SPOUSES MARIANO CASTILLO AND PILAR CASTILLO IN THEIR OWN BEHALF AND IN REPRESENTATION OF HEIRS OF EDUARDO CASTILLO, PETITIONERS, VS. HEIRS OF VICENTE MADRIGAL AND/OR SUSANA REAL…

This is a petition for review on certiorari seeking reversal of the decision of the Court
of Appeals dated August 5, 1982 in CA-G.R. No. 66849-R entitled
“Spouses Mariano Castillo, et al., Plaintiffs-Appellants v. Heirs of
Vicente Madrigal, et al., Defendants-Appellees.”

The antecedent facts are as follows:

On December 17, 1979, petitioners spouses Mariano Castillo and Pilar Castillo, in their own behalf and in representation
of the heirs of Eduardo Castillo, filed a verified complaint before the Court
of First Instance (now Regional Trial Court) of Manila for annulment of
contract and transfer certificate of title and/or reconveyance
with damages against private respondents heirs of Vicente Madrigal and/or
Susana Realty, Inc. and public
respondent Register of Deeds of the City of Manila.  The complaint
contained the following pertinent allegations (pp. 105-108, Rollo):

“x x x.

“4.  That plaintiff spouses and their brother,
Eduardo Castillo (herein represented by his legal heirs Paula Castillo and
Antonio Castillo), are registered co-owners of a parcel of land situated in Ermita, Manila,
which property is more particularly described and bounded as follows:

‘Lot 20 of Block 362 of
the Cadastral Survey of the City of Manila,
Cadastral Case No. 53 G.L.R.C. Cadastral Record No. 515 with a chalet of strong
materials existing thereon, situated on the NE line of Calle M.H. del Pilar,
District of Ermita. 
Bounded on the NE by Lots Nos. 18 and 8 of Block No. 12; on the SE, by
Lots Nos. 3, 4 and 7 of Block No. 362; on the SW by Lots Nos. 7 and 19 of Block
362 and Calle M.H. del Pilar;
and on the NW, by Lots Nos. 19, 17 and 12 of Block No. 362 containing an area
of SEVEN HUNDRED AND TWENTY EIGHT (728) SQUARE METERS, more or less, Date of
Survey, December 18, 1925 (Full technical description appear on tct no. 29454)’

That the plaintiffs’ ownership over the
property above-described is evidenced by Transfer Certificate of Title No.
623597 issued in their name and that of their brother Eduardo Castillo on August 11, 1941, x x x;

“5.  That the immediate origin of the above
property is Transfer Certificate of Title No. 28454 in the name of Petronila Vda. de Castillo, plaintiffs’ mother, and
from whom they acquired the realty by way of inheritance in equal share with
Eduardo Castillo entered in the Registration Book in 1927 yet, x x x.

“6.  That plaintiffs’ mother aforesaid as predessor-in-interest (sic) declared the property for
taxation purposes for the year 1940 under Tax Dec. No. 531 and paid taxes
thereon in 1941 under official receipt No. 571689, x x x;

“7.  That after the transfer of the property in
their own name and their brother aforesaid, the property was mortgaged by
plaintiffs in favor of the Agricultural and Industrial Bank and due to the
existing war conditions at the time, the possession, management and supervision
of the land was entrusted to Eduardo Castillo reposing in him the (sic) full
trust and confidence;

“8.  That beginning the year 1941 up to the year
1977, plaintiff spouses left Manila and engaged in several business ventures in
the provinces and stayed for so long a time in Cagayan
Valley in northern Luzon and often times (sic) traveled to far-away places
thereby allowing his (sic) brother Eduardo Castillo herein to manage the same and collect the rentals due
upon the understanding that once accumulated said amount be utilized to redeem the
mortgaged property from the Bank which their brother did;

“9.  That during and after the effectivity
of the mortgage with the aforesaid Bank, plaintiffs herein never gave their
brother Eduardo Castillo authority to sell their undivided property neither
were there transactions entered into by plaintiffs with any person or persons,
natural or juridical with respect to their undivided half portion;

