HOSPITAL SAN JUAN DE DIOS, APPLICANT, THE REPUBLIC OF THE PHILIPPINES, PETITIONER AND APPELLEE, VS. HOSPITAL SAN JUAN DE DIOS AND ERNEST H. BURT, OPPOSITORS AND APPELLANTS.

Appeal from an order of the Court of First Instance of Bulacan
which holds that the rights of the petitioner, the Republic of the Philippines,
under and pursuant to the contract of lease with an option to purchase, are
preferred or enjoy priority over whatever rights Ernest H. Burt may have in the
parcels of land described in transfer certificates of title Nos. 28506 and
28507; and directs Ernest H. Burt to surrender within 60 days from the last date
of publication of the Court order the duplicates for the owner of transfer
certificates of title Nos. 28506 and 28507, and the Registrar of Deeds in and
for the province of Bulacan to enter a memorandum of the contract of lease with
an option to purchase in favor of the petitioner on the original certificates of
title Nos. 428 and 494 and on transfer certificates of title Nos. 28506 and
28507, with the statement that the right of the petitioner is preferred or
enjoys priority over whatever right Ernest H. Burt might have acquired in and
over the parcels of land therein described.

On 4 March 1939, the Commonwealth of the Philippines and the
San Juan de Dios Hospital entered into a contract whereby the latter leased to
the former three (3) parcels of land described in original certificate of title
No. 426 and one (1) parcel of land described in original certificate of title
No. 4941 issued by the Registrar of Deeds in and for the province of Bulacan,
for a period of twenty five (25) years beginning the 1st day of January 1939,
with an option in favor of the lessee, the Commonwealth of the Philippines, to
purchase the parcels of land within the period of the lease (Exhibit A). On 15
March, the contract of lease with an option to purchase was presented for
registration in the office of the Registrar of Deeds in and for the province of
Bulacan and noted in the entry or day book (Exhibit A). The entry was the
22495th or bears No. 22495. The original of the contract of lease with an option
to purchase and a photostatic copy thereof were presented and shown to the
Registrar for the latter to check up the copy with the original, as the latter
was to be immediately withdrawn and kept in the Executive Office as a State
document. On 21 March, the Registrar requested by letter the officer who
presented for registration the lease contract with an option to purchase to send
P0.50 to pay the filing fee (Exhibit 1-A). For failure te pay the fee the
Registrar of Deeds in and for the province of Bulacan did not enter a Memorandum
of the contract of lease with an option to purchase on the back of original
certificates of title Nos. 428 and 494. On 29 June 1946, the San Juan de Dios
Hospital sold and conveyed to Ernest H. Burt the parcels of land described in
the original certificates of title Nos. 428 and 494, together with another
parcel of land described in certificate of title No. 14209, and upon
presentation of the deed of sale with a mortgage to the Registrar of Deeds in
and for the province of Bulacan on 1 July 1946, the original certificates of
title Nos. 428 and 494 were cancelled and, in lieu thereof, transfer
certificates of title Nos. 28506 and 28507 were issued in the name of Ernest H.
Burt. As the contract of lease with an option to purchase in favor of the
Commonwealth Government was not noted on the original certificates of title Nos.
423 and 494, transfer certificates of title Nos. 28506 and 28507 were issued in
the name of Ernest H. Burt without such notation. Nevertheless, in the deed of
sale with mortgage executed by the San Juan de Dios Hospital in favor of Ernest
H. Burt reference is made to the contract of lease with an option to purchase
executed by the San Juan de Dios Hospital in favor of the Commonwealth of the
Philippines (Exhibits B & 5). In August 1946, in the course of an
Investigation conducted by the Landed Estates Committee of the House of
Representatives of the Congress of the Philippines the petitioner, the Republic
of the Philippines, as successor in interest of the lessee, the Commonwealth of
the Philippines, case to know for the first time of the failure of the Registrar
of Deeds in and for the province of Bulacan to enter a memorandum of the
contract of lease with aa option to purchase on the back of the original
certificates of title Nos. 428 and 494.

