G.R. No. 171531 January 30, 2009
GUARANTEED HOMES, INC., Petitioner, vs. HEIRS OF MARIA P. VALDEZ, (EMILIA V. YUMUL and VICTORIA V. MOLINO), HEIRS OF SEVERINA P. TUGADE (ILUMINADA and LEONORA P. TUGADE, HEIRS OF ETANG P. GATMIN (LUDIVINA G. DELA CRUZ (by and through ALFONSO G. DELA CRUZ), HILARIA G. COBERO and ALFREDO G. COBERO) and SIONY G. TEPOL (by and through ELENA T. RIVAS and ELESIO TEPOL, JR.), AS HEIRS OF DECEDENT PABLO PASCUA, Respondents.

FACTS

Respondents, descendants of Pablo Pascua, filed a complaint for reconveyance or damages over a 23.7229-hectare parcel of land in Zambales covered by Original Certificate of Title (OCT) No. 404 in Pablo’s name. The OCT’s annotations showed Pablo had sold the property during his lifetime. On February 13, 1967, Cipriano Pascua, Sr., one of Pablo’s children, executed an “Extrajudicial Settlement of a Sole Heir and Confirmation of Sales,” declaring himself Pablo’s only heir and confirming prior sales, including an alleged sale to spouses Albino and Fabia Rodolfo. Subsequently, Transfer Certificate of Title (TCT) No. T-8241 was issued in Cipriano’s name (though unsigned by the Register of Deeds), and on the same day, TCT No. T-8242 was issued to the spouses Rodolfo, canceling TCT No. T-8241. On October 31, 1969, the spouses Rodolfo sold the property to petitioner Guaranteed Homes, Inc., leading to the issuance of TCT No. T-10863 in petitioner’s name on November 5, 1969. Respondents alleged that neither the Rodolfo spouses nor petitioner ever had possession of the property, as some Pascua heirs remained in actual possession. Petitioner moved to dismiss the complaint, arguing the action was barred by the statute of limitations (over 28 years having passed since TCT No. T-10863’s issuance) and that the complaint stated no cause of action as petitioner was an innocent purchaser for value. The Regional Trial Court (RTC) granted the motion to dismiss, finding the action for reconveyance based on an implied trust had prescribed (10-year period from title issuance) and that laches applied. The Court of Appeals reversed, ruling the complaint sufficiently alleged a case for quieting of title which had not prescribed, and that for purposes of the motion to dismiss, the allegations of respondents’ possession must be hypothetically admitted.

ISSUE

Whether the Regional Trial Court correctly granted the motion to dismiss the complaint for reconveyance (or, conversely, whether the Court of Appeals erred in reversing the dismissal).

RULING

The Supreme Court granted the petition, reversing the Court of Appeals and reinstating the RTC’s order of dismissal. The Court held that the complaint, read together with its documentary annexes, failed to state a cause of action against petitioner. First, the complaint alleged no defect in the title of petitioner’s predecessors-in-interest (spouses Rodolfo) nor any circumstance that should have put petitioner on inquiry notice; petitioner, as a purchaser of registered land, had the right to rely on the face of the Torrens title. Second, the action for reconveyance based on an implied or constructive trust (arising from Cipriano’s fraudulent representation as sole heir) had prescribed, as more than ten years had elapsed from the issuance of the title (TCT No. T-10863 in 1969) to the filing of the complaint (1997). Third, the claim against the Assurance Fund had also prescribed under the six-year period in Section 102 of Presidential Decree No. 1529. Fourth, while the complaint purported to be one for quieting of title, the attached OCT No. 404 showed annotations of prior sales, meaning the title was not “clouded” by any instrument, claim, or encumbrance appearing on it; a quieting action requires such a cloud. Finally, laches barred the action, as respondents waited over 28 years despite knowledge of the issuance of titles to the Rodolfos and the petitioner, and their allegation of possession was contradicted by the documentary evidence showing registered transactions divesting ownership.