TodayisMonday,January25,2016

RepublicofthePhilippines
SUPREMECOURT
Manila
FIRSTDIVISION
G.R.No.161298January31,2006
SpousesANTHONYandPERCITAOCO,Petitioners,
vs.
VICTORLIMBARING,Respondent.
DECISION
PANGANIBAN,CJ.:
Basicinprocedurallawistherulethateveryactionmustbeprosecutedordefendedinthenameoftherealparty
ininterest.Inthepresentcase,therespondent,whowasnotapartytothecontractsbeingsuedupon,wasnot
able to prove material interest in the litigation. For his failure to do so, the trial court cannot be faulted for
dismissingtheactiontorescindthecontracts.Hisstatusastrustorremainedabareallegation,ashehadfailedto
rebutthelegalpresumption:thatthereisabsenceofatrustwhenthepurchasepriceinadeedofsaleispaidbya
parent in favor of a child. Here, the prima facie presumption is "that there is a gift in favor of the child." Any
allegationtothecontrarymustbeprovenbyclearandsatisfactoryevidence,aburdenthatwasnotdischargedby
theplaintiff.
TheCase
BeforeusisaPetitionforReview1underRule45oftheRulesofCourt,assailingtheAugust26,2003Decision2
andtheNovember25,2003Resolution3oftheCourtofAppeals(CA)inCAGRCVNo.69386.Thechallenged
Decisiondisposedasfollows:
"WHEREFORE, the order dated October 2, 2000 of the Regional Trial Court, Branch 15, Ozami[s] City in Civil
CaseNo.OZC9914isherebyREVERSED.Theagreemententereduponbyplaintiffappellantanddefendant
appellee Percita L. Oco is hereby RESCINDED. After returning the agreed purchase amount of P60,000.00 to
defendantsappellees,theRegisterofDeedsofOzami[s]CityshallissuethenewTransferCertificatesofTitlein
thenameofplaintiffappellanttherebycancelingtheTCTNos.T22073andT22072."4
TheFacts
Thepertinentfactsarenotdisputed.Sometimein1996,SabasLimbaringsubdividedhisLot2325D,coveredby
TransferCertificateofTitle(TCT)No.5268,intotwolotsdenominatedasLotNos.2325D1and2325D2.5He
thenexecutedinfavorofJenniferLimbaringaDeedofSaleforLot2325D2forP60,000and,infavorofSarah
JaneLimbaring,anotherDeedforLot2325D1forP14,440.Accordingly,TCTNo.5268wascancelledandTCT
Nos.T21921andT21920wereissuedinthenamesofJenniferandSarahJane,respectively.6
Sensingsomeirregularitiesinthetransaction,PercitaOco,thedaughterofSabasLimbaring,leftPuertoPrincesa
CityandwenttoOzamisCity.7Shethenfiledacaseofperjuryandfalsificationofdocumentsagainstrespondent,
her uncle who was the father of Jennifer and Sarah Jane. During the prelitigation conference called by City
ProsecutorLuzmindaUyonJuly1,1996,thepartiesagreedthatthetwoparcelsoflandshouldbereconveyedto
Percita,whowastopayrespondentalltheexpensesthathadbeenandwouldbeincurredtotransferthetitlesto
hername.8
RespondentdemandedP30,000fortheestimatedexpensesfordocumentation,capitalgains,anddocumentary
stamp taxes registration fees for the Register of Deeds and other incidental expenses for clearances from the
Department of Agrarian Reform (DAR).9 Percita succeeded in lowering the amount to P25,000, for which she
executedanundertakingwordedasfollows:
"I, Percita Oco, of legal age, and residing at Puerto Princesa, do hereby undertake to give the full amount of
TwentyFiveThousand(P25,000.00)PesostomyuncleVictorLimbaringafterdocumentNo.230,seriesof1996
TransferCertificateofTitleNo.T21920andTransferCertificateofTitleNo.T21921shallhavebeencancelled
andrevoked.
"OzamisCity,Philippines,July1,1996."10
Pursuant to their agreement, respondent facilitated the transfer of the titles to her from the names of his

