Case Summary (G.R. No. 171531)
Procedural History (Trial Court and Appellate Proceedings)
Guaranteed Homes filed a motion to dismiss asserting prescription (more than 28 years elapsed from issuance of TCT No. T-10863 to the filing of the complaint) and that the complaint failed to state a cause of action because petitioner was an innocent purchaser for value relying on a clean title. The RTC (Branch 73, Olongapo City) granted the motion to dismiss, concluding respondents had not shown possession and that an action to quiet title had prescribed; it also held the claim against the Assurance Fund prescribed under Section 102 of P.D. No. 1529. The Court of Appeals reversed, finding the complaint sufficiently alleged possession and adverse use, denying that petitioner’s motion to dismiss should be granted. The Supreme Court reviewed the CA decision.
Issue Presented to the Supreme Court
Whether the RTC erred in granting petitioner’s motion to dismiss (and whether the Court of Appeals properly reversed that order), i.e., whether the complaint stated a cause of action against petitioner and whether the claims (including against the Assurance Fund) were barred by prescription or otherwise untenable.
Legal Standard on Motion to Dismiss
To dismiss for failure to state a cause of action, the insufficiency of the cause must appear on the face of the complaint. The court rules that, for a motion to dismiss, the moving party must hypothetically admit the truth of material and relevant well-pleaded facts in the complaint. However, the admission is limited to those facts; courts need not accept legally impossible facts, matters judicially noticed to be untrue, or facts shown by documents in the pleadings to be unfounded. Additionally, when a motion to dismiss is heard with submission of evidence (as here), documentary exhibits and pleadings may be considered.
Supreme Court’s Assessment of the Factual Allegations and Annexes
Although acknowledging the rule of hypothetical admission, the Court emphasized that admitted facts must be material and well-pleaded. Because parties submitted documentary evidence at the hearing on the motion to dismiss (including the title instruments and other annexes), those documents were properly considered. On that record, the Court concluded respondents’ complaint did not state a cause of action against petitioner for reconveyance or cancellation of title.
Reasoning: Reliance on Predecessor’s Torrens Title and Good Faith Purchaser Rule
The Court held that respondents did not allege any defect in TCT No. T-8242 (the Rodolfos’ title) or any facts indicating petitioner had actual knowledge that would compel inquiry into that title. Under Torrens principles, a purchaser of registered land may rely on the certificate of title of the immediate transferor; registration is the operative act that conveys or affects land as to third persons. Absent any indication on the face of the certificate of title of any cloud or vice, a purchaser is not required to look beyond the title. The Court stressed that requiring otherwise would frustrate the Torrens system’s conclusiveness.
Effect of TCTs and Validity of Registration Sequence
The Court found OCT No. 404 had been cancelled by the subsequent issuance of TCT No. T-8241 (in Cipriano’s name), and that the alleged non-signature on TCT No. T-8241 did not invalidate that title because the same Register of Deeds signed TCT No. T-8242 and both were issued on the same day. There is a presumption of regularity in official acts, and TCT No. T-8241 was certified as on file. The Court concluded petitioner was entitled to rely on the latest certificate of title issued in the name of the immediate transferor (spouses Rodolfo).
Effect and Operative Force of the Extrajudicial Settlement
Although an extrajudicial settlement executed by a single alleged heir without the concurrence of other heirs is not binding on those other heirs, the Court observed that such instruments nevertheless have operative effect under Section 44 of the Property Registration Decree (P.D. No. 1529), which limits the encumbrances that a subsequent purchaser for value and in good faith must take subject to. Even if the extrajudicial settlement were a forgery, the decision applied doctrine recognizing that, where a certificate of title has been transferred to a forger and remained in that state, a later innocent purchaser who relied on that certificate may acquire a valid title. Thus, the Court held the extrajudicial settlement (and the sequence of registration) did not defeat petitioner’s title.
Possession, Quieting of Title, and Prescription
The Court concluded respondents failed to establish title or possession sufficient to sustain a quieting of title claim. OCT No. 404 had been cancelled and respondents had no outstanding title to ground reconveyance. The complaint’s allegations on possession were conclusory and ambiguous—referring to “occupants” or “a number of the Pascua heirs” without clear, material, well-pleaded facts showing actual, conti
...continue readingCase Syllabus (G.R. No. 171531)
Case Caption, Citation and Procedural Posture
- Supreme Court G.R. No. 171531, Second Division; Decision promulgated January 30, 2009 (597 Phil. 437).
- Petition for review under Rule 45 from the Court of Appeals Decision dated 22 March 2005 and Resolution dated 9 February 2006 in CA-G.R. CV No. 67462.
- The Court of Appeals reversed the Regional Trial Court of Olongapo City, Branch 73 Order dated 12 November 1999 granting Guaranteed Homes, Inc.'s motion to dismiss; the CA denied petitioner’s motion for reconsideration.
- The Supreme Court granted the petition, reversed the Court of Appeals, set aside the appellate decision, and reinstated the RTC Order of 12 November 1999 dismissing the complaint in Civil Case No. 432-097.
Parties
- Petitioner: Guaranteed Homes, Inc.
- Respondents: Heirs of decedent Pablo Pascua — specifically named groups including heirs of Maria P. Valdez (Emilia V. Yumul and Victoria V. Molino), heirs of Severina P. Tugade (Iluminada and Leonora P. Tugade), heirs of Etang P. Gatmin (Ludivina G. Dela Cruz by and through Alfonso G. Dela Cruz, Hilaria G. Cobero and Alfredo G. Cobero) and Siony G. Tepol (by and through Elena T. Rivas and Elesio Tepol, Jr.).
