ARCADIO DOMAOAL, PLAINTIFF-APPELLANT, VS. TEODORA BEA, JOAQUIN REYES AND HIS WIFE MARIA ARENAS, SALVADOR ARENAS AND HIS WIFE ANGELINA PECHAY, AND HERMOGENES G. BAUTISTA AND HIS …

Arcadio Domaoal versus Teodora Bea

The Case

This is a case about a man who says he was defrauded of land he had been awarded, and who was thrown out of court before he could prove it. Arcadio Domaoal sues Teodora Bea and the persons to whom the land was later transferred, asking for reconveyance of a lot and for damages, on the ground that the patent and title covering it were obtained through fraud. The case matters because it teaches the bar candidate two things at once: how a court must test a complaint for failure to state a cause of action, and when the four-year period for an action based on fraud begins to run. It is a lesson in the difference between dismissing a case on its face and deciding it on the merits without evidence.

Procedural History

Domaoal filed his complaint for reconveyance and damages in the Court of First Instance of Cotabato. The defendants answered and set up affirmative defenses: that the complaint states no cause of action, that the cause of action had prescribed, that the plaintiff has no personality to sue, and that the court has no jurisdiction over the subject matter. No preliminary hearing on those affirmative defenses was held. Instead, the parties submitted memoranda, and the trial court dismissed the complaint, with costs against Domaoal. It held that five years had elapsed from the issuance of the patent to the filing of the action, and that the only remedy left was a personal action for damages. Domaoal moved for reconsideration, and the trial court denied the motion. He then appealed to the Supreme Court, assigning as errors the dismissal without any evidence having been presented, the characterization of his action as one to nullify the title, the holding that he was a third person in relation to the government as grantor, and the holding that the defendants were the owners of the lot.

Facts

Domaoal alleges that he was the lawful awardee of a lot in Dadiangas, General Santos, Cotabato, by virtue of a resolution of the Board of Directors of the National Land Settlement Administration dated April 17, 1950. Through a series of fraudulent acts by the defendants, Teodora Bea was able to obtain a Miscellaneous Sales Patent over the lot in February 1960, and an original certificate of title was issued in her name in May 1960.

The land then passed from hand to hand. Teodora Bea transferred it to Joaquin Reyes, who in turn conveyed it to Salvador Arenas and Hermogenes Bautista. A transfer certificate of title was issued to Arenas and Bautista, who thereafter mortgaged the property to Reyes. Domaoal avers that all these sales and transfers were made without valuable consideration and in favor of immediate relatives.

Domaoal says he discovered the fraud only in October 1964. He filed his action for reconveyance and damages in May 1965. The trial court dismissed the complaint on the ground that five years had passed since the issuance of the patent, and that his only remedy was a personal action for damages.

Issues

• Whether or not the complaint states a cause of action, such that dismissal on that ground was proper without receiving evidence.
• Whether or not the action for reconveyance based on fraud had already prescribed at the time it was filed.
• Whether or not Domaoal is the proper party to bring the suit, considering that the land was previously public land.
• Whether or not the trial court had jurisdiction over the subject matter of the action.

Applicable Provisions

The decision applies the rule on testing the sufficiency of a complaint, as stated in the cited jurisprudence:

In order to sustain a dismissal on the ground that the complaint states no cause of action, the insufficiency of the cause of action must appear on the face of the complaint, and the test of the sufficiency of the facts alleged in the complaint, to constitute a cause of action, is whether or not, admitting the facts alleged, the court could render a valid judgment upon the same in accordance with the prayer of the complaint. For this purpose, the motion to dismiss must hypothetically admit the truth of the facts alleged in the complaint.

This rule governs the first issue, because it fixes the standard by which the trial court should have judged the complaint.

The decision also applies the prescriptive period for an action based on fraud, which the Court states as follows:

Considering that petitioner is suing private respondents, based upon a constructive trust or implied trust resulting from the fraud, the complaint must be brought within four (4) years from the discovery of fraud.

This rule governs the second issue, because it fixes the starting point of the period at the discovery of the fraud, not at the issuance of the patent.

Ruling

On the first issue, the Court held that there was merit in the appeal. The trial court dismissed the complaint on the ground that it failed to state a cause of action, but it overlooked the settled rule that the insufficiency must appear on the face of the complaint, and that the motion to dismiss must hypothetically admit the truth of the facts alleged. Domaoal had alleged that he was the lawful awardee of the lot and that, through a series of fraud, Teodora Bea obtained a title over it. Those allegations, assuming them to be true, constitute a valid cause of action upon which the court could render a valid judgment in accordance with the prayer for reconveyance.

On the second issue, the Court held that the action is based on a constructive or implied trust resulting from fraud, and so must be brought within four years from the discovery of the fraud. The complaint avers that Domaoal discovered the fraud only in October 1964. Filing the case in May 1965 was therefore well within the prescriptive period.

On the third issue, the Court held that the claim that only the Director of Lands, through the Solicitor General, could bring the suit should be taken with caution. The trial court should have conducted a preliminary hearing on that defense, because the action is one for reconveyance based on a constructive or implied trust resulting from fraud, and the court had no way of determining against whom the fraud was committed without a hearing. The Court explained the distinction: the assertion of the private respondents would be true if the fraud or misrepresentation was committed against the State or in violation of the law, but if it was committed against Domaoal in breach of their understanding, then he is the right party to bring the suit.

On the fourth issue, the Court held that since the action is for reconveyance and was brought within the prescriptive period, the trial court has jurisdiction over the subject matter.

Doctrine

First, a complaint may be dismissed for failure to state a cause of action only if the insufficiency appears on the face of the complaint. The test is whether, admitting the facts alleged to be true, the court could render a valid judgment in accordance with the prayer. The motion to dismiss hypothetically admits the truth of the allegations.

Second, an action for reconveyance based on a constructive or implied trust resulting from fraud must be brought within four years from the discovery of the fraud. The period runs from discovery, not from the issuance of the patent or the registration of the title.

Third, where the land was previously public land, the question of who is the proper party to sue turns on against whom the fraud was committed. If the fraud was against the State or in violation of the law, the Director of Lands, through the Solicitor General, is the proper party. If the fraud was committed against the awardee in breach of their understanding, the awardee is the right party to bring the suit, and a preliminary hearing should be conducted to determine that question.

Fourth, where the action for reconveyance is brought within the prescriptive period, the trial court has jurisdiction over the subject matter.

Disposition

The Supreme Court set aside the trial court's order dismissing the complaint and its order denying reconsideration, and remanded the case to the trial court for further proceedings. Domaoal prevailed on the appeal.

Remember This

The line worth memorizing is that an action for reconveyance based on a constructive trust arising from fraud prescribes in four years from the discovery of the fraud, and that a complaint is tested by hypothetically admitting its allegations to be true. Examiners like to use this case on motions to dismiss for failure to state a cause of action, on the starting point of the prescriptive period for reconveyance, and on the proper party to sue where the land was once public land.