Roque vs Aguada

Facts
The property subject of this case is a parcel of land with an area of 20,862 square meters (sq.m.), located in
Sitio Tagpos, Barangay Tayuman, Binangonan, Rizal, known as Lot 18089. On July 21, 1977, petitioners-spouses
Jose C. Roque and Beatriz dela Cruz Roque (Sps. Roque) and the original owners of the then unregistered Lot
18089 namely, Velia R. Rivero (Rivero), Magdalena Aguilar, Angela Gonzales, Herminia R. Bernardo,
Antonio Rivero, Araceli R. Victa, Leonor R. Topacio, and Augusto Rivero (Rivero, et al.) executed a Deed of
Conditional Sale of Real Property (1977 Deed of Conditional Sale) over a 1,231-sq.m. portion of Lot 18089
(subject portion) for a consideration of P30,775.00. The parties agreed that Sps. Roque shall make an initial payment
of P15,387.50 upon signing, while the remaining balance of the purchase price shall be payable upon the registration
of Lot 18089, as well as the segregation and the concomitant issuance of a separate title over the subject portion in
their names. After the deed's execution, Sps. Roque took possession and introduced improvements on the
subject portion which they utilized as a balut factory.
On August 12, 1991, Fructuoso Sabug, Jr. (Sabug, Jr.), former Treasurer of the National Council of Churches in
the Philippines (NCCP), applied for a free patent over the entire Lot 18089 and was eventually issued Original
Certificate of Title (OCT) No. M-5955 in his name on October 21, 1991. On June 24, 1993, Sabug, Jr. and Rivero,
in her personal capacity and in representation of Rivero, et al., executed a Joint Affidavit (1993 Joint Affidavit),
acknowledging that the subject portion belongs to Sps. Roque and expressed their willingness to segregate the
same from the entire area of Lot 18089.
On December 8, 1999, however, Sabug, Jr., through a Deed of Absolute Sale (1999 Deed of Absolute Sale),
sold Lot 18089 to one Ma. Pamela P. Aguado (Aguado) for P2,500,000.00, who, in turn, caused the cancellation
of OCT No. M-5955 and the issuance of Transfer Certificate of Title (TCT) No. M-96692 dated December 17,
1999 in her name.
Thereafter, Aguado obtained an P8,000,000.00 loan from the Land Bank of the Philippines (Land Bank)
secured by a mortgage over Lot 18089. When she failed to pay her loan obligation, Land Bank commenced
extra-judicial foreclosure proceedings and eventually tendered the highest bid in the auction sale. Upon Aguado's
failure to redeem the subject property, Land Bank consolidated its ownership, and TCT No. M-115895 13 was issued
in its name on July 21, 2003.
On June 16, 2003, Sps. Roque filed a complaint for reconveyance, annulment of sale, deed of real estate
mortgage, foreclosure, and certificate of sale, and damages before the RTC, docketed as Civil Case No. 03-022,
against Aguado, Sabug, Jr., NCCP, Land Bank, the Register of Deeds of Morong, Rizal, and Sheriff Cecilio U. Pulan,
seeking to be declared as the true owners of the subject portion which had been erroneously included in the sale
between Aguado and Sabug, Jr., and, subsequently, the mortgage to Land Bank, both covering Lot 18089 in its
entirety.

NCCP and Sabug, Jr. denied any knowledge of the 1977 Deed of Conditional Sale through which the subject
portion had been purportedly conveyed to Sps. Roque.
For her part, Aguado raised the defense of an innocent purchaser for value as she allegedly derived her title
(through the 1999 Deed of Absolute Sale) from Sabug, Jr., the registered owner in OCT No. M-5955, covering Lot
18089, which certficate of title at the time of sale was free from any lien and/or encumbrances. She also claimed that
Sps. Roque's cause of action had already prescribed because their adverse claim was made only on April 21, 2003,
or four (4) years from the date OCT No. M-5955 was issued in Sabug, Jr.'s name on December 17, 1999.
On the other hand, Land Bank averred that it had no knowledge of Sps. Roque's claim relative to the
subject portion, considering that at the time the loan was taken out, Lot 18089 in its entirety was registered in
Aguado's name and no lien and/or encumbrance was annotated on her certificate of title.

Meanwhile, on January 18, 2005, NCCP filed a separate complaint also for declaration of nullity of
documents and certificates of title and damages, docketed as Civil Case No. 05-003. It claimed to be the real
owner of Lot 18089 which it supposedly acquired from Sabug, Jr. through an oral contract of sale in the early
part of 1998, followed by the execution of a Deed of Absolute Sale on December 2, 1998 (1998 Deed of Absolute
Sale). NCCP also alleged that in October of the same year, it entered into a Joint Venture Agreement (JVA)
with Pilipinas Norin Construction Development Corporation (PNCDC), a company owned by Aguado's
parents, for the development of its real properties, including Lot 18089, into a subdivision project, and as such,
turned over its copy of OCT No. M-5955 to PNCDC.
Upon knowledge of the purported sale of Lot 18089 to Aguado, Sabug, Jr. denied the transaction and alleged
forgery. Claiming that the Aguados and PNCDC conspired to defraud NCCP, it prayed that PNCDC's
corporate veil be pierced and that the Aguados be ordered to pay the amount of P38,092,002.00 representing
the unrealized profit from the JVA.
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 Moreover, NCCP averred that Land Bank failed to exercise the diligence required to ascertain the true
owners of Lot 18089. Hence, it further prayed that: (a) all acts of ownership and dominion over Lot 18089 that the
bank might have done or caused to be done be declared null and void; (b) it be declared the true and real owners of
Lot 18089; and (c) the Register of Deeds of Morong, Rizal be ordered to cancel any and all certificates of title
covering the lot, and a new one be issued in its name.

In its answer, Land Bank reiterated its stance that Lot 18089 was used as collateral for the P8,000,000.00
loan obtained by the Countryside Rural Bank, Aguado, and one Bella Palasaga. There being no lien and/or
encumbrance annotated on its certificate of title, i.e., TCT No. M-115895, it cannot be held liable for NCCP's
claims.

RTC Ruling
The RTC rendered a Decision dated July 8, 2008, dismissing the complaints of Sps. Roque and NCCP.
Moreover, the RTC ruled that Sps. Roque's action for reconveyance had already prescribed, having been filed ten
(10) years after the issuance of OCT No. M-5955.

CA Ruling
The CA did not order its reconveyance or segregation because of Sps. Roque's failure to pay the remaining
balance of the purchase price. Hence, it only directed Land Bank to respect Sps. Roque's possession with the option
to appropriate the improvements introduced thereon upon payment of compensation. As regards NCCP, the CA found
that it failed to establish its right over Lot 18089 for the following reasons: (a) the sale to it of the lot by Sabug, Jr.
was never registered; and (b) there is no showing that it was in possession of Lot 18089 or any portion thereof
from 1998. Thus, as far as NCCP is concerned, Land Bank is a mortgagee/purchaser in good faith.

Sps. Roque maintain that they are lawful owners of the subject portion despite having possessed the same since
the execution of the 1977 Deed of Conditional Sale, sufficient for acquisitive prescription to set in in their favor. To
bolster their claim, they also point to the 1993 Joint Affidavit whereby Sabug, Jr. dnd Rivero acknowledged their
ownership thereof. Being the first purchasers and in actual possession of the disputed portion, they assert that
they have a better right over the 1,231-sq.m. portion of Lot 18089 and, hence, cannot be ousted therefrom by Land
Bank, which was adjudged as a mortgagee/purchaser in bad faith, pursuant to Article 1544 of the Civil Code. (RSPol
Note: Sps. Roque claim ownership of the land based on the 1977 Conditional Sale and the 1993 Joint Affidavit)
In opposition, Land Bank points out that Sps. Roque's action for reconveyance had already prescribed.
Instead of traversing the arguments of Sps. Roque, NCCP, in its Comment dated December 19, 2011, advanced its
own case, arguing that the CA erred in holding that it failed to establish its claimed ownership over Lot 18089 in its
entirety. Incidentally, NCCP's appeal from the CA Decision dated May 12, 2010 was already denied by the Court, and
hence, will no longer be dealt with in this case.

