Case Digest

William Uy and Rodel Roxas vs. CA, et al., G.R. No. 120465,
September 9, 1999
Source: https://jeffsarabusing.wordpress.com/2017/12/21/case-brief-uy-and-roxas-vs-ca/

Facts:
William Uy and Rodel Roxas are agents authorized to sell 8
parcels of land by the owners thereof. By virtue of such authority,
they offered to sell the lands, located in Benguet to National
Housing Authority (NHA) to be utilized and developed as a
housing project. On 14 February 1989, the NHA Board passed
Resolution 1632 approving the acquisition of said lands, with an
area of 31.8231 hectares, at the cost of P23.867 million, pursuant
to which the parties executed a series of Deeds of Absolute Sale
covering the subject lands. Of the 8 parcels of land, however, only
5 were paid for by the NHA because of the report it received from
the Land Geosciences Bureau of the Department of Environment
and Natural Resources (DENR) that the remaining area is located
at an active landslide area and therefore, not suitable for
development into a housing project. On 22 November 1991, the
NHA issued Resolution 2352 cancelling the sale over the 3
parcels of land. The NHA, through Resolution 2394, subsequently
offered the amount of P1.225 million to the landowners as daños
perjuicios.
On 9 March 1992, petitioners Uy and Roxas filed before the RTC
Quezon City a Complaint for Damages against NHA and its
General Manager Robert Balao. After trial, the RTC rendered a
decision declaring the cancellation of the contract to be justified.
The trial court nevertheless awarded damages to plaintiffs in the

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sum of P1.255 million, the same amount initially offered by NHA
to petitioners as damages.
Upon appeal by petitioners, the Court of Appeals reversed the
decision of the trial court and entered a new one dismissing the
complaint. It held that since there was “sufficient justifiable basis”
in cancelling the sale, “it saw no reason” for the award of
damages. The Court of Appeals also noted that petitioners were
mere attorneys-in-fact and, therefore, not the real parties-in-
interest in the action before the trial court. Their motion for
reconsideration having been denied, petitioners seek relief from
the Supreme Court.

ISSUES:
1. Whether or not there was legal basis for rescinding the sale.
2. Whether or not the respondent CA erred in dimissing the
subject complaint, finding that the petitioners failed to join as
indispensable party plaintiff the selling lot-owners.

HELD:
1) Yes. The right of rescission or, more accurately, resolution, of a
party to an obligation under Article 1191 is predicated on breach
of faith by the other party that violates the reciprocity between
them. The power to rescind, therefore, is given to the injured
party. Article 1191 states that “the power to rescind obligations is
implied in reciprocal ones, in case one of the obligors should not
comply with what is incumbent upon him. The injured party may
choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may
also seek rescission, even after he has chosen fulfillment, if the
latter should become impossible.” In the present case, the NHA
did not rescind the contract. Indeed, it did not have the right to do
so for the other parties to the contract, the vendors did not commit
any breach, much less a substantial breach, of their obligation.
Their obligation was merely to deliver the parcels of land to the

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NHA, an obligation that they fulfilled. The NHA did not suffer any
injury by the performance thereof the cancellation was not a
rescission under Article 1191. Rather, the cancellation was based
on the negation of the cause arising from the realization that the
lands, which were the object of the sale, were not suitable for
housing.
Cause is the essential reason which moves the contracting
parties to enter into it. In other words, the cause is the immediate,
direct and proximate reason which justifies the creation of an
obligation through the will of the contracting parties. Cause, which
is the essential reason for the contract, should be distinguished
from motive, which is the particular reason of a contracting party
which does not affect the other party. Ordinarily, a party’s motives
for entering into the contract donor affect the contract. However,
when the motive predetermines the cause, the motive may be
regarded as the cause.
In this case, it is clear, and petitioners do not dispute, that NHA
would not have entered into the contract were the lands not
suitable for housing. In other words, the quality of the land was an
implied condition for the NHA to enter into the contract. On the
part of the NHA, therefore, the motive was the cause for its being
a party to the sale. SC held that the NHA was justified in
canceling the contract. 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. The Supreme Court denied
the petition.
2) No. Section 2, Rule 3 of the Rules of Court requires that every
action must be prosecuted and defended in the name of the real
party-in-interest. 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. “Interest,” within the meaning of the rule,
means material interest, an interest in the issue and to be affected
by the decree, as distinguished from mere interest in the question
involved, or a mere incidental interest. Cases construing the real

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party-in-interest provision can be more easily understood if it is
borne in mind that the true meaning of real party-in-interest may
be summarized as follows: An action shall be prosecuted in the
name of the party who, by the substantive law, has the right
sought to be enforced. Where the action is brought by an
attorney-in-fact of a landowner in his name, (as in our present
action) and not in the name of his principal, the action was
properly dismissed because the rule is that every action must be
prosecuted in the name of the real parties-in-interest (Section 2,
Rule 3, Rules of Court).
Petitioners claim that they lodged the complaint not in behalf of
their principals but in their own name as agents directly damaged
by the termination of the contract. Petitioners in this case
purportedly brought the action for damages in their own name and
in their own behalf. An action shall be prosecuted in the name of
the party who, by the substantive law, has the right sought to be
enforced. 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. As agents, they only render
some service or do something in representation or on behalf of
their principals. The rendering of such service did not make them
parties to the contracts of sale executed in behalf of the latter.
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 inaction upon that contract must, generally, either be
parties to said contract. Petitioners have not shown that they are
assignees of their principals to the subject contracts. While they
alleged that they made advances and that they suffered loss of
commissions, 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 principals.