Heirs of Soledad Alido vs. Flora Campano

An oral sale of real property that has been completely or partially executed is valid and binding between the parties, but a sale of land acquired through free patent made within five years from the issuance of the patent is void ab initio and produces no legal effect; the action for declaration of nullity of a void contract does not prescribe and laches cannot be invoked to defeat it; the land must be returned to the grantee or his heirs, while the buyer may recover the purchase price and interest.

Soledad Alido obtained a free patent over a parcel of land in Alimodian, Iloilo, and was issued Original Certificate of Title No. F-16558 on March 17, 1975. In 1978, Flora Campano entered into possession of the property, held the owner’s duplicate title, and began paying realty taxes, asserting that Alido had orally sold the land to her. Alido died on September 18, 1996. On September 8, 2009, her children — Reynaldo Almendral, Maggie Almendral-Sencil, and Rodrigo Almendral — executed a Deed of Adjudication and sought to register the property in their names. Campano refused to surrender the owner’s duplicate title, prompting the heirs to file a verified petition in the Regional Trial Court to compel its surrender.

• Nature: The case is an action by the heirs of Soledad Alido to recover the owner’s duplicate of OCT No. F-16558 from Flora Campano, who claimed ownership over the covered land by virtue of an oral sale.

• Registration and the Oral Sale: On March 17, 1975, Soledad Alido registered a parcel of land in Barangay Abang-Abang, Alimodian, Iloilo, under her name and was issued OCT No. F-16558 pursuant to a free patent. In 1978, Flora Campano took possession of the land and obtained custody of the owner’s duplicate of title, alleging that Alido had orally sold the property to her.

• Acts of Ownership by Campano: From 1978 onward, Campano possessed the property peacefully, paid the realty taxes in her own name, and kept the owner’s duplicate title. Alido never disturbed Campano’s possession or demanded the return of the title until Alido’s death in 1996.

• Death of Alido and Heirs’ Action: Alido died on September 18, 1996, leaving as heirs Reynaldo Almendral, Maggie Almendral-Sencil, and Rodrigo Almendral. On September 8, 2009, the heirs executed a Deed of Adjudication over the property and sought to register it in their names. Campano refused to surrender the owner’s duplicate title. On May 31, 2010, the heirs filed a verified petition in the RTC to compel its surrender.

• Lower Court Findings: The RTC found no written deed of sale and concluded that an oral sale of real property is void; it ordered Campano to surrender the title. The CA found that the oral sale was executed and valid between the parties, as Campano had taken possession, held the title, and paid taxes since 1978, but declared the sale void because it occurred within the five-year prohibitory period after the free patent issuance. The CA nonetheless dismissed the petition on the ground of laches, noting the 32-year delay before the heirs asserted any right.

• Indefeasibility of Torrens Title: Petitioners argued that OCT No. F-16558 is indefeasible, incontrovertible, and imprescriptible, and cannot be defeated by adverse possession or prescription. As registered owners under the Torrens system, they were entitled to recover the owner’s duplicate title from respondent.

• Absence of Written Sale: Petitioners maintained that respondent had no document to prove the alleged sale, and an oral sale of real property is invalid. They insisted that the delivery of the certificate of title did not create a valid sale.

• Inapplicability of Laches: Petitioners contended that applying laches would perpetrate an injustice because a certificate of title is proof of ownership that cannot be overcome by adverse possession or acquisitive prescription; thus, the action to recover the title should not be barred.

• Laches and Unreasonable Delay: Respondent countered that petitioners’ action was barred by laches because she had possessed the land in the concept of an owner for more than three decades with the explicit knowledge of Alido and her heirs, who took 32 years to act.

• Validity of Executed Oral Sale: Respondent argued that the fact the sale was not embodied in a public document did not render it void; the sale had been executed as shown by her possession, payment of taxes, and custody of the title. She highlighted that Alido and her heirs stopped paying realty taxes after the sale, and petitioners presented no proof to dispute the transaction.

• Validity of Sale: Whether there was a valid sale of real property between Soledad Alido and Flora Campano.

• Laches: Whether petitioners’ action had been barred by laches.

• Validity of Sale: The oral sale of the property was valid and binding between the parties as an executed contract, but it was void ab initio because it was entered into within the five-year prohibitory period from the issuance of the free patent. Article 1358 of the Civil Code requires sales of real property to be in a public instrument, but non-observance does not affect the intrinsic validity of the contract; the form is for evidentiary convenience, not for validity. The Statute of Frauds under Article 1403(2) renders an oral sale unenforceable, not void, and the Statute does not apply to contracts that have been totally or partially executed. Here, the sale was executed: Campano had possessed the land, held the owner’s duplicate title, and paid realty taxes since 1978 without objection from Alido, indicating consummation of the transaction.

  Nevertheless, the sale was void because it contravened the five-year prohibition on the alienation of lands acquired through free patent under the Public Land Act. Alido sold the property in 1978, only three years after the patent was issued on March 17, 1975. A sale made in violation of this prohibition is void and produces no legal effect. Under Article 1412(1) of the Civil Code, the parties to a void contract who are equally at fault ordinarily cannot demand recovery from each other (in pari delicto). However, the doctrine does not apply where public policy is advanced by allowing the grantee to recover, as in the case of homestead or free patent lands. The property must be returned to the heirs of the grantee, while the buyer is entitled to recover the purchase price and interest, with the fruits of the land potentially compensating the interest.

• Laches: Laches cannot bar an action to declare the nullity of a void contract. The action or defense for declaration of the inexistence of a contract does not prescribe under Article 1410 of the Civil Code. Because the sale was void ab initio, petitioners’ right to challenge it was imprescriptible and laches, a doctrine of equity, could not prevail over a positive statutory mandate. The heirs, as successors-in-interest of Alido, validly asserted their right to recover the property despite the lapse of time.

