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Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 120465 September 9, 1999

WILLIM U! "#$ RO%EL RO&S, petitioners,vs.COURT O' PPELS, (ON. RO)ERT )LO "#$ NTIONL (OUSINGUT(ORIT!, respondents.

*PUNN, J.:

Petitioners illia! "# and Rodel Ro$as are a%ents authori&ed to sell ei%ht parcels ofland b# the o'ners thereof. (# virtue of such authorit#, petitioners offered to sell thelands, located in Tuba, Tadian%an, (en%uet to respondent National )ousin% *uthorit#+N)* to be utili&ed and developed as a housin% pro-ect.

On Februar# /, 010, the N)* (oard passed Resolution No. 234 approvin% theac5uisition of said lands, 'ith an area of 3.143 hectares, at the cost of P43.126!illion, pursuant to 'hich the parties e$ecuted a series of Deeds of *bsolute Salecoverin% the sub-ect lands. Of the ei%ht parcels of land, ho'ever, onl# five 'ere paid forb# the N)* because of the report 1it received fro! the 7and 8eosciences (ureau ofthe Depart!ent of 9nviron!ent and Natural Resources +D9NR that the re!ainin%

area is located at an active landslide area and therefore, not suitable for develop!entinto a housin% pro-ect.

On 44 Nove!ber 00, the N)* issued Resolution No. 43:4 cancellin% the sale overthe three parcels of land. The N)*, throu%h Resolution No. 430/, subsec%uentl#offered the a!ount of P.44: !illion to the lando'ners as daos perjuicios.

On 0 March 004, petitioners filed before the Re%ional Trial ;ourt +RT; of in>fact and,therefore, not the real parties>in>interest in the action before the t rial court.

. . . In para%raph / of the co!plaint, plaintiffs alle%edthe!selves to be =sellers' agents= for the several owners ofthe 8 lotssub-ect !atter of the case. Obsviousl#, illia! "#and Rodel Ro$as in filin% this case acted as attorne#s>in>fact of the lot o'ners 'ho are the real parties in interest but'ho 'ere o!itted to be pleaded as part#>plaintiffs in thecase. This o!ission is fatal. here the action is brou%ht b#an attorne#>in>fact of a land o'ner in his na!e, +as in ourpresent action and not in the na!e of his principal, theaction 'as properl# dis!issed +Ferrer vs. Villa!or, 2?S;R* /?2 @06/AB Marcelo vs. de 7eon, ?: Phil. 6:because the rule is that ever# action !ust be prosecuted inthe na!e of the real parties>in>interest +Section 4, Rule 3,Rules of ;ourt.

hen plaintiffs "C and Ro$as sou%ht pa#!ent of da!a%esin their favor in vie' of the partial rescission of ResolutionNo. 234 and the Deed of *bsolute Sale coverin% T;T Nos.?001, ?000 and 404 +Pra#er co!plaint, pa%e :, RT;records, it beco!es obviousl# indispensable that the loto'ners be included, !entioned and na!ed as part#>

plaintiffs, bein% the real part#>in>interest. "C and Ro$as, asattorne#s>in>fact or apoderados, cannot b# the!selvesla'full# co!!ence this action, !ore so, 'hen the supposedspecial po'er of attorne#, in their favor, 'as neverpresented as an evidence in this case. (esides, even ifherein plaintiffs "# and Ro$as 'ere authori&ed b# the loto'ners to co!!ence this action, the sa!e !ust still be filedin the na!e of the principal, +Filipino Industrial ;orporationvs. San Die%o, 43 S;R* 6?2 @021A. *s such indispensablepart#, their -oinder in the action is !andator# and theco!plaint !a# be dis!issed if not so i!pleaded +ND; vs.;*, 4 S;R* /44 @004A. 2

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Their !otion for reconsideration havin% been denied, petitioners see relief fro! this;ourt contendin% thatE

I. T)9 R9SPOND9NT ;* 9RR9D IN D9;7*RIN8 T)*TR9SPOND9NT N)* )*D *NC 798*7 (*SIS FORR9S;INDIN8 T)9 S*79 INVO7VIN8 T)9 7*ST T)R99+3 P*R;97S ;OV9R9D (C N)* R9SO7"TION NO.234.

