Professional Documents
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FACTS:
1 July 1994
Del Monte Corporation-USA (DMC-USA) entered into a
Distributorship Agreement with Montebueno Marketing, Inc. (MMI) as
the sole and exclusive distributor of its Del Monte products in the
Philippines for a period of five (5) years, renewable for two (2)
consecutive five (5) year periods with the consent of the parties. The
agreement had an arbitration clause:
OCTOBER 1994
With the approval of DMC-USA, MMI appointed Sabrosa Foods,
Inc. (SFI) as MMIs marketing arm.
OCTOBER 1996
MMI, SFI and MMIs Managing Director Liong Liong C. Sy (LILY
SY) filed a Complaint against DMC-USA, Paul E. Derby, Jr., Daniel
Collins and Luis Hidalgo, and Dewey Ltd. before the RTC of Malabon,
Metro Manila.
It was predicated on Arts. 20, 21, 23 of the Civil Code. According
to MMI, et al., DMC-USA products continued to be brought into the
country by parallel importers despite the appointment of MMI as the
sole and exclusive distributor of Del Monte products. This caused
great embarrassment and substantial damage to MMI.
They alleged that the products brought into the country by these
importers were aged, damaged, fake or counterfeit.
21 October 1996
DMC-USA filed a Motion to Suspend Proceedings invoking the
arbitration clause.
23 December 1996
The trial court deferred consideration of DMC-USA’s Motion to
Suspend Proceedings as the grounds alleged therein did not
constitute the suspension of the proceedings considering that the
action was for damages with prayer for the issuance of Writ of
Preliminary Attachment and not on the Distributorship Agreement.
2 April 1997
MMI filed an Urgent Motion for Leave to Admit Supplemental
Pleading which was admitted over DMC-USA’s opposition.
22 July 1997
As a result of the admission of the Supplemental Complaint, DMC-
USA filed a Manifestation adopting their Motion to Suspend
Proceedings.
This was denied by the trial court because such "will not serve the
ends of justice and to allow said suspension will only delay the
determination of the issues”…
On appeal, the Court of Appeals affirmed the decision of the trial
court on the ground that the interpretation of Art. 21 of the Civil
Code would require a full blown trial making arbitration out of the
question.
Hence, the case reached the Supreme Court via a petition for
review on certiorari.
ISSUE:
Whether the parties can be compelled to submit their disputes to
arbitration.
MMI’s CONTENTION:
They claim that their causes of action are rooted in Arts. 20, 21
and 23 of the Civil Code, the determination of which demands a full
blown trial.
NOTE:
A careful examination of the case shows that the arbitration clause in
the Distributorship Agreement between DMC-USA and MMI is valid
and the dispute between the parties is arbitrable.
So should the case be referred to arbitration?
CONCLUSION:
Arbitration should only take place between the parties because it is a
contract. The principle of relativity or privity of contracts applies.
If there are other parties involved in the subject matter of the
contract, the case should be brought to the regular courts for the
speedy disposition of justice.