Title
Uy vs. Court of Appeals
Case Decision Date
G.R. No. 120465 9 Sep 1999
Petitioners, agents selling land to NHA, sued for damages after NHA canceled
the sale of three landslide-prone parcels. SC ruled petitioners lacked standing
as agents, upheld NHA's cancellation, and dismissed the case for failure to
join indispensable landowners.
[Link] - Case Digest (G.R. No. 120465)
Reasoning Model - Advanced
Facts:
Authority and Initiation of Sale
Petitioners William Uy and Rodel Roxas acted as agents authorized by the
landowners to sell eight parcels of land located in Tuba, Tadiangan, Benguet.
They o!ered the subject lands to the National Housing Authority (NHA) for
development as a housing project.
The NHA Board, by Resolution No. 1632 dated February 14, 1989, approved
the acquisition of the lands covering an area of 31.8231 hectares for P23.867
million, which led to the execution of a series of Deeds of Absolute Sale.
Payment and Discovery of Defects
Of the eight parcels, only "ve were paid for by the NHA because a report
from the Land Geosciences Bureau of the DENR revealed that the remaining
three parcels were situated in an active landslide area and were unsuitable
for housing development.
On November 22, 1991, NHA issued Resolution No. 2352 to o#cially cancel
the sale over the three parcels.
Subsequently, through Resolution No. 2394, the NHA o!ered the amount of
P1.225 million as damages (daños perjuicios) to the landowners.
Litigation and Procedural History
On March 9, 1992, petitioners "led a Complaint for Damages before the
Regional Trial Court (RTC) of Quezon City against NHA and its General
Manager Robert Balao.
The RTC found the cancellation of the contract justi"ed but nevertheless
awarded petitioners damages in the sum of P1.255 million, matching the
amount initially o!ered by the NHA.
On appeal, the Court of Appeals reversed the RTC decision by dismissing the
complaint, holding that there was su#cient basis for the cancellation of the
sale and noting that the petitioners, being mere attorneys-in-fact, were not
the real parties-in-interest.
Issues Regarding Party Standing and Claims
Petitioners claimed that they acted in their own name and directly as agents
who sustained losses in the form of unearned income, lost opportunities,
and additional expenses due to the cancellation.
They argued their complaint should not be dismissed on the ground that the
actual (real) parties-in-interest—the lot owners—were not joined in the suit.
The contention was raised that even assuming NHA’s cancellation was
legally unfounded, petitioners were entitled to damages under Article 1191 of
the Civil Code.
Issue:
Real Party-in-Interest
Whether petitioners, acting solely as attorneys-in-fact/agents, could "le a suit
in their own name instead of involving the real parties-in-interest (the
landowners).
Whether the omission of the lot owners as party-plainti!s renders the suit
procedurally defective and mandates dismissal.
Validity of the Cancellation
Whether the NHA had a legal basis to cancel the sale of the three parcels due
to the lands being located in an active landslide area making them unsuitable
for housing.
Whether the cancellation of the contract constituted a rescission under
Article 1191 of the Civil Code, thereby entitling petitioners to claim damages.
Entitlement to Damages
Whether petitioners could claim damages, such as unearned income,
opportunity loss, and expenses, on the ground that they personally incurred
losses despite being only agents.
Whether such claims could succeed in view of the requirement that actions
must be prosecuted in the name of the real party-in-interest.
Ruling:
On the Issue of Party Standing
The court ruled that every action must be prosecuted in the name of the real
party-in-interest, as mandated by Section 2, Rule 3 of the Rules of Court.
Petitioners, acting merely as agents or attorneys-in-fact and not as principals
or assignees, lacked the requisite standing to sue in their own name.
The omission of the lot owners (the true parties-in-interest) was deemed
fatal, and as established in previous cases, actions brought by attorneys-in-
fact without joining the principals must be dismissed.
On the Validity of the Cancellation
The cancellation of the sale by the NHA was upheld based on the conclusive
"ndings of the Land Geosciences Bureau, which determined that the three
parcels were located in an active landslide area and, thus, unsuitable for
housing development.
The cancellation was not seen as a rescission under Article 1191 but rather as
a negation of the cause (the essential reason for the contract) due to the
unsuitability of the land.
On the Claim for Damages
Even assuming petitioners had su#cient standing, the court held that they
were not entitled to claim damages.
The contractual remedies provided under the law are available only to the
parties who hold the substantive rights arising from the contract (i.e., the
landowners or their assignees/heirs).
The damages claim was thus found to be without merit, as the petitioners
were not the real parties-in-interest and did not possess any assignable right
to enforce the contract.
Ratio:
Requirement of Joinder of the Real Party-in-Interest
The court emphasized that under Section 2, Rule 3 of the Rules of Court,
every action must be "led in the name of the real party-in-interest—the party
who bene"ts from or su!ers the consequences of the contract.
Citations from previous cases (Ferrer vs. Villamor and Marcelo vs. de Leon)
rea#rmed that an attorney-in-fact must join the principal, as the latter are
the legitimate claimants.
Limitation on the Rights of Agents
The petitioners’ contention that they could claim damages in their own right
was refuted by the legal principle that an agent’s entitlement to damages is
limited unless they have been expressly assigned rights under the contract.
The decision noted that article 1311 of the Civil Code restricts contractual
rights to the contracting parties, their assigns, or heirs.
Analysis of the Cause and Rescission
The court's reasoning distinguished between motive and cause, highlighting
that the motive of the NHA (to use the lands for housing) was predicated on
the inherent quality (cause) of the land.
The cancellation was justi"ed because the cause—the suitability of the land—
was negated by the "ndings of geological instability, and thus, the
cancellation did not invoke the rescission remedy under Article 1191.
Preventing Nullity and Pointless Judgments
The court expressed that rendering any decision in favor of petitioners
would be pointless since it would not bind the real parties-in-interest.
This ensures that only those with a direct material interest can obtain a
remedy, aligning with established doctrines on party standing and the
enforcement of contractual rights.
Doctrine:
Real Party-in-Interest Principle
Every legal action must be brought in the name of the real party-in-interest,
ensuring that the judgment directly a!ects the party with a substantive legal
right.
This doctrine prevents agents or incidental claimants from obtaining judicial
relief if they are not the primary bene"ciaries or injured parties of the
contract.
Limitations on Agent’s Capacity to Sue
An agent, without a clear assignment of rights or evidence of being a
bene!ciary of a stipulation pour autrui, cannot enforce a contract in his own
name.
The decision reinforces that the rights to claim damages from a contract are
con!ned to the parties who entered into it, or those who have been
speci!cally designated to receive its bene!ts.
Distinction Between Cause and Motive
The ruling elucidates the di"erence between the cause (the essential reason
for the contract) and the motive (the particular desire of a party), clarifying
that only the former impacts the validity of the contract.
The doctrine underscores that the cancellation of a contract due to the
negation of its cause does not give rise to a claim for rescission as
contemplated in Article 1191 of the Civil Code.
Judicial Policies on Contractual Remedies
The case illustrates a judicial policy of avoiding decisions that would be non-
binding or moot if the real parties-in-interest are not properly joined.
It also highlights the application of established agency law principles,
including those found in Section 372 of the Restatement of the Law on
Agency, to delineate the extent of an agent’s standing to sue.
