Bohol Resort Development, Inc. vs. Doloreich Dumaluan

The issue of prescription cannot be resolved at the pleading or summary-hearing stage where it depends on unresolved factual questions; the court should defer determination until after trial on the merits. An action for reconveyance based on a void contract is imprescriptible, whereas one based on fraud or trust prescribes in ten years from erroneous registration, and the allegations in the complaint determine the nature of the action.

Doloreich Dumaluan and Bohol Resort Development, Inc. assert conflicting ownership over Lot No. 3-B in Bolod, Panglao, Bohol. Doloreich traces his claim to a purchase from the heirs of Juan Dumaluan, while BRDI traces its title through a chain of registered transfers culminating in TCT No. 29414. The dispute involves the Torrens system and the remedial rules governing prescription as an affirmative defense in an action for reconveyance.

Lot No. 5682 in Bolod, Panglao, Bohol is the subject of conflicting claims. Doloreich Dumaluan alleged that he bought a parcel of land covered by Tax Declaration No. TM3-838 over Lot No. 5682, consisting of 23,971 square meters, from the heirs of the late Juan Dumaluan, represented by Eusebio Dumaluan, through a Deed of Extrajudicial Settlement with Simultaneous Sale. On May 29, 1996, Original Certificate of Title No. 75904 was issued to him, but it covered only 16,298 square meters, not the 23,971 square meters stated in TD No. TM3-838.

Doloreich later discovered that on January 31, 1983, Geralda Lorejo, Leonardo Lorejo, and Sotero Lorejo sold to Paulino Franco a lot with a total area of 8,998 square meters forming part of Lot No. 5682 covered by TD No. 33-03-0281. BRDI, for its part, placed the sale on January 31, 1984 and identified a Deed of Absolute Sale as evidence. Doloreich asserted that the sale was void because TD No. 33-03-0281 covered only 2,805 square meters and because the Lorejos were not the owners of the parcel and had no right or authority to sell it. Franco thereafter had Lot No. 5682 subdivided into Lot No. 5682-A and Lot No. 5682-B; Lot No. 5682-B became the subject of a pending litigation between Doloreich and Daniel Vergara for double titling. Franco consolidated Lot No. 5682-A with his other lots and, on December 16, 1986, obtained OCT No. 56607 over Lot No. 5682-A and his other properties. The consolidated property was later subdivided into Lot No. 3-A, Lot No. 3-B, and Lot No. 3-C. On July 29, 1993, Franco sold Lot No. 3-B to the spouses Tirso Uytengsu and Ma. Perlita Uytengsu, who were issued TCT No. 20887. In 2002, the Spouses Uytengsu sold Lot No. 3-B to Bohol Resort Development, Inc., and on February 28, 2003, BRDI was issued TCT No. 29414 over Lot No. 3-B.

Doloreich insisted that Lot No. 3-B belonged to him as part of the land he bought from the Juan Dumaluan Heirs. He prayed for declaration of nullity of TCT No. 29414 and reconveyance of Lot No. 3-B, arguing that the sale between the Lorejos and Franco was void because the Lorejos had no right over the land. He also alleged that Franco committed extrinsic fraud when he merged Lot No. 5682-A with his other properties to prevent interested parties from tracing Lot No. 5682-A, and he sought a temporary restraining order and/or preliminary injunction to stop BRDI's construction works on Lot No. 3-B.

In its Answer with Compulsory Counterclaim dated July 8, 2005, BRDI asserted that it was the registered owner of Lot No. 3-B, located at Bolod, Panglao, Bohol, with an area of 15,736 square meters and covered by TCT No. 29414 issued on February 28, 2003. It claimed that it purchased Lot No. 3-B from the Spouses Uytengsu in 2002, when the spouses were the registered owners under TCT No. 20887, and that the Spouses Uytengsu had bought Lot No. 3-B from Franco. According to BRDI, Franco purchased a portion of Lot No. 5682 containing 8,998 square meters from the Lorejos on January 31, 1984, as evidenced by a Deed of Absolute Sale. Lot No. 5682 was covered by TD No. 33-03-0281, which pertained to a land with a total area of 2,805 square meters. While TD No. 33-03-0281 was declared under the name of Juan Dumaluan, BRDI claimed that the true owner was Juan's father, Valentin Dumaluan. BRDI alleged that Valentin had eight children—Simeon, Glicerio, Tomas, Geralda, Sotera, Juan, and Catalina. During his lifetime, Valentin gave Simeon and Glicerio parcels of land as their respective shares in their inheritance; his other six children became co-owners of the lot covered by TD No. 33-03-0281 upon his death. Thus, the Lorejos, as sellers in the Deed of Absolute Sale, were owners of their undivided shares of the portion of land under TD No. 33-03-0281 sold to Franco. In particular, Geralda Dumuluan-Lorejo was the daughter of Valentin; Leonardo Lorejo was the son of Geralda and the authorized representative of Eusebio, a son of Catalina Dumaluan; and Sotero Lorejo was actually Sotera Dumaluan-Mejos, also a daughter of Valentin. A year after the sale to Franco, the three remaining heirs, Tomas, Felix who represented Juan, and Pablo, complained to the barangay captain of Bolod and demanded payment of their share of the proceeds of the sale; this led to conciliation proceedings and the execution of documents confirming that Tomas, Juan, and Pablo were paid their shares.

