G.R. No. L-4321; August 27, 1952
JULIANA R. DE SANTOS Y OTRO, demandantes-apelados, vs. EL SECRETARIO DE AGRICULTURA Y RECURSOS NATURALES Y EL DIRECTOR DE TERRENOS, demandados-apelantes.

FACTS

In 1941, Juliana R. de Santos was the highest bidder in a public auction for a government-owned lot (sublot 2-B) in Manila. The Director of Lands awarded her the lot via an “order-award,” which required, among other conditions, the commencement of construction of appropriate improvements within six months and completion within 18 months from the date of the award. The award also stipulated that the land could not be encumbered or conveyed without the Secretary’s consent and that the applicant must not permit any disqualified person to have an interest in the land. By August 1, 1944, De Santos had fully paid the purchase price. In 1945, she leased the lot to Victorina A. de Gaerlan, who constructed a building on it. In 1947, De Santos requested the execution of the final deed of sale. However, based on a petition by Gaerlan, the Secretary of Agriculture and Natural Resources, in 1948, ordered the cancellation of De Santos’s award and the forfeiture of her payments, citing a violation of the Public Land Act for allowing Gaerlan to occupy and construct on the premises, contrary to the condition that the purchase be for the applicant’s exclusive benefit. After exhausting administrative remedies, De Santos and her spouse filed a petition for mandamus in the Court of First Instance of Manila, which ruled in their favor, declaring the cancellation orders null and void and ordering the Secretary to execute the deed of sale. The Secretary and the Director of Lands appealed.

ISSUE

Whether the Secretary of Agriculture and Natural Resources and the Director of Lands acted correctly in cancelling the award and forfeiting the payments made by Juliana R. de Santos for the purchased lot.

RULING

The Supreme Court affirmed the decision of the Court of First Instance. The Court held that the contract of sale was perfected upon the award and the agreement on the object and price. It was consummated when De Santos fully paid the purchase price on August 1, 1944, at which point she became the absolute owner of the lot, with only the execution of the formal deed of sale remaining. The condition to construct improvements within the specified periods became physically impossible to perform due to the Japanese occupation of Manila starting in January 1942, during which construction materials were confiscated and properties seized. Such impossibility extinguished the obligatory condition under Article 1184 of the Spanish Civil Code. Furthermore, the act of leasing the lot to Gaerlan in 1945 was a legitimate exercise of De Santos’s rights as an owner (under Article 348 of the Spanish Civil Code) and did not violate the award’s conditions, as the lease was for consideration and did not constitute a sale or conveyance for the benefit of a disqualified person. The purpose of the relevant Public Land Act provisions was to prevent acquisition through dummies, which was not the case here, as De Santos clearly purchased for herself, later ejected the lessee, and acquired the building. Therefore, the cancellation orders were null and void, and the government officials were compelled to execute the deed of sale.