Heirs of Tomas Arao vs. Heirs of Pedro Eclipse

A contract executed after the death of one of the purported parties is void ab initio and inexistent, and actions to declare such inexistence are imprescriptible under Article 1410 of the Civil Code, rendering the defense of laches unavailable. Consequently, a forged deed conveys no title, and all certificates of title issued pursuant thereto are void, notwithstanding registration under the Torrens system; however, an unregistered but notarized deed of sale remains valid and binding between the parties and their heirs, even against successors-in-interest with actual notice of the conveyance.

Spouses Policarpio Eclipse and Cecilia Errera were the registered owners of Lot No. 1667 in Ugac Sur, Tuguegarao City, covered by Original Certificate of Title (OCT) No. 1546. Policarpio died on November 21, 1936, and Cecilia died on June 3, 1925. Their children—Pedro, Eufemia, Honorato, and Maria—inherited the property. In 1994, respondents (successors-in-interest of the Eclipse spouses) discovered that the subject land had been transferred to Tomas Arao (and subsequently to his children) based on a Deed of Absolute Sale dated September 5, 1969, purportedly executed by the long-deceased Policarpio. Respondents instituted an action for nullity of the deed and reconveyance, alleging the document was a forgery. Petitioners (heirs of Tomas Arao) countered that they derived title through a separate Deed of Sale dated June 25, 1940, executed by the children of Policarpio in favor of Paulino Arao (Tomas's brother), and subsequently to Tomas by succession and a 1949 conveyance.

• The Subject Property: The controversy centers on Lot No. 1667, a 5,587-square-meter parcel of land situated in Ugac Sur, Tuguegarao City, Cagayan, originally registered in the name of Policarpio Eclipse under Original Certificate of Title (OCT) No. 1546. Policarpio was married to Cecilia Errera, who predeceased him on June 3, 1925; Policarpio died on November 21, 1936.
• The Forged 1969 Deed: A Deed of Absolute Sale dated September 5, 1969 purported to convey the subject land from Policarpio Eclipse (already deceased for 33 years) and his wife Cecilia (deceased for 44 years) to Tomas Arao. This deed was registered, resulting in the cancellation of OCT No. 1546 and the issuance of Transfer Certificate of Title (TCT) No. T-13798 in Tomas's name.
• Subsequent Transfers: On June 30, 1977, Tomas executed a Deed of Absolute Sale conveying the land to his children Eulalia, Proceso, and Felipa Arao. Eulalia and Felipa subsequently registered the property in their names under TCT No. T-39071. Petitioners are the heirs of these transferees.
• Discovery and Suit: In 1994, respondents (heirs of Policarpio's children: Pedro, Eufemia, Honorato, and Maria) discovered the 1969 transfer and filed suit for nullity and reconveyance, alleging the 1969 Deed was a forgery because the supposed vendors were already dead at the time of execution.
• The 1940 Deed: Petitioners presented a Deed of Absolute Sale dated June 25, 1940, executed by the children of Policarpio (Pedro, Eufemia, Honorato, and Maria) in favor of Paulino Arao (Tomas's brother), conveying the subject land for consideration. Paulino died intestate without issue except his brother Tomas, who inherited the property by operation of law.
• The 1949 Deed: Petitioners also presented a Deed of Sale dated November 14, 1949, executed by Gavino Arao (identified as Paulino's son) in favor of Tomas, purporting to convey the same land. The genuineness of this deed was questioned because petitioners' Answer stated Paulino died without issue, creating uncertainty regarding Gavino's authority.
• Possession: Records indicate petitioners have been in actual possession of the lot since 1940.

• Laches and Prescription: Petitioners argued that respondents are barred by laches from pursuing their cause of action due to inaction for over 32 years (from 1969 registration to 2001 filing) despite constructive notice of the adverse registration and possession. They alternatively contended that the 10-year prescriptive period for reconveyance had lapsed.
• Validity of the 1940 Deed: Petitioners maintained that their ownership derives not from the void 1969 Deed but from the valid 1940 Deed of Sale between the true heirs of Policarpio and Paulino Arao, followed by succession to Tomas. They argued that non-registration of the 1940 Deed does not invalidate the contract between the parties.
• Good Faith Purchase: Assuming the 1969 Deed was fraudulent, petitioners asserted they are buyers in good faith and for value, entitled to protection under the principle that a forged deed may be a valid source of legal rights to innocent purchasers for value.
• Lack of Standing for Reconveyance: Petitioners contended respondents failed to prove ownership of the litigated lot or that petitioners' registration was wrongful, thus failing to establish a cause of action for reconveyance.

• Void Ab Initio Contract: Respondents countered that the 1969 Deed is void ab initio for being a forgery (executed after the death of the supposed vendors), rendering all subsequent titles void and the action for nullity imprescriptible under Article 1410 of the Civil Code.
• Inapplicability of Laches: Respondents argued that laches cannot be invoked to resist the enforcement of an imprescriptible legal right, and equity cannot prevail against the statutory mandate of Article 1410.
• Invalidity of the 1940 Deed: Respondents alleged that the 1940 Deed was inoperative for failing to comply with the Property Registration Decree, implying that unregistered deeds cannot transfer title.
• Lack of Good Faith: Respondents contended petitioners cannot claim good faith because they admitted using the forged 1969 Deed merely to "cut short" the registration process, demonstrating knowledge of its falsity.

