Luzon Iron Development Group Corporation vs. Bridestone Mining and Development Corporation

Simultaneous filing of complaints before the RTC and the DENR seeking return of exploration permits for alleged violations of the same TPAA constitutes forum shopping warranting dismissal, and a dispute covered by an arbitration clause must be referred to arbitration rather than litigated in court. The rule applied where identity of parties, causes of action, and reliefs existed despite non-joinder of the parent company in one forum, where summons on the foreign signatory was not effected through a resident agent or authorized agent, and where Paragraphs 14.8 and 15.1 of the TPAA were harmonized to preserve arbitration.

Luzon Iron Development Group Corporation and Consolidated Iron Sands, Ltd., on one hand, and Bridestone Mining and Development Corporation and Anaconda Mining and Development Corporation, on the other, were parties to a Tenement Partnership and Acquisition Agreement for assignment of the former's Exploration Permit Applications in favor of the latter. Luzon Iron was described as the wholly-owned subsidiary of Consolidated Iron, a foreign corporation, with the TPAA executed in Makati. The TPAA contained Paragraph 14.8 on challenges to assignments of exploration permits and Paragraph 15.1 requiring referral to arbitration in Singapore under SIAC Rules of disputes arising out of or in connection with the TPAA.

Luzon Iron Development Group Corporation and Consolidated Iron Sands, Ltd. entered into a Tenement Partnership and Acquisition Agreement with Bridestone Mining and Development Corporation and Anaconda Mining and Development Corporation for assignment of the former's Exploration Permit Applications in favor of the latter. The TPAA was executed in Makati with both Luzon Iron and Consolidated Iron as signatories, Luzon Iron being the wholly-owned subsidiary of Consolidated Iron. Paragraph 15.1 provided that disputes arising out of or in connection with the TPAA, including questions on existence, validity or termination, unresolved within 90 days from notice, shall be referred to and finally resolved by arbitration in Singapore under SIAC Rules, while Paragraph 14.8 addressed challenges to assignments of exploration permits and related agreements.

On October 25, 2012, Bridestone and Anaconda filed separate complaints before the Regional Trial Court, Branch 59, Makati City, for rescission of the TPAA and damages and for return of their respective Exploration Permits on the ground of alleged TPAA violations by petitioners, docketed as Civil Case No. 12-1053 and Civil Case No. 12-1054. Thereafter, Luzon Iron and Consolidated Iron filed Special Appearances with Motions to Dismiss contending that Consolidated Iron, a foreign corporation that had never transacted business in the Philippines, could not be subjected to jurisdiction, and that the RTC lacked jurisdiction over the subject matter because of the arbitration clause. After the RTC ordered consolidation on December 19, 2012, petitioners filed a Supplement dated January 31, 2013 alleging forum shopping because similar complaints had been filed before the DENR Mines and Geosciences Bureau Regional Panel of Arbitrators against Luzon Iron.

The RTC denied dismissal, finding Consolidated Iron doing business through Luzon Iron as resident agent, jurisdiction retained under clause 14.8 where a direct and/or blatant TPAA violation was committed, and no forum shopping for lack of identity of parties and reliefs. The Court of Appeals affirmed, treating Luzon Iron as business conduit for service purposes, clause 14.8 as an exception permitting direct court resort, and the DENR and RTC cases as lacking identity of parties, relief, and cause of action. In contrast, the DENR found itself devoid of jurisdiction because the matter was subject to arbitration, creating conflicting jurisdictional rulings. Summons for Consolidated Iron had been served only through Luzon Iron, which was never registered with the Securities and Exchange Commission as Consolidated Iron's resident agent, and the complaints alleged only generally that Luzon Iron was resident agent and wholly-owned subsidiary without pleading conduit, fraud, or disregard of separate personality.

• Jurisdiction over the Person: Petitioner argued that the RTC acquired no jurisdiction over Consolidated Iron because it was a foreign corporation neither doing nor transacting business in the Philippines, and service through Luzon Iron was defective since a wholly-owned subsidiary with separate and distinct personality was neither its resident agent nor representative.
• Jurisdiction over Subject Matter and Arbitration: Petitioner maintained that the trial court had no jurisdiction because Paragraph 15.1 of the TPAA required arbitration, Paragraph 14.8 could not be read to authorize direct court action without rendering the arbitration clause nugatory, no formal request for arbitration was needed to render the clause operative, and raising the clause in motions to dismiss sufficed to activate it.
• Forum Shopping: Petitioner argued that respondents were guilty of forum shopping because the DENR complaint contained similar causes of action and reliefs, with the evil of conflicting decisions already realized when the DENR and RTC issued contradictory jurisdictional orders.

