G.R. No. L-30831 - Philippine National Bank vs. Court of Appeals

The Solomon spouses (Leandro Solomon and Leocadia Bustamante) were the registered owners of Lot No. 230 in Davao, covering 126,497 square meters, evidenced by Original Certificate of Title No. 152.
In 1932, to secure a loan of P500.00, the Solomon spouses mortgaged the property in favor of the Banco Nacional Filipino, which is now the Philippine National Bank (PNB).
Due to failure to pay the loan on maturity, the mortgage was foreclosed; the property was sold at a public auction on December 28, 1934, and a Certificate of Sale was executed in favor of the Bank.

The day following the sale, on December 29, 1934, the Solomon spouses and the Bank entered into a "Promesa de Venta" (promise to sell). This contract bound the Bank to sell its rights in the foreclosed property back to the spouses for a total consideration of P802.26, payable in eight equal annual installments starting December 29, 1935.
It was agreed that upon full payment, the Bank would execute a final deed of sale transferring ownership to the spouses. Possession of the property was also turned over to them immediately upon the contract’s execution.
A crucial stipulation was that failure to pay any installment or comply with any contractual provision would automatically rescind and cancel the contract; all payments made would be deemed as rent, and the Bank would be free to retake and sell the property.

The Solomon spouses made timely payments on their contract except for the seventh and eighth installments due in December 1941 and December 1942, leaving an outstanding balance of P217.23.
The onset of World War II on December 8, 1941, and the subsequent deaths of Leandro Solomon (January 8, 1943) and Leocadia Bustamante (March 20, 1943) affected the performance of the contract.
Delfin Perez, the son of Leocadia Bustamante by her first husband and the stepson of Leandro Solomon, succeeded into possession of the property as the sole heir.

On March 12, 1948, about seven years after default, Delfin Perez offered to pay the two outstanding installments plus accrued interest and requested that the Bank execute a deed of sale in his favor; his offer was rejected by Bank Manager Amado Lagdameo on the ground that the "Promesa de Venta" had been executed for the benefit of the Solomon spouses.
On the suggestion of the Bank Manager, Perez filed an action for a declaration of heirship, and on September 25, 1956, he was declared the sole and only heir of the Solomon spouses by the Court of First Instance of Davao.
On May 9, 1957, Perez notified the Bank of this Court Order and reiterated his desire to pay the remaining obligation. The Bank subsequently issued a statement of account showing that the total due as of June 15, 1957, was P535.45 and promised to release the mortgage upon full payment.
Perez made further offers to purchase the property, raising his price incrementally from P600.00, then to P3,000.00, P5,000.00, P7,000.00, and finally P8,000.00. Despite these repeated offers, the Bank consistently refused to allow him to redeem the property.

On October 6, 1958, Perez’s adverse claim was inscribed on the Bank’s Certificate of Title.
On May 18, 1959, the Bank informed Perez of a third party willing to buy the property for P13,500.00, asking him to match the offer, which he failed to do.
On July 1, 1959, the Bank sold the property to Joaquin de Castro and Graciana Pasia; a Transfer Certificate of Title (TCT No. T-8583) was issued on July 2, 1959.
Perez then filed a Complaint for Specific Performance and Damages against the Bank (with the complaint subsequently amended to include the De Castro spouses) seeking enforcement of the "Promesa de Venta" and a declaration granting him the right to redeem the property.
The trial court (Court of First Instance of Davao) rendered a decision on March 20, 1963, dismissing Perez’s action and ordering him to vacate the property.
The Court of Appeals reversed the trial court’s decision on June 6, 1969, holding that Perez was entitled to redeem the property under the contract. Errors and assignments of error were raised by both the Bank and the De Castro spouses.

After the Court received manifestation that Delfin Perez had died (with his death noted on July 1, 1976), his heirs were substituted and duly recognized.
Multiple assignments of error were raised by the petitioners, notably contesting issues such as the applicability of Article 1191 of the New Civil Code, the enforcement of the automatic rescission clause, rejection of estoppel and the interference with redemption rights, among others.

Whether the Bank, through its branch managers and agents, is bound by representations assuring Perez his right to redeem the foreclosed property despite the existence of an automatic rescission clause in the "Promesa de Venta."
Whether the failure of the Solomon spouses to pay the last two installments automatically rescinded the "Promesa de Venta" or whether such noncompliance, under the circumstances of war and subsequent deaths, is excusable.
Whether Perez’s adverse claim inscribed on the Certificate of Title and his actions based on the Bank Manager’s representations entitle him to redeem the property, notwithstanding the later sale to third parties (the De Castro spouses).
Whether the doctrine of estoppel can be applied to bar the Bank from reneging on its earlier commitments and representations regarding Perez’s right to redeem.
Whether the delay by the Bank in registering the sale and transferring title (spanning over twenty-four years) affects the validity of the redemption and the subsequent sale to the De Castro spouses.
Whether the statutory requirements regarding the disposal of real estate acquired in debt collection (under Act No. 2612 and RA 1300) were violated by the Bank and, if so, whether such violation supports Perez’s right to redeem.