- Impleaded/Intervening parties: Register of Deeds and the National Treasurer, represented by the Office of the Solicitor General in relation to the Assurance Fund.
Property and Title History (Facts)
- Subject property: Parcel of land consisting of 23.7229 hectares located in Cabitaugan, Subic, Zambales, covered originally by Original Certificate of Title (OCT) No. 404 in the name of Pablo Pascua (decedent).
- Annotations on OCT No. 404 indicated sales by Pablo during his lifetime to Alejandria Marquinez and Restituto Morales (as shown in memorandum of encumbrances).
- 13 February 1967: Cipriano Pascua, Sr. executed an instrument titled “Extrajudicial Settlement of a Sole Heir and Confirmation of Sales,” declaring himself sole heir of Pablo and confirming sales allegedly made by Pablo, including the subject property.
- 14 February 1967: Transfer Certificate of Title No. T-8241 was issued in the name of Cipriano (alleged issuance “without OCT No. 404 having been cancelled” and T-8241 lacked the Register of Deeds’ signature); on that same day TCT No. T-8242 was issued in the name of spouses Albino and Fabia Rodolfo and TCT No. T-8241 was cancelled.
- 31 October 1969: Spouses Rodolfo executed a Deed of Sale with Mortgage conveying the disputed property to Guaranteed Homes, Inc.
- 5 November 1969: TCT No. T-8242 was cancelled and TCT No. T-10863 was issued in the name of petitioner Guaranteed Homes, Inc.
- 24 January 1997: Jorge Pascua, Sr. (son of Cipriano) filed a petition in RTC Olongapo City, Branch 75, for issuance of a new owner’s duplicate of OCT No. 404 (Other Case No. 04-0-97); the RTC denied that petition.
Pleadings, Annexes and Documentary Record
- Respondents filed a complaint for reconveyance of the subject land (23.7229 hectares) covered by OCT No. 404; alternatively prayed for damages.
- Complaint included as annexes: OCT No. 404, TCT No. T-8241, TCT No. T-8242, TCT No. T-10863, the Extrajudicial Settlement of a Sole Heir and Confirmation of Sales (executed by Cipriano), and the Deed of Sale with Mortgage between spouses Rodolfo and petitioner.
- Petitioner filed a motion to dismiss asserting statute of limitations and lack of cause of action, claiming to be an innocent purchaser for value relying on the “clean title” of spouses Rodolfo.
- The heirs of Cipriano (impleaded defendants) denied knowledge of the extrajudicial settlement and denied Cipriano executed any document transferring ownership during his lifetime.
- Register of Deeds and the National Treasurer (through the OSG) answered asserting that claims against the Assurance Fund under P.D. No. 1529 Section 102 had prescribed (six-year period) counting from issuance of TCT No. T-10863 in 1969, and that respondents failed to show actual deprivation of ownership.
Lower Court (RTC) Ruling — Order of 12 November 1999
- RTC granted petitioner’s motion to dismiss and dismissed the complaint.
- RTC findings and bases:
- Respondents never claimed nor established possession of the property; no evidence presented that petitioner was not in possession.
- Applied doctrine that action to quiet title prescribes where plaintiff is not in possession of the property.
- Characterized the case as involving an implied or constructive trust on Cipriano’s part for inaccurately claiming sole heir status in the extrajudicial settlement that led to issuance of TCT No. T-8241 in his name.
- Held action for reconveyance of a fraudulently-registered property prescribes in ten (10) years reckoned from date of issuance of the certificate of title — thus, action was prescribed, more than 28 years having elapsed from issuance of TCT No. T-10863 (5 November 1969) to filing of complaint (21 November 1997).
- Ruled petitioner was an innocent purchaser for value entitled to rely on TCT No. T-8242 issued in spouses Rodolfo’s name; purchaser is not obliged to go beyond the title in absence of circumstances that would put purchaser on inquiry.
- Found claim against Assurance Fund prescribed under Section 102 of P.D. No. 1529 (six-year period), counted from issuance of TCT No. T-10863 in 1969 (thus expired in 1975).
Court of Appeals Ruling — Decision dated 22 March 2005
- Court of Appeals reversed the RTC and ordered reinstatement of the complaint.
- Appellate court reasoning summarized:
- When reviewing a motion to dismiss, movant (petitioner) must be taken to have hypothetically admitted truth of allegations in complaint; thus respondents did not have to prove possession at the motion stage.
- Found possession sufficiently alleged in complaint: complaint alleged “neither petitioner nor the Rodolfo spouses ever had possession of the disputed property” and that “a number of the Pascua heirs either had been (still are) in actual, continuous and adverse possession thereof or had been enjoying (still are enjoying) the use thereof.”
- Determined laches had not set in.
- Found RTC’s conclusion that petitioner was an innocent purchaser for value contrary to allegations in respondents’ complaint.
- Denied petitioner’s motion to dismiss and reinstated complaint, remanding for further proceedings.
Issues Presented to the Supreme Court
- Whether the RTC erred in granting petitioner’s motion to dismiss (i.e., whether the complaint stated a cause of action).
- Whether the Court of Appeals erred in reversing the RTC and reinstating the complaint.