Daclag vs. Macahilig

An action for reconveyance based on a void contract is imprescriptible. Where a deed of sale is an absolute nullity because the seller was not the owner of the land sold, the action to declare its inexistence does not prescribe under Article 1410 of the Civil Code, and the registered owner is deemed to hold the property in trust for the true owner, who may sue for reconveyance at any time as long as the land remains in the name of the person who caused the wrongful registration.

The case involves a parcel of land that was registered in the name of petitioner Rogelia Daclag in 1984. Respondents filed a complaint for reconveyance in 1991, within the 10-year prescriptive period. The land was originally unregistered when petitioners purchased it, which the Court found relevant to the defense of good faith purchase. The dispute centers on a deed of sale executed by Maxima, who was not the owner of the land she sold to petitioners, as the one-half northern portion was owned by respondents.

The land at the center of the dispute was registered in the name of petitioner Rogelia Daclag in 1984. Respondents filed a complaint for reconveyance in 1991, within the 10-year prescriptive period. The deed of sale executed by Maxima in favor of petitioners was null and void, since Maxima was not the owner of the land she sold to petitioners; the one-half northern portion of such land was owned by respondents.

Petitioners bought the property when it was still an unregistered land. The RTC found that petitioners should pay respondents their corresponding share in the produce of the subject land from the time they were deprived thereof until the possession is restored to them. The RTC also found that since Maxima died in October 1993, whatever charges and claims petitioners may recover from her expired with her.

Petitioners received a summons together with respondents' complaint on August 5, 1991. Petitioners never raised the issue of Maxima's liability in their appellants' brief, in their motion for reconsideration before the CA, or in their petition for review before the Supreme Court. Maxima was not substituted at all by her heirs after the promulgation of the RTC Decision.

• Prescription of Reconveyance Action: Petitioners contended that the 10-year period for reconveyance is applicable only if the action is based on an implied or constructive trust; since respondents' action for reconveyance was based on fraud, the action must be filed within four years from the discovery of the fraud, citing Gerona vs. De Guzman and Balbin vs. Medalla.

• Good Faith Possession and Damages: Petitioners contended that they are possessors in good faith, thus the award of damages should not have been imposed. They argued that under Article 544, a possessor in good faith is entitled to the fruits received before the possession is legally interrupted; if indeed petitioners are jointly and severally liable to respondents for the produce of the subject land, the liability should be reckoned only for 1991 and not 1984.

• Liability of Maxima's Estate: Petitioners argued that the proper person to be held liable for damages to be awarded to respondents should be Maxima Divison or her estate, since she misrepresented herself to be the true owner of the subject land.

N/A — The decision does not recount the respondents' arguments in response to the motion for reconsideration.

• Prescription of Reconveyance Action: Whether the respondents' action for reconveyance was subject to prescription, and if so, whether the applicable period was four years from discovery of fraud or ten years from the issuance of the certificate of title.

• Good Faith Possession and Reckoning of Damages: Whether petitioners' good faith possession ceased upon service of summons on August 5, 1991, such that their liability for the produce of the land should be reckoned from that date rather than from 1984.

• Liability of Maxima's Estate: Whether the Court should consider petitioners' argument that Maxima Divison or her estate, not petitioners, should be liable for damages to respondents.

• Prescription of Reconveyance Action: No, the action was not subject to prescription. The deed of sale executed by Maxima in favor of petitioners was null and void since Maxima was not the owner of the land she sold. Being an absolute nullity, the deed is subject to attack anytime, in accordance with Article 1410 of the Civil Code that an action to declare the inexistence of a void contract does not prescribe.

• Good Faith Possession and Reckoning of Damages: Yes, partial merit. Under Article 528 of the Civil Code, possession in good faith ceases from the moment defects in the title are made known to the possessors, and such interruption takes place upon service of summons. Since petitioners received summons on August 5, 1991, their good faith ceased on that day, and they should pay respondents 10 cavans of palay per annum beginning August 5, 1991 instead of 1984.