II. 8R*NTIN8 *R8"9NDO T)*T T)9 R9SPOND9NTN)* )*D 798*7 (*SIS TO R9S;IND T)9 S"(9;TS*79, T)9 R9SPOND9NT ;* NON9T)979SS 9RR9D IND9NCIN8 )9R9IN P9TITION9RSG ;7*IM TO D*M*89S,;ONTR*RC TO T)9 PROVISIONS OF *RT. 0 OF T)9;IVI7 ;OD9.

III. T)9 R9SPOND9NT ;* 9RR9D IN DISMISSIN8 T)9S"(9;T ;OMP7*INT FINDIN8 T)*T T)9

P9TITION9RS F*I79D TO OIN *S INDISP9NS*(79P*RTC P7*INTIFF T)9 S977IN8 7OT>ON9RS. +

e first resolve the issue raised in the the third assi%n!ent of error.

Petitioners clai! that the# lod%ed the co!plaint not in behalf of their principals but intheir o'n na!e as a%ents directl# da!a%ed b# the ter!ination of the contract. Theda!a%es pra#ed for 'ere intended not for the benefit of their principals but to inde!nif#petitioners for the losses the# the!selves alle%edl# incurred as a result of suchter!ination. These da!a%es consist !ainl# of =unearned inco!e= andadvances. 4Petitioners, thus, atte!pt to distin%uish the case at bar fro! those involvin%a%ents or apoderedos institutin% actions in their o'n na!e but in behalf of theirprincipals. 5Petitioners in this case purportedl# brou%ht the action for da!a%es in their

o'n na!e and in their o'n behalf.

e find this contention un!eritorious.

Sec. 4, Rule 3 of the Rules of ;ourt re5uires that ever# action !ust be prosecuted anddefended in the na!e of the real part#>in>interest. The real part#>in>interest is the part#'ho stands to be benefited or in-ured b# the -ud%!ent or the part# entitled to the availsof the suit. =Interest, 'ithin the !eanin% of the rule, !eans !aterial interest, an interestin the issue and to be affected b# the decree, as distin%uished fro! !ere interest in the5uestion involved, or a !ere incidental interest. 6;ases construin% the real part#>in>interest provision can be !ore easil# understood if it is borne in !ind that the true

!eanin% of real part#>in>interest !a# be su!!ari&ed as follo'sE *n action shall beprosecuted in the na!e of the part# 'ho, b# the substantive la', has the ri%ht sou%ht tobe enforced.

Do petitioners, under substantive la', possess the ri%ht the# see to enforceH e rulein the ne%ative.

The applicable substantive la' in this case is *rticle 3 of the ;ivil ;ode, 'hichstatesE

Contracts take effect only between the parties theirassigns and heirs, e$cept in case 'here the ri%hts andobli%ations arisin% fro! the contract are not trans!issible b#their nature, or b# stipulation, or b# provision of la'. . . .

!f a contract should contain so"e stipulation in favor of athird person he "ay de"and its fulfill"entprovided heco!!unicated his acceptance to the obli%or before its

revocation. * !ere incidental benefit or interest of a personis not sufficient. The contractin% parties !ust have clearl#and deliberatel# conferred a favor upon a third person.+9!phasis supplied.

Petitioners are not parties to the contract of sale bet'een their principals and N)*.The# are !ere a%ents of the o'ners of the land sub-ect of the sale. *s a%ents, the#onl# render so!e service or do so!ethin% in representation or on behalf of theirprincipals. -The renderin% of such service did not !ae the! parties to the contracts ofsale e$ecuted in behalf of the latter. Since a contract !a# be violated onl# b# theparties thereto as a%ainst each other, the real parties>in>interest, either as plaintiff ordefendant, in an action upon that contract !ust, %enerall#, either be parties to saidcontract. 9

Neither has there been an# alle%ation, !uch less proof, that petitioners are the heirs oftheir principals.

