SECOND DIVISION
G.R. No. 136154 February 7, 2001
DEL MONTE CORPORATION-USA, PAUL E. DERBY, JR., DANIEL COLLINS and LUIS
HIDALGO, petitioners,
vs.
COURT OF APPEALS, JUDGE BIENVENIDO L. REYES in his capacity as Presiding Judge,
RTC-Br. 74, Malabon, Metro Manila, MONTEBUENO MARKETING, INC., LIONG LIONG
C. SY and SABROSA FOODS, INC., respondents.
BELLOSILLO, J.:
Facts:
On 1 July 1994, in a Distributorship Agreement, petitioner Del Monte Corporation-USA
(DMC-USA) appointed private respondent 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 provided, among others, for an arbitration clause which states: “All disputes arising
out of or relating to this Agreement or the parties' relationship, including the termination
thereof, shall be resolved by arbitration in the City of San Francisco, State of California, under
the Rules of the American Arbitration Association. The arbitration panel shall consist of three
members, one of whom shall be selected by DMC-USA, one of whom shall be selected by MMI,
and third of whom shall be selected by the other two members and shall have relevant
experience in the industry”
On 3 October 1996 private respondents MMI, SFI and MMI's Managing Director Liong
Liong C. Sy filed a Complaint against petitioners on the alleged violations by petitioners of Arts.
20, 21, and 23 of the Civil Code. According to private respondents, DMC-USA products
continued to be brought into the country by parallel importers despite the appointment of private
respondent MMI as the sole and exclusive distributor of Del Monte products thereby causing
them great embarrassment and substantial damage. Private respondents claimed that they had
exhausted all possible avenues for an amicable resolution and settlement of their grievances.
Issue:
Whether the dispute between the parties warrants an order compelling them to submit to
arbitration.
Ruling:
A careful examination of the instant case shows that the arbitration clause in the
Distributorship Agreement between petitioner DMC-USA and private respondent MMI is valid
and the dispute between the parties is arbitrable. However, this Court must deny the petition.
The Agreement between petitioner DMC-USA and private respondent MMI is a contract.
The provision to submit to arbitration any dispute arising therefrom, and the relationship of the
parties is part of that contract and is itself a contract. As a rule, contracts are respected as the law
between the contracting parties and produce effect as between them, their assigns, and heirs.
Clearly, only parties to the Agreement, i.e., petitioners DMC-USA and its Managing Director for
Export Sales Paul E. Derby, Jr., and private respondents MMI and its Managing Director LILY
SY are bound by the Agreement and its arbitration clause as they are the only signatories thereto.
Petitioners Daniel Collins and Luis Hidalgo, and private respondent SFI, not parties to the
Agreement and cannot even be considered assigns or heirs of the parties, are not bound by the
Agreement and the arbitration clause therein. Consequently, referral to arbitration in the State of
California pursuant to the arbitration clause and the suspension of the proceedings in Civil Case
No. 2637-MN pending the return of the arbitral award could be called for but only as to
petitioners DMC-USA and Paul E. Derby, Jr., and private respondents MMI and LILY SY, and
not as to the other parties in this case.
The object of arbitration is to allow the expeditious determination of a dispute. Clearly,
the issue before us could not be speedily and efficiently resolved in its entirety if we allow
simultaneous arbitration proceedings and trial, or suspension of trial pending arbitration.
Accordingly, the interest of justice would only be served if the trial court hears and adjudicates
the case in a single and complete proceeding.