“10.  That after plaintiffs have returned from the
provinces and upon arrival from abroad later in 1977, they decided to get their
share from their brother Eduardo Castillo as he was entrusted but the latter
being sickly then could not give the explanation and after conference with his
wife, Paula Castillo, the latter told the plaintiffs that she and her husband
Castillo (Eduardo) did not know the mysterious transactions that transpired in
the transfer or registration of the above property to Vicente Madrigal (under
Transfer Certificate Title No. 72066)
and upon verification thereof, an alleged deed of sale executed by plaintiffs
and Eduardo Castillo appears on the back of the title but in truth and in fact,
plaintiffs had never signed any document in favor of Vicente
Madrigal contrary to what appears thereon; x x x and subsequently transferred by Vicente Madrigal to
Susana Realty Inc., under TCT No. 36280, x x x;

“11.  That plaintiffs exerted serious efforts in
recovering his property (Mariano Castillo) in his capacity as a registered
co-owner peacefully but of (sic) no
avail for the defendant Susana Realty
Inc. refused to heed to the inquiry and hence this present action;

“12.  That the transfer of the property under
litigation in favor of the late Vicente Madrigal was done thru fraud,
simulation, illegality and serious irregularity equivalent to nullity and
inexistence of contract and follows that the Transfer Certificate of Title No.
36280 under the name of defendant Susana Realty Inc. is null and void and
without any effect whatsoever either under the Civil Code or under the Land
Registration Act especially so that the transactions entered on the title took
place during war time and without supporting papers or documents available up
to the present time;

“x x x.

“14.  That under the aforesaid facts and
circumstances, the remedy of reconveyance is feasible
considering that the falidity (sic) of the title from
plaintiffs’ mother to them is not affected and without flaw;

“x x x.

“16.  That the plaintiffs herein suffered damages
for the reason that they were deprived of the possession, ownership and fruits
or income of the property in question and to which they demand from the herein
defendant heirs of Vicente Madrigal and/or Susana Realty Inc. in such amount as
may be proved during the trial.” (Underscoring supplied)

On February 4, 1980,
private respondents filed a motion to dismiss on the ground that:  (a) the complaint states no cause of action;
and (b) the cause of action is barred by the statute of limitations.

On March 25, 1980,
the trial court dismissed the complaint (pp. 120-126, Rollo).  On appeal to the Court of Appeals, the
decision was affirmed in toto on August 5, 1982 (pp. 44-52, Rollo). 
Hence, the present petition.

The issues raised by petitioners may be grouped into:  whether or not (1) petitioners’ action for
annulment of contract and transfer certificate of title and/or reconveyance with damages is subject to prescription; and
(2) the complaint states a cause of action against private respondents.

Petitioners allege that a reading of paragraphs 9 and 10 of their
complaint reveals that they
impugn the existence and validity of the alleged deed of sale.  As contained therein, petitioners never entered into any transaction with any person conveying the subject property.  They did not sign any document in favor of
any one neither did they give any one authorization for that purpose.  Therefore, consent and cause did not exist in
the execution of the deed of sale, invoking Articles 1318^[1],
1352^[2]
and 1409 (3)^[3]
of the Civil Code.  And, pursuant to
Article 1410 of the Civil Code, an action for the declaration of the
inexistence of a contract does not prescribe.

In dismissing petitioners’ complaint on the ground of
prescription, the trial court opined (p. 123, Rollo):

“x x x,
any action for annulment of the deed and TCT 72066 should have been instituted
within ten (10) years from the accrual of the cause of action, that, (sic) is,
ten years from 1943 when the deed was executed at the earliest, or ten years
from 1944 at the latest.  This action was
filed on December 17, 1979, or after more than 30 years from 1943 and 1944.  The action, therefore, has long
prescribed.  x x
x.”

The Court of Appeals expressed the same
opinion (p. 51, Rollo):

“x x x,
even as We consider that there was fraud in the registration and the issuance
of title in favor of defendant Madrigal creating thereby a constructive trust
in favor of the plaintiffs, the remedy of the plaintiffs is an action for reconveyance within ten (10) years from the registration of
the property in the name of defendant Madrigal (Alzona
v. Capunitan, 4 SCRA 450; Gonzales v. Jimenez 13
SCRA, 80).  Again, the filing of the
complaint was way beyond the ten-year period of limitation.”

