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FRABELLE FISHING CORPORATION v. PHILIPPINE AMERICAN LIFE INSURANCE COMPANY

FACTS:

The case involves a dispute between Philam Properties Corporation, Philippine American Life Insurance Company, PERF Realty Corporation, Frabelle Properties Corporation, and Frabelle Fishing Corporation over the construction and development of a 45-storey office condominium called Philamlife Tower in Makati City. The parties entered into various agreements regarding their rights, obligations, and interests in the construction project. However, Frabelle Fishing discovered material concealment by the other parties and violations of their contractual obligations, such as the non-construction of a partition wall and the reduction of the net usable floor area. Frabelle Fishing referred the matter to the Philippine Dispute Resolution Center, but the other parties refused to submit to its jurisdiction. Frabelle Fishing then filed a complaint with the Housing and Land Use Regulatory Board (HLURB) alleging reformation of the contracts and seeking specific performance and damages. The HLURB issued an order denying the motion to dismiss the complaint, prompting the respondents to file a petition for prohibition with the Court of Appeals. The Court of Appeals granted the petition, ruling that the HLURB has no jurisdiction over an action for reformation of contracts. Frabelle Fishing filed a motion for reconsideration, which was denied. Hence, the present petition for review on certiorari.

ISSUES:

  1. Whether the Housing and Land Use Regulatory Board (HLURB) has jurisdiction over the complaint for reformation of instruments, specific performance, and damages.

  2. Whether the parties should initially resort to arbitration.

RULING:

  1. The Court held that the HLURB does not have jurisdiction over the complaint for reformation of instruments. This type of action falls under the jurisdiction of the Regional Trial Court (RTC) as provided in Section 1, Rule 63 of the 1997 Rules of Civil Procedure. The Court emphasized that any disagreement as to the nature of the parties' relationship, which would require amendment or reformation of their contract, can be resolved by the courts without the need for the expertise of the HLURB.

  2. With regard to the second issue, the Court held that the parties are bound by the arbitration agreement stated in the Memorandum of Agreement (MOA). Any dispute between or among the parties should be settled through arbitration in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce. The Court emphasized that arbitration is a recognized method of dispute resolution and parties are expected to abide by their contractual agreement in good faith.

PRINCIPLES:

  • An action for reformation of instruments falls under the jurisdiction of the Regional Trial Court.

  • Disputes that require amendment or reformation of a contract can be resolved by the courts without the need for specialized knowledge of the Housing and Land Use Regulatory Board.

  • Parties are bound by their contractual agreement to resort to arbitration in case of disagreement, as arbitration is recognized as a valid method of dispute resolution.