• Jurisdiction over the Person: Respondent countered that jurisdiction over Consolidated Iron was validly acquired because it was doing business in the Philippines with Luzon Iron merely as its conduit, so summons could be served on Luzon Iron as its agent.
• Jurisdiction over Subject Matter and Arbitration: Respondent argued that the trial court had jurisdiction because Paragraph 14.8 allowed direct resort to courts upon direct and/or blatant TPAA violation, petitioners failed to move for referral to arbitration and merely filed motions to dismiss, and arbitrable actions were merely suspended, not dismissed.
• Forum Shopping: Respondent maintained that there was no forum shopping because the issues and reliefs in the RTC and DENR complaints differed.

• Jurisdiction over the Person: Whether the Court of Appeals erred in ruling that the trial court acquired jurisdiction over the person of Consolidated Iron.
• Jurisdiction over Subject Matter: Whether the Court of Appeals erred in ruling that the trial court has jurisdiction over the subject matter of the consolidated cases.
• Forum Shopping: Whether the Court of Appeals erred in ruling that Bridestone/Anaconda were not guilty of forum shopping.

• Jurisdiction over the Person: Yes. No jurisdiction was acquired because service through Luzon Iron was defective, Luzon Iron being neither registered resident agent nor proven agent or business conduit of Consolidated Iron.
• Jurisdiction over Subject Matter: Yes. The controversy was subject to arbitration under Paragraph 15.1, with Paragraph 14.8 harmonized to preserve arbitration and invocation through motions to dismiss deemed sufficient without formal request.
• Forum Shopping: Yes. Forum shopping was committed as all its elements concurred, with substantial identity of parties, identity of causes of action and reliefs, and consequent res judicata effect, confirmed by conflicting RTC and DENR rulings.

• Jurisdiction over the Person: Transacting business in the Philippines sufficed to make Section 12, Rule 14 applicable, Consolidated Iron having signed the TPAA executed in Makati, and extraterritorial service under Section 15 was not the controlling provision for a foreign juridical entity that transacted business. Service nevertheless failed under all permissible modes because Luzon Iron was undisputedly never registered as resident agent, mere wholly-owned subsidiary status with control did not establish agency or warrant piercing the veil absent pleaded fraud or conduit facts, and a general allegation of agency was insufficient to show connection to the transaction.
• Jurisdiction over Subject Matter: Consistent with the State policy favoring arbitration and liberal construction of arbitration agreements, Paragraphs 14.8 and 15.1 were harmonized so that claims assailing assignments and related agreements upon direct and/or blatant TPAA violation were still commenced by arbitration, preventing clause 14.8 from swallowing the arbitration agreement. Paragraph 14 as general provision yielded to Paragraph 15 as specific arbitration provision, lack of formal request did not defeat invocation where the existence of the clause and desire to enforce it were repeatedly raised in motions to dismiss pursuant to Koppel, Inc. vs. Makati Rotary Club Foundation, Inc., and judicial restraint under the competence-competence principle required deference to the arbitral tribunal.
• Forum Shopping: All three elements were present because substantial, not absolute, identity of parties sufficed where Luzon Iron was defendant in both fora and Consolidated Iron shared community of interest as parent and TPAA co-signatory; causes of action were identical where both sets of complaints sought return of exploration permits on alleged TPAA violations and would be sustained by the same facts and evidence; and any judgment in one would amount to res judicata in the other. The prohibited evil had materialized in directly conflicting decisions, with the RTC asserting jurisdiction despite arbitration and the DENR disclaiming jurisdiction because of arbitration.

• Forum Shopping — Forum shopping exists when multiple suits involving the same parties and same causes of action are filed simultaneously or successively to obtain favorable judgment other than by appeal or certiorari, vexing courts and risking conflicting decisions. Its elements are (a) identity of parties or parties representing the same interests, substantial identity sufficing including community of interest even if one party was not impleaded in the other case; (b) identity of rights asserted and reliefs prayed for founded on the same facts; and (c) such identity that judgment in one action amounts to res judicata in the other. Identity of causes of action does not require absolute identity; the test is whether the same evidence sustains both actions or the facts essential to maintenance are identical. Applied here to dismiss the RTC complaints filed in parallel with DENR complaints seeking return of permits for TPAA violations.
• Service Upon Foreign Private Juridical Entity — When the defendant is a foreign private juridical entity which has transacted business in the Philippines, service may be made on its resident agent designated by law, or if none, on the government official designated by law, or on any of its officers or agents within the Philippines; if unregistered or without resident agent, service may with leave of court be effected outside the Philippines by personal service through foreign court with DFA assistance, publication with registered mail, facsimile or recognized electronic means, or other court-directed means. Doing business is no longer the sole trigger, transacting business suffices. Mere subsidiary status and control do not make the subsidiary an agent or business conduit absent specific pleading of conduit relationship or fraud justifying disregard of separate personality. Applied to hold service on Consolidated Iron through Luzon Iron defective.
• Arbitration Favored; Competence-Competence — The State actively promotes party autonomy and alternative dispute resolution, with arbitration agreements liberally construed to render the arbitration clause effective, general provisions yielding to specific arbitration provisions. Invocation does not require a separate formal request where the clause and desire to arbitrate are apprised to the court in pleadings such as motions to dismiss or answer, following Koppel, Inc. vs. Makati Rotary Club Foundation, Inc. Under competence-competence, courts exercise restraint and defer to the arbitral tribunal's first opportunity to rule on its competence, making only a prima facie determination on nullity or inoperativeness and suspending or, where dismissal grounds exist, dismissing while directing arbitration. Applied to harmonize TPAA Paragraphs 14.8 and 15.1 toward Singapore arbitration.

