Tiu vs.

CA (228 SCRA 51 [1993]) – Damages

Petitioner George T. Tiu and his mother, Rosalina Tiu, filed an action for reformation of contract, delivery
of personal property, and damages before the regional trial court against Juan Go and the Spouses Juanito
Lim and Lim Lee Show Fong.

Among the allegations of the complaint, as quoted by the Court of Appeals, are the following:

That plaintiff George Tiu is the registered owner of Two (2) CONDOMINIUM UNITS identified and
described as follows —

UNIT 9-A of the Condominium located on the ninth floor, with an area of 133.48 sq. mts., more or less,
with 3 rooms and 3 comfort rooms, of the Blue Diamond Tower Condominium Project.

UNIT 9-B of the Condominium located on the ninth floor, with an area of 98.26 sq. mts., more or less, with
3 rooms and 3 comfort rooms, of the Blue Diamond Tower Condominium Project" covered by
CONDOMINIUM CERTIFICATE OF TITLE NOS. 4583 and 4584, respectively, of the REGISTER OF DEEDS FOR
THE CITY OF MANILA, copies of which are hereto attached as Annexes "A" and "B", respectively;

That sometime in March, 1986, plaintiff GEORGE TIU and plaintiff ROSALINA TIU, his mother, negotiated
a loan of P300,000.00 with defendant JUAN GO who then asked for a mortgage of the aforesaid
CONDOMINIUM UNITS of plaintiff GEORGE TIU as security for the payment therefor and additional
thereto, a pledge of jewelries and checks from plaintiff ROSALINA TIU;

That in that transaction, defendant JUAN GO agreed to extend the loan without any fixed period of re-
payment and with the further condition that the plaintiffs shall have ample time to pay when demanded
and that they can remain in possession of the said CONDOMINIUM UNITS of plaintiff GEORGE TIU in the
event of mortgage;

That with that agreement, defendant JUAN GO then prepared, based on copies of the CONDOMINIUM
CERTIFICATE OF TITLE NOS. 4583 and 4584 of plaintiff GEORGE TIU earlier given to him, a document
denominated as "DEED OF SALE OF A CONDOMINIUM WITH RIGHT TO REPURCHASE" and another as
"CONTRACT OF LEASE", the former was prepared in favor of defendant JUANITO LIM AND LIM LEE SHOW
FONG, while the latter was prepared in favor of plaintiff GEORGE TIU;

That when the said documents were presented to the plaintiffs by defendant JUAN GO, plaintiff GEORGE
TIU asked him why the documents had to be drawn in that form and why there a need to involve the
defendant spouses JUANITO LIM AND LIM LEE SHOW FONG, both total strangers to the plaintiffs, when
the transaction of loan was purely between GEORGE TIU, plaintiff ROSALINA TIU, his mother, and
defendant JUAN GO, but defendant JUAN GO then said that he cannot carry a real estate property in his
own name, as he is a Chinese National, and that there was no harm in having the covering instruments
made in that way and in that form, as their agreement of mortgage intended to secure the loan will always
prevail, stand and govern over the said instruments, for which reason plaintiff GEORGE TIU agreed to sign
the said DEED OF SALE OF A CONDOMINIUM WITH RIGHT TO REPURCHASE and CONTRACT OF LEASE and
after signing them, plaintiff ROSALINA TIU handed to defendant JUAN GO jewelries with a value of
P200,000.00 and PCIB Check No. 51405, drawn to the sum of P200,000.00, signed by plaintiff ROSALINA
TIU but undated, and another PCIB Check No. 51428, signed by plaintiff ROSALINA TIU but without any
stated amount and date, as additional collateral for the loan just received and which the defendant JUAN
GO then required in their agreement;

That the said DEED OF SALE OF A CONDOMINIUM WITH RIGHT TO REPURCHASE and CONTRACT OF LEASE
were later verified before a notary public and then later registered by the defendants' agent with the
REGISTER OF DEEDS FOR THE CITY OF MANILA and subsequently annotated at the back of CONDOMINIUM
CERTIFICATE OF TITLE NOS. 4583 and 4584, as now evidenced by certified true copies hereto attached as
Annexes "C" and "D", respectively;

That, from the date of execution of said documents, Annexes "C" and "D", to this time of filing, plaintiff
GEORGE TIU, with plaintiff ROSALINA TIU, has remained and continue to remain in possession of said
Condominium Units as lessee;

That plaintiff GEORGE TIU, in executing the said DEED OF SALE OF A CONDOMINIUM UNIT WITH RIGHT
TO REPURCHASE, has merely agreed to a mortgage of the properties, for which reason reformation is
proper, pursuant to the provisions of the Civil code which state, thus —

Art. 1365. If two parties agree upon the mortgage or pledge of real or personal property, but the
instrument states that the property is absolutely sold or with a right to repurchase, reformation is proper.

