Rafols vs. Barba

An action to declare the inexistence of a void contract does not prescribe, but it may nonetheless be barred by laches where the plaintiff, with knowledge of the defendant's conduct and an opportunity to sue, unreasonably delays in asserting the right and the defendant would be prejudiced if relief were granted.

The plaintiffs-appellants are the wife and four children of Nicolas Rafols, a resident of Cebu City who died testate on May 2, 1947. His estate was the subject of administration proceedings in the Court of First Instance of Cebu, in which Vidal T. Montayre was appointed administrator. The applicable rule at the time of the transaction was Section 2, Rule 90 of the old Rules of Court, which required written notice to heirs, devisees, and legatees before the probate court could authorize the sale of estate property.

Nicolas Rafols, a resident of Cebu City, died testate on May 2, 1947, leaving his wife Francisca and four children as heirs. His estate was placed under administration in Sp. Proc. No. 154-R of the Court of First Instance of Cebu, with Vidal T. Montayre appointed as administrator. On May 22, 1948, Montayre, through counsel, moved for authority to sell a parcel of cogon land of approximately 100 hectares, assessed at P7,800.00 under Tax Declaration No. 05805, situated in Barrio Bunga, Toledo City, to pay taxes, administration expenses, and other estate indebtedness. The court granted the motion on the same day, but the sale was not effected for more than three years due to the alleged lack of interested buyers.

On August 14, 1951, Marcelo A. Barba purchased the land for P18,000.00. The deed of sale executed in his favor by the administrator was submitted to the court for approval on August 15, 1951, and Judge Juan L. Bocar approved the sale by manifesting such approval on the face of the deed. On November 24, 1966, more than fifteen years after the execution of the deed, the heirs instituted Civil Case No. 124-T against Barba for declaration of nullity of the deed of sale and recovery of damages and attorney's fees, contending that they were not notified of the hearing of the application to sell, nor of the order dated May 22, 1948, nor of the approval of the sale.

The record revealed that the heirs were fully aware of the sale. On August 18, 1951, just three days after the execution of the deed, heirs Ricardo, Crisostomo, and Amparo Rafols filed a motion praying that the administrator be ordered to pay each of them P1,000.00 plus P600.00 for their lawyer, which was granted the same day. After Montayre's death, Ricardo Rafols was substituted as administrator. On January 8, 1954, the administrator filed a "REPORT ON THE PRESENT STATUS OF THE ESTATE OF NICOLAS RAFOLS" which expressly mentioned the sale of the land to Barba for P18,000.00. The heirs did not claim lack of notice of this report, nor of the final accounting and motion for closing of administration filed by Ricardo Rafols on September 17, 1962. During the pendency of the appeal, Ricardo Rafols filed a motion to withdraw appeal on April 27, 1968, stating that all the heirs knew of the sale, that the price was the best offered for the unproductive land, that the proceeds paid the estate's obligations, and that the transaction was "on the level."

• Imprescriptibility of Action: Plaintiffs-appellants argued that the sale was null and void for lack of written notice to the heirs, devisees, and legatees as required by the Rules, citing Bonaga vs. Soler, De Jesus vs. de Jesus, and Corpuz vs. Beltran, and that an action to declare the inexistence of a void contract is imprescriptible pursuant to Article 1410 of the new Civil Code.
• Lack of Notice: Plaintiffs-appellants contended that the documents presented — the motion to sell, the order granting authority, the motion for approval, the deed of sale, and the approval stamped thereon — did not show that they were served or given notice, which they argued sufficed to annul the sale.

• Estoppel by Laches: Defendant-appellee argued that plaintiffs-appellants were in estoppel by their inaction and failure to question the sale despite the lapse of more than fifteen years, and by conducting themselves in a manner showing consent and assent to the consummation of the sale.
• Good Faith Purchase: Defendant-appellee contended that he acquired the land in good faith, for valuable consideration, and with judicial approval.
• Prescription: Defendant-appellee argued that assuming plaintiffs-appellants had a good cause of action, the same had already prescribed.

• Nullity of the Sale: Whether the sale of the estate property was null and void for lack of written notice to the heirs, devisees, and legatees.
• Laches: Whether the plaintiffs-appellants' action was barred by laches despite the alleged imprescriptibility of an action to declare a void contract inexistent.

• Nullity of the Sale: No. The nullity of the sale was not established because there was no positive showing that the requirements for securing the authority to sell had not been complied with; the lack of indication on the documents that the heirs were served with copies did not necessarily mean they had no notice.
• Laches: Yes. The action was barred by laches. While an action to annul a void or inexistent contract does not prescribe, it may nonetheless be barred by laches, and all the essential elements of laches were present.

• Nullity of the Sale: The Court acknowledged the rule that when an administrator applies to sell real property of the estate, written notice to the heirs, devisees, and legatees is required, and a sale without such notice is void. However, the plaintiffs-appellants offered no proof of the alleged lack of notice, relying solely on exhibits presented by the defendant during the hearing of the motion to dismiss. The Court held that the absence of any indication on the documents that the heirs were served with copies does not necessarily mean they had no notice. In the absence of a positive showing of non-compliance, the presumptions that the law had been obeyed, that official duty had been regularly performed, and that private transactions had been fair and regular applied under Section 5, paragraphs (m), (p), and (ff), Rule 131 of the Rules of Court. A purchaser in good faith may rest on the presumption of the legality of the court's order, citing Esguerra vs. de Leon.