• Liability of Maxima's Estate: No. Petitioners never raised this issue in their appellants' brief, in their motion for reconsideration before the CA, or in their petition for review before the Supreme Court. Raising it in the motion for reconsideration offends the basic rules of fair play, justice and due process, especially since Maxima was not substituted at all by her heirs after the promulgation of the RTC Decision.

• Prescription of Reconveyance Action: The Court cited Caro vs. Court of Appeals, which explicitly held that "the prescriptive period for the reconveyance of fraudulently registered real property is 10 years reckoned from the date of the issuance of the certificate of title." However, upon review of the factual antecedents, the Court found that respondents' action for reconveyance was not even subject to prescription. The deed of sale executed by Maxima in favor of petitioners was null and void because Maxima was not the owner of the land she sold to petitioners; the one-half northern portion was owned by respondents. Being an absolute nullity, the deed is subject to attack anytime, in accordance with Article 1410 of the Civil Code. The Court consistently ruled that when there is a showing of such illegality, the property registered is deemed to be simply held in trust for the real owner by the person in whose name it is registered, and the former has the right to sue for the reconveyance of the property. An action for reconveyance based on a void contract is imprescriptible. As long as the land wrongfully registered under the Torrens system is still in the name of the person who caused such registration, an action in personam will lie to compel him to reconvey the property to the real owner. Since title to the property is in the name of petitioner Rogelia, the trial court correctly ordered the reconveyance of the subject land to respondents.

• Good Faith Possession and Reckoning of Damages: Article 528 of the Civil Code provides that possession acquired in good faith does not lose this character, except in a case and from the moment facts exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully. Possession in good faith ceases from the moment defects in the title are made known to the possessors, by extraneous evidence or by suit for recovery of the property by the true owner. Whatever may be the cause or the fact from which it can be deduced that the possessor has knowledge of the defects of his title or mode of acquisition, it must be considered sufficient to show bad faith. Such interruption takes place upon service of summons. Article 544 provides that a possessor in good faith is entitled to the fruits only so long as his possession is not legally interrupted. Records show that petitioners received a summons together with respondents' complaint on August 5, 1991; thus, petitioners' good faith ceased on the day they received the summons. Consequently, petitioners should pay respondents 10 cavans of palay per annum beginning August 5, 1991 instead of 1984.

• Liability of Maxima's Estate: Petitioners never raised the issue of Maxima's liability in their appellants' brief, in their motion for reconsideration filed before the CA, or in their petition for review before the Supreme Court. Thus, petitioners cannot raise the same in the motion for reconsideration without offending the basic rules of fair play, justice and due process, especially since Maxima was not substituted at all by her heirs after the promulgation of the RTC Decision.

• Prescription of actions for reconveyance based on void contracts — An action for reconveyance based on a void contract is imprescriptible. Under Article 1410 of the Civil Code, an action to declare the inexistence of a void contract does not prescribe. Where a deed of sale is an absolute nullity because the seller was not the owner of the land sold, the property registered is deemed to be simply held in trust for the real owner by the person in whose name it is registered, and the former has the right to sue for reconveyance at any time. As long as the land wrongfully registered under the Torrens system is still in the name of the person who caused such registration, an action in personam will lie to compel him to reconvey the property to the real owner.

• Cessation of possession in good faith — Under Article 528 of the Civil Code, possession acquired in good faith does not lose this character, except in a case and from the moment facts exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully. Possession in good faith ceases from the moment defects in the title are made known to the possessors, by extraneous evidence or by suit for recovery of the property by the true owner. Such interruption takes place upon service of summons. Under Article 544, a possessor in good faith is entitled to the fruits only so long as his possession is not legally interrupted.

• Issues raised for the first time on appeal — A party cannot raise an issue for the first time in a motion for reconsideration before the Supreme Court without offending the basic rules of fair play, justice and due process, especially where the party never raised the matter in the appellants' brief, in the motion for reconsideration before the Court of Appeals, or in the petition for review before the Supreme Court.