That the said DEED OF SALE OF A CONDOMINIUM WITH RIGHT TO REPURCHASE executed by plaintiff
GEORGE TIU is in law an equitable mortgage at the same time on two of the specified grounds, for which
reformation is also proper on either one, in accordance with the provisions of the Civil Code, thus —

Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:

(2) When the vendor remains in possession as lessee or otherwise;

(6) In any other case where it may fairly be inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other obligation.

That the real intention of the parties on the transaction covered by the DEED OF SALE OF A
CONDOMINIUM WITH RIGHT TO REPURCHASE being a mortgage, and not a sale, plaintiff GEORGE TIU is
entitled to the redemption of the property as sanctioned by Article 1601 of the Civil Code;

That, after a lapse of the unlawful period of repurchase stated in the DEED OF SALE OF A CONDOMINIUM
WITH RIGHT TO REPURCHASE, plaintiff GEORGE TIU tried to redeem the mortgaged condominium units,
but the defendants refused redemption;

That when plaintiff GEORGE TIU tried to redeem the said properties, plaintiff ROSALINA TIU also
attempted to get back the jewelries and checks given as additional collateral, but defendant JUAN GO
who refused the redemption of the mortgaged properties also refused to return the said jewelries and
checks to plaintiff ROSALINA TIU;

That, after the redemption offer was made by plaintiff GEORGE TIU and the return of the personal
properties were asked by plaintiff ROSALINA TIU, defendant JUAN GO, after filing the blanks in PCIB Check
No. 51405 and PCIB Check No. 51428, presented them to the bank for encashment, but were returned,
for which there is now a demand made upon plaintiff ROSALINA TIU for her to pay for the value thereof;
That defendant JUAN GO and JUANITO LIM have acted with evident bad faith, unlawfully and contrary to
the agreement, and in violation of the plaintiffs' right;

That by reason of the unlawful acts of the said defendants, the plaintiffs suffered sleepless nights, anxiety,
besmirched reputation and social humiliation, for which they now seek the sum of not less than
P100,000.00 as payment for moral damages, plus litigation expenses;

That the plaintiffs were forced to litigate in this action and in so doing, they were compelled to engage
the services of the undersigned counsel for an attorney's fee of P50,000.00;

That as corrective measure to those who unlawfully act contrary to their agreements and in violation of
the rights of others, an exemplary damage to be determined by the Honorable Court is also sought.

The Spouses Lim filed a separate answer with counterclaim, denying the material allegations of the
complaint and, as special and affirmative defenses, claimed that by virtue of George Tiu's failure, as
vendor a retro, to exercise his right to repurchase the condominium units within the period expressly
stipulated in the contract, the spouses thereupon irrevocably acquired the absolute ownership of said
condominium units; that absolute ownership thereof has been consolidated in their names; that the deed
of sale is clear, without any ambiguity, mistake, or imperfection and the deed is and should only be the
repository of the truth of the contractual relations of the parties and no parol evidence is admissible to
alter the stipulations, terms, and conditions of the contract.

The Tius filed a reply and answer to the counterclaim of the Spouse Lim.

On the other hand, Go, in his answer with counterclaim, alleged that while indeed the Tius had incurred
various amounts of loans on different dates, the totality is much greater than the sum of P200,000.00
alleged in the complaint, and which remained unpaid; that the two checks mentioned in Paragraph 8 of
the complaint issued in partial payment on the Tius various loans were dishonored when presented by Go
for encashment; and that the Tius had not offered or given any other security to answer for the payment
of their overdue loans and obligations to Go; that he (Go) is merely one of the instrumental witnesses to,
and has nothing to do with, the Tius' transactions with the Spouses Lim, which should thus be treated
separately and distinctly from the various loan transactions between the Tius and Go; that Go never
committed the supposed acts of misrepresentation in the execution of the deeds as alleged in the
complaint.

