Civil Law,  Legally Yours

Heirs of ARRA vs. Development Bank of the Philippines

Heirs of ARRA vs. Development Bank of the Philippines

G.R. No. 173441 December 3, 2009

FACTS:

When the late Emilio Dalope died, he left a 589-square meter untitled lotin Sta. Barbara, Pangasinan, to his wife, Felisa Dalope (Felisa), and their nine children, one of whom was Rosa Dalope-Funcion. To enable Rosa and her husband Antonio Funcion (the Funcions) to get a loan from respondent Development Bank of the Philippines (DBP), Felisa sold the whole lot to the Funcions. With the deed of sale in their favor and the tax declaration transferred in their names, the Funcions mortgaged the lot with the DBP. The Funcions failed to pay their loan, the DBP foreclosed the mortgage on the lot and consolidated ownership in its name.

Four years later DBP conditionally sold the lot to Sofia Quirong for the price of P78,000.00. In their contract of sale, Sofia Quirong waived any warranty against eviction. The contract provided that the DBP did not guarantee possession of the property and that it would not be liable for any lien or encumbrance on the same.

Two months after the sale or on November 28, 1983 Felisa and her eight children (collectively, the Dalopes) filed an action for partition and declaration of nullity of documents with damages against the DBP and the Funcions. Despite the suit, DBP executed a deed of absolute sale of the subject lot in Sofia Quirong’s favour on December 1974. The deed of sale carried substantially the same waiver of warranty against eviction and of any adverse lien or encumbrance.

In May 1975, the heirs of Quirong asked the RTC to award the lot to them and, should it instead be given to the Dalopes, to allow the Quirong heirs to recover the lot’s value from the DBP. But, because the heirs failed to file a formal offer of evidence, the trial court did not rule on the merits of their claim to the lot and, alternatively, to relief from the DBP. In December 1992, the RTC rendered a decision saying that the sale between DBP and Quirong was valid only insofar as the shares of  Felisa and Rosa Funcion’s in the property. DBP failed to appeal. In June 1998 the Quirong heirs filed the present action against the DBP for rescission of the contract of sale between Sofia Quirong, their predecessor, and the DBP and praying for the reimbursement of the price of P78,000.00 that she paid the bank plus damages. The heirs alleged that they were entitled to the rescission of the sale because the decision in the earlier civil case stripped them of nearly the whole of the lot that Sofia Quirong, their predecessor, bought from the DBP. The DBP filed a motion to dismiss the action on the ground of prescription and res judicata. The appealed decision dismissed plaintiff’s actions on the ground of prescription based on Art. 1389 of the NCC. Hence this petition

ISSUE:

Whether or not the Quirong heirs’ action for rescission of respondent DBP’s sale of the subject property to Sofia Quirong was already barred by prescription

HELD:

Yes, it is barred by prescription since the heirs’ action is based on “rescission” and not “upon a written contract.” Hence, the 4-year prescription period applies.

The cause of action of the Quirong heirs stems from their having been ousted by final judgment from the ownership of the lot that the DBP sold to Sofia Quirong, their predecessor, in violation of the warranty against eviction that comes with every sale of property or thing as provided in Art. 1548 of the NCC. With the loss of 80% of the subject lot to the Dalopes by reason of the judgment of the RTC in Civil Case D-7159, the Quirong heirs had the right to file an action for rescission against the DBP pursuant to the provision of Article 1556 of the Civil Code.

The action for rescission provided for in Art. 1556, which is based on a subsequent economic loss suffered by the buyer, was precisely the action that the Quirong heirs took against the DBP. Consequently, it prescribed as Article 1389 provides in four years from the time the action accrued. Since it accrued on January 28, 1993 when the decision in Civil Case D-7159 became final and executory and ousted the heirs from a substantial portion of the lot, the latter had only until January 28, 1997 within which to file their action for rescission. Given that they filed their action on June 10, 1998, they did so beyond the four-year period.

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