DANICA V.

NOL 2E

SOLEDAD BENGSON VS MARIANO CHAN

GR. No. L-27283 July 29 1977

FACTS:
Bengson entered into a contract for the construction of a six storey building with
Chan as the contractor. Such contract includes an arbitration clause. Later, Bengson
filed for damages against Chan for violation of the contract by failing to construct
the 1st and 2nd stories within the stipulated time. Chan filed for corresponding
counterclaims and alleged failure of appellant to state cause of action as the
contract stipulates that a controversy over it must first be submitted for arbitration.
The trial court dismissed the complaint. Hence the appeal.

ISSUES:
1.Whether or not appellant has a cause of action.
2.If the answer to the latter is in the affirmative, whether or not arbitration may be
resorted to during the pendency of the case.
HELD:
1.Appellant has a cause of action. The cause of action arose from the breach of the
construction contract caused by a delay on the construction. However, since the
contract includes an arbitration clause, duly agreed by both parties, appellant
should have resorted first to arbitration before filing a case in court.

2.Arbitration may be resorted to during the pendency of the case. Section 7 of the
Arbitration Law states,
Section 7. Stay of civil action. If any suit or proceeding be brought upon an issue
arising out of an agreement providing for an arbitration thereof, the court in which
such suit or proceeding is pending upon being satisfied that the issue involved in
such suit is referable to arbitration, SHALL STAY THE ACTION OR PROCEEDING UNTIL
AN ARBITRATION HAS BEEN HAD IN ACCORDANCE WITH THE TERMS OF THE
AGREEMENT PROVIDED THAT THE APPLICANT FOR THE STAY IS NOT IN DEFAULT IN
PROCEEDING WITH SUCH ARBITRATION.
Therefore, the proceedings of the case are to be suspended until after the
designated time ordered by the court for arbitration expires without definitely
settling the dispute.
ORMOC SUGAR PLANTERS ASSOCIATION INC ET AL vs THE COURT OF
APPEALS
GR No. 156660 August 24, 2009
FACTS:
Petitioner Ormoc Sugar Planters 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.