• Laches and Prescription: Whether the Court of Appeals erred in finding that the doctrine of laches is inapplicable to bar respondents' action.
• Validity of the 1940 Deed: Whether the Court of Appeals erred in disregarding the Deed of Sale dated June 25, 1940 as a valid source of petitioners' title.
• Good Faith: Whether the Court of Appeals committed reversible error in not declaring petitioners as buyers in good faith and for value.

• Laches and Prescription: Laches was properly rejected. Because the 1969 Deed is void ab initio, the action to declare its inexistence is imprescriptible pursuant to Article 1410 of the Civil Code. Laches, being an equitable doctrine, cannot prevail against a statutory right to bring an imprescriptible action; equity must yield to positive law (aequitas nunquam contravenit legis).
• Validity of the 1940 Deed: The 1940 Deed is valid and binding. Non-registration does not affect validity as between the parties; it only serves to bind third persons. As the deed was acknowledged before a notary public, it is a public document entitled to presumption of regularity. Respondents, as heirs of the grantors, and petitioners, as successors-in-interest with actual notice, are bound by the conveyance regardless of registration. The 1949 Deed is superfluous to the determination of title, as ownership already passed to Tomas via the 1940 Deed and succession.
• Good Faith: Petitioners are not buyers in good faith. Their admission that they utilized the forged 1969 Deed to expedite registration, knowing it to be false, negates any claim of honest belief that their predecessor had valid title to convey. Good faith requires the belief that the transferor is the rightful owner; knowledge of the forgery precludes such protection.
• Reconveyance: Reconveyance was denied to respondents because they failed to prove they are the rightful owners of the property. Having established the validity of the 1940 Deed in petitioners' favor, respondents cannot compel reconveyance. The Court directed the parties to execute all necessary documents to facilitate the issuance of a new Transfer Certificate of Title based on the valid 1940 Deed, applying the principle that courts should dispose of litigation finally to avoid multiplicity of suits.

• Imprescriptibility of Void Contracts (Article 1410) — Actions to declare the inexistence of a void contract do not prescribe. This statutory provision prevails over equitable defenses such as laches, which cannot be invoked to resist the enforcement of an imprescriptible legal right.
• Effect of Death on Contractual Capacity — The death of a person terminates contractual capacity. A contract purportedly executed by a deceased individual is simulated, false, and void ab initio because a dead person cannot be a party to a contract.
• Forged Deeds and Torrens System — A forged deed is a nullity and conveys no title. The principle that "the spring cannot rise higher than its source" applies: certificates of title issued pursuant to a void deed are likewise void. Registration under the Torrens system does not validate forgery or shield fraud; good faith must concur with registration.
• Effect of Non-Registration — Registration is not a requirement for the validity of a contract of sale as between the parties. Its principal purpose is to notify third persons not parties to the contract. An unregistered but notarized deed is valid and binding upon the grantor, the grantor's heirs and devisees, and third persons with actual notice.
• Requisites for Reconveyance — An action for reconveyance is available only to the rightful owner who can allege and prove: (1) his ownership of the land; and (2) the defendant's erroneous, fraudulent, or wrongful registration thereof. Failure to prove ownership is fatal to the claim.
• Good Faith of Purchasers — Good faith in acquisition of property consists in the belief that the person from whom the thing is received is the rightful owner who could convey title. Knowledge that the registration was procured through a fraudulent deed negates good faith.

• "Laches is a doctrine in equity and our courts are basically courts of law and not courts of equity. Equity, which has been aptly described as 'justice outside legality,' should be applied only in the absence of, and never against, statutory law. Aequitas nunquam contravenit legis. The positive mandate of Art. 1410 of the New Civil Code conferring imprescriptibility to actions for declaration of the inexistence of a contract should pre-empt and prevail over all abstract arguments based only on equity."
• "When the instrument presented is forged, even if accompanied by the owner's duplicate certificate of title, the registered owner does not thereby lose his title, and neither does the assignee in the forged deed acquire any right or title to the property."
• "The spring cannot rise higher than its source."
• "Registration is not a requirement for validity of the contract as between the parties, for the effect of registration serves chiefly to bind third persons."

• Fil-Estate Golf and Development, Inc. v. Navarro, 553 Phil. 48 (2007) — Cited for the principle that actions for cancellation of title based on nullity of the deed are imprescriptible.
• Heirs of Ingjug-Tiro v. Spouses Casals, 415 Phil. 665 (2001) — Applied for the rule that laches cannot be set up to resist enforcement of imprescriptible rights and that death terminates contractual capacity.
• Romero v. Singson, 765 Phil. 515 (2015) — Referenced regarding the rule that void titles are susceptible to direct and collateral attack and do not prescribe.
• Spouses Reyes v. Montemayor, 614 Phil. 256 (2009) — Cited for the principle that Torrens title does not furnish a shield for fraud and that good faith must concur with registration.
• Spouses Aguinaldo v. Torres, Jr., G.R. No. 225808, September 11, 2017 — Applied to justify the directive for parties to execute registrable documents to prevent multiplicity of suits.

• Article 1410, Civil Code — Provides that an action to declare the inexistence of a void contract does not prescribe; applied to reject the defense of laches.
• Section 19(b), Rule 132, Revised Rules of Court — Defines public documents and establishes the presumption of regularity for notarized deeds; applied to validate the 1940 Deed despite non-registration.
• Property Registration Decree (Presidential Decree No. 1529) — Referenced regarding the effects of registration and the principle that unregistered deeds are valid between parties but not binding on third persons without notice.

Peralta, J. (Chairperson), and Leonen, J.