Both courts ruled incorrectly. 
It is evident in paragraphs 9, 10 and 12 of the complaint, supra,
that petitioners sought the declaration of the inexistence of the deed of sale
because of the absence of their consent. 
Thus, following the provision of Article 1410 of the Civil Code, this
kind of action is imprescriptible.  The action for reconveyance
is likewise imprescriptible because its basis is the
alleged void contract of sale.  This
pronouncement is certainly far from novel. 
We have encountered similar situations in the past which We resolved in
the same manner.  One of these is the
case of Baranda, et al., v. Baranda,
et al., G.R. No. 73275, May 20, 1987, 150 SCRA 59, 73:

“x x
x.  In
the instant case, however, we are dealing not with a voidable
contract tainted with fraud, mistake, undue influence, violence or intimidation
that can justify its nullification, but with a contract that is null and void ab initio.

“Paulina Baranda
declared under oath in her complaint that she signed the deeds of sale without
knowing what they were, which means that her consent was not merely marred by
the above-stated vices, so as to make the contracts voidable,
but that she had not given her consent at all. 
x x x.  Lack of consent x x x made the deeds of sale void altogether
[Salonga vs. Ferrales, 105
SCRA 359] and rendered them subject to
attack at any time, conformably to the rule in Article 1410 that an action to
declare the inexistence of void contracts ‘does not prescribe.’

“x x x.  We have consistently ruled 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 former then has the right to sue for the reconveyance of the property.  The action for the purpose is also imprescriptible.”

However, there should be no debate that the action for damages
against private respondents has already prescribed.  In accordance with Article 1144 of the Civil
Code^[4],
it should have been brought within ten (10) years from the date of the sale to
Vicente Madrigal and the issuance of Transfer Certificate of Title No. 72066 in
his name on July 12, 1943, if against the heirs of Vicente Madrigal; or within
ten (10) years from the date of the issuance of Transfer Certificate of Title
No. 36280 in the name of Susana Realty, Inc. on May 12, 1954, if against the
firm.

Notwithstanding the discussion on the imprescriptibility
of petitioners’ action for annulment of contract and transfer certificate of
title and/or reconveyance, the dismissal of their
complaint by the trial court and the Court of Appeals on the ground of failure
to state a cause of action was correct. 
It was also Our ruling in the Baranda case, supra,
(and in other previous cases) that only as long as the property is still in the
name of the person who caused the wrongful registration and has not passed to
an innocent third person for value will an action lie to compel that person to reconvey the property to the real owner.  In this regard, we are in conformity with the
Court of Appeals that (p. 52, Rollo):

“x x x the
property subject of the alleged fraudulent registration had already been
conveyed to an innocent party for value which is defendant Susana Realty,
Inc.  The claim of plaintiffs that said
defendant is not an innocent purchaser for value is not borne by the
allegations of the complaint.  x x x.”

Where the complaint for recovery of
ownership and possession of a parcel of land alleges that some of the
defendants bought said land from their co-defendants who had a defective title
thereto but does not allege that the purchasers were purchasers in bad faith or
with notice of the defect in the title of their vendors, there is a failure to
state a cause of action (Galvez, et al. v. Tuazon y de la Paz, et al., 119 Phil. 612).  By reason of this failure, private respondent
Susana Realty, Inc. is presumed to be an innocent purchaser for value and in
good faith, entitled to protection under the law (see Tiburcio,
et al. v. People’s Homesite and Housing Corporation, et al., 106
Phil. 477).

ACCORDINGLY, the petition is hereby DENIED.  The decision of the Court of Appeals dated
August 5, 1982 is AFFIRMED, subject to the modification regarding the issue on
prescription.

SO ORDERED.

Narvasa, (Chairman), Cruz, and Griño-Aquino,
JJ., concur.

Gancayco, J., no part.

^[1]
Art. 1318.  There is no contract unless
the following requisites concur:

(1) Consent of the contracting
parties;

(2) Object certain which is the
subject matter of the contract;

(3) Cause of the obligation which is
established.

^[2]
Art. 1352.  Contracts without cause, or
with unlawful cause, produce no effect whatever.  The cause is unlawful if it is contrary to
law, morals, good customs, public order or public policy.

^[3]
Art. 1409.  The following contracts are
inexistent and void from the beginning:

(3) Those whose cause or object did
not exist at the time of the transaction;

^[4]
Art. 1144.  The following actions must be
brought within ten years from the time the right of action accrues:

(1) Upon a written
contract;

(2) Upon an obligation
created by law;

(3) Upon a judgment.