G.R. No. 181154 - Haveria vs. Social Security System

Josefina L. Valdez and Carlos L. Valdez, Jr. (petitioners) are the immediate family of Carlos Valdez, Sr., who died intestate, leaving behind Josefina and their children.
The disputed property is a parcel of land originally measuring 24,725 square meters, designated as Lot No. 3 of Pls-208-D-13 and covered by Transfer Certificate of Title (TCT) No. T-19529 (T-1902), issued on August 18, 1967.

On December 28, 1978, Josefina caused a subdivision survey of the property into eight (8) lots (Lots 3-A to 3-H), all fronting the national road.
To enhance the marketability of the property, Josefina decided to sell a portion of it to Jose Lagon, a successful businessman involved in construction, real estate, and banking.
On May 1, 1979, Josefina executed a Special Power of Attorney authorizing her son, Carlos, Jr., to sell parts of Lot No. 3 (specifically portions of Lots 3-C and 3-D) on her behalf.

On May 9, 1979, a Deed of Absolute Sale was executed through Carlos, Jr., transferring a portion of Lot No. 3—measuring 4,094 square meters with a frontage of 64.3 meters—to Lagon.
The deed stated a purchase price of P80,000.00 (cash), although the actual agreed price was computed at P40.00 per square meter, amounting to P163,760.00, with P73,760.00 allocated as a personal account of Carlos, Jr.
Part of the transaction’s consideration included a condition that Lagon must cause the transfer of the Rural Bank of Isulan to the property and construct a commercial building adjacent to the bank.

On April 21, 1981, Lagon provided partial payments via PCIB checks totaling P90,076.00 after deductions for Carlos, Jr.’s personal account.
Carlos, Jr. obtained an affidavit from Lagon on April 27, 1981, wherein Lagon undertook to transfer the Rural Bank and construct a commercial building within five (5) years from the deed’s execution (i.e., by May 9, 1984).
Lagon failed to pay the remaining balance (P61,880.00) and did not start the construction or cause the transfer of the bank; subsequent reminders by Carlos, Jr. went unanswered.
In the meantime, Josefina and her children executed an extrajudicial settlement of the estate of Carlos, Sr. on December 31, 1982, and parts of the property were sold or mortgaged in further transactions, including the sale of portions of Lot No. 3-C and Lot No. 3-D to third parties such as the PCIB and an individual named Engr. Rolendo Delfin.

Lagon filed a complaint on September 24, 1990, seeking specific performance, damages, and orders for the delivery of the possession and transfer of title, based on his claim for breach of the agreed conditions.
The Regional Trial Court (RTC) of Isulan rendered a judgment on January 20, 1995 in favor of Lagon, ordering Josefina (and indirectly Carlos, Jr.) to execute the necessary deed of sale and deliver title along with awarding damages and attorney’s fees.
The decision was subsequently appealed; the Court of Appeals (CA) initially reversed the RTC ruling but then, upon a motion for reconsideration, rendered an amended decision on February 4, 1999, affirming that a valid deed of absolute sale had been executed.
Petitioners (Josefina and Carlos, Jr.) then filed a petition for review on certiorari with issues questioning the nature of the contract and the enforceability of Lagon’s claims.

Whether the transaction between Josefina and Lagon constituted a contract to sell or a contract of sale.
Whether the documents – the deed of absolute sale, the Special Power of Attorney, and Lagon’s affidavit – should be read as forming one integrated contract containing all essential terms and conditions.

Whether Carlos, Jr. acted within his authority in executing the deed of absolute sale when the Special Power of Attorney limited his power to selling on a cash basis only.
Whether Josefina’s subsequent acceptance of partial payments (by Carlos, Jr.) constituted a ratification that validated the deed despite the authority issue.

Whether Lagon’s failure to pay the balance of the purchase price, transfer the Rural Bank, and commence construction of the commercial building constituted non-compliance that justified the rescission of the sale.
Whether the conditions agreed upon (i.e., the construction and bank transfer) should be deemed fulfilled, or alternatively, whether they remained suspensive conditions integral to the sale.

Whether the failure of Josefina (or her son acting as her agent) to deliver the Torrens title and actual possession of the property was legally justified due to Lagon’s non-performance.
Whether the subsequent dealings relating to subdivision, extrajudicial settlement, and sale of other portions affected the rights of Lagon as vendee.