The petition in this case is filed, under and pursuant to the
provisions of section 112 of the Land Registration Act (Act 496), in the
original record of the land registration case (G.L.R.O. Record No. 7605), in
which the decree had been entered and upon which original certificates of title
Nos. 428 and 494 were subsequently issued by the Registrar of Deeds in and for
the province of Bulacan.

The last proviso of section 56, Act 496, as amended by Act 3300
reads a follows:

“Provided, further, That the Insular Government and the
provincial and municipal governments need not pay such fees in advance in order
to be entitled to entry or registration.”

When he required by letter the officer, who brought for
registration the original contract of lease with an option to purchase and a
photostatic copy thereof duly certified by the notary public before whom it was
acknowledged, to pay the filing fee, and when by reason of the failure of the
officer to pay such fee he refused or failed to enter a memorandum of the
contract of lease with an option to purchase on the original certificates of
title Nos. 428 and 494 and on the duplicates for the owner issued in the name of
the San Juan de Dios Hospital after the notation thereof la the entry or day
book, the Registrar of Deeds in aid for the province of Bulacan overlooked the
provisio of said proviso. The general provisions of section 56, as amended, as
to nullity of the registration in the entry or day book, if the filing and
registration fees are not paid within 15 days after the date of registration in
the entry or day book, do not apply to the Insular, provincial and municipal
governments. The Registrar of Deeds in and for the province of Bulacan was in
duty bound not only to register or annotate the contract of lease with an option
to purchase presented to him for registration on 15 March 1939 in the entry or
day book, but also to enter a memorandum thereof on the original certificates of
title Nos. 426 and 494 to which the lease contract with an option to purchase
had reference, without payment in advance of the filing and registration fees.
Had he refused or failed to perform his duty, he could have been compelled, as
he can be compelled, to perform it by special action for mandamus. But
the petitioner, the successor in interest of the lessee, instead of filing a
special action for mandamus, chose the remedy provided for in section 112
of the Land Registration Act (Act 496). There exists no legal objection to such
a choice.

Section 112, Act 496, in part provides the following:

“Any registered owner or other person in interest may at
any time apply by petition to the Court, upon the ground * * * that any
error, omission, or mistake was made in entering a
certificate or any memorandum thereon or on any duplicate certificate; * * *
or upon any other reasonable ground; and the Court shall have jurisdiction to
hear and determine the petition after notice to all parties in interest, and may
order the entry of a new certificate, the entry or cancellation of a
memorandum upon a certificate, or grant any other relief upon such
terms and conditions, requiring security if necessary, as it may deem
proper: Provided, however, That this section shall not be construed to
give the court authority to open the original decree of registration, and that
nothing shall be done or ordered by the court which shall impair the title or
other interest of a purchaser holding a certificate for value and in good faith,
or his heirs or assigns, without his or their written consent.” (Italic
ours.)

Under the provisions just copied, the petitioner is entitled to
apply by petition to the Court of First Instance of Bulacan, acting as Land
Registration Court, to have the error or mistake of the Registrar of Deeds in
and for the province of Bulacan corrected by an order directing him to annotate
the contract of lease with an option to purchase on the original certificates of
title Nos. 426 and 494 and to have the omission of said Registrar supplied by an
order instructing him to record the contract of lease with an option to purchase
on transfer certificates of title Nos. 28506 and 28507; and the Court has
jurisdiction to hear and determine the petition after notice to all parties in
interest, and after hearing may order the entry of a memorandum of such lease
contract with an option to purchase on the original certificates of title Nos.
423 and 494 and on transfer certificates of title Nos. 28506 and 28507, or grant
any other relief upon such terms and conditions as it may deem proper.

