G.R. No.

224678, July 03, 2018

SPOUSES JOSE MANUEL AND MARIA ESPERANZA RIDRUEJO STILIANOPOULOS, Petitioners, v. THE

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated March 16, 2016 and the Resolution 3 dated
May 19, 2016 of the Court of Appeals (CA) in CA-G.R. CV No. 104207, which partially reversed and set aside the
Decision4 dated August 19, 2013 and the Order5 dated April 30, 2014 of the Regional Trial Court of Legazpi City,
Albay, Branch 2 (RTC) in Civil Case No. 10805, and accordingly, held that the claim of petitioners Spouses Jose
Manuel (Jose Manuel) and Maria Esperanza Ridruejo Stilianopoulos (collectively; petitioners) against the Assurance
Fund is already barred by prescription.

The Facts

This case stemmed from a Complaint 6 for Declaration of Nullity of Transfer Certificate of Title (TCT) No. 42486,
Annulment of TCT No. 52392 and TCT No. 59654, and Recovery of Possession of Lot No. 1320 with Damages
(subject complaint) filed by petitioners against respondents The Register of Deeds for Legazpi City (RD-Legazpi) and
The National Treasurer (National Treasurer), as well as Jose Fernando Anduiza (Anduiza), Spouses Rowena Hua-
Amurao (Rowena) and Edwin Amurao (collectively; Spouses Amurao), and Joseph Funtanares Co, et al. (the Co
Group) before the RTC.

Petitioners alleged that they own a 6,425-square meter property known as Lot No. 1320, as evidenced by TCT No.
134507 in the name of Jose Manuel, who is a resident of Spain and without any administrator of said property in the
Philippines.8 On October 9, 1995, Anduiza caused the cancellation of TCT No. 13450 and issuance of TCT No.
424869 in his name.10

Thereafter, Anduiza mortgaged Lot No. 1320 to Rowena. 11 As a result of Anduiza's default, Rowena foreclosed the
mortgage, and consequently, caused the cancellation of TCT No. 42486 and issuance of TCT No. 52392 12 in her name
on July 19, 2001.13 On April 15, 2008, Rowena then sold Lot No. 1320 to the Co Group, resulting in the cancellation
of TCT No. 52392 and issuance of TCT No. 5965414 in the latter's name.15

According to petitioners, their discovery of the aforesaid transactions only on January 28, 2008 prompted them to
file a complaint for recovery of title on May 2, 2008.16 However, such complaint was dismissed for petitioners' failure
to allege the assessed value of Lot No. 1320. Thus, they filed the subject complaint on March 18, 2009, praying that:
(a) TCT Nos. 42486, 52392, and 59654 in the respective names of Anduiza, Rowena, and the Co Group be annulled;
(b) all defendants be held solidarily liable to pay petitioners damages and attorney's fees; and (c) the RD-Legazpi
and the National Treasurer, through the Assurance Fund, be ordered to pay petitioners' claims should the defendants
be unable to pay the same in whole or in part. 17 In support of their complaint, petitioners claimed that they were
deprived of the possession and ownership of Lot No. 1320 without negligence on their part and through fraud, and in
consequence of errors, omissions, mistakes, or misfeasance of officials and employees of RD-Legazpi.18

In their defense, Spouses Amurao and the Co Group both maintained that they purchased Lot No. 1320 in good faith
and for value, and that petitioners' cause of action has already prescribed, considering that they only had ten (10)
years from the issuance of TCT No. 42486 in the name of Anduiza on October 9, 1995 within which to file a
complaint for recovery of possession. 19 For their part,20 the RD-Legazpi and the National Treasurer also invoked the
defense of prescription, arguing that the right to bring an action against the Assurance Fund must be brought within
six (6) years from the time the cause of action occurred, or in this case, on October 9, 1995 when Anduiza caused
the cancellation of petitioners' TCT over Lot No. 1320.21 Notably, Anduiza did not file any responsive pleading despite
due notice.22

The RTC Ruling

In a Decision 23 dated August 19, 2013 the RTC: (a) dismissed the case against Spouses Amurao and the Co Group as
they were shown to be purchasers in good faith and for value; and (b) found Anduiza guilty of fraud in causing the
cancellation of petitioners' TCT over Lot No. 1320, and thus, ordered him to pay petitioners the amount of
P5,782,500.00 representing the market value of Lot No. 1320, as well as P10,000.00 as exemplary damages; and
(c) held the National Treasurer, as custodian of the Assurance Fund, subsidiarily liable to Anduiza's monetary liability
should the latter be unable to fully pay the same.24

Prefatorily, the RTC characterized the subject complaint filed on March 18, 2009 as one for reconveyance based on
an implied trust, which is subject to extinctive prescription of ten (10) years ordinarily counted from the time of the
repudiation of the trust, i.e., when Anduiza registered TCT No. 42486 in his name on October 9, 1995. This
notwithstanding, the RTC found that since: (a) petitioners are residing in Spain; (b) they are in possession of the
owner's duplicate copy of TCT No. 13450 registered in their names; and (c) Anduiza's act of fraudulently cancelling
their title was unknown to – if not effectively concealed from – them, the ten (10)-year prescriptive period should be
reckoned from their actual discovery of the fraud in 2008.25 As such, petitioners' complaint for reconveyance – as
well as their claim against the Assurance Fund which has a six (6)-year prescriptive period – has not prescribed.26
Anent the merits of the case, the RTC found that Anduiza had indeed acquired title over Lot No. 1320 in bad faith
and through fraud – a fact which is further highlighted by his failure to refute petitioner's allegations against him on
account of his omission to file a responsive pleading despite due notice.27 This notwithstanding, the RTC held that
petitioners could no longer recover Lot No. 1320 from Spouses Amurao and/or the Co Group as the latter are
innocent purchasers for value and in good faith, absent any evidence to the contrary. As such, it is only proper that
Anduiza be made to pay compensatory damages corresponding to the value of the loss of property, as well as
exemplary damages as stated above.28

Finally, the RTC found that Anduiza alone could not have perpetrated the fraud without the active participation of the
RD-Legazpi. It then proceeded to point out that the evidence on record clearly established the irregularities in the
cancellation of petitioners' title and the issuance of Anduiza's title, all of which cannot be done successfully without
the complicity of the RD-Legazpi. Hence, the Assurance Fund may be held answerable for the monetary awards in
favor of petitioners, should Anduiza be unable to pay the same in whole or in part.29

Aggrieved, petitioners moved for reconsideration,30 while the RD Legazpi and the National Treasurer moved for a
partial reconsideration;31 both of which were denied in an Order32 dated April 30, 2014. Thus, they filed their
respective notices of appeal.33 However, in an Order34 dated June 11, 2014, petitioners' notice of appeal was denied
due course due to their failure to pay the appellate docket and other lawful fees. 35 Consequently, the Co Group
moved for a partial entry of judgment, 36 which the RTC granted in an Order 37 dated July 22, 2014. As such, only the
appeal of the RD-Legazpi and the National Treasurer questioning the subsidiary liability of the Assurance Fund was
elevated to the CA.38