FACTS:
On
June 10, 1995, BCDA entered into a Joint Venture Agreement (JVA) with
Philippine National Railways (PNR) and other foreign corporations.
In
accord also with the said JVA, BCDA established the Northrail for purposes of
constructing, operating and managing the railroad system. The Northrail was
registered with the SEC.
The
JVA was amended to include D.M. Consunji, Inc. (DMCI) and/or its nominees as an
additional investor of Northrail. It shall subscribe to 20% of the increase in
Northrail’s authorized stock. The application to increase Northrail’s
authorized capital stock was filed with the SEC. The parties also entered into
a Memorandum of Agreement infusing initial seed capital of P600 million to
Northrail. Out of that amount, P300 million shall be DMCI’s share which shall
be converted to equity upon Northrail’s privatization. The P300 million was
deposited by DMCI Project Developers, Inc. (DMCI-PDI) into Northrail’s account.
DMCI also designated DMCI-PDI as nominee for all the agreements it entered and
would enter with them in connection with the railroad project.
Later,
Northrail withdraw from the SEC its application for increased authorized
capital stock. DMCI-PDI then started demanding from BCDA and Northrail the
return of its P300 million deposit for Northrail’s failure to increase its
authorized capital stock. However, BCDA and Northrail denied the demand. Thus,
DMCI-PDI served a demand for arbitration to BCDA and Northrail, citing the
arbitration clause in the June 10, 1995 JVA. BCDA and Northrail claim on the
other hand that DMCI-PDI was not a party to the JVA containing the Arbitration
Clause.
ISSUE:
Whether the DMCI-PDI may compel BCDA and Northrail to
submit to arbitration.
RULING:
Yes. An arbitration clause in a document of contract may extend to
succeeding documents of the contract executed for the same purpose. Nominees of a
party to and beneficiaries of a contract containing an arbitration clause may
become parties to a proceeding initiated based on that arbitration clause.
As it is held, a whole contract may be contained in several documents that
are consistent with one another. Considering also that each documents of agreements show that they were executed for the single purpose of implementing the railroad project and that the succeeding documents were executed to amend or supplement the original JVA. Thus, the original JVA and its succeeding documents must be read as a whole document.
In this case, all the documents of agreement shows that
they were executed by the same parties. The JVA as amended to
include DMCI and/or
its nominee, were deemed to have include it as a party to
the original JVA executed by BCDA, PNR and the foreign corporations. DMCI and/or
its nominee then became bound to the terms of both the JVA and its amendment. Furthermore, the arbitration clause contained in the original JVA is consistent with the terms and conditions of the succeeding documents. Thus, the clause will still be valid and enforceable to the succeeding documents.
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