Del Monte Corp USA, Paul E. Derby, Jr.

, Daniel Collins and Luis Hidalgo

vs. CA, Judge Bienvenido L. Reyes, Br. 74, Malabon, Montebueno
Marketing Inc., Liong Liong C. Sy and Sabrosa Foods, Inc.

Facts:

In 1994, DMC-USA appointed Montebueno Marketing as its sole

and exclusive distributor of Del Monte products in the
Philippines for 5 years, renewable for 2 consecutive 5 year
periods with the consent of the parties. This was embodied in a
Distributorship Agreement.
The Agreement also provided for an arbitration clause which
states that all disputes to be held in San Francisco, California
under the Rules of the American Arbitration Association. The
arbirtration panel was to consist of 3 members DMC and MMI
would chose 1 member each and the third will be selected by the
first 2.
Sabrosa Foods, Inc was appointed by MMI as their marketing
arm.
However, DMC-USA products continued to enter the country
through other parallel distributors .
This gave rise to a complaint for violation of Articles 20, 21 and
23 of the Civil Code filed by MMI, SFI and its owners (the
respondents herein) against DMC-USA and its corporate officers
(the petitioners here) before the RTC.
o The presence of parallel importers is causing the
respondents great embarrassment and substantial damage
because of the sub-standard quality of the products
brought in by the parallel importers.
o Also, the petitioners should be held liable for expenses
incurred by the respondents in the delayed shipment of
orders, the actual expenses and cost of money for the
unused Letters of Credit and the substantial opportunity
losses
o That DMC-USA tried to get out of their Distributorship
agreement by saying that MMI had committed violations.
o They pray for damages, exemplary damages, attorneys
fees and litigation expenses.
DMC-USA filed a Motion to suspend proceedings invoking the
arbitration clause.
The RTC denied their motion because the action was for damages
not on the distributorship agreement.
The CA affirmed the RTCs denial.
DMC-USA brings this case to the SC via Petition for review.
Issue: WON the dispute between the parties warrants an order
compelling them to submit to arbitration

Petitioners Arguments:
The subject matter of the cause of action arises from the
Distributors Agreement, thus it should be resolved by
arbitration. They cite Sec. 7 of RA 876, the Arbitration Law where
the civil case should be stayed until the arbitration is concluded.

Respondents Arguments:
The causes of action are rooted in Articles 20, 21 and 23 of the
Civil Code which requires a full-blown trial and the issues cannot
be decided on during arbitration.
The petitioners should have sent a written demand to arbitrate
instead of filing a Motion to Suspend Proceedings.
Arbitration clause centers more on venue.
The fact that DMC filed a petition to compel MMI to arbitrate in
the US District Court is equivalent to abandonment of the current
remedy of Petition for Review before the SC.

SC:
Arbitration is valid and constitutional in the Philippine
jurisdiction.
The courts will look with favor upon amicable arrangement and
will only interfere with great reluctance to anticipate or nullify the
action of the arbitrator.
RA 876 authorizes arbitration of domestic disputes.
Foreign arbitration as a system of settling commercial disputes
when the Philippines adhered to the UN Convention on the
Recognition and the Enforcement of Foreign Arbitral Awards of
1958 under Senate Reso. No. 71 which gave reciprocal
recognition and allowing enforcement of international arbitration
agreements between parties of different nationalities within a
contracting state.
The Arbitration Clause in the Distributors Agreement is valid and
the dispute between the parties is arbitrable. However, this
notwithstanding, the petition must be denied.
The Agreement is a contract. Contracts are respected as the law
between the contracting parties and produce effects as between
them, their assigns and heirs.
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.
Suspension of the proceedings is valid only as to DMC-USA,
Derby and MMI and Lily Sy and not the other parties of the case.
BUT the splitting of the proceedings to arbitration as to some of
the parties on one hand and trial for the others on the other
hand, or the suspension of trial pending arbitration between
some of the parties, should not be allowed as it would, in effect,
result in multiplicity of suits, duplicitous procedure and
unnecessary delay.
The object of arbitration is to allow the expeditious determination
of a dispute. If the court allows simultaneous arbitration and trial,
the issue would not be speedily and efficiently resolved.
It would be in the interest of justice for the trial court to
adjudicate and hear the case in a single and complete
proceeding.
Petition is DENIED. The CAs decision is affirmed. RTC is directed
to proceed with the hearing of the case.

LM POWER ENGINEERING CORPORATION, petitioner

vs.
CAPITOL INDUSTRIAL CONSTRUCTION GROUPS, INC., respondent.
Alternative dispute resolution methods or ADRs -- like arbitration, mediation,
negotiation and conciliation -- are encouraged by the Supreme Court. By enabling
parties to resolve their disputes amicably, they provide solutions that are less time-
consuming, less tedious, less confrontational, and more productive of goodwill and
lasting relationships.

