Stanfilco v.

Dole

GR 154048

Facts:

SEARBEMCO, as seller, and respondent DOLE Philippines, as buyer, entered into a Banana Production
and Purchase Agreement4 (BPPA). The BPPA provided that SEARBEMCO shall sell exclusively to DOLE,
and the latter shall buy from the former, all Cavendish bananas of required specifications to be planted
on the land owned by SEARBEMCO, except those rejected by the BUYER for failure to meet the
specifications and conditions which the SELLER shall have the right to sell such rejected bananas to third
parties, for domestic non-export consumption. Their contract also had an arbitration clause, stating that
all disputes arising in connection with their agreement shall be finally settled under the Rules of
Conciliation and Arbitration of the International Chamber of Commerce by three (3) Arbitrators
appointed in accordance with said Rules.

Procedural History:

DOLE filed a complaint with RTC against SEARBEMCO, Oribanex and Spouses Abujos for specific
performance and damages, with a prayer for the issuance of a writ of preliminary injunction and of a
temporary restraining order. DOLE alleged that SEARBEMCO sold and delivered to Oribanex, through the
spouses Abujos, the bananas rejected by DOLE, stating that Oribanex is an exporter of bananas.

SEARBEMCO responded with a motion to dismiss, stating that it was the DARAB that had proper
jurisdiction, that they sold to third party buyers and not exporters, and for the prematurity of the
complaint for not being arbitrated.

The RTC and CA both ruled against SEARBEMCO, stating that the matter was not an agrarian contract
and that for DARAB to have jurisdiction over a case, there must exist a tenancy relationship between the
parties. Further, as there were necessary parties impleaded that weren’t in the initial deal between
SEARBEMCO and DOLE, the arbitration clause would be invalid. SEARBEMCO now raises these issues to
the SC.

Issue:

W/N the parties should resort to arbitration first

Judgment:

The SC agrees with the CA ruling that the BPPA arbitration clause does not apply to the present case
since third parties are involved. Any judgment or ruling to be rendered by the panel of arbitrators will be
useless if third parties are included in the case, since the arbitral ruling will not bind them; they are not
parties to the arbitration agreement. In the present case, DOLE included as parties the spouses Abujos
and Oribanex since they are necessary parties,i.e., they were directly involved in the BPPA violation
DOLE alleged, and their participation are indispensable for a complete resolution of the dispute. To
require the spouses Abujos and Oribanex to submit themselves to arbitration and to abide by whatever
judgment or ruling the panel of arbitrators shall make is legally untenable; no law and no agreement
made with their participation can compel them to submit to arbitration. The object of arbitration is to
allow the expeditious determination of a dispute. Clearly, the issue could not be speedily and efficiently
resolved in its entirety if there were simultaneous arbitration proceedings and trial, or suspension of
trial pending arbitration. Accordingly, the interest of justice would only be served if the trial court hears
and adjudicates the case in a single and complete proceeding.