SC Ruling
On Action for Reconveyance and Conditional Sale
The essence of an action for reconveyance is to seek the transfer of the property which was wrongfully or
erroneously registered in another person's name to its rightful owner or to one with a better right. Thus, it is
incumbent upon the aggrieved party to show that he has a legal claim on the property superior to that of the
registered owner and that the property has not yet passed to the hands of an innocent purchaser for value. Sps.
Roque claim that the subject portion covered by the 1977 Deed of Conditional Sale between them and Rivero, et al.
was wrongfully included in the certificates of title covering Lot 18089, and, hence, must be segregated therefrom and
their ownership thereof be confirmed. (RSPol Note: To be considered as the rightful owner in an action for
reconveyance, the party must prove that he has (1) legal claim on the property and (2) the property has not yet passed
to the hands of innocent purchaser for value.)
The Court finds that the stipulation of the 1977 Deed of Conditional Sale is actually in the nature of a
contract to sell and not one of sale contrary to Sps. Roque's belief. In this relation, it has been consistently ruled that
where the seller promises to execute a deed of absolute sale upon the completion by the buyer of the payment of the
purchase price, the contract is only a contract to sell even if their agreement is denominated as a Deed of Conditional
Sale, as in this case. Elsewise stated, in a contract to sell, ownership is retained by the vendor and is not to pass
to the vendee until full payment of the purchase price.
In Ursal v. CA, the Court held that: In contracts to sell the obligation of the seller to sell becomes demandable
only upon the happening of the suspensive condition, that is, the full payment of the purchase price by the buyer.
It is only upon the existence of the contract of sale that the seller becomes obligated to transfer the ownership of the

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thing sold to the buyer. Prior to the existence of the contract of sale, the seller is not obligated to transfer the
ownership to the buyer, even if there is a contract to sell between them.
Here, it is undisputed that Sps. Roque have not paid the final installment of the purchase price. As such,
the condition which would have triggered the parties' obligation to enter into and thereby perfect a contract of sale in
order to effectively transfer the ownership of the subject portion from the sellers (i.e., Rivero et al.) to the buyers (Sps.
Roque) cannot be deemed to have been fulfilled. Consequently, the latter cannot validly claim ownership over the
subject portion even if they had made an initial payment and even took possession of the same. (RSPol Note: Sps.
Roque cannot claim ownership on the property for failure to pay the purchase price under a contract to sell which
only transfers ownership upon full payment of purchase price; there being NO LEGAL CLAIM as first requisite, the
action for reconveyance will not prosper.)

On Not Protecting their Claim

The Court further notes that Sps. Roque did not even take any active steps to protect their claim over the
disputed portion. This remains evident from the following circumstances appearing on record: (a) the 1977 Deed of
Conditional Sale was never registered; (b) they did not seek the actual/physical segregation of the disputed
portion despite their knowledge of the fact that, as early as 1993, the entire Lot 18089 was registered in Sabug,
Jr.'s name under OCT No. M-5955; and (c) while they signified their willingness to pay the balance of the purchase
price, Sps. Roque neither compelled Rivero et al., and/or Sabug, Jr. to accept the same nor did they consign any
amount to the court, the proper application of which would have effectively fulfilled their obligation to pay the
purchase price. Instead, Sps. Roque waited 26 years, reckoned from the execution of the 1977 Deed of Conditional
Sale, to institute an action for reconveyance (in 2003), and only after Lot 18089 was sold to Land Bank in the
foreclosure sale and title thereto was consolidated in its name.
In fine, Sps. Roque failed to establish any superior right over the subject portion as against the registered owner
of Lot 18089, i.e., Land Bank, thereby warranting the dismissal of their reconveyance action, without prejudice to
their right to seek damages against the vendors, i.e., Rivero et al.
In the case of Coronel v. CA, the Court ruled: Title to the property will transfer to the buyer after
registration because there is no defect in the owner-seller's title per se, but the latter, of course, may be sued for
damages by the intending buyer.

On Double Sale
On the matter of double sales, suffice it to state that Sps. Roque's reliance 64 on Article 1544 65 of the Civil
Code has been misplaced since the contract they base their claim of ownership on is, as earlier stated, a
contract to sell, and not one of sale. In Cheng v. Genato, the Court stated the circumstances which must concur in
order to determine the applicability of Article 1544, none of which are obtaining in this case, viz:
(a) The two (or more) sales transactions in issue must pertain to exactly the same subject matter, and must be
valid sales transactions;
(b) The two (or more) buyers at odds over the rightful ownership of the subject matter must each represent
conflicting interests; and
(c) The two (or more) buyers at odds over the rightful ownership of the subject matter must each have bought
from the same seller.
(RSPol Note: There is no double sale if one buyer is under a contract to sell because there is no transfer of
ownership until full payment of price; this allows the seller to validly sell the same property to other buyers; of course,
the buyer under the conract to sell may claim damages against said seller.)

On Prescription
Finally, regarding Sps. Roque's claims of acquisitive prescription and reimbursement for the value of the
improvements they have introduced on the subject property, it is keenly observed that none of the arguments
therefor were raised before the trial court or the CA. Accordingly, the Court applies the well-settled rule that
litigants cannot raise an issue for the first time on appeal as this would contravene the basic rules of fair play and
justice. In any event, such claims appear to involve questions of fact which are generally prohibited under a Rule
45 petition.

Reyes vs Montemayor
Facts
On 18 February 1994, petitioners filed before the RTC a Complaint for Reconveyance against private
respondent and the Register of Deeds of Cavite. Petitioners alleged in their Complaint that they were the owners
of a parcel of land covered by Transfer Certificate of Title (TCT) No. T-58459 situated in Paliparan,
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Dasmarias, Cavite (subject property). They bought the subject property from the previous owner, Marciano
Cuevas (Marciano), as evidenced by a Deed of Absolute Sale dated 8 October 1976. Thereafter, Marciano
surrendered to petitioners the Owner's Duplicate Copy of TCT No. T-58459. Petitioners accordingly paid the taxes
on the sale of the subject property. However, they were unable to register the sale and effect the transfer of the
certificate of title to the subject property to their names. Petitioners claimed that they had consistently paid the
real estate taxes on the subject property since their acquisition of the same in 1976 until 1991.
In 1993, when they went to the Office of the Register of Deeds of Cavite to pay their real estate taxes for the
years 1992 and 1993, they were informed that the subject property was sold by Marciano to private respondent
on 10 November 1992, and TCT No. T-369793 covering it was issued in private respondent's name on 4 January
1993.

Petitioners asserted that private respondent was able to cause the issuance of TCT No. T-369793 in her
name by presenting a simulated and fictitious Deed of Absolute Sale dated 10 November 1992. The signatures of
the sellers, spouses Virginia (Virginia) and Marciano Cuevas (spouses Cuevas), were forged in the said Deed. Hence,
petitioners prayed for the cancellation of TCT No. T-369793 in private respondent's name; the issuance of a new
certificate of title in petitioners' names.
Private respondent averred that the subject property was offered to her for sale, but she did not disclose
who actually made the offer. She discovered that there was no adverse claim or any kind of encumbrance annotated
on the certficate of title of the spouses Cuevas covering the subject property. She had purchased the subject
property for value and in good faith and had been in possession thereof. Private respondent insisted that she
had a better title to the subject property, since she was the first registrant of its sale. Private respondent thus
prayed for the award of moral damages in the amount of not less than P100,000.00 for the mental anguish, serious
anxiety, and besmirched reputation she suffered by reason of the unjustified filing by petitioners of the case; the
award of exemplary damages in the amount of P100,000.00 for petitioners' malicious filing of the case; and the award
of attorney's fees, and costs of suit.

Testimonies for Petitioners

Marciano testified that he and his wife Virginia signed, on 8 October 1976, a Deed of Absolute Sale
covering the subject property in petitioner Emma's favor. He denied selling the subject property to any other
person, including private respondent. Marciano, when shown the Deed of Absolute Sale dated 10 November 1992,
involving the same property, in private respondent's favor, flatly stated that the signatures found therein were not his
or his wife's.
Petitioner Emma personally confirmed that Marciano sold the subject property to her in 1976. She had faithfully
paid the real property taxes on it from 1976 until 1993, when she learned that it had been registered in private
respondent's name. Upon examining the Deed of Absolute Sale dated 10 November 1992, supposedly executed by
the spouses Cuevas over the subject property in private respondent's favor, petitioner Emma observed that the
spouses Cuevas' signatures found therein appeared to have been forged. She further claimed that after finding that
the subject property had been registered in private respondent's name, she suffered from nervousness and the
aggravation of her rheumatoid arthritis. She was compelled to engage the services of a lawyer to prosecute her case
against private respondent, which could cost her P100,000.00 or more. During the cross-examination and re-direct
examination, petitioner Emma explained that she had not been able to register the subject property in her name
because of her diabetes and rheumatoid arthritis.
Carolyn introduced herself as a Senior Document Examiner in the National Bureau of Investigation (NBI),
performing, among her other duties, handwriting analysis. She found: (1) The questioned and the standard/specimen
signatures VIRGINIA M. CUEVAS were not written by one and the same person; (2) The questioned and the
standard/specimen signatures of ESCOLASTICO CUEVAS [Registrar of Deeds of Cavite] were written by one and
the same person; and (3) No definite opinion on MARCIANO CUEVAS per above stated findings no. 3.

Testimonies for Respondent

Jaime disclosed that it was Vice-Mayor Lauro Carungcong (Carungcong) of Dasmarias who supposedly
brokered the sale of the subject property, and who instructed Jaime to verify with the Register of Deeds the
existence of the Original Copy of TCT No. T-58459, and to check for any encumbrances thereon. Three weeks
thereafter, Vice-Mayor Carungcong gave Jaime a copy of the Deed of Absolute Sale dated 10 November 1992
executed by the spouses Cuevas over the subject property in private respondent's favor, and directed Jaime to
pay the obligatory taxes and to register the subject property in private respondent's name. On
cross-examination, Jaime admitted that he had never met nor was he acquainted with either of the spouses Cuevas,
the alleged vendors of the subject property.

