#11 Magellan Capital V Rolando Zosa

G. R. No. 129916, March 26, 2001

Facts:

Petitioner and Respondent entered into an “Employee Agreement” where MCMC was the
appointed manager for MCHC, and Zosa as President as well as CEO of MCHC. Provided in
their agreement are the grounds for termination and that the respondent’s employment shall be
coterminous with the management agreement or until March 1996, unless sooner terminated
pursuant to its provisions.

On May 10, 1995, majority of MCHC’s Board of Directors decided not to re-elect the respondent
due to his alleged violation of their resolution and the non-competition clause written on their
existing agreement. However, the respondent was still elected to a new position as Vice
Chairman for New Ventures Development. On September 26, 1995, respondent resigned from
his position for a good reason under paragraph 7 of the Employment Agreement, and demanded
for termination benefits as also provided on the latter.

The management did not accept the resignation but instead terminated the Employment
Agreement on account of his breach under Sec 12 of the same on November 19, 1995. With this,
the respondent shall have no further rights to claim except the right to receive within 30 days
after the termination. This prompted the respondent to invoke the arbitration clause of their
agreement but instead of submitting the dispute to arbitration, he filed an action for damages
before the RTC of Cebu to enforce his benefits. Petitioners filed a motion to dismiss, where the
respondent filed an amended complaint after. The RTC of Cebu denied the motion to dismiss,
and was filed back with a motion for reconsideration but was also denied after finding that the
validity of the arbitration provision only be determined after trial on the merits. CA rendered a
decision declaring the arbitration clause in the EA partially void and of no effect only insofar as
it concerns the composition of the panel of arbitrators.

Issue: W/N the arbitration clause contained in their agreement is void and of no effect

Ruling:

Yes, the arbitration clause, insofar as the composition of the panel of arbitrators is concerned
should be declared void and of no effect, because the law says, “Any clause giving one of the
parties power to choose more arbitrators than the other is void and of no effect” (Article 2045,
Civil Code). The petitioners must have one arbitrator as representative as they share the same
interest, which decision is favorable for them. Having an arbitrator for them each is against the
respondent and would not get justice during proceedings. The dispute should be settled in
accordance with the Employment Agreement but with 1 arbitrator for each party and a 3rd one
which was chosen by both.