G.R. No. L-75287 June 30, 1987
House International Building Tenants Association, Inc. vs. Intermediate Appellate Court, Centertown Marketing Corp., Manila Towers Development Corp., and the Government Service Insurance System

FACTS

The petitioner, House International Building Tenants Association, Inc., is a non-stock corporation whose members are tenants of the House International Building in Binondo, Manila. The property, originally owned by Felipe Ang, was foreclosed by respondent GSIS after a mortgage default. GSIS subsequently sold the property to respondent Centertown Marketing Corporation via a deed of conditional sale. Centertown, whose corporate charter did not authorize it to engage in real estate business, later assigned its rights under the sale to its sister corporation, Manila Towers Development Corporation, which was organized for that purpose. The petitioner association filed a complaint seeking the annulment of the deed of conditional sale and its assignment, arguing the sale was ultra vires and void since Centertown was not qualified to acquire real estate. The trial court dismissed the complaint, and the Intermediate Appellate Court affirmed the dismissal.

ISSUE

The primary issues are: (1) whether the petitioner association has the legal personality to sue on behalf of its tenant members; and (2) whether the petitioner has a cause of action to annul the contracts between GSIS, Centertown, and Manila Towers.

RULING

The Supreme Court denied the petition, upholding the appellate court’s decision. On the first issue, the Court ruled that the petitioner association lacked the requisite legal standing to institute the suit. Under the Rules of Court, an action must be prosecuted by the real party in interest—the party who stands to be benefited or injured by the judgment. The real parties in interest were the individual tenant members, not the association itself. The association, having a separate juridical personality, did not demonstrate any real, material, or substantial interest in the subject matter of the action. Any rights allegedly violated were personal to the tenants, who were the indispensable parties.
On the second issue, the Court found no cause of action. The petitioner’s challenge, based on the contract being ultra vires and void, was unavailing. The Court clarified that an ultra vires contract is merely voidable, not void ab initio. More critically, the action for annulment of a contract can only be instituted by those who are obliged principally or subsidiarily under it, as per Article 1397 of the Civil Code. The petitioner was neither a party nor a privy to the deed of conditional sale or its assignment. Consequently, it had no right to assail the validity of these contracts. The constitutional and statutory provisions invoked by the petitioner were deemed inapplicable, as they either required implementing legislation or did not pertain to a situation where both land and building belonged to the lessor.