daughters. After the transfer had been effected on July 12, 1996, Percita left for Puerta Princesa on July 17,
1996,withoutpayingtheP25,000.Severaldemandsweremade,butsherefusedtopay.
OnApril6,1999,respondentfiledagainstSpousesAnthonyandPercitaOcoaComplaintfortherescissionofthe
sales contracts, with recovery of possession and ownership of the two parcels of land.11 Among others, he
claimed1)thathewastheactualbuyerofthelots,butthevendeeswhosenamesappearedontheDeedswere
hisdaughters2)thatheinitiallyrefusedtoreconveythepropertiesbecausehehadpaidforthemwithhishard
earnedmoney,whichwaspartlyusedbySabasLimbaringformedicalexpenses3)thatPercitahadpreparedthe
twoDeedsofSale,whichhisdaughterssigneddespitereceivingnoconsiderationasstatedintheDeeds4)that
becausesherefusedtopaytheP25,000,theLimbaringclanheldameetingonOctober26,1996,duringwhichit
wasagreedthatP1,000permonthwouldbegiventorespondentfromtherentalsofSabasLimbaringshouse
and5)thattheagreementwasnotimplemented,becausePercitahadfailedtocooperate.12
OnMay27,1999,SpousesOcofiledaMotiontoDismissonthegroundthattheplaintiff(hereinrespondent)was
nottherealpartyininterest.13InhisOppositiontotheMotiontoDismiss,respondentcontendedthathewasa
trustor,whosepropertywasbeingheldintrustbyhisdaughters.14Healsoaverredthat,ontheassumptionthat
hewasnottherealpartyininterest,hewasentitledtoanamendmentofthepleadings.15
OnAugust30,1999,theRTCissuedanOrderdenyingtheMotiontoDismiss.Itruledthatevidencewasrequired
toresolvethepartiesrespectiveallegations.16
On October 4, 1999, Spouses Oco filed an Answer with Counterclaim, alleging in the main: 1) that respondent
had tried to secure a DAR clearance and to have a certificate of title issued in his name, but failed because
RepublicAct(RA)6657prohibitedtheacquisitionofmorethanfivehectaresofagriculturalland2)thatthrough
deceit and manipulation, respondent was able to convince Sabas Limbaring to execute the two Deeds of Sale,
notwithstandingthelackofanyconsideration3)thatSabasinformedPercitathattheagriculturallandhadnever
beensold4)thatsherefusedtopaytheP25,000,becausethesuspensiveconditionsstatedinthePromissory
Notehadnotbeencompliedwith5)thatshepaidforalltheexpensesincurredintheirtransaction6)thatforher
alleged failure to pay the P25,000 and for "other deceits," respondent filed a criminal Complaint docketed as
CriminalCaseNo.29857)thatrespondentwasguiltyofforumshoppingforfilingthatcasedespitetheinstitution
of the civil aspect in the criminal case 8) that respondent was not the real party in interest and had no legal
standing to sue 9) that the lots, which were acquired by Jennifer and Sarah Jane without paying any
consideration, should be returned to Percita without any consideration and 10) that the Deeds of Sale
reconveyingthelotsacknowledgedreceiptofconsideration.17
Respondenttestifiedonhisbehalf.Hethenformallyofferedhisexhibits.18AfterfilingtheirCommentstoPlaintiffs
FormalOfferofExhibits,SpousesOcofiledaDemurrertoEvidence,towhichhefiledhisOpposition.19
On October 2, 2000, the RTC granted the demurrer and dismissed the Complaint and Counterclaim,20 on the
groundthatrespondentwasnottherealpartyininterest.ThetrialcourtalsoheldthatJenniferandSarahJane
hadalreadyacknowledgedreceiptoftheconsiderationforthereconveyanceofthelots.ItaddedthattheP25,000
wasanindependentobligationforthereimbursementoftheexpensesincurredforthetransferofthetitles.21
RulingoftheCourtofAppeals
TheCAheldthatatrustrelationshipwascreatedwhenrespondentpurchasedthelotsinfavorofhisdaughters.22
Thus,hewasarealpartyininterest.
The appellate court also ruled that the P25,000 was part of the consideration for the reconveyance of the two
parcelsofland.23TheCAheldthat,sincePercitahadadmittedherfailuretopaytheamount,respondenthadthe
righttorescindthecontractsofreconveyance.24
TheassailedNovember25,2003CAResolutiondeniedreconsideration.Hence,thisPetition.25
TheIssues
Petitionersstatetheissuesinthiswise:
"I.TheHonorableCourtofAppealsgravelyerredinfindingrespondentthetrustorofthesubjectpropertiesandin
declaring respondent the real party in interest for the rescission of the two deeds of absolute sale executed by
JenniferLimbaringandSarahJaneLimbaringinfavorofthepetitioners.
"II. The Honorable Court of Appeals gravely erred in declaring that respondent has fully complied [with] his
obligationintheundertakingexecutedbypetitioneraftertheownershipofthesubjectpropertiesweretransferred
topetitioners.
"III.TheHonorableCourtofAppealsgravelyerredandgravelyabused[its]discretioninorderingtherescissionof
theDeedofAbsoluteSaleexecutedbyJenniferLimbaringandSarahJaneLimbaringinfavorofthepetitioners
involvingthesubjectproperties.
"IV.TheHonorableCourtofAppealsgravelyabused[its]discretionwhenitignoredthependingcasebeforethe
FourthDivisionoftheHonorableCourtofAppealswiththesametransaction,essentialfactsandcircumstancesin