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 Angelina, employed as a Deeds Examiner in the Register of Deeds of Cavite, was tasked, as part of her duties,
to examine the documents related to the transfer of the subject property in private respondent's name before issuing
the corresponding certificate of title. However, she admitted during cross-examination that she was not in a position
to determine the authenticity of the documents presented to her.

RTC Ruling
RTC dismissed the case and declared that the true and lawful owner of the subject property as described in, and
covered by, TCT No. T-369793 is Irene Montemayor. The RTC noted that Marciano testified that the signatures
found in the Deed of Absolute Sale dated 8 October 1976 and the Kasunduan sa Bilihan ng Lupa 17 dated 15
June 1971 were Virginia's; but the NBI Report stated that "the questioned and the standard/specimen
signatures VIRGINIA M. CUEVAS were not written by one and the same person". The RTC also gave little
credence to Marciano's denial of the sale of the subject property to private respondent, on the ground that it was
self-serving.

CA Ruling
During the pendency of CA-G.R. CV No. 54517, petitioners filed with the Court of Appeals an Urgent
Manifestation 19 on 20 October 1998. According to them, they obtained information that private respondent's TCT
No. T-369793 covering the subject property had already been canceled; that a new certificate of title, TCT No.
T-784707, had been issued in the name of another person, Engracia Isip (Engracia); and that a mortgage was
constituted on the subject property. It began with private respondent executing a Waiver and Quitclaim on 15
January 1998, wherein she confessed to obtaining TCT No. T-369793 over the subject property in bad faith. In
the same document, private respondent recognized Engracia's title to the subject property and, thus, private
respondent relinquished her right over it to Engracia and the latter's heirs and successors-in-interest. The
Register of Deeds, impleaded as a party in CA-G.R. CV No. 54517, canceled TCT No. T-369793 in private
respondent's name; issued TCT No. T-784707 in the names of Engracia's heirs; and annotated on the latest certificate
of title private respondent's Waiver and Quitclaim dated 15 January 1998.
In its Decision dated 20 May 2004 in CA-G.R. CV No. 54517, the Court of Appeals denied petitioners'
appeal and affirmed the RTC Decision dated 7 October 1996 in Civil Case No. 878-94. The appellate court held
that petitioners were negligent in failing to register the subject property in their names. And, just like the RTC, the
Court of Appeals declared Marciano's denial of the sale of the subject property in private respondent's favor as
self-serving.

SC Ruling
On the Double Sale
Contrary to the findings of both the Court of Appeals and the RTC, the evidence on record reveals that the
spouses Cuevas, the previous owners of the subject property, did not sell the said property to private
respondent. Marciano's explicit statements, made under oath before the trial court, that he did not sell the subject
property to anyone other than petitioners, and that the signatures of the vendors appearing in the Deed of Absolute
Sale dated 10 November 1992 were not made by him and his wife, were not refuted. Private respondent's witness,
Jaime, who was tasked to verify if there was no encumbrance on the spouses Cuevas' title to the subject property and
to register it in private respondent's name after the alleged sale, admitted that he had never met the supposed
vendors of the subject property and, thus, could not competently testify on whether it was actually the spouses
Cuevas who executed the Deed of Absolute Sale dated 10 November 1992 in private respondent's favor.
The spouses Cuevas only sold the subject property to the petitioners in 1976, and did not sell it a second
time to private respondent in 1992. As a consequence, the rules on the double sale of registered property are not
relevant herein. The Court then proceeds to rule on the consequence of private respondent's fraudulent registration of
the subject property in her name.

On the Marcianos Testimony

The pronouncement of the RTC, affirmed by the Court of Appeals, that Marciano's testimony was self-serving
was utterly baseless. Neither the RTC nor the Court of Appeals explained how Marciano's confirmation of the
sale of the subject property to petitioners, and his renunciation of the supposed sale of the same property to private
respondent, would accrue to Marciano's benefit. In giving such a testimony in 1994, Marciano did not stand to gain
back the subject property, which he had already admitted to selling to petitioners 18 years prior, in 1976. On the other
hand, if Marciano falsely testified in open court that he and his wife did not sell the subject property to private
respondent, Marciano was risking prosecution for the crime of perjury and liability for damages. (RSPol Note: CA
and RTCs finding that Marcianos testimony as self-serving is erroneous because his testimony would not accrue to

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his benefit--he is not getting back the property in question; it appears that self-serving testimonies are only applicable
to witnesses who will benefit from the same.)

On Questioned Documents
Additionally, although Questioned Documents Report No. 548-795 of the NBI did not make a definitive finding
on whether Marciano's purported signature on the Deed of Sale dated 10 November 1992 was actually his or a forgery,
the same Report did unqualifiedly state that the signature that Virginia supposedly affixed to the said Deed
and the specimen signatures that she provided the NBI were not written by the same person. Clearly, Questioned
Documents Report No. 548-795 of the NBI established that her purported signature in the Deed of Absolute Sale
dated 10 November 1992 was forged.
It is true that a finding of forgery does not depend exclusively on the testimonies of expert witnesses and that
judges must use their own judgment, through an independent examination of the questioned signature, in
determining the authenticity of the handwriting. However, it is important to note that in this case neither the RTC
nor the Court of Appeals made any finding through an independent examination of Virginia's signatures. The
RTC gave credence to Questioned Documents Report No. 548-795 of the NBI, but misread it as saying that the two
specimen signatures given by Virginia were not written by the same person. Hence, Questioned Documents Report
No. 548-795 of the NBI, finding that the signature of Virginia in the Deed of Absolute Sale dated 10 November
1992 is a forgery, stands unquestioned. That at least one of the signatures of the alleged vendors was indubitably
established as a forgery should have already raised serious doubts as to the authenticity and validity of the
Deed of Absolute Sale dated 10 November 1992.

On Vice Mayor as Broker

Vice Mayor Carungcong, who allegedly brokered the sale, had already died during the pendency of the
case and was not presented as witness. It was not made clear whether he was duly authorized by the spouses
Cuevas to broker such sale. Private respondent's witness, Jaime, did not claim to have been present during the
negotiations or in any part of the sale transaction, and had not even met the spouses Cuevas. All he was able to
testify on was that he verified with the Register of Deeds that there was no encumbrance annotated on TCT No.
T-58459 of the spouses Cuevas, and eventually, he was able to cause the cancellation of TCT No. T-58459 in the
spouses Cuevas' names and the issuance of TCT No. T-369793 in private respondent's name based on the
questionable Deed of Absolute Sale dated 10 November 1992. Similarly ambiguous was how Jaime was able to have
TCT No. T-58459 of the spouses Cuevas cancelled when the Owner's Duplicate Copy thereof was with petitioners.
When a certificate of title is cancelled, the owner's duplicate must also be surrendered to the Register of Deeds for
cancellation, in accordance with Section 53 of Presidential Decree No. 1529, otherwise known as the Property
Registration Decree, as amended.

On Registering the Property in Bad Faith

Other than the forged Deed of Absolute Sale dated 10 November 1992, private respondent's bad faith in
registering the subject property in her name and her dishonest scheme in appropriating the land for herself are
further evidenced by her own admissions in the Waiver and Quitclaim dated 15 January 1998, which she executed
in favor of Engracia's heirs: That, I know (sic) from the very beginning the dubiousness of my title to the above
described roperty (sic).
Private respondent's unabashed confession that she knew of the dubiousness of her title from the very
beginning is contrary to the concept of good faith. Good faith consists in the belief of the possessors that the
persons from whom they received the thing are its rightful owners who could convey their title.

On Equitable Remedies: Reconveyance

The Deed of Absolute Sale dated 10 November 1992, a forged deed, is a nullity and conveys no title. 32
Paragraph 2 of Section 53 of Presidential Decree No. 1529 reads:
In all cases of registration procured by fraud, the owner may pursue all his legal and
equitable remedies against the parties to such fraud without prejudice, however, to the
rights of any innocent holder for value of a certificate of title. After the entry of the decree of
registration on the original petition or application, any subsequent registration procured by
the presentation of a forged duplicate certificate of title, or of a forged deed or other
instrument, shall be null and void.

Insofar as a person who fraudulently obtained a property is concerned, the registration of the property in
said person's name would not be sufficient to vest in him or her the title to the property. A certificate of title
merely confirms or records title already existing and vested. The indefeasibility of the Torrens title should not be
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used as a means to perpetrate fraud against the rightful owner of real property. Good faith must concur with
registration because, otherwise, registration would be an exercise in futility. A Torrens title does not furnish a shield
for fraud, notwithstanding the longstanding rule that registration is a constructive notice of title binding upon the
whole world. The legal principle is that if the registration of the land is fraudulent, the person in whose name
the land is registered holds it as a mere trustee.
Reconveyance is all about the transfer of the property, in this case the title thereto, which has been
wrongfully or erroneously registered in another person's name, to its rightful and legal owner, or to one with a
better right. Evidently, petitioners, being the rightful owners of the subject property, are entitled to the
reconveyance of the title over the same.
This having been said, an action for reconveyance is an action in personam available to a person whose property
has been wrongfully registered under the Torrens system in another's name. Reconveyance is always available as
long as the property has not passed to an innocent person for value.
Engracia's heirs cannot be considered "innocent" persons or persons who acquired the subject property
"for value". Engracia's heirs "re-acquired" the subject property by virtue of the private respondent's Waiver and
Quitclaim dated 15 January 1998. That the said document was executed by private respondent, who admitted to
holding a dubious title to the subject property, should be sufficient to put Engracia's heirs on notice and to cause the
latter to investigate the other transfers and titles issued for the subject property. The Waiver and Quitclaim dated 15
January 1998 also does not establish that the subject property was transferred to Engracia's heirs for value, it
appearing to have been executed by private respondent in favor of Engracia's heirs without any consideration at
all. Hence, the cancellation of TCT No. T-369793 in private respondent's name and the issuance of TCT No.
T-784707 in the names of Engracia's heirs cannot bar the reconveyance of the subject property to petitioners.
A judgment directing a party to deliver possession of a property to another is in personam; it is binding
only against the parties and their successors in interest by title subsequent to the commencement of the action.
The Court may deem Engracia's heirs as private respondent's successors-in-interest, having acquired title to the
subject property through private respondent after the commencement of petitioners' action for reconveyance of the
same property.

