G.R. No. L-18783; May 25, 1964
Generoso Baje and Saturnina Sacdalan, petitioners, vs. Court of Appeals, Cristina Valdez, Vicente Valdez, Clemente Valdez, Macaria Valdez, Geronimo Valdez, Marcelo Valdez II, accompanied by his guardian ad litem Cristina Valdez, Maximo Valdez, Maria de los Santos and Ambrosio Cacayan, respondents.

FACTS

Marcelo Valdez was issued a homestead patent and Original Certificate of Title No. 542 on June 17, 1932, covering four parcels of land in Nueva Vizcaya. Within five years from the patent’s issuance, specifically in 1933 and 1935, Marcelo Valdez sold these homestead lands to the petitioners, Generoso Baje and Saturnina Sacdalan. The respondents, as heirs of Marcelo Valdez, later demanded the return of the lands, culminating in a formal action for recovery of possession filed on March 23, 1953.
The Court of First Instance dismissed the complaint, ruling that the heirs were guilty of laches. The Court of Appeals reversed this decision. It held that the sales executed within the five-year prohibitory period were null and void under the Public Land Act (Act No. 2874). Consequently, the action to declare such nullity does not prescribe. The appellate court declared the heirs as the rightful owners, ordered the cancellation of the petitioners’ title, and awarded damages to the heirs from the date of judicial demand. The petitioners sought review, primarily arguing for reimbursement of the purchase price and the value of improvements.

ISSUE

The core issue is whether the heirs of the homesteader, in an action to recover land sold in violation of the five-year prohibition, can obtain restitution without simultaneously reimbursing the vendee for the purchase price paid.

RULING

The Supreme Court modified the decision of the Court of Appeals. It affirmed the fundamental ruling that the sales were null and void ab initio for violating Section 116 of the Public Land Act, which prohibits alienation of a homestead within five years from the patent’s issuance. An action to declare such a contract void does not prescribe.
However, the Court established a reciprocal obligation principle for restitution. While the heirs are declared the true owners entitled to possession, this right is conditioned upon their reimbursement of the purchase price (P3,734) received by their predecessor, Marcelo Valdez. The Court abandoned the contrary doctrine in Labrador v. De los Santos and aligned with Ocampo v. Court of Appeals, holding that the vendee’s obligation to return the land and the vendor’s (or his heirs’) obligation to return the price are reciprocal. Performance by one cannot be demanded without offer of performance by the other.
Therefore, the heirs cannot obtain possession until they refund the purchase price. Consequently, the award of damages to the heirs is suspended until such reimbursement is made. The Court denied the petitioners’ claim for reimbursement of improvements, upholding the lower courts’ finding that the alleged expenses were for production, not permanent improvements, and were offset by harvests. The dispositive portion ordered the heirs to reimburse the purchase price as a condition precedent to recovery of possession and title.