thiscase."26
Thethresholdissueiswhetherrespondent,whowastheplaintiffinthetrialcourt,wasarealpartyininterestin
thesuittorescindtheDeedsofReconveyance.
TheCourtsRuling
ThePetitionismeritorious.
MainIssue:
RealPartyinInterest
Petitionerscontendthatrespondentwasnotatrustor,andthereforenottherealpartyininterestandhadnolegal
right to institute the suit.27 The real parties in interest were Jennifer and Sarah Jane, to whom the subject
propertieshadbeengivenasgifts.28
ThecontroversycentersonRule3oftheRulesofCourt,specificallyanelementaryruleinremediallaw,whichis
quotedasfollows:
"Sec. 2. Parties in interest. A real party in interest is the party who stands to be benefited or injured by the
judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these
Rules,everyactionmustbeprosecutedordefendedinthenameoftherealpartyininterest."
Asappliedtothepresentcase,thisprovisionhastworequirements:1)toinstituteanaction,theplaintiffmustbe
the real party in interest and 2) the action must be prosecuted in the name of the real party in interest.29
Necessarily, the purposes of this provision are 1) to prevent the prosecution of actions by persons without any
right,titleorinterestinthecase2)torequirethattheactualpartyentitledtolegalreliefbetheonetoprosecute
the action 3) to avoid a multiplicity of suits and 4) to discourage litigation and keep it within certain bounds,
pursuanttosoundpublicpolicy.30
Interest within the meaning of the Rules means material interest or an interest in issue to be affected by the
decreeorjudgmentofthecase,asdistinguishedfrommerecuriosityaboutthequestioninvolved.31Onehaving
nomaterialinteresttoprotectcannotinvokethejurisdictionofthecourtastheplaintiffinanaction.32Whenthe
plaintiffisnottherealpartyininterest,thecaseisdismissibleonthegroundoflackofcauseofaction.33
ActiononContracts
Thepartiestoacontractaretherealpartiesininterestinanactionuponit,asconsistentlyheldbytheCourt.34
Onlythecontractingpartiesareboundbythestipulationsinthecontract35theyaretheoneswhowouldbenefit
fromandcouldviolateit.36Thus,onewhoisnotapartytoacontract,andforwhosebenefititwasnotexpressly
made, cannot maintain an action on it. One cannot do so, even if the contract performed by the contracting
partieswouldincidentallyinuretoonesbenefit.37
Asanexception,partieswhohavenottakenpartinacontractmayshowthattheyhavearealinterestaffectedby
its performance or annulment.38 In other words, those who are not principally or subsidiarily obligated in a
contract,inwhichtheyhadnointervention,mayshowtheirdetrimentthatcouldresultfromit.39 Contracts pour
autruiarecoveredbythisexception.40Inthislatterinstance,thelawrequiresthatthe"contractingpartiesmust
haveclearlyanddeliberatelyconferredafavoruponathirdperson."A"mereincidentalbenefitisnotenough."
ActionontheContracts
PresentlyInvolved
RespondentsComplaint,entitled"RescissionofContract&RecoveryofPossession&OwnershipofTwoParcels
of Land," is clearly an action on a contract. The agreements sought to be rescinded41 clearly show that the
partiestotheDeedsofAbsoluteSalewereJenniferandSarahJaneLimbaring42asvendorsandPercitaOcoas
vendee.Clearlythen,theactionuponthecontractsmayasarulebeinstitutedonlybyJenniferandSarah
JaneagainstPercita.
Respondent is not a real party in interest. He was not a party to the contracts and has not demonstrated any
material interest in their fulfillment. Evidently, the allegations in the Complaint do not show that the properties
would be conveyed to him, even if Percita were to be proven to have committed a breach of the subject
agreements.
TrustRelationship
To show material interest, respondent argues that a trust was created when he purchased the properties from
Sabas Limbaring in favor of his daughters. As trustor, he allegedly stands to be benefited or injured by any
decisioninthecase.43

