BCDA
vs. DMCI [G.R. No. 173137. January 11, 2016.] LEONEN, J : p
DOCTRINE: An arbitration clause in a document of contract may extend to subsequent documents of contract
executed for the same purpose. Nominees of a party to and beneficiaries of a contract containing an arbitration
clause may become parties to a proceeding initiated based on that arbitration clause.
FACTS:(BCDA)&(PNR) entered Joint Venture Agreement (JVA) containing an Arbitration Clause & other foreign
Corps to construct Rail Road System (MANILA>CLARK>SUBIC>LA UNION> ILOCOS NORTE & NUEVA ECIJA)
>BCDA shall establish (Northrail) for purposes of constructing, operating, and managing the railroad system.\
>BCDA organized and incorporated Northrail registered under SEC.
BCDA invited investors (DMCI & Metro Pacific Corp) to participate in the railroad project's financing and
implementation.
RESULTED to Amending JVA to include D.M. Consunji as additional investor of Northrail subscribing to 20% of the
increase in Northrail’s authorized stock, Inc. and/or its nominee as party.
MOA was entered by BCDA and other parties of JVA, even D.M. Consunji, Inc. and/or its nominee
STATED: parties agreed that P600M as initial seed capital for Northrail.
D.M. Consunji, Inc.'s share = P200m but increase to 300M to be converted to equity upon Northrail's privatization.
Upon BCDA & Northrail's request, DMCI deposited P300 M into Northrail's account with LBP for “future subscription
of the Northrail shares of stocks.”
Pending with SEC is the North rail’s application to increase its authorized capital stock.
Letters of D.M. Consunji, Inc. informing PNR & other parties that DMCI shall be its designated nominee for all
agreements it entered and would enter them with the railroad project.
Northrail withdrew from SEC its application for increased authorized capital stock.
DMCI-PDI, BCDA applied for Official Development Assistance from Obuchi Fund of Japan. This required Northrail to
be a 100% GOCC.
DMCI-PDI demanded from BCDA and Northrail the return of P300M deposit due to Northrail's failure to increase its
authorized capital stock as reason for the demand. BCDA and Northrail refused to return the deposit
Upon BCDA's request, the Office of the Government Corporate Counsel (OGCC) issued that "since no
increase in capital stock was implemented, it is but proper to return the investments of both FBDC and
DMCI[.]"
DMCI-PDI requested the refund of P300M deposit for future Northrail subscription. But DMCI denied its request.
DMCI-PDI demanded for arbitration to BCDA and Northrail, citing arbitration clause in JVA. BCDA and Northrail
failed to respond.
DMCI-PDI filed w/ RTC a Petition to Compel Arbitration against BCDA and Northrail, in accord with arbitration clause
in JVA.
BCDA filed a Motion to Dismiss absence of arbitration clause that DMCI-PDI could enforce since DMCI-PDI was not
a party to the JVA containing the arbitration clause.
Northrail filed Motion to Dismiss for the court did not have jurisdiction over it and DMCI-PDI had no cause for
arbitration against it.
TC denied BCDA's and Northrail's Motions to Dismiss and granted DMCI-PDI's Petition to Compel Arbitration
IMPORTANT RULING: the arbitration clause in the JVA should cover all subsequent documents including the amended JVA and
MOA. The (3) documents constituted one contract for the formation and funding of Northrail.
Despite DMCI-PDI was not a signatory to the JVA and MOA, it was an assignee of D.M. Consunji, Inc.'s rights. Therefore, it could
invoke the arbitration clause in the JVA. HEITAD
BCDA filed Rule 45 Petition, assailing TC’s Order granting DMCI-PDI's Petition to Compel Arbitration and the June 9,
2006 Order denying BCDA and Northrail's MR.
ISSUE: W/R DMCI-PDI may compel BCDA and Northrail to submit to arbitration.
DOCTRINE: The arbitration clause in the original JVA is not interpreted as applicable only to the JVA’s original
parties but to succeeding agreements for they are deemed part of or a continuation of the JVA.
The arbitration clause should extend to all the agreements and its parties since it is still consistent with all the terms
and conditions of the amendments and supplements.
3 documents — (a) JVA has arbitration clause, (b) amended JVA, and (c) MOA between BCDA, Northrail, and D.M.
JVA was executed by BCDA, PNR, and some foreign corporations.
