Reyes v. Court of Appeals
REITERATIONFacts
The Antecedents: Petitioner Guadalupe S. Reyes sold one-half (1/2) of a 300-square meter lot to respondent Juanita L. Raymundo on June 21, 1967. Subsequently, on September 24, 1969, petitioner sold her remaining interest in the property to respondent, evidenced by a deed of absolute sale. The house on the property had been leased by the spouses Mario and Zenaida Palacios from petitioner since 1967. In December 1984, petitioner allegedly refused rentals, prompting the Palacios spouses to file for consignation. A compromise agreement was reached, extending the lease to November 24, 1986. Later, respondent intervened in a contempt case filed by petitioner against the lessees, claiming ownership of the entire property and presenting a lease contract dated March 17, 1987, retroactive to January 1, 1987. The Palacios spouses then began paying rentals to respondent. Procedural History: On August 23, 1987, petitioner filed a complaint for cancellation of TCT No. 149036 and reconveyance with damages, alleging the second deed of sale was simulated. Petitioner claimed an agreement that respondent would secure a GSIS loan using the entire property as collateral for constructing an apartment, and if the loan failed, respondent would reconvey the property. The loan did not materialize. The Regional Trial Court (RTC) ruled in favor of petitioner, finding the second deed of sale simulated, cancelling the title, and ordering reconveyance and damages. The Court of Appeals (CA) reversed the RTC, ruling that the notarized deed of sale prevailed over the private writing, and that petitioner's action had prescribed and was barred by laches. The Petition: Petitioner posits that her cause of action accrued in 1987 when respondent asserted ownership, thus her complaint filed on August 23, 1987, had not prescribed. She also asserts the credibility of the January 10, 1970 agreement over the second deed of sale.
Issue(s)
Whether petitioner's action for reconveyance has prescribed. Whether petitioner's action is barred by laches. Whether the second deed of sale dated September 24, 1969, is simulated.
Ruling
The petition is GRANTED. The Decision of the Court of Appeals is SET ASIDE, and the Decision of the Regional Trial Court is REINSTATED and ADOPTED.
Ratio Decidendi
On the issue of prescription: The Court held that an action for reconveyance based on an implied or constructive trust generally prescribes in ten (10) years from the date of registration or issuance of title. However, this rule does not apply when the claimant is in actual possession of the property. Petitioner remained in actual possession through her lessees, the Palacios spouses, who had been leasing the property since 1967 and paying rentals to petitioner. This possession was only disturbed in 1987 when respondent asserted ownership. Therefore, petitioner's action for reconveyance, filed on August 23, 1987, had not prescribed. Furthermore, the Court clarified that an action for the declaration of the inexistence of a contract, such as the simulated second deed of sale, does not prescribe under Article 1410 of the Civil Code. On the issue of laches: The Court found the CA's conclusion that petitioner was guilty of laches, based on 18 years of respondent's alleged possession, to be unsupported by evidence. The Palacios spouses consistently paid rentals to petitioner from 1967 until 1986, as evidenced by their petition for consignation and respondent's own lease contract acknowledging a previous lease with petitioner. The Court emphasized that laches is an equitable doctrine that should not be applied to defeat justice or perpetrate fraud. Applying laches against petitioner would result in manifest injustice by vesting ownership in respondent through a simulated deed of sale. On the issue of simulation: The Court found the second deed of sale to be simulated, aligning with the RTC's findings. The continued exercise of dominion by petitioner over the property, including collecting rentals from the lessees from 1969 to 1986, despite the execution of the second deed of sale, defied logic and the principle of ownership. The Court noted that the only change effected by the purported sale was the transfer of title, while petitioner retained possession and control. This conduct, coupled with the existence of a private writing dated January 10, 1970, detailing their true agreement, indicated that the deed of sale was not intended to convey any real right over the property. The Court reiterated that the Torrens system does not validate simulated transactions and cannot be used to shield fraud or unjust enrichment.
Main Doctrine
An action for reconveyance based on a simulated sale, where the vendor remains in actual possession of the property, does not prescribe, and the doctrine of laches will not apply to defeat the vendor's right to seek reconveyance, especially when applying it would result in manifest injustice.