On The Waiver and Quitclaim

However, as a further demonstration of private respondent's continuing bad faith and persistent effort to
unlawfully deprive petitioners of the subject property, private respondent executed the Waiver and Quitclaim dated 15
January 1998. It must be stressed that Engracia, whose TCT No. T-13105 over the subject property was already
cancelled on 26 April 1965, had never filed a case questioning the cancellation of said certificate of title during her
lifetime. There is also nothing in the records that would show that after Engracia's death in 1981, her heirs
attempted to recover title to the subject property.
The Waiver and Quitclaim dated 15 January 1998 deserves little evidentiary weight as to the truth or
veracity of the statements contained therein, considering that they were unilaterally made by private
respondent. There is no independent evidence that all certificates of title subsequent to OCT No. 1002 covering the
subject property were simulated and fictitious. In fact, private respondent contradicted herself by acknowledging in
the very same document that Engracia's title, which was transferred to her heirs, was genuine. The only fact that said
Waiver and Quitclaim established was private respondent's bad faith in having the subject property registered
in her name. For the Court to make such finding of bad faith on private respondent's part, it need not actually be true
that all titles to the subject property, prior to private respondent's, were simulated and fictitious, only, private
respondent believed them to be so, but still persisted in acquiring and registering in her name what she already knew
was a dubious title.
What is apparent to this Court is that private respondent executed the Waiver and Quitclaim dated 15
January 1998 so as to effect the transfer of the subject property to third persons, i.e., Engracia's heirs, and
defeat any judgment granting the petitioners the remedy of reconveyance of the subject property.
The Register of Deeds of Cavite, who was a party to petitioners' case for reconveyance, and was undoubtedly
aware of the issues involved in the said case and the pendency of the same. Yet it blindly allowed the registration of
the alleged title to the subject property of Engracia and her heirs, in effect, reviving a title that had already been
cancelled way back in 1965, and disregarding all other titles issued in between, based entirely on the unilateral claims
of a self-confessed fraud. Moreover, in placing its faith in the unsupported statements of the private respondent, who
had confessed to having acquired and registered the property in bad faith, against the presumed good faith of the
former owners, the Register of Deeds acted in a manner that was highly irregular.

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RSPol
 Gasataya vs Mabasa
Facts
Respondent Editha Mabasa's father, Buenaventura Mabasa, was granted a homestead patent on Lots 279,
272 and 972 located in Lala, Lanao del Norte. Buenaventura Mabasa mortgaged these lots to secure a loan from the
Development Bank of the Philippines (DBP). Because of his failure to pay his indebtedness, DBP foreclosed on the
lots and sold them at public auction where it emerged as the highest bidder. DBP then obtained titles to the lots:
Lot 279 under TCT No. T-2247 and consolidated Lots 272 and 972 under TCT No. T-2448. When Buenaventura
Mabasa died, respondent's siblings authorized her to negotiate with DBP for the repurchase of the lots. DBP
allowed respondent to reacquire the foreclosed properties through a deed of conditional sale for P25,875.
Subsequently, respondent entered into an agreement with petitioner's father, Sabas Gasataya, for the latter to
assume payment of her obligation to DBP. They further agreed that Sabas Gasataya would take possession of
the lots for 20 years and develop them into a fishpond. As consideration thereof, respondent received P10,000 cash,
in addition to the P25,000 that Sabas Gasataya had to pay DBP on her behalf.
Upon representation by Sabas Gasataya that respondent's obligation to DBP had already been settled, they
entered into another agreement denominated as "Deed of Sale of Fishpond Lands with Right to Repurchase." Eight
years after the execution of the above deed of sale with right to repurchase, respondent discovered that Sabas
Gasataya had stopped paying DBP. As a result, DBP revoked her right to repurchase the subject lots. DBP later
on held a public auction of the properties where petitioner participated and bid the highest price of P27,200.
Eventually, he acquired titles to the lots for which he was issued TCT No. T-11720 in lieu of TCT No. T-2447 (Lot
279) and TCT No. T-11721 for TCT No. T-2448 (Lots 272 and 972).
Respondent then filed a complaint in the RTC for reconveyance of titles of lands with damages against
petitioner and Sabas Gasataya (Gasatayas). She claimed that the latter deliberately reneged on his commitment to pay
DBP to: (1) revoke her right to repurchase the lots under the deed of conditional sale and (2) subject the properties to
another public auction where petitioner could bid.
Petitioner and his father denied the allegations saying that the deed of conditional sale assumed by the latter
from respondent was rendered ineffective by DBP's refusal to accept payments thereon.

RTC Ruling
RTC ruled in favor of the respondent. According to the trial court, the Gasatayas failed to prove that DBP
indeed rejected payments from Sabas Gasataya.

CA Ruling
CA which affirmed the RTC's decision and dismissed their appeal for lack of merit. The CA declared: The
contention of [respondent] that [the Gasatayas] deliberately chose not to pay DBP as agreed, in order for them to
acquire said properties in a fraudulent and treacherous manner, was not fully controverted by [them]. [The
Gasatayas] failed to produce evidence to support their defenses.

SC Ruling
On Reconveyance
Reconveyance is available not only to the legal owner of a property but also to the person with a better
right than the person under whose name said property was erroneously registered. While respondent is not the
legal owner of the disputed lots, she has a better right than petitioner to the contested lots on the following grounds:
first, the deed of conditional sale executed by DBP vested on her the right to repurchase the lots and second, her
right to repurchase them would have subsisted had they (the Gasatayas) not defrauded her. (RSPol Note:
Mabasa has a better right despite no longer the legal owner because: (1) the vested right to repurchase the lots, and (2)
there was fraud on the part of the Gasatayas.)
Petitioner, however, insists that respondent had no right to the disputed lots since the conditional sale agreement
where such right was based had long been cancelled by DBP. According to petitioner, a void and inexistent deed
cannot override his right as registered owner of the lots.
Petitioner cannot discredit the deed of conditional sale just so he can to keep his titles to the lots.
Petitioner should be reminded that DBP revoked respondent's right to repurchase the lots under said deed
because of the deceitful maneuverings that he and his father employed. If we were to sustain petitioner's
argument, then we would, in effect, reward him for his misdeed.
Neither can this Court uphold petitioner's contention that his titles are unsullied on the mere fact that he
purchased the properties at public auction. Fraud overthrows the presumption that the public sale was attended
with regularity. The public sale did not vest petitioner with any valid title to the properties since it was but the
consequence of his and his father's fraudulent schemes.

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RSPol
On Registration
The registration of the properties in petitioner's name did not obliterate the fact that fraud preceded and
facilitated such registration. Actual or positive fraud proceeds from an intentional deception practiced by means of
misrepresentation of material facts, which in this case was the conscious representation by petitioner's father
(Sabas Gasataya) that respondent's obligation to DBP had already been settled. It is fraud to knowingly omit or
conceal a fact, upon which benefit is obtained, to the prejudice of another. Consequently, fraud is a ground for
reconveyance.

On Innocent Purchaser for Value

Moreover, the law only protects an innocent purchaser for value and not one who has knowledge of and
participation in the employment of fraud. An innocent purchaser for value is one who buys the property of another
without notice that some other person has a right to or interest in that same property, and who pays a full and fair
price at the time of the purchase or before receiving any notice of another person's claim. Obviously, petitioner was
not an innocent purchaser for value.

On Homestead Grant
As a final point, the Court takes significant note of the fact that respondent's father originally acquired the
subject lots through homestead grant. Commonwealth Act 141 (Public Land Act) aims to confine and preserve
to the homesteader and his kin the homestead lots. We, therefore, agree with the CA's disquisition that courts
should "lend a stout shoulder to help keep a homestead in the homesteader's family" for the stern reality cannot be
belied that "homesteaders and their families are generally in the lower stratum of life" and most likely, when
they alienate the homestead, it is "out of dire necessity." According to the CA, desperation does not allow much
of a choice, hence homesteaders and their kin should be given every opportunity to repurchase their
homestead.

