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 land 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 vacate the property and
the corresponding rental on failure to pay rentals. Hence, Guevarra filed a case for the rescission of the
contract.
The trial court, ruled in favor of the appellant-defendants Guevarra and Francisco, Hence, the
instant case.
Issue:
Whether or not there is a valid 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 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 .

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 791 of Land registration act is also referenced
(Act 496), in relation to pending litigations concerning real estates.

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.