• "the prescriptive period for the reconveyance of fraudulently registered real property is 10 years reckoned from the date of the issuance of the certificate of title x x x." — This quotation from Caro vs. Court of Appeals states the general rule on prescription of reconveyance actions based on fraud, which the Court initially applied but then superseded upon finding that the action was based on a void contract and thus imprescriptible.

• "Being an absolute nullity, the deed is subject to attack anytime, in accordance with Article 1410 of the Civil Code that an action to declare the inexistence of a void contract does not prescribe." — This passage articulates the controlling doctrine that an action for reconveyance based on a void contract is imprescriptible, forming the basis for the Court's clarification that respondents' action was not even subject to prescription.

• "Possession in good faith ceases from the moment defects in the title are made known to the possessors, by extraneous evidence or by suit for recovery of the property by the true owner." — This passage defines when good faith possession ceases, which the Court applied to hold that petitioners' good faith ended upon service of summons on August 5, 1991.

• "Such interruption takes place upon service of summons." — This passage establishes the specific moment when possession in good faith is legally interrupted, which the Court used to modify the reckoning date of petitioners' liability for the produce of the land.

• Caro vs. Court of Appeals, G.R. No. 76148, December 20, 1989, 180 SCRA 401 — Cited as authority for the rule that the prescriptive period for reconveyance of fraudulently registered real property is 10 years reckoned from the date of issuance of the certificate of title; the Court distinguished this case upon finding that the action was based on a void contract.

• Salomon vs. Intermediate Appellate Court, G.R. No. 70263, May 14, 1990, 185 SCRA 352 — Cited for the rule that when there is a showing of illegality, the property registered is deemed to be simply held in trust for the real owner by the person in whose name it is registered, and the former has the right to sue for reconveyance.

• Lacsamana vs. Court of Appeals, 351 Phil. 526, 534 (1998) — Cited for the proposition that an action for reconveyance based on a void contract is imprescriptible.

• Baranda vs. Baranda, 234 Phil. 64, 77 (1987) — Cited for the rule that as long as the land wrongfully registered under the Torrens system is still in the name of the person who caused such registration, an action in personam will lie to compel him to reconvey the property to the real owner.

• Wong vs. Carpio, G.R. No. 50264, October 21, 1991, 203 SCRA 118 — Cited for the rule that possession in good faith ceases from the moment defects in the title are made known to the possessors, by extraneous evidence or by suit for recovery of the property by the true owner.

• Manotok Realty, Inc. vs. Tecson, G.R. No. L-47475, August 19, 1988, 164 SCRA 587 — Cited for the rule that interruption of possession in good faith takes place upon service of summons.

• Mindanao Academy, Inc. vs. Yap, 121 Phil. 204, 210 (1965) — Cited in support of the rule that interruption of possession takes place upon service of summons.

• Gerona vs. De Guzman, G.R. No. L-4258, January 18, 1951, 11 SCRA 153 — Cited by petitioners for the proposition that an action for reconveyance based on fraud must be filed within four years from discovery of fraud; the Court did not adopt this argument.

• Balbin vs. Medalla, 195 Phil. 475 (1981) — Cited by petitioners as reiterating the four-year prescriptive period for fraud-based reconveyance actions; the Court did not adopt this argument.

• Article 1410, Civil Code — Provides that an action to declare the inexistence of a void contract does not prescribe. The Court applied this provision to hold that the respondents' action for reconveyance, being based on a void deed of sale, was imprescriptible.

• Article 528, Civil Code — Provides that possession acquired in good faith does not lose this character, except in a case and from the moment facts exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully. The Court applied this to determine when petitioners' good faith possession ceased.

• Article 544, Civil Code — Provides that a possessor in good faith is entitled to the fruits received before the possession is legally interrupted. The Court applied this to limit petitioners' liability for the produce of the land to the period after legal interruption of their possession.

• Quisumbing, J.
• Carpio, J.
• Chico-Nazario, J.
• Nachura, J.

N/A — No dissenting opinions are noted in the text.