Facts:

The case revolves around "Association of Baptists for World Evangelism, Inc." (petitioner) and "First Baptist Church" (respondent). On September 30, 1963, the parties entered into a "Contract of Purchase and Sale" in which the petitioner agreed to sell a 735 square meter parcel of land situated at the corner of Leon Guinto and Padre Faura Streets, Manila, for the price of P293,506.25. The payment was structured in three installments: P29,350.62 due on September 30, 1963, P66,038.90 due by September 30, 1964, and a final payment of P198,116.72 (after a deduction of P25,000) due on September 30, 1965. Under the contract, the respondent was granted the right to occupy the property for church purposes during the term of the agreement, which lasted five years. A key provision stated that failure to pay any installment when due would result in automatic rescission of the contract, and the respondent would surrender possession of the property back to the p

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Facts:

Contract Formation and Terms

• On 30 September 1963, the petitioner (Association of Baptists for World Evangelism, Inc.) and the respondent (First Baptist Church) entered into a "Contract of Purchase and Sale" for a parcel of land, including a building and improvements, covering 735 square meters and located at the corner of Leon Guinto and Padre Faura Streets, Manila.
• The property was covered by TCT No. 62203 and sold for the total amount of P293,506.25, payable in three installments:
• First installment of P29,350.62 on or before 30 September 1963.
• Second installment of P66,038.90 on or before 30 September 1964.
• Final installment of P198,116.72 (after a P25,000.00 deduction) on or before 30 September 1965.
• It was expressly agreed that:
• All payments would be made to the petitioner’s authorized resident agent and attorney-in-fact in Manila.
• The respondent was granted the right to occupy and use the property for church purposes for a period of five consecutive years, commencing immediately upon execution of the contract.
• Failure by the respondent to pay any installment on time would automatically rescind the contract, mandating that the respondent return possession of the property (with any paid sums to be reimbursed).

Modification and Default Under the Contract

• The first installment was duly paid, and the respondent took possession of the property.
• When the second installment became due on 30 September 1964, the petitioner extended its payment period to 30 October 1964 by executing a "Supplement to the Contract of Purchase and Sale," which confirmed that all provisions of the original contract remained in effect unless modified by the supplement.
• The respondent failed to pay the second installment by the new deadline and did not return possession of the property, triggering the contractual rescission clause.

Filing of the Notice of Adverse Claim

• On 8 March 1965, the respondent recorded a Notice of Adverse Claim against TCT No. 62203 at the Register of Deeds of Manila, based on the now disputed contract.

Judicial Proceedings on the Cancellation of the Adverse Claim

• Upon discovering the encumbrance on its title, the petitioner sought cancellation of the notice by filing a petition on 6 June 1965 with the Court of First Instance of Manila.
• The respondent opposed the petition, but no evidence was submitted by the respondent at the hearing held on 14 August 1965.
• The court declared the case "submitted" and issued an order suspending the resolution pending the respondent’s filing of a civil action within fifteen days to “thresh out the question involved in ordinary suit.”
• The respondent did not initiate the civil suit, and the petitioner, on 8 September 1965, moved to give due course to the petition to cancel the notice.
• During the hearing on 11 September 1965, the respondent indicated that its members believed filing a suit against the petitioner would be "unscriptural" and would only be considered as a last resort.

Lower Court Decision and Subsequent Appeals

• On 15 September 1965, the lower court ordered the cancellation of the adverse claim on the grounds that the contractual basis for the claim had ceased upon the respondent’s failure to pay the second installment and to file the required civil action.
• The respondent filed a motion for reconsideration claiming that, as a land registration court, the trial court lacked jurisdiction to determine the validity of the rescission of the contract; this motion was denied.
• The respondent subsequently appealed to the Court of Appeals.
• On 25 May 1970, the Court of Appeals rendered a decision affirming the lower court’s order but later set aside that decision by Resolution on 17 August 1970, holding that the court sitting as a land registration court had limited jurisdiction to resolve issues that should be litigated in a regular court.

Jurisdiction and Rescission of the Underlying Contract

• The disputed contract was further addressed in a separate action: on 1 August 1967, the petitioner filed an action for rescission of the contract of purchase and sale.
• After trial, the contract was ordered rescinded.
• On appeal, the rescission was affirmed by the Court of Appeals and later confirmed by this Court on 15 May 1972, with the judgment becoming final and executory on 14 August 1972.
• With the rescission of the purchase agreement, the contractual basis for the notice of adverse claim was nullified.

Issue:

Jurisdiction of the Land Registration Court

• Whether the Court of First Instance (now Regional Trial Court), acting as a land registration court, had the jurisdiction to cancel the adverse claim based on a contract that had been automatically rescinded due to non-payment of the second installment.

Validity of the Adverse Claim

• Whether the notice of adverse claim, recorded on the basis of the "Contract of Purchase and Sale," remained valid after the contractual agreement had been deemed rescinded.

Impact of the Failure to File a Civil Suit

• Whether the respondent’s failure to initiate the required civil action (as ordered by the trial court) affected the cancellation of the adverse claim and the determination of the contract’s rescission.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)