G.R. No. 127608 . September 30, 1999.
GUADALUPE S. REYES, petitioner, vs. COURT OF APPEALS and JUANITA L. RAYMUNDO, respondents.

FACTS

Petitioner Guadalupe S. Reyes sold one-half of a 300-square meter lot to respondent Juanita L. Raymundo on June 21, 1967. A new title (TCT No. 119205) was issued in both their names. On September 24, 1969, petitioner sold her remaining interest in the property to respondent for P15,000.00, evidenced by a deed of absolute sale, and TCT No. 149036 was issued solely in respondent’s name. Petitioner alleged this second sale was simulated, executed only to enable respondent to secure an additional GSIS loan using the entire property as collateral, with an agreement to reconvey if the loan failed. This true agreement was purportedly embodied in a private writing dated January 10, 1970. The loan did not materialize. Since 1967, a house on the property was leased by the Palacios spouses from petitioner. In 1985, the Palacios spouses filed a petition for consignation of rentals after petitioner allegedly refused them. They later entered into a compromise agreement with petitioner. In 1987, when petitioner filed a contempt case against the lessees, respondent intervened, claiming ownership and presenting a lease contract with the Palacioses dated March 17, 1987. From then on, rentals were paid to respondent. On August 23, 1987, petitioner filed a complaint for cancellation of title and reconveyance. The trial court ruled in favor of petitioner, declaring the second deed simulated and ordering reconveyance. The Court of Appeals reversed, holding the notarized deed prevailed, and that petitioner’s action had prescribed and was barred by laches.

ISSUE

1. Whether petitioner’s action for reconveyance had prescribed.
2. Whether petitioner was guilty of laches.
3. Whether the second deed of sale was simulated.

RULING

1. The action for reconveyance based on an implied or constructive trust had not prescribed. An action for reconveyance prescribes in ten years from the date of registration of the deed or issuance of the title only when the plaintiff is not in possession of the property. Here, petitioner remained in actual possession of the property through the Palacios spouses, her lessees since 1967, even after the second sale. Her possession was disturbed only in 1987 when respondent asserted ownership. Therefore, as one in actual possession claiming ownership, her right to seek reconveyance to quiet title does not prescribe. Furthermore, an action for the declaration of the inexistence of a contract, such as the simulated deed, does not prescribe under Article 1410 of the Civil Code.
2. Petitioner was not guilty of laches. Laches requires neglect to assert a right for an unreasonable length of time. The finding of the Court of Appeals that respondent was in possession for eighteen years was unsupported by evidence. The Palacios spouses, in their 1985 petition, stated they were renting from petitioner since 1967. Respondent’s own 1987 lease contract acknowledged the lessees had been staying under a previous contract with petitioner. Petitioner exercised acts of ownership by collecting rentals until 1986. She filed her complaint promptly in 1987 after respondent disturbed her possession. Thus, there was no unreasonable delay.
3. The second deed of sale was indeed simulated. The trial court’s finding, based on the evidence, was reinstated. The circumstances—including the agreement of January 10, 1970, the purpose of the transfer to secure a loan which did not materialize, and petitioner’s continued exercise of ownership through collection of rentals until respondent’s intervention in 1987—supported the conclusion that the deed did not reflect the true intention of the parties and was without material consideration. The Supreme Court reinstated the trial court’s decision cancelling TCT No. 149036 and the second deed, ordering reconveyance to petitioner, and awarding damages and attorney’s fees.