Title
Felix Gochan and Sons Realty Corp. vs. Heirs of Baba
Case
G.R. No. 138945
Decision Date
Aug 19, 2003
Heirs of Raymundo Baba sued to nullify property sale, alleging lack of consent in extrajudicial settlement; SC ruled action imprescriptible, remanded for trial.
ownership dispute
land ownership
legal battle
A

Case Summary (G.R. No. 138945)

Facts and Genesis of the Dispute

Lot No. 3537 was originally titled under Original Certificate of Title No. RO-0820 in the name of Dorotea Inot. After Raymundo died in 1947, an extrajudicial settlement of Raymundo’s estate, including Lot No. 3537, was executed on December 8, 1966 among Raymundo’s heirs, namely Dorotea Inot and Raymundo’s two children Victoriano Baba and Gregorio Baba. Under that settlement, one-half undivided portion of the lot was adjudicated to Dorotea, while the other half was divided between Victoriano and Gregorio. On December 28, 1966, Dorotea, Victoriano, and Gregorio executed a deed of sale in favor of petitioner Felix Gochan and Sons Realty Corporation for P2,346.70. As a result, the original title was cancelled and Transfer Certificate of Title No. T-1842, dated February 23, 1968, was issued in favor of Gochan Realty.

Sometime in 1995, the petitioners entered into a joint venture agreement with Sta. Lucia Realty and Development Corporation Inc. for the development, among others, of Lot No. 3537 into a subdivision. Long after these transactions, in 1996, the respondents filed suit.

Filing of the Complaint and the Allegations of Fraud and Non-Consent

On June 13, 1996, respondents, described as among the seven children of Dorotea Inot and Raymundo Baba, filed a complaint for quieting of title and reconveyance with damages against the petitioners before the RTC of Lapu-Lapu City, Branch 54, docketed as Civil Case No. 4494-L. They alleged that petitioners connived with the parties to the extrajudicial settlement and deed of sale—Dorotea Inot, Victoriano, and Gregorio—so as to deprive them fraudulently of their hereditary shares in Lot No. 3537. Respondents further alleged that the transactions were void insofar as their shares were concerned because they never consented to the sale and extrajudicial settlement. They claimed they learned of the transactions only about a year before filing the complaint.

In their answer, petitioner Gochan Realty argued that respondents had no personality to sue because they were not children of Dorotea Inot and Raymundo Baba. It also asserted that even if respondents were lawful heirs, their action was barred by estoppel, laches, and prescription, because it was allegedly filed more than 28 years after title had been issued in its name. It added that any defect in the transactions leading to its acquisition would not affect its title because it was allegedly a purchaser in good faith and for value. Sta. Lucia Realty and Development Corporation Inc. was declared in default for failure to file an answer within the reglementary period.

RTC Decision: Prescription and Laches

On May 3, 1997, the RTC dismissed the complaint on the ground of prescription and laches. The trial court reasoned that the action sought to enforce an implied or constructive trust based on fraud, which would prescribe in ten (10) years from the issuance of title over the property. On that premise, the RTC concluded that respondents filed after 28 years from the time Gochan Realty acquired title and thus their action was time-barred.

Court of Appeals Ruling: Reinstatement Based on Possession and Quieting of Title

Respondents appealed. The Court of Appeals reversed. It agreed that the case involved a suit to enforce an implied or constructive trust based on fraud, but held that prescription and laches would not bar respondents because respondents were allegedly in possession of the disputed property. It considered the action to be in the nature of quieting of title, such that prescription and laches did not apply in the same manner.

Petitioners moved for reconsideration, which the Court of Appeals denied on May 25, 1999, prompting the petition for review on certiorari in the Supreme Court. The petition raised a single issue: whether the respondents’ complaint was dismissible due to prescription and laches.

Issues Framed in the Supreme Court

The Court recognized that both the RTC and the Court of Appeals treated the action as one grounded on fraud and applied the related prescriptive period used for enforcement of implied or constructive trusts. Yet the Court of Appeals had ruled that the action did not prescribe due to possession. The Supreme Court held that the issue of possession was not determinative because it was not material to the case’s true nature as pleaded by respondents.

The Supreme Court’s Core Method: The Cause of Action Depends on the Complaint

The Supreme Court emphasized that the purpose of an action, including the law governing it and the applicable period of prescription, is determined by the complaint itself, its allegations, and its prayer. While issues of possession and fraud may be material where the action is truly one for reconveyance and quieting of title, the Court found that this framework would not control when, from the complaint’s allegations, the action was in reality one for a declaration of nullity of contracts based on the absence of essential requisites. In such a case, the contracts would be void ab initio, and an action to declare their inexistence would not prescribe.

Recharacterization of the Complaint: Absence of Consent and Inexistence of Contracts

Upon a “circumspect scrutiny” of the complaint, the Court found that although respondents characterized the extrajudicial settlement and deed of sale as fraudulent insofar as their shares were concerned, respondents’ pleading described a different legal theory. The allegations attacked those transactions on the ground that respondents never consented to them and thus lacked an essential element of a valid contract. The Court noted that respondents alleged, in substance, that Dorotea, Gregorio, Victoriano, and defendant Gochan Realty conspired to obtain issuance of a transfer certificate covering the entire lot in Gochan Realty’s name by making it appear that they had validly executed the extrajudicial settlement and deed of absolute sale free from legal infirmity. Respondents also alleged that “plaintiffs herein never disposed of their share to anybody,” and that the deed of conveyance would not bind them insofar as each plaintiff’s share was concerned.

For the Court, these allegations did not merely describe fraud that would support an implied trust. They assailed the contracts as having been formed without an indispensable ingredient—consent—and thus sought a determination of inexistence.

Applicable Civil Code Rules on Inexistence and Prescription

The Supreme Court anchored its reasoning on the rule in Article 1318 of the Civil Code that no contract exists unless the following requisites concur: (1) consent, (2) object certain, and (3) cause of the obligation. The absence of any essential requisite renders the contract inexistent, and Article 1410 provides that an action to declare such a contract void ab initio does not prescribe.

The Court drew support from jurisprudence holding that consent is indispensable for the existence of a valid contract and that legal consent presupposes legal capacity. Thus, there is no consent in law, and consequently no contract, when one purports to dispose of property without authorization or capacity to bind another. It further invoked Heirs of Romana Ingjug-Tiro v. Casals, where the Court had applied Article 1410 to hold that prescription could not run when the assailed conveyance was void ab initio as to those who lacked knowledge of the transaction, and that the registration of the whole property in favor of a vendee could not divest the non-consenting co-owners of their shares.

The Court stressed the doctrinal implication of nemo dat quod non habet—no one can give what he does not have. Accordingly, even if title had been issued in the vendee’s name, registration did not create ownership beyond what the transferor could lawfully convey. Registration was characterized as evidence of title rather than a source of ownership that could validate a void transaction.

Imprescriptibility of Actions to Declare Void Contracts

Based on the complaint’s allegations, the Court held that respondents’ cause of action, assuming the allegations were true, was an imprescriptible action to declare the transactions inexistent insofar as respondents’ shares were concerned. The Court declared erroneous the RTC’s dismissal grounded on prescription and also found that the Court of Appeals, though correct in reinstating the complaint, reached its result by relying on a different rationale centered on possession.

Treatment of Laches: Evidentiary Proof Required

The Court separately addressed laches. It defined laches as neglect to assert a right within a reasonable time de

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