G.R. No. 174104 ; February 14, 2011
INSURANCE OF THE PHILIPPINE ISLANDS CORPORATION, Petitioner, vs. SPOUSES VIDAL S. GREGORIO and JULITA GREGORIO, Respondents.

FACTS

Spouses Gregorio obtained three separate loans from Insurance of the Philippine Islands Corporation (IPI) in 1968, securing each with a real estate mortgage over specific parcels of land. They presented tax declarations as proof of ownership, representing the properties as unregistered. The spouses defaulted, leading IPI to extrajudicially foreclose the mortgages in 1969. IPI emerged as the highest bidder, consolidated ownership after no redemption, and secured tax declarations in its name.
In 1995, while preparing documents for titling applications, IPI discovered that the mortgaged properties were already registered under the names of third parties, with Transfer Certificates of Title (TCTs) issued as early as 1970, 1973, and 1989. IPI filed a complaint for damages in 1996, alleging fraud, as the spouses had misrepresented their ownership. The Regional Trial Court ruled in favor of IPI, awarding damages. The Court of Appeals reversed, dismissing the complaint on grounds of prescription and laches, ruling that the prescriptive period began from the dates the TCTs were issued to third parties.

ISSUE

Whether the action for damages based on fraud has prescribed.

RULING

The Supreme Court granted the petition, reversing the Court of Appeals and reinstating the RTC decision. The prescriptive period for an action for damages based on fraud is four years from the discovery of the fraud, pursuant to Article 1146 of the Civil Code. The Court held that the cause of action accrued in 1995 when IPI actually discovered the fraud, not from the earlier dates of registration of the TCTs.
The legal logic is clear: IPI could not have reasonably discovered the fraud earlier. The spouses presented only tax declarations, misrepresenting the lands as unregistered. IPI, in good faith, relied on these documents. It had no duty or reasonable means to immediately check the Register of Deeds for possible registered titles, as it was led to believe the properties were unregistered. Therefore, the prescriptive period commenced only upon actual discovery in 1995. The filing in 1996 was thus timely. The defense of laches also fails, as laches requires negligence or delay, and IPI exercised due diligence under the circumstances. The Court emphasized that allowing prescription from the registration dates would sanction fraud and cause injustice, as IPI was deprived of properties it rightfully acquired through foreclosure due to the spouses’ deceit.