G.R. No. 125861 September 9, 1998
ROSITA G. TAN, EUSEBIO V. TAN, REMIGIO V. TAN, JR., EUFROSINA V. TAN, VIRGILIO V. TAN and EDUARDO V. TAN, petitioners, vs. COURT OF APPEALS and FERNANDO V. TAN KIAT, respondents.

FACTS

Private respondent Fernando Tan Kiat filed a complaint for recovery of property against petitioners. He claimed he bought two parcels of land in Manila from Alejandro Tan Keh in 1954, built a house thereon, but could not transfer the title due to his foreign nationality. Alejandro gave him the owner’s duplicate copy of TCT No. 35656 and executed a 40-year lease contract in his favor. In 1958, Alejandro sold the same properties to Remigio Tan (petitioners’ father) with the understanding that Remigio would hold them in trust for Fernando and transfer them upon demand. TCT No. 35656 was cancelled and TCT No. 53284 was issued in Remigio’s name. Another lease contract was executed in Fernando’s favor, but he never paid rent. Remigio died in 1968. At his wake, petitioners allegedly promised to transfer the properties to Fernando, who had by then acquired Filipino citizenship, but they did not. Instead, petitioners had the properties transferred to their names under TCT No. 117898. Petitioners moved to dismiss the complaint on grounds of no cause of action, prescription, bar by prior judgment, and waiver/abandonment/laches/estoppel. The trial court dismissed the complaint. The Court of Appeals reversed and ordered remand for further proceedings. Petitioners elevated the case to the Supreme Court.

ISSUE

Whether the trial court correctly dismissed the complaint on the grounds raised by petitioners, particularly for failure to state a cause of action.

RULING

Yes, the Supreme Court reversed the Court of Appeals and reinstated the trial court’s dismissal of the complaint. The Court held that the complaint failed to state a cause of action for the following reasons:
1. The existence of a lease contract between Remigio Tan (as lessor) and Fernando Tan Kiat (as lessee), admitted in the complaint, estopped Fernando from disputing Remigio’s title under Article 1436 of the Civil Code and Section 2(b), Rule 131 of the Rules of Court.
2. The Memorandum of Encumbrances on TCT No. 53284 showed Remigio mortgaged the properties in 1963, an act of strict dominion inconsistent with a subsisting trust.
3. No express or implied trust was established. The transaction, at best, constituted a double sale governed by Article 1544 of the Civil Code. Remigio, who registered the sale and obtained TCT No. 53284 in 1958, prevailed over Fernando, who claimed a 1954 sale but presented no document and did not register.
4. Fernando’s claim would rely on parol evidence regarding transactions with the deceased Alejandro Tan Keh, which is barred by the “Dead Man’s Statute” (Section 23, Rule 130 of the Rules of Court).
5. Fernando’s cause of action, if based on an implied trust, prescribed in 10 years from the 1958 registration in Remigio’s name. His 1993 complaint was filed 35 years later.
6. Fernando’s inaction for 30 years, despite knowledge of the registration and mortgage, constituted laches.
The Supreme Court found the complaint legally insufficient and dismissed it.