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SalasJrvsLaperalRealtyCorp:135362:December13,1999:J.DeLeonJr.:SecondDivision

SECONDDIVISION

[G.R.NO.135362.December13,1999]

HEIRSOFAUGUSTOL.SALAS,JR.,namely:TERESITAD.SALASforherselfandas
legal guardian of the minor FABRICE CYRILL D. SALAS, MA. CRISTINA S.
LESACA, and KARINA TERESA D. SALAS, petitioners, vs. LAPERAL REALTY
CORPORATION,ROCKWAYREALESTATECORPORATION,SOUTHRIDGE
VILLAGE, INC., MAHARAMI DEVELOPMENT CORPORATION, Spouses
THELMA D. ABRAJANO and GREGORIO ABRAJANO, OSCAR DACILLO,
Spouses VIRGINIA D. LAVA and RODEL LAVA, EDUARDO A. VACUNA,
FLORANTE DE LA CRUZ, JESUS VICENTE B. CAPELLAN, and the
REGISTEROFDEEDSFORLIPACITY,respondents.
DECISION
DELEON,JR.,J.:

BeforeusisapetitionforreviewoncertiorarioftheOrder[1]ofBranch85oftheRegionalTrialCourtof
LipaCity[2]dismissingpetitionerscomplaint[3]forrescissionofseveralsaletransactionsinvolvinglandowned
byAugustoL.Salas,Jr.,theirpredecessorininterest,onthegroundthattheyfailedtofirstresorttoarbitration.
Salas,Jr.wastheregisteredownerofavasttractoflandinLipaCity,Batangasspanning1,484,354square
meters.
On May 15, 1987, he entered into an OwnerContractor Agreement[4] (hereinafter referred to as the
Agreement)withrespondentLaperalRealtyCorporation(hereinafterreferredtoasLaperalRealty)torenderand
providecomplete(horizontal)constructionservicesonhisland.
On September 23, 1988, Salas, Jr. executed a Special Power of Attorney in favor of respondent Laperal
Realtytoexercisegeneralcontrol,supervisionandmanagementofthesaleofhisland,forcashoroninstallment
basis.
On June 10, 1989, Salas, Jr. left his home in the morning for a business trip to Nueva Ecija. He never
returned.
OnAugust6,1996,TeresitaDiazSalasfiledwiththeRegionalTrialCourtofMakatiCityaverifiedpetition
for the declaration of presumptive death of her husband, Salas, Jr., who had then been missing for more than
seven(7)years.ItwasgrantedonDecember12,1996.[5]
Meantime,respondentLaperalRealtysubdividedthelandofSalas,Jr.andsoldsubdividedportionsthereof
to respondents Rockway Real Estate Corporation and South Ridge Village, Inc. on February 22, 1990 to
respondent spouses Abrajano and Lava and Oscar Dacillo on June 27, 1991 and to respondents Eduardo
Vacuna,FlorantedelaCruzandJesusVicenteCapalanonJune4,1996(allofwhomarehereinafterreferredto
asrespondentlotbuyers).
On February 3, 1998, petitioners as heirs of Salas, Jr. filed in the Regional Trial Court of Lipa City a
Complaint[6]fordeclarationofnullityofsale,reconveyance,cancellationofcontract,accountinganddamages
againsthereinrespondentswhichwasdocketedasCivilCaseNo.980047.
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On April 24, 1998, respondent Laperal Realty filed a Motion to Dismiss[7]on the ground that petitioners
failedtosubmittheirgrievancetoarbitrationasrequiredunderArticleVIoftheAgreementwhichprovides:

ARTICLEVI.ARBITRATION.
AllcasesofdisputebetweenCONTRACTORandOWNERSrepresentativeshallbe
referredtothecommitteerepresentedby:
a.OnerepresentativeoftheOWNER
b.OnerepresentativeoftheCONTRACTOR
c.OnerepresentativeacceptabletobothOWNERandCONTRACTOR.[8]

OnMay5,1998,respondentspousesAbrajanoandLavaandrespondentDacillofiledaJointAnswerwith
CounterclaimandCrossclaim[9]prayingfordismissalofpetitionersComplaintforthesamereason.
On August 9, 1998, the trial court issued the herein assailed Order dismissing petitioners Complaint for
noncompliancewiththeforegoingarbitrationclause.
Hencethispetition.
Petitionersargue,thus:

ThepetitionerscausesofactiondidnotemanatefromtheOwnerContractorAgreement.
Thepetitionerscausesofactionforcancellationofcontractandaccountingarecovered
bytheexceptionundertheArbitrationLaw.
Failuretoarbitrateisnotagroundfordismissal.[10]
Inacatenaofcases[11]inspiredbyJusticeMalcolmsprovocativedissentinVegav.SanCarlosMillingCo.
[12],thisCourthasrecognizedarbitrationagreementsasvalid,binding,enforceableandnotcontrarytopublic
policysomuchsothatwhenthereobtainsawrittenprovisionforarbitrationwhichisnotcompliedwith,thetrial
courtshouldsuspendtheproceedingsandorderthepartiestoproceedtoarbitrationinaccordancewiththeterms
oftheiragreement[13]Arbitrationisthewaveofthefutureindisputeresolution.[14]Tobrushasideacontractual
agreementcallingforarbitrationincaseofdisagreementbetweenpartieswouldbeastepbackward.[15]
Nonetheless,wegrantthepetition.
A submission to arbitration is a contract.[16] As such, the Agreement, containing the stipulation on
arbitration,bindsthepartiesthereto,aswellastheirassignsandheirs.[17]Butonlythey.Petitioners,asheirsof
Salas,Jr.,andrespondentLaperalRealtyarecertainlyboundbytheAgreement.If respondent Laperal Realty,
hadassigneditsrightsundertheAgreementtoathirdparty,makingtheformer,theassignor,andthelatter,the
assignee,suchassigneewouldalsobeboundbythearbitrationprovisionsinceassignmentinvolvessuchtransfer
of rights as to vest in the assignee the power to enforce them to the same extent as the assignor could have
enforced them against the debtor[18] or in this case, against the heirs of the original party to the Agreement.
However, respondents Rockway Real Estate Corporation, South Ridge Village, Inc., Maharami Development
Corporation, spouses Abrajano, spouses Lava, Oscar Dacillo, Eduardo Vacuna, Florante de la Cruz and Jesus
VicenteCapellanarenotassigneesoftherightsofrespondentLaperalRealtyundertheAgreementtodevelop
Salas,Jr.slandandsellthesame.Theyare,rather,buyersofthelandthatrespondentLaperalRealtywasgiven
theauthoritytodevelopandsellundertheAgreement.Assuch,theyarenotassignscontemplatedinArt.1311
oftheNewCivilCodewhichprovidesthatcontractstakeeffectonlybetweentheparties,theirassignsandheirs.
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Petitionersclaimthattheysufferedlesionofmorethanonefourth(1/4)ofthevalueofSalas,Jr.slandwhen
respondentLaperalRealtysubdivideditandsoldportionsthereoftorespondentlotbuyers.Thus,theyinstituted
action[19]againstbothrespondentLaperalRealtyandrespondentlotbuyersforrescissionofthesaletransactions
andreconveyancetothemofthesubdividedlots.Theyarguethatrescission,beingtheircauseofaction,falls
under the exception clause in Sec. 2 of Republic Act No. 876 which provides that such submission [to] or
contract[ofarbitration]shallbevalid,enforceableandirrevocable,saveuponsuchgroundsasexistatlawfor
therevocationofanycontract.
Thepetitionerscontentioniswithoutmerit.Forwhilerescission,asageneralrule,isanarbitrableissue,[20]
theyimpleadedinthesuitforrescissiontherespondentlotbuyerswhoareneitherpartiestotheAgreementnor
thelattersassignsorheirs.Consequently,therighttoarbitrateasprovidedinArticleVIoftheAgreementwas
nevervestedinrespondentlotbuyers.
RespondentLaperalRealty,asacontractingpartytotheAgreement,hastherighttocompelpetitionersto
first arbitrate before seeking judicial relief. However, to split the proceedings into arbitration for respondent
LaperalRealtyandtrialfortherespondentlotbuyers,ortoholdtrialinabeyancependingarbitrationbetween
petitionersandrespondentLaperalRealty,wouldineffectresultinmultiplicityofsuits,duplicitousprocedure
and unnecessary delay. On the other hand, it would be in the interest of justice if the trial court hears the
complaint against all herein respondents and adjudicates petitioners rights as against theirs in a single and
completeproceeding.
WHEREFORE,theinstantpetitionisherebyGRANTED.TheOrderdatedAugust19,1998ofBranch85
oftheRegionalTrialCourtofLipaCityisherebyNULLIFIEDandSETASIDE.Saidcourtisherebyorderedto
proceedwiththehearingofCivilCaseNo.980047.
Costsagainstprivaterespondents.
SOORDERED.
Bellosillo,(Chairman),Mendoza,Quisumbing,andBuena,JJ.,concur.

[1]AnnexAofthePetition,Rollo,pp.1920.
[2]PresidedbyHon.JudgeAvelinoG.Demetria.
[3]Rollo,p.32.
[4]AnnexBofthePetition,Rollo,p.22.
[5]DecisionofBranch59oftheRegionalTrialCourtofMakatiCityinSP.PROC.No.M4394markedasAnnexCofthePetition,
Rollo,pp.2931.
[6]AnnexDofthePetition,Rollo,pp.3249.
[7]AnnexEofthePetition,Rollo,pp.5056.
[8]OwnerContractorAgreement,p.6,Rollo,p.27.
[9]AnnexFofthePetition,Rollo,pp.5873.
[10]Petition,pp.7,910,Rollo,pp.9,1112.
[11]MindanaoPortlandCementCorporationv.McDonoughConstructionCompanyofFlorida,19SCRA808,815(1967)Bengson
v. Chan, 78 SCRA 113, 119 (1977) Chung Fu Industries (Phils.), Inc. v. Court of Appeals, 206 SCRA 545, 549552 (1992)
Puromines,Inc.v.CourtofAppeals,220SCRA281,289290(1993)NationalPowerCorporationv.CourtofAppeals,254SCRA
116,125(1996).
[12]51Phil.908,916920(1924).
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[13]Bengsonv.Chan,supra.
[14]B.F.Corporationv.CourtofAppeals,etal.,288SCRA267,286(1998).
[15]Ibid.
[16]ManilaElectricCompanyv.PasayTransportationCo.,57Phil.600,603(1932).
[17]Art.1311,CivilCode.
[18]Tolentino,ArturoM.,CommentariesandJurisprudenceontheCivilCodeofthePhilippines,Vol.5(1992),p.188.
[19]ComplaintdatedFebruary2,1998markedasAnnexDofthePetition,Rollo,pp.3248.
[20]Santiagov.Gonzalez,79SCRA494,500(1977).

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