JVA PURPOSE: for the construction of a railroad system; BCDA agreed to incorporate Northrail, which shall
have an authorized capital stock of P5.5B. The parties agreed that BCDA/PNR shall have a 30% equity
with Northrail. Other Filipino partners shall have a total of 50% equity, while foreign partners shall have at
most 20% equity.
JVA was amended to include DMCI and/or its nominee as party. The participations of the parties in Northrail were
also modified. Also, the same parties executed a MOA "to set up the mechanics for raising the seed capitalization
needed by NORTHRAIL[.]"
ABSENCE of a RULE: a contract should be contained in a single document. A whole contract may be contained in
several documents that are consistent with one other.
+During the lifetime of an agreement, circumstances may arise resulting to change or add to the terms
previously agreed upon.
+Thus, amendments or supplements to the agreement may be executed by contracting parties to address
the circumstances or issues that arise while a contract subsists.
+These changes may cause effects that are inconsistent with the wordings of the original before the
changes were applied.
THUS: old provisions lost their force and effect, while the changes shall be deemed to have taken effect. Provisions
that are not affected by the changes usually remain effective.
When a contract is supplemented, new provisions that are not inconsistent with the old provisions are added. The
nature, scope, and terms and conditions are expanded = the old and the new provisions form part of the contract.
HERE: All documents of agreement shows that they were executed by the same parties.
1st) JVA is between BCDA, PNR, and the foreign corporations.
2) JVA was amended to include DMCI. and/or its nominee deemed to be as party to the original JVA
executed by BCDA, PNR, and the foreign corporations.
D.M. Consunji, Inc. and/or its nominee is bounded to the terms of both the JVA and its amendment.
The document has a single purpose of implementing the railroad project, these documents of agreement succeeding
the original JVA merely amended or supplemented the provisions of the original JVA.
1st JVA — defined the project, its purposes, the parties, the parties' equity participation, and their
responsibilities.
2nd Amended JVA — only changed the equity participation of the parties and included D.M. Consunji, Inc.
and/or its nominee as party to the railroad project.
3rd MOA — raised the seed capitalization of Northrail from P100M as indicated in the 1st agreement to
P600M, in order to accelerate the implementation of the same project defined in the first agreement.
MOA is an implementation of JVA and amended JVA.
>It could not exist without referring to the provisions of the original and amended JVA.
>It assumes a prior knowledge of its terms.
JVA, the amended JVA, and MOA should be treated as one contract because they all form part of a whole
agreement and understand the parties’ whole agreement
II DMCI-PDI is a party to all the agreements, even the arbitration agreement and may invoke the arbitration clause
against all the parties, even lack of consent from BCDA and PNR
Contrary to BCDA and Northrail's position: the agreement's prohibition against transfers, conveyance, and
assignment of rights without the consent of the other party does not apply to nomination.
Sec 17.2 JVA provides that the agreement shall be binding on nominees:
The principal parties to the agreement after its amendment include D.M. Consunji, Inc. and/or its nominee:
Based on DMCI-PDI's letter to BCDA and Northrail, D.M. Consunji, Inc. designated DMCI-PDI as its
nominee for the agreements it entered into in relation to the project:
\
THUS: lack of consent to the assignment is irrelevant because there was no assignment or transfer of rights to
DMCI-PDI. DMCI-PDI was D.M. Consunji, Inc.'s nominee.
Section 17.2 of JVA shows the intent to treat assignment and nomination differently.
Assignment - involves transfer of rights after the perfection of a contract.
Nomination - act of naming the party with whom it has a relationship of trust or agency.
"nominee" - one who is designated to act for another usually in a limited way; a person in whose name a stock or
bond certificate is registered but who is not the actual owner thereof is considered a nominee."
III Northrail, although not a signatory to the contracts, is also bound by the arbitration agreement.
Lanuza v. BF Corporation, non-signatories to a contract may be compelled to submit to arbitration and invoke rights
or obligations based on the contract.
Here, Northrail is deemed to have communicated its acceptance of the terms of the agreements when it accepted
D.M. Consunji, Inc.'s funds.
Merit to DMCI-PDI's argument that if the Civil Code gives 3rd party beneficiaries to a contract the right to demand the
contract's fulfillment in its favor, the reverse should also be true. A beneficiary who communicated his or her
acceptance to the terms of the agreement before its revocation may be compelled to abide by the terms of an
agreement, including the arbitration clause.
