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* SECOND DIVISION.
584
584 SUPREME COURT REPORTS ANNOTATED
Luzon Iron Development Group Corporation vs.Bridestone Mining
and Development Corporation
585
586
587
588
MENDOZA, J.:
This petition for review on certiorari with prayer for the issuance
of a writ of preliminary injunction and/or temporary restraining
order (TRO) seeks to reverse and set aside the September 8, 2015
Decision1 of the Court of Appeals (CA) in C.A.-G.R. S.P. No.
133296, which affirmed the March 18, 20132 and September 18,
20133 Orders of the Regional Trial Court, Branch 59, Makati City
(RTC), in the consolidated case for rescission of contract and
damages.
The Antecedents
On October 25, 2012, respondents Bridestone Mining and
Development Corporation (Bridestone) and Anaconda Mining and
Development Corporation (Anaconda) filed separate com-
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589
590
591
Issues
I
WHETHER THE COURT OF APPEALS ERRED IN RULING
THAT THE TRIAL COURT ACQUIRED JURISDICTION OVER
THE PERSON OF CONSOLIDATED IRON;
II
WHETHER THE COURT OF APPEALS ERRED IN RULING
THAT THE TRIAL COURT HAS JURISDICTION OVER THE
SUBJECT MATTER OF THE CONSOLIDATED CASES; AND
III
WHETHER THE COURT OF APPEALS ERRED IN RULING
THAT BRIDESTONE/ANACONDA WERE NOT GUILTY OF
FORUM SHOPPING.9
Petitioners Luzon Iron and Consolidated Iron insist that the RTC
has no jurisdiction over the latter because it is a foreign corporation
which is neither doing business nor has transacted business in the
Philippines. They argue that there could be no means by which the
trial court could acquire jurisdiction over the person of Consolidated
Iron under any
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9 Id., at p. 34.
592
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593
ing that when a direct and/or blatant violation of the TPAA had been
committed, a party could go directly to the courts. They faulted the
petitioners in not moving for the referral of the case for arbitration
instead of merely filing a motion to dismiss. They added that actions
that are subject to arbitration agreement were merely suspended, and
not dismissed.
Reply of Petitioners
In their Reply,11 dated April 29, 2016, the petitioners stated that
Consolidated Iron was not necessarily doing business in the
Philippines by merely establishing a wholly-owned subsidiary in the
form of Luzon Iron. Also, they asserted that Consolidated Iron had
not been validly served the summons because Luzon Iron is neither
its resident agent nor its representative in the Philippines. The
petitioners explained that Luzon Iron, as a wholly-owned subsidiary,
had a separate and distinct personality from Consolidated Iron.
The petitioners explained that Paragraph 14.8 of the TPAA
should not be construed as an authority to directly resort to court
action in case of a direct and/or blatant violation of the TPAA
because such interpretation would render the arbitration clause
nugatory. They contended that, even for the sake of argument, the
judicial action under the said provisions was limited to issues or
matters which were inexistent in the present case. They added that a
party was not required to file a formal request for arbitration before
an arbitration clause became operational. Lastly, they insisted that
the respondents were guilty of forum shopping in simultaneously
filing complaints before the trial court and the DENR.
The Court’s Ruling
The petition is impressed with merit.
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594
Filing of complaints
before the RTC and
the DENR is forum
shopping
Forum shopping is committed when multiple suits involving the
same parties and the same causes of action are filed, either
simultaneously or successively, for the purpose of obtaining a
favorable judgment through means other than appeal or certiorari.12
The prohibition on forum shopping seeks to prevent the possibility
that conflicting decisions will be rendered by two tribunals.13
In Spouses Arevalo v. Planters Development Bank,14 the Court
elaborated that forum shopping vexed the court and warranted the
dismissal of the complaints. Thus:
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12 Vda. de Karaan v. Aguinaldo, G.R. No. 182151, September 21, 2015, 771
SCRA 107, 113.
13 Philippine Postal Corporation v. Court of Appeals, 722 Phil. 860; 711 SCRA
632 (2013).
14 68 Phil. 236; 670 SCRA 252 (2012).
595
x x x x
What is essential in determining the existence of forum shopping is
the vexation caused the courts and litigants by a party who asks
different courts and/or administrative agencies to rule on similar or
related causes and/or grant the same or substantially similar reliefs, in
the process creating the possibility of conflicting decisions being
rendered upon the same issues.
x x x x
We emphasize that the grave evil sought to be avoided by the rule against
forum shopping is the rendition by two competent tribunals of two separate
and contradictory decisions. To avoid any confusion, this Court adheres
strictly to the rules against forum shopping, and any violation of these
rules results in the dismissal of a case. The acts committed and described
herein can possibly constitute direct contempt.15 [Emphases supplied]
There is forum shopping when the following elements are
present: (a) identity of parties, or at least such parties representing
the same interests in both actions; (b) identity of rights asserted and
reliefs prayed for, the relief being founded on the same facts; and (c)
the identity of the two preceding particulars, such that any judgment
rendered in the other action will, regardless of which party is
successful, amounts to res judicata in the action under
consideration.16 All the above stated elements are present in the case
at bench.
