G.R. No. L-11765 - Descutido vs. Baltazar

Jose Descutido and Matea Dolduco were the registered owners of Lot No. 790 of the Cadastral Survey of Dumangas, Iloilo, as evidenced by Original Certificate of Title No. 31060.
Their title was later cancelled due to the registration of a deed of sale (Exhibit B) dated December 10, 1937, allegedly executed by them in favor of Pedro Diamante, who subsequently received Transfer Certificate of Title No. 20491.
A subsequent deed of sale (Exhibit C) was executed on June 1, 1940 by Pedro Diamante in favor of Bonifacia Descutido, resulting in the cancellation of the previous title and the issuance of Transfer Certificate of Title No. 25284 on May 28, 1941 in Bonifacia’s name.

Jose Descutido died in August 1944, leaving behind three children: Damaso, Pedro, and Bonifacia.
A private instrument of partition (Exhibit D) was executed on April 30, 1944 by the spouses Jose Descutido and Matea Dolduco and their three children, wherein Lot No. 790 was assigned to Damaso, who had continuously, openly, and adversely possessed the property.

Plaintiffs Damaso Descutido and his wife Regina Decierdo filed an action to annul the deeds of sale (Exhibits B and C) on the ground of fraud, asserting that such deeds were fictitious and executed without any valid or sufficient consideration.
The fraudulent nature was underscored by the lack of actual payment:

Pedro Diamante reportedly did not pay the full consideration due to Jose Descutido for the alleged fishpond purchase in 1937 under circumstances leading to a mortgage arrangement, which was later subverted.
The alleged cancellation of the mortgage in 1940, which was believed to be a document of cancellation, turned out to be another deed of sale in favor of Bonifacia Descutido.

Jacinto Baltazar and his children, husband and heirs of Bonifacia, entered the record as defendants/appellants. They denied specific allegations and raised multiple affirmative defenses, including that the plaintiffs' cause of action was barred, that the plaintiffs lacked legal capacity to sue for annulment, and that they were good faith purchasers for valuable consideration.
Defendants Pedro Diamante and Cristina Doctolero, in their answer, denied buying or ever possessing the property and alleged that the renowned transaction was fraudulently engineered by Jacinto Baltazar with the assistance of Notary Public Carlos Divinagracia.
The lower court conducted a full trial where it investigated the timeline of transactions, discovery of fraud (notably in 1950/1951), and the dispute over possession initiated by Jacinto Baltazar attempting to wrest property from Damaso.

The deeds of sale Exhibits B and C were found to be fraudulent, fictitious, and executed without lawful consideration.
The document of partition (Exhibit D) was upheld as awarding possession and title to Damaso Descutido in his capacity as successor in interest to his parents.
The fraudulent deeds vitiated the ensuing transfer certificate of title in the name of Bonifacia Descutido.
The lower court also resolved the issue of delay by ruling that the cause of action was filed within the four-year period from the discovery of fraud.

Whether the deeds of sale (Exhibits B and C) were valid, taking into account the allegations of fraud, fictitious transactions, and lack of valid consideration.
Whether the cancellation of the original title and the subsequent issuance of a new transfer certificate based on these deeds were legally sustainable.

Whether Damaso Descutido, by virtue of the private partition (Exhibit D) executed among the heirs, had the legal capacity and standing to file an action for the annulment of the disputed deeds.
Whether the fact that the plaintiffs were not parties to the original transactions affected their right to challenge the deeds of sale.

Whether the action was barred by the statute of limitations, given the timeline of events and the moment when the fraud was allegedly discovered (in 1950/1951).

Whether the private instrument of partition should be given precedence over the previously issued transfer certificate of title in the name of Bonifacia Descutido.

Whether the respondents’ counterclaim (erroneously designated as a cross-complaint) should be treated as barred due to failure to file an answer or due to the alleged barred cause of action therein.