Trustisthelegalrelationshipbetweenonepersonwhohasequitableownershipofapropertyandanotherwho
ownsthelegaltitletotheproperty.44Thetrustoristheonewhoestablishesthetrustthebeneficiary,theperson
for whose benefit the trust was created and the trustee, the one in whom, by conferment of a legal title,
confidencehasbeenreposedasregardsthepropertyofthebeneficiary.45
Trusts may be either express or implied.46 Express trusts are those created by direct and positive acts of the
parties,suchasbysomewriting,deedorwillorbywordseitherexpresslyorimpliedlyevidencinganintentionto
create a trust. Implied trusts are those that, without being expressed, are deducible from the nature of the
transaction as matters of intent or that are superinduced in the transaction by operation of law as a matter of
equity,independentlyoftheparticularintentionoftheparties.47
Respondenthaspresentedonlybareassertionsthatatrustwascreated.Notingtheneedtoprovetheexistence
ofatrust,thisCourthasheldthus:
"Asarule,theburdenofprovingtheexistenceofatrustisonthepartyassertingitsexistence,andsuchproof
must be clear and satisfactorily show the existence of the trust and its elements. While implied trusts may be
provedbyoralevidence,theevidencemustbetrustworthyandreceivedbythecourtswithextremecaution,and
should not be made to rest on loose, equivocal or indefinite declarations. Trustworthy evidence is required
becauseoralevidencecaneasilybefabricated."48
Onthispoint,theCivilCodestatesasfollows:
"ART.1448.Thereisanimpliedtrustwhenpropertyissold,andthelegalestateisgrantedtoonepartybutthe
priceispaidbyanotherforthepurposeofhavingthebeneficialinterestoftheproperty.Theformeristhetrustee,
while the latter is the beneficiary. However, if the person to whom the title is conveyed is a child, legitimate or
illegitimate,oftheonepayingthepriceofthesale,notrustisimpliedbylaw,itbeingdisputablypresumedthat
thereisagiftinfavorofthechild."
Under the last sentence of Article 1448, respondents alleged acts paying the price of the subject properties
and, in the titles, naming his children as owners raise the presumption that a gift was effected in their favor.
Respondent failed to rebut this presumption. Absent any clear proof that a trust was created, he cannot be
deemed a real party in interest.49 That he should be deemed a trustor on the basis merely of having paid the
purchasepriceisplainlycontradictedbythepresumptionbasedonArticle1448oftheCivilCode"thatthereisa
giftinfavorofthechild,"notatrustinfavoroftheparent.
OtherIssues
Havingfoundthatrespondentisnotarealpartyininterest,thisCourtdeemsitnolongernecessarytoruleonthe
otherissuesraisedbypetitioner.
WHEREFORE, the Petition is GRANTED, and the assailed Decision and Resolution are SET ASIDE. Civil Case
No. OZC9914, entitled "Victor Limbaring v. Spouses Percita L. Oco and Anthony Oco," is DISMISSED. No
pronouncementastocosts.
SOORDERED.
ARTEMIOV.PANGANIBAN
ChiefJustice
Chairman,FirstDivision
WECONCUR:
CONSUELOYNARESSANTIAGO
AssociateJustice

MA.ALICIAAUSTRIAMARTINEZ
AssociateJustice

ROMEOJ.CALLEJO,SR.
AssociateJustice

MINITAV.CHICONAZARIO
AssociateJustice

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision were
reachedinconsultationbeforethecasewasassignedtothewriteroftheopinionoftheCourtsDivision.
ARTEMIOV.PANGANIBAN
ChiefJustice

Footnotes

1Rollo,pp.1023.
2 Id., pp. 3454. Special Fourth Division. Penned by Justice Remedios A. SalazarFernando (acting

chairperson), with the concurrence of Justices Mercedes GozoDadole and Edgardo F. Sundiam
(members).
3Id.,p.55.
4Id.,p.53.
5RTCOrder,datedOctober2,2000,p.1rollo,p.31.
6Ibid.
7Ibid.
8Ibid.
9Id.,p.2rollo,p.32.
10Undertaking,datedJuly1,1996rollo,p.26.
11AssailedDecision,pp.12rollo,pp.3435.
12Id.,pp.3&36.
13Ibid.
14Id.,pp.4&37.
15Ibid.
16Ibid.
17Id.,pp.68&3941.
18Id.,pp.8&41.
19Ibid.
20RTCOrder,p.3rollo,p.33.
21Ibid.
22AssailedDecision,pp.1011rollo,pp.4344.
23Id.,pp.16&49.
24Id.,pp.17&50.
25ThecasewasdeemedsubmittedfordecisiononApril21,2005,uponthisCourtsreceiptofpetitioners

