Rapid City Realty and Development Corp. v. Paez-Cline

 

Rapid City Realty and Development Corp. v. Paez-Cline

G.R. No. 217148

December 7, 2021

 

FACTS:

The case involves a complaint filed by Sta. Lucia Realty and Rapid City Realty (petitioners) against the spouses Lourdes Paez-Cline and Orlando Villa, the Department of Public Works and Highways (DPWH), the Department of Environment and Natural Resources (DENR), the Registry of Deeds of Antipolo, and the Office of the Solicitor General (OSG) (defendants). The complaint seeks the annulment and cancellation of certain transfer certificates of title (TCTs), subdivision plans, and a deed of absolute sale. Petitioners are the developers of the subdivision project in Antipolo, Rizal known as Parkehills Executive Village situated along Marcos Highway, while Lourdes is the surviving heir of the late Emilia Estudillo, also known as Emilia Estudillo Paez, who was the registered owner of a parcel of land located at San Isidro, Antipolo, Rizal (now Antipolo City) The RTC ruled in favor of the petitioners declaring the TCTs and deed of absolute sale as null and void. But the CA reversed the decision and dismissed the complaint filed by petitioners as the CA disagreed with the RTC's judgment because Sta. Lucia Realty and Rapid City Realty are not real parties in interest to ask for the nullification and cancellation of titles, plans, and the deed of absolute sale.

ISSUE:

Whether the CA erred in not affirming the RTC Decision.

HELD:

No. Based on the principle of relativity of contracts embodied in Article 1311 of the Civil Code. Thus, generally, a contract cannot produce any effect whatsoever as far as third persons are concerned; and he or she, who is not a party thereto, or an assignee thereunder, has no legal capacity to challenge its validity. This lack of capacity on the part of third persons is apparent in voidable, unenforceable and void contracts under Articles 1397, 1408 and 1421 of the Civil Code. However, insofar as rescissible contracts are concerned, they can be attacked by a third party who is injured or defrauded since, by nature, a rescissible contract is one which is valid because it contains all of the essential requisites prescribed by law, but which is defective because of injury or damage to either of the contracting parties or to third persons. In the present case, petitioner questions the validity of the Deed of Absolute Sale and seeks its nullification. While a fraudulent contract is not expressly provided in Article 1409 of the Civil Code as one of those which are inexistent and void from the beginning. Since the issue concerns the nullity of the contract being questioned, the applicable provision of the Civil Code is not Article 1397, but Article 1421 of the Civil Code.