G.R. No. L-28774 - Development Bank of the Philippines vs. Court of Appeals

Case Summary (G.R. No. L-28774)

Subsequent PHHC dispositions to private vendees

Despite the earlier sale to DBP, PHHC personnel (without DBP’s knowledge) issued orders of payment and accepted down payments and full payments for Lots 2 and 4 in favor of Honesto and Elisa Nicandro in late 1958. Deeds of sale in favor of the Nicandros were prepared and signed by the PHHC General Manager, but the original deeds were retained by PHHC and not released to the Nicandros. PHHC officials had internal recommendations to suspend final deeds due to DBP’s prior interest, but the transactions with the Nicandros proceeded at the administrative level.

Administrative doubts and Secretary of Justice opinions

DBP auditors raised doubts (Dec. 6, 1955) about the legality of DBP’s acquisition under Section 13 of RA 85; the matter was referred through Executive Secretary to the Secretary of Justice. The Secretary of Justice issued Opinion No. 16 (Jan. 20, 1959) concluding DBP lacked authority under Section 13 to undertake the housing project, and later Opinion No. 40 (Mar. 14, 1960) declared deeds of sale covering the lots ultra vires, illegal and void. In the interim, Executive action directed DBP to revoke Resolution No. 2004 on the basis of the Justice Department opinion.

Registration chronology and prior Supreme Court ruling

Although the subdivision plan and segregation produced a new title (TCT No. 36533) in PHHC’s name prior to January 15, 1959, DBP presented its 1955 sales agreement for registration on January 15, 1959 and it was annotated on the still-uncancelled master title (TCT No. 1356). The Register of Deeds later transferred the annotation to TCT No. 36533. Adverse claims by the Nicandros were filed and annotated on TCT No. 36533 on February 17, 1959. On April 29, 1961, this Court (in Register of Deeds of Quezon City v. Nicandro) held that the annotation of the DBP sales agreement on the then-uncancelled TCT No. 1356 (January 15, 1959) constituted sufficient registration to bind third parties and ordered issuance of titles in favor of DBP — reasoning that DBP was the first registrant and the Nicandros’ remedy (adverse claim) was inadequate because vendee registration procedures under the Torrens Act existed.

Legislative amendment intended as curative measure

On June 17, 1961 Congress enacted RA 3147, amending Section 13 of DBP’s charter to expressly permit the Bank to provide housing for its officials and employees (now expressed as Section 23 in the amended enactment). The Court recognized the amendment as a curative statute enacted while the legality of the DBP acquisition remained in question, and observed that curative statutes are designed to validate otherwise defective or disabled acts.

Procedural posture and lower court rulings

Respondents sued (Nov. 10, 1961) to rescind PHHC’s sale of Lots 2 and 4 to DBP, to cancel any certificates issued to DBP, and to claim damages. The trial court found the sale to DBP void under Section 13 of RA 85 and rescinded it. The Court of Appeals affirmed the trial court on February 29, 1968. DBP sought certiorari relief in this Court to annul the Court of Appeals’ ruling.

Standing of the Nicandros

The Supreme Court addressed DBP’s contention that the Nicandros lacked capacity to challenge the DBP–PHHC transaction because their rights arose after that transaction and because rescission requires mutual restitution. The Court applied an exception recognized in its prior jurisprudence (Teves; Yturralde; De Santos; Banez) that a person not principally bound by a contract may still seek annulment if he is prejudiced by it and can show probable detriment. Given that the Nicandros had paid in full for the lots later claimed by DBP, the Court held they had sufficient standing to sue.

Curative statute retroactivity and vested rights analysis

The dispositive issue the Court resolved was whether RA 3147’s amendment could validate the DBP’s prior acquisition. The Court explained that curative statutes can validate past acts but they cannot be given retroactive effect insofar as they impair vested rights of third parties. Thus the question was whether the Nicandros had vested rights in Lots 2 and 4 prior to enactment of RA 3147. The Court relied on the terminal principle that a vested right is absolute, complete and unconditional, and observed that under the Torrens system registration is the operative act that confers validity against third parties. Because DBP had earlier registered its sales agreement (annot

Case Syllabus (G.R. No. L-28774)

Nature of the Case

Petition for certiorari to set aside the decision of the Court of Appeals (dated February 29, 1968) in CA-G.R. No. 34518-R, which affirmed the trial court decision in Civil Case No. Q-6091 seeking rescission of sale and cancellation of title involving Lots 2 and 4, Block WT-21, Diliman Estate Subdivision, West Triangle, Quezon City.
Underlying dispute arises from competing claims to Lots 2 and 4: the Development Bank of the Philippines (DBP) as first vendee under a 1955 sales agreement with the People’s Homesite and Housing Corporation (PHHC), and respondents Honesto G. Nicandro and Elisa F. Nicandro as later purchasers from PHHC (November 1958).
Central legal questions resolved by the Supreme Court: (1) standing of the Nicandro spouses to seek rescission; (2) whether Republic Act No. 3147 (amending Section 13 of DBP Charter, R.A. No. 85) has retroactive, curative effect validating DBP’s earlier acquisition; and (3) whether the Nicandro spouses possessed vested rights that would be impaired by retroactive application of the amendment.