Memorandum,signedbyAtty.ProcopioC.LaoVII.RespondentsMemorandumsignedbyAttys.Amelia
C. Garchitorena, Marvin R. Osias and Josie Christina T. Dugay of the Public Attorneys Office was
receivedbythisCourtonMarch9,2005.
26PetitionersMemorandum,pp.1617rollo,pp.134135.Uppercaseintheoriginal.
27Id.,pp.17&135.
28Id.,pp.18&136.
29Moran,1CommentsontheRulesofCourt213(1995).
3067CJSParties10,910(1950).
31 Abella v. Civil Service Commission, 442 SCRA 507, 521, November 17, 2004 Mathay v. Court of

Appeals, 378 Phil. 466, 482, December 15, 1999 Rebollido v. Court of Appeals, 170 SCRA 800, 806,
February28,1989.
32Abellav.CivilServiceCommission,ibid.Borlonganv.Madrideo,380Phil.215,224,January25,2000

Rallav.Ralla,199SCRA495,499,July23,1991.
33Pascualv.CourtofAppeals,409SCRA105,117,August15,2003BankofAmericaNT&SAv.Courtof

Appeals,448Phil.181,194195,March31,2003.
34 Uy v. Court of Appeals, 372 Phil. 743, 754, September 9, 1999 Earth Minerals Exploration, Inc. v.

Macaraig,194SCRA1,February11,1991Sustiguerv.Tamayo,176SCRA579,590,August21,1989
Baliwag Transit, Inc. v. Court of Appeals, 169 SCRA 849, 854, January 31, 1989 Marimperio Compaia
Naviera,S.A.v.CourtofAppeals,156SCRA368,378,December14,1987.
35ThefirstparagraphofArticle1311oftheCivilCodeprovides:

"Contracts take effect only between the parties, their assigns and heirs, except in case where the
rightsandobligationsarisingfromthecontractarenottransmissiblebytheirnature,orbystipulation
orbyprovisionoflaw.xxx."
36MarimperioCompaiaNaviera,S.A.v.CourtofAppeals,supraatnote34.
37HouseInternationalBuildingv.IntermediateAppellateCourt,151SCRA703,707,June30,1987.
38Sustiguerv.Tamayo,supraatnote34Ibaezv.HongkongandShanghaiBankingCorporation,22Phil.

572,588,February26,1912.
39 Earth Minerals Exploration Inc. v. Macaraig, supra at note 34 Sustiguer v. Tamayo, ibid. Dilson

EnterprisesInc.v.IntermediateAppellateCourt,170SCRA676,679,February27,1989.
40Moran,supraatnote29,p.218Herrera,1RemedialLaw243(1994).

The second paragraph of Article 1311 of the Civil Code states the rule on contract pour autrui, as
follows:
"Ifacontractshouldcontainsomestipulationinfavorofathirdperson,hemaydemanditsfulfillment
provided he communicated his acceptance to the obligor before its revocation. A mere incidental
benefit or interest of a person is not sufficient. The contracting parties must have clearly and
deliberatelyconferredafavoruponathirdperson."
41TheremedyofrescissionisprovidedbythefollowingarticleoftheCivilCode:

"Art.1191.Thepowertorescindobligationsisimpliedinreciprocalones,incaseoneoftheobligors
shouldnotcomplywithwhatisincumbentuponhim.
"Theinjuredpartymaychoosebetweenthefulfillmentandtherescissionoftheobligation,withthe
payment of damages in either case. He may also seek rescission, even after he has chosen
fulfillment,ifthelattershouldbecomeimpossible."
42Notably,JenniferandSarahJaneLimbaringwerebothoflegalagewhentheyexecutedtherespective

Deeds.(DeedsofAbsoluteSalerollo,pp.27&29)
43RespondentsMemorandum,p.8rollo,p.105.
44 Cuenco v. Manguerra, 440 SCRA 252, 262, October 13, 2004 Spouses Rosario v. Court of Appeals,

369Phil.729,740741,July19,1999Moralesv.CourtofAppeals,274SCRA282,297,June19,1997
Buan Vda. de Esconde v. Court of Appeals, 323 Phil. 81, 8889, February 1, 1996. See Tolentino, IV
CommentariesandJurisprudenceontheCivilCodeofthePhilippines669(1991).
45Art.1440oftheCivilCode.
46Art.1441oftheCivilCode.
47DeRomerov.CourtofAppeals,377Phil.189,199,November25,1999Moralesv.CA,supraatnote

44,p.298.
48Id.,p.300,perDavide,J.(laterChiefJustice).
49InMoralesv.CourtofAppeals,supraatnote44,theCourtrebuttedtheexistenceofanimpliedtrustby

applyingthepresumptionunderthelastsentenceofArticle1448.SeealsoTolentino,supraatnote44,p.
678.
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