In 1983, the cadastral survey of the land covered by TD No. 33-03-0281 was completed. The survey showed that the actual area was 23,971 square meters, not 2,805 square meters. TD No. 33-03-0281 was then cancelled and superseded by TD No. TM3-838, the tax declaration referred to in the purported sale between Doloreich and the Juan Dumaluan Heirs. Franco consolidated Lot No. 5682 with his other properties and obtained OCT No. 56607. After this, TD No. TM3-838 was cancelled in 1987 and superseded by TD No. TM3-947 in the name of Franco and TD No. TM3-943 in the name of Juan. On July 29, 1993, Franco and the Spouses Uytengsu executed a Deed of Absolute Sale for Lot No. 3-B with an area of 15,736 square meters. The Spouses Uytengsu eventually sold Lot No. 3-B to BRDI, for which BRDI was issued TCT No. 29414 on February 28, 2003. BRDI asserted that it was an innocent purchaser for value and had no knowledge of any defect or flaw in its vendor's title. It claimed there was no defect in the sale between the Lorejos and Franco because the Lorejos, as heirs of Valentin, sold their undivided share in the land described in TD No. 33-03-0281. It explained that the discrepancy in the lot area in TD No. 33-03-0281 was due to the fact that the tax declaration was issued before the cadastral survey was completed in 1983. It also argued that the sale between Doloreich and the Juan Dumaluan Heirs was defective because they could not have conveyed the parcel described in TD No. TM3-838 in 1993 since that tax declaration had already been cancelled in 1987. BRDI further argued that Doloreich acted in bad faith in purportedly purchasing the land because the purchase price was only PHP 30,000.00 and Doloreich, a relative of the Juan Dumaluan Heirs, knew that they did not own the land purportedly sold; it also insisted that Doloreich's action for reconveyance had already prescribed.

The dispute reached the courts when Doloreich filed a Complaint for Declaration of Nullity of TCT No. 29414 and Reconveyance with prayer for injunctive relief. The RTC found that BRDI was presented with TCT No. 20887 in the name of the sellers when it purchased Lot No. 3-B and that nothing in the pleadings substantially stated that BRDI was in bad faith. The CA found that the Complaint adequately alleged a reconveyance based on a void sale, although fraud was not pleaded with particularity, and that BRDI's Answer raised factual matters—including the pre-cadastral survey and the Lorejos' status as Valentin's heirs—that required a trial.

• Prescription Resolved Without Trial: BRDI argued that the CA committed reversible error when it ruled that the issue of prescription cannot be properly decided without a trial on the merits, because Doloreich had already sufficiently adduced evidence during the hearing for injunctive relief and the Rules of Court allow termination of a case through judgment on the pleadings and summary judgment.
• Innocent Purchaser Defense: BRDI argued that the CA erred when it effectively held that BRDI must first prove in a full-blown trial that it is an innocent purchaser for value before it can seek dismissal of the case; the defense is immediately available to holders of Torrens titles and protects them from needless litigation.
• Prescription Already Set In: BRDI argued that the CA wrongly remanded the case notwithstanding its own ruling that the prescriptive period for an action for reconveyance based on fraud is ten years from the registration of the adverse title, which meant that Doloreich's action prescribed on December 16, 1996, or ten years from Franco's registration of his title on December 16, 1986.

• Premature Dismissal: Doloreich argued in his Motion for Reconsideration that the RTC gravely erred in prematurely dismissing the case for lack of cause of action despite the fact that none of the parties had presented evidence in support of their allegations.
• Void Sale and Reconveyance: Doloreich maintained that the sale between the Lorejos and Franco was void because the Lorejos had no right over the land and the property sold exceeded the area covered by TD No. 33-03-0281; he sought nullity of TCT No. 29414 and reconveyance of Lot No. 3-B.
• Extrinsic Fraud: Doloreich alleged that Franco committed extrinsic fraud when he merged Lot No. 5682-A with his other properties to prevent interested parties from tracing Lot No. 5682-A.

