G.R. No. 76759 March 22, 1990
RAMON A. GONZALES, petitioner, vs. LAND BANK OF THE PHILIPPINES and COURT OF APPEALS, respondents.

FACTS

Ramon A. Gonzales filed an action to compel the Land Bank of the Philippines (LBP) to issue Land Bank bonds directly in his name. He based his claim on a Deed of Assignment executed by Ramos Plantation Company, Inc., which assigned its rights under a Land Transfer Claim to him. The assigned claim pertained to compensation for the corporation’s land, which had been placed under the government’s land reform program. The LBP refused, arguing it had no privity of contract with Gonzales and that its policy was to deal solely with the registered landowner to ensure efficiency and avoid disputes over multiple claimants. The parties submitted a partial Stipulation of Facts, and the Regional Trial Court ruled in favor of Gonzales, ordering LBP to issue the bonds in his name and directing the landowner-corporation to comply with certain outstanding requirements for the claim’s processing.
The Court of Appeals reversed the trial court’s decision. It held that the LBP could not be compelled to issue the bonds directly to Gonzales as an assignee. The appellate court ruled that the bonds must first be issued in the name of the assignor, Ramos Plantation Company, Inc., which could subsequently endorse them to Gonzales. Gonzales then elevated the case to the Supreme Court via a petition for review on certiorari, challenging the appellate court’s jurisdiction and its interpretation of the Deed of Assignment’s effect.

ISSUE

The primary issue is whether the Land Bank of the Philippines can be legally compelled to issue Land Bank bonds directly in the name of an assignee, Ramon A. Gonzales, by virtue of a Deed of Assignment executed by the original landowner-assignor.

RULING

The Supreme Court denied the petition and affirmed the core ruling of the Court of Appeals, but modified its dispositive portion. The Court held that the LBP cannot be compelled to issue the bonds directly to Gonzales. The legal logic rests on the principle of relativity of contracts under Article 1311 of the Civil Code. A contract, such as the Deed of Assignment, is binding only upon the parties thereto and their assigns. It does not bind third persons like the LBP, which was not a party to the assignment. The LBP’s obligation under the land reform law is to pay compensation directly to the registered landowner. To require the LBP to recognize private assignments and issue bonds to assignees would contravene this policy, introduce administrative complexity, and potentially compromise the orderly implementation of the agrarian reform program by involving the bank in verifying the validity of private transfers.
However, the Supreme Court modified the appellate court’s decision by reinstating the trial court’s directive to the landowner-corporation. Since the corporation did not appeal the trial court’s order, that order had become final. Therefore, Ramos Plantation Company, Inc. was ordered to comply with the outstanding requirements for the release of the bonds and, upon their issuance in its name, to immediately endorse the bonds to Gonzales as its assignee. This balanced the rights of the assignee under the Deed of Assignment with the LBP’s policy and contractual privity, ensuring Gonzales could receive the bonds through the proper channel—the assignor’s endorsement after compliance.