G.R. No. 148280 - Chong vs. Court of Appeals

The petitioners are the heirs of Benigno Sumagang, represented by Jesus S. Abellanos, Marina Bellita, Resurreccion Cavan, Alex Mapait, and Teodorico Sumagang.
The respondents include Aznar Enterprises, Inc., Aznar Brothers Realty Company (ABRC), Sta. Lucia Realty and Development Inc., the heirs of Perfecta Labaya (with attorney‐in‐fact Francis R. Pestaao), and intervenors Teresita Dela Calzada-Reyes (first intervenor) and Celso Deiparine (second intervenor).
The case involves a dispute over a parcel of land in Barangay Pardo, Cebu City, known as Lot 4, covered by Original Certificate of Title (OCT) No. 251.

The subject property is part of a tract of land developed by Sta. Lucia Realty into what is now known as the Alta Vista Golf and Country Club, Inc.
On March 4, 1998, the heirs of Perfecta Labaya filed an action for recovery of ownership and possession of the property, seeking annulment of title, reconveyance, damages, and a writ of preliminary injunction against ABRC, Sta. Lucia Realty, and the heirs of Sumagang.
The action was predicated on their claim of being forced and legal heirs of the late Gregorio Labaya whose properties, including a portion of the subject property, had been in open, continuous, adverse, and peaceful possession until Sta. Lucia Realty’s development in 1992.

Teresita Dela Calzada-Reyes, asserting her relation to Perfecta Labaya, was allowed to intervene on April 21, 1998, alleging that the issuance of OCT No. 251 in favor of ABRC was fraudulently secured.
Celso Deiparine filed his complaint-in-intervention on February 9, 1999, claiming that the property had been conveyed by the late Gregorio Labaya to his daughter Fortunata Labaya, and later transferred through subsequent sales.

ABRC and Aznar Enterprises argued that OCT No. 251 was validly issued on June 17, 1971 and that the recovery action was filed too late, thus extinguished by prescription.
The heirs of Sumagang countered that they had been in actual, open, and peaceful possession of the property and that ABRC’s acquisition of the title was tainted by force and intimidation. They filed a cross-claim to directly attack the validity of OCT No. 251, claiming it was obtained through fraud.

The Regional Trial Court (RTC) in its decision dated March 8, 2004, declared ABRC as the lawful owner of the subject property.
The Court of Appeals (CA) subsequently affirmed the RTC ruling in decisions dated June 22, 2011, and July 30, 2014, dismissing appeals and cross-claims for lack of merit and timeliness.
The heirs of Sumagang, aggrieved by the CA rulings, subsequently filed a Petition for Review on Certiorari in the Supreme Court, challenging the affirmation of ABRC’s title.

Whether the Court of Appeals erred in upholding the RTC’s decision declaring ABRC as the lawful owner and possessor of the subject property.

The main contention centers on whether the cross-claim, secured by the heirs of Sumagang, constitutes a direct attack on the validity of OCT No. 251.
Whether the alleged fraud in the issuance of the certificate of title can serve as a sufficient basis to nullify the title despite the protection afforded by the Torrens system.

Whether the delay in asserting the claim – particularly filing the cross-claim decades after the alleged fraud and registration of the title – bars the heirs of Sumagang’s claim under the prescriptive periods provided by law.

The issue includes the applicability of Section 32 of Presidential Decree No. 1529 regarding the indefeasibility of titles after one year.
It also involves consideration of the ten-year prescriptive period for an action for reconveyance based on an implied or constructive trust.