G.R. No. L-23396 August 29, 1969
ARSENIA GUARDIANO, petitioner, vs. JORGE ENCARNACION, respondent.

FACTS

The People’s Homesite and Housing Corporation (PHHC) owned Lot 18, Block E-148 of the East Avenue Subdivision. Petitioner Arsenia Guardiano, a squatter, had occupied a portion of the lot since 1945 and was later accepted by PHHC as a “registered squatter” or bona fide occupant. On February 8, 1957, respondent Jorge Encarnacion, also a squatter, applied to purchase the same lot, made a 10% deposit of P810.00 pursuant to an “order of payment,” and was given a tentative award. The PHHC issued a blank, unsigned printed form of a “conditional contract to sell.” When Encarnacion sought to take possession, Guardiano objected. Following an investigation prompted by Guardiano’s complaint, the PHHC’s investigating committee recommended cancellation of Encarnacion’s award. The PHHC General Manager then wrote Encarnacion canceling the award, upholding Guardiano’s preferential right as the actual occupant, and offered Encarnacion another lot. Encarnacion sued the PHHC for specific performance to execute the conditional contract of sale. Guardiano intervened. The trial court ruled in favor of Encarnacion, ordering the PHHC to execute the contract. The Court of Appeals affirmed, holding that a perfected contract to sell existed between Encarnacion and the PHHC upon his payment of the deposit, and that Guardiano, as a squatter, had no preferential right.

ISSUE

1. Whether a perfected contract of sale existed between respondent Encarnacion and the PHHC.
2. Whether petitioner Guardiano, as a prior bona fide occupant, had a preferential right to purchase the lot over respondent Encarnacion.

RULING

1. No, there was no perfected contract of sale. The Supreme Court found that the Court of Appeals erred in concluding a perfected contract existed. The “conditional contract to sell” was a blank, unsigned printed form. Encarnacion’s transaction consisted only of an application to purchase and a tentative award authorizing a 10% deposit, expressly received as such and not as an initial payment. The application provided that a contract would be executed only after survey and inspection and that the lot was ready to be sold, with a provision for forfeiture of part of the deposit if the applicant did not proceed. No subsequent payments were made or accepted. Therefore, no meeting of the minds or perfected contract was reached.
2. Yes, petitioner Guardiano had a preferential right. The Supreme Court reversed the appellate court’s dismissal of Guardiano’s claim. Her status as a squatter had been legalized by the PHHC’s acceptance of her as a “registered squatter” and bona fide occupant since 1945. The PHHC’s policy, supported by a Presidential Memorandum, was to award subdivision lots to prior and deserving squatters or actual occupants. As a recognized actual occupant, Guardiano had a preferential right over Encarnacion, who was an outsider and non-occupant of the specific lot. The PHHC acted within its authority in canceling Encarnacion’s tentative award and upholding Guardiano’s right. The complaint for specific performance was dismissed.