SECOND DIVISION

[G.R. No. L-28774. February 28, 1980.]

DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner, v. THE COURT OF

APPEALS, HON. HERMOGENES CALUAG, Judge of the Court of First Instance of
Rizal, and SPOUSES HONESTO G. NICANDRO and ELISA F.
NICANDRO, Respondents.

DECISION

ANTONIO, J.:

Petition for certiorari to set aside the decision of the Court of Appeals, 1 dated February
29, 1968, in Honesto G. Nicandro, Et. Al. v. Development Bank of the Philippines and
People’s Homesite and Housing Corporation (CA-G.R. No. 34518-R), affirming the
decision of the trial court in Civil Case No. Q-6091.

The facts are summarized as follows: chanrob1es virtual 1aw library

On March 18, 1955, the Board of Governors of petitioner-appellant DBP (hereinafter

referred to as petitioner or simply DBP for brevity and convenience), Under its
Resolution No. 2004, appropriated the sum of P1,204,000.00 to purchase land for a
housing project for its employees. It was contemplated that the Bank itself will build
houses on the land to be acquired and these will then be sold to employees who do not
yet own homes and who shall pay for them in monthly installments over a period of
twenty (20) years. 2

Pursuant thereto, on October 20, 1955, the DBP bought 91,188.30 square meters of
land, consisting of 159 lots, in the proposed Diliman Estate Subdivision, West Triangle,
Quezon City, of the People’s Homesite and Housing Corporation (PHHC). Of the price of
P802,155.56, the DBP paid the amount of P400,000.00 as down payment. The area
sold was then part of a bigger parcel embraced under TCT No. 1356 and because the
subdivision plan for the area (including the 159 lots sold to the DBP) was still pending
approval by the Bureau of Lands, the sales agreement between the DBP and the PHHC
was not presented immediately for registration by the DBP. Lots 2 and 4, which form
part of said 159 lots, are the properties involved in the instant litigation. 3

In a memorandum to the Auditor General dated December 6, 1955, Mr. Isidro Buñag,
the DBP Auditor, expressed his doubts as to whether the DBP could acquire the
property in question for the intended purpose of a housing project in the light of the
then Section 13 of Republic Act No. 85 (Exhibit 12A-DBP).

The Auditor General endorsed the matter to the Office of the President, Malacañang,
Manila, and on July 30, 1957 the Executive Secretary, in turn, referred the question (re
legality of the acquisition of the lots in question by the DBP) to the Secretary of Justice
for opinion (Exhibit 13-DBP). chanrobles.com:cralaw:red

Meanwhile, on June 24, 1957, without the knowledge of the DBP, a portion of the
property covered by the master title, TCT No. 1356, including the 159 lots sold to the
DBP, were segregated therefrom and a separate certificate of title, TCT No. 36533, was
issued for the segregated portion in the name of PHHC. However, the subdivision plan
on which the segregation was based was not annotated on the master title, TCT No.
1356, nor was the fact that the latter was cancelled pro tanto by TCT No. 36533 as to
the 159 lots (Exhibit 15-DBP).

Atty. Roman Cariaga, Chief of the Sales Division of the PHHC, testified that on or before
September 29, 1958, he was summoned by Benjamin Gray, Secretary to the Board of
Directors of the PHHC, and, while in the latter’s room, was introduced to respondent
appellee, Honesto G. Nicandro. Gray then requested Cariaga to prepare the order of
payment for Lots 2 and 4 in favor of Honesto G. Nicandro. Cariaga informed them (Gray
and Nicandro) forthwith that both lots were part of those already sold to the DBP.

On September 29, 1958, Mr. Sergio Ortiz Luis, a PHHC Director, and, at the time,
Acting Manager of the PHHC, wrote to the Chairman of the DBP that Lots 2 and 4, Block
WT-21, had been inadvertently included among the lots sold to the DBP and for said
reason requested that the two lots be excluded from the sale (Exhibit 1-DBP).