Amerol vs Bagumbaran
Facts
It is commonly known as Lot No. 524, Pls-126 and technically described and bounded in the sketch. This is the
very tract of land alleged by the plaintiff (now respondent Bagumbaran) to have been forcibly entered into by
the defendants (now petitioner Amerol) and which plaintiff now seeks to recover possession thereof. It has also
been proven that the same lot was covered by two free patent applications: (1) that of defendant Liwalug
Datomanong (erroneously surnamed Amerol) which he filed on the 4th day of September, 1953, and (2) that of
Molok Bagumbaran which was filed on December 27, 1954. There is also no question regarding the fact that as to
these two free patent applications, that of plaintiff Molok Bagumbaran was given due course as a result of
which Free Patent No. V-19050 was issued on August 16, 1955 by authority of the President of the Philippines
Ramon Magsaysay, by Jaime Ferrer, Undersecretary of Agriculture and Natural Resources and duly registered with
the office of the Register of Deeds of the Province of Lanao (now Lanao del Sur) in the same year whereupon
Original Certificate of Title No. P-466 was duly issued; owner's duplicate certificate having been furnished the herein
plaintiff.
This court is also inclined to believe that defendant Liwalug Datomanong had never known of plaintiff's
free patent application on the land in question nor was he ever notified or participated in the administrative
proceedings relative to plaintiff's free patent application. In the meantime, since the date he purchased the land
from Mandal Tando, said defendant has been and up to the present in continuous occupation and cultivation of
the same. His co-defendants named in the complaint are merely his tenants.
It is also incontrovertible fact that said defendant did not take appropriate action to annul the patent and
title of the plaintiff within one year from issuance thereof and that the first step taken by him to contest said
patent and title was a formal protest dated April 24, 1964, filed before the Bureau of Lands after the lapse of
Nine (9) long years from the issuance of patent in favor of the plaintiff. The second step he took was his
counterclaim contained in his answer to the complaint in the above entitled case, which answer was filed with
this court on December 4, 1964. In said counterclaim, defendant reiterated his stand that plaintiff secured patent
on the land by means of deceit and fraud, wherefore, defendant prayed that said title be annulled, or, alternatively,
plaintiff be ordered to reconvey the said land to the said defendant Liwalug Datomanong.
Upon a thorough examination of the evidence, proofs are sufficient to support defendant's contention that
plaintiff is guilty of fraud and misrepresentation. In the first place, proofs are abundant tending to show that since
1952 when Mandal Tando transferred the land to said defendant, the latter occupied, took possession thereof and
cultivated the same continuously, publicly, adversely against any claimant and in the concept of owner up to the
present; that said defendant had introduced considerable improvements such as coconut and coffee plantations and
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RSPol
other fruit trees besides his farm house, a mosque, cassava plantation and clearing and full cultivation of the
entire area. The fact of possession on the part of said defendant has been attested to by competent and creditable
witnesses like Mandal Tando who conveyed the land to the defendant; Hadji Sirad Gomandang, the barrio captain of
Montay, Malabang, Lanao del Sur; Hadji Rasol Maruhom and Hadji Abdulcadir Pagayawan, both of Pialot, Malabang,
Lanao del Sur who are farmers and barrio-mates of said defendant; and also Disomnong Dimna Macabuat, an
employee in the office of the District Land Officer at Marawi City who had officially conducted occular inspection
and investigation of the premises in connection with the protest of said defendant found thereon the above-mentioned
improvements introduced by the said defendant.
What is more, on or before filing his free patent application, plaintiff (now respondent Bagumbaran) knew
that the land in question which was covered by his free patent application was then actually occupied and
cultivated by defendant Liwalug Datomanong (now petitioner Amerol) if not by Mandal Tando, the original
occupant. Be it remembered that Mandal Tando had transferred to defendant Liwalug Datomanong Twenty Four (24)
hectares, more than eleven hectares of which is (sic) outside the military reservation and designated as Lot No. 524,
Pls-126 and the rest which is in the southern portion lies within the military reservation. Now, immediately adjacent
thereto on the south is the land claimed and occupied by the herein plaintiff also consisting of Twenty Four (24)
hectares but wholly within the military reservation. It appears that plaintiff declared this Twenty four hectares for
the first time on October 24, 1950 for taxation purposes and stated in said tax declaration regarding the
boundaries that the adjacent owner on the north is Mandal Tando. In other words, plaintiff had expressly
recognized the fact that Mandal Tando is an adjacent land owner north of plaintiff's property. On February 19,
1951 herein plaintiff revised the abovestated tax declaration and secured another and still plaintiff stated
therein that his boundary land owner on the north is Hadji Abdul Gani (a.k.a. Liwalug Datomanong (Amerol).

Issue
The only issue for resolution is the prescriptive period of an action for reconveyance of real property which
has been wrong fully or erroneously registered under the Torrens System in another's name. In other words,
what is the prescriptive period for the action to reconvey the title to real property arising from an implied or
constructive trust and, corollarily, its point of reference.

RTC Ruling
The patent of the plaintiff (now respondent Bagumbaran) having been registered back in 1955 and in
contemplation of law registration thereof is notice to the whole world and yet defendant (now petitioner Amerol)
exerted no effort whatsoever either to annul the title or institute proceedings for reconveyance except in his
counterclaim contained in his answer to the complaint in this case at bar which answer and counter-claim was
filed on December 4, 1964, some nine long years from the date of registration of the patent, defendant
unfortunately lost his right to reconveyance within the period of four (4) years from the date of registration of
said patent.

SC Ruling
We hold that the prescriptive period for such an action for reconveyance, as this case, is ten years. The point of
reference is, or the ten-year prescriptive period commences to run from, the date of the issuance of the
certificate of title over the real property.

On Person Acquiring Property Through Fraud: Trustee of an Implied Trust

Indubitably, the act of respondent in misrepresenting that he was in actual possession and occupation of the
property in question, obtaining a patent and Original Certificate of Title No. P-466 in his name, created an
implied trust in favor of the actual possessor of the said property. The Civil Code provides: ARTICLE 1456. If
property is acquired through mistake or fraud; the person obtaining it is by force of law, considered a trustee of
an implied trust for the benefit of the person from whom the property comes.
In this case, the land in question was patented and titled in respondent's name by and through his false
pretenses. Molok Bagumbaran fraudulently misrepresented that he was the occupant and actual possessor of the land
in question when he was not because it was Liwalug Datomanong Bagumbaran falsely pretended that there was no
prior applicant for a free patent over the land but there was Liwalug Datomanong. By such fraudulent acts,
Molok Bagumbaran is deemed to hold the title of the property in trust and for the benefit of petitioner Liwalug
Datomanong. Notwithstanding the irrevocability of the Torrens title already issued in the name of respondent,
he, even being already the registered owner under the Torrens system, may still be compelled under the law to
reconvey the subject property to Liwalug Datomanong. After all, the Torrens system was not designed to shield
and protect one who had committed fraud or misrepresentation and thus holds title in bad faith. Further,
contrary to the erroneous claim of the respondent, reconveyance does not work to set aside and put under review
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RSPol
anew the findings of facts of the Bureau of Lands. In an action for reconveyance, the decree of registration is
respected as incontrovertible. What is sought instead is the transfer of the property, in this case the title thereof,
which has been wrongfully or erroneously registered in another person's name, to its rightful and legal owner, or
to one with a better right. That is what reconveyance is all about.

On Prescription of an Implied Trust: 10 Years

Yet, the right to seek reconveyance based on an implied or constructive trust is not absolute. It is subject
to extinctive prescription. Happily, both parties agree on this point. The seeming impediment however, is that while
the petitioners assert that the action prescribes in ten years, the respondent avers that it does in only four years.
In support of his submission, the respondent invokes several cases. We have examined the invocations and find them
inapplicable. For instance, the case of Fabian v. Fabian, relied on by the respondent, does not square with the present
case. In Fabian, the party who prayed for reconveyance was not in actual possession and occupation of the
property. It was instead the party to whom title over the property had been issued who occupied and possessed it.
Further, the litigated property had been in the adverse possession of the registered owner for well-nigh over
twenty-nine big years, hence, reconveyance had been irretrievably lost.
Miguel v. Court of Appeals, is, likewise, inapplicable. In Miguel, the actual occupant and possessor of the
controverted parcel of land, after having been enticed by Leonor Reyes, an ambulatory notary public, with
promise of help, engaged and retained the services of the latter to facilitate the issuance of a patent for the said
land in his (Miguel's) favor. Thus, there existed between the parties a relationship very much akin to that of
lawyer-client and which is similarly fiduciary in character. But Reyes, inspite of his compensation of one-fifth of the
yearly produce of the property, still violated the trust reposed on him and instead worked for the issuance of the patent
in the name of his own wife. So, after the demise of Leonor Reyes, the property was fraudulently patented and
titled in his widow's favor. The reconveyance of the property was decreed by the Court based on "breach of
fiduciary relations and/or fraud." It was shown that the parties were legally bound to each other by a bond of
fiduciary trust, a bond lacking in the case at bar.
Finally, the case of Ramirez vs. Court of Appeals can not be availed of because the period of prescription was
not there definitely and squarely settled. In fact, Ramirez underscores a vacillation between the four-year and the
ten-year rule. There it was stated that "an action for relief on the ground of fraud to which class the remedy prayed
for by Paguia belongs can only be brought within four years after accrual of the right of action, or from the
discovery of the fraud." If the decision just stayed pat on that statement, there would be merit in the respondent's
presentation. But Ramirez continues: "(I)ndepedently, however, of the alleged fraud on the part of Ramirez, the
right to demand a reconveyance prescribes after 10 years from accrual of the cause of action, June 22, 1944, the
date of registration of the patent and of the issuance of OCT No. 282-A in his name."
The accrual of the cause of action in Fabian was in 1928, in Miguel, February, 1950, and in Ramirez, 1944. It
must be remembered that before August 30, 1950, the date of the effectivity of the new Civil Code, the old Code
of Civil Procedure (Act No. 190) governed prescription.

