G.R. No. 171735 - People vs. Obligado y Magdaraog

On 1 July 1994, Del Monte Corporation-USA (DMC-USA) and Montebueno Marketing, Inc. (MMI) executed a five-year exclusive distributorship agreement, renewable twice for five-year periods by consent.
Clause 12 provided that the agreement is governed by California/U.S. law and that all disputes “arising out of or relating to this Agreement or the parties’ relationship, including the termination thereof,” shall be resolved by arbitration in San Francisco under the American Arbitration Association rules, with a three-member panel selected by the parties.

In October 1994, MMI’s appointment as sole distributor was published locally; MMI, with DMC-USA’s approval, designated Sabrosa Foods, Inc. (SFI) as its marketing arm under its managing director, Liong Liong C. Sy.
On 3 October 1996, MMI, SFI and Sy filed a complaint in RTC-Malabon (Civil Case No. 2637-MN) against DMC-USA, its officials (Derby Jr., Collins, Hidalgo) and Dewey Ltd., alleging violations of Civil Code Arts. 20, 21 and 23 due to parallel imports causing damage, and praying for damages, attorney’s fees and preliminary attachment.
Petitioners moved to suspend proceedings on 21 October 1996, invoking the arbitration clause. The trial court deferred consideration (23 December 1996), denied the motion (11 November 1997), and the Court of Appeals affirmed (17 July 1998) and denied reconsideration (30 October 1998). Petitioners filed a Petition for Review on Certiorari before the Supreme Court.

Whether the controversy “arises out of or relates to” the Distributorship Agreement, thus mandating arbitration under RA 876 § 7.
Whether claims for damages under Civil Code Arts. 20, 21 and 23 require a full trial and are therefore non-arbitrable.

Whether the clause binds only the signatories or also non-signatories (Collins, Hidalgo, SFI).
Whether splitting proceedings—arbitration for some parties and trial for others—is permissible or leads to multiplicity of suits.