G.R. No. L-22404. May 31, 1971.
PASTOR B. CONSTANTINO, plaintiff-appellant, vs. HERMINIA ESPIRITU, defendant-appellee.

FACTS

Pastor B. Constantino filed a complaint alleging he executed a fictitious deed of absolute sale on October 30, 1953, conveying a house and lots to Herminia Espiritu for P8,000. The understanding was that Espiritu would hold the properties in trust for their then-unborn illegitimate son, Pastor Constantino, Jr. The complaint stated that Espiritu subsequently mortgaged the properties and offered them for sale. It prayed for an injunction to prevent further alienation and for an order compelling Espiritu to execute a deed of sale in favor of their son, then about five years old.
Espiritu moved to dismiss the complaint on two grounds: first, that the beneficiary, Pastor Constantino, Jr., was not included as a party-plaintiff, and second, that the cause of action was unenforceable under the Statute of Frauds. The trial court granted the motion and dismissed the complaint. Constantino then filed a motion to admit an amended complaint, which included the minor as a co-plaintiff and sought his appointment as the minor’s guardian ad litem. Espiritu opposed, arguing this constituted an improper substitution of parties. The trial court denied the motion for admission of the amended complaint, prompting this direct appeal.

ISSUE

Whether the trial court erred in denying the motion to admit the amended complaint which included the beneficiary as a co-plaintiff.

RULING

Yes, the trial court erred. The Supreme Court reversed the order and directed the admission of the amended complaint. The legal logic is anchored on the nature of the contract and procedural rules governing amendments. The original complaint alleged a contract pour autrui (a stipulation for the benefit of a third person), couched as a deed of absolute sale but with an agreement to hold the property in trust for the parties’ child. An action for specific performance to enforce such a stipulation can be brought by the contracting party, Constantino. More importantly, the third-party beneficiary, once he communicates acceptance, may also demand fulfillment. By amending the complaint to include the minor as a co-plaintiff, all interested parties would be before the court, allowing for a complete adjudication.
The Court found the case analogous to Echaus vs. Gan (55 Phil. 527), where a similar action for specific performance based on a contract for the benefit of a third person was upheld. The amendment was a matter of right under Section 2, Rule 10 of the Rules of Court, as it arose from the same facts and sought to include an indispensable party whose interest was central to the controversy. The technical objection regarding party substitution was misplaced; the amendment merely supplied an omission to join a necessary party. Furthermore, the defense of the Statute of Frauds was not a bar to the action at the pleading stage. The allegation of an implied trust under Article 1453 of the Civil Code, and the partial execution of the agreement through the conveyance, potentially took the case outside the Statute. The merits of the alleged trust and the terms of the agreement were matters of proof to be resolved during trial, not grounds for dismissal.