Uy and Roxas v.

CA (1999) Karl Salvador

Law 173 – Agency and Partnership A2025

Case Name Uy and Roxas v. CA (1999)

Topic Concept > Effect of Agency: Integration and Extension

Case No. | Date G.R. No. 120465 | September 9, 1999

Petitioner/s William Uy and Rodel Roxas

Respondent/s Court of Appeals, Hon. Robert Balao, and National Housing Authority

Ponente Kapunan, J.

Case Summary

The petitioners were agents authorized by the owners to sell eight parcels of land to the
NHA. The parties executed a series of Deeds of Absolute Sale covering the subject lands.
However, the NHA cancelled the sale over three of the parcels of land due to a report from
the DENR indicating that the area is located at an active landslide area and not suitable for
development. The petitioners filed a Complaint for Damages against NHA and its GM. The
RTC declared that the cancellation was justified, but it still awarded damages to the
plaintiffs. The CA reversed the RTC and dismissed the complaint.

W/N the petitioners had a right to institute the case: No

The SC ruled that the petitioners were not the proper parties. Under the NCC, “contracts
take effect only between the parties, their assigns, and heirs… if a contract should contain
some stipulation in favor of a third person, he may demand its fulfillment.” As agents of the
owner, they only render some service or do something in representation or on behalf of their
principals. Not being the real parties-in-interest, any decision rendered ITC against the
petitioners would be pointless since it would not bind the real parties-in-interest.

Decision

The SC denied the petition and affirmed the CA.

Doctrine

• Art. 1311, NCC. “Contracts take effect only between the parties, their assigns, and
heirs… If a contract should contain some stipulation in favor of a third person, he may
demand its fulfillment”
• An action shall be prosecuted in the name of the party who, by the substantive law, has
the right sought to be enforced.
• Under Sec. 2, Rule 3, ROC, every action must be prosecuted and defended in the name
of the real party-in-interest.
• Real party-in-interest: the party who stands to be benefited or injured by the judgment
or the party entitled to the avails of the suit.
• The “interest” referred to is material interest, or an interest in the issue and to be affected
by the decree

Relevant Facts

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• Petitioners Uy and Roxas were agents authorized by the owners to sell eight parcels of
land to respondent National Housing Authority (NHA) to be used as a housing project.
• The NHA passed a Resolution approving the acquisition. The parties executed a series
of Deeds of Absolute Sale covering the subject lands.
• The NHA only paid for five out of the eight parcels of land due to a Report from the
Land Geosciences Bureau of the DENR indicating that the area is located at an active
landslide area and not suitable for development.
• The NHA issued a Resolution cancelling the sale over the three parcels of land. It
offered P1.225 million to the landowners as danos perjuicios (damages).
• The petitioners filed a Complaint for Damages against NHA and General Manager
Balao.
• RTC: The RTC declared the cancellation of the contract was justified. However, it
awarded to the plaintiffs P1.255 million in damages. The respondents appealed to CA.
• CA: The CA reversed the RTC and dismissed the complaint.
o It held that since there was sufficient justifiable basis in cancelling the sale,
there was no reason to award damages.
o Also, it held that the petitioners were mere attorneys-in-fact and, therefore, not
the real parties-in- interest in the action before the trial court.
o The plaintiffs filed an MR, which was denied. They filed a petition to the SC.
• Petitioner’s Arguments:
o They lodged the complaint not on behalf of their principals but in their own
name as agents directly damaged by the termination of the contract.
o The damages prayed for were intended to indemnify the petitioners for the
losses they allegedly incurred as a result of such termination. These damages
consist mainly of "unearned income" and advances.

Issue/s, Held and Ratio

1. W/N the petitioners had a right to institute the case: No

As agents of the owner, the petitioners were not the proper parties ITCAB
• An action shall be prosecuted in the name of the party who, by the substantive law, has
the right sought to be enforced.
o Under Sec. 2, Rule 3, ROC, every action must be prosecuted and defended in
the name of the real party-in-interest.
o The real party-in-interest is the party who stands to be benefited or injured by
the judgment or the party entitled to the avails of the suit.
o The “interest” referred to is material interest, or an interest in the issue and to
be affected by the decree
• Art. 1311, NCC: “Contracts take effect only between the parties, their assigns, and
heirs… If a contract should contain some stipulation in favor of a third person, he may
demand its fulfillment”
• ITC, as agents of the owner, they were not the proper parties to the contracts of sale
executed on behalf of the latter.

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o The petitioners are not parties to the contract of sale between their principals
and NHA. They are mere agents of the owners of the land subject of the sale.
o As agents, they only render some service or do something in representation or
on behalf of their principals.
o Since a contract may be violated only by the parties thereto as against each
other, the real parties-in-interest, either as plaintiff or defendant, in an action
upon that contract must, generally, either be parties to said contract.

The agents are also not the assignees of their principals to the contracts
• The SC held that an agent, in his own behalf, may bring an action founded on a contract
made for his principal, as an assignee of such contract.
• However, ITCAB, the petitioners were not able to show that they were the assignees of
their principals to the contracts.
o They have not established any agreement granting them "the right to receive
payment and out of the proceeds to reimburse [themselves] for advances and
commissions before turning the balance over to the principal[s]."

The petitioners are also not beneficiaries of a stipulation pour autrui under Art.
1311(2), NCC
• There was no stipulation in any of the Deeds of Absolute Sale "clearly and deliberately"
conferring a favor to any third person.

The petitioners are not entitled to the damages they are seeking
• The petitioners are not entitled to file an action against respondent NHA for not
receiving their commissions or recoup their advances due to the non-performance of
the contract
• Sec. 372(2), Restatement of the Law on Agency (Second): “An agent does not have such
an interest in a contract as to entitle him to maintain an action at law upon it in his
own name merely because he is entitled to a portion of the proceeds as compensation
for making it or because he is liable for its breach.”

2. W/N the cancellation of the contract was proper: Yes

NHA did not rescind the contract

• Rescission under Art. 1191 is predicated on a breach of faith by the other party that
violates the reciprocity between them. The power to rescind is given to the injured
party.
• ITCAB, NHA did not rescind the contract. It did not have the right to do so since the
vendors did not commit any breach of their obligation.

The cancellation was based on the negation of the cause of the sale
• Cause is the essential reason which moves the contracting parties to enter into it. It is
the immediate, direct and proximate reason which justifies the creation of an
obligation through the will of the contracting parties.
• Motive is the particular reason of a contracting party which does not affect the other
party.

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• Ordinarily, a party's motives for entering into the contract do not affect the contract.
However, when the motive predetermines the cause, the motive may be regarded as
the cause.
• ITC, the quality of the land was an implied condition for the NHA to enter into the
contract. It was its motive and cause for the sale.
• The SC held that the NHA was justified in cancelling the contract. (There was no cause,
hence there was no contract)
o 3 elements of a contract: Consent, Object, Cause
o The realization of the mistake as regards the quality of the land resulted in the
negation of the motive/cause thus rendering the contract inexistent.
o The NHA would not have entered into the contract were the lands not suitable
for housing.

Ruling

WHEREFORE, the instant petition is hereby DENIED.

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