In his reply letter dated October 16, 1958, Chairman Gregorio S. Licaros of the DBP
refused to exclude Lots 2 and 4 as requested, insisting that they form part of the 159
lots sold to the DBP as shown in the Sales Agreement dated October 20, 1955 and for
which DBP has made a partial payment of P400,000.00 (Exhibit 2-DBP). On October 14,
1958, Acting Manager Sergio Ortiz Luis, without waiting for the reply of DBP Chairman
Licaros, approved the order of payment for Lots 2 and 4, Block WT-21, in favor of
appellees Honesto G. Nicandro and Elisa F. Nicandro who paid the sum of P700.56 and
P660.00 as down payment, representing 10% of the price of the lots.

On October 28, 1958, Mr. Angel G. de la Paz, Chairman of the DBP Housing Project
Committee, also wrote to the Board of Directors of the PHHC, as follows: chanrobles.com.ph : virtual law library

"In connection with your inquiry whether this bank will proceed with the purchase of the
employees housing project site in the West Triangle Subdivision, Quezon City, please be
advised that this Bank will definitely purchase the area allocated to it by that
Corporation.

"During a convocation held yesterday, at which Mr. G.S. Licaros, our new Chairman,
spoke, this question was brought by Chairman Licaros that this housing project will go
through, to be financed either by this Bank or by other financial institutions in case the
Secretary of Justice renders an adverse opinion as to its legality." (Exhibit 3-DBP).

On October 31, 1958, without the knowledge o f the DBP, Bernardo Torres, the General
Manager of the PHHC, also approved the Order of Payment for 39 lots (comprised also
in the 159 lots already sold to the DBP) in favor of the so-called Garcia Group. Among
these was an Order of Payment for Lot 2, Block WT-21 (which was already reawarded
to respondent-appellee Honesto G. Nicandro) in favor of Bernabe G. Garcia, who paid
also the 10% down payment of P700.50 (Exhibits 7-DBP and 11-DBP).
On November 3, 1958, the PHHC accepted payment in full of Lots 2 and 4 from
respondents spouses Honesto G. Nicandro and Elisa F. Nicandro (hereinafter referred to
simply as respondent spouses).

On November 6, 1958, Honesto G. Nicandro went to see Atty. Roman Cariaga, Chief of
the Sales Division, PHHC, and demanded that the corresponding deeds of sale for Lots
2 and 4 be executed in their favor. Atty. Cariaga accompanied him to the General
Manager, Bernardo Torres, and in the presence of Mr. Nicandro, the former asked Mr.
Torres whether the deeds of sale for the two (2) lots requested by Mr. Nicandro should
be prepared considering that the DBP has not yet relinquished its right thereon.
However, the General Manager told him to go ahead and prepare the deeds of sale.

On November 7, 1958, a deed of sale over Lot 2 in favor of Honesto G. Nicandro and
another deed of sale over Lot 4 in favor of his wife, Elisa F. Nicandro, were prepared by
the Sales Division of the PHHC under Atty. Cariaga.

On November 13, 1958, Mr. Bienvenido C. Olarte, Homesite Management Chief, PHHC,
wrote to the General Manager a memorandum which in part reads as follows: chanrobles virtual lawlibrary

"Respectfully forwarded to the Board of Directors PHHC, Quezon City, for its information
and consideration.

"The memorandum was prepared in view of the sale of Lots 2 and 4, Block WT-21 to
Honesto and Elisa Nicandro who have paid in full their purchase prices, and the
acceptance from Gov. Garcia of deposits for 10 lots in Block WT-21, 14 lots in WT-22,
notwithstanding previous sale of all these lots to the DBP under conditional contract to
sell. The DBP made initial payment of P400,000.00 on the 159 lots in the RFC (DBP)
area, leaving an unpaid balance of P402,155.56. The employees of the DBP will
definitely push through the purchase as confirmed in the letters of Messrs. Licaros, DBP
Chairman and Angel de la Paz, DBP Housing Project Committee Chairman, both dated
October 16 and 29, 1958, respectively.

"The deposits made for the 39 lots are subject to final arrangement of the purchase of
the 159 lots by the DBP employees. However, as to the sale of Lots 2 and 4, Block WT-
21, it is recommended that the execution of the final deeds of sale be suspended until
after the aforestated arrangement shall have been determined." (Exhibit 7-
DBP. Emphasis supplied.)