As compulsory counterclaim, Go alleged that Rosalina Tiu had secured, on different dates, loan advances
in the total amount of P1,060,000.00, which remained unpaid despite demands.

The Tius filed a reply and answer to the counterclaim of Go, admitting receipt by Rosalina Tiu of the money
stated in respondent Go's counterclaim, but alleging that the loans had already been paid for by tobacco
delivered to Go.

Go subsequently filed a motion for leave to admit third party-complaint for a sum of money and damages
against Joaquin Tiu, alleging that on different dates, the latter had, for himself and in behalf of the Tius,
received the money as loan or advances in connection with the latter's tobacco business, in the total
amount of P700,000.00, for which amount Joaquin Tiu should be held jointly and severally liable with the
Tius.
Over the opposition of the Tius, the motion for leave to admit third-party complaint was granted by the
trial court on June 22, 1988.

Pre-trial was conducted on May 13 and November 14, 1988.

On August 21, 1989, the trial court rendered summary judgment, disposing as follows:

WHEREFORE, judgment is hereby rendered as follows:

1. The complaint of the plaintiffs is DISMISSED;

2. Plaintiff Rosalina Tiu is ordered to pay defendant Juan Go the sum of P1,060,000.00;

3. The third party complaint of Juan Go against Joaquin Go is DISMISSED;

4. The respective counterclaim of the two groups of defendants in their separate answers for moral
and exemplary damages, and for attorney's fees are DENIED and DISMISSED;

5. Plaintiffs George Tiu and Rosalina Tiu are ordered to pay the costs of the present action.

The Tius and Joaquin Tiu (third-party defendant) appealed while the Lims filed a "Motion for
Supplemental/Additional Relief or Decision".

Go filed a motion for reconsideration of the summary judgment.

On October 30, 1989, the trial court issued an order resolving the respective motions of the Lims and Go,
thus —

ACCORDINGLY, the motion of defendants-spouses Juanito Lim and Lim Lee Show Fong, and the Register
of Deeds of the City of Manila is hereby ordered to make the corresponding note of consolidation and
cancel the Condominium Certificates of Title Nos. 4583 and 4584 in the name of George Tiu, and, in lieu
thereof, issue an new Condominium Certificate of Title in the name of Juanito Lim and Lim Lee Show Fong.

The motion for reconsideration by defendant and third party plaintiff is Denied for lack of merit.

The Tius, including Joaquin, appealed, arguing that the trial court erred when it (1) accepted the Deed of
Sale of Condominium Units with Right of Repurchase as the true agreement of the contracting parties;
and (2) held Rosalina Tiu liable for the total amount of P1,060,000.00 claimed by Go.

Go, who also appealed, on the other hand, lamented the failure of the trial court to hold George Tiu and
Joaquin Tiu jointly and solidarily liable with Rosalina Tiu on the amount of P1,060,000.00, and for
dismissing both his third-party complaint and counterclaim for moral and exemplary damages, and for
attorney's fees.

The Court of Appeals (Paras [P], Ordoñez-Benitez, Montenegro, JJ.) upheld and affirmed the summary
judgment rendered by the trial court. Hence, the instant petition anchored on the general assertion that
the decision of respondent Court of Appeals is not in accord with law.
Issue:

Whether or not damages may be recovered

Ruling:

We vote to sustain the appellate court. The summary judgment of the trial court was properly rendered.

A summary judgment is one granted by the court, upon motion by either party, for an expeditious
settlement of the case, there appearing from the pleadings, depositions, admissions, and affidavits that
there are no genuine questions or issues of fact involved (except as to the amount of damages) — and
that, therefore , the moving party is entitled to a judgment as a matter of law (Sections 1, 2, and 3, Rule
34; Justice E.L. Paras, Revised Rules of Court, Ann., Vol. I, 1989 Ed., p. 632).

In the present case, the Tius maintain that there are as yet unresolved questions of fact that preclude
summary judgment, such as whether there was indeed a loan contract between the Tius and Go, which
was secured by a mortgage on the condominium units owned by George Tiu and a pledge by Rosalina Tiu
of her pieces of jewelry and checks; and, assuming the existence of a loan, whether reformation is feasible
in order that the true agreement of the parties on an equitable mortgage may be reflected in the deed of
sale.

