Alfredo Aguila Jr vs Court of Appeals et al

Business Organization Partnership, Agency, Trust Identity Separate and Distinct

In April 1991, the spouses Ruben and Felicidad Abrogar entered into a loan
agreement with a lending firm called A.C. Aguila & Sons, Co., a partnership. The
loan was for P200k. To secure the loan, the spouses mortgaged their house and lot
located in a subdivision. The terms of the loan further stipulates that in case of
non-payment, the property shall be automatically appropriated to the partnership
and a deed of sale be readily executed in favor of the partnership. She does have a
90 day redemption period.

Ruben died, and Felicidad failed to make payment. She refused to turn over the
property and so the firm filed an ejectment case against her (wherein she lost).
She also failed to redeem the property within the period stipulated. She then filed
a civil case against Alfredo Aguila, manager of the firm, seeking for the
declaration of nullity of the deed of sale. The RTC retained the validity of the
deed of sale. The Court of Appeals reversed the RTC. The CA ruled that the sale is
void for it is a pactum commissorium sale which is prohibited under Art. 2088 of
the Civil Code (note the disparity of the purchase price, which is the loan amount,
with the actual value of the property which is after all located in a subdivision).

ISSUE: Whether or not the case filed by Felicidad shall prosper.

HELD: No. Unfortunately, the civil case was filed not against the real party in
interest. As pointed out by Aguila, he is not the real party in interest but rather
it was the partnership A.C. Aguila & Sons, Co. The Rules of Court provide that
every action must be prosecuted and defended in the name of the real party in
interest. A real party in interest is one who would be benefited or injured by the
judgment, or who is entitled to the avails of the suit. Any decision rendered
against a person who is not a real party in interest in the case cannot be
executed. Hence, a complaint filed against such a person should be dismissed for
failure to state a cause of action, as in the case at bar.

Under Art. 1768 of the Civil Code, a partnership has a juridical personality
separate and distinct from that of each of the partners. The partners cannot be
held liable for the obligations of the partnership unless it is shown that the
legal fiction of a different juridical personality is being used for fraudulent,
unfair, or illegal purposes. In this case, Felicidad has not shown that A.C. Aguila
& Sons, Co., as a separate juridical entity, is being used for fraudulent, unfair,
or illegal purposes. Moreover, the title to the subject property is in the name of
A.C. Aguila & Sons, Co. It is the partnership, not its officers or agents, which
should be impleaded in any litigation involving property registered in its name. A
violation of this rule will result in the dismissal of the complaint.