Despite the aforesaid recommendation of Mr. Olarte, the deeds of sale for Lots 2 and 4
in favor of respondent spouses were prepared and submitted to the board of Directors
of the PHHC on December 17, 1958.

Thereafter, the General Manager, Mr. Bernardo Torres, signed the deeds of sale over
Lots 2 and 4 in favor of respondent spouses. Notwithstanding this fact, however, the
originals of said deeds of sale (Exhibits 10-DBP and 10-A-DBP) were retained at the
PHHC and were never released to the respondent spouses.

On January 15, 1959, the Sales Agreement dated October 20, 1955 between the PHHC
and the DBP (covering the 159 lots including Lots 2 and 4 in question) was presented
for registration to the Register of Deeds of Quezon City. It was entered in the day book
and annotated on TCT No. 1356 as a "sale of an unsegregated portion" with the note
"new titles to be issued upon presentation of the corresponding subdivision plan and
technical descriptions duly approved by the authorities." (Exhibit 15.)

On January 20, 1959, pursuant to the Executive Secretary’s reference of the matter to
the Secretary of Justice for an opinion, as mentioned earlier, the latter issued Opinion
No. 16, s. of 1959, holding that —

"Premises considered, it is our opinion that the RFC (DBP) has no express or incidental
power to undertake the housing project under consideration and that the same is
incongruous with, if not a clear violation of, the prohibition contained in Section 13 of
Republic Act No. 85." (Annex "A", Complaint.)

On February 16, 1959, respondent Honesto G. Nicandro attempted to register the sale
of Lots 2 and 4 in his favor by presenting copies of the deeds of sale in their favor (as
mentioned earlier, the originals were retained by the PHHC and were never released)
before the Register of Deeds of Quezon City, but registration was denied because: (1)
the deeds of sale were only photostatic copies; (2) the consent of the GSIS (to whom
the whole property was mortgaged) to the sale is not shown therein; and (3) the deeds
of sale lacked the necessary documentary stamps. On the following day, February 17,
affidavits of adverse claims on Lots 2 and 4 were filed by the respondents and these
were registered and annotated on TCT No. 36533 (Exhibit 15-DBP).

On February 17, 1959, on the basis of the afore-mentioned Opinion No. 16, s. of 1959,
of the Secretary of Justice, the Office of the President addressed a memorandum to the
Board of Governors of the DBP directing it to revoke Resolution No. 2004 dated March
18, 1955. 4

On March 6, 1959, upon learning that the required subdivision plan of the 159 lots sold
to it were already submitted and duly recorded on TCT No. 36533, the DBP forthwith
requested the annotation of its sales agreement dated October 20, 1955 covering the
lots in question on TCT No. 36533, and as a consequence, the Register of Deeds
transferred the annotation of said sales agreement appearing on TCT No. 1356 to the
new certificate of title, TCT No. 36533. 5

As the DBP’s request for issuance of new certificates of title for Lots 2 and 4 was being
opposed by the respondent spouses and unable to decide as to who should be issued
certificates of title for the two lots, the Register of Deeds of Quezon City referred the
matter on consulta to the Land Registration Commission, where it was docketed as In
Re Consulta No. 250. In a resolution dated July 25, 1959, the Land Registration
Commission held that respondent spouses Honesto G. Nicandro and Elisa F. Nicandro
were better entitled to the issuance of certificates of title for Lots 2 and 4. After its
motion for reconsideration of the resolution was denied, the DBP promptly appealed the
decision to this Court.
chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

On April 29, 1961, resolving DBP’s appeal of In Re Consulta No. 250, 6 this Court held
that the annotation made on January 15, 1959 of the sales agreement in favor of the
DBP on TCT No. 1356 constituted sufficient registration to bind third parties, thereby
reversing the resolution of the Land Registration Commission of July 25, 1959, to the
effect that the annotation on TCT No. 1356 of the sales agreement between the PHHC
and the vendee DBP did not constitute sufficient registration to bind innocent third
parties (referring to the Nicandros), in favor of the appellees.