FACTS:
On February 22, 1983, Petitioner LM Power Engineering Corporation and
Respondent Capitol Industrial Construction Groups Inc. entered into a
Subcontract Agreement involving electrical work at the Third Port of
Zamboanga.
On April 25, 1985, respondent took over some of the work contracted to
petitioner. Since it was alleged that the petitioner wala na finish ang project due to
inability daw to procure materials.
Upon completing its task under the Contract, petitioner billed respondent in the
amount of P6,711,813.90. Contesting the accuracy of the amount of advances and
billable accomplishments listed by the former, the latter refused to pay.
Respondent also took refuge in the termination clause of the Agreement.
That clause allowed it to set off the cost of the work that petitioner had failed to
undertake -- due to termination or take-over -- against the amount it owed the
respondent.
 A collection suit was filed but the respondent filed a Motion to Dismiss instead of
an Answer alleging that wala dasw mi resort first to Arbitration si petitioner.

ISSUE:
Whether or not the dispute can be a subject of arbitration.

RULING:
Essentially, the dispute arose from the parties ncongruent positions on whether
certain provisions of their Agreement could be applied to the facts. The instant
case involves technical discrepancies that are better left to an arbitral body that
has expertise in those areas. In any event, the inclusion of an arbitration clause in
a contract does not ipso facto divest the courts of jurisdiction to pass upon the
findings of arbitral bodies, because the awards are still judicially reviewable under
certain conditions.
In the case before us, the Subcontract has the following arbitral clause:

6. The Parties hereto agree that any dispute or conflict as regards to interpretation and
implementation of this Agreement which cannot be settled between [respondent] and
[petitioner] amicably shall be settled by means of arbitration x x x.

Clearly, the resolution of the dispute between the parties herein requires a referral
to the provisions of their Agreement. Within the scope of the arbitration clause
are discrepancies as to the amount of advances and billable accomplishments, the
application of the provision on termination, and the consequent set-off of
expenses.
A review of the factual allegations of the parties reveals that they differ on the
following questions: (1) Did a take-over/termination occur? (2) May the expenses
incurred by respondent in the take-over be set off against the amounts it owed
petitioner? (3) How much were the advances and billable accomplishments?
The resolution of the foregoing issues lies in the interpretation of the provisions of
the Agreement. According to respondent, the take-over was caused by petitioners
delay in completing the work. Such delay was in violation of the provision in the
Agreement as to time schedule. The issue as to the correct amount of petitioners
advances and billable accomplishments involves an evaluation of the manner in
which the parties completed the work, the extent to which they did it, and the
expenses each of them incurred in connection therewith. Arbitrators also need to
look into the computation of foreign and local costs of materials, foreign and local
advances, retention fees and letters of credit, and taxes and duties as set forth in
the Agreement.
Being an inexpensive, speedy and amicable method of settling disputes,
arbitration -- along with mediation, conciliation and negotiation -- is encouraged
by the Supreme Court. Aside from unclogging judicial dockets, arbitration also
hastens the resolution of disputes, especially of the commercial kind. It is thus
 regarded as the wave of the future in international civil and commercial
disputes. Brushing aside a contractual agreement calling for arbitration between
the parties would be a step backward.
Consistent with the above-mentioned policy of encouraging alternative dispute
resolution methods, courts should liberally construe arbitration clauses. Provided
such clause is susceptible of an interpretation that covers the asserted dispute, an
order to arbitrate should be granted. Any doubt should be resolved in favor of
arbitration.
According to petitioner, assuming arguendo that the dispute is arbitrable, the
failure to file a formal request for arbitration with the Construction Industry
Arbitration Commission (CIAC) precluded the latter from acquiring jurisdiction
over the question.
It is settled in jurisprudence that under the present Rules of Procedure, for a
particular construction contract to fall within the jurisdiction of CIAC, it is
merely required that the parties agree to submit the same to voluntary arbitration
Unlike in the original version of Section 1, as applied in the Tesco case, the law
as it now stands does not provide that the parties should agree to submit disputes
arising from their agreement specifically to the CIAC for the latter to acquire
jurisdiction over the same. Rather, it is plain and clear that as long as the parties
agree to submit to voluntary arbitration, regardless of what forum they may
choose, their agreement will fall within the jurisdiction of the CIAC, such that,
even if they specifically choose another forum, the parties will not be precluded
from electing to submit their dispute before the CIAC because this right has been
vested upon each party by law, i.e., E.O. No. 1008.
Clearly, there is no more need to file a request with the CIAC in order to vest it
with jurisdiction to decide a construction dispute.
The arbitral clause in the Agreement is a commitment on the part of the parties to
submit to arbitration the disputes covered therein. Because that clause is binding,
they are expected to abide by it in good faith. And because it covers the dispute
between the parties in the present case, either of them may compel the other to
arbitrate.