G.R. No. 119281; November 22, 2000
VETERANS FEDERATION OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS, PHILIPPINE NATIONAL RAILWAYS (PNR), LOURDES CHAVEZ, et al., respondents.

FACTS

On September 6, 1963, the Philippine National Railways (PNR) sold a 1,092-square-meter parcel of land in San Pablo City to the Veterans Federation of the Philippines (VFP). The Absolute Deed of Sale contained a specific technical description of the property. However, upon registration, the Register of Deeds erroneously inscribed a different technical description on Transfer Certificate of Title No. T-4414, which was issued in the name of VFP. The erroneous description was copied from a separate document supplied by PNR. Unaware of the discrepancy, VFP fenced the property according to the boundaries stated in its title.
Eighteen years later, in 1981, VFP discovered that its fence had been dismantled and that several permanent structures had been erected on the land by individuals who were leasing portions of the property from PNR. VFP demanded that the occupants vacate, and upon their refusal, filed an accion publiciana complaint before the Regional Trial Court (RTC) against PNR and the lessees. The RTC ruled in favor of VFP, ordering the Register of Deeds to cancel the erroneous title and issue a new one reflecting the correct description from the deed of sale, and directing PNR to deliver possession. The Court of Appeals reversed this decision, dismissing VFP’s complaint on the grounds of prescription and laches.

ISSUE

Whether the VFP’s action to correct the technical description in its certificate of title and to recover possession of the property had prescribed or was barred by laches.

RULING

The Supreme Court reversed the Court of Appeals and reinstated the RTC decision with modifications. The Court held that the action had not prescribed and laches did not apply. An action for reconveyance based on an implied or constructive trust, which arises from fraud or mistake, prescribes in ten years from the issuance of the title. Here, the title was issued in 1964, and VFP filed its complaint in 1986, which was beyond the ten-year period. However, the Court ruled that this was not a simple action for reconveyance. The core issue was the correction of a clerical error in the certificate of title, which did not affect the validity of the sale or VFP’s ownership. VFP was seeking to enforce its rights under the valid and existing contract of sale with PNR.
The error was a mistake in the technical description made by the Register of Deeds based on PNR’s submission. VFP’s cause of action accrued not from the date of registration in 1964, but from the date it discovered the encroachment and the error in 1981. Its filing in 1986 was thus timely. Laches was also inapplicable as VFP acted with reasonable diligence; it was not aware of the discrepancy until it attempted to develop the land. The Court emphasized that PNR, as the vendor, had the obligation to convey the correct property and could not benefit from its own mistake. The Supreme Court ordered the cancellation of the erroneous title and the issuance of a new one with the correct description from the deed of sale, and directed PNR to surrender possession to VFP. The complaint against certain occupants who were not proven to be PNR lessees was dismissed.