Meanwhile, prior to the aforesaid decision of this Court, on March 14, 1960, in reply to
the query of the Board of Governors of the DBP whether the Bank can sell the 159 lots
on a cash basis to its employees, the Secretary of Justice issued Opinion No. 40,
holding that the deed of sale covering said lots is not only ultra vires but is also illegal
and void and, for that reason, the DBP cannot sell the same to its employees even for
cash.

On June 17, 1961, Republic Act No. 3147 was enacted, amending certain provisions of
the DBP Charter (Republic Act No. 85), among which was Section 13 which, as Section
23 in the amended law, now reads as follows: jgc:chanrobles.com.ph

"No officer or employee of the bank nor any government official who may exercise
executive or supervisory authority over the said bank either directly, or indirectly, for
himself or as representative or agent of others shall, except when the same shall be in
the form of advances appropriated or set aside by the Bank itself in order to provide for
housing for the benefit of its officials and employees, borrow money from the Bank, nor
shall become a guarantor, endorser or surety for loans from the said bank to the
others, or in any manner be an obligor for moneys borrowed from the said Bank. Any
such officer or employee who violates the provisions of this section shall be immediately
removed by competent authority and said officer or employee shall be punished by
imprisonment of not less than one year nor exceeding five years and by a fine of not
less than one thousand nor more than five thousand pesos." (Emphasis supplied.) 7

On November 10, 1961, respondent spouses then filed the case at bar against the DBP
and the PHHC, to rescind the sale of Lots 2 and 4 by PHHC in favor of DBP, to cancel
the transfer certificate of title that may have been issued covering the two lots to DBP,
and to order DBP to pay damages to the plaintiffs. It was alleged that the acquisition of
Lots 2 and 4 by the DBP is not only in excess of its corporate powers but also a
violation of the express prohibition of Section 13 of its Charter, Republic Act No. 85, as
amended. Against the PHHC, respondent spouses alleged that in the alternative event
that the case against the DBP will not prosper, that PHHC be adjudged to pay to the
plaintiff the "value which the said properties may have on the date of decision . . ." cralaw virtua1aw library

It is important to note that the PHHC alleged as defenses the actuations of the plaintiffs
(Nicandro spouses) which have been characterized by bad faith, thus: chanrob1es virtual 1aw library

(a) that notwithstanding the information given by the defendant to the plaintiffs that
the question of legality of the acquisition by the DBP of lots has not been resolved,
plaintiffs insisted in paying on November 3, 1958, the full purchase price of the lots in
question;

(b) that notwithstanding the understanding between the defendant and the plaintiffs
that no final deed of sale over the lots in question will be executed until the question of
legality of the acquisition of lots by the DBP is resolved, the plaintiffs insisted in the
execution of the final deed of sale to which the defendant agreed with the
understanding that the latter will be given until about December 12, 1959 to obtain a
clearance from the GSIS of the mortgage on the lots in question, and that, in the
meantime, the final deed of sale will not be presented to the Register of Deeds for
registration; and

(c) that without a copy of the final deed of sale being officially released, the plaintiffs,
one way or another, succeeded in obtaining assigned copy of the aforesaid deed of sale
which they presented to the Register of Deeds for registration in violation of the
understanding mentioned in the immediately preceding paragraph (b) above.

In its decision, the respondent Court of First Instance of Rizal held that the sale of Lots
2 and 4, Block WT-21 of the Diliman Estate Subdivision, to the DBP is null and void, for
being in violation of Section 13 of the DBP Charter, ignoring in toto the other defenses.
No provision at all was made for return of the price that was paid to PHHC for the two
lots in question. A motion for reconsideration having been filed and denied, the DBP
appealed said decision to the Court of Appeals.

