FACTS:

The dispute in this case revolves around a piece of land in Barangay Abang-Abang, Alimondian, Iloilo, covered by Original Certificate of Title (OCT) No. F-16558 and registered under the name of Soledad Alido. The respondent, Flora Campano, claimed that Alido sold the property to her and she took possession of the land and the owner's duplicate of OCT No. F-16558 in 1978. However, after Alido's death in 1996, her heirs executed a Deed of Adjudication and sought to register the property in their names. The respondent refused to surrender the owner's duplicate of the title, prompting the heirs to file a petition before the Regional Trial Court (RTC) for its surrender. The RTC ruled in favor of the petitioners and ordered the respondent to surrender the owner's duplicate of the title. The respondent appealed to the Court of Appeals (CA), which reversed the RTC decision and dismissed the petition. The CA held that the sale between Alido and the respondent was void due to a violation of the terms of Alido's free patent application. The CA also found that the petitioners' action was barred by laches. Dissatisfied with the CA decision, the petitioners filed a Petition for Review on Certiorari, raising the issues of the validity of the sale and the application of laches.

ISSUES:

1. Whether the validity of OCT No. F-16558, a Torrens title, can be challenged by the respondent based on an oral sale of the property.

2. Whether the lack of a written deed of sale renders the oral sale of real property between the respondent and Alido unenforceable.

3. Whether the Statute of Frauds applies to executed contracts.

4. Whether the oral sale between respondent and Alido had been executed.

5. Whether the sale of the property within the five-year prohibition period is void.

6. Whether the doctrine of in pari delicto applies in the present case.

7. Whether the property should be conveyed to the respondent.

8. Whether or not laches can bar the petitioners' right to challenge the sale between Alido and respondent

9. Whether or not the respondent can claim the purchase price and interest after the annulment of the sale

10. Whether or not the Court of Appeals correctly ruled that respondent Soledad Alido has a legal basis to claim damages against petitioner.

11. Whether or not the heirs of Soledad Alido can be held liable for the damages awarded.

RULING:

1. The validity of OCT No. F-16558 was never questioned, and therefore, the indefeasibility of the title is not at issue. The respondent is asserting ownership based on an oral sale, not on adverse possession or acquisitive prescription. The Court ruled that the oral sale of real property is valid and binding among the parties, even though Article 1358 of the Civil Code requires such sales to be in a written public document.

2. The lack of a written deed of sale does not render the oral sale of real property between the respondent and Alido unenforceable. Non-compliance with the requirement of a written contract under the Statute of Frauds only renders the contract unenforceable by any action. The form prescribed by law is for evidentiary purposes only, and if the parties permit the contract to be proved without objection, it is just as binding as if the Statute had been complied with.

3. The Statute of Frauds does not apply to executed contracts, as its purpose is to prevent fraud and perjury in contracts that are difficult to prove without a written instrument. It only applies to executory contracts where there is no palpable evidence of the intention of the parties.

4. The oral sale between respondent and Alido had been executed. The respondent peacefully possessed the property, had custody of the original certificate of title, and paid the real property taxes. Possession, improvements, and payment of taxes are indicators that an oral sale of a piece of land had been performed or executed.

5. Yes, the sale of the property within the five-year prohibition period is void.

6. No, the doctrine of in pari delicto does not apply in the present case.

7. Yes, the property should be conveyed to the respondent.

8. Laches does not bar the petitioners' right to challenge the sale between Alido and respondent. Laches cannot prevail over the law that actions to assail a void contract are imprescriptible, especially if the contract is void ab initio. The right to challenge a void contract is based on equity and is not subject to prescription or laches.

9. After the annulment of the sale, the respondent can claim the purchase price and interest. While the property sold in violation of the prohibition on alienation may be recovered by the original owner, the purchaser is entitled to recover the purchase price and interest.

10. The Court of Appeals erred in ruling that respondent Soledad Alido has a legal basis to claim damages against petitioner.

11. The heirs of Soledad Alido cannot be held liable for the damages awarded.

PRINCIPLES:

• A Torrens Title is indefeasible and cannot be assailed collaterally except in a direct proceeding. Ownership supported by a certificate of title cannot be defeated by adverse possession or prescription.

• Contracts for the sale of real property must generally be in a written public document under Article 1358 of the Civil Code. However, failure to comply with this requirement does not render the contract invalid, but merely affects its efficacy. The contract remains valid and binding among the parties.

• The Statute of Frauds, which requires certain contracts to be in writing, applies only to executory contracts and not to those that have been executed either fully or partially.

• The lack of a written contract under the Statute of Frauds does not render a contract void or voidable, but only unenforceable by any action.

• The purpose of the Statute of Frauds is to prevent fraud and perjury in contracts that are difficult to prove without a written instrument.

• The Statute of Frauds does not apply to executed contracts, as its purpose is not applicable.

• Possession, improvements, and payment of taxes may serve as indicators that an oral sale of a piece of land had been performed or executed.

• Contracts that transgress the five-year prohibition on alienation of lands acquired through free patent are void.

• The doctrine of in pari delicto, which holds that parties in a void contract who are of equal fault cannot demand recovery from the other, does not apply when the agreement is merely prohibited and public policy is enhanced by allowing relief against the transaction.

• The doctrine of in pari delicto does not apply in the sale of a homestead that has been illegally sold in violation of the homestead law.

• In cases involving the sale of a property covered by the five-year prohibitory period, the property should revert to the grantee in the absence of any reversion proceedings instituted by the State.

• Laches may be invoked to bar a party's claim if there is unreasonable and unexplained delay in asserting a right, causing prejudice to the other party.

• Laches is the failure or neglect to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it has abandoned or declined to assert it. It is a creation of equity and cannot prevail over the law that actions to assail a void contract are imprescriptible.

• Actions for reconveyance of property based on the fact that the conveyance complained of was null and void ab initio do not prescribe. Laches cannot be invoked in cases where a contract is declared void from its inception.

• A sale of a parcel of land in violation of the prohibition on alienation of land acquired via a free patent application is considered void and produces no legal effect.

• After the annulment of a sale in violation of the prohibition on alienation, the purchaser is entitled to recover the purchase price and interest.

• The court must carefully evaluate the evidence presented and determine whether the claimant has a legal basis to claim damages.

• The liability for damages is personal and cannot be transferred to the heirs of the deceased.