SEC. 43. Other civil actions; how limited. Civil actions other than for the recovery of real
property can only be brought within the following periods after the right of action accrues:
xxx xxx xxx
3. Within four years: . . . An action for relief on the ground of fraud, but the right of action in
such case shall not be deemed to have accrued until the discovery of the fraud;

In contrast, under the present Civil Code, we find that just as an implied or constructive trust is an offspring
of the law (Art. 1456, Civil Code), so is the corresponding obligation to reconvey the property and the title
thereto in favor of the true owner. In this context, and vis-a-vis prescription, Article 1144 of the Civil Code is
applicable.

Article 1144. The following actions must be brought within ten years from the time the right
of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.

(RSPol Note: It appears that the three cases relied upon by Bagumbaran imposed the four-year prescriptive period
because the rights of action in those cases accrued prior to Aug. 30, 1950, the effectivity of the New Civil Code. In
the Old Civil Code, the prescriptive period was four years but in the NCC, it is ten years. In this case, since Amerols

Land Titles: Action for Reconveyance

RSPol
right of action accrued on August 16, 1955, when the OCT was issued in favor of Bagumbaran and after the
effectivity of the NCC, the NCC is applicable which has the prescriptive period of ten years.)

An action for reconveyance based on an implied or constructive trust must perforce prescribe in ten years
and not otherwise. A long line of decisions of this Court, and of very recent vintage at that, illustrates this rule.
Undoubtedly, it is now well-settled that an action for reconveyance based on an implied or constructive trust
prescribes in ten years from the issuance of the Torrens title over the property. The only discordant note, it seems, is
Balbin vs. Medalla, which states that the prescriptive period for a reconveyance action is four years. However,
this variance can be explained by the erroneous reliance on Gerona vs. de Guzman. But in Gerona, the fraud
was discovered on June 25, 1948, hence Section 43(3) of Act No. 190, was applied, the new Civil Code not
coming into effect until August 30, 1950 as mentioned earlier. It must be stressed, at this juncture, that Article
1144 and Article 1456, are new provisions. They have no counterparts in the old Civil Code or in the old Code of
Civil Procedure, the latter being then resorted to as legal basis of the four-year prescriptive period for an action for
reconveyance of title of real property acquired under false pretenses.
It is abundantly clear from all the foregoing that the action of petitioner Datomanong (Amerol) for
reconveyance, in the nature of a counterclaim interposed in his Answer, filed on December 4, 1964, to the complaint
for recovery of possession instituted by the respondent, has not yet prescribed. Between August 16, 1955, the date
of reference, being the date of the issuance of the Original Certificate of Title in the name of the respondent, and
December 4, 1964, when the period of prescription was interrupted by the filing of the Answer cum
Counterclaim, is less than ten years. (RSPol Note: The OCT was issued to Bagumbaran on Aug. 16, 1955 and the
filing of answer by Amerol was on Dec. 4, 1964; hence, the action by Amerol was well within the prescriptive period
because the action would only prescribe on Aug. 16, 1965.)

On Mortgaging the Property under Litigation

The respondent also interposed as a deterrent to reconveyance the existence of a mortgage on the
property. It is claimed by the respondent that reconveyance would not be legally possible because the property
under litigation has already been mortgaged by him to the Development Bank of the Philippines. This claim is
untenable otherwise the judgment for reconveyance could be negated at the will of the holder of the title. By the
simple expedient of constituting a mortgage or other encumbrance on the property, the remedy of reconveyance
would become illusory. In the instant case, the respondent being doubly in bad faith for applying for and
obtaining a patent and the Original Certificate of Title therefor without being in possession of the land and for
mortgaging it to the Development Bank knowing that his Original Certificate of Title was issued under false
pretenses must alone suffer the consequences.
Besides, given the undisputed facts, we cannot consider the mortgage contracted by the respondent in favor of
the Development Bank of the Philippines as valid and binding against petitioner Liwalug Datomanong. It would be
most unjust to saddle him, as owner of the land, with a mortgage hen not of his own making and from which he
derived no benefit whatsoever. The consequences of the void mortgage must be left between the mortgagor and the
mortgagee. In no small measure the Development Bank of the Philippines might even be faulted for not making
the requisite investigation on the possession of the land mortgaged.

Sanjorjo vs Quijano
Facts
On August 29, 1988, Free Patent No. VII-4-2974 was issued to Alan P. Quijano, married to Mila Matutina,
over a parcel of land located in Antipolo, Medellin, Cebu, with an area of 14,197 square meters identified as Lot
374, Cadastre 374-D. Based on the said patent, Original Certificate of Title (OCT) No. OP-38221 was issued by
the Register of Deeds to and in the name of Alan P. Quijano on September 6, 1988.
On November 11, 1988, Free Patent No. VII-4-3088 was issued to and in favor of Gwendolyn Q. Enriquez,
married to Eugenio G. Enriquez, over a parcel of land located in Antipolo, Medellin, Cebu, identified as Lot
379, Cadastre 374-D, with an area of 6,640 square meters. Based on the said patent, OCT No. OP-39847 was issued
in her favor on February 11, 1989. In the meantime, Gwendolyn Enriquez filed an application for a free patent
over Lot 376 of Cadastre 374-D with the Department of Environment and Natural Resources (DENR). The
application was docketed as Free Patent Application (F.P.A.) No. VII-4-3152. She also filed an application for a free
patent over Lot 378, docketed as F.P.A. No. VII-4-3152-A. However, the heirs of Guillermo Sanjorjo, namely,
Tranquilina, Pablo, Boir, Erlinda, Josefina, Maria, Maximo, Isabel, Jose, Dario, Vicente, Noel, Albina, Ramon,
Domingo, Adriano and Celedonia, all surnamed Sanjorjo, filed a protest/complaint with the DENR on May 22,
1991, praying for the cancellation of Free Patent No. VII-4-2974 (or Lot 374 of Quijano), as well as Free Patent
No. VII-4-3088 (or Lot 379 of Enriquez), and for the dismissal of the free patent applications over Lots 376 and
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RSPol
378. The complaint was docketed as PENRO Claim No. PN 072231-4, and was assigned to the Regional Executive
Director for hearing and decision.
The protestants/claimants (Sanjorjo) alleged that the said parcels of land were originally owned by Ananias
Ursal but were exchanged for a parcel of land located in San Remegio, Cebu, owned by their predecessor,
Guillermo Sanjorjo, married to Maria Ursal, and from whom they inherited the property.

DENR RED Decision

During the pre-trial conference of August 2, 1991, the protestants/claimants manifested that they were
withdrawing their protest/complaint. Thus, on April 14, 1992, the Regional Executive Director rendered a decision
giving due course to the applications. However, he ruled that the free patents over Lots 374 and 379 could no
longer be disturbed since the complaint for the cancellation was filed more than one year from their issuance.
RED said: Patent/Titles already issued and entered in the Registry Book in favor of applicants-respondents on Lot
Nos. 374 and 379 in 1988 and 1989 need not be disturbed anymore, for failure to show evidence of actual fraud in the
procurement of such titles.

On September 13, 1993, Vicente Sanjorjo, the heirs of Maximo Sanjorjo, namely, Macaria Sanjorjo,
Domingo Sanjorjo, Alfredo Castro, and the Spouses Santos and Lolita Inot, herein petitioners, filed a complaint for
cancellation of titles under tax declarations and reconveyance of possession of real property covering Lots 374,
376, 378 and 379 located in Medellin, Cebu, against the private respondents, the heirs of Manuel Quijano,
namely, Rosa Q. Ledesma, Milagros Q. Yuliongsiu, Alan P. Quijano and Gwendolyn P. Enriquez, and Vicente Gulbe.
The petitioners did not implead the rest of the heirs of Guillermo Sanjorjo, including his daughter Tranquilina
Sanjorjo, as parties-plaintiffs.

