Case Summary (G.R. No. 128195)
Dispute Arising from Lease and Rental Payments
In December 1984, Reyes allegedly refused to accept rental payments, prompting the Palacios spouses to file a consignation petition on March 13, 1985. The parties entered into a compromise agreement extending the lease to November 24, 1986, and providing for unpaid rentals. Despite this, the Palacios spouses were ejected but managed to return. When Reyes filed a contempt case against the lessees, Raymundo intervened claiming full ownership and asserting a lease contract with the Palacios dated March 17, 1987. The trial court dismissed the contempt case on August 12, 1987, after which rentals were paid to Raymundo.
Petitioner's Complaint for Cancellation and Reconveyance
On August 23, 1987, Reyes filed suit to cancel TCT No. 149036 and the second deed of sale, alleging the sale was simulated. She claimed the deed's purpose was to enable Raymundo to obtain a GSIS loan, which was conditional and if disapproved, Raymundo would reconvey the property to her. This underlying agreement was allegedly contained in a private writing dated January 10, 1970. Reyes sought reconveyance and damages.
Trial Court Findings on Simulation and Ownership
The Regional Trial Court found the second deed of sale simulated, reasoning that Reyes remained in possession by collecting rentals through 1986 and only lost possession in 1987 when Raymundo asserted ownership. It held that the sale was intended solely as collateral to obtain a loan which ultimately failed. Consequently, the court cancelled the second title and deed, ordered reconveyance, and awarded damages and attorney’s fees.
Court of Appeals' Contrary Ruling
The Court of Appeals reversed, holding that the notarized deed of sale prevailed over the private agreement. It found Reyes’ claim barred by the ten-year prescriptive period for an action to recover property or under a written contract and that laches applied because Reyes allowed Raymundo to remain in possession for 18 years. The appellate court dismissed Reyes’ complaint and denied reconsideration.
Supreme Court's Analysis on Prescription and Possession
The Supreme Court ruled that Reyes’ cause of action only accrued when Raymundo disturbed Reyes’ possession in 1987 by intervening in the contempt case and asserting ownership with a new lease contract. Under prevailing jurisprudence, prescription does not run against a party in actual possession of the property. Since Reyes retained possession through the lessees until 1987, the action filed thereafter was timely and had not prescribed.
Legal Principles on Possession and Ownership
The Court emphasized actual possession includes acts of dominion exercised by one’s agent, such as leasing. The Palacios spouses’ longstanding tenancy under Reyes indicated her possession. Under Article 524 of the Civil Code, possession may be in the name of another. The Court cited prior rulings confirming the principle that possession affords a continuing right to vindicate ownership when that possession is disturbed.
Rejection of Laches Due to Failure of Evidence
The Court found the Court of Appeals erred in applying laches, as Reyes’ possession was continuous and undisturbed until 1987. The Palacios had paid rent consistently to Reyes, and Raymundo offered no explanation for allowing this for 17 years. Laches requires unreasonable neglect to assert one’s right, but here delay was justified by Reyes’ uninterrupted possession.
Equity and Simulation as Grounds to Void Deed
The Court reiterated that notarization presumes regularity, but the notary cannot validate an instrument not intended by the parties to be binding. The parties’ true intention was set forth in the private January 10, 1970 agreement. The second deed of sale was a mere simulation designed as security for a GSIS loan that did not materialize. By contrast to the documentary evidence, Reyes’ continuous possession and collection of rents reflected true ownership.
Precedents Supporting Simulation Doctrine and Possession
The Court relied on the cases of Suntay v. Court of Appeals and Santiago v. Co
...continue readingCase Syllabus (G.R. No. 128195)
Factual Background and Transaction History
- Petitioner Guadalupe S. Reyes sold to respondent Juanita L. Raymundo one-half of a 300-square meter lot located at No. 4-F Calderon St., Project 4, Quezon City, designated as Lot 8-B, for the amount of P10,000.00 on 21 June 1967.
- A new title, TCT No. 119205, was issued representing the whole property in the names of Reyes and Raymundo in equal shares.
- Respondent obtained a P17,000.00 loan from the Government Service Insurance System (GSIS) using her half-share of the property as collateral.
- Petitioner sold her remaining half interest to respondent on 24 September 1969 for P15,000.00 evidenced by a deed of absolute sale (Exh. “E”), and TCT No. 149036 was subsequently issued in respondent’s name cancelling the former title.
- Since 1967, the spouses Mario and Zenaida Palacios leased the house on the property from petitioner and paid rentals, which petitioner allegedly refused to accept starting December 1984, prompting the Palacios spouses to file a petition for consignation in March 1985.
- The parties later entered into a compromise agreement extending the lease to 24 November 1986 and ensuring the payment of accrued rentals to petitioner.
- Despite this, the Palacioses were ejected but managed to return, causing petitioner to file a contempt case in which respondent intervened, claiming ownership and introduced a lease contract with the Palacios spouses dated 17 March 1987 but retroactive to 1 January 1987.
- The trial court dismissed the contempt case in August 1987, after which the Palacioses paid rentals to respondent.
Petitioner's Allegations and Cause of Action
- Petitioner filed a complaint against respondent on 23 August 1987 before the Regional Trial Court (RTC) seeking cancellation of TCT No. 149036 and reconveyance with damages.
- Petitioner alleged that the second sale on 24 September 1969 was simulated, executed under constraint, and without material consideration.
- The alleged true agreement between petitioner and respondent, dated 10 January 1970, stipulated that respondent would secure an additional GSIS loan to build an apartment on the property and upon failure to secure such loan, respondent should reconvey the property to petitioner.
- Petitioner asserted repeated requests for reconveyance were ignored after the loan disapproval was discovered.
RTC Findings and Decision
- The trial court found the second deed of sale to be simulated since petitioner continued exercising ownership through collecting rentals until December 1986 and respondent only asserted ownership in 1987.
- It found that petitioner was coerced to transfer title to facilitate respondent's loan application, which never materialized.
- The court ordered cancellation of TCT No. 149036 and the second deed of sale, reconveyance of the property to petitioner, P25,000.00 in actual and exemplary damages, P10,000.00 in attorney’s fees, and costs.
Court of Appeals (CA) Ruling
- The CA reversed the RTC, holding that the notarized deed of sale took precedence ov