G.R. No. L-22587 April 28, 1969
RUFINO BUENO, FILOMENA B. GUERRO, LUIS B. GUERRERO, BENJAMIN B. GUERRERO, VIOLETA B. REYES-SAMONTE, FELICIDAD B. REYES-FONACIER, MERCEDES B. REYES, HONESTA B. REYES-SARMIENTO, TEODORA B. REYES-DALUMPINES, MAMERTA B. REYES-MERCADO, ROSARIO B. REYES-CONCEPCION, FEDERICO B. REYES and CONCEPCION B. REYES, plaintiffs-appellants, vs. MATEO H. REYES, and JUAN H. REYES, defendants-appellees.

FACTS

On January 7, 1936, Francisco H. Reyes filed an answer in Cadastral Case No. 47 of Ilocos Norte, claiming Lot No. 2857 of the Laoag Cadastre as property belonging to himself and his two brothers, Juan and Mateo. The lot was adjudicated in their favor on March 27, 1939, and Original Certificate of Title No. 19074 was issued in their names on July 7, 1939. Twenty-three years later, on December 12, 1962, the plaintiffs (heirs of Jorge Bueno, including the children of Francisco H. Reyes) filed an action for reconveyance of the lot. They alleged that the lot originally belonged to Jorge Bueno and descended to his three children: Brigida Bueno, Eugenia Bueno (wife of Francisco H. Reyes), and Rufino Bueno. They further alleged that Francisco H. Reyes was entrusted by agreement among the heirs to file the cadastral answer and obtain title for and in behalf of all the heirs of Jorge Bueno. Instead, Francisco H. Reyes, in either bad faith or mistake, and with the connivance of his brothers, obtained title in his own name and the names of his brothers. The plaintiffs claimed they only discovered this fact in 1962 when the defendants filed a petition for a writ of possession against a wrong person. The defendants moved to dismiss the complaint on the ground of prescription, which the trial court granted.

ISSUE

Whether the trial court correctly dismissed the complaint on the ground of prescription of action.

RULING

No. The order of dismissal is set aside and the case is remanded for further proceedings. The Supreme Court held that the trust involved was an implied (constructive) trust under Article 1456 of the Civil Code, arising from the alleged mistake or fraud of Francisco H. Reyes, compounded by the connivance of the defendants. While an action upon an implied trust generally prescribes in ten years, the prescriptive period is counted from the discovery of the bad faith or mistake constituting the fraud. Based on the allegations in the complaint (deemed hypothetically admitted for the motion to dismiss), the cause of action accrued only upon the plaintiffs’ discovery in 1962 that Francisco H. Reyes had violated their agreement and obtained registration in his and his brothers’ names. The cadastral proceeding did not constitute constructive notice to the plaintiffs as they had authorized Francisco H. Reyes to file an answer on their behalf, and the defendants could not invoke the constructive-notice rule based on their own breach of authority. The plaintiffs also alleged continuous possession of the property as owners until 1962. Since the grounds for dismissal were not indubitable, the parties should be afforded the opportunity to substantiate their claims and defenses at a full trial.