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DEL MONTE CORPORATION-USA v. CA

FACTS:

Petitioner Del Monte Corporation-USA (DMC-USA) appointed private respondent Montebueno Marketing, Inc. (MMI) as the sole distributor of its products in the Philippines. The appointment was published in newspapers in October 1994. After the appointment, MMI appointed Sabrosa Foods, Inc. (SFI) as its marketing arm with the approval of DMC-USA. In October 1996, MMI, SFI, and MMI's managing director filed a complaint against DMC-USA, Paul E. Derby, Jr., Daniel Collins, Luis Hidalgo, and Dewey Ltd. alleging violations of certain provisions of the Civil Code. They claimed that parallel importers continued to bring in DMC-USA products despite MMI's exclusive distributorship, causing them damage. They also alleged that petitioners acted in bad faith and proposed unreasonable solutions to their grievances. Private respondents sought various reliefs, including the payment of damages, attorney's fees, and litigation expenses. Petitioners filed a motion to suspend the proceedings based on the arbitration clause in their agreement, but the trial court and the Court of Appeals denied the motion.

ISSUES:

  1. Whether or not the arbitration clause in the Distributorship Agreement is applicable to the present case.

  2. Whether or not the trial court erred in denying the motion to suspend proceedings.

RULING:

  1. Yes, the arbitration clause in the Distributorship Agreement is applicable to the present case. The Supreme Court held that the language of the arbitration clause is clear and explicit in providing that all disputes arising out of or relating to the Agreement shall be resolved by arbitration. The Court emphasized that arbitration is a matter of contract, and unless the parties mutually agree to submit their dispute to arbitration, they cannot be compelled to do so. In this case, the parties voluntarily agreed to the arbitration clause as stated in the Distributorship Agreement, thus making it applicable to their present dispute.

  2. No, the trial court did not err in denying the motion to suspend proceedings. The Supreme Court ruled that the trial court correctly denied the motion to suspend proceedings as the grounds alleged therein did not constitute suspension of the proceedings. The Court explained that the action filed by the private respondents was for damages with prayer for the issuance of Writ of Preliminary Attachment and not solely on the Distributorship Agreement. The Court further emphasized that the arbitration clause cannot be used as a ground to suspend the proceedings when the dispute involves other claims that are outside the scope of the agreement.

PRINCIPLES:

  • Arbitration is a matter of contract and parties cannot be compelled to submit their dispute to arbitration unless they mutually agree to do so.

  • The language of the arbitration clause in a contract should be clear and explicit in order for it to be applicable to the dispute.

  • The arbitration clause cannot be used as a ground to suspend proceedings when the dispute involves other claims that are outside the scope of the agreement.