G.R. No. 73611 , October 27, 1986
MARIA PEÑALES and CONSORCIA PEÑALES, Accompanied by her Husband, FELIPE LUSTRIA, petitioners, vs. HON. INTERMEDIATE APPELLATE COURT; SALVACION LUSTRIA, Accompanied by her Husband, ALVARO PORRAS; MADONNA LUSTRIA, Accompanied by her Husband, ELADIO DASMARIÑAS; and SEGUNDO LUSTRIA, JR., respondents.

FACTS

The dispute concerns ownership of a one-half share in a parcel of land. The property was originally registered under OCT No. 40766 in the name of the late Segundo Lustria, Sr., who died in 1931. On June 8, 1953, Transfer Certificate of Title (TCT) No. T-14243 was issued solely in the name of Adalia Peñaflorida, subject to an annotation reserving, for a period of two years, any claim to a one-half share on behalf of the heirs of Segundo Lustria under Section 4, Rule 74 of the Rules of Court. In 1970, Adalia sold the entire property to petitioners Maria and Consorcia Peñales, who were issued TCT No. T-63055 containing the same annotation. In 1972, the petitioners executed an affidavit cancelling this two-year claim annotation.
In 1977, private respondents, the children and heirs of Segundo Lustria, filed an action for reconveyance of the one-half share, damages, and cancellation of the Peñales’ title. The trial court ruled in favor of the Lustrias, ordering reconveyance and awarding damages, a decision affirmed by the Intermediate Appellate Court. The appellate court reasoned that by cancelling the annotation in 1972, the petitioners set up a title adverse to the heirs, creating an implied trust under Article 1456 of the Civil Code, and that the ten-year prescriptive period for an action based on such trust commenced only from that 1972 act.

ISSUE

Whether the action for reconveyance filed by the heirs of Segundo Lustria in 1977 had already prescribed.

RULING

Yes, the action had prescribed. The Supreme Court reversed the appellate decision. The legal logic centers on the correct commencement date of the prescriptive period. The Court held that the adverse claim against the heirs arose not in 1972 upon the cancellation of the annotation, but on June 8, 1953, when TCT No. T-14243 was issued solely in Adalia Peñaflorida’s name. This registration constituted constructive notice to the whole world, including the heirs, of an adverse claim over the entire property, thereby starting the clock for prescription. The annotation under Section 4, Rule 74, was merely a temporary safeguard for claims within a two-year period; it did not legally recognize Segundo Lustria as a co-owner. Upon the expiration of that two-year period in 1955, the annotation became functus officio. Consequently, when the heirs filed their complaint in 1977, more than ten years had elapsed from the 1953 registration. Their right to assert any claim, if it existed, was already barred by prescription, which exists as a statute of repose to prevent the litigation of stale claims. The petitioners, as assignees, merely stepped into the rights of their vendor Adalia.