In the instant petition, the Tius narrate a series of events and loan transactions between Rosalina Tiu and
Juan Go that would negate, in their opinion, the sale transaction between the Tius and the Spouses Lim,
and would thus necessitate trial on the merits to determine the true agreement or intention of the parties.
The appellate court, however, brushed aside this argument thusly:

Under Rule 34 of the Rules of Court, summary judgment may be rendered by the court upon application
of a party when there is no genuine issue as to any material fact and that the moving party is entitled to
a judgment as a matter of law. By genuine issue is meant an issue of fact which calls for the presentation
of evidence as distinguished from an issue which is sham, fictitious, contrived, set up in bad faith and
patently unsubstantial so as not to constitute a genuine issue for trial. The court can determine this on
the basis of the pleadings, admissions, documents, affidavits and/or counter affidavits submitted by the
parties to the Court. Where the facts pleaded by the parties are disputed or contested, proceedings for a
summary judgment cannot take the place of a trial. (Paz vs. CA, 181 SCRA 26).

The appellate court then continued :

The lower court correctly rendered the summary judgment on the basis of the pleadings, admissions,
documents and affidavits submitted by the parties.

Appellants Tiu admitted not only the due execution, genuineness and authenticity of the Deed of Sale of
Condominium with Right to Repurchase and Contract of Lease (Exhs. C & D). They also admitted that they
read and understood the contents of said deeds before they signed the said documents (tsn., May 13,
1988, p. 26) which deeds were later annotated at the back of Condominium Certificate of Title Nos. 4583
and 4584. They failed to offer any counter-affidavit to controvert the statement of the Notary Public,
Florante C. de la Cruz before whom the parties acknowledged and ratified their agreement that he (de la
Cruz) ascertained the agreement of the parties before preparing the document. In his affidavit, Notary
Public Florante C. de la Cruz swore:
"That on March 25, 1986 George Tiu, together with Sps. JUANITO LIM and LIM LEE SHOW FONG requested
me to prepare a DEED OF SALE of Condominium Units with a Right to Repurchase and a CONTRACT OF
LEASE over the same CONDOMINIUM Units which I notarized as Doc. No. 412; Page No. 64; Book No. 83;
Series of 1986 and Doc. 413; Page No. 64; Book No. 83; Series of 1986 respectively, both documents signed
by the parties therein and their instrumental witnesses, copies of said Deed of Sale and Contract of Lease
is hereto attached and marked as Annex A & B respectively;

"That prior to March 25, 1986 George Tiu accompanied by Juan Go came to my office and requested me
to prepare a Contract of which they would sell the two (2) Condominium Units in favor of Sps. JUANITO
LIM and LIM LEE SHOW FONG with a reservation for Vendor to Repurchase the same within one (1) year
for the amount of FOUR HUNDRED THOUSAND PESOS (P400,000.00), and that Tiu shall remain in
possession for one (1) year from March 1986 but since Sps. Vendees Juanito Lim and Lim Lee Show Fong
were not around, I instructed George Tiu to return with said Sps. Vendees;

"That it was on March 25, 1986, that all the parties mentioned in the documents above mentioned were
present and after determining and ascertaining what they have agreed I prepared said documents after
explaining to them both in Tagalog and in Ilocano; that there is no other Contract of Agreement written
or verbal regarding the subject matter of sale or lease that I prepared except the two (2) aforementioned
DEED OF SALE of a Condominium Units with a Right to Repurchase and the CONTRACT OF LEASE as
aforementioned."

In addition thereto, appellants Tiu admitted that they have updated the real estate taxes due on the
condominium only up to the time of the transaction after which they have never paid anymore the taxes
thereon belying their claim that they continued paying the taxes even after the execution of deeds (tsn.,
Nov. 24, 1988, pp. 15 & 16). Also the said appellants admitted that they did not file an opposition to the
petition for consolidation of ownership and that they filed the present complaint for reformation six (6)
days after receipt of a copy of the said petition (tsn, Nov. 24, 1988, pp. 23 & 26). If it were true that their
agreement was one of mortgage, then, they could have filed at least an opposition to the said petition.

