G.R. No. 126556 - David vs. Court of Appeals

On March 18, 1955, the Board of Governors of the Development Bank of the Philippines (DBP) passed Resolution No. 2004 appropriating P1,204,000 to purchase land for a housing project for DBP employees. It was intended that DBP would build houses and sell them on installment.
On October 20, 1955, DBP purchased 91,188.30 square meters, composed of 159 lots, from People’s Homesite and Housing Corporation (PHHC) in Diliman Estate Subdivision, Quezon City, paying P400,000 as partial payment of the P802,155.56 price.
The subdivision plan was pending approval; thus, the sale agreement was not registered immediately. Lots 2 and 4 were among these 159 lots and became the subject of the dispute.

DBP’s Auditor doubted legality of property acquisition under Section 13 of Republic Act No. 85 (DBP Charter). The matter was escalated to the Executive Secretary and referred to the Secretary of Justice.
On June 24, 1957, separate title TCT No. 36533 for the 159 lots including Lots 2 and 4 was issued to PHHC without DBP’s knowledge. The subdivision plan was not annotated on the master title TCT No. 1356.
In September 1958, PHHC officials informed respondent Honesto G. Nicandro that Lots 2 and 4 were among the lots already sold to DBP. Despite this, PHHC approved order of payment for Lots 2 and 4 in favor of Nicandro spouses, who paid 10% down payment for the lots.
PHHC also approved the sale of Lot 2 to another party (Garcia Group) without DBP’s knowledge.
PHHC accepted full payment from the Nicandro spouses on November 3, 1958, and prepared deeds of sale for Lots 2 and 4 on November 7, 1958, which were signed but originals were retained by PHHC.
DBP refused PHHC’s request to exclude Lots 2 and 4 from the sale, insisting on its rights from the 1955 contract and payment.

On January 15, 1959, DBP’s sale agreement with PHHC was registered and annotated on TCT No. 1356.
On January 20, 1959, the Secretary of Justice issued Opinion No. 16, s. of 1959, stating that DBP had no power to undertake the housing project, finding violation of Section 13 of the DBP Charter.
On February 16, 1959, the Nicandro spouses attempted to register their deed copies, but registration was denied due to non-original documents, lack of required consents, and documentary stamps.
On February 17, 1959, adverse claims were filed by the Nicandro spouses and annotated on TCT No. 36533.
Subsequently, the Office of the President directed DBP to revoke Resolution No. 2004 (the land acquisition authorization).
DBP requested the annotation of its sales agreement on the new TCT No. 36533 in March 1959, to which the Register of Deeds complied.

The Register of Deeds referred the dispute on title to the Land Registration Commission (In Re Consulta No. 250).
The Land Registration Commission ruled in favor of Nicandro spouses, holding they were better entitled to the certificates of title.
DBP appealed to the Supreme Court, which reversed the Commission’s ruling on April 29, 1961, holding that the registration of the sales agreement by DBP on TCT No. 1356 was valid and binding on third parties, thus favoring DBP as first registrant.

On June 17, 1961, Republic Act No. 3147 amended Section 13 of the DBP Charter to expressly authorize housing for its employees, thus removing prior doubts on DBP’s powers.
On November 10, 1961, the Nicandro spouses filed suit to rescind the sale to DBP, cancel titles, and claim damages, alleging that DBP’s acquisition violated the DBP Charter and exceeded corporate powers.
PHHC defended itself based on alleged bad faith of the Nicandro spouses, who proceeded with purchase and registration despite doubts about legality and agreements with PHHC not to execute final deeds or register titles until clearance was obtained.
The Regional Trial Court (Court of First Instance, Rizal) held the sale to DBP was null and void for violation of Section 13 of the DBP Charter, ignoring defenses and without ordering return of payments by PHHC to Nicandros.
The Court of Appeals affirmed the trial court decision on February 29, 1968.

Lack of standing of the Nicandro spouses to question the sale for being strangers to original contract and property at time of the transaction.
Claim that rescission requires mutual restitution, which Nicandros cannot perform.
The Nicandro spouses merely stepped into the shoes of PHHC, which was estopped from questioning the sale after full execution.
Ratification of the sale by the 1961 amendment of Section 13, validating DBP’s authority retrospectively, except as to rights of third parties with vested interests.
The prior Supreme Court ruling recognized DBP’s rights over the Nicandros, so Nicandros have no vested rights that would nullify the curative effects of the amendment.

Whether respondent spouses had legal standing to question the validity of the sale between PHHC and DBP despite not being original contracting parties.
Whether the sale of Lots 2 and 4 by PHHC to DBP was null and void for violation of Section 13 of Republic Act No. 85 (DBP Charter).
Whether Republic Act No. 3147 amending Section 13 of the DBP Charter should be given retroactive effect to validate the purchase by DBP notwithstanding prior doubts of authority.
Whether the rights of the Nicandro spouses over Lots 2 and 4 had vested such that the curtailed retroactivity of the curative amendment.
Whether rescission could be granted despite lack of mutual restitution by the respondent spouses.