Facts:

On June 11, 1956, Victorino Alfonso, Ciriaca Alfonso, and Paciencia Alfonso initiated a legal action in the Court of First Instance of Rizal against Agueda Santos and Santiago Cruz, seeking the annulment of an extrajudicial settlement and a deed of sale concerning a parcel of land that they claimed was owned by Placido Alfonso, the deceased husband of Agueda Santos. The complaint was later amended to include Susana Realty, Inc. as a party defendant, as the property had been sold to them. On August 1, 1956, Agueda Santos and Santiago Cruz filed their answers, while Susana Realty, Inc. submitted a motion to dismiss the case, citing three grounds: (1) lack of cause of action; (2) prescription of the cause of action; and (3) lack of legal capacity of the plaintiffs to sue. On September 1, 1956, Geronimo Avecilla was appointed as the judicial administrator of Placido Alfonso's estate and substituted the original plaintiffs. The court dismissed the complaint against Susana Real...

Facts:

Procedural History

• On June 11, 1956, Victorino Alfonso, Ciriaca Alfonso, and Paciencia Alfonso filed an action in the Court of First Instance of Rizal.
• The action sought the annulment of an extrajudicial settlement and deed of sale over a parcel of land allegedly owned by Placido Alfonso, the deceased husband of Agueda Santos.
• The complaint was later amended to include Susana Realty, Inc. as a party defendant, to which the property was subsequently sold.
• On August 1, 1956, Agueda Santos and Santiago Cruz filed their respective answers, while Susana Realty, Inc. filed a motion to dismiss the complaint on the grounds of:
• Lack of cause of action.
• Prescription of the cause of action, if any existed.
• Plaintiffs’ lack of legal capacity to sue.
• On September 1, 1956, the plaintiffs were substituted by Geronimo Avecilla, who had been appointed judicial administrator of the estate of the deceased Placido Alfonso on June 8, 1956.
• On September 14, 1956, the court granted the motion to dismiss insofar as it concerned Susana Realty, Inc., dismissing the complaint against the company by finding:
• That the plaintiff did not allege a valid cause of action against Susana Realty, Inc.
• That, even if a cause of action existed, it had already prescribed.

Allegations in the Amended Complaint

• It was alleged that the spouses Placido Alfonso and Agueda Santos owned a parcel of land covered by Transfer Certificate of Title (TCT) No. 21913, which was conjugal in nature.
• Placido Alfonso died in 1947 without leaving any issue.
• Agueda Santos, fraudulently claiming to be the sole heir of her late husband, executed an extrajudicial deed of settlement and secured TCT No. 3585 in her name.
• Subsequently, she sold the land to Santiago Cruz, who obtained TCT No. 3586 through fraudulent means.
• Santiago Cruz, in turn, conveyed the property to Susana Realty, Inc., which acquired TCT No. 31543 in its name.
• Plaintiffs discovered the fraudulent transactions in stages:
• In January 1956, they became aware of the fraudulent sale between Agueda Santos and Santiago Cruz.
• In June 1956, they discovered the subsequent sale between Santiago Cruz and Susana Realty, Inc.
• Plaintiffs then prayed for the annulment of the extrajudicial settlement and the deeds of sale in favor of Santiago Cruz and Susana Realty, Inc., and requested that the property be reconveyed to them.

Findings of the Trial Court

• The court found that the complaint failed to allege any fraud involving Susana Realty, Inc. as it appeared that the company acted in good faith in purchasing the land.
• The complaint’s allegations centered on the fraudulent acts of Agueda Santos and Santiago Cruz, but did not impute any knowledge or complicity to Susana Realty, Inc.
• Under Section 55 of Act 496, which protects an innocent holder for value of a certificate of title, the court held that any remedy for fraud should be sought through an action for damages—if at all—rather than an action for annulment of the deed of sale against an innocent purchaser.
• The court also ruled that the cause of action had prescribed since the prescriptive period for an action to annul a sale began on April 11, 1947—the date the fraudulent document (the affidavit of extrajudicial settlement by Agueda Santos) was registered—and the four-year period expired.
• Additionally, the court denied the plaintiffs’ motion for leave to amend the complaint to supply alleged deficiencies regarding Susana Realty, Inc., holding that such matters are within the sound discretion of the trial court.

Procedural Issue Raised by Petitioner

• The petitioner argued against the lower court’s decision denying the amendment.
• The petitioner also maintained that, upon Agueda Santos’ fraud, a constructive trust was created in favor of the defrauded heirs, which should allow them to vindicate the property notwithstanding the lapse of time.
• The court rejected this contention, clarifying that a constructive trust remedy is applicable only against the trustee responsible for the fraud (or parties like Santiago Cruz who had knowledge of it), not against an innocent purchaser such as Susana Realty, Inc.
• Furthermore, the petition was brought by way of a petition for certiorari, which was deemed procedurally erroneous given that the proper remedy against the final order was by appeal.

Issue:

Cause of Action Against an Innocent Purchaser

• Whether the complaint sufficiently alleged a cause of action against Susana Realty, Inc., given that the fraudulent acts were attributed only to Agueda Santos and Santiago Cruz.
• Whether the absence of any allegation of knowledge of the fraud by Susana Realty, Inc. precludes the existence of a cause of action against it.

Prescription of the Cause of Action

• Whether the cause of action against Susana Realty, Inc., even if it existed, has already prescribed.
• Whether the prescriptive period (counting from April 11, 1947) rightly bars the action due to the registration of the allegedly fraudulent document acting as constructive notice to the world.

Appropriateness of the Remedy

• Whether the petition for certiorari is a proper remedy against the trial court’s order dismissing the complaint against Susana Realty, Inc.
• Whether an action for annulment is the correct remedy or whether damages against the fraud-makers would be more appropriate.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)