Toyota Motor Philippines Corporation v. CA (G.R. No. 102881)


This case involves a boundary dispute between petitioner Toyota Motor Phil. Corporation (Toyota) and private respondent Sun Valley Manufacturing and Development Corporation (Sun Valley). Both Toyota and Sun Valley are the registered owners of two (2) adjoining parcels of land which they purchased from the Asset Privatization Trust (APT). The properties in question formerly belonged to Delta Motors Corporation (DMC) which were foreclosed by the Philippine National Bank (PNB) and later transferred to the national government through the APT for disposition. APT then proceeded to classify the DMC properties, called the GC III-Delta Motors Corporation, and divided into Delta I, Delta II, and Delta III. Further subdivisions for the separate catalogues were made for each division e.g. Delta I into Lots 1, 2 and 3. After this classification, APT parcelled out and catalogued the properties for bidding and sale.

Part of the duly parcelled Delta I property (Lot 2) was sold to Toyota through public bidding. After its purchase, Toyota constructed a concrete hollow block (CHB) perimeter fence around its alleged property. Another part of the parcelled Delta I (Lot 1) was purchased by Sun Valley from APT. Petitioner then filed a case against APT for the reformation of the Deed of Sale executed between them alleging that the instrument failed to reflect the true intention of the parties as the title failed to include 723 square meters strip of land. On the other hand, Sun Valley, filed a case for recovery of possession of the disputed 723 square meters relying upon the title description of its property and the surveys it has commissioned. Through legal maneuverings, the parties have succeeded in muddling up the vital issues of the case and getting the lower courts embroiled in numerous appeals over technicalities. Hence, the three appellate decisions/resolutions before the Court for review and conflicting orders issued by lower courts as a result of the separate cases filed by the parties.


Whether or not Judge Tensuan had jurisdiction to take cognizance of the case for reformation of instrument.


Attention must first be brought to the fact that the contract of sale executed between APT and Toyota provides an arbitration clause which states that:

  1. In case of disagreement or conflict arising out of this Contract, the parties hereby undertake to submit the matter for determination by a committee of experts, acting as arbitrators, the composition of which shall be as follows: a) One member to be appointed by the VENDOR; b) One member to be appointed by the VENDEE; c) One member, who shall be a lawyer, to be appointed by both of the aforesaid parties;

The contention that the arbitration clause has become dysfunctional because of the presence of third parties is untenable.

Toyota filed an action for reformation of its contract with APT, the purpose of which is to look into the real intentions/agreement of the parties to the contract and to determine if there was really a mistake in the designation of the boundaries of the property as alleged by Toyota. Such questions can only be answered by the parties to the contract themselves. This is a controversy which clearly arose from the contract entered into by APT and Toyota. Inasmuch as this concerns more importantly the parties APT and Toyota themselves, the arbitration committee is therefore the proper and convenient forum to settle the matter as clearly provided in the deed of sale. Having been apprised of the presence of the arbitration clause in the motion to dismiss filed by APT, Judge Tensuan should have at least suspended the proceedings and directed the parties to settle their dispute by arbitration. Judge Tensuan should have not taken cognizance of the case.

In view of all the foregoing, the petition is hereby dismissed for failure to show reversible error, much less grave abuse of discretion, on the part of the respondent court.


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