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.

FACTS

Petitioner Del Monte Corporation-USA (DMC-USA) entered into a Distributorship Agreement with respondent Montebueno Marketing, Inc. (MMI), appointing MMI as the exclusive distributor of Del Monte products in the Philippines. The agreement contained an arbitration clause stating that all disputes arising from the agreement shall be resolved by arbitration in San Francisco, California. Subsequently, respondents MMI, Sabrosa Foods, Inc., and Liong Liong C. Sy filed a complaint for damages against petitioners DMC-USA and its officers before the Regional Trial Court (RTC) of Malabon. The complaint alleged violations of Articles 20, 21, and 23 of the Civil Code, citing acts of bad faith, fraud, and malice that allegedly caused business losses, independent of any contractual breach from the Distributorship Agreement.

ISSUE

Whether the trial court should have suspended the judicial proceedings and compelled the parties to submit to arbitration as stipulated in their Distributorship Agreement.

RULING

The Supreme Court denied the petition and affirmed the lower courts’ rulings refusing to suspend proceedings. The legal logic is that the arbitration clause, while valid, is not a bar to the instant court action because the causes of action pleaded are based on tort and quasi-delict under the Civil Code, not on the contract itself. The complaint specifically alleged acts contrary to morals, good customs, and public policy, which constitute independent civil liabilities that exist separately from the contractual relationship. The Court explained that an arbitration agreement covers only disputes arising from the interpretation or performance of the contract in which it is stipulated. The claims for damages grounded on alleged willful and fraudulent acts causing injury, as articulated under Articles 20 and 21 of the Civil Code, are not necessarily intertwined with the interpretation of the Distributorship Agreement’s terms. Therefore, the trial court correctly assumed jurisdiction to hear the case in its entirety to avoid multiplicity of suits and to serve the ends of justice, as forcing arbitration would not speedily resolve the tort-based claims. The arbitration clause is binding only for disputes relating to the contract’s terms, not for independent legal wrongs.