• "Forum shopping is the act of litigants who repetitively avail themselves of multiple judicial remedies in different fora, simultaneously or successively, all substantially founded on the same transactions and the same essential facts and circumstances; and raising substantially similar issues either pending in or already resolved adversely by some other court; or for the purpose of increasing their chances of obtaining a favorable decision, if not in one court, then in another." — States the canonical definition of forum shopping relied upon to characterize the parallel RTC and DENR filings.
• "What is essential in determining the existence of forum-shopping is the vexation caused the courts and litigants by a party who asks different courts and/or administrative agencies to rule on similar or related causes and/or grant the same or substantially similar reliefs, in the process creating the possibility of conflicting decisions being rendered upon the same issues." — Supplies the essential test of vexation and risk of conflicting decisions found satisfied by the contradictory RTC and DENR jurisdictional rulings.
• "Arbitration agreements are liberally construed in favor of proceeding to arbitration." — Articulates the pro-arbitration construction applied to preserve Paragraph 15.1 against an expansive reading of Paragraph 14.8.
• "Hornbook is the rule that identity of causes of action does not mean absolute identity; otherwise, a party could easily escape the operation of res judicata by changing the form of the action or the relief sought." — Defines the identity-of-causes test used to reject the argument that differences in parties impleaded or relief formulation negated forum shopping.

• Spouses Arevalo vs. Planters Development Bank, 68 Phil. 236 (2012) — Cited as elaboration that forum shopping vexes courts, warrants dismissal, and can constitute direct contempt, with emphasis on avoiding two contradictory decisions.
• Yap vs. Chua, 687 Phil. 392 (2012) — Followed for the rule that identity of causes of action does not mean absolute identity and the same-evidence test for res judicata.
• Atiko Trans, Inc. vs. Prudential Guarantee and Assurance, Inc., 671 Phil. 388 (2011) — Elucidated modes of serving summons on foreign juridical entities through resident agent, designated government official, or officers or agents within the Philippines.
• Pacific Rehouse Corporation vs. CA, 730 Phil. 325 (2014) — Followed to hold that control alone, even over financial and operational concerns, does not make a subsidiary a mere instrumentality without fraud or illegal purpose.
• Bases Conversion Development Authority vs. DMCI Project Developers, Inc., G.R. No. 173137, January 11, 2016 — Cited for State policy favoring arbitration and liberal construction of arbitration clauses under Republic Act No. 9285.
• Koppel, Inc. vs. Makati Rotary Club Foundation, Inc., 717 Phil. 337 (2013) — Followed to hold that failure to file a formal request under Section 24 of Republic Act No. 9285 does not defeat invocation where the clause was apprised to the court in pleadings.

• Section 12, Rule 14, Revised Rules of Court, as amended by A.M. No. 11-3-6-SC — Governs service upon a foreign private juridical entity which has transacted business in the Philippines, including extraterritorial modes with leave of court; applied to allow service on Consolidated Iron as TPAA signatory but found unsatisfied because Luzon Iron was not its resident agent or proven agent.
• Section 15, Rule 14, Revised Rules of Court — Governs extraterritorial service on defendants not residing and not found in the Philippines in in rem or quasi in rem actions; distinguished as inapplicable where Section 12 specifically covers foreign entities that transacted business.
• Sections 2 and 24, Republic Act No. 9285 — Declare State policy promoting party autonomy and alternative dispute resolution and require referral to arbitration when the action is subject to an arbitration agreement unless null, void, inoperative, or incapable of performance; applied to favor arbitration under TPAA Paragraph 15.1.
• Rules 2.4 and 4.1 to 4.5, A.M. No. 07-11-08-SC (Special Rules of Court on Alternative Dispute Resolution) — Implement referral to arbitration and the competence-competence principle requiring judicial restraint and deference to the arbitral tribunal's first opportunity to rule on jurisdiction; applied to direct arbitration proceedings despite absence of formal request.

Carpio, Chairperson, Del Castillo, and Leonen, JJ., concur. Brion, J., on leave.