Plaintiffs (Sanjorjo) alleged that:

1. They are the owners of Lots 374 (already issued to Alan Quijano), 376, 378 (applied for free patent by G.
Enriquez) and 379 (already issued to G. Enriquez);
2. The lots originally belonged to the late MAXIMO SANJORJO who died during World War II. His
children MAURO, FLORENTINO, SABINIANO, TRANQUILINA and RAYMUNDA, all surnamed SANJORJO,
inherited the said properties. They have also passed away and the plaintiffs, who are the children of MAXIMO
SANJORJO's children are now the rightful heirs of the aforementioned parcels of land;
3. That sometime in 1983, the parcels of land in question were leased to MANUEL QUIJANO for a two (2)
year period at the rate of P4,500.00 per year. However, the lease was never paid for nor was possession of the said
properties ever returned to the plaintiffs, despite repeated demands on QUIJANO to return the same;
4. That MANUEL QUIJANO died in 1987 and the herein defendants, the heirs of MANUEL QUIJANO,
divided among themselves the land belonging to the plaintiffs. Titles and Tax Declarations were then issued on the
said lots in the name of the defendants;
5. That sometime in September 1991, the defendant ALAN QUIJANO charged plaintiff ALFREDO
CASTRO (an heir of Sanjorjo) with QUALIFIED THEFT for allegedly having stolen the coconuts on the
properties in question. Subsequently, the Municipal Court of Medellin acquitted CASTRO on the ground that
he was the real owner of the lot. It was only on that time that plaintiffs discovered that defendants had already
titled their lots. Furthermore, in 1992, the herein plaintiffs were sued by the defendants for Quieting of Title, which
case they subsequently withdrew. This case made the plaintiffs realize that all their properties had already been titled
in defendants' names;
6. That, at present, defendants have leased these lots to a certain VICENTE GULBE, who is named as a
defendant in this case. Plaintiffs also demanded from defendant GULBE the return of their possession over these
lots but to no avail. The Certification to File Action from the barangay captain of Antipolo, Medellin, Cebu, is hereto
attached and marked as Annex "J" and made an integral part of this complaint.

The private respondents (Quijano) filed a motion to dismiss the complaint on the ground of res judicata
based on the decision of the Regional Executive Director on April 14, 1992. They maintained that the decision of
the Regional Executive Director had become final and executory and, as such, barred the petitioners' action.

RTC Ruling
On September 13, 1994, the trial court issued an Order dismissing the complaint on the ground of res
judicata. The petitioners appealed the order to the CA.

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RSPol
CA Ruling
In its Decision promulgated on February 17, 1999, the appellate court affirmed the assailed order of the trial
court, albeit for a different reason, i.e., prescription. Citing Section 32 of Presidential Decree No. 1529, it held that
the OCTs issued to the respondents on the basis of their respective free patents became as indefeasible as one
which was judicially secured upon the expiration of one year from the date of the issuance of the patent. The
CA did not deem it necessary to rule on the issue of res judicata since it dismissed the case on the ground of
prescription.

SC Ruling
We note that the petitioners limited the issues to the two titled lots, Lots 374 and 379, arguing that there can
be no res judicata in this case because one of its elements, i.e., that the former judgment is a judgment on the
merits, was lacking. The petitioners did not assail the trial court's order dismissing the complaint insofar as
Lots 376 and 378 are concerned. Moreover, according to the petitioners, the April 14, 1992 Decision of the
Regional Executive Director was not a decision on the merits of the complaint, as they had yet to prove their
allegation of fraud as regards the said lots.

On the issue of Res Judicata

The elements of res judicata are the following: (1) the previous judgment has become final; (2) the prior
judgment was rendered by a court having jurisdiction over the subject matter and the parties; (3) the first judgment
was made on the merits; and (4) there was substantial identity of parties, subject matter and causes of action, as
between the prior and subsequent actions.
A judgment on the merits is one rendered after argument and investigation, and when there is
determination which party is right, as distinguished from a judgment rendered upon some preliminary or
formal or merely technical point, or by default and without trial. As gleaned from the decision of the DENR
Regional Executive Director, he dismissed the petitioners' complaint for the cancellation of Free Patent Nos.
VII-4-2974 and VII-4-3088 on the ground that it was filed only on May 22, 1991, more than three years from the
issuance of the said patents on August 29, 1988 and November 11, 1988, respectively. In the said decision, the
Regional Executive Director declared that after the lapse of one year from the issuance of patent and registry thereof
in the Registry Book of the Register of Deeds, Cebu Province, only the regular courts of justice have jurisdiction on
the matter of cancellation of title. The petitioners agreed with the Regional Executive Director and withdrew their
complaint, opting to file an appropriate action in court for the nullification of the said patents and titles. Hence, the
decision of the Regional Executive Director was not a decision on the merits of the petitioners' complaint.
(RSPol Note: The DENR RED Decision was not a judgment on merits because the complaint by the Sanjorjos in
1991 was not dismissed after argument and investigation but was dismissed solely upon a formal or technical point
which was prescription--lapse of one year from the issuance of titles in 1988; in other words, it was a dismissal
without trial, not a judgment on merits; hence, no res judicata.)

On the issue of Reconveyance and Prescription

On the second issue, we agree with the petitioners that their action against the private respondents for the
reconveyance of Lots 374 and 379, covered by OCT No. OP-38221 issued on September 6, 1988 and OCT No.
OP-39847 issued on February 11, 1989, respectively, was not barred by Section 32 of P.D. No. 1529, which reads:
SEC. 32. Review of decree of registration; Innocent purchaser for value. The decree of
registration shall not be reopened or revised by reason of absence, minority, or other
disability of any person adversely affected thereby, nor by any proceeding in any court for
reversing judgments, subject, however, to the right of any person, including the
government and the branches thereof, deprived of land or of any estate or interest
therein by such adjudication or confirmation of title obtained by actual fraud, to file in
the proper Court of First Instance a petition for reopening and review of the decree of
registration not later than one year from and after the date of the entry of such decree
of registration, but in no case shall such petition be entertained by the court where an
innocent purchaser for value has acquired the land or an interest therein, whose rights may
be prejudiced. Whenever the phrase "innocent purchaser for value" or any equivalent
phrase occurs in this Decree, it shall be deemed to include an innocent lessee, mortgagee,
or other encumbrancer for value.

We agree with the ruling of the CA that the torrens title issued on the basis of the free patents became as
indefeasible as one which was judicially secured upon the expiration of one year from date of issuance of the patent.
The order or decision of the DENR granting an application for a free patent can be reviewed only within one
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year thereafter, on the ground of actual fraud via a petition for review in the Regional Trial Court (RTC)
provided that no innocent purchaser for value has acquired the property or any interest thereon. However, an
aggrieved party may still file an action for reconveyance based on implied or constructive trust, which prescribes
in ten years from the date of the issuance of the Certificate of Title over the property provided that the property
has not been acquired by an innocent purchaser for value.
In Javier v. Court of Appeals, the Court said: The basic rule is that after the lapse of one (1) year, a decree of
registration is no longer open to review or attack although its issuance is attended with actual fraud. This does
not mean, however, that the aggrieved party is without a remedy at law. If the property has not yet passed to an
innocent purchaser for value, an action for reconveyance is still available. The decree becomes incontrovertible
and can no longer be reviewed after one (1) year from the date of the decree so that the only remedy of the
landowner whose property has been wrongfully or erroneously registered in another's name is to bring an
ordinary action in court for reconveyance, which is an action in personam and is always available as long as the
property has not passed to an innocent third party for value. If the property has passed into the hands of an innocent
purchaser for value, the remedy is an action for damages. In this case, the disputed property is still registered in the
name of respondent Demetrio Caringal, so that petitioner was correct in availing himself of the procedural remedy of
reconveyance.
An action for reconveyance is one that seeks to transfer property, wrongfully registered by another, to its
rightful and legal owner. All that must be alleged in the complaint are two (2) facts which, admitting them to be true,
would entitle the plaintiff to recover title to the disputed land, namely, (1) that the plaintiff was the owner of the
land and, (2) that the defendant had illegally dispossessed him of the same. The body of the pleading or complaint
determines the nature of an action, not its title or heading. In their complaint, the petitioners clearly asserted that their
predecessors-in-interest have long been the absolute and exclusive owners of the lots in question and that they were
fraudulently deprived of ownership thereof when the private respondents obtained free patents and certificates of title
in their names. These allegations certainly measure up to the requisite statement of facts to constitute an action for
reconveyance.
Article 1456 of the New Civil Code provides that a person acquiring property through fraud becomes by
operation of law a trustee of an implied trust for the benefit of the real owner of the property. The presence of
fraud in this case created an implied trust in favor of the petitioners, giving them the right to seek
reconveyance of the property from the private respondents. However, because of the trial court's dismissal order
adverted to above, the petitioners have been unable to prove their charges of fraud and misrepresentation.
The petitioners' action for reconveyance may not be said to have prescribed, for, basing the present action
on implied trust, the prescriptive period is ten years. The questioned titles were obtained on August 29, 1988 and
November 11, 1988, in OCT Nos. OP-38221 and OP-39847, respectively. The petitioners commenced their action
for reconveyance on September 13, 1993. Since the petitioners' cause of action is based on fraud, deemed to have
taken place when the certificates of title were issued, the complaint filed on September 13, 1993 is, therefore, well
within the prescriptive period.