• Remand and Prescription: Whether the CA correctly remanded the case to the RTC for trial on the merits without resolving the question of whether Doloreich's cause of action had prescribed.

• Remand and Prescription: Yes. The CA correctly remanded the case because prescription depended on factual findings not fully threshed out in the injunction hearings; whether the action is imprescriptible depends on whether the underlying sale is void, which requires trial.

• Remand and Prescription: The CA correctly ruled that the issue of prescription cannot be resolved at this stage of the proceedings. Whether extinctive prescription has set in depends on factual findings which have not been fully threshed out in the hearings for injunctive relief. The CA properly remanded the case to the RTC.
• Affirmative Defense Procedure: Under Rule 6, Section 5(b) of the Rules of Court, prescription is an affirmative defense. Under the 1997 Amendments to the Rules of Court, prescription may be raised either in a motion to dismiss or as an affirmative defense in an answer; where raised as an affirmative defense, the court has discretion to conduct a preliminary hearing as if a motion to dismiss had been filed and determine if the affirmative defense warrants dismissal. Under Rule 9, Section 1, prescription is not waived even if not raised by the parties, and the court may dismiss the claim motu proprio where it appears from the pleadings or evidence that the action has prescribed. Under the 2019 Amendments, Rule 8, Section 12 allows the court to conduct a summary hearing on affirmative defenses and resolve them within thirty days from termination; denial is not subject to a motion for reconsideration or petition for certiorari, prohibition, or mandamus, but may be raised on appeal after judgment on the merits. The RTC exercised authority under the 1997 Rules, but the CA determined that the proper route here was not Rule 16 or Rule 9 of the 1997 Rules nor Rule 8 of the 2019 Rules; the question of prescription could not be resolved based on the pleadings or the evidence already on record nor through a mere summary hearing.
• Nature of Action and Prescriptive Period: The unique circumstances require that certain preliminary questions be resolved before prescription can be determined: first, the nature of the action; second, the nature of the cause of action determines the period of prescription or whether the action is imprescriptible; third, whether Doloreich has a defense against prescription. These require factual determinations that can only be had after trial. The CA concluded that the Complaint is an action for reconveyance anchored on the allegation that the sale between the Lorejos and Franco is void. An action for reconveyance is a landowner's remedy to recover property wrongfully registered in another person's name after one year from the date of the registration decree, as long as the property has not passed to an innocent purchaser for value. It does not seek to reopen the registration proceeding; it only purports to show that the person who secured registration is not the real owner. It may be based on fraud, an implied or constructive trust, an express trust, or a void contract. The ground determines the prescriptive period: where based on fraud or trust, ten years from the erroneous registration; where based on the nullity of the deed of conveyance, imprescriptible. In Uy vs. Court of Appeals, the Court held that when the action for reconveyance is based on a void contract, the action is imprescriptible; registration does not vest title and a void sale produces no legal effects. The allegations in a complaint determine the nature of the action. The Complaint alleged that Doloreich seeks reconveyance based on the void sale and Franco's fraud; it alleged that the Lorejos had no right over the land, that the area sold exceeded TD No. 33-03-0281, and that Franco committed extrinsic fraud by merging and subdividing Lot No. 5682. The CA correctly characterized the action as one for reconveyance anchored on the nullity of the Deed of Absolute Sale.
• Factual Issues Requiring Trial: Whether Doloreich's action for reconveyance is indeed imprescriptible requires the resolution of factual issues. The RTC must first determine if Doloreich correctly claimed that the sale between the Lorejos and Franco is void because (a) the Lorejos were not the owners of the property sold and (b) the property sold was in excess of the property covered by TD No. 33-03-0281. BRDI also made related factual assertions requiring trial: that the Lorejos, as Valentin's heirs, sold their undivided share to Franco, and that the discrepancy in the technical description of the lot covered by TD No. 33-03-0281 can be explained by the fact that the tax declaration was issued before the cadastral survey was completed. These matters were not fully threshed out in the hearings for injunctive relief, especially considering that BRDI did not present any evidence in those hearings.
• Gatmaytan Guidance: In Gatmaytan vs. Misibis Land, Inc., the cause of action was reconveyance on the ground that the underlying deed of sale which led to the issuance of a Torrens title was void. The Court ruled that the lower court erred in dismissing the complaint without a trial; considering that the petitioner made factual allegations pertaining to the nullity of the underlying sale, the issue should first be resolved in a trial on the merits. If, after trial, the RTC determines that the underlying Deed of Absolute Sale is indeed void, then the action for reconveyance is classified as imprescriptible and Doloreich's claim cannot be said to be time-barred, subject to BRDI's defense that it is an innocent purchaser for value, which must still be proven by the required proof.
• Fraud Allegations: Doloreich also alleged extrinsic fraud, but the CA correctly pointed out that he did not make these allegations with sufficient particularity under Rule 8, Section 5 of the 2019 Amendments to the Rules of Court. He has not, so far, presented evidence supporting this allegation of fraud in the hearing for injunctive relief. Under Rule 10, Section 5 of the 2019 Amendments, issues not raised by the pleadings but tried with the express or implied consent of the parties shall be treated as if they had been raised in the pleadings; thus, it may be possible for Doloreich to raise the issue of fraud during trial and present evidence. If it turns out that Doloreich is able to establish the existence of fraud, this could also support his action for reconveyance on a ground other than void sale, making the action subject to the ten-year prescriptive period. A trial is required for the RTC to assess which of Doloreich's assertions will be proved.
• Post-Pre-Trial Options: Under Rule 18, Section 10 of the 2019 Amendments to the Rules of Court, a court has the discretion to submit the case for summary judgment or judgment on the pleadings if it finds, after pre-trial, that there are no more controverted facts or no genuine issue or material question of fact that requires trial. Considering that the case has remained pending for years, the RTC is directed to consider the propriety of a judgment on the pleadings or summary judgment after the conclusion of the pre-trial and to act on the case with dispatch.

