Mr. Marcelino O. Gamosa

February 5, 1985 Mr. Marcelino O. Gamosa 23-2 Bagumbayan Sur Naga City Sir : This refers to your letter dated November 16, 1984, requesting the opinion of this Commission on the query posed therein. It appears therein that a stockholder who is suffering mental infirmity or weakness of the mind disposed of his shares of stock in a corporation in favor of another stockholder. Hence, your query is whether an action for annulment of the contract of sale be filed by another stockholder on behalf of the alleged mentally incapacitated vendor, and whether said action is cognizable by the S.E.C. or the ordinary civil court. Anent thereto, the pertinent provisions of the Civil Code of the Philippines are quoted as follows: "ARTICLE 1390. The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties: (1) Those where one of the parties is incapable of giving consent to a contract xxx xxx xxx These contracts are binding unless they are annulled by a proper action in court. xxx xxx xxx." "ARTICLE 1397. The action for annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily. xxx xxx xxx." "Two different requisites are necessary to confer the capacity for the exercise of the action for annulment of contract. The first is that the plaintiff must have an interest in the contract .The second is that the victim and not the party responsible for the defect is the person who must assert the same. Thus, by virtue of the first requisite, a person who is not principally or subsidiarily bound cannot attack the validity of an annullable contract; he has no capacity to challenge the validity of such contract ." (Tolentino, Civil C od e of the Philippines, Vol. 4, pp. 350-351, citing Sentencia, April 18, 1901; Wolfson vs. Estate of Martinez, G.R. No. 5970 October 13, 1911, 20 Phil. 340; Compania General vs. Topio, G.R. No. 1244, April 22, 1904, 4 Phil. 33, etc. Emphasis supplied). prcd In view thereof, a stockholder who is not principally or subsidiarily bound to the contract of sale between an alleged demented person (vendor) and another stockholder (vendee) cannot institute an action for the annulment of said contract. In other words, a person who has no interest in the subject of the action and in obtaining the relief demanded cannot be a plaintiff in an action. (Sec. 2, Rule 3, Rules of Court) Finally, please be informed that an action for annulment of contract falls within the jurisdiction of the regular civil court. Please be advised accordingly. llcd Very truly yours, (SGD.) MANUEL G. ABELLO Chairman