GSIS
vs. Santiago
G.R. No. 155206 October 28, 2003
FACTS:
Deceased
spouses Jose Zulueta and Soledad Ramos obtained various loans from GSIS from
1956 to 1957 in the total amount of P3,117,000.00 secured by real estate
mortgages over their parcels of land.
The Zuluetas
failed to pay their loans to defendant GSIS and the latter foreclosed the real
estate mortgages. On August 1974, the mortgaged properties were sold at
public auction with defendant GSIS being the highest bidder. Not all
lots covered by the mortgaged titles, however, were sold. Ninety-one
(91) lots were expressly excluded from the auction since the lots were
sufficient to pay for all the mortgage debts.
A Certificate
of Sale was issued later on and an Affidavit of Consolidation of
Ownership was executed by defendant GSIS over Zulueta’s lots, including the
lots, which as earlier stated, were already excluded from the foreclosure. On
March 1980, GSIS sold the foreclosed properties to Yorkstown Development
Corporation which sale was disapproved by the Office of the President. The sold
properties were returned to GSIS and the land titles issued in favour of
Yorkstown were subsequently cancelled.
Thereafter,
GSIS began disposing the foreclosed lots including the excluded ones.
On April
7, 1990, Representative Eduardo Santiago and then plaintiff Antonio Vic Zulueta
executed an agreement whereby Zulueta transferred all his rights and interests
over the excluded lots. Plaintiff Santiago’s lawyer wrote a demand
letter dated May 11, 1989 to defendant GSIS asking for the return of
the eighty-one (81) excluded lots.
On May 7,
1990, Antonio Vic Zulueta, represented by Eduardo M. Santiago, filed with the
Regional Trial Court (RTC) of Pasig City, Branch 71, and a complaint
for reconveyance of real estate against the GSIS. Spouses Alfeo and
Nenita Escasa, Manuel III and Sylvia G. Urbano, and Marciana P. Gonzales and the
heirs of Mamerto Gonzales moved to be included as intervenors and filed their
respective answers in intervention. Subsequently, the petitioner, as
defendant therein, filed its answer alleging inter alia that
the action was barred by the statute of limitations and/or laches and that the
complaint stated no cause of action. Subsequently, Zulueta was
substituted by Santiago as the plaintiff in the complaint a
quo. Upon the death of Santiago in 1996, he was
substituted by his widow as the plaintiff. After due trial, the RTC rendered
judgment against the petitioner ordering it to reconvey to the respondent,
Rosario Enriquez Vda. De Santiago, in substitution of her deceased husband
Eduardo, the seventy-eight lots excluded from the foreclosure sale.
ISSUES:
I.
Whether or not the petitioner acted in bad faith in
consolidating ownership and causing the issuance of titles in its name over the
subject lots, notwithstanding that these were expressly excluded from the
foreclosure sale.
II.
Whether or not Petitioner’s defense on prescription is
tenable.
HELD:
First Issue:
YES. The acts of defendant-appellant
GSIS in concealing from the Zuluetas the existence of these excluded lots, in
failing to notify or apprise the spouses Zulueta about the excluded lots from
the time it consolidated its titles on their foreclosed properties, in failing
to inform them when it entered into a contract of sale of the foreclosed
properties to Yorkstown as well as when the said sale was revoked by then President
during the same year, demonstrated a clear effort on its part to defraud the
spouses Zulueta and appropriate for itself the subject properties.
Even if titles over the lots had been
issued in the name of the defendant-appellant, still it could not legally claim
ownership and absolute dominion over them because indefeasibility of title
under the Torrens system does not attach to titles
secured by fraud or misrepresentation. The fraud committed by
defendant-appellant in the form of concealment of the existence of said lots
and failure to return the same to the real owners after their exclusion from
the foreclosure sale made defendant-appellant holders in bad faith. It is well-settled that a holder in
bad faith of a certificate of title is not entitled to the protection of the
law for the law cannot be used as a shield for fraud.
Second
Issue:
NO. On the issue of prescription, generally, an action
for reconveyance of real property based on fraud prescribes in four years from
the discovery of fraud; such discovery is deemed to have taken place upon the
issuance of the certificate of title over the property. Registration of real property is a
constructive notice to all persons and, thus, the four-year period shall be
counted therefrom. On the other hand, Article 1456 of the Civil Code provides:
Art. 1456. If property is acquired through
mistake or fraud, the person obtaining it is, by force of law, considered a
trustee of an implied trust for the benefit of the person from whom the
property comes.
An action for reconveyance based on
implied or constructive trust prescribes in ten years from the alleged
fraudulent registration or date of issuance of the certificate of title over
the property.
The petitioner’s defense of
prescription is untenable. As
held by the CA, the general rule that the discovery of fraud is deemed to have
taken place upon the registration of real property because it is “considered a
constructive notice to all persons” does not apply in this case.
Contrary to its claim, the petitioner unarguably had the
legal duty to return the subject lots to the Zuluetas. The petitioner’s
attempts to justify its omission by insisting that it had no such duty under
the mortgage contract is obviously clutching at straw. Article 22 of the Civil Code
explicitly provides that “every person who, through an act of performance by
another, or any other means, acquires or comes into possession of something at
the expense of the latter without just or legal ground, shall return the same
to him.”