• Affirmative Defense of Prescription; Deferral When Not Indubitable — Prescription is an affirmative defense that may be raised in an answer; the court may conduct a summary or preliminary hearing on it. Where the ground for dismissal is not indubitable and depends on factual issues, the court should defer determination until after trial on the merits. Applied: the CA correctly remanded because prescription depended on whether the action was imprescriptible, which in turn depended on whether the underlying sale was void.
• Action for Reconveyance and Prescriptive Period — An action for reconveyance is a landowner's remedy to recover property wrongfully registered in another person's name after one year from the registration decree, provided the property has not passed to an innocent purchaser for value. It may be based on fraud, trust, or void contract. Fraud or trust: ten years from erroneous registration. Void contract: imprescriptible. Applied: the Complaint alleged a void sale; if proved, the action is imprescriptible subject to the innocent purchaser defense; if fraud is established, the action is subject to the ten-year period.
• Allegations Determine Nature of Action — The nature of the action and the applicable prescriptive period are determined by the allegations in the complaint. Applied: the CA correctly characterized the Complaint as one for reconveyance anchored on the nullity of the Deed of Absolute Sale based on its allegations.
• Innocent Purchaser for Value as Defense — The defense of innocent purchaser for value is a factual matter that must be proven; it does not automatically warrant dismissal at the pleading stage. Applied: BRDI's defense remains subject to proof after trial if the sale is found void.
• Judgment on the Pleadings or Summary Judgment After Pre-Trial — Under Rule 18, Section 10 of the 2019 Amendments to the Rules of Court, the court may submit the case for summary judgment or judgment on the pleadings after pre-trial if no controverted facts or genuine issues remain. Applied: the RTC was directed to consider this after pre-trial.

• "The CA correctly ruled that the issue of prescription cannot be resolved at this stage of the proceedings. Whether extinctive prescription has set in in this case depends on factual findings which have not been fully threshed out in the hearings for injunctive relief. The CA properly remanded the case to the RTC." — This states the ratio decidendi: prescription was not ripe for resolution because it depended on unresolved factual findings.
• "This Court has consistently ruled that where the ground for dismissal is not indubitable, the court should defer the determination of the issue until after trial of the case on the merits." — This articulates the controlling rule on deferring dismissal where the ground is not indubitable.
• "When the action for reconveyance is based on a void contract, as when there was no consent on the part of the alleged vendor, the action is imprescriptible. The property may be reconveyed to the true owner, notwithstanding the TCTs already issued in another's name. The issuance of a certificate of title in the latter's favor could not vest upon him or her ownership of the property; neither could it validate the purchase thereof which is null and void. Registration does not vest title; it is merely the evidence of such title. Our land registration laws do not give the holder any better title than what he actually has. Being null and void, the sale produces no legal effects whatsoever." — Quoted from Uy vs. Court of Appeals, this defines the imprescriptibility of reconveyance based on a void contract and the principle that registration does not vest title.
• "The allegations in a complaint determine the nature of the action." — This is the rule used to classify the Complaint as one for reconveyance anchored on a void sale.

