Title
Reyes vs. Court of Appeals
Case
G.R. No. 127608
Decision Date
Sep 30, 1999
Reyes sold property to Raymundo in 1969, later claiming it was simulated for a loan. SC ruled in favor of Reyes, citing possession, no prescription, and contract simulation.
cancellation of title
reconveyance of property
second sale
A

Case Summary (G.R. No. 127608)

Chronology of Transfers and Titles

On 21 June 1967 petitioner sold one-half of the 300-sq.m. lot to respondent for P10,000.00, and a new title (TCT No. 119205) was issued in the names of Reyes and Raymundo as co-owners. Respondent thereafter obtained a P17,000.00 GSIS loan using her one-half share as collateral. On 24 September 1969 petitioner executed a second deed of absolute sale for the remainder of her interest to respondent for P15,000.00; TCT No. 149036 was thereafter issued in respondent’s name covering the whole lot.

Alleged Agreement to Reconvey and Private Writing

Petitioner alleges the 24 September 1969 sale was simulated: she was coerced to execute the deed as part of an arrangement that respondent would secure an additional GSIS loan using the whole lot as collateral to construct an apartment, with the understanding that if the loan failed respondent would reconvey the property to petitioner. Petitioner points to a private agreement dated 10 January 1970 embodying their true arrangement.

Possession and Lease to the Palacios Spouses

Since 1967 the house on the property had been leased by the Palacios spouses from petitioner, who received rentals. In December 1984 petitioner allegedly refused further rental receipts, prompting the Palacioses to file a consignation petition on 13 March 1985. A compromise was approved on 28 May 1985 extending the lease term through 24 November 1986 and addressing accrued rentals. The Palacioses were ejected and later returned; when petitioner filed a contempt case, respondent intervened claiming ownership and producing a lease purporting to be dated 17 March 1987 (retroactive to 1 January 1987).

Trial Court Findings and Relief

The Regional Trial Court (Branch 106, Quezon City) found the 24 September 1969 deed of sale to be simulated. It concluded petitioner retained actual possession through the Palacioses and that respondent had allowed petitioner to exercise ownership, only asserting ownership in 1987. The trial court held the 1969 sale was a device to obtain a GSIS loan that did not materialize and therefore cancelled TCT No. 149036 and the second deed of sale, ordered reconveyance to petitioner, and awarded P25,000.00 as actual and exemplary damages, P10,000.00 as attorney’s fees, and costs.

Court of Appeals Reversal and Grounds

The Court of Appeals reversed and dismissed petitioner’s complaint, holding that a notarized public deed prevails over a later private writing; that petitioner’s cause of action had prescribed because the action should have been filed within ten years from 1969 (as action to recover title) or ten years from 1970 (as action based on a written contract); and that laches barred petitioner because respondent allegedly remained in possession for eighteen years after the second deed of sale. The Court of Appeals denied reconsideration.

Petitioner’s Argument on Accrual of Cause of Action

Petitioner argued her cause of action accrued only in 1987 when respondent first asserted ownership and presented a lease contract asserting title. Thus, petitioner contends her complaint filed on 23 August 1987 was timely. Petitioner also contended that the 10 January 1970 agreement better reflected the parties’ real intention and thus established simulation of the 1969 deed.

Legal Principle on Prescription and Possession Applied by the Supreme Court

The Supreme Court reiterated that under prior jurisprudence an action for reconveyance based on implied or constructive trust prescribes in ten years, measured from registration of the deed or issuance of the certificate of title, but this rule applies only when the plaintiff is not in possession. If the claimant is in actual possession, the right to seek reconveyance does not prescribe because possession can be relied upon until disturbed. Actual possession includes acts of dominion by the owner or by another person who recognizes the owner’s rights; possession may be exercised in one’s own name or in the name of another (Art. 524, Civil Code).

Application to the Facts on Possession, Prescription, and Written-Contract Prescription

The Court found petitioner remained in actual possession through the lessees after the 1969 deed. The Palacioses’ consignation petition and respondent’s own lease dated 17 March 1987 acknowledged occupancy since 1967 under a prior lease with petitioner. Because petitioner’s possession was undisturbed until respondent asserted ownership in 1987, the Supreme Court held petitioner’s action for reconveyance filed on 23 August 1987 had not prescribed. The Court also clarified that Art. 1144 (ten years for actions upon written contract) was inapplicable; the relevant provision on a declaration of inexistence of a contract is Art. 1410, which states such an action does not prescribe.

On Laches and Equitable Considerations

The Supreme Court rejected the Court of Appeals’ laches finding. Laches is an equitable doctrine dependent on the particular circumstances and is not an absolute rule; it should not be invoked where doing so would perpetrate manifest injustice. Given the trial court’s findings of simulation and petitioner’s continued possession through the Palacioses, applying laches to bar petitioner and thereby vest title in respondent would produce inequity. The Court relied on precedents (Suntay and Santiago) where simulation was inferred from

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