First, there is identity of parties. In both the complaints before
the RTC and the DENR, Luzon Iron was impleaded as
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596
Hornbook is the rule that identity of causes of action does not mean
absolute identity; otherwise, a party could easily escape the operation of res
judicata by changing the form of the action or the relief sought. The test to
determine whether the causes of action are identical is to ascertain
whether the same evidence will sustain both actions, or whether there is
an identity in the facts essential to the maintenance of the two actions. If
the same facts or evidence would sustain both, the two actions are
considered the same, and a judgment in the first case is a bar to the
subsequent action. Hence, a party cannot, by varying the form of action or
adopting a different method of presenting his case, escape the opera-
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17 Santos v. Heirs of Dominga Lustre, 583 Phil. 118, 127; 561 SCRA 120, 129-
130 (2008).
18 Rollo, pp. 528 and 612.
19 687 Phil. 392; 672 SCRA 419 (2012).
597
tion of the principle that one and the same cause of action shall not be twice
litigated between the same parties or their privies. x x x20 [Emphases
supplied]
In the case at bench, both complaints filed before different fora
involved similar facts and issues, the resolution of which depends on
analogous evidence. Thus, the filing of two separate complaints by
the petitioners with the RTC and the DENR clearly constitutes
forum shopping.
It is worth noting that the very evil which the prohibition against
forum shopping sought to prevent had happened — the RTC and the
DENR had rendered conflicting decisions. The trial court ruled that
it had jurisdiction notwithstanding the arbitration clause in the
TPAA. On the other hand, the DENR found that it was devoid of
jurisdiction because the matter was subject to arbitration.
Summons were not
validly served
Section 12 of Rule 14 of the Revised Rules of Court provides
that “[w]hen the defendant is a foreign private juridical entity which
has transacted business in the Philippines, service may be made
on its resident agent designated in accordance with law for that
purpose, or, if there be no such agent, on the government official
designated by law to that effect, or on any of its officers or agents
within the Philippines.”
The Rule on Summons, as it now reads, thus, makes the question
whether Consolidated Iron was “doing business in the Philippines”
irrelevant as Section 12, Rule 14 of the Rules of Court was broad
enough to cover corporations which have “transacted business in the
Philippines.”
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20 Id., at p. 401; p. 430.
598
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599
The petitioners are mistaken in arguing that it cannot be served
summons because under Section 15, Rule 14 of the Rules of Court,
extrajudicial service of summons may be resorted to only when the
action is in rem or quasi in rem and not when the action is in
personam. The premise of the petitioners is erroneous as the rule on
extraterritorial service of summons provided in Section 15, Rule 14
of the Rules of Court is a specific provision dealing precisely with
the service of summons on a defendant which does not reside and is
not found in the Philippines.22 On the other hand, Section 12, Rule
14 thereof, specifically applies to a defendant foreign private
juridical entity which had transacted business in the Philippines.
Both rules may provide for similar modes of service of summons,
nevertheless, they should only be applied in particular cases, with
one applicable to defendants which do not reside and are not found
in the Philippines and the other to foreign private juridical entities
which had transacted business in the Philippines.
In the case at bench, it is crystal clear that Consolidated Iron
transacted business in the Philippines as it was a signatory in the
TPAA that was executed in Makati. Hence, as the respondents
argued, it may be served with the summons in accordance with the
modes provided under Section 12, Rule 14 of the Rules of Court.
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600
The Court, however, finds that Consolidated Iron was not
properly served with summons through any of the permissible
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601
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602
Albeit the RTC bore emphasis on the alleged control exercised by Export
Bank upon its subsidiary E-Securities, “[c]ontrol, by itself, does not mean
that the controlled corporation is a mere instrumentality or a business
conduit of the mother company. Even control over the financial and
operational concerns of a subsidiary company does not by itself call for
disregarding its corporate fiction. There must be a perpetuation of fraud
behind the control or at least a fraudulent or illegal purpose behind the
control in order to justify piercing the veil of corporate fiction. Such
fraudulent intent is lacking in this case.”29 [Emphasis supplied]
In the case at bench, the complaint merely contained a general
statement that Luzon Iron was the resident agent of Consolidated
Iron, and that it was a wholly-owned subsidiary of the latter. There
was no allegation showing that Luzon Iron was merely a business
conduit of Consolidated Iron, or that the latter exercised control over
the former to the extent that their separate and distinct personalities
should be set aside. Thus, Luzon Iron cannot be deemed as an agent
of Consolidated Iron in connection with the third mode of service of
summons.
