G.R. No. 234501 - Mercantile Insurance Co., Inc. vs. Yi

The estates of Guillermo Nombre and Victoriana Cari-an were at issue after both died without issue (in 1924 and 1938, respectively).
Guillermo Nombre’s heirs included his nephews and grandnephews, while Victoriana Cari-an was succeeded by her late brother’s son, Gregorio Cari-an.
After Gregorio Cari-an’s death in 1971, his wife (Generosa Martinez) and children (Rodolfo, Carmen, Leonardo, and Fredisminda, all surnamed Cari-an) were adjudged as heirs by representation.
Subsequent succession events included Leonardo Cari-an’s death, leaving his widow (Nelly Chua vda. de Cari-an) and minor son (Leonell Cari-an) as heirs.

The estate included two parcels of land – Lot No. 1616 (29,350 square meters) and Lot No. 1617 (460,948 square meters) of the Kabankalan Cadastre.
Petitioners (Pedro Escanlar and Francisco Holgado, as well as the heirs of Pedro Escanlar) were former lessees of these lots and later became involved in a transaction claiming to purchase hereditary rights in the property.

The heirs of Gregorio Cari-an (private respondents Cari-an) executed a Deed of Sale of Rights, Interests and Participation in the one-half (1/2) pro-indiviso share of Lot Nos. 1616 and 1617 in favor of petitioners, for a purchase price of ₱275,000.00.
The contract included a stipulation that its effectivity depended on:

Approval by the Honorable Court of First Instance of Negros Occidental, Branch VI, Himamaylan.
Full payment of the balance, which was to be settled by May 1979 in a related Deed of Agreement.

Petitioners made an initial payment of ₱50,000.00, with the balance of ₱225,000.00 subject to subsequent installments.

Petitioners were unable to meet the payment deadline for the Cari-an heirs’ individual shares (₱55,000.00 each), although later payments—twelve installments—were made.
Some heirs (Rodolfo, Generosa, Carmen, Fredisminda) eventually acknowledged receipt of their full shares via cash and evidencing receipts, while the minor Leonell’s share was placed in court custody.
Despite the payment irregularities, petitioners continued to occupy the lots and even paid rental amounts per a lease contract.
On September 21, 1982, a separate sale was executed by some heirs (private respondents Cari-an, in combination with other heirs of Guillermo Nombre) to spouses Paquito Chua and Ney Sarrosa Chua, forming a second transaction over portions of the estate.
Petitioners later sold their interests over the subject lots to fourth-party defendants (spouses Dr. Edwin Jayme and Elisa Tan Jayme) and turned over possession.

The trial court, on December 18, 1991, ruled in favor of the cancellation of the September 15, 1978 sale on the ground that the deed lacked the necessary probate court approval and that the Cari-an heirs were not fully paid.
The Court of Appeals affirmed the trial court’s decision, finding that the disputed transaction was a contract to sell (subject to a suspensive condition) rather than an absolute sale.
Petitioners raised the case to the Supreme Court, which eventually consolidated the petitions involving both actions (G.R. Nos. 119777 and 120690).

Whether the September 15, 1978 Deed of Sale of Rights, Interests and Participation is to be construed as a contract to sell (with a suspensive condition of court approval and full payment) or as an absolute contract of sale.
Whether the absence of a reserved title or a unilateral rescission clause upon non-payment supports classification as a contract of sale.

Whether the requirement for approval by the probate court affects the validity of the contract or merely its effectivity.
Whether the parties’ subsequent acts—acceptance of installments and continued possession—override the stipulated condition of judicial approval.

Whether the failure to pay the balance by the May 1979 deadline entitled the sellers to rescind the contract.
Whether the acceptance of late installment payments constitutes a waiver of the right to rescind under Article 1592 of the Civil Code.

How the subsequent sale of portions of the estate to the Chua spouses affects the rights and interests of petitioners, who claim ownership of the 1/2 portions acquired in 1978.
The proper apportionment of the hereditary rights contained in Lot Nos. 1616 and 1617, particularly given the intertwined transactions from both sale instances.