Ormoc Sugarcane Planters' Association, Inc. vs. Court of Appeals

An association not a party to a contract cannot demand arbitration or sue for its enforcement, as it is not a real party in interest and the contract's incidental benefits do not constitute a stipulation pour autrui.

Sugar planters' associations (OSPA, OLFAMCA, UNIFARM, ONDIMCO) and sugar centrals (Hideco, OSCO) operated under milling contracts signed by individual planters and the centrals. These contracts allocated 65% of the sugar and molasses to the planter, 34% to the central, and 1% to the planter's association as aid. The centrals subsequently gave the 1% share to independent, unaffiliated planters instead of reverting it to the centrals, prompting the associations to demand arbitration and an adjustment in their members' shares.

• Parties and Membership: Petitioners are associations of sugar planters (OSPA with 264 members, OLFAMCA with 533, UNIFARM with 617, ONDIMCO with 760). Respondents are sugar centrals (Hideco and OSCO).
• The Milling Contracts: The relationship between centrals and planters is governed by individual milling contracts. Article VI allocates 65% of proceeds to the Planter, 34% to the Central, and 1% as aid to the Planter's association (reverting to the Central if the Planter has no association). Article XIV prohibits the Central from granting better benefits to a Planter without the association's consent. Article XX provides for a Board of Arbitration to settle differences.
• The Dispute: Respondents gave the 1% share to independent planters not belonging to any association, instead of reverting it to the centrals. Petitioners viewed this as a violation giving undue benefits to non-members and demanded arbitration to equalize shares.
• Lack of Privity: Of the roughly 2,000 planters in the district, only about 80 (all OSPA members) actually executed milling contracts with respondents. None of the petitioner associations signed the milling contracts, whether as parties or representatives.

• Right to Arbitrate: Petitioners argued they possessed legal personality to demand arbitration as the recognized representatives of the planters, pursuant to Article XX of the Milling Contract and R.A. 876.
• Contract Pour Autrui: Petitioners maintained that the milling contract is a contract pour autrui under Article 1311 of the Civil Code, granting them an independent right to demand fulfillment without impleading the individual planters.

• Lack of Cause of Action: Respondents countered that petitioners had no legal standing to demand arbitration because they were not parties to the milling contracts; only the individual planters who signed the contracts could invoke the arbitration clause.

• Propriety of Certiorari: Whether a petition for certiorari under Rule 65 is the proper remedy to challenge the Court of Appeals' decision.
• Legal Personality to Arbitrate: Whether sugar planters' associations have the legal personality to demand arbitration in their own name without impleading their individual members.
• Stipulation Pour Autrui: Whether the milling contracts contain a stipulation pour autrui that grants the associations an independent right to sue.

• Propriety of Certiorari: The petition was improper. Certiorari lies only when there is no appeal or plain, speedy, and adequate remedy. The proper recourse was a petition for review under Rule 45. Errors of law committed by the appellate court do not amount to grave abuse of discretion correctable by certiorari.
• Legal Personality to Arbitrate: Petitioners lack legal personality. Under Section 4 of R.A. 876, an arbitration agreement must be in writing and subscribed by the parties. Petitioners were not signatories. As mere agents, they should have sued in the name of their principals and presented a special power of attorney, which they failed to do. Under Rule 3, Section 2 of the Rules of Court, only real parties in interest—those who stand to be benefited or injured—may prosecute an action. The individual planters, as contracting parties, are the real parties in interest.
• Stipulation Pour Autrui: The milling contracts are not stipulations pour autrui in favor of the associations. The 1% aid and the consent clause are primarily for the protection and benefit of the member planters; the associations' interest is merely incidental. A stipulation pour autrui requires a clear and deliberate conferment of a favor, not a mere incidental benefit.

• Real Party in Interest — A real party in interest is the party who stands to be benefited or injured by the judgment, or entitled to the avails of the suit. The parties to a contract are the real parties in interest in an action upon it. One who is not a party to a contract, and for whose benefit it was not expressly made, cannot maintain an action on it, even if the contract incidentally inures to one's benefit. Applied: Petitioners, not being parties to the milling contracts, are not real parties in interest and cannot sue upon the contracts.
• Stipulation Pour Autrui — Requisites: (1) a stipulation in favor of a third person; (2) it must be 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; (4) the third person must have communicated acceptance before revocation; (5) neither contracting party bears the legal representation of the third party. Applied: The 1% aid to associations is primarily for the benefit of the member planters, making the associations' benefit merely incidental; thus, the requisites are not met.
• Form of Arbitration Agreement — An arbitration agreement must be in writing and subscribed by the party sought to be charged, or by their lawful agent. Applied: Petitioners did not sign the milling contracts, either as parties or representatives, and thus cannot compel arbitration.

• "The parties to a contract are the real parties in interest in an action upon it... One who is not a party to a contract, and for whose benefit it was not 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 one’s benefit."
• "To be considered a pour autrui provision, an incidental benefit or interest, which another person gains, is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person."

• B.F. Corporation v. CA, G.R. No. 120105, March 27, 1998, 288 SCRA 267 — Cited for the requirement that an arbitration agreement must be written and subscribed by the parties.
• Oco v. Limbaring, G.R. No. 161298, January 31, 2006, 481 SCRA 348 — Cited for the definition and purposes of the real party in interest rule.
• Uy v. Court of Appeals, G.R. No. 120465, September 9, 1999, 314 SCRA 76 — Cited for the principle that agents of parties to a contract do not have the right to bring an action on the contract, as they are not real parties in interest.
• South Pachem Development, Inc v. CA, G.R. No. 126260, December 16, 2004, 447 SCRA 85 — Cited for the requisites of a stipulation pour autrui.
• Associated Bank v. CA, G.R. No. 123793, June 29, 1998, 291 SCRA 511 — Cited for the rule that a mere incidental benefit is insufficient to constitute a stipulation pour autrui.

• Rule 65, Section 1, Rules of Court — Governs Petition for Certiorari; applied to show the remedy was improper because appeal was available.
• Republic Act No. 876, Section 2 — Defines persons and matters subject to arbitration; applied to emphasize that arbitration is a contractual right.
• Republic Act No. 876, Section 4 — Prescribes the form of an arbitration agreement (in writing, subscribed by parties or lawful agent); applied to deny petitioners' right to arbitrate since they were not signatories.
• Rule 3, Section 2, Rules of Court — Requires that every action be prosecuted in the name of the real party in interest; applied to dismiss the petitioners' suit since the individual planters are the real parties in interest.
• Rule 3, Section 3, Rules of Court — Requires the beneficiary to be included in the title of the case when an action is prosecuted by a representative; applied to show petitioners' failure to properly implead the planters.
• Article 1311, Civil Code — Governs the relativity of contracts and stipulations pour autrui; applied to determine that the milling contracts did not contain a stipulation pour autrui in favor of the associations.
• Article 1878(3), Civil Code — Requires a special power of attorney to submit questions to arbitration; applied to emphasize that petitioners lacked authority to demand arbitration for the planters.

Chief Justice Reynato S. Puno, Associate Justice Antonio T. Carpio, Associate Justice Renato C. Corona, Associate Justice Lucas P. Bersamin