Ormoc Sugarcane Planters’ Association, Inc. v.

CA, 596 SCRA 630 (2009)

FACTS

Petitioners Ormoc Sugarcane Planters’ Association, Inc. are, without impleading any of
their individual members, filed twin petitions with the RTC for Arbitration under R.A. 876
against Hideco Sugar Milling Co., Inc. (Hideco) and Ormoc Sugar Milling Co, Inc. (OSCO).

Petitioners claimed 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. Petitioners contended that respondents unduly
accorded the independent Planters more benefits and thus prayed that an order be issued
directing the parties to commence with arbitration in accordance with the terms of the
milling contracts. They also demanded that respondents be penalized by increasing their
member Planters' 65% share provided in the milling contract by 1%, to 66%.

The RTC ruled that there is an existing milling contract between the petitioners and
respondents and these planters are represented by the officers of the associations. The
petitioners have the right to sue in behalf of the planters. This Court, acting on the petitions,
directs the respondents to nominate two arbitrators to represent HIDECO/HISUMCO and
OSCO in the Board of Arbitrators within fifteen (15) days from receipt of this Order.

However, CA set aside the assailed Orders of the RTC. The CA held that petitioners neither
had an existing contract with respondents nor were they privy to the milling contracts
between respondents and the individual Planters. In the main, the CA concluded that
petitioners had no legal personality to bring the action against respondents or to demand
for arbitration.

ISSUE

Whether or not petitioners have legal personality to file a suit against, or demand
arbitration from, respondents in their own name without impleading the individual Planters
(NO).

RULING

The SC affirmed the findings of the CA and dismissed the petition.

RATIO

Section 4 of R.A. 876 provides:

Section 4. Form of Arbitration Agreement - A contract to arbitrate a controversy thereafter

arising between the parties, as well as a submission to arbitrate an existing controversy,
shall be in writing and subscribed by the party sought to be charged, or by his lawful agent.

Petitioners do not have any agreement to arbitrate with respondents. Only eighty (80)
Planters who were all members of OSPA were shown to have such an agreement to
arbitrate, included as a stipulation in their individual milling contracts. The other
petitioners failed to prove that any of their members had milling contracts with
respondents, much less, that respondents had an agreement to arbitrate with the petitioner
associations themselves.

Even assuming that all the petitioners were able to present milling contracts in favor of
their members, it is undeniable that under the arbitration clause in these contracts it is the
parties thereto who have the right to submit a controversy or dispute to arbitration.

Moreover, even assuming that petitioners are indeed representatives of the member
Planters who have milling contracts with the respondents and assuming further that
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. Even if Section 4 of R.A. No. 876 allows the agreement to
arbitrate to be signed by a representative, the principal is still the one who has the right to
demand arbitration.

Assuming petitioners had properly brought the case in the name of their members who had
existing milling contracts with respondents, petitioners must still prove that they were
indeed authorized by the said members to institute an action for and on the members'
behalf.

In the same manner that an officer of the corporation cannot bring action in behalf of a
corporation unless it is clothed with a board resolution authorizing an officer to do so, an
authorization from the individual member planter is a sine qua non for the association or
any of its officers to bring an action before the court of law. The mere fact that petitioners
were organized for the purpose of advancing the interests and welfare of their members
does not necessarily mean that petitioners have the authority to represent their members
in legal proceedings, including the present arbitration proceedings.

DOCTRINE

Except where a compulsory arbitration is provided by statute, the first step toward the
settlement of a difference by arbitration is the entry by the parties into a valid agreement to
arbitrate. An agreement to arbitrate is a contract, the relation of the parties is contractual,
and the rights and liabilities of the parties are controlled by the law of contracts. 11 In an
agreement for arbitration, the ordinary elements of a valid contract must appear, including
an agreement to arbitrate some specific thing, and an agreement to abide by the award,
either in express language or by implication.