On February 29, 1968, the Court of Appeals affirmed the decision of the trial court.
chanrobles.com:chanrobles.com.ph
chanrobles virtualawlibrary

In their brief, the DBP maintains: chanrob1es virtual 1aw library

(1) that the Court of Appeals erred in holding that the respondent spouses have legal
personality to question the legality of the sale in question because: chanrob1es virtual 1aw library

(a) the spouses have no relation to the contracting parties not to the property itself at
the time the transaction took place; 8

(b) the question of whether or not a corporation has acted without authority or has
abused its authority or has acted in contravention of law cannot be raised by one whose
rights accrued subsequent to the transaction in question; 9

(c) rescission of contract requires mutual restitution. Hence, since the respondent
spouses are neither principally nor subsidiarily bound under the sales agreement
between the PHHC and the DBP, they are not in a position to make any restitution on
the questioned contract and, consequently, they have no right to ask for its annulment;
10 and

(d) the respondent spouses, being second vendees of Lots 2 and 4, merely stepped into
the shoes of the vendor, PHHC, and their right to question the transaction cannot rise
above that of the PHHC. Since the contract between the PHHC and the DBP has been
fully executed and the DBP’s right thereto has been perfected by the registration of the
sales agreement in its favor, the PHHC is now in estoppel to question the transaction. A
fortiori the spouses are similarly bound from doing so; and

(2) that when Congress amended Section 13 of its Charter on June 17, 1961, five (5)
years after the questioned transaction, it in effect ratified the DBP acquisition of said
lots from the PHHC, and dispelled whatever doubts existed as to the power of the DBP
to acquire the lots in question, unless some interest or right which would be adversely
affected has accrued in favor of third parties. On the latter question, the DBP claims
that since the Supreme Court itself has recognized the rights of the DBP over and
above those of the respondent spouses over the two lots, the latter have no interest
that will bring it out of the curative effects of the amendment.

The general rule is that the action for the annulment of contracts can only be
maintained by those who are bound either principally or subsidiarily by virtue thereof.
11 There is, however, an exception to the rule. This Court, in Teves v. People’s
Homesite and Housing Corporation, 12 held that "a person who is not obliged principally
or subsidiarily in a contract may exercise an action for nullity of the contract if he is
prejudiced in his rights with respect to one of the contracting parties, and can show the
detriment which could positively result to him from the contract in which he had no
intervention." We applied this exception to the rule in Yturralde v. Vagilidad; 13 De
Santos v. City of Manila; 14 and Bañez v. Court of Appeals. 15 It cannot be denied that
respondent spouses stand to be prejudiced by reason of their payment in full of the
purchase price for the same lots which had been sold to the petitioner by virtue of the
transaction in question. We, therefore, hold that respondent spouses have sufficient
standing to institute the action in the case at bar.

Since the case may be resolved on the issue of retroactivity of the amendment of
Section 13 of Republic Act No. 85, by Republic Act No. 3147, this Court does not find it
necessary to resolve whether or not the sale to the DBP was void, pursuant to Section
13 of Republic Act No. 85. Even assuming that the DBP had no authority initially to
acquire the lots in question for the housing project of the corporation for its employees,
the important issue is whether or not the Court of Appeals erred in not granting
retroactive effect to Republic Act No. 3147 amending Republic Act No. 85, which
authorizes the DBP to provide for housing for the benefit of its officials and employees.
The Court of Appeals, in effect, held that the amendment "cannot validate the sale of
Lots 2 and 4 in favor of the DBP because the rights of the plaintiffs have already
accrued before its amendment" and section 13 as subsequently amended contains no
express provision of retroactive application. It necessarily follows that such amended
section cannot be given retroactive effect.

It may be stated, as a general rule, that curative statutes are forms of "retrospective
legislation which reach back on past events to correct errors or irregularities and to
render valid and effective attempted acts which would be otherwise ineffective for the
purpose the parties intended." They are intended to enable persons to carry into effect
that which they have designed and intended, but which has failed of expected legal
consequences by reason of some statutory disability or irregularity in their action. They
thus make valid that which, before enactment of the statute, was invalid. 16 There
cannot be any doubt that one of the purposes of Congress when it enacted Republic Act
No. 3147, by amending Section 13 of Republic Act No. 85, was to erase any doubts
regarding the legality of the acquisition by the DBP of the 159 lots from the PHHC for
the housing project which it intended to establish for its employees who did not yet
have houses of their own. This is obvious from the fact that Republic Act No. 3147 was
enacted on July 17, 1961, at a time when the legality of the acquisition of the lots by
the DBP for its housing project was under question. It is, therefore, a curative statute
to render valid the acquisition by the DBP of the 159 lots from the PHHC. Since such
curative statute may not be given retroactive effect if vested rights are impaired
thereby, the next question then is whether or not the respondent spouses have any
vested right on the property which may be impaired by the statutory amendment. It is
admitted in the partial stipulation of facts that after the second sale of Lots 2 and 4 to
Honesto and Elisa Nicandro on November 7, 1958 by the PHHC, the question arose as
to who between the DBP, which purchased three (3) years earlier the afore-mentioned
lots on October 20, 1955, and the Nicandro spouses were better entitled to the issuance
of the certificates of title for Lots 2 and 4 on the basis of entries made on the day book
and annotations on the old and new certificates of title covering the lots in question.

