GR 166383; (October, 2009) (Digest)
G.R. No. 166383; October 16, 2009
ASSOCIATED BANK, Petitioner, vs. SPOUSES JUSTINIANO S. MONTANO, SR., AND LIGAYA MONTANO and TRES CRUCES AGRO-INDUSTRIAL CORPORATION, Respondents.
FACTS
Spouses Justiniano and Ligaya Montano owned three parcels of land in Cavite. In 1975, during martial law and while Justiniano was in self-exile, they transferred the properties to Tres Cruces Agro-Industrial Corporation (TCAIC) in exchange for shares, giving them 98% control. The titles were issued in TCAIC’s name. In 1976, TCAIC sold the properties to International Country Club, Inc. (ICCI), which then mortgaged them to Associated Bank. Upon ICCI’s loan default, the bank foreclosed the mortgage in 1984, acquired the properties at auction, and obtained new titles in 1987. The Montanos returned to the Philippines in 1986 after the ouster of President Marcos, took possession of the land, and in 1989 filed a complaint for reconveyance. They alleged the initial transfer to TCAIC was merely to avoid confiscation by the Marcos regime and the subsequent sale to ICCI was accomplished through intimidation.
ISSUE
Whether the Court of Appeals erred in reversing the Regional Trial Court’s dismissal of the complaint on the grounds of prescription and failure to state a cause of action.
RULING
The Supreme Court denied the petition and affirmed the Court of Appeals’ ruling. On the procedural issue, the RTC erred in dismissing the complaint for failure to state a cause of action based solely on the petitioner’s motion, without requiring the respondents to file their opposition. A motion to dismiss on this ground hypothetically admits the truth of the material allegations in the complaint. The Montanos’ allegations of simulated transfers and intimidation, if taken as true, sufficiently constituted a cause of action for reconveyance based on implied or constructive trust.
On the substantive issue of prescription, the Court held the action had not prescribed. An action for reconveyance based on an implied or constructive trust prescribes in ten years from the issuance of the title under the Torrens system, which operates as constructive notice. The ten-year period commenced from the date of the registration of the deed of sale to ICCI and the issuance of titles in its name in May 1977. The Montanos filed their complaint in September 1989, which was within the ten-year prescriptive period. The RTC incorrectly applied the four-year period for actions based on fraud under Article 1391 of the Civil Code. The prescriptive period for reconveyance based on a constructive trust is ten years, pursuant to Article 1144.