GR 62650; (June, 1991) (Digest)
G.R. No. 62650; June 27, 1991
SPOUSES MARIANO CASTILLO AND PILAR CASTILLO, et al., petitioners, vs. HEIRS OF VICENTE MADRIGAL AND/OR SUSANA REALTY, INC., et al., respondents.
FACTS
Petitioners, co-owners of a parcel of land in Ermita, Manila, filed a complaint for annulment of contract and title and/or reconveyance. They alleged that their title, TCT No. 623597, was fraudulently transferred to Vicente Madrigal under TCT No. 72066 based on a simulated deed of sale they never signed. They entrusted the property’s management to their brother, Eduardo Castillo, and discovered the alleged fraud only in 1977 upon their return from the provinces. The property was subsequently transferred to respondent Susana Realty, Inc. under TCT No. 36280 in 1954.
Private respondents moved to dismiss the complaint on the grounds of failure to state a cause of action and prescription. The trial court granted the motion, a decision affirmed by the Court of Appeals. Petitioners elevated the case to the Supreme Court via certiorari, arguing their action was imprescriptible as it was based on an alleged void or inexistent contract.
ISSUE
Whether the trial court correctly dismissed the complaint for failure to state a cause of action.
RULING
Yes, the dismissal was correct. The Supreme Court clarified that while an action for reconveyance based on an implied or constructive trust prescribes in ten years, an action for annulment of a void contract does not prescribe. However, this distinction became immaterial due to a fatal flaw in the complaint’s allegations.
The Court emphasized the settled doctrine that an action for reconveyance only lies as long as the property has not passed to an innocent purchaser for value. The complaint alleged that the property was transferred to Susana Realty, Inc. It failed, however, to allege that this corporation was a purchaser in bad faith or had knowledge of the alleged defect in its vendor’s title. In the absence of such an allegation, Susana Realty, Inc. is conclusively presumed to be an innocent purchaser for value and in good faith, entitled to the protection of the law. Consequently, even assuming the initial sale was void, petitioners no longer had a cause of action for reconveyance against the current registered owner. The petition was denied and the appellate decision affirmed, with a modification stating the action was imprescriptible, but the dismissal for failure to state a cause of action stood.