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La Naval Drug Corp. vs. CA

The Court of Appeals sits as a special court to resolve a dispute between La Naval Drug Corporation and Yao over the renewal of a lease contract. La Naval Drug and Yao disagreed over the rental rate and submitted the issue to arbitration with three arbitrators. However, La Naval Drug delayed appointing the third arbitrator. The Court of Appeals appointed Eloisa R. Narciso as the third arbitrator and ordered the parties to submit position papers on whether Yao's claim for damages could be litigated in the summary arbitration proceeding. The Supreme Court ruled that the Court of Appeals, in its limited jurisdiction, could only determine if the parties should proceed to arbitration, not hear claims for damages, which must be pursued separately

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58 views1 page

La Naval Drug Corp. vs. CA

The Court of Appeals sits as a special court to resolve a dispute between La Naval Drug Corporation and Yao over the renewal of a lease contract. La Naval Drug and Yao disagreed over the rental rate and submitted the issue to arbitration with three arbitrators. However, La Naval Drug delayed appointing the third arbitrator. The Court of Appeals appointed Eloisa R. Narciso as the third arbitrator and ordered the parties to submit position papers on whether Yao's claim for damages could be litigated in the summary arbitration proceeding. The Supreme Court ruled that the Court of Appeals, in its limited jurisdiction, could only determine if the parties should proceed to arbitration, not hear claims for damages, which must be pursued separately

Uploaded by

Kanglaw
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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LA NAVAL DRUG CORPORATION VS. COURT OF APPEALS, ET AL.

,
G.R. No. 103200 August 31, 1994

FACTS: Yao was the owner of a commercial building, a portion of which is leased to La Naval Drug. However,
during the renewal of the contract of lease, the two disagreed on the rental rate, and to resolve the controversy,
they submitted their disagreement to arbitration. Two arbitrators (Alamarez and Sabile) has been appointed by
the parties while the appointment of the third arbitrator (Tupang) was held in abeyance because La Naval Drug
instructed its arbitrator to defer the same until its Board of Directors could convene and approved Tupang’s
appointment. This was theorized by the respondent as dilatory tactics, hence, he prayed that a summary hearing
be conducted and direct the 2 arbitrators to proceed with the arbitration in accordance with Contract of Lease
and the applicable provisions of the Arbitration law, by appointing and confirming the appointment of the Third
Arbitrator; and that the Board of Three Arbitrators be ordered to immediately convene and resolve the
controversy before it.

The Court of Appeals announced that the two arbitrators chose Mrs. Eloisa R. Narciso as the third arbitrator and
ordered the parties to submit their position papers on the issue as to whether or not Yao's claim for damages
may be litigated upon in the summary proceeding for enforcement of arbitration agreement. In moving for
reconsideration of the said Order, petitioner argued that in Special Case No. 6024, the Court of Appeals sits as a
special court exercising limited jurisdiction and is not competent to act on respondent Yao's claim for damages,
which poses an issue litigable in an ordinary civil action. However, respondent court was not persuaded by to La
Naval Drug's submission, hence, it denied the motion for reconsideration. While the appellate court has agreed
with to La Naval Drug that, under Section 6 of Republic Act No. 876, a court, acting within the limits of its special
jurisdiction, may in this case solely determine the issue of whether the litigants should proceed or not to
arbitration, it, however, considered to La Naval Drug in estoppel from questioning the competence of the court to
additionally hear and decide in the summary proceedings Yao's claim for damages.

ISSUES: Whether the court a quo has jurisdiction over the subject matter. – NO.

HELD: In the case at bench, the want of jurisdiction by the court is indisputable, given the nature of the
controversy. The arbitration law explicitly confines the court's authority only to pass upon the issue of whether
there is or there is no agreement in writing providing for arbitration. In the affirmative, the statute ordains that
the court shall issue an order "summarily directing the parties to proceed with the arbitration in accordance with
the terms thereof." If the court, upon the other hand, finds that no such agreement exists, "the proceeding shall
be dismissed." The proceedings are summary in nature. All considered, the court a quo must then refrain from
taking up the claims of the contending parties for damages, which, upon the other hand, may be ventilated in
separate regular proceedings at an opportune time and venue. The circumstances obtaining in this case are far,
we hold, from justifying the application of estoppel against either party.

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