Uy v. CA

Facts:

Petitioners William Uy and Rodel Roxas are agents authorized to sell 8 parcels of land. Petitioners offered to sell the land to NHA for a housing project. On February 14, 1989, NHA passed a resolution approving the acquisition of said lands, and pursuant to this the parties executed Deeds of Absolute Sale. However, only 5 out of 8 lands were paid for by NHA because of a report from DENR that the remaining area is located at an active landslide area and are therefore not conducive for housing. On November 22, 1991, NHA issued a resolution canceling the sale of the remaining lands and offered P1.225 million to the landowners as daños perjuicios. On March 9, 1992, petitioners filed a complaint for damages against NHA and its general manager Robert Balao. The RTC declared the cancellation to be justified, but awarded the amount offered by NHA. The Court of Appeals affirmed the decision, but deleted the award.

Issues:

(1) Whether the petitioners are real parties in interest

(2) Whether the cancellation is justified

Held:

(1) 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 an action 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 principal[s]."

(2) 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 do not 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. We hold 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.