*re petitioners assi%nees to the ri%hts under the contract of saleH In #c#icking vs.$anco %spaol&ilipino, 10'e held that the rule re5uirin% ever# action to be prosecutedin the na!e of the real part#>in>interest.

. . . reco%ni&es the assi%n!ents of ri%hts of action and alsoreco%ni&es that 'hen one has a ri%ht of action assi%ned tohi! he is then the real part# in interest and !a# !aintain an

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action upon such clai! or ri%ht. The purpose of @this ruleA isto re5uire the plaintiff to be the real part# in interest, or, inother 'ords, he !ust be the person to 'ho! the proceedsof the action shall belon%, and to prevent actions b# persons'ho have no interest in the result of the sa!e. . . .

Thus, an a%ent, in his o'n behalf, !a# brin% an action founded on a contract !ade forhis principal, as an assi%nee of such contract. e find the follo'in% declaration inSection 364 + of the Restate!ent of the 7a' on *%enc# +SecondE 11

Sec. 364. *%ent as O'ner of ;ontract Ri%ht

+ "nless other'ise a%reed, an a%ent 'ho has or 'hoac5uires an interest in a contract 'hich he !aes on behalfof his principal can, althou%h not a pro!isee, !aintain suchaction thereon !aintain such action thereon as !i%ht atransferee havin% a si!ilar interest.

The ;o!!ent on subsection + statesE

a.(gent a transferee. One 'ho has !ade a contract onbehalf of another !a# beco!e an assi%nee of the contractand brin% suit a%ainst the other part# to it, as an# othertransferee. The custo!s of business or the course ofconduct bet'een the principal and the a%ent !a# indicatethat an a%ent 'ho ordinaril# has !erel# a securit# interest isa transferee of the principals ri%hts under the contract andas such is per!itted to brin% suit. If the a%ent has settled'ith his principal 'ith the understandin% that he is to collectthe clai! a%ainst the obli%or b# 'a# of rei!bursin% hi!selffor his advances and co!!issions, the a%ent is in the

position of an assi%nee 'ho is the beneficial o'ner of thechose in action. )e has an irrevocable po'er to sue in hisprincipalGs na!e. . . . *nd, under the statutes 'hich per!itthe real part# in interest to sue, he can !aintain an action inhis o'n na!e. This po'er to sue is not affected b# asettle!ent bet'een the principal and the obli%or if the latterhas notice of the a%entGs interest. . . . 9ven thou%h the a%enthas not settled 'ith his principal, he !a#, b# a%ree!ent 'iththe principal, have a ri%ht to receive pa#!ent and out of theproceeds to rei!burse hi!self for advances andco!!issions before turnin% the balance over to theprincipal. In such a case, althou%h there is no for!al

assi%n!ent, the a%ent is in the position of a transferee ofthe 'hole clai! for securit#B he has an irrevocable po'er tosue in his principalGs na!e and, under statutes 'hich per!itthe real part# in interest to sue, he can !aintain an action inhis o'n na!e.

Petitioners, ho'ever, have not sho'n that the# are assi%nees of their principals to thesub-ect contracts. hile the# alle%ed that the# !ade advances and that the# sufferedloss of co!!issions, the# have not established an# a%ree!ent %rantin% the! =the ri%htto receive pa#!ent and out of the proceeds to rei!burse @the!selvesA for advancesand co!!issions before turnin% the balance over to the principal@sA.=

Finall#, it does not appear that petitioners are beneficiaries of a stipulationpourautruiunder the second para%raph of *rticle 3 of the ;ivil ;ode. Indeed, there is nostipulation in an# of the Deeds of *bsolute Sale =clearl# and deliberatel#= conferrin% afavor to an# third person.

