DEL MONTE CORPORATION-USA vs.

COURT OF APPEALS
FACTS:
On July 1, 1994, Del Monte Corporation-USA (DMC-USA) and Montebueno
Marketin, !n"# (MM!) entered in a Di$tributor$%ip Aree&ent, t%e latter bein
a$ e'"lu$i(e di$tributor o) produ"t$ in t%e *%ilippine$ )or a period o) +(e (,)
year$, rene-able )or t-o (.) "on$e"uti(e +(e (,) year period$ /%e Aree&ent
pro(ided, a&on ot%er$, )or an arbitration "lau$e -%i"% $tate$ -
GOVERNING LAW AND ARBITRATION
This Agreement shall be governed by the laws o the !tate o "aliornia
and#or$ i a%%li&able$ the 'nited !tates o Ameri&a( All dis%)tes arising o)t o
or relating to this Agreement or the %arties* relationshi%$ in&l)ding the
termination thereo$ shall be resolved by arbitration in the "ity o !an
+ran&is&o$ !tate o "aliornia$ )nder the R)les o the Ameri&an Arbitration
Asso&iation( The arbitration %anel shall &onsist o three members$ one o
whom shall be sele&ted by D,"-'!A$ one o whom shall be sele&ted by ,,I$
and third o whom shall be sele&ted by the other two members and shall have
relevant e.%erien&e in the ind)stry . . . .
MM! appointed Sabro$a 0ood$, !n"# (S0!), -it% t%e appro(al o) petitioner DMC-
USA, a$ MM!1$ &arketin ar& to "on"entrate on it$ &arketin and $ellin
)un"tion a$ -ell a$ to &anae it$ "riti"al relation$%ip -it% t%e trade#
On 2 O"tober 1993, MM!, S0! and MM!1$ Manain Dire"tor 4ion 4ion C# Sy
+led a Co&plaint aain$t petitioner$ DMC-USA, *aul 5# Derby, Jr#, Daniel
Collin$ and 4ui$ 6idalo, and De-ey 4td# be)ore t%e 7eional /rial Court o)
Malabon, Metro Manila, t%eir "o&plaint i$ on t%e alleed (iolation$ by
petitioner$ o) Art$# .8, .1, and .2 o) t%e Ci(il Code#
/%e "o&plainant "lai&ed, DMC-USA produ"t$ "ontinued to be brou%t into t%e
"ountry by parallel i&porter$ de$pite t%e appoint&ent o) pri(ate re$pondent
MM! a$ t%e $ole and e'"lu$i(e di$tributor o) Del Monte produ"t$ t%ereby
"au$in t%e& reat e&barra$$&ent and $ub$tantial da&ae# /%ey alleed
t%at t%e produ"t$ brou%t into t%e "ountry by t%e$e i&porter$ -ere aed,
da&aed, )ake or "ounter)eit# /%e "o&plainant %ad e'%au$ted all po$$ible
a(enue$ )or t%e re$olution and $ettle&ent o) t%eir rie(an"e$ and t%at a$ a
re$ult o) t%e )raud, bad )ait% and &ali"e t%ey $%ould be %eld re$pon$ible )or all
t%e a"tual e'pen$e$ in"urred by pri(ate re$pondent$ in t%e delayed $%ip&ent
o) order$ -%i"% re$ulted in t%e e'tra %andlin t%ereo), t%e a"tual e'pen$e$
and "o$t o) &oney )or t%e unu$ed 4etter$ o) Credit (4C$) and t%e $ub$tantial
opportunity lo$$e$ due to "reated out-o)-$to"k $ituation$ and unaut%ori9ed
$%ip&ent$ o) Del Monte-USA produ"t$ to t%e *%ilippine Duty 0ree Area and
5"ono&i" :one; t%at t%e bad )ait%, )raudulent a"t$ and -ill)ul nelien"e o)
petitioner$, &oti(ated by t%eir deter&ination to $<uee9e pri(ate re$pondent$
out o) t%e out$tandin and onoin Di$tributor$%ip Aree&ent in )a(or o)
anot%er party#
On .1 O"tober 1993 petitioner$ +led a Motion to Su$pend *ro"eedin$
in(okin t%e arbitration "lau$e in t%eir Aree&ent# !n a 7e$olution
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dated .2
De"e&ber 1993 t%e trial "ourt de)erred "on$ideration o) petitioner$# On 1,
January 199= petitioner$ +led a Motion )or 7e"on$ideration# On 11 >o(e&ber
199= t%e Motion to Su$pend *ro"eedin$ -a$ denied by t%e trial "ourt
ISSUE:
Petitioners Motion to suspend proceedings on cop!"int #!ed at
7eional /rial Court o) Malabon, Metro Manila, in(okin t%e arbitration "lau$e
in t%eir Aree&ent#
$ELD:
/%e petition i$ D5>!5D
/%ere i$ no doubt t%at arbitration i$ (alid and "on$titutional in our
?uri$di"tion# 5(en be)ore t%e ena"t&ent o) 7A @=3, t%i$ Court %a$
"ountenan"ed t%e $ettle&ent o) di$pute$ t%rou% arbitration#
/%e Aree&ent bet-een petitioner DMC-USA and pri(ate re$pondent MM!
i$ a "ontra"t# A$ a rule, "ontra"t$ are re$pe"ted a$ t%e la- bet-een t%e
"ontra"tin partie$ and produ"e eAe"t a$ bet-een t%e&, t%eir a$$in$ and
%eir$# Clearly, only partie$ to t%e Aree&ent, i(e#, petitioner$ DMC-USA and it$
Manain Dire"tor )or 5'port Sale$ *aul 5# Derby, Jr#, and pri(ate re$pondent$
MM! and it$ Manain Dire"tor 4!4B SB are bound by t%e Aree&ent and it$
arbitration "lau$e a$ t%ey are t%e only $inatorie$ t%ereto# *etitioner$ Daniel
Collin$ and 4ui$ 6idalo, and pri(ate re$pondent S0!, not partie$ to t%e
Aree&ent and "annot e(en be "on$idered a$$in$ or %eir$ o) t%e partie$, are
not bound by t%e Aree&ent and t%e arbitration "lau$e t%erein# Con$e<uently,
re)erral to arbitration in t%e State o) Cali)ornia pur$uant to t%e arbitration
"lau$e and t%e $u$pen$ion o) t%e pro"eedin$ in Ci(il Ca$e >o# .32=-M>
pendin t%e return o) t%e arbitral a-ard "ould be "alled )or but only a$ to
petitioner$ DMC-USA and *aul 5# Derby, Jr#, and pri(ate re$pondent$ MM! and
4!4B SB, and not a$ to t%e ot%er partie$ in t%i$ "a$e t%u$, Daniel Collin$ and
4ui$ 6idalo, and pri(ate re$pondent S0!, not partie$ to t%e Aree&ent and
"annot e(en be "on$idered a$$in$ or %eir$ o) t%e partie$, are not bound by
t%e Aree&ent and t%e arbitration "lau$e t%erein#
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