In the decision of this Court of April 29, 1961, in Register of Deeds of Quezon City v.
Nicandro, Et Al., 17 it held that: (a) the deed of sale of October 20, 1955 by the PHHC
to the DBP of the 159 lots is "clearly, a registrable document" ; and (b) that the
annotation of the deed of sale in favor of the DBP on TCT No. 1356 on January 15,
1959 constituted sufficient registration to bind third parties and, consequently, ordered
the Register of Deeds of Quezon City to issue the corresponding certificate of title in
favor of appellant DBP. This Court further stated: chanrobles virtual lawlibrary

"Neither can it be claimed that the annotation of the deed of sale in favor of the DBP on
TCT No. 1356, under date of January 15, 1959, does not constitute sufficient
registration to bind third parties. True it may be that when the instrument was
presented to the Register of Deeds for registration, and in fact it was so inscribed in the
day book, the 159 lots subject of the sale were already covered by separate certificate
of title, TCT No. 36533. It must be remembered, however, that on said date, January
15, 1959, TCT No. 1356 which originally covered the whole tract of land, including the
159 lots, was yet uncanceled nor any inscription appeared thereon to the effect that a
new certificate was already issued in respect to the said 159 lots. Evidently, when the
DBP presented the deed of sale for registration, there were two subsisting titles
covering the 159 lots subject of the sale. As TCT No. 1356, being uncanceled, did, for
all intents and purposes, still cover the 159 lots, the annotation thereon of the sale to
the DBP is valid and effective. For this reason, the Register of Deeds acted correctly in
transferring the inscription from TCT No. 1356 to TCT No. 36533 upon discovery that
the subdivision plan had already been approved, submitted and annotated, and a new
certificate of title issued. Even on this score alone, considering that the adverse claim of
the Nicandros was annotated on TCT No. 35633 only on February 17, 1959, whereas
the sale to the DBP was registered as of January 15, 1959, the certificate of title on the
two lots in controversy should be issued in favor of the first registrant, the DBP.

"There is, however, another reason why the Commissioner’s ruling must be set aside.

"Although admittedly we have here a case of double sale, actually this is not an
instance of double registration. As above stated, only the deed of sale in favor of
appellant was inscribed on the certificate of title covering the lots in question. The
Nicandros were not able to register their deeds of sale; instead, informed of the prior
registration by the DBP, they sought to protect their right by filing adverse claims based
on the said deeds of sale under Section 110 of Act 496, which provides: chanrob1es virtual 1aw library

‘SEC. 110. Whoever claims any right or interest in registered land adverse to the
registered owner, arising subsequent to the date of the original registration, may, if no
other provision is made in this Act for registering the same, make a statement in
writing setting forth fully his alleged right or interest, and how or under whom acquired,
and a reference to the volume and page of the certificate of title of the registered
owner, and a description of the land in which the right or interest is claimed. . . .’

"It is clear from the above quotation that for this special remedy (adverse claim) to be
availed of, it must be shown that there is no other provision in the law for registration
of the claimant’s alleged right or interest in the property. The herein claim of the
Nicandros is based on a perfected contract of sale executed in their favor by the lawful
owner of the land. Considering that the Land Registration Act specifically prescribes the
procedure for registration of a vendee’s right on a registered property, (Section 57, Act
496) the remedy provided in Section 110, which was resorted to and invoked by
appellees, would be ineffective for the purpose of protecting their said right or interest
on the two lots.

"WHEREFORE, the Resolution appealed from is hereby set aside, and the Register of
Deeds of Quezon City ordered to issue the corresponding certificate of title in favor of
appellant DBP. Without costs. So ordered." (At pp. 1341-1342. Emphasis supplied.)