Chronology and Core Facts

March 18, 1955: DBP Board of Governors, Resolution No. 2004, appropriated P1,204,000.00 to purchase land for an employees’ housing project; plan to build houses and sell to DBP employees payable over 20 years.
October 20, 1955: DBP bought 91,188.30 sq. meters (159 lots) in Diliman Estate Subdivision from PHHC for P802,155.56; DBP paid P400,000.00 down payment. Lots 2 and 4 were part of these 159 lots. At that time the subdivision plan was pending approval by Bureau of Lands; sale was not immediately registered.
December 6, 1955: DBP Auditor Isidro Bunag expressed doubts about legality under Section 13, R.A. No. 85. Auditor General endorsed to Office of the President; Executive Secretary referred to Secretary of Justice (July 30, 1957).
June 24, 1957: Portion of master title TCT No. 1356 (including the 159 lots) segregated and new certificate TCT No. 36533 issued in name of PHHC; the master title bore no annotation of this segregation nor of pro tanto cancellation.
September–October 1958: PHHC personnel (Benjamin Gray, Atty. Roman Cariaga) and PHHC acting manager Sergio Ortiz Luis dealt with prospective purchasers including Nicandro; Atty. Cariaga informed Gray and Nicandro that Lots 2 and 4 had been sold to DBP. Ortiz Luis wrote Sept. 29, 1958 to DBP requesting exclusion of Lots 2 and 4 from DBP sale; DBP Chairman Gregorio S. Licaros refused (Oct. 16, 1958).
October 14, 1958: Ortiz Luis approved orders of payment for Lots 2 and 4 in favor of Honesto and Elisa Nicandro; Nicandros paid 10% down payments (P700.56 and P660.00 respectively). Oct. 31, 1958: PHHC General Manager approved orders of payment for 39 lots (including Lot 2 reawarded to Bernabe G. Garcia who also paid down payment).
November 3, 1958: PHHC accepted full payment for Lots 2 and 4 from the Nicandro spouses.
November 6–7, 1958: Nicandro demanded deeds; PHHC Sales Division prepared deeds of sale on November 7, 1958 for Lot 2 in favor of Honesto G. Nicandro and Lot 4 in favor of Elisa F. Nicandro.
November 13, 1958: Homesite Management Chief Bienvenido C. Olarte recommended suspension of execution of final deeds for Lots 2 and 4 pending resolution of DBP purchase arrangements. Despite recommendation, deeds were submitted to PHHC Board on December 17, 1958 and signed by GM Bernardo Torres; originals retained at PHHC and never released to Nicandros.
January 15, 1959: DBP presented Sales Agreement (Oct. 20, 1955) for registration to Register of Deeds, entered in day book and annotated on TCT No. 1356 as “sale of an unsegregated portion” with note that new titles to be issued upon presentation of approved subdivision plan and technical descriptions.
January 20, 1959: Secretary of Justice Opinion No. 16, s. of 1959 concluded RFC/DBP lacked power under Section 13, R.A. No. 85 to undertake the housing project; DBP’s authority questioned.
February 16–17, 1959: Nicandro attempted registration with photostatic copies; registration denied for lack of originals, missing GSIS consent and stamps. Feb. 17, 1959: Nicandro spouses filed affidavits of adverse claims, annotated on TCT No. 36533. Feb. 17, 1959: Office of the President directed DBP to revoke Resolution No. 2004 (pursuant to Sec. of Justice opinion).
March 6, 1959: DBP requested annotation of its sales agreement be transferred to TCT No. 36533; Register of Deeds transferred annotation from TCT No. 1356 to TCT No. 36533.
Land Registration Commission consulta (In Re Consulta No. 250): Register of Deeds referred dispute; LRC resolution dated July 25, 1959 held Nicandros better entitled to issuance of certificates of title for Lots 2 and 4.
DBP appealed LRC resolution to the Supreme Court; April 29, 1961 Supreme Court decision (L-16448, Register of Deeds of Quezon City v. Nicandro, et al.) held: (a) deed of sale Oct. 20, 1955 to DBP was registerable; (b) annotation on TCT No. 1356 on Jan. 15, 1959 constituted sufficient registration to bind third parties; ordered Register to issue corresponding certificate in favor of DBP.
March 14, 1960: Secretary of Justice Opinion No. 40 responded to DBP Board query that sale to DBP was ultra vires and void; DBP cannot sell the lots even for cash to employees.
June 17, 1961: Republic Act No. 3147 enacted amending Section 13 of R.A. No. 85 (Section 23 in amended law), expressly allowing the Bank to appropriate or set aside advances to provide housing for benefit of its officials and employees (text of amended provision quoted in full in record).
November 10, 1961: Nicandro spouses filed suit against DBP and PHHC to rescind sale of Lots 2 and 4 to DBP, cancel any titles issued to DBP covering the two lots, and for damages; alleged DBP acquisition was ultra vires and contrary to Section 13 of R.A. No. 85 (as then worded).
Trial court (Court of First Instance of Rizal) held sale to DBP was null and void for violation of Section 13 and granted rescission; no provision made for return of price paid to PHHC. Motion for reconsideration denied.
Court of Appeals (Feb. 29, 1968) affirmed trial court decision.
DBP appealed to the Supreme Court by petition for certiorari.

Procedural History and Prior Rulings Cited

L.R.C. Resolution In Re Consulta No. 250 (July 25, 1959): held Nicandros better entitled to titles; later reversed on appeal.
Register of Deeds of Quezon City v. Nicandro, et al., L-16448 (Apr. 29, 1961; 1 SCRA 1334): Supreme Court held annotation of DBP’s sale on TCT No. 1356 on Jan. 15, 1959 constituted sufficient registration to bind third parties and ordered issuance of title in favor of DBP; explained legal effect of registration under Torrens system and remedy of adverse claim under Section 110, Act 496 versus registration under Section 57.
Trial Court of Rizal: rescission of sale (DBP acquisition null and void), no restitution order.
Court of Appeals (Feb. 29, 1968): affirmed trial court rescission.
Supreme Court (this decision):