DBP bought 91,188.30 square meters of land, consisting of 159 lots, in the proposed Diliman Estate Subdivision of the PHHC. However, the sale of the lots to DBP, Lots 2 and 4, which form part of said 159 lots, were still sold by PHHC to the spouses Nicandro, for which 2 deeds of sale were issued to them by PHHC. Upon learning of PHHC’s previous transaction with DBP, the spouses filed a complaint against DBP and the PHHC to rescind the sale of Lots 2 and 4 by PHHC in favor of DBP. The CFI held that the sale of Lots 2 and 4, to DBP is null and void, for being in violation of Section 13 of the DBP Charter.

Issue:

Do the spouses possess the legal personality to question the legality of the sale?

Held:

Yes. The spouses stand to be prejudiced by reason of their payment in full of the purchase price for the same lots which had been sold to DBP by virtue of the transaction in question.The general rule is that the action for the annulment of contracts can only be maintained by those who are bound either principally or subsidiarily by virtue thereof. However, a person who is not obliged principally or subsidiarily in a contract may exercise an action for nullity of the contract if he is prejudiced in his rights with respect to one of the contracting parties, and can show the detriment which could positively result to him from the contract in which he had no intervention.