There is evidence to the effect that prior to or during the preparation of the
corresponding deeds of sale for lots 2 and 4 in their favor, the private respondents
knew of the previous acquisition of said property by the DBP. Sometime in September
1958, the Chief of the Sales Division of the PHHC informed Honesto G. Nicandro that
Lots 2 and 4 were part of the 159 lots previously sold by the PHHC to the DBP. On
November 6, 1958, when Nicandro asked that the corresponding deeds of sale over
Lots 2 and 4 be prepared, the same Chief of the Sales Division expressed his misgivings
by telling the General Manager of the PHHC, in the presence of Nicandro, that the two
lots that the Nicandros wanted to buy had already been sold to the DBP and the latter
had not yet relinquished its right over said property. 18 In any event, the Nicandros
were not able to register their deeds of sale over Lots 2 and 4. Before the registration
of a deed or instrument, a registered property is not bound thereby insofar as third
persons are concerned. Registration is the means whereby the property is made subject
to the terms of the instrument. It is the operative act that gives validity to the transfer
or creates a lien upon the land.19 In Register of Deeds of Quezon City v. Nicandro,
supra, this Court held that the registration of the sales agreement between the PHHC
and the DBP and the annotation thereof on the old TCT No. 1365 constituted a prior
valid registration of its rights to the properties sold.

Under such circumstances, since under the Torrens system, registration is the operative
act that gives validity to the transfer, 20 and it was the sale to the DBP that was
registered and transfer certificate of title issued to the DBP, private respondents could
not have, therefore, acquired any complete, absolute and unconditional right over the
property. They had no vested rights on the property at the time of the enactment of
Republic Act No. 3147. A "vested right is one which is absolute, complete, and
unconditional, to the exercise of which no obstacle exists, and which is immediate and
perfect in itself and not dependent upon a contingency." 21 To be vested in its accurate
legal sense, a right must be complete and consummated, and one of which the person
to whom it belongs cannot be divested without his consent. 22

During the pendency of this case, the People’s Homesite and Housing Corporation
(PHHC) has been dissolved and its powers, functions, balance of appropriations,
records, assets, rights and chooses in action, subject to certain conditions, were
transferred to the National Housing Authority. 23 Considering that this case has been
pending in the courts since 1961, and the constitutional right of the parties to a speedy
disposition of their case, this Court hereby renders judgment herein, without awaiting
the substitution of the PHHC by the National Housing Authority.
WHEREFORE, in view hereof, judgment is hereby rendered: (1) reversing the judgment
of the Court of Appeals in CA-G.R. No. 34518-R, dated February 29, 1968, and
dismissing the complaint filed by the respondent spouses for "rescission of the sale" ;
and (2) ordering the Development Bank of the Philippines to reimburse to the Nicandro
spouses the payments which they made to the PHHC in connection with said lots, with
interest at the legal rate from November 6, 1958 until fully paid, which amount shall be
deducted from the balance of the purchase price of the property. No special
pronouncement as to costs.

SO ORDERED.

Barredo and Aquino, JJ., concur.

Concepcion, Jr., J., took no part.

Abad Santos, J., is on leave.

De Castro and Melencio-Herrera, J., Members of the First Division, were designated to

sit in the Second Division.

Endnotes:

1. Composed of Justice Hermogenes Concepcion Jr. (now Associate Justice of this

Court) as ponente, and Justices Juan P. Enriquez and Angel H. Mojica.

2. Partial Stipulation of Facts, Record on Appeal, p. 45.

3. Ibid., Record on Appeal, p. 43.

4. Partial Stipulation of Facts, Record on Appeal, p. 48.

5. Ibid., Record on Appeal, p. 45.

6. L-16448, April 29, 1961, 1 SCRA 1334.

7. Partial Stipulation of Facts, Record on Appeal, p. 48.

8. Cook v. McMicking, No. 8913, March 3, 1914, 27 Phil. 10; Harding v. Commercial
Union Assurance Co., No. 12707, Aug. 10, 1918, 38 Phil. 464.

