G.R. No. 217148 , December 07, 2021
Rapid City Realty and Development Corporation, Petitioner, vs. Lourdes Estudillo Paez-Cline Alias Lourdes Paez-Villa, Orlando Villa, Department of Public Works and Highways, Department of Environment and Natural Resources, Register of Deeds of Antipolo, and Office of the Solicitor General, Respondents.

FACTS

The case stemmed from a complaint filed by Sta. Lucia Realty and Development, Inc. and Rapid City Realty and Development Corporation (petitioner) against respondents Spouses Lourdes Paez-Cline/Villa and Orlando Villa, the DPWH, DENR, Register of Deeds of Antipolo, and the OSG. The plaintiffs sought the annulment of Transfer Certificates of Title (TCT Nos. 409502, 409503, 409504 and derivative titles), subdivision plans (Psd-04-118781 and Pcs-04-015503), and a Deed of Absolute Sale dated February 26, 2003, involving a 21,437-square meter property identified as Lot 2, (LRC) Psd-214777 in Antipolo City. The plaintiffs, developers of the Parkehills Executive Village, claimed the disputed property was a road lot forming part of the Marikina-Infanta Road (Marcos Highway) and served as the point of ingress and egress to their subdivision. The respondents were declared in default by the Regional Trial Court (RTC) for failure to file responsive pleadings. After ex-parte proceedings, the RTC ruled in favor of the plaintiffs, declaring the titles, plans, and deed of sale null and void, ordering reformation of the deed, and awarding damages. The Spouses Villa, OSG, and DPWH appealed to the Court of Appeals (CA), which reversed the RTC and dismissed the complaint. The CA held that the plaintiffs, as non-parties to the deed of sale between Lourdes and the Republic (through DPWH), had no legal standing to seek its annulment or reformation, and that their claim of being third-party beneficiaries was unsubstantiated. The CA also found the action barred by prescription and laches. Petitioner Rapid City Realty filed a Petition for Review on Certiorari before the Supreme Court.

ISSUE

The core issue is whether the Court of Appeals erred in dismissing the complaint, primarily on the grounds that the petitioner, as a non-party to the Deed of Absolute Sale, lacked legal standing to seek its annulment or reformation.

RULING

The Supreme Court denied the petition and affirmed the CA’s dismissal of the complaint. The Court held that the petitioner, not being a party or an assignee to the Deed of Absolute Sale between respondent Lourdes and the Republic of the Philippines (through DPWH), had no cause of action to seek its annulment or reformation. The principle of relativity of contracts under Article 1311 of the Civil Code dictates that contracts are binding only upon the parties and their successors-in-interest. The petitioner failed to prove it was a third-party beneficiary under the deed; a mere incidental interest in the property subject of the contract is insufficient to confer such status. The deed contained no stipulation clearly and deliberately conferring a favor upon the petitioner or any other third party. Consequently, the petitioner lacked the requisite legal standing to file the suit. The Court found no need to delve into the ancillary issues of prescription and laches, as the lack of cause of action was a sufficient ground for dismissal. The RTC decision was reversed, and the complaint was properly dismissed.