Topic: To Transfer Ownership

Sikatuna vs Guevarra (Potenciana Guevarra and Florencio Francisco)

G.R. No. L-18336

March 15, 1922

Facts:
The land in question is owned by the partnership Jacinto, Palma y Hermanos
(Jacinto). Jacinto is the lessor of the land and the defendant Guevarra is the lessee of a
certain portion (100 sqm). The contract of lease has a provision that within a specified
period, Jacinto is given option to purchase the house of Potenciana Guevarra that has
been constructed on it. In turn, the defendant shall have the right to acquire the land
leased, if Jacinto will not exercise such option upon its expiration. This contract, however,
was never noted on the OCT.
The period lapsed and Jacinto did not exercise his option to acquire the house. The
defendant then opted to acquire the land, however Jacinto objected. Hence, the
defendant filed an action for its acquisition. However, while the case was pending, Jacinto
had sold the land to Sikatuna Corp. Then Sikatuna had recorded the transfer in the
registry, under the provisions of the Act No. 496, as a result of which a TCT was issued.
Subsequently, Sikatuna Corp. notified the defendants to vacate the property and
demanded the corresponding rental on the defendants failure to pay rentals. Hence,
Guevarra filed a case for the rescission of the contract siting the fourth paragraph of
Article 1291 of the Spanish Civil Code:
Contracts referring to litigious things, when they have been entered into by the
defendant without the awareness and approval of the litigators or the competent judicial
Authority. (Contracts capable for rescission)

The trial court, ruled in favor of the appellant-defendants Guevarra and Francisco.
The trial court ordered, among others, the rescission of the contract and transfer of
ownership of the land to the defendants. Hence, the instant case.
Issue:
Whether or not there is a valid sale and transfer of ownership of the land to
Sikatuna Corp.
Ruling:
Yes. The Supreme Court ruled that there is a valid transfer of ownership to
Sikatuna Corp. The rescission of the contract granted by the lower court is not proper.
The second paragraph of article 1295 of the Civil Code (Spanish Civil Code) provides as
follows:
Neither shall rescission take place when the things which are the subject-matter of the
contract are lawfully in the possession of third persons who have not acted in bad faith .

Topic: To Transfer Ownership

There is no doubt but that in this case the plaintiff corporation has the character of a
third person, and it has not been shown that it had acted in bad faith. Section 79 1 of Land
registration act is also referenced (Act 496), in relation to pending litigations concerning
real estates.

1 Section 79. No action to recover possession of real estate, or to quiet the title thereto, or to remove clouds
upon the title thereof, or for partition of other proceeding of any kind in court affecting the title to real estate or
the use and occupation thereof or the buildings thereon, and no judgment or decree, and no proceeding to
vacate or reverse any judgment or decree, shall have any effect upon registered land as against persons other
than the parties thereto, unless a memorandum stating the institution of such action or proceeding and the
court wherein the same is pending, and the date of the institution thereof, containing also a reference to the
number of the certificate of title of the land affected and the volume and page of the registration book where it
is entered, shall be filed and registered. This section shall not apply to attachments, levies of execution, or to
proceedings for the probate of wills, or for administration of the estates of deceased persons in the Court of
First Instance: Provided, however, That in case notice of the pendency of the action has been duly registered it
shall be sufficient to register the judgment or decree in such action within sixty days after the rendition thereof.