• Laches: The Court found that the record revealed sufficient indicia that the heirs were fully aware of the sale yet questioned its validity only after fifteen years. They could not have been ignorant that the estate was under settlement proceedings with a court-appointed administrator required to render an accounting. The heirs filed motions for payment just three days after the sale, Ricardo Rafols became administrator and filed reports expressly mentioning the sale, and the heirs did not claim lack of notice of the final accounting. The Court quoted Nielson & Co. vs. Lepanto Consolidated Mining Co. for the distinction between laches and prescription: prescription concerns the fact of delay, while laches concerns the effect of delay; prescription is statutory and based on fixed time, while laches applies in equity. The essential elements of laches, as stated in Yusingco vs. Ong Hing Lian, were all present: (1) the defendant's conduct gave rise to the situation complained of; (2) the plaintiffs delayed in asserting their rights despite knowledge and opportunity to sue; (3) the defendant had no knowledge or notice that the plaintiffs would assert the right; and (4) the defendant would be injured or prejudiced if relief were granted. The Court also noted that the validity of the order authorizing the sale could not be attacked in a collateral proceeding, the supposed ground for declaring it void for lack of jurisdiction not being apparent on the face thereof.

• Laches vs. Prescription — Laches is a defense that applies independently of prescription. Prescription is concerned with the fact of delay, whereas laches is concerned with the effect of delay. Prescription is a matter of time; laches is principally a question of the inequity of permitting a claim to be enforced. Prescription is statutory and based on fixed time; laches applies in equity and is not based on fixed time. The Court applied this doctrine to hold that even an imprescriptible action to declare a void contract inexistent may be barred by laches.
• Elements of Laches — The essential elements are: (1) conduct on the part of the defendant, or one under whom he claims, giving rise to the situation that led to the complaint and for which the complaint seeks a remedy; (2) delay in asserting the complainant's rights, the complainant having had knowledge or notice of the defendant's conduct and having been afforded an opportunity to institute a suit; (3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit; and (4) injury or prejudice to the defendant in the event relief is accorded to the complainant or the suit is not held barred. The Court found all four elements present in this case.
• Presumptions of Regularity — In the absence of a positive showing that the requirements for securing the authority to sell had not been complied with, the presumptions that the law had been obeyed, that official duty had been regularly performed, and that private transactions had been fair and regular apply. The Court applied these presumptions to uphold the validity of the probate court's order authorizing the sale.

• "The lack of any indication on the documents mentioned that they were served with copies of the same does not necessarily mean that they had no notice thereof. In the absence of a positive showing that the requirements for securing the authority to sell had not been complied with, it is appropriate to apply the presumptions that the law had been obeyed; that official duty has been regularly performed; and that private transactions had been fair and regular." — This passage establishes the standard of proof required to challenge the validity of a probate court's order authorizing a sale, applying the presumptions of regularity.
• "While it is true that, technically, the action to annul a void or inexistent contract does not prescribe, it may nonetheless be barred by laches." — This is the core ratio decidendi of the case, holding that laches can bar even imprescriptible actions.
• "Prescription is concerned with the fact of delay, whereas laches is concerned with the effect of delay. Prescription is a matter of time; laches is principally a question of inequity of permitting a claim to be enforced, this inequity being founded on the same change in the condition of the property or the relation of the parties." — This passage, quoted from Nielson & Co. vs. Lepanto Consolidated Mining Co., provides the canonical distinction between laches and prescription frequently cited in subsequent jurisprudence.

• Nielson & Co. vs. Lepanto Consolidated Mining Co., L-21601, December 17, 1966, 18 SCRA — Quoted for the distinction between laches and prescription; controlling authority for the proposition that laches applies independently of prescription.
• Yusingco vs. Ong Hing Lian, 42 SCRA 589 — Cited for the essential elements of laches, which the Court applied to the facts of the case.
• Esguerra vs. de Leon, 69 Phil. 493 — Cited for the rule that a purchaser in good faith may rest on the presumption of the legality of the court's order authorizing the sale.
• Estate of Gamboa vs. Lorenza, 12 Phil. 191; Santos vs. Roman Catholic Church, 45 Phil. 895; Ortalez vs. Register of Deeds, 55 Phil. 33 — Cited for the rule that a sale of estate property without notice to the heirs, devisees, and legatees is void.
• Bonaga vs. Soler, G.R. No. L-15717, June 30, 1961; De Jesus vs. de Jesus, G.R. No. L-16553, November 29, 1961; Corpuz vs. Beltran, G.R. No. L-7487, October 27, 1955 — Cited by plaintiffs-appellants for the rule that sales of estate property require prior compliance with notice requirements; the Court distinguished these cases on the facts.

• Article 1410, New Civil Code — Provides that an action to declare the inexistence of a void contract does not prescribe. The Court acknowledged this rule but held that the action may nonetheless be barred by laches.
• Section 2, Rule 89, Rules of Court (formerly Section 2, Rule 90, old Rules of Court) — Requires written notice to heirs, devisees, and legatees before the probate court may grant an administrator's application to sell real property of the estate. The Court applied this rule but found no positive showing of non-compliance.
• Section 5, paragraphs (m), (p), and (ff), Rule 131, Rules of Court — Establishes the presumptions that the law had been obeyed, that official duty has been regularly performed, and that private transactions had been fair and regular. The Court applied these presumptions in the absence of proof of lack of notice.

Teehankee (Acting C.J.), Melencio-Herrera, Plana, Relova, and Gutierrez, Jr., JJ., concurred.