ROGELIA DACLAG AND ADELINO DACLAG (DECEASED), SUBSTITUTED BY RODEL M. DACLAG, AND ADRIAN M. DACLAG, PETITIONERS, VS. ELINO MACAHILIG, ADELA MACAHILIG, CONRADO MACAHILIG, LORENZA…

Daclag versus Macahilig

The Case

This is a petition for review brought by Rogelia Daclag and Adelino Daclag, the latter now deceased and substituted by Rodel Daclag and Adrian Daclag, against Elino Macahilig and the other Macahilig respondents. The action began as a complaint for reconveyance of a parcel of registered land, with damages and an accounting of the produce of the land. The case matters because it gathers in one place three rules every Bar candidate must carry: the prescriptive period for reconveyance of fraudulently registered land, the imprescriptibility of an action to declare the inexistence of a void contract, and the moment when a possessor's good faith is legally interrupted so that his right to the fruits stops.

Procedural History

The Regional Trial Court ordered the reconveyance of the subject land to the respondents and directed the petitioners to pay the respondents their corresponding share in the produce of the land from the time they were deprived of it until possession is restored. The petitioners appealed to the Court of Appeals, which affirmed the trial court in a Decision dated October 17, 2001, and later denied reconsideration in a Resolution dated August 7, 2003. The petitioners then came to the Supreme Court on a petition for review. The Supreme Court rendered a Decision dated July 28, 2008 affirming the Court of Appeals. The petitioners filed a Motion for Reconsideration of that Decision, and it is this Motion for Reconsideration that the Court now resolves.

Facts

The land in question was owned in part by the respondents. Maxima, who was not the owner of the land she sold, executed a deed of sale in favor of the petitioners. The one-half northern portion of that land belonged to the respondents. In 1984, the land was registered in the name of the petitioner Rogelia.

In 1991, the respondents filed their complaint for reconveyance. The petitioners received a summons together with the complaint on August 5, 1991. The trial court found that the petitioners should pay the respondents their share in the produce of the land from the time they were deprived of it until possession is restored, and it fixed that reckoning point at 1984.

Maxima died in October 1993. The petitioners later argued that any claim against her expired with her, and that the proper party to answer for damages should be Maxima or her estate, since she had misrepresented herself as the true owner. The petitioners never raised this point in their appellants' brief, nor in their motion for reconsideration before the Court of Appeals, nor in their petition for review before the Supreme Court. Maxima was never substituted by her heirs after the trial court's Decision.

Issues

• Whether or not the respondents' action for reconveyance, being based on fraud, prescribed in four years from discovery of the fraud rather than in ten years from issuance of the certificate of title.
• Whether or not the petitioners are possessors in good faith, and if so, from what date their liability for the produce of the land should be reckoned.
• Whether or not the petitioners may raise, for the first time in their Motion for Reconsideration, the argument that the proper party liable for damages is Maxima or her estate.

Applicable Provisions

Article 1410 of the Civil Code provides:

The action or defense for the declaration of the inexistence of a contract does not prescribe.

This provision is the basis for the Court's holding that the action for reconveyance, grounded on a void deed of sale, is imprescriptible.

Article 528 of the Civil Code provides:

Possession acquired in good faith does not lose this character except in the case and from the moment facts exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully.

This provision fixes the moment when the petitioners' good faith ceased, which in turn limits their liability for the fruits.

Article 544 of the Civil Code provides:

A possessor in good faith is entitled to the fruits only so long as his possession is not legally interrupted.

This provision is the reason the petitioners must account for the produce only from the date their possession was legally interrupted, not from 1984.

Ruling

On the first issue, the Court rejected the petitioners' argument. The Court held that the prescriptive period for the reconveyance of fraudulently registered real property is ten years reckoned from the date of the issuance of the certificate of title. The complaint was filed in 1991, while the land was registered in the name of the petitioner Rogelia in 1984, and so it was filed within the ten-year period. But the Court went further and clarified that the action was not even subject to prescription. The deed of sale executed by Maxima in favor of the petitioners was null and void, because Maxima was not the owner of the land she sold, and the one-half northern portion belonged to the respondents. Being an absolute nullity, the deed is subject to attack anytime, in accordance with Article 1410 of the Civil Code. The Court also held that when there is a showing of such illegality, the property registered is deemed to be simply held in trust for the real owner by the person in whose name it is registered, and the real owner then has the right to sue for reconveyance. An action for reconveyance based on a void contract is imprescriptible. As long as the land wrongfully registered under the Torrens system is still in the name of the person who caused such registration, an action in personam will lie to compel him to reconvey the property to the real owner. Since title is in the name of the petitioner Rogelia, the trial court correctly ordered the reconveyance.

On the second issue, the Court found partial merit. Under Article 528, possession in good faith ceases from the moment defects in the title are made known to the possessors, by extraneous evidence or by suit for recovery of the property by the true owner. Such interruption takes place upon service of summons. Under Article 544, a possessor in good faith is entitled to the fruits only so long as his possession is not legally interrupted. The records show that the petitioners received the summons together with the complaint on August 5, 1991. Their good faith therefore ceased on that day. Consequently, the petitioners should pay the respondents ten cavans of palay per annum beginning August 5, 1991, instead of 1984.

On the third issue, the Court was not persuaded. The petitioners never raised this matter in their appellants' brief, nor in their motion for reconsideration before the Court of Appeals, nor in their petition for review before the Supreme Court. They cannot raise it for the first time in their Motion for Reconsideration without offending the basic rules of fair play, justice and due process, especially since Maxima was not substituted at all by her heirs after the promulgation of the trial court's Decision.

Doctrine

First, the prescriptive period for the reconveyance of fraudulently registered real property is ten years reckoned from the date of the issuance of the certificate of title. Second, and more fundamentally, an action for reconveyance based on a void contract is imprescriptible, because Article 1410 of the Civil Code provides that the action for the declaration of the inexistence of a contract does not prescribe. Third, when land is wrongfully registered under the Torrens system, the registered owner is deemed to hold it in trust for the real owner, and as long as the land remains in the name of the person who caused the registration, an action in personam lies to compel reconveyance. Fourth, under Article 528, possession in good faith ceases from the moment defects in the title are made known to the possessor, and such interruption takes place upon service of summons. Fifth, under Article 544, a possessor in good faith is entitled to the fruits only so long as his possession is not legally interrupted, so the accounting for fruits runs from the date of service of summons, not from the date of registration. Sixth, a party may not raise a new issue for the first time in a motion for reconsideration.

Disposition

The petitioners' Motion for Reconsideration was partly granted. The Decision of the Court of Appeals was modified only with respect to prescription as discussed in the text of the Resolution, and the dispositive portion was modified so that the petitioners are ordered to pay the respondents ten cavans of palay per annum beginning August 5, 1991 instead of 1984.

Remember This

Memorize this line: an action for reconveyance based on a void contract is imprescriptible, and a possessor in good faith loses that character upon service of summons, so the fruits are accounted for only from that date. Examiners like to use this case to test the distinction between the ten-year period for fraudulently registered land and the imprescriptibility of an action grounded on a void contract, and to test when good faith of a possessor is interrupted.