• Executed oral sale of real property — An oral sale of real property is not void; the failure to observe the form required by Article 1358 of the Civil Code does not affect the validity of the transaction but only its efficacy. The Statute of Frauds under Article 1403(2) merely renders an unexecuted oral contract unenforceable by action; if the contract has been totally or partially executed, the Statute does not apply, and the sale is valid and binding between the parties. Indicators of execution include the buyer’s possession, payment of realty taxes, and custody of the certificate of title without objection from the seller.

• Five-year prohibition on alienation of free patent lands — Lands acquired through free patent cannot be alienated or encumbered within five years from the date of issuance of the patent. Any sale made in violation of this prohibition is void ab initio and produces no legal effect. The law regards the original grantee as the rightful owner, subject to escheat proceedings by the State.

• Inapplicability of in pari delicto to void sales of homestead/free patent lands — The doctrine of in pari delicto under Article 1412(1) of the Civil Code does not apply to the illegal sale of a homestead or free patent land made within the prohibitory period. Public policy underlying the Public Land Act — to preserve the land for the grantee’s home and cultivation — allows the grantee or his heirs to recover the property, and the buyer is entitled only to reimbursement of the purchase price and interest.

• Laches cannot bar an action to declare a void contract — Laches is a doctrine of equity and cannot be invoked to resist the enforcement of an imprescriptible legal right. Since an action to declare the nullity of a void contract does not prescribe under Article 1410 of the Civil Code, laches cannot defeat it. A positive statutory provision prevails over abstract equitable considerations.

• “The Statute of Frauds … applies only to executory contracts and not to those which have been executed either fully or partially. … The purpose of the Statute is to prevent fraud and perjury in the enforcement of obligations depending … on the unassisted memory of witnesses …”

• “While the Statute of Frauds aim to safeguard the parties to a contract from fraud or perjury, its non-observance does not adversely affect the intrinsic validity of their agreement. The form prescribed by law is for evidentiary purposes, non-compliance of which does not make the contract void or voidable, but only renders the contract unenforceable by any action.”

• “Laches is a doctrine in equity and our courts are basically courts of law and not courts of equity. … The positive mandate of Art. 1410 of the New Civil Code conferring imprescriptibility to actions for declaration of the inexistence of a contract should preempt and prevail over all abstract arguments based only on equity.”

• “As above-mentioned, a sale of a parcel of land in violation of the five-year prohibition on the alienation of land acquired via a free patent application is void and produces no legal effect. … petitioners’ right to challenge the sale … cannot be barred by laches.”

• The Estate of Pedro C. Gonzales v. The Heirs of Marcos Perez, G.R. No. 175433, December 4, 2009 — Cited for the rule that failure to observe the form required by Article 1358 does not invalidate contracts; the form is merely for convenience and an oral sale of real property is valid and binding between the parties.

• Swedish Match, AB v. Court of Appeals, G.R. No. 128120, December 20, 2004 — Expounded on the purpose and effect of the Statute of Frauds; non-compliance renders the contract unenforceable, not void, and the Statute is inapplicable to executed contracts.

• Heirs of Simplicio Santiago v. Heirs of Mariano E. Santiago, G.R. No. 151440, February 17, 2003 — Cited for the proposition that tax declarations and payment of realty taxes are good indicia of possession in the concept of owner and evidence of a claim of title.

• Spouses Maltos v. Heirs of Eusebio Borromeo, G.R. No. 195839, July 1, 2015 — Applied the exception to in pari delicto in the sale of homestead/free patent land; the property must be returned to the grantee’s heirs and the buyer is entitled to recover the purchase price.

• Heirs of Ingjug-Tiro v. Spouses Casals, G.R. No. 134718, February 26, 2001 — Held that laches cannot prevail over the imprescriptibility of actions to declare the nullity of a void contract; equity cannot override statutory law.

• Tingalan v. Spouses Melliza, G.R. No. 176913, April 15, 2015 — Applied the same rule that upon annulment of a void sale of free patent land, the land returns to the grantee’s heirs, and the purchaser may recover the purchase price and interest; remanded for factual determination of the amounts.

• Article 1356, Civil Code — Contracts are obligatory in whatever form they may have been entered into, provided all essential requisites for their validity are present; reinforces that form is not an element of validity.

• Article 1358, Civil Code — Enumerates acts and contracts, including sales of real property, which must appear in a public instrument; applied as a convenience rule, non-compliance does not affect validity.

• Article 1403(2), Civil Code (Statute of Frauds) — Requires that an agreement for the sale of real property be evidenced by a writing to be enforceable; held inapplicable because the sale was completely executed.

• Article 1405, Civil Code — Provides that contracts infringing the Statute of Frauds are ratified by failure to object to oral evidence or by acceptance of benefits; noted to underscore that the statute concerns enforceability, not validity.

• Article 1412(1), Civil Code (In pari delicto) — Provides that where both parties are at fault in a void contract, neither may recover; held inapplicable because public policy favors recovery by the grantee of free patent land.

• Article 1416, Civil Code — Allows recovery of what has been paid or delivered when the agreement is not illegal per se but merely prohibited, and the prohibition is designed for the protection of the plaintiff, if public policy is enhanced.

• Five-year prohibition under the Public Land Act (Commonwealth Act No. 141, Section 118) — Lands acquired under free patent cannot be alienated or encumbered within five years from the date of the patent; any sale in violation is void and produces no effect, with the land reverting to the grantee.

Carpio, (Chairperson), Perlas-Bernabe, Caguioa, and Lazaro-Javier, JJ., concurred.