That petitioners did not obtain their co!!issions or recoup their advances because of

the non>perfor!ance of the contract did not entitle the! to file the action belo' a%ainstrespondent N)*. Section 364 +4 of the Restate!ent of the 7a' on *%enc# +SecondstatesE

+4 *n a%ent does not have such an interest in a contract as to entitlehi! to !aintain an action at la' upon it in his o'n na!e !erel#because he is entitled to a portion of the proceeds as co!pensationfor !ain% it or because he is liable for its breach.

The follo'in% ;o!!ent on the above subsection is illu!inatin%E

The fact that an a%ent 'ho !aes a contract for his principal 'ill %ainor suffer loss b# the perfor!ance or nonperfor!ance of the contract

b# the principal or b# the other part# thereto does not entitle hi! to!aintain an action on his o'n behalf a%ainst the other part# for itsbreach. *n a%ent entitled to receive a co!!ission fro! his principalupon the perfor!ance of a contract 'hich he has !ade on hisprincipalGs account does not, f ro! this fact alone, have an# clai!a%ainst the other part# for breach of the contract, either in an actionon the contract or other'ise. *n a%ent 'ho is not a pro!isee cannot!aintain an action at la' a%ainst a purchaser !erel# because he isentitled to have his co!pensation or advances paid out of thepurchase price before pa#!ent to the principal. . . .

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Thus, in )opkins vs. !ves, 12the Supre!e ;ourt of *ransas, citin% Section 364 +4above, denied the clai! of a real estate broer to recover his alle%ed co!!issiona%ainst the purchaser in an a%ree!ent to purchase propert#.

In *oduco vs. Court of appeals, 1+this ;ourt held thatE

. . . %rantin% that appellant had the authorit# to sell thepropert#, the sa!e did not !ae the bu#er liable for theco!!ission she clai!ed. *t !ost, the o'ner of the propert#and the one 'ho pro!ised to %ive her a co!!ission shouldbe the one liable to pa# the sa!e and to 'ho! the clai!should have been directed. . . .

*s petitioners are not parties, heirs, assi%nees, or beneficiaries of a stipulationpourautruiunder the contracts of sale, the# do not, under substantive la', possess the ri%htthe# see to enforce. Therefore, the# are not the real parties>in>interest in this case.

Petitioners not bein% the real parties>in>interest, an# decision rendered herein 'ould be

pointless since the sa!e 'ould not bind the real parties>in>interest. 14

Nevertheless, to forestall further liti%ation on the substantive aspects of this case, 'eshall proceed to rule on !e !erits. 15

Petitioners sub!it that respondent N)* had no le%al basis to =rescind= the sale of thesub-ect three parcels of land. The e$istence of such le%al basis, not'ithstandin%,petitioners ar%ue that the# are still entitled to an a'ard of da!a%es.

Petitioners confuse the cancellation of the contract b# the N)* as a rescission of thecontract under *rticle 0 of the ;ivil ;ode. The ri%ht of rescission or, !ore

accuratel#, resolution, of a part# to an obli%ation under *rticle 0 is predicated on abreach of faith b# the other part# that violates the reciprocit# bet'een the!. 16Thepo'er to rescind, therefore, is %iven to the in-ured part#. 1*rticle 0 statesE

The po'er to rescind obli%ations is i!plied in reciprocal ones, in caseone of the obli%ors should not co!pl# 'ith 'hat is incu!bent uponhi!.

The in-ured part# !a# choose bet'een the fulfill!ent and therescission of the obli%ation, 'ith the pa#!ent of da!a%es in eithercase. )e !a# also see rescission, even after he has chosenfulfill!ent, if the latter should beco!e i!possible.

