G.R. No. 175073; August 15, 2011
ESTATE OF MARGARITA D. CABACUNGAN, represented by LUZ LAIGO-ALI, Petitioner, vs. MARILOU LAIGO, PEDRO ROY LAIGO, STELLA BALAGOT and SPOUSES MARIO B. CAMPOS AND JULIA S. CAMPOS, Respondents.

FACTS

Margarita Cabacungan owned three parcels of unregistered land in La Union. In 1968, to support her son Roberto Laigo, Jr.’s application for a non-immigrant U.S. visa, Margarita executed an Affidavit of Transfer of Real Property, transferring the tax declarations of the properties to Roberto’s name. She alleged this was only an accommodation and she never intended to donate the properties. Roberto later adopted respondents Pedro and Marilou Laigo and married respondent Estella Balagot. In 1990 and 1992, Roberto sold the three properties: one to the Spouses Campos and the other two to Marilou and Pedro, respectively. Margarita claimed she only learned of these sales in August 1995 at Roberto’s wake. In February 1996, Margarita, represented by her daughter Luz, filed a complaint for annulment of sale, recovery of ownership and possession, cancellation of tax declarations, and damages against the buyers. She argued the sales were fictitious due to gross inadequacy of price and the buyers were in bad faith. Prior to trial, Margarita and the Spouses Campos entered into a compromise agreement, which was approved by the trial court. Margarita died and was substituted by her estate. The trial proceeded against respondents Pedro and Marilou Laigo.

ISSUE

1. Whether the complaint for annulment of sale and recovery of ownership is barred by laches and prescription.
2. Whether the rule on innocent purchaser for value applies to the sale of unregistered land.
3. Whether an implied trust was created between Margarita and her son Roberto.

RULING

The Supreme Court DENIED the petition and AFFIRMED the Court of Appeals’ decision.
1. On Prescription and Laches: The Court ruled that the action was barred by prescription. The Affidavit of Transfer was executed in 1968. Assuming an implied trust was created under Article 1456 of the Civil Code (property acquired through mistake or fraud), the action for reconveyance based on such an implied trust prescribes in ten years from the issuance of the title or registration. Since the properties were unregistered, the ten-year period commenced from the date of the execution of the affidavit in 1968. Margarita filed the complaint only in 1996, well beyond the prescriptive period. Furthermore, Margarita was guilty of laches for her unreasonable delay of 28 years in asserting her rights, prejudicing the respondents who had acquired the properties in the interim.
2. On Innocent Purchaser for Value: The Court held that the principle of innocent purchaser for value applies only to registered land under the Torrens system. Since the subject properties were unregistered, the respondents could not invoke being innocent purchasers for value as a defense. However, this did not aid the petitioner because her action was already barred by prescription and laches.
3. On Implied Trust: The Court found that an implied trust under Article 1456 was established. Roberto acquired the properties through mistake or fraud (the mistaken belief that the transfer was only for visa purposes, or fraud if he later refused to reconvey). He thus became a trustee by operation of law for the benefit of Margarita. However, as stated, the action to enforce this trust had prescribed.
The Court emphasized that the long delay in asserting a right, coupled with prejudice to the other party, constitutes laches. Margarita’s inaction from 1968 to 1996, despite the opportunity to demand reconveyance upon Roberto’s return from the U.S., barred her recovery. The compromise with the Spouses Campos did not affect the claims against the other respondents.