Magellan Capital vs.

Rolando Zosa,
G.R. No. 129916
DOCTRINE:
Arbitration proceedings are designed to level the playing field among the parties in pursuit of a mutually acceptable
solution to their conflicting claims. Any arrangement or scheme that would give undue advantage to a party in the negotiating
table is anathema to the very purpose of arbitration and should, therefore, be resisted.

Article 2045, Civil Code: “Any clause giving one of the parties power to choose more arbitrators than the other is void and of
no effect”.

FACTS:
This is a case of involving the validity of arbitration clause as provided in the “Employment Agreement” among Magellan
Capital Holdings Corporation

[MCHC], Magellan Capital Management Corporation [MCMC] and Rolando M. Zosa designating Zosa as President and Chief
Executive Officer of MCHC.
 Magellan Capital Holdings Corporation [MCHC], Magellan Capital Management Corporation [MCMC], and private
respondent Rolando M. Zosa entered into an "Employment Agreement" designating Zosa as President and Chief
Executive Officer of MCHC.
 The term of respondent Zosa's employment shall be co-terminous with the management agreement, unless sooner
terminated pursuant to the provisions of the Employment Agreement.
 Later on, the majority of MCHC’s Board of Directors decided not to re-elect respondent Zosa on account of loss of
trust and confidence arising from alleged violation of the resolution issued by MCHC's board of directors and of the
non-competition clause of the Employment Agreement.
 Nevertheless, respondent Zosa was elected to a new position as MCHC's Vice-Chairman/Chairman for New Ventures
Development.
 Zosa resigned and demanded that he be given termination benefits as provided for in the Employment Agreement.
 MCHC did not accept Zosa’s resignation on account of his breach of the agreement.
 Zosa then invoked the arbitration clause of the agreement. ,
 The parties (Zosa, MCHC, and MCMC) designated their respective representatives in the arbitration panel.
 However, instead of submitting the dispute to arbitration, respondent Zosa, filed an action for damages against
petitioners before the RTC Cebu to enforce his benefits under the EA.
 Petitioners filed a motion to dismiss on the ground of lack of jurisdiction since respondent Zosa's claims should be
resolved through arbitration pursuant to the EA; and
 (2) the venue is improperly laid since respondent Zosa, like the petitioners, is a resident of Pasig City and thus, the
venue of this case, granting without admitting that the respondent has a cause of action against the petitioners
cognizable by the RTC, should be limited only to RTC-Pasig City.
 RTC: denied petitioner’s motion to dismiss; MR denied
o validity and legality of the arbitration provision can 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:
Whether or not the arbitration clause in the Employment Agreement is partially 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 enshrined in Article 2045, Civil Code: “Any clause giving one of the parties power to choose
more arbitrators than the other is void and of no effect”.

The Arbitration Clause in the Agreement state:

““Arbitration shall be effected by a panel of three arbitrators. The Manager, Employee and Corporation
shall designate one (1) arbitrator who shall, in turn, nominate and elect who among them shall be the
chairman of the committee”
 The Court, in view fairness and justice to the plaintiff [defendant], the two defendants (MCMC and MCHC)[herein
petitioners] which represent the same interest should be considered as one and should be entitled to only one arbitrator to
represent them in the arbitration proceedings. .

From the foregoing arbitration clause, it appears that the two (2) defendants [petitioners] (MCMC and MCHC) have
one (1) arbitrator each to compose the panel of three (3) arbitrators. As the defendant MCMC is the Manager of defendant
MCHC, its decision or vote in the arbitration proceeding would naturally and certainly be in favor of its employer and the
defendant MCHC would have to protect and preserve its own interest; hence, the two (2) votes of both defendants (MCMC and
MCHC) would certainly be against the lone arbitrator for the plaintiff [herein defendant].

Apparently, plaintiff [defendant] would never get or receive justice and fairness in the arbitration proceedings from the
panel of arbitrators as provided in the aforequoted arbitration clause.

Arbitration proceedings are designed to level the playing field among the parties in pursuit of a mutually acceptable
solution to their conflicting claims. Any arrangement or scheme that would give undue advantage to a party in the negotiating
table is anathema to the very purpose of arbitration and should, therefore, be resisted.