G.R. No. 137823 - Mortel vs. KASSCO, Inc.

Kassco, Inc. is the registered owner of a lot and the "Kassco Building" located at the corner of Cavite and Lico Streets, Rizal Avenue, Sta. Cruz, Manila, as evidenced by Transfer Certificate of Title No. 137791.
To secure a loan from the Philippine National Bank (PNB) – which was renting the first floor of the building – Kassco, Inc. mortgaged the property, an encumbrance duly annotated on the back of the title on May 11, 1981.

In 1985, Kassco, Inc. applied for the conversion of the Kassco Building into a condominium, an application approved by the then Human Settlements Regulatory Commission (HSRC) on August 9, 1985.
Kassco, Inc., represented by Oscar Santos, entered into an agreement with petitioner Reynaldo Mortel wherein:

The second floor of the Kassco Building, with a floor area of approximately 165 square meters including common areas, was offered for sale.
The sale was subject to a condition: the execution of a Deed of Absolute Sale upon securing an individual condominium certificate of title (CCT) within one year from the execution of the agreement.
Simultaneously, a contract of lease was incorporated, providing that the agreement would remain in force for one year, pending the delivery of the title and full payment of the purchase price.

Kassco, Inc. failed to secure the partial cancellation of the mortgage and, consequently, the Condominium Certificate of Title could not be obtained within the one-year period required by the agreement.
A subsequent agreement was executed between the parties, largely mirroring the first agreement, except for an increased purchase price and higher monthly rental fee.
Despite the second agreement, the conditions for effecting the contract—namely, the release of the mortgage and issuance of the CCT—remained unfulfilled.
Petitioner remained in occupation of the premises at a monthly rental fee, until Kassco, Inc. ordered him to vacate on November 10, 1988, which led to further disputes.

On November 24, 1988, petitioner's demand for the delivery of the CCT and execution of a Deed of Absolute Sale prompted Kassco, Inc. to file a complaint for unlawful detainer.
In response, petitioner Mortel instituted an action for specific performance or rescission with damages against Kassco, Inc.
During the pendency of the case, the Kassco Building was foreclosed due to Kassco, Inc.'s failure to settle its obligations with PNB.
The Regional Trial Court dismissed petitioner's complaint on November 29, 1995, a decision that was later affirmed by the Court of Appeals on September 30, 1998.

Petitioner contended that the agreements were in the nature of a contract to sell a condominium, thereby invoking the provisions of the Condominium Law (P.D. 957) and the Law on Sale of Real Estate on Installment (R.A. 6581).
He claimed entitlement to recover all payments made as partial payments and monthly rental fees, as well as reimbursement for improvements introduced to the premises.
Petitioner further alleged misrepresentation and bad faith on the part of Kassco, Inc., asserting that the latter failed to inform him about the existing mortgage on the property and the absence of a license to sell at the time the agreements were executed.

Whether the subject agreements constituted a valid contract to sell a condominium and, concurrently, a contract of lease.
Whether the suspensive condition of securing and delivering the individual condominium certificate of title (CCT) was fulfilled, thereby giving effect to the contract to sell.
Whether the invoked laws, P.D. 957 and R.A. 6581, which protect buyers in a contract to sell a condominium, are applicable in the present case.
Whether petitioner is entitled to recover the amounts paid (as partial payment and monthly rental fees) and the value of improvements made to the subject property.
Whether there is sufficient evidence to uphold petitioner’s allegations of misrepresentation and bad faith on the part of Kassco, Inc.