• Uy vs. Court of Appeals, 769 Phil. 705 (2015) — Quoted for the rule that an action for reconveyance based on a void contract is imprescriptible, that registration does not vest title, and that a void sale produces no legal effects. The Supreme Court relied on it to explain the consequence if the underlying sale is found void.
• Gatmaytan vs. Misibis Land, Inc., G.R. No. 222166, June 10, 2020 — Cited as guidance; the Court ruled that where reconveyance is based on a void underlying deed of sale, the lower court erred in dismissing the complaint without trial because the factual allegations of nullity should first be resolved in a trial on the merits.
• Abejaron vs. Nabasa, 411 Phil. 552 (2001) — Cited for the definition and purpose of an action for reconveyance: a landowner's remedy to recover property wrongfully registered in another's name after one year from the registration decree, as long as the property has not passed to an innocent purchaser for value.
• Sps. Aboitiz vs. Sps. Po, 810 Phil. 123 (2017) — Cited with Uy for the rule that where reconveyance is based on fraud or trust, the prescriptive period is ten years from the erroneous registration of the property.
• Selerio vs. Bancasan, G.R. No. 222442, June 23, 2020; Philippine National Bank vs. Hipolito, 121 Phil. 22 (1965); Sison vs. McQuaid, 94 Phil. 201 (1953) — Cited for the rule that where the ground for dismissal is not indubitable, the court should defer determination of the issue until after trial on the merits.
• Caro vs. Court of Appeals, 259 Phil. 891 (1989) — Cited by the RTC for the ten-year prescriptive period for an action for reconveyance based on fraud, reckoned from the time the adverse party registers the land.

• Rule 6, Section 5(b), Rules of Court — Defines affirmative defenses as allegations of new matter which, while hypothetically admitting the material allegations in the pleading, would prevent or bar recovery; includes fraud, statute of limitations, release, payment, illegality, statute of frauds, estoppel, former recovery, discharge in bankruptcy, and other matters by way of confession and avoidance. Applied: prescription is an affirmative defense.
• Rule 16, Section 6, 1997 Amendments to the Rules of Court — Where prescription is raised as an affirmative defense in an answer, and not as a ground for dismissal in a motion to dismiss, the court has discretion to conduct a preliminary hearing as if a motion to dismiss had been filed and determine if the affirmative defense warrants dismissal. Applied: the RTC had authority to dismiss on prescription under the 1997 Rules.
• Rule 9, Section 1, Rules of Court — Defenses and objections not pleaded in a motion to dismiss or answer are deemed waived, except when it appears from the pleadings or evidence that the court has no jurisdiction, another action is pending, or the action is barred by prior judgment or statute of limitations, in which case the court shall dismiss the claim. Applied: prescription is not waived and may be raised motu proprio if apparent from the pleadings or evidence.
• Rule 8, Section 12, 2019 Amendments to the Rules of Court — Affirmative defenses shall be raised in the answer; the court shall motu proprio resolve certain defenses within thirty days from filing of the answer; as to other affirmative defenses, the court may conduct a summary hearing within fifteen days from filing of the answer and resolve them within thirty days from termination; denial is not subject to a motion for reconsideration or petition for certiorari, prohibition, or mandamus, but may be raised on appeal after judgment on the merits. Applied: the Court noted the modified procedure for affirmative defenses but held that the CA correctly found prescription could not be resolved through a mere summary hearing in this case.
• Rule 8, Section 5, 2019 Amendments to the Rules of Court — Requires fraud to be alleged with particularity. Applied: Doloreich's extrinsic fraud allegations were not pleaded with sufficient particularity.
• Rule 10, Section 5, 2019 Amendments to the Rules of Court — When issues not raised by the pleadings are tried with the express or implied consent of the parties, they shall be treated as if they had been raised in the pleadings; no amendment is necessary. Applied: Doloreich may raise fraud during trial and present evidence.
• Rule 18, Section 10, 2019 Amendments to the Rules of Court — Judgment after pre-trial; if there are no more controverted facts, no genuine issue as to any material fact, or no issue, or the answer fails to tender an issue, the court shall include in the pre-trial order that the case be submitted for summary judgment or judgment on the pleadings. Applied: the RTC was directed to consider the propriety of judgment on the pleadings or summary judgment after pre-trial.

Caguioa (Chairperson), Inting, Gaerlan, and Dimaampao, JJ., concur.