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PHILIPPINE NATIONAL BANK v. HEIRS OF ESTANISLAO MILITAR

FACTS:

The case involves the heirs of Estanislao Militar who were co-owners of Lot Nos. 3011 and 3017. Different heirs sold their shares to various parties but continued to occupy a portion of the lots until their deaths. Four heirs executed a sale of the lots to the Jalbuna spouses in 1975, resulting in the cancellation of titles and the issuance of new ones. The lots were subdivided and sold to other parties. The surviving heirs filed a complaint for reconveyance of title, annulment of sale, cancellation of titles, and damages against the Jalbuna spouses, the PNB, and the Lucero spouses. The trial court dismissed the complaint, but the Court of Appeals reversed the decision and ordered the reconveyance of the properties to the original owners. The main issues are whether all indispensable parties were included, whether PNB and the Lucero spouses were mortgagee and purchasers in good faith, and whether the action for reconveyance has prescribed or is barred by laches.

ISSUES:

  1. Whether a co-heir is an indispensable party in an action for reconveyance of title.

  2. Whether the heirs of a deceased co-owner have a cause of action in an action for reconveyance.

  3. Whether PNB and the spouses Lucero are purchasers in good faith.

  4. Whether the action for reconveyance has prescribed.

  5. Whether the defense of laches can be successfully invoked.

RULING:

  1. A co-heir is not an indispensable party in an action for reconveyance of title. The ultimate relief sought in the action is the reconveyance of titles to their rightful owners, in this case, the estates of the deceased co-owners. The interests of the co-heirs in the controversy or subject matter are distinct and divisible from each other and from the interests of the other parties. Thus, a co-heir may bring such action without necessarily joining all the other co-heirs as co-plaintiffs because the suit is deemed to be instituted for the benefit of all.

  2. The heirs of a deceased co-owner have a cause of action in an action for reconveyance. When the shares of the deceased co-owners were inherited by another co-owner who predeceased them, the heirs of the deceased co-owner have an interest in the inherited shares and the right to institute an action for reconveyance.

  3. PNB and the spouses Lucero are not purchasers in good faith. PNB failed to exercise due diligence required of a banking institution in investigating the rights of those in possession of the property. The spouses Lucero also failed to verify the status of the property they were buying by inquiring from the possessors thereof.

  4. The action for reconveyance has not prescribed. The complaint filed amounts to an action for declaration of nullity of a void contract, which does not prescribe.

  5. The defense of laches cannot be successfully invoked. The positive mandate of the Civil Code granting imprescriptibility to actions or defense for the declaration of the inexistence of a contract preempts arguments based only on equity.

PRINCIPLES:

  • An indispensable party is one whose interest is so inextricably intertwined with the other parties' that his legal presence as a party in the proceeding is necessary for a final determination of the case.

  • A party is not indispensable if his interest in the controversy or subject matter is distinct and divisible from the interest of the other parties and will not necessarily be prejudiced by a judgment that does complete justice to the parties in court.

  • The determination of whether a party is indispensable or not can only be determined by the facts and context of the particular suit or litigation.

  • The ultimate relief sought in an action for reconveyance is the reconveyance of titles to their rightful owners, which may include the estates of deceased co-owners.

  • In an action for reconveyance, a co-heir may bring the action without joining all the other co-heirs as co-plaintiffs because the suit is deemed to be instituted for the benefit of all.

  • The heirs of a deceased co-owner have an interest in the inherited shares and the right to institute an action for reconveyance.

  • The burden of proving the status of a purchaser in good faith and for value lies upon the party asserting that status.

  • A buyer of real property in possession of persons other than the seller should investigate the rights of those in possession to be considered a buyer in good faith.

  • Banking institutions are expected to exercise more care and prudence than private individuals in their dealings, even involving registered lands.

  • An action for reconveyance on the ground of a fictitious deed of sale is an action for declaration of nullity, which does not prescribe.

  • Laches cannot be set up to resist the enforcement of an imprescriptible legal right.

  • Certificates of title are merely confirmatory or record existing and vested titles and cannot protect a usurper or be used for fraud.