To reiterate, the Court did not acquire jurisdiction over
Consolidated Iron because the service of summons, coursed through
Luzon Iron, was defective. Luzon Iron was neither the resident agent
nor the conduit or agent of Consolidated Iron.
On the above mentioned procedural issues alone, the dismissal of
the complaints before the RTC was warranted. Even granting that
the complaints were not procedurally defective, there still existed
enough reason for the trial court to refrain from proceeding with the
case.
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603
Controversy must be
referred for arbitration
The petitioners insisted that the RTC had no jurisdiction over the
subject matter because under Paragraph 15.1 of the TPAA, any
dispute out of or in connection with the TPAA must be resolved by
arbitration. The said provision provides:
If, for any reasonable reason, the Parties cannot resolve a material fact,
material event or any dispute arising out of or in connection with this TPAA,
including any question regarding its existence, validity or termination,
within 90 days from its notice, shall be referred to and finally resolved by
arbitration in Singapore in accordance with the Arbitration Rules of the
Singapore International Arbitration Centre (“SIAC Rules”) for the time
being in force, which rules are deemed to be incorporated by reference in
this clause 15.1.30
The RTC, as the CA agreed, countered that Paragraph 14.8 of the
TPAA allowed the parties to directly resort to courts in case of a
direct and/or blatant violation of the provisions of the TPAA.
Paragraph 14.8 stated:
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604
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605
Thus, consistent with the state policy of favoring arbitration, the
present TPAA must be construed in such a manner that would give
life to the arbitration clause rather than defeat it, if such
interpretation is permissible. With this in mind, the Court views the
interpretation forwarded by the petitioners as more in line with the
state policy favoring arbitration.
Paragraphs 14.8 and 15.1 of the TPAA should be harmonized in
such a way that the arbitration clause is given life, especially since
such construction is possible in the case at bench. A synchronized
reading of the above mentioned TPAA provisions will show that a
claim or action raising the sufficiency, validity, legality or
constitutionality of: (a) the assignments of the EP to Luzon Iron; (b)
any other assignments contemplated by the TPAA; or (c) any
agreement to which the EPs may be converted, may be instituted
only when there is a direct and/or blatant violation of the TPAA. In
turn, the said action or claim is commenced by proceeding with
arbitration, as espoused in the TPAA.
The Court disagrees with the respondents that Paragraph 14.8 of
the TPAA should be construed as an exception to the arbitration
clause where direct court action may be resorted to in case of direct
and/or blatant violation of the TPAA occurs. If such interpretation is
to be espoused, the arbitration clause would be rendered inutile as
practically all matters may be directly brought before the courts.
Such construction is anathema to the policy favoring arbitration.
A closer perusal of the TPAA will also reveal that paragraph 14
and all its subparagraphs are general provisions, whereas paragraphs
15 and all its sub-clauses specifically refer to arbitration. When
general and specific provisions are
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33 Id.
606
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34 TSPIC Corporation v. TSPIC Employees Union (FFW), 568 Phil. 744, 785;
545 SCRA 215, 227 (2008).
35 717 Phil. 337; 705 SCRA 142 (2013).
607
It is undisputed that the petitioners Luzon Iron and Consolidated
Iron never made any formal request for arbitration.
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608
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609
formed, the court must suspend the action before it and refer the parties to
arbitration pursuant to the arbitration agreement. [Emphasis supplied]
Generally, the action of the court is stayed if the matter raised
before it is subject to arbitration.38 In the case at bench, however, the
complaints filed before the RTC should have been dismissed
considering that the petitioners were able to establish the ground for
their dismissal, that is, violating the prohibition on forum shopping.
The parties, nevertheless, are directed to initiate arbitration
proceedings as provided under Paragraph 15.1 of the TPAA.
WHEREFORE, the petition is GRANTED. The September 8,
2015 Decision of the Court of Appeals in C.A.-G.R. S.P. No.
133296, affirming the March 18, 2013 and September 18, 2013
Orders of the Regional Trial Court, Branch 59, Makati City, is
hereby SET ASIDE. The complaints in Civil Case Nos. 12-1053
and 12-1054 are DISMISSED. The parties, however, are
ORDERED to commence arbitration proceedings pursuant to
Paragraph 15.1 of the Tenement Partnership and Acquisition
Agreement.
SO ORDERED.
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610