G.R. No. 169129 March 28, 2007
Sps. Virgilio F. Santos & Esperanza Lati Santos, et al., Petitioners, vs. Sps. Jose Lumbao and Proserfina Lumbao, Respondents.

FACTS

Respondents Spouses Lumbao purchased a 107-square meter lot from Rita Catoc Santos through two “Bilihan ng Lupa” documents dated 1979 and 1981. The property was part of Rita’s inchoate share in her deceased mother’s estate. The Lumbaos took possession, built a house, and made demands for the execution of a separate title. Rita explained that a separate title could not yet be issued as the estate remained unpartitioned. After Rita’s death, her heirs, the petitioner Santos siblings, executed a Deed of Extrajudicial Settlement in 1986, partitioning the entire estate, including the subject lot, among themselves and obtaining a transfer certificate of title in their names. The Lumbaos filed a Complaint for Reconveyance with Damages.
The Regional Trial Court dismissed the complaint, finding no fraud in the execution of the extrajudicial settlement and ruling that the action was barred for failure to first undergo barangay conciliation. It also awarded attorney’s fees to the Santos siblings. The Court of Appeals reversed this decision, ordering the Santos siblings to reconvey the property to the Lumbaos and awarding attorney’s fees to the latter instead.

ISSUE

Whether the Court of Appeals erred in ordering the reconveyance of the property and in awarding attorney’s fees to the respondents.

RULING

The Supreme Court affirmed the decision of the Court of Appeals. On the procedural issue, the Court held that the failure to resort to barangay conciliation was not a jurisdictional defect but merely a condition precedent. The action for reconveyance based on an implied trust prescribes in ten years from the issuance of the title. The Lumbaos filed their complaint in 1992, well within the prescriptive period from the 1986 title issuance. Dismissing the case for lack of prior conciliation would have unjustly caused the action to prescribe, constituting a valid excuse for non-compliance.
On the merits, the Court found that the Lumbaos sufficiently proved the sale through the “Bilihan ng Lupa” documents and their continuous possession. The Santos siblings, as Rita’s heirs, stepped into her shoes and were bound by her contractual obligation to transfer the property. Their act of including the already-sold lot in the extrajudicial settlement and obtaining title in their names constituted fraud, giving rise to a constructive trust under Article 1456 of the Civil Code. As trustees under an implied trust, they were obligated to reconvey the property to the rightful owners, the Lumbaos. The award of attorney’s fees to the Lumbaos was proper as they were compelled to litigate to protect their interest.