G.R. No. L-7083 May 19, 1955
JUAN EUGENIO and BASILIA EUGENIO, petitioners, vs. SILVINA PERDIDO, ROSITA, JOSE, ROMUALDO, FELIX, ALEJANDRINO, FRANCISCA, ASUNCION, FLORENCIA and AMADO, all surnamed Salang, respondents.

FACTS

On November 1, 1927, Homestead Patent No. 10847 was issued in the name of Teodoro Eugenio, and Original Certificate of Title No. 62 was issued in his name on December 5, 1927. On March 12, 1932, within five years from the issuance of the patent, Teodoro Eugenio, in the presence of his children Juan and Basilia (the petitioners), sold the homestead for P1,300.00 to Silvina Perdido and her husband Clemente Sadang (predecessors of the respondents) and delivered possession. On May 4, 1949, Juan and Basilia Eugenio filed an action to recover the land, claiming the contract was a mere mortgage and they had attempted to repay the debt. The Court of First Instance held the contract was a sale, void for being executed within the prohibited five-year period, and ordered the return of the property upon repayment of P1,300.00 with interest. The Court of Appeals reversed, holding the petitioners had no personality to attack the sale’s validity and their right to repurchase had lapsed. The petitioners sought review, arguing the action to annul had not prescribed and the right to repurchase had not lapsed because the sale was never registered.

ISSUE

1. Whether the action to annul the 1932 sale has prescribed.
2. Whether the petitioners have the legal personality to prosecute the suit for recovery.
3. Whether the petitioners are estopped from denying the sale’s validity or are in pari delicto.
4. Whether the subsequent acquisition of a complete homestead title by the vendor validated the sale.

RULING

The Supreme Court reversed the decision of the Court of Appeals.
1. The action to annul has not prescribed. The sale executed within five years from the patent’s issuance is unlawful and null and void from its execution under Sections 116 and 122 of Act No. 2874 ( Commonwealth Act No. 141 ). Under the New Civil Code, such an inexistent contract cannot be validated by prescription, a principle recognized since Tipton vs. Velasco. Furthermore, Section 46 of the Land Registration Act ( Act No. 496 ) provides that no title to registered land in derogation of the registered owner shall be acquired by prescription or adverse possession. The homestead, being registered under the Torrens system, enjoys imprescriptibility.
2. The petitioners have the personality to prosecute the suit. While Section 124 of the Public Land Law provides that an illegal sale can cause reversion to the State, such reversion is not automatic. As long as the Government has not acted to annul the grant, the rights of the homesteader or his heirs stand and must be recognized in court.
3. The petitioners are not estopped, and the in pari delicto doctrine does not apply. No estoppel can arise from an illegal act, and respondents are conclusively presumed to know the law. The in pari delicto doctrine may not be invoked as it would run counter to the State’s fundamental policy on homesteads. The forfeiture is a matter between the State and the grantee or his heirs.
4. The subsequent acquisition of a complete homestead title did not validate the sale. A null and void (inexistent) contract cannot be ratified, as held in Sabas vs. Garma.
The Supreme Court permitted the petitioners to recover the homestead upon payment of P1,300.00 to the respondents. Costs were imposed on the respondents.