Remedial Law Digest: CARGILL PHILS. V. SAN FERNANDO REGALA TRADING [G.R. No. 178008,October 09, 2013]

CARGILL PHILS. v. SAN FERNANDO REGALA TRADING

Facts:

CARGILL and SAN FERNANDO are sellers and buyers of molasses under the contract. It was agreed that SAN FERNANDO would purchase 12,000 metric tons of Thailand origin cane blackstrap molasses at a certain price. CARGILL however failed to deliver the ordered molasses to SAN FERNANDO. Thus, SAN FERNANDO filed a complaint for rescission of contract with damages before the RTC.

CARGILL field a motion to dismiss or suspend the proceedings and to refer the controversy to voluntary arbitration pursuant to the arbitration clause. It alleged that the contract was never consummated because SAN FERNANDO did not return the proposed agreement bearing its written acceptance and conformity. The controversy being the existence of the contract, it argued that the RTC was not the proper forum but by an arbitration proceeding before the American Arbitration Association.

SAN FERNANDO opposed. It argued that RTC has jurisdiction over the action for rescission of contract and could not be changed by the arbitration clause.

RTC denied the motion to dismiss and directed CARGILL to file answer.

CARGILL filed a Petition for Certiorari with the CA. CA denied the petition and affirmed RTC’s Orders. It held that the case cannot be brought under the Arbitration Law for the purpose of suspending the proceedings before the RTC and it was proper that the issue on the validity of the contract and the arbitration clause be resolved first. Arbitration is not proper when one of the parties repudiated the existence or validity of the contract.

ISSUE: IS the CA correct?

HELD:

NO. Petition for Certiorari with the CA is the proper remedy.

RTC has acted in excess of its jurisdiction. In issuing the Order which denied CARGILL’s motion to dismiss and to refer to Voluntary arbitration and directing CARGILL to file an answer, the RTC went beyond its authority of determining ONLY the issue of whether or not there is an agreement in writing providing for arbitration.  RTC should have instead ordered the parties to proceed to arbitration.

Since RTC acted in excess of jurisdiction and since there is no plain, speedy and adequate remedy in the ordinary course of law, Petition for Certiorari is proper.