Magellan Capital Management Corporation v. Rolando M. Zosa

Summary

This case involves a dispute over the validity of an arbitration clause in an employment agreement where two corporate entities with aligned interests (MCMC as manager and MCHC as principal) were each entitled to designate one arbitrator, potentially creating a 2-1 disadvantage against the employee Zosa. When Zosa's employment was terminated, instead of proceeding to arbitration as contractually required, he filed a damages action in RTC Cebu challenging the arbitration clause's composition. The Supreme Court affirmed the trial court's finding that the arbitration clause was partially void under Article 2045 of the Civil Code, which prohibits giving one party the power to choose more arbitrators than the other. The Court emphasized that arbitration should provide a level playing field and arrangements creating undue advantage violate arbitration's fundamental purpose. The case established that regular courts, not the SEC, have jurisdiction over arbitration clause validity issues, and that such clauses in employment agreements must ensure fairness in arbitrator selection.