Prescription and Implied Trusts in Reconveyance: What the Supreme Court Said

The Supreme Court recently had the opportunity to clarify important rules on land registration, prescription of actions, and the effect of defects in notarized documents. In Spouses Pontigon v. Heirs of Meliton Sanchez (G.R. No. 221513, December 5, 2016), the Court laid down clear guidelines on when an action for reconveyance based on an implied trust prescribes, and how a document that was not properly notarized can still be valid between the parties and their heirs.

The Facts of the Case

Meliton Sanchez owned a 24-hectare parcel of land in Pampanga, registered under Original Certificate of Title (OCT) No. 207. When he died in 1948, he left the property to his three children: Apolonio, Flaviana, and Juan. The property was never partitioned among them.

In 1979, the three siblings executed an Extrajudicial Settlement of Estate with Absolute Sale, conveying the property to Luisito Pontigon and his wife Leodegaria (who was Juan's daughter). The document was notarized by a lawyer but lacked Flaviana's residence certificate number. A new title, TCT No. 162403-R, was issued in the petitioners' names on May 21, 1980.

In September 2000 — more than 20 years after the issuance of the new title — the heirs of Flaviana filed a complaint seeking to nullify the title. They claimed the transfer was fraudulent and that the property was merely held in trust for Meliton's heirs. They also argued that the Extrajudicial Settlement was invalid because Flaviana was already senile and was allegedly coerced into signing it.

The Issue of Prescription

The central question was whether the respondents' action was barred by prescription. The trial court initially ruled it was not, reasoning that a trust relationship existed between the parties, making the action imprescriptible.

The Supreme Court disagreed. The Court distinguished between actions for reconveyance and actions for quieting of title. While an action for reconveyance based on an implied or constructive trust prescribes in ten years from the issuance of the Torrens title, an action for quieting of title is imprescriptible — but only if the plaintiff is in actual possession of the property.

Since the respondents in this case did not allege possession of the property, their action was one for reconveyance only. The ten-year prescriptive period ran from May 21, 1980, the date TCT No. 162403-R was issued. Their complaint filed in September 2000 was therefore filed more than 20 years too late.

The Effect of an Improperly Notarized Document

The Court also clarified an important point about notarization. While the Extrajudicial Settlement was not properly notarized because Flaviana's residence certificate number was missing, this defect did not make the document void.

Under Article 1358 of the New Civil Code, contracts involving real property should be in a public document. However, the Court explained that this requirement is only for convenience and registration purposes. The absence of proper notarization merely makes the document a private instrument — it does not invalidate the transaction itself.

More importantly, the Court ruled that the heirs of the contracting parties are not "third persons" who can question the contract. Under Article 1311 of the New Civil Code, contracts take effect between the parties, their assigns, and their heirs. Since the respondents were Flaviana's heirs, they were bound by the Extrajudicial Settlement their mother had signed.

The Claim of Fraud and Coercion

The respondents also claimed that Flaviana was coerced into signing the document. The Court noted that if true, this would make the contract voidable, not void. An action to annul a voidable contract based on intimidation or undue influence must be brought within four years from the time the defect of consent ceases. That period had long expired.

The Court also found that the respondents failed to prove that the petitioners participated in any fraud in the issuance of the title. While there were irregularities in the Register of Deeds' procedures, these could not be attributed to the petitioners, who merely surrendered the owner's duplicate certificate as required.

Practical Takeaways

• Actions for reconveyance based on implied trusts prescribe in ten years from the issuance of the certificate of title. This applies even if fraud is alleged.
• Possession matters. If the plaintiff is in actual possession of the property, the action may be treated as one for quieting of title, which is imprescriptible.
• Defective notarization does not void a contract. It merely makes the document a private instrument, which is still binding between the parties and their heirs.
• Heirs are bound by their predecessors' contracts. Under Article 1311 of the Civil Code, heirs are not considered third persons who can question a valid agreement.
• A voidable contract must be annulled within the prescriptive period. For intimidation, violence, or undue influence, the period is four years from the time the defect of consent ceases.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.