FIRST DIVISION
G.R. Nos. 102526-31 May 21, 1998
Sps. LORENZO V. LAGANDAON and CECILIA T. LAGANDAON and OVERSEAS AGRICULTURAL DEVELOPMENT CORPORATION, petitioners,
vs.
COURT OF APPEALS, Sps. MELITON BANOYO and ASUNCION P. BANOYO, Sps. DEMETRIO B. BATAYOLA and ANITA A. BATAYOLA, BONIFACIO VASQUEZ, Sps. ROMEO M. GOMEZ and ESTER M. GOMEZ, AURORA GOMEZ, Sps. CARLOS V. DAVID and MANUELA C. DAVID, Sps. LEONIDO D. BONGCO and FE V. BONGCO, Sps. RAFAEL S. SOLIDUM and LUCENDA M. SOLIDUM, Sps. RAYMUNDO SITJAR and LUCIA SITJAR AND Sps. BENJAMIN V. VIVA and GILDA VIVA, respondents.
Separate Opinions
VITUG, J., separate opinion;
I find myself unable to share the conclusions expressed in the exhaustive ponencia of Mr. Justice Artemio V. Panganiban.
The basic and telling issue, it seems to me, is whether or not petitioners, as purchasers of the subject subdivision lots from the foreclosing mortgagee-bank, as far as the Lagandaon spouses are concerned, and as purchasers at the execution sale, with respect to Overseas Agricultural Development Corporation, may be held liable to private respondents for the obligations of Pacweld (the owner-mortgagor) under the contracts to sell executed by the latter in favor of private respondents.
A fundamental rule in contracts is the principle of relativity embodied in Article 1311 of the Civil Code which provides:
Art. 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent.
If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person.
In consonance with the axiom "res inter alios acta aliis neque nocet prodest," a contract can only obligate the parties who had entered into it, or their successors who assumed their personalities or juridical positions, and that, concomitantly, a contract can neither favor nor prejudice third persons,1 although, in some ways, such persons may be affected in varying degrees. Thus, in contracts creating real rights, third persons who come into possession of the object of the contract may be bound thereby under the provisions of mortgage laws and land registration laws.2 Creditors are protected in cases of contracts intended to defraud them.3
Accion directa is allowed by law in certain cases.4 Any third person who induces another to violate his contract can be made liable for damages to the other contracting party.5 Exceptionally, contracts may confer benefits to a third person or what are otherwise also known as "stipulation pour autrui."6 But that should be just about all.
I take note of the ruling of the trial court, affirmed by respondent appellate court, that petitioners are not entitled to the rescission of the contracts to sell executed by Pacweld in favor of the individual private respondents because the alleged verbal modified contracts to sell between petitioners and private respondents do not legally exist. I agree with the conclusion reached insofar as it denies the remedy of rescission to herein petitioners for, as a consequence of the rule that a contract takes effect only between the contracting parties and that third persons cannot be obligated thereunder;7 a person who is not a party to a contract has no legal standing to challenge its validity or to prosecute an action for its rescission (accion pauliana) except only to the extent that the contract may be prejudicial to him.
If, as so found by the trial court, no modified contracts to sell have been entered into between petitioners and private respondents, I cannot see how petitioners can be held liable under the original contracts to sell executed by Pacweld. Lorenzo Lagandaon may have been an officer of Pacweld corporation at the time of perfection of those contracts to sell; his participation, however, has been in representation of the corporation and not in his individual capacity. There is not enough justification shown to allow the doctrine of lifting the veil of corporate fiction to prevail.
It might be mentioned, in passing, that the trial court has declared petitioners to be in no position to exercise the right of rescission under Republic Act No. 6552, otherwise known as "An Act To Provide Protection To Buyers Of Real Estate On Installment Payments," said petitioners not being the subdivision owners or developers envisioned in the law, which itself is an acknowledgment that petitioners, indeed, are "third persons" in the contracts to sell between Pacweld and private respondents.
Neither can petitioners be made liable to private respondents in the specific performance case where Pacweld was adjudged to comply with its obligations to develop the subdivision.8 Certainly, Pacweld's liability under the judgment will not extend to herein petitioners who were not themselves made parties to the litigation.
Nor can it be successfully contended that petitioners have assumed the obligations of Pacweld pursuant to a provision in the Deed of Absolute Sale executed between the foreclosing bank (DBP) and the Lagandaon spouses on 12 May 1980 which states:
It is hereby understood that any and all claims, liens, assessments, liabilities and/or damages whatsoever arising from any case or litigation involving the above properties shall wholly be assumed and borne by the vendees to the exclusion of the vendor.ℒαwρhi৷
I do not see how the above provision can be interpreted to mean that petitioners have thereby assumed the obligations of Pacweld to develop the subdivision (e.g., to undertake the cementing of roads, gutters, concrete curbs, etc.). The condition in the contract between DBP and the petitioners is no more than an agreement, a standard clause in contracts of this nature, by the latter to respond to any subsisting claim, lien, assessment, liability or damages on the subject property but evidently insofar as, or to the extent only that, the vendee (DBP) itself is bound or accountable for. There is nothing in the DBP and Lagandaon agreement of 12 May 1980 to warrant a conclusion that petitioners have intended and agreed to likewise assume the liabilities of Pacweld.
In execution or foreclosure sales, unlike the contrary possibility in voluntary conveyances or assignments, the buyer gets the rights, not liabilities, of the debtor but holds the foreclosed property subject to legitimate charges, including preferred liens and encumbrances, thereon and, in appropriate cases, to the right of redemption or right of subrogation. Petitioners, having acquired title to the property, are bound to recognize the then subsisting contracts to sell duly either recorded or known to them and to allow private respondents, who would so wish, to perfect their rights thereover and ultimately their respective titles thereto by completing payments of the purchase price less the applicable charges, i.e., the estimated or agreed cost of development yet to be undertaken, on and attaching to the property. The demand or receipt of unpaid accounts on those contracts to sell is indicative of the acknowledgment by petitioners of the rights of private respondents, as above, but do not necessarily mean that petitioners have thereby also assumed unqualifiedly the liabilities of the debtor even beyond the benefit derived by the creditor consequent to the execution or foreclosure sale.
Accordingly, I vote to grant a part relief to the petition by remanding the case to the trial court for the determination of the correlative rights of the parties in accordance with the opinion, particularly elaborated in the paragraph immediately preceding, hereinabove expressed.
Footnotes
1 Garcia vs. Court of Appeals, 258 SCRA 446; Ouano vs. Court of Appeals 211 SCRA 740.
2 Art. 1312, Civil Code.
3 Art. 1313, Civil Code.
4 See Art. 1729, Civil Code.
5 Art. 1314, Civil Code; National Union of Bank Employees vs. Lazaro, G.R. No. 56431, 19 January 1988.
6 Jose C. Vitug, Compendium of Civil Law and jurisprudence, 1993 Ed., p. 537.
7 Banzagales vs. Galman, 222 SCRA 350; Ozaeta vs. Court of Appeals, 222 SCRA 7.
8 Rollo, p. 33.
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