G.R. No. 123891 February 28, 2001
PAZ S. LIM for herself and as an attorney-in-fact of ANTONIO S. LIM, JR., petitioner, vs. VICTORIA K. CHAN and CHRISTOPHER C. CHAN, respondents.

FACTS

Petitioners Paz S. Lim and her husband executed Special Powers of Attorney (SPAs) in 1973, appointing Carlos Chan and Victor San as their attorneys-in-fact with authority to sell their properties in Davao City. Acting under these SPAs, the agents executed three deeds of sale in favor of respondent Victoria K. San (Chan) in 1975 and 1978, leading to the transfer of the titles to her name. One lot was subsequently sold to co-respondent Christopher C. Chan.
In 1993, petitioners filed a complaint to annul the sales and for reconveyance before the Regional Trial Court (RTC) of Davao City. They alleged that Victoria, as an agent, fraudulently acquired the properties in violation of the trust reposed in her and the prohibition against agents purchasing their principal’s assets. The RTC dismissed the complaint via a motion to dismiss on grounds of prescription, estoppel, and lack of earnest efforts toward a compromise. The Court of Appeals affirmed the dismissal, ruling that the SPAs were valid and unrevoked at the time of sale, and there was no allegation of forgery.

ISSUE

Whether the trial court and the Court of Appeals erred in dismissing the complaint on grounds of prescription, estoppel, and lack of earnest efforts toward a compromise without conducting a full trial on the merits.

RULING

Yes. The Supreme Court reversed and remanded the case for trial. The Court held that the grounds for dismissal—prescription, estoppel, and the existence of fraud—are inherently factual matters that require a full presentation of evidence. A motion to dismiss hypothetically admits the allegations in the complaint for the purpose of testing their legal sufficiency. The petitioners’ complaint sufficiently averred a cause of action based on an implied trust arising from an agent’s fraudulent acquisition of the principal’s property, which, under jurisprudence, could make the right to reconveyance imprescriptible. Dismissing the case summarily, merely a month and a half after filing, deprived the petitioners of their day in court to substantiate their claims of fraud and trust. The factual findings of the lower courts were premature, as they were based on an incomplete record before a full-blown trial. Consequently, the case was remanded to the RTC for a proper trial on the merits to allow both parties to present their evidence and for the court to make a definitive ruling on the factual and legal issues involved.