Sunday, March 11, 2012

PepsiCo vs. Emerald Pizza

Facts: Emerald Pizza applied for a franchise from Pizza Hut Co. (one of the PepsiCo's restaurant Business). There were subsequent amendments and settlements to the agreement of the parties that clearly proved the participation of Pepsico assuming obligations of PepsiCo. 15 years after the start of the franchise, when the franchise was being renewed, it was alleged that Pizza hut co. violated one of their agreements in not extending the franchise. Emerald petitioned the RTC for specific performance, injunction, and damages against Pepsi co. PepsiCo argued that it was not a signatory to the franchise agreement subject of the case, thus, the complaint states no cause of action for it was not brought against the real party-in-interest. The RTC favored Pepsico and dismissed the petition saying that the case was premature because PepsiCo wasn't the real party in interest. The CA reversed the decision of the RTC and recommended that an amicable settlement happen. 

Issue: Whether or not the case should be dismissed on account of Pizza Hut being not included as party in interest 

Held: No, PepsiCo was a party to the contract. 

The contested provision which is RULES OF COURT, Rule III, Section 2 states that: 

"every action must be prosecuted or defended in the name of the real party-in-interest, the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit" 

"Interest" within the meaning of this rule means material interest, an interest in issue and to be affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest. The real-parties in interest must be parties to the said contract. 

It is true that PepsiCo is not a signatory to the March 12, 1981 Franchise Agreement, the parties thereto being only Pizza Hut and Emerald. However, the settlement agreement entered into by the parties herein and Pizza Hut on January 13, 1989 clearly reveals that PepsiCo also assumed the obligations of Pizza Hut in the said franchise agreement and that it was in effect acting as a franchisor together with Pizza Hut. (The 1989 agreement is an agreement where PepsiCo allowed Emerald to relocate its then existing restaurant, granted it a third unit site, reduced the protective radius of the franchise, guaranteed its sales, represented that the overseeing unit would accede to the settlement, and agreed to execute a franchise agreement)[But the initial franchise agreement (1981) was with Pizza Hut and Co.]. 

Pizza Hut is an indispensable party. 

An indispensable party is a party-in-interest without whom no final determination can be had of an action, and who shall be joined either as plaintiff or defendant.30 The joinder of indispensable parties is mandatory. Their presence is necessary to vest the court with jurisdiction, which is "the authority to hear and determine a cause, the right to act in a case." Thus, without their presence to a suit or proceeding, judgment of a court cannot attain real finality. The absence of an indispensable party renders all subsequent actions of the court null and void for want of authority to act, not only as to the absent parties but even as to those present. 

But absence of an indispensible party is not a cause for dismissal the remedy is to implead the non-party claimed to be indispensable. It is only when the Petitioner refuses to implead the indispensable party that the court can dismiss the case. 

The trial court should include Pizza Hut and Co as an indispensable party.

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