The Court of Appeals also disregarded the claim of the Tius that a deed of sale with right of repurchase
was drawn up in favor of the Spouses Lim instead of a mortgage with Go as creditor-mortgagee because
Go cannot own real estate being a Chines citizen, re-echoing, in the process, the conclusion of the trial
court that aliens or non-Filipino citizens are not disqualified from being mortgagees of real estate
properties.

Upon the foregoing premises, we agree with the Court of Appeals that summary judgment was properly
rendered by the trial court as there was no genuine issue of fact that would necessitate formal trial.

On the feasibility of reformation of the deed of sale with right of repurchase, we also agree with the
appellate court, that the Tius' complaint did not aver ultimate facts that would constitute a cause of action
for reformation of instrument despite the Tius' insistence that paragraphs 11, 12, 13, 14 and 15 of their
complaint contain allegations of fraud and inequitable conduct, upon which reformation may be
premised.
A perusal of these paragraphs (reproduced earlier) would show that indeed, as pointed out by the Court
of Appeals, the allegations therein are mere conclusions of law or opinion; hence, reformation is not
feasible. Section 5 of Rule 8 of the Revised Rules of Court directs a party averring fraud or mistake to state
with particularity the circumstances constituting such fraud or mistake, with particularity is conspicuously
absent in the complaint.

Further, in view of Rosalina Tiu's failure to controvert the allegations of the Mario Obar Trading Center
denying any trading partnership with Go, (and in effect, debunking Rosalina Tiu's claim that payments to
the trading firm were payments to Juan Go), summary judgment holding Rosalina Tiu liable was proper.

We shall also not disturb the ruling of the Court of Appeals that George and Joaquin Tiu are not solidary
liable with Rosalina Tiu on the amount of P1,060,000.00, for apt and correct are the findings of the
appellate court on this point:

The various receipts (Exhs. 1-15-Go) clearly show that the appellant George Tiu never signed the receipts
nor received any money from appellant Go while appellant Joaquin Tiu signed and received the money
for an in behalf of Rosalina. Consequently, they are not liable solidarily for the said amounts even if the
money were used for tobacco business. And even if they admitted that they received the money, both are
not liable in solidum because there was no express provision in said receipts that appellants George and
Joaquin Tiu should be liable in solidum. There is solidary obligation only when the obligation expressly so
states or when the law or nature of the obligation requires solidarity (Article 1207, NCC).

And there is no truth to the allegation that appellants George and Joaquin Tiu admitted that they are
jointly and solidarily liable for said amount. What they admitted was that they received said money.
Appellants' failure to deny the allegations in pars. 8, 9, 10 of appellant Go's third party complaint does not
amount to an admission that they are solidarily liable. Be it noted that appellants Tiu, in their reply and
answer to the counterclaim of appellant Go, admitted that only appellant Rosalina Tiu received the
monies. The allegation in appellant Go's third party complaint is essentially the same with the allegations
in the counterclaim of appellant Go. Thus, it was not necessary for them to deny the allegations in the
third party complaint.

Assuming arguendo that they admitted their solidary liability, still they are not liable. As aptly held by the
lower court:

At any rate, the doctrine laid down on the case of Un Fak Leang vs. Nigurra, 9 Phil. 381, falls squarely on
the point wherein the Supreme Court ruled that an admission of two debtors in their brief that their
liability in the contract is a solidary one does not convert the joint character of their obligation as
appearing in their contract, for what determines the nature of the obligation is the tenor of their contract
itself, not the admission of the parties.

On Go's prayer for attorney's fees, moral and exemplary damages, all that has to be said perhaps is that
simply because the Tius did not prevail in their suit against Go would it necessarily follow that they should
be made liable for attorney's fees and damages. An adverse result of a suit in law does not mean that the
same is wrongful as to justify assessment of damages against the actor (Rubio vs. Court of Appeals, 141
SCRA 488 [1986]).

WHEREFORE, the decision appealed from is AFFIRMED in toto

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).

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:

In connection with your inquiry whether this bank will proceed with the purchase of the employees
housing project site in tile 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 of 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 re-awarded 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:

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 teaming 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 spouse 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 spouse 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.

On April 29, 1961, resolving DBP's appeal of In Re Consults 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:

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, indorser 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 ...".

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:

(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 a signed 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
preceeding 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.

In their brief, the DBP maintains:

(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:

(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
registerable 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:

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 uncancelled
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 uncancelled, 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:

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.

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 choses 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, the 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 rescision 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.