As provided for in the section commented upon, the hearing and
determination of the petition cannot be held and made without notice to all
parties in interest. This brings us to the point whether a Land Registration
Court after notifying all the parties in interest may determine that a party in
interest holding a certificate to be annotated is or is not a purchaser for
value and in good faith. That part of the section which clothes the Court with
jurisdiction and authority to “grant any other relief upon such terns and
conditions, * * * as it nay deem proper,” we believe is sufficient authority to
make such finding or pronouncement. In this particular case, not only does the
law authorize the Court to make it, but also the opponents and appellants in
their pleadings submitted to the Court the claim that the opponent and appellant
Ernest H. Burt is a purchaser for value and in good faith; and in support of
their claim they introduced at the hearing parole and documentary evidence. To
decide whether the Registrar of Deeds in and for the province of Bulacan can be
compelled or directed, pursuant to the provisions of section 112 of the Land
Registration Act, to make an entry or memorandum of the contract of lease with
an option to purchase, an entry or memorandum which would affect a party who had
acquired an interest in the parcels of land described in the original
certificates of title Nos. 428 and 494 and is a holder of transfer certificates
of title issued in lieu of the original certificates, the other question whether
the holder of such transfer certificates of title is a purchaser for value and
in good faith has to be passed upon. It cannot be sidetracked, especially taking
into consideration the provision of said section “that nothing shall be done or
ordered by the Court which shall impair the title or other interest of a
purchaser holding a certificate for value and in good faith, or his heirs or
assigns, without his or their written consent.”

On the point whether the appellant Ernest H. Burt as holder of
transfer certificates of title Nos. 28506 and 28507 is a purchaser for value and
in good faith, we hold with the Court below that he is not. He had notice of the
contract of lease with an option to purchase, reference to which is made in the
very deed of sale with mortgage executed by him and the authorized officers of
the San Juan de Dios Hospital (Exhibits B & 5). The information imparted to
him or to his attorney by the officers of the San Juan de Dios Hospital as to
the alleged resolution or cancellation of the contract of lease with an option
to purchase does not and cannot bind the petitioner. If it was an erroneous
information as to the law on the subject and the appellant Ernest H. Burt
believed it and acted upon it, the petitioner is not and cannot be bound
thereby. If any party is responsible for such an erroneous information, it must
be the officer or officers of the San Juan de Dios Hospital who had given it.
But the error of the information is so crass that no one it would believe and,
if anyone did believe it, he would be chargeable with gross contributory
negligence, for it is obvious that a bilateral contract, such as a contract of
lease with an option to purchase, could not and cannot be resolved by one party
without a judicial decree to afford the other party an opportunity to be heard.
Such is the law found in article 1124 of the Civil Code invoked by the
appellants. Furthermore, the down payment of P10,000 made by the vendee, a
trifle as compared to the purchase price of P5,000,000, is a proof that the
vendee was in doubt as to whether the parcels of land he was purchasing were
really free or released from the petitioner’s leasehold right and option to
purchase.

As to the claim of the San Juan de Dios Hospital that the
predecessor in interest of the petitioner as well as the latter had breached the
contract of lease with an option to purchase by failure to pay in advance the
yearly rentals stipulated in the lease contract during the first fifteen days of
January each year, the lessee having failed to pay the rentals from 1942 to
1946; to deliver and pay to the lessor the proceeds of the sale of lots of the
estate; and for selling lots to tenants at a price higher than the cost; for
increasing the rentals to a rate higher than those collected by the lessor; for
selling ricelands when the lessee was only authorized to sell the residential
lots, the lessee having sold nearly 6,000 hectares of ricelands for a price of
more than P4,000,000, suffice it to repeat what has just been said that, in
order to resolve or cancel a contract or a reciprocal obligation by reason of or
for such breaches, a judicial action must be brought to secure the resolution of
the contract. Besides, there is no evidence but only an offer by counsel at the
hearing to prove the breaches of the contract. All these alleged breaches were
committed, as may be gathered from the statements of counsel at the hearing,
during the Japanese occupation. Needless to say, those breaches even if proved
do not and cannot bind and prejudice the petitioner. As to the failure to pay
the stipulated yearly rental, the predecessor in interest of the petitioner was
prevented from paying it due to the country’s occupation by the enemy.

The order appealed from is affirmed, with costs against the
appellants.

Moran, C.J., Paras, Bengzon, Tuason, Reyes, and
Torres, JJ., concur.