ORMOC SUGAR PLANTER’S ASSOCIATION INC ET AL vs THE COURT OF APPEALS

GR No. 156660 August 24, 2009

FACTS:
Petitioner Ormoc Sugar Planter’s Association (OSPA) and other associations whoce members
are sugar planters while respondent Hideco Sugar Milling Co. Inc and Ormoc Sugar Milling Co
Inc are sugar centrals engaged in the grinding and milling sugar cane delivered to them by
numerous individual sugar planters who may or may not be members of an association. The
relationship of indicidual sugar planters are governed by milling contracts. The milling contract
provides that 34% of the sugar and molasses produced by the planters shall belong to the sugar
centrals, 65% thereof to the individual planters and the remaining 1% shall be given to the
association to which the planter is a member. If the planter is not a member of any, it shall revert
back to the centrals. Petitioner OSPA et al filed a case before the RTC for arbitration under RA
876 to Recover Additional Benefits, and others against respondents. Petitioners claim breach of
the milling contract because respondent gave the 1% to the individual planters who are not
there members the 1% instead of reverting it back to the centrals. The RTC directed the parties
to proceed with the arbitration. Respondents elevated the case to the CA by way of certiori. The
CA set aside the challenged decision hence the petition.

ISSUE:
Whether or not petitioner associations have legal personality to file a suit against or demand
arbitration from respondents in their own name without impleading the individual planters.

HELD:
Petitioners have no legal personality to do so. Section 2 of RA 876.
Section 2: Persons and matters subject to arbitration. Two or more persons or parties may
submit to the arbitration of one or more arbitrators any controversy existing between them at the
time of the submission and which may be subject of an action, or the parties to any contract
may in such contract agree to settle by arbitration a controversy thereafter arising between
them. Such submission or contract shall be valid, enforceable, and irrevocable, save upon such
grounds as exist at law for the revocation of any contract.

Petitioner in this case is not the proper party but the individual members of the association.
Without a special power of attorney to make them a representative of the members, the
associations are a stranger to the contract. The parties to a contract are the real parties in
interest in an action upon it, as consistently held by the Court. Only the contracting parties are
bound by the stipulations in the contract; they are the ones who would benefit from and could
violate it. Thus, one who is not a party to a contract and for whose benefit it was expressly
made, cannot maintain an action on it. One cannot do so, even if the contract performed by the
contracting parties would incidentally inure to ones benefit.