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Excellent Quality Apparel vs Win Multiple Rich Builders | 578 SCRA 272 (2009)

FACTS

On 26 March 1996, Excellent Quality Apparel, Inc., represented by Max L.F. Ying (VP for
Productions) and Alfiero Order (Treasurer) entered into a contract with Multi-Rich Builders,
represented by Wilson Chua (President and GM)
o Construction of garment factory in Cavite Philippine Economic Zone Authority
o Duration of project: max period of 5 months of 150 days
Included in the contract is an Arbitration Clause:
o That, should there be any dispute or controversy between them that may not be
resolved, the matter shall be submitted to an Arbitration Committee of 3 members, 1
choses by Owner, 1 chosen by Contractor, and chairman to be chosen by the 2
members; that the decision of the Committee shall be final and binding; that he
Arbitration shall be govered by Arbitration Law (RA 876); that cost shall be born 50-50
The building was completed on Nov 27, 1996
Win Multi-Rich (Win) was incorporated with the SEC on Feb 20 1997, with Chua as its
President and GM
Win then filed a complaint for sum of money against Excellent Quality and Mr Ying
o Amount: P8,634,448.20
o Prayer: issuance of writ of attachment

Claim: Mr. Ying was about to abscond and that Excellent Quality was about
to close
RTC issued the Writ of Attachment against the properties of Excellent Quality
o Thus, Sherrif Dacumos of RTC MNL went to the office to serve the writ, but Excellent
Quality issued a check in the said amount to prevent the taking of its properties
Excellent Quality then filed an Omnibus Motion
o That, it was not about to close
o That they do not owe anything to Win as it had already paid all its obligations
o Also, they questioned the jurisidiction of the RTC since their contract had an
Arbitration Clause, thus, the case should be referred to the Construction Industry
Arbitration (CIAC) pursuant to EO no 1008
In the hearing, Wins counsel moved that the name of the case be changed
o From Win Multi-Rich Builders to Multi-Rich Builders

It was here that Excellent Quality became aware of the variance of the name
Excellent Quality moved for dismissal since Win was not the contractor nor a party to the
contract, thus, cannot institute the case
o They presented a Certificate of Non-Registration of Corporation/Partnership from the
SEC which certified that Win did not have any records of a Multi-Rich Builders, Inc
WIN: did not oppose the allegation and admitted that it was only incorporated on Feb 20 1997,
after the contract was executed
o Win also admitted that at time of execution, Multi-Rich was a registered sole
proprietorship with a business permit
RTC: denied the motion to dismiss and ordered trial to commence; RTC also approved Wins
Motion to deposit the garnished amount to the court to protect itself; and subsequently, the
garnished amount was relased to Win
Excellent Quality then filed a petition for review on certiorari under Rule 65 with CA questioning
the jurisidiction of RTC and its orders
CA: annulled the orders of the RTC; but ruled that the RTC had jurisidiction since it is a suit for
collection of money

ISSUES
(1) does Win have a legal personality to institute the present case
(2) does the RTC have jurisdiction over the case notwithstanding the presence of the arbitration clause;

HELD:
(1) No. Win is not a real party in interest

Sec 2, Rule 3 of ROC defines a real party in interest, which has the only right to institute a suit
o A real party in interest is the party who stands to be benefited or injured by the
judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise
authorized by law or these Rules, every action must be prosecuted or defended in the
name of the real party in interest.

Win had already admitted that the party that executed the contract was Multi Rich, a sole
proprietorship with a business permited issued by Office of the Mayor of Manila
o Sole Proprietorship

the oldest, simplest, most prevalent from of business enterprise

An unorganized business owned by one person

The sole proprietor is personally liable for all the debts and obligations of the
business

! Based on Mangila vs CA, being a sole proprietor, no law authorizes it to file a suit in court
since it does not possess a juridical personality separate and distinct from the personality of the
owner of the enterprise
o The law merely recognizes the existence of a sole proprietorship as a form of
business organization conducted for profit by a single individual
o Law requires its proprietor to secure licenses, permits, register its business name, and
pay taxes
o Law does NOT vest a separate legal personality on the sole proprietorship or
empower it to file or defend an action in court

In this case, the original petition was instituted by Win, a SEC-registered corporation, and the
collection suit involved the contract between Multi-Rich and Excellent Quality
o The name cannot be changed to that of a sole proprietorship since they do not have
juridical personality to file or defend an action

For a corporation to be able to file suit and claim receivables of its predecessor, it must show
proof that the corporation had acquired the assets and liabilities of the sole proprietor
o In this case, Win failed to present anything to prove this. No deed of assignment were
presented
o Thus, we cannot presume that Multi-Rich is the predecessor-in-business of Win,
having legal standing
(2) No. The Construction Industry Arbitration Commission has jurisdiction based on the presence of the
arbitration clause in the contract

Sec 4 of EO No. 1008 provides that for CIAC to acquire jurisdiction, the parties must agree to
submit the same to voluntary arbitration
o In this case, it is clear that the parties agreed that should any dispute or controversy
arise, the same shall be submitted for arbitration

The arbitration clause is a commitment on the part of the parties to submit to arbitration the
disputes covered since that clause is binding, and they are expected to abide by it in good faith.
(3) The RTC had no authority to order the release of the garnished amount and thus, Win must return it
to Excellent Quality