ORMOC SUGARCANE PLANTERS V CA

ORMOC SUGARCANE PLANTERS' ASSOCIATION v.
CA
GR NO. 156660, 2009-08-24
VELASCO, JR., J
Facts:
Petitioners, Planters, are composed of sugar planters while respondents
Hideco Sugar Milling Co., Inc. (Hideco) and Ormoc Sugar Milling Co, Inc. (OSCO) are
sugar centrals. The milling contracts provide that 34% of the sugar and molasses
produced from milling the Planter's sugarcane shall belong to the centrals
(respondents) as compensation, 65% thereof shall go to the Planter and the
remaining 1% shall go the association to which the Planter concerned belongs else
it shall revert to the centrals.
The milling contract also states that the centrals may not sign or execute any
agreement that will provide better or more benefits to a Planter, without the written
consent of the existing and recognized associations except to Planters whose
plantations are situated in areas beyond thirty (30) kilometers from the mill. Article
XX provides that all differences and controversies which may arise between the
parties concerning the agreement shall be submitted for discussion to a Board of
Arbitration. Petitioners filed twin petitions with the RTC for Arbitration against
Hideco and OSCO, claiming that respondents violated the Milling Contract when
they gave to independent planters who do not belong to any association the 1%
share, instead of reverting said share to the centrals. Respondents filed a motion to
dismiss on ground of lack of cause of action because the association had no milling
contract with respondents.
The RTC denied motion to dismiss while CA concluded that petitioners had no
legal personality to bring the action against respondents or to demand for
arbitration.
Issues: Do petitioners have the right to demand arbitration?
Ruling:
Section 2 of The Arbitration Law provides two modes of arbitration: (a) an
agreement to submit to arbitration some future dispute, usually stipulated upon in a
civil contract between the parties, and known as an agreement to submit to
arbitration, and (b) an agreement submitting an existing matter of difference to
arbitrators, termed the submission agreement. Article XX of the milling contract is
an agreement to submit to arbitration because it was made in anticipation of a
dispute that might arise between the parties after the contract's execution.
Associations have juridical personalities separate and distinct from that of
their member Planters; and 80 milling contracts that were presented were signed
only by the member Planter concerned and one of the Centrals as parties. In other
words, none of the petitioners were parties or signatories to the milling contracts.
There is no legal basis for petitioners' purported right to demand arbitration
when they are not parties to the milling contracts, especially since the arbitration
clause expressly grants the right to demand arbitration only to the parties to the
contract. Petitioners cannot sue respondents even if they are the representatives of
the Planters since petitioners did not sign the milling contracts whether as a party
or as a representative of their member Planters and no provision in the milling
contracts that the individual Planter is authorizing the association to represent
him/her in a legal action
Even if petitioners are representatives of the member Planters who have
milling contracts with the respondents and even if petitioners signed the milling
contracts as representatives of their members, petitioners could not initiate
arbitration proceedings in their own name as they had done in the present case. As
mere agents, they should have brought the suit in the name of the principals that
they purportedly represent. The principal is still the one who has the right to
demand arbitration.
If petitioners had properly brought the case in the name of their members,
petitioners must still prove that they were indeed authorized by the said members
to institute an action for and on the members' behalf.
Article 1311 of the Civil Code states that the requisites of a stipulation pour
autrui or a stipulation in favor of a third person are the following: (1) there must be
a stipulation in favor of a third person, (2) the stipulation must be a part, not the
whole, of the contract, (3) the contracting parties must have clearly and
deliberately conferred a favor upon a third person, not a mere incidental benefit or
interest, (4) the third person must have communicated his acceptance to the
obligor before its revocation, and (5) neither of the contracting parties bears the
legal representation or authorization of the third party.
These requisites are not present in this case as Article VI of the Milling
Contract is the solitary provision that mentions some benefit in favor of the
association and this provision cannot be considered as a stiputation pour autrui. The
primary rationale for the said stipulation is to ensure a just share in the proceeds of
the harvest to the Planters. In other words, it is a stipulation meant to benefit the
Planters. Even the 1% share to be given to the association as aid does not redound
to the benefit of the association but is intended to be used for its member Planters.
Not only that, the share reverts back to respondent sugar centrals if the contracting
Planter is not affiliated with any recognized association.

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