GR 155206; (October, 2003) (Digest)
G.R. No. 155206; October 28, 2003
Government Service Insurance System, petitioner, vs. Eduardo M. Santiago, substituted by his widow Rosario Enriquez Vda. De Santiago, respondent.
FACTS
Deceased spouses Jose C. Zulueta and Soledad Ramos obtained loans from the GSIS secured by real estate mortgages. Upon default, GSIS foreclosed the mortgages. At the public auction on August 14, 1974, GSIS was the highest bidder. The Certificate of Sale, however, expressly excluded ninety-one (91) specific lots from the sale, noting they were sufficient to pay the debt or had been previously released. Despite this exclusion, GSIS executed an Affidavit of Consolidation of Ownership in 1975, consolidating title over all mortgaged properties, including the excluded lots. GSIS later sold the foreclosed properties, including the excluded lots, to a third party.
Antonio Vic Zulueta, represented by Eduardo M. Santiago, filed a complaint for reconveyance against GSIS in 1990. Santiago acquired Zulueta’s rights over the excluded lots. The Regional Trial Court ruled in favor of Santiago, ordering GSIS to reconvey the seventy-eight excluded lots. The Court of Appeals affirmed the decision.
ISSUE
Whether the action for reconveyance is barred by prescription or laches.
RULING
The Supreme Court denied the petition and affirmed the Court of Appeals. The action for reconveyance, based on an implied or constructive trust arising from fraud, prescribes in ten years from the issuance of the title. However, the prescriptive period is reckoned from the actual discovery of the fraud, not from the date of registration. The Court cited Adille v. Court of Appeals, which held that the ten-year period begins to run from the date the plaintiff actually discovered the trustee’s adverse claim.
Here, the fraud consisted of GSIS wrongfully consolidating ownership over and disposing of lots expressly excluded from the foreclosure sale. The respondent, Eduardo Santiago, categorically testified that he only discovered this fraudulent act in 1989 when he discussed the matter with Zulueta and was given a special power of attorney. The complaint was filed in 1990, barely a year from the discovery. Therefore, the action was well within the prescriptive period. GSIS, having acted in bad faith, cannot invoke the protection of the law, which cannot be used as a shield for fraud. It has a legal duty under Article 22 of the Civil Code to return what it acquired at the expense of another without just or legal ground.