothong is not a necessary party to the case as he signed the Annex
SL-V only in a representative capacity for CAGLI so his inclusion in the
second complaint was a superfluity.
ii. There is an identity in subject matter and cause of action.
1. Both applications are:
a. For the same relief of arbitration so CAGLI may recover the value of
the supposed unreturned inventories;

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b. Are grounded on the right to be paid for or to receive the value of
excess inventories; and
c. Are founded on the same instrument, Annex SL-V.
2. Both also rely on the same factual averments: (pp.603-604)
a. WLI and CAGLI entered into an agreement (Annex SL-V);
b. That certain CAGLI inventories will be transferred to WLI;
c. That the inventories transferred were in excess of that agreed upon;
d. That WLI failed to return the excess;
e. That demands have been made through letters and other
communications but these did not elicit any response
iii. The order of RTC-Cebu which dismissed the complaint against AEV attained
finality when CAGLI did not file an MR or appeal contesting the dismissal.
iv. The parties did not dispute that the aforementioned order was issued by a court
having jurisdiction over the subject matter and the parties.
1. Jurisdiction was acquired over CAGLI as plaintiff when it filed the complaint,
and jurisdiction over the defendants were acquired through service of
summons.
v. The dismissal of the first complaint with respect to AEV was a judgment on the
merits.
1. Cabreza Jr. v. Cabreza: A judgment may be considered as one rendered on
the merits when it determines the rights and liabilities of the parties based on
the disclosed facts, irrespective of formal, technical or dilatory objections; or
when the judgment is rendered after a determination of which party is right,
as distinguished from a judgment rendered upon some preliminary or formal
or merely technical point.
2. Mendiola v. Court of Appeals: It is not necessary that there be a trial in order
that a judgment be considered as one on the merits.
3. Prior to issuing dismissal with respect to AEV, RTC allowed the parties to fully
establish the facts to ventilate their arguments relevant to the complaint
admitting CAGLIs opposition to the MTD, AEVs reply and opposition,
CAGLIs rejoinder, and AEVs surrejoinder.
a. After going through the contentions and the arguments of the parties,
RTC-Cebu made a definitive determination that CAGLI had not
right to compel AEV to subject itself to arbitration vis--vis
CAGLIs claims under Annex SL-V.
i. There was no contract or existing document that bound the two
to arbitrate CAGLIs claim
1. AEV was not a party involved in Annex SL-V.
2. If such other document existed, it should have been
attached to the complaint but it was not.
ii. There is no legal or factual basis for the application of arbitration
with respect to AEV.
vi. The requisites for res judicata have been satisfied and the second complaint should
have been dismissed.
vii. From this, it follows that CAGLI committed forum shopping in filing the second
complaint asking for the same reliefs after obtaining an unfavorable judgment at
least with respect to AEV.
viii. However, at the time of the filing of the second complaint, AEV had already been
discharged from the proceedings relating to first complaint.

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1. The first complaint was no longer pending at the time of the filing of the
second complaint with respect to AEV and CAGLI; thus, the second complaint
could not have been barred by litis pendentia.

3. W/N Aboitiz is bound by an agreement to arbitrate with CAGLI with the latters claims of
unreturned inventories NO
a. None of the parties alleged that the controversy is subject of compulsory arbitration as
provided by statute so it must necessarily be founded on contract.
b. Four contracts have been cited: The Agreement, Annex SL-V, the SPA, and the Escrow
Agreement.
c. The obligation for WLI to acquire CAGLI inventories is contained in Annex SL-V so this
must be the one considered.
i. The Agreements arbitration clause does not contemplate arbitration regarding
disputes arising from Annex SL-V.
ii. Annex SL-V is only between WLI and CAGLI, so it necessarily follows that
WLI/WG&A/ATSC and CAGLI are the only ones bound by it.
iii. SPA, which AEV entered into, has a clause on arbitration but it stipulates that
disputes only arising from the SPA requires arbitration as a mode of settling disputes
under that agreement. It made AEV a stockholder of WLI/AG&A/ATSC but did not
render AEV personally liable for the obligations of the corporation.
iv. AEV is a stockholder of ATSC, but it is basic that a corporation has a personality
separate and distinct from its individual stockholders. Its status as a stockholder in
itself is insufficient to make it liable for ATSCs obligations.

DISPOSITIVE PORTION
WHEREFORE, the petition is GRANTED. The assailed orders of RTC-Cebu are declared VOID and
RTC-Cebu is ordered to dismiss Civil Case No. CEB-37004.

DIGESTER: Liana