abalos vs. darapa

G.R. No. 164693 ,March 23, 2011

JOSEFA S. ABALOS AND THE DEVELOPMENT BANK OF THE PHILIPPINES, Petitioners vs.SPS. LOMANTONG DARAPA AND SINAB DIMAKUTA, Respondents

On 25 June 1962, petitioner DBP, Ozamis Branch, granted a P31,000.00 loan to respondent spouses Lomantong Darapa and Sinab Dimakuta (spouses) who executed therefore a real and chattel mortgage contract.

The assignment of the spouses’ equity rights over the land covered by Tax Declaration No. A-148 in DBPs favor was embedded in the Deed of Assignment of Rights and Interests which the spouses executed simultaneous with the real and chattel mortgage contract.

In 1970, the spouses applied for the renewal and increase of their loan using Sinab Dimakutas (Dimakuta) Transfer Certificate of Title (TCT) No. T-1,997 as additional collateral. The DBP disapproved the loan application without returning Dimakutas TCT.

When the spouses failed to pay their loan, DBP extrajudicially foreclosed the mortgages on 16 September 1971, which, unknown to the spouses, included the TCT No. T-1,997. The spouses failed to redeem the land under TCT No. T-1,997 which led to its cancellation, and, the eventual issuance of TCT No. T-7746 in DBPs name.

In 1984, the spouses discovered all these and they immediately consulted a lawyer who forthwith sent a demand letter to the bank for the reconveyance of the land. The bank assured them of the return of the land. In 1994, however, a bank officer told them that such is no longer possible as the land has already been bought by Abalos, daughter of the then provincial governor.

The DBP sold the land to its co-petitioner Josefa Abalos (Abalos). The TCT No. T-7746 (originally TCT No. T-1,997) was cancelled and on 6 July 1994, T-16,280 was issued in Abalos name.The spouses filed with the RTC of Iligan City, a Complaint for Annulment of Title, Recovery of Possession and Damages, against DBP and Abalos. The spouses averred that TCT No. T-1,997 was not one of the mortgaged properties, and, thus, its foreclosure by DBP and its eventual sale to Abalos was null and void.

On the other hand, DBP countered that TCT No. T-1,997 had its roots in Tax Declaration No. A-148, which the spouses mortgaged with the DBP in 1962 as evidenced by the Real Estate Mortgage and the Deed of Assignment. Abalos, on her part, contended that she was an innocent purchaser for value who relied in good faith on the cleanliness of the DBPs Title.

DBP made the spouses believe that there was no need to institute any action for the land would be returned to the spouses soon, only to be told, after ten (10) years of naivet, that reconveyance would no longer be possible for the same land was already sold to Abalos, an alleged purchaser in good faith and for value.

Issue:

WON the spouses claim is barred by prescription of 10 years?

Held:

The DBP contends that the prescriptive period for the reconveyance of fraudulently registered real property is ten (10) years reckoned from the date of the issuance of the certificate of title.

While the above disquisition of the DBP is true, the 10-year prescriptive period applies only when the reconveyance is based on fraud which makes a contract voidable (and that the aggrieved party is not in possession of the land whose title is to be actually reconveyed). It does not apply to an action to nullify a contract which is void ab initio, as in the present petition. Article 1410 of the Civil Code categorically states that an action for the declaration of the inexistence of a contract does not prescribe.

The spouses action is an action for Annulment of Title, Recovery of Possession and Damages, grounded on the theory that the DBP foreclosed their land covered by TCT No. T-1,997 without any legal right to do so, rendering the sale and the subsequent issuance of TCT in DBPs name void ab initio and subject to attack at any time conformably to the rule in Article 1410 of the Civil Code.

In finis, the Court notes that Abalos, DBPs co-defendant, was ordered by the RTC to return to the spouses the land she bought from DBP; the RTC also ordered the cancellation of Abalos title. Abalos, however, abandoned her appeal then pending before the Court of Appeals, resulting in its dismissal. In this Courts Resolution dated 13 February 2006, she was subsequently dropped as party-petitioner. By abandoning her appeal, the RTC decision with respect to her, thus, became final.