Aqualab Philippines, Inc. v. Heirs of Marcelino Pagobo

Facts:

Lot 6727-Q and Lot 6727-Y of the Opon Cadastre, situated in Punta Engao, Lapu-lapu City, Mactan Island, Cebu used to form part of Lot 6727 owned by respondents’ great grandfather, Juan Pagobo, covered by OCT RO-2246 containing an area of 127,436 square meters.

Lot 6727 was once covered by Juan Pagobos homestead application. Upon his death on January 18, 1947, his homestead application continued to be processed culminating in the issuance on December 18, 1969 of Homestead Patent No. 128470 for Lot 6727. On the basis of this homestead patent, OCT RO-2246 was issued in the name of Juan Pagobo. Apparently, from the description of the subdivision lots of Lot 6727, particularly those of subject Lots 6727-Q and 6727-Y above, and even before the issuance of OCT RO-2246, the mother Lot 6727 was surveyed in 1963 and 1967 and eventually subdivided into 34 subdivision lots denominated as Lots 6727-A to 6727-HH.

Incidentally, on the same date that OCT RO-2246 was issued covering Lot 6727, OCT RO-1277 was likewise issued also covering Lot 6727 in the name of the late Juan Pagobo also pursuant to Homestead Patent No. 128470. Subsequently, however, on August 10, 1977, OCT RO-1277 was canceled for being null and void pursuant to an Order issued on August 4, 1977 by the Court of First Instance in Lapu-lapu City in view of the issuance of OCT RO-2246.Subject Lots 6727- Q  and 6727-Y were subsequently sold to Tarcela de Espina who then secured TCT 3294 therefor on April 21, 1970.

Subsequently, Tarcela de Espina sold subject lots to Rene Espina who was issued, on September 28, 1987, TCT 17830 for Lot 6727-Q and TCT 17831 for Lot 6727-Y. Thereafter, Rene Espina sold subject lots to Anthony Gaw Kache, who in turn was issued TCT 17918 and TCT 18177, respectively, on November 9, 1987. Finally, Aqualab acquired subject lots from Anthony Gaw Kache and was issued TCT 18442 and TCT 18443, respectively, on May 4, 1988.

The heirs of Bernabe Pagobo asserted that subject Lot 6727-Y was owned by their predecessor Bernabe Pagobo as evidenced by TD 00520. They maintained that even before the Second World War and before the death of Juan Pagobo on January 18, 1947, Bernabe Pagobo already had possession of subject Lot 6727-Y which was the portion assigned to him. Moreover, they contended that respondents never made any demands for partition of subject Lot 6727-Y.

RTC granted Aqualabs motion and dismissed respondents’ complaint.

CA reversed the Order of dismissal by the RTC, declaring the sale of subject lots as null and void, and remanding the case to the trial court for partition proceedings.

Issue:

Whether or not the action of respondents is barred by prescription; and whether or not Aqualab is an innocent purchaser for value.

Held:

No and no.

From the foregoing premises, the trial court erred in finding prescription. Prescription, as a ground for a motion to dismiss, is adequate when the complaint, on its face, shows that the action has already prescribed. Such is not the case in this instance. Respondents have duly averred continuous possession until 1991 when such was allegedly disturbed by Aqualab. Being in possession of the subject lotshypothetically admitted by Aqualab, respondents’ right to reconveyance or annulment of title has not prescribed or is not time-barred.

Verily, an action for annulment of title or reconveyance based on fraud is imprescriptible where the plaintiff is in possession of the property subject of the acts. And the prescriptive period for the reconveyance of fraudulently registered real property is 10 years, reckoned from the date of the issuance of the certificate of title, if the plaintiff is not in possession. Thus, one who is in actual possession of a piece of land on a claim of ownership thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right. Since respondents filed their complaint in 1994, or three years after their possession was allegedly disturbed, it is clear that prescription has not set in, either due to fraud or constructive trust.

It would appear that Anthony Gaw Kache, Aqualabs predecessor-in-interest, was not in possession of subject lots. Such a fact should have put Aqualab on guard relative to the possessors’ interest over subject lots. A buyer of real property that is in the possession of a person other than the seller must be wary, and a buyer who does not investigate the rights of the one in possession can hardly be regarded as a buyer in good faith. Aqualab cannot be considered, in the context of its motion to dismiss, to be an innocent purchaser for value or a purchaser in good faith. Moreover, the defense of indefeasibility of a Torrens title does not extend to a transferee who takes it with notice of a flaw in the title of his transferor.

The appellate court was, thus, correct insofar as it reversed and set aside the September 30, 1997 Order of dismissal of the trial court. Unfortunately, however, it went further, for it did not merely remand the case for further proceedings, i.e., for trial on the merits, but it also resolved and decided the case in favor of respondents without going into a full-blown trial on the merits. This violated Aqualabs right to due process.

The CA reversibly erred when it decided the case on the merits when what was appealed thereto was a dismissal of the case through a motion to dismiss. There was no trial on the merits. Thus, its resolution of the case on the merits had no factual basis.

First, the assertion of respondents that they had possession until 1991, a factual issue, still had to be established on trial. Indeed, he who asserts a fact has the burden of proving it. So, too, the contention of being an innocent purchaser for value by Aqualab still has yet to be determined through a trial on the merits. The hypothetical admission applied against a defendant is relied upon by the court only to resolve his motion to dismiss. Verily, the burden of proving the purchasers good faith lies in the one who asserts the same it is not enough to invoke the ordinary presumption of good faith.

Second, and corollary to the first, given that there is no judicial factual finding that Aqualab is not an innocent purchaser for value, it is legally and factually without bases for the appellate court to order the cancellation of the certificates of title covering subject lots in the name of Aqualab.

Third, the issues of reconveyance or redemptive rights of respondents and their action for partition have to be resolved by the trial court in light of its eventual findings from a trial on the merits of the instant case.