In this case, the N)* did not rescind the contract. Indeed, it did not have the ri%ht to doso for the other parties to the contract, the vendors, did not co!!it an# breach, !uchless a substantial breach, 1-of their obli%ation. Their obli%ation 'as !erel# to deliverthe parcels of land to the N)*, an obli%ation that the# fulfilled. The N)* did not sufferan# in-ur# b# the perfor!ance thereof.

The cancellation, therefore, 'as not a rescission under *rticle 0. Rather, thecancellation 'as based on the ne%ation of the cause arisin% fro! the reali&ation thatthe lands, 'hich 'ere the ob-ect of the sale, 'ere not suitable for housin%.1wphi1.nt

;ause is the essential reason 'hich !oves the contractin% parties to enter into it. 19Inother 'ords, the cause is the i!!ediate, direct and pro$i!ate reason 'hich -ustifiesthe creation of an obli%ation throu%h the 'ill of the contractin% parties.20;ause, 'hich isthe essential reason for the contract, should be distin%uished fro! !otive, 'hich is theparticular reason of a contractin% part# 'hich does not affect the other part#. 21

For e$a!ple, in a contract of sale of a piece of land, such as in this case, the cause ofthe vendor +petitionersG principals in enterin% into the contract is to obtain the price. For

the vendee, N)*, it is the ac5uisition of the land.

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The !otive of the N)*, on the otherhand, is to use said lands for housin%. This is apparent fro! the portion of the Deeds of*bsolute Sale 2+statin%E

)9R9*S, under the 9$ecutive Order No. 0? dated Dece!ber 6,012, the V9ND99 is !andated to focus and concentrate its effortsand resources in providin% housin% assistance to the lo'est thirt#percent +3? of urban inco!e earners, thru slu! up%radin% anddevelop!ent of sites and services pro-ectsB

)9R9*S, 7etters of Instructions Nos. ::: and ::6 @asA a!endedb# 7etter of Instruction No. 23?, prescribed slu! i!prove!ent andup%radin%, as 'ell as the develop!ent of sites and services as the

principal housin% strate%# for dealin% 'ith slu!, s5uatter and otherbli%hted co!!unitiesB

$$$ $$$ $$$

)9R9*S, the V9ND99, in pursuit of and in co!pliance 'ith theabove>stated purposes offers to bu# and the V9NDORS, in a %estureof their 'illin% to cooperate 'ith the above polic# and co!!it!ents,a%ree to sell the aforesaid propert# to%ether 'ith all the e$istin%i!prove!ents there or belon%in% to the V9NDORSB

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NO, T)9R9FOR9, for and in consideration of the fore%oin%pre!ises and the ter!s and conditions hereinbelo' stipulated, theV9NDORS hereb#, sell, transfer, cede and conve# unto theV9ND99, its assi%ns, or successors>in>interest, a parcel of landlocated at (o. Tadian%an, Tuba, (en%uet containin% a total area ofFIFTC SIJ T)O"S*ND 9I8)T )"NDR9D NIN9T99N +:2,10

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*ccordin%l#, 'e hold that the N)* 'as -ustified in cancelin% the contract. Thereali&ation of the !istae as re%ards the 5ualit# of the land resulted in the ne%ation ofthe !otiveKcause thus renderin% the contract ine$istent. 2-*rticle 31 of the ;ivil ;odestates thatE

*rt. 31. -here is no contract unless the followingre2uisites concur

E

+ ;onsent of the contractin% partiesB

+4 Ob-ect certain 'hich is the sub-ect !atter of the contractB

+3 Causeof the obli%ation 'hich is established. +9!phasissupplied.

Therefore, assu!in% that petitioners are parties, assi%nees or beneficiaries to thecontract of sale, the# 'ould not be entitled to an# a'ard of da!a%es.

)9R9FOR9, the instant petition is hereb# D9NI9D.

SO ORD9R9D.

uno ardo and 3nares&4antiago 55. concur.

6avide 5r. C.5. on leave.

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