G.R. No. L-30167 August 31, 1984
Arcadio Domaoal, plaintiff-appellant, vs. Teodora Bea, et al., defendants-appellees.

FACTS

On May 19, 1965, Arcadio Domaoal filed a complaint for reconveyance and/or damages against the defendants. He alleged he was the lawful awardee of Lot No. 4374 by virtue of a 1950 NLSA Board Resolution. He claimed that through a series of fraudulent transactions by the defendants, Teodora Bea was able to obtain Miscellaneous Sales Patent No. V-92 and Original Certificate of Title No. V-681 on May 27, 1960, which was subsequently transferred to other defendants. Domaoal asserted he only discovered this fraud in October 1964.
The defendants filed an answer interposing affirmative defenses, including failure to state a cause of action and prescription. Without conducting a preliminary hearing on these defenses, the trial court, based solely on the parties’ memoranda, dismissed the complaint. It ruled that more than five years had elapsed from the patent’s issuance, barring recovery of the property, and that Domaoal’s only remedy was an action for damages.

ISSUE

Whether the trial court erred in dismissing the complaint based on the affirmative defenses without a hearing and on an incorrect application of law.

RULING

Yes. The Supreme Court reversed and remanded the case. The trial court erred in dismissing the complaint for failure to state a cause of action. The test for such a dismissal is whether, hypothetically admitting the complaint’s allegations as true, a valid judgment could be rendered. Domaoal’s allegations of fraud resulting in the wrongful issuance of title, if proven, constitute a valid cause of action for reconveyance.
The court also erred in its prescription ruling. An action for reconveyance based on an implied or constructive trust arising from fraud prescribes in four years from the discovery of the fraud. The complaint explicitly alleged discovery in October 1964, and the suit filed in May 1965 was well within the prescriptive period. Furthermore, the defense that only the Director of Lands could sue, as the land was formerly public, required a preliminary hearing to determine if the alleged fraud was against the State or against Domaoal personally. The trial court had jurisdiction over the subject matter as the action was timely filed. The orders of dismissal were set aside for further proceedings.