Case Summary (G.R. No. L-28774)
Facts of the Case and Land Acquisition
In 1955, DBP’s Board of Governors authorized the purchase of land for a housing project. Consequently, DBP contracted with PHHC to buy 159 lots, including Lots 2 and 4, but the subdivision plan approval was pending, delaying formal registration of the sale. Despite this, PHHC subsequently sold Lots 2 and 4 to the Nicandro spouses in 1958, who paid the down payment and full price thereafter, while DBP had already paid a partial amount for the same lots.
Legal Concerns and Initial Government Opinions
DBP’s Auditor expressed doubt as to the legality of the purchase under Section 13 of Republic Act No. 85, which restricted DBP’s powers. This prompted referral of the issue to the Secretary of Justice, who, in 1959, opined that DBP lacked authority to acquire the lots for housing projects. Meanwhile, PHHC proceeded with sales to third parties, including the Nicandro spouses, despite DBP’s registered interest. Attempts by the Nicandros to register their titles were initially denied, and adverse claims were filed.
Registration and Prior Judicial Determination
On January 15, 1959, DBP’s sales agreement was registered and annotated on the master title, which at that time was still effective as the subdivision plan was not yet annotated on the new certificate of title covering the 159 lots. The Supreme Court, in 1961, held that DBP’s registration of the sales agreement was valid and binding against third parties, including the Nicandros, who only filed adverse claims after DBP’s annotation.
Enactment of Republic Act No. 3147 and Its Effect
In 1961, Republic Act No. 3147 amended Section 13 of the DBP Charter, explicitly authorizing DBP to undertake housing projects for its employees. The amendment was a curative statute intended to clarify and validate DBP's authority to acquire lands for such purposes amid existing legal challenges.
Legal Issues: Standing and Validity of Sale
The DBP contended that the Nicandro spouses lacked standing to question the legality of the earlier sale since their rights arose subsequently and rescission of contract required mutual restitution, which the spouses could not perform as they were not parties to the original contract. The spouses' standing was upheld based on the established exception that a party prejudiced by a contract, even if not originally bound, can challenge its validity if detriment arises.
Retroactivity of Amending Statute
The pivotal issue before the Court was whether the 1961 amendment had retroactive effect validating the original sale notwithstanding the legal infirmities at the time of the transaction. The Court recognized that while curative statutes generally have retrospective effect to cure defects, such effect cannot impair vested rights. Therefore, the question was whether the Nicandro spouses possessed vested rights.
No Vested Rights in Favor of Respondents
The Court found no vested rights in the Nicandro spouses because registration—under the Torrens system being the operative act that confers validity to a property transfer—was in favor of DBP prior to the Nicandros’ adverse claim registration. Thus, the Nicandros’ rights were contingent and incomplete, not amounting to vested rights immune from legislative curative action.
Impact of Prior Supreme Court Ruling and Torrens System Principles
The Supreme Court’s earlier decision confirmed DBP’s registered interest as superior. The Nicandros' registration attempts failed, rendering their rights unenforceable against third parties. The Torrens system’s principle that registration is essential to effect ownership transfer was emphasized, reinforcing DBP’s priority.
Final Resolution and Orders
The Court reversed
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Case Syllabus (G.R. No. L-28774)
Facts of the Case
- On March 18, 1955, the Board of Governors of the Development Bank of the Philippines (DBP) appropriated P1,204,000.00 by Resolution No. 2004 to purchase land for a housing project intended for its employees.
- The housing project plan contemplated that DBP would buy land, build houses, and sell these to employees on a 20-year installment plan.
- On October 20, 1955, DBP purchased 91,188.30 square meters, comprising 159 lots, in the Diliman Estate Subdivision, Quezon City, from the People’s Homesite and Housing Corporation (PHHC) for P802,155.56, paying P400,000.00 as a down payment.
- The lots sold to DBP, including Lots 2 and 4 (the subject of the lawsuit), were part of a larger parcel under master title TCT No. 1356, with subdivision plans pending approval; therefore, the sales agreement was not immediately registered.
- DBP Auditor Isidro Bunag expressed doubts about the legality of the acquisition under Sec. 13 of Republic Act No. 85, which the Auditor General forwarded to the Office of the President, then referred to the Secretary of Justice in July 1957.
- Without DBP’s knowledge, on June 24, 1957, a separate title (TCT No. 36533) was issued to PHHC for the 159 lots including Lots 2 and 4.
- In September 1958, PHHC officials, including Benjamin Gray and Atty. Roman Cariaga, informed Honesto G. Nicandro (respondent) that Lots 2 and 4 were part of lots sold to DBP.
- On September 29, 1958, PHHC requested the exclusion of Lots 2 and 4 from the sale with DBP, which DBP refused in October 1958, maintaining the lots’ inclusion.
- Nonetheless, PHHC approved the order of payment for Lots 2 and 4 in favor of Honesto and Elisa Nicandro, who paid down payments representing 10% of the lot prices in October 1958.
- PHHC, through General Manager Bernardo Torres, also approved sales to a “Garcia Group” on overlapping lots without DBP’s knowledge.
- The deeds of sale for Lots 2 and 4 in favor of Nicandro spouses were prepared and signed by PHHC officials in November and December 1958, though originals were retained by PHHC and not released to the Nicandros.
- On January 15, 1959, the original sales agreement between PHHC and DBP was registered and annotated on TCT No. 1356, binding third parties.
- On January 20, 1959, the Secretary of Justice issued Opinion No. 16 concluding that DBP had no power to acquire the property for the housing project, violating Sec. 13 of RA 85.
- Subsequent registration attempts by the Nicandros failed due to procedural deficiencies; adverse claims were filed and registered on the title.
- The Office of the President directed DBP to revoke its prior resolution concerning the land purchase.
- The DBP requested annotation of the sales agreement on the new certificate of title, TCT No. 36533, after recognizing the subdivision plan approval.
- The Land Registration Commission ruled that the Nicandro spouses were better entitled to the certificates of title for Lots 2 and 4; DBP appealed to the Supreme Court.
- The Supreme Court in 1961 reversed the Land Registration Commission, ruling the earlier registered sale to DBP bound third parties, including Nicandros.
- In 1961, the Secretary of Justice also declared any sale by DBP of the 159 lots void.
- Republic Act No. 3147 was enacted in 1961 amending Sec. 13 of the DBP Charter to expressly authorize housing projects for DBP employees.
- In November 1961, the Nicandro spouses filed suit against DBP and PHHC to rescind the sale to the DBP, cancel titles, and claim damages, alleging illegality under the Charter.
- PHHC invoked defenses alleging bad faith and improper conduct of the Nicandros in acquiring the lots.
- The Court of First Instance ruled the sale of Lots 2 and 4 to DBP null and void for violating Sec. 13, with no order for return of prices paid.
- The Court of Appeals affirmed the trial court decision in 1968.
Issues Presented
- Whether the Nicandro spouses had legal personality and standing to question t