9. 19 Corpus Juris Secundum, pp. 441-443.

10. Santander, Et. Al. v. Villanueva, Et Al., L-6184, Feb. 28, 1958, 103 Phil. 1.

11. Article 1397, Civil Code.

12. L-21498, June 27, 1968, 23 SCRA 1141, 1147-1148.

13. L-20571, May 30, 1969, 28 SCRA 393, 398.

14. L-21677, June 29, 1972, 45 SCRA 409, 416.

15. L-30351, Sept. 11, 1974, 59 SCRA 15, 21.

16. Wichelman v. Minser, 83 NW 2d 890; Earnik v. Board of County of Com’rs of Uncle

County, 341 P. 2d 467, 471; Fullilone v. U.S. Cas. Co., 129 So. 2d 816, 827; 10 A,
Words & Phrases 420.

17. L-16448, April 29, 1961, 1 SCRA 1334.

18. Thus, Atty. Roman Cariaga, Chief, Sales Division, of the PHHC, testified as
follows:jgc:chanrobles.com.ph

"‘COURT: chanrob1es virtual 1aw library

P. You also claim that when you called the attention of the Manager that these two lots
here which the PHHC wanted to sell, to the Nicandros have already been sold, you claim
to have given that manifestation in the presence of the Nicandros and within their
hearing?

A. Yes, Your Honor.

P. What was his reaction, did he comment anything, did he say ‘I am willing to buy it at
my own risk?’ You claim that Mr. Nicandro was present when you have informed the
Manager and called his attention that these two lots that the Nicandros wanted to buy
have already been sold to the Development Bank of the Philippines?

R. That is right.

P. What was the reaction of the Nicandros?

R. He was there and he argued with the Manager. That is the reaction of Mr. Nicandro.
He explained his arguments to the Manager why the deed of sale should be given due
course.

P. In spite of the information given by you that the two lots were already sold to the
DBP?

R. Yes, Your Honor.

P. What was the reason he alleged why the People’s Homesite & Housing Corporation
should proceed with the sale?

R. I cannot remember his exact words but in substance I think he said that if the deeds
of sale were executed and released to him it would give him more bargaining power
with the DBP’. (T.s.n. pp. 31-33, Hearing of Feb. 8, 1963)" (Page 47, Brief for
Defendant-Appellant DBP, in CA-G.R. No. 34518-R, page 36, Rollo).
19. Section 51, Act No. 496; Vargas v. Tancioco and Guerrero, No. 45899, April 12,
1939, 67 Phil. 308.

20. Paraiso v. Camon, L-13919, Sept. 18, 1959, 57 O.G. 1229.

21. Hutton v. Autoridad Sobre Hogares a la Capital (DC Puerto Rico), 78 F. Supp. 988;
16 Am. Jur. 2d 421.

22. Merchants Bank v. Garrad, 158 G. 867, 124 SE 715, 38 ALR, 102.
DBP V. CA – G.R. NO. 28774
Facts:

DBP bought 91,188.30 square meters of land, consisting of 159 lots, in the proposed Diliman Estate
Subdivision of the PHHC. However, the sale of the lots to DBP, Lots 2 and 4, which form part of said 159
lots, were still sold by PHHC to the spouses Nicandro, for which 2 deeds of sale were issued to them by
PHHC. Upon learning of PHHC’s previous transaction with DBP, the spouses filed a complaint against
DBP and the PHHC to rescind the sale of Lots 2 and 4 by PHHC in favor of DBP. The CFI held that the
sale of Lots 2 and 4, to DBP is null and void, for being in violation of Section 13 of the DBP Charter.

Issue:

Do the spouses possess the legal personality to question the legality of the sale?

Held:

Yes. The spouses stand to be prejudiced by reason of their payment in full of the purchase price for the
same lots which had been sold to DBP by virtue of the transaction in question.The general rule is that the
action for the annulment of contracts can only be maintained by those who are bound either principally or
subsidiarily by virtue thereof. However, a person who is not obliged principally or subsidiarily in a contract
may exercise an action for nullity of the contract if he is prejudiced in his rights with respect to one of the
contracting parties, and can show the detriment which could positively result to him from the contract in
which he had no intervention.