View full case

HYGIENIC PACKAGING CORPORATION v. NUTRI-ASIA

FACTS:

The case involves a dispute between Hygienic Packaging Corporation (Hygienic), a domestic corporation engaged in the manufacturing and selling of packaging materials, and Nutri-Asia, Inc. (Nutri-Asia), a domestic corporation engaged in the manufacturing and distribution of food products. From 1998 to 2009, Hygienic supplied Nutri-Asia with plastic containers for its banana catsup products. The transactions were covered by Purchase Orders issued by Nutri-Asia, which contained terms and conditions including a provision for arbitration of disputes. However, Nutri-Asia refused to pay for the goods delivered by Hygienic, prompting the latter to file a Complaint for sum of money against Nutri-Asia before the Regional Trial Court of Manila. Nutri-Asia filed an Answer with Compulsory Counter-Claim, arguing that the case should be dismissed for failure to comply with the arbitration provision and improper venue.

Hygienic Container Corporation ("Hygienic") filed a Complaint for breach of contract and damages against Nutri-Asia, Inc. ("Nutri-Asia") before the Regional Trial Court of Manila. Hygienic alleged that Nutri-Asia failed to pay the total amount of ₱26,405,553.95 for the delivery of plastic containers. Nutri-Asia argued that the venue of the action should be either in San Pedro, Laguna or Pasig City, where their principal places of business are located, and that the claim has been extinguished through compensation. Nutri-Asia claimed that it discovered that the plastic containers it received from Hygienic were contaminated, causing its UFC Banana Catsup products to have a foul smell and taste. Nutri-Asia further alleged that Hygienic admitted in meetings that the contamination was due to the use of a different colorant with poor bonding. Nutri-Asia demanded reimbursement for its recall expenses, product costs, freight and rental charges, and brand damage. Hygienic denied the allegations and argued that the cause of action was based on the sales invoices and delivery receipts, which Nutri-Asia failed to pay. Hygienic also argued that the arbitration clause in the purchase orders was inoperative due to the conflicting jurisdiction clause in the sales invoices. Nutri-Asia filed an Omnibus Motion reiterating its arguments, while Hygienic opposed it in a Consolidated or Joint Comment.

The facts of the case are as follows: Nutri-Asia, Inc. (Nutri-Asia) and Hygienic Packaging Corporation (Hygienic) entered into a series of purchase orders and sales invoices. Nutri-Asia filed a complaint against Hygienic for collection of a sum of money, while Hygienic filed a counter-claim for damages. Nutri-Asia alleged that the dispute should be submitted to arbitration, as stated in the purchase orders, which contained an arbitration clause. However, Hygienic rejected Nutri-Asia's offer for arbitration in its sales invoices. The trial court denied Hygienic's motion and held that the dispute should be resolved in court. Nutri-Asia filed a motion for reconsideration, which was denied by the trial court. Nutri-Asia then filed a petition for certiorari before the Court of Appeals. The Court of Appeals granted the petition and reversed the trial court's orders, dismissing the complaint and counter-claim without prejudice to referral to arbitration. Hygienic filed a motion for reconsideration, which was denied by the Court of Appeals. Hygienic then filed a petition for review on certiorari before the Supreme Court.

ISSUES:

  1. Whether or not Nutri-Asia, Inc. and Hygienic Packaging Corporation were contractually bound by either the arbitration clause in the Purchase Orders or the venue stipulation in the Sales Invoices.

  2. Whether or not the Complaint for collection of sum of money was properly filed in the Regional Trial Court of Manila.

RULING:

  1. The Court ruled that both the arbitration clause in the Purchase Orders and the venue stipulation in the Sales Invoices were unenforceable. The signatures on these documents did not bind the parties to each other’s stipulations. The representative who signed the Sales Invoices was only acknowledging receipt of goods, and the representative signing the Purchase Orders was only acknowledging the order, not consenting to the arbitration clause.

  2. The Complaint was improperly filed in the Regional Trial Court of Manila because there was no binding contract stipulating Manila as the venue. Following Rule 4, Section 2 of the 1997 Revised Rules of Civil Procedure, the Complaint should have been filed in the Regional Trial Court either in San Pedro, Laguna (where the petitioner’s principal place of business is located), or in Pasig City (where the respondent’s principal place of business is located).

PRINCIPLES:

  1. Venue of Personal Actions - Rule 4, Section 2 of the Rules of Civil Procedure states that the venue for personal actions can be where the plaintiff or the defendant resides.

  2. Freedom to Contract - Article 1306 of the Civil Code allows parties to stipulate the venue or mode of dispute resolution, provided they are not contrary to law, morals, public order, or public policy.

  3. Binding Effect of Contracts - For a stipulation to be enforceable, there must be a clear meeting of the minds between the parties.

  4. Acknowledge of Receipt - Signing to acknowledge receipt of goods does not bind the signatory to all terms of the document, unless expressly consented to.

  5. Improper Venue as Ground for Dismissal - A case filed in an improper venue can be dismissed under Rule 16, Section 1 of the 1997 Revised Rules of Civil Procedure.

  6. Unenforceable Arbitration Clauses - An arbitration clause is unenforceable if it lacks proper consent and mutual agreement by the parties involved.