Voiding Land Sales Under Free Patent: The Five-Year Restriction on Alienation

The Supreme Court recently reminded buyers and sellers of land acquired through a free patent that any sale made within five years from the issuance of the patent is absolutely void. In Spouses De Guzman v. Court of Appeals (G.R. No. 185757, March 2, 2016), the Court declared two deeds of sale null and void because they were executed within the prohibited period, even though the buyers had paid for the property and had waited decades to assert their rights.

The Facts of the Case

Leoncio Bajao obtained a free patent over a 25,178-square meter lot in Misamis Oriental on May 28, 1968. A year later, in 1969, he and his wife sold 200 square meters of the lot to the De Guzman spouses. In 1970, they sold another 280 square meters. Both sales were covered by separate Deeds of Absolute Sale.

The buyers paid a total of P2,400 but never received a separate title. They later discovered that the property had been included in the share of Leoncio's heir, Lamberto Bajao, through an extrajudicial settlement. When the heir refused to surrender the title for annotation, the buyers filed a complaint for reconveyance in 2000 — more than 30 years after the first sale.

The Issue Before the Court

The central question was whether the buyers' action for reconveyance had already prescribed. The Court of Appeals dismissed the complaint on the ground of prescription, holding that an action based on an implied trust must be filed within 10 years from the registration of the title.

The Supreme Court agreed with the dismissal, but for a more fundamental reason: the sales themselves were void from the start.

The Five-Year Prohibition Under the Public Land Act

Section 118 of Commonwealth Act No. 141, the Public Land Act, prohibits the alienation or encumbrance of lands acquired under a free patent or homestead within five years from the date of issuance of the patent. The purpose of this rule is to protect the grantee and his family — the State gives the land for free so that the grantee may have a home and a means of livelihood, not so that it can be immediately sold for profit.

In this case, the free patent was issued on May 28, 1968. Both sales — in 1969 and 1970 — were made within the five-year period. Under Section 124 of the Public Land Act, any conveyance made in violation of the prohibition is unlawful and null and void from its execution. A void contract cannot be ratified, and an action to declare its nullity does not prescribe.

The Court stressed that ignorance of the prohibition is no excuse. The date of issuance of the patent is a matter of official record, and the law does not count the five-year period from the buyer's knowledge of the patent.

What Happens to the Property and the Purchase Price

Because the sales were void, the buyers acquired no right over the property. The Court noted that while Section 124 provides for the reversion of the property to the State, only the Solicitor General may bring an action for reversion. Until then, the heir of the original patentee has the better right to possess the property.

The principle of pari delicto — which normally bars parties to an illegal contract from recovering what they gave — did not apply. Public policy favoring the preservation of homestead and free patent grants for the grantee's family required that the heir be allowed to recover the property.

However, the Court ordered the heir to return the purchase price of P2,400 with legal interest at 6% per annum from the filing of the complaint until full payment. The buyers' claim was reduced to the return of what they paid.

Prescription and the Implied Trust Rule

The Court also addressed the alternative ground raised by the buyers. Even if the sales were valid, their action for reconveyance would have prescribed. Under Article 1456 of the Civil Code, a person who acquires property through fraud becomes an implied trustee for the benefit of the real owner. An action for reconveyance based on an implied trust prescribes in 10 years from the registration of the title.

The exception is when the plaintiff remains in possession of the property. In that case, the action becomes one for quieting of title, which is imprescriptible. Here, the buyers failed to prove actual possession. They did not live on the property, their tax payments were only shown for 2000 to 2002, and the fence they claimed to have built was only proven to exist in 1996. The Court found no reason to overturn the appellate court's factual findings.

Practical Takeaways

• Check the patent date before buying. If the property was acquired through a free patent or homestead, verify when the patent was issued. Any sale within five years from that date is void, no matter how much was paid.
• Void sales cannot be cured by time. A contract that violates Section 118 of the Public Land Act is null and void from the start. It cannot be ratified, and the nullity can be raised at any time.
• Buyers of void sales get their money back. The purchaser's remedy is limited to the return of the purchase price with legal interest, not ownership of the land.
• Act promptly on reconveyance claims. An action for reconveyance based on an implied trust prescribes in 10 years from the registration of the title. Only actual possession of the property makes the action imprescriptible.
• Possession must be proven. Bare claims of possession, without tax declarations, receipts, or other evidence, will not defeat a defense of prescription.

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