Chu & Kokeng vs Caparas & Sps Perez

Facts
At the root of the case is a parcel of land with an area of 26,151 square meters (subject property) located
at Maguyam, Silang, Cavite, originally owned and registered in the name of Miguela Reyes and covered by Tax
Declaration (TD) No. 9529.4
On November 10, 1995, the petitioners filed a complaint to recover possession of the subject property
against the respondents, with a prayer to annul the sale of the subject property executed between the respondents. In
the complaint, the petitioners alleged that they are the successors-in-interest of Miguela over the subject
property, which Caparas held in trust for Miguela. The petitioners also averred that the subject property was
erroneously included in the sale of land between the respondents.
The respondents failed to file an answer to the complaint and were declared in default. The RTC thus allowed
the petitioners to present their evidence ex parte against the respondents.
The petitioners evidence showed that the subject property was previously part of the 51,151-square meter tract
of land owned by Miguela at Maguyam, Silang, Cavite. On July 5, 1975, Miguela sold to Caparas 25,000 square
meters of the eastern portion of the 51,151-square meter tract of land. Miguela retained for herself the balance (or
26, 151 square meters) of the subject property, located at the western portion of the original 51,151-square meter
property. Further, the deed of conveyance executed between Miguela and Caparas, entitled "Kasulatan ng Tuluyang
Bilihan ng Lupa," described the boundaries of the parcel of land purchased by Caparas as: "sa ibaba ay Faustino
Amparo, sa silangan ay Silang at Carmona boundary, sa ilaya ay Aquilino Ligaya, at sa kanluran ay ang natitirang
lupa ni Miguela Reyes."
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 The petitioners asserted that more than fourteen (14) years later, Caparas caused the preparation of a
consolidated survey plan (Caparas survey plan) under her name for several parcels of land (consolidated parcels of
land) located at Silang-Carmona, Cavite, with a total land area of 40,697 square meters. Under the Caparas survey
plan, the parcel of land supposedly retained by Miguela was erroneously transferred to the eastern portion of the
original 51,151-square meter tract of land. As a result of the error, the subject property was included in the
consolidated parcels of land owned by Caparas. The petitioners asserted that Caparas admitted the wrongful
inclusion of the subject property owned by Miguela in the consolidated parcels of land through Caparas
"Sinumpaang Salaysay ng Pagpapatotoo" dated August 27, 1990.
The petitioners also alleged that on November 8, 1991, Caparas sold to the spouses Perez the consolidated
parcels of land in a deed entitled "Kasulatan ng Bilihang Tuluyan." The petitioners claimed that included in the
aforesaid sale was a parcel of land with boundary description similar to the 25,000-square meter parcel of land
sold by Miguela to Caparas. According to the petitioners, Miguela, on July 24, 1994, sold the subject property to
the petitioners for which they (the petitioners) secured a tax declaration (TD No. 22477-A). Considering the alleged
error in the Caparas survey plan, the petitioners demanded the reconveyance of the subject property from
Caparas and the spouses Perez, who refused to reconvey the subject property.
The spouses Perez filed a petition for relief from judgment on the ground of excusable negligence. The spouses
Perez averred that the parcel of land sold to the petitioners was not the subject property whose title had been
confirmed in their (spouses Perezs) names. In the alternative, the spouses Perez claimed that they bought the
subject property in good faith and for value and had been in open, continuous, public and adverse possession of it
since 1991.

RTC Ruling
The RTC dismissed the petitioners complaint for lack of merit. The RTC held that the petitioners had no
sufficient cause of action for reconveyance and damages against the respondents. The RTC found that Chu admitted
during cross-examination that the parcel of land sold to them was different from the subject property.

CA Ruling
The CA dismissed the petitioners appeal and affirmed the February 19, 1998 decision of the RTC. The CA
declared that the petitioners resort to the court was premature since there was no proof that the Bureau of Lands
revoked its approval of the Caparas survey plan. In any event, the CA declared that Chus admission and the
existing and duly approved Caparas survey plan belied their claim of encroachment in the petitioners property by
the spouses Perez.

Petition
The petitioners insist that the CA misunderstood the term "encroachment." They argue that this case involves
technical encroachment and not mere physical encroachment. There was technical encroachment due to the
mistake in the Caparas survey plan that included the subject property as among the consolidated parcels of land
owned by Caparas.
The petitioners explained that the "Kasulatan ng Tuluyang Bilihan ng Lupa," between Miguela and Caparas,
referred to a parcel of land located at the eastern portion of the original 51,151-square meter tract of land. Under the
Caparas survey plan however, the parcel of land retained by Miguela (and thereafter sold to the petitioners) became
the parcel of land located at the eastern portion of the 51,151-square meter tract of land (designated as Lot No. 3);
the portion on the west of the 51,151-square meter tract of land (the subject property) was designated as Lot No. 1
and was included in Caparas consolidated parcels of land sold to the spouses Perez.
(RSPol Note: According to the petitioners, Caparas should only include the EASTERN PORTION and NOT
THE WESTERN PORTION in her survey since Miguela sold only the eastern portion to Caparas on July 5, 1975 and
retained the western portion, which was sold by Miguela to the petitioners on July 24, 1994. In other words, Caparas
should have the east portion, while the petitioners should have the west portion. However, in the Caparas Survey, it
appeared that instead of the western portion, what was retained by Miguela was the eastern portion. The survey
resulted to the inclusion of the petitioners western portion in the Caparas consolidated parcels of land, which was
subsequently sold to Sps Perez on Nov. 8, 1991.)
Similarly, the petitioners assert that the CA also disregarded the evidence of Caparas "Sinumpaang Salaysay ng
Pagpapatotoo" on Miguelas ownership of the subject property and Caparas admission that she was merely a
trustee thereof. The petitioners also assert that the CA should have also considered that the spouses Perez, as Caparas
successors-in-interest, are also trustees in the subject property.

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RSPol
Respondents
The spouses Perez, relying on the rulings of the RTC and of the CA, maintain that: (1) the petitioners resort to
the court was premature as they failed to prove their claim of encroachment; (2) the petitioners cannot be deemed
purchasers in good faith over the subject property; and (3) the RTC has no authority to approve or cancel survey
plans.

SC Ruling
On the Issue of Encroachment and Prematurity of the Action
First, the records undoubtedly established that the subject property was not the parcel of land that the
petitioners purchased from Miguela. We note that the Caparas survey plan was used in identifying the property
purchased by the petitioners from Miguela. The deed of sale between them showed what the petitioners purchased
from Miguela referred to another parcel of land designated as Lot No. 3 in the Caparas survey plan, while the
subject property was designated as Lot No. 1 of the same plan. Significantly, Chu also admitted that the parcel of
land they purchased from Miguela was different from the subject property.
(RSPol Note: The Court found that there was no error or encroachment in the sale between Caparas and Sps.
Perez because what the petitioners purchased from Miguela was designated as Lot No. 3, and what was designated as
Lot No. 1 was the one sold to Sps. Perez. There being two different properties, petitioners do not have a legal interest
over the subject property or Lot No. 1. In other words, Caparas sold Lot No. 1 to Sps Perez which was distinct and
separate from Lot No. 3 which was owned by the petitioners.)
The spouses Perezs Original Certificate of Title No. P-312333 covering the subject property and their
actual occupation of this property since 1991 duly established their ownership of this property. Clearly then,
there was no encroachment by the spouses Perez since they were the owners of the subject property. There was also
no evidence to prove that the spouses Perez encroached on the parcel of land (Lot No. 3) belonging to the petitioners.

Second, contrary to the petitioners assertion, what Caparas admitted in the "Sinumpaang Salaysay ng
Pagpapatotoo" was the erroneous inclusion of Lot No. 3 in the Caparas survey plan and its implication that Lot
No. 3 belonged to Caparas. It was for this reason that Caparas acknowledged Miguelas ownership of Lot No. 3.

On Reconveyance and Trust

In light of the above, the petitioners action against Caparas and the spouses Perez for reconveyance, based
on trust, must fail for lack of basis. An action for reconveyance is a legal and equitable remedy that seeks to
transfer or reconvey property, wrongfully registered in another persons name, to its rightful owner.To warrant
reconveyance of the land, the plaintiff must allege and prove, among others, ownership of the land in dispute and the
defendants erroneous, fraudulent or wrongful registration of the property.
In the present petition, the petitioners failed to prove that the parcel of land they owned was the subject
property. Logically, there is nothing to reconvey as what the spouses Perez registered in their names did not
include the parcel of land which the petitioners, by their evidence, own.
We also see no trust, express or implied, created between the petitioners and the spouses Perez over the subject
property. A trust by operation of law is the right to the beneficial enjoyment of a property whose legal title is
vested in another. A trust presumes the existence of a conflict involving one and the same property between two
parties, one having the rightful ownership and the other holding the legal title. There is no trust created when
the property owned by one party is separate and distinct from that which has been registered in anothers
name.

On the Discrepancy in the Survey Plan

In this case, the Caparas survey plan and the deed of sale between the petitioners and Miguela showed that the
parcel of land sold to the petitioners is distinct from the consolidated parcels of land sold by Caparas to the spouses
Perez. Although we are aware of an apparent discrepancy between the boundary description of the parcel of
land described in the "Kasulatan ng Tuluyang Bilihan ng Lupa" executed between Caparas and Miguela, the
"Kasulatan ng Tuluyang Bilihan ng Lupa" executed between Caparas and the spouses Perez, and Caparas TD on the
one hand, and the boundary description of the consolidated parcels of land stated in the Caparas survey plan and the
spouses Perezs title on the other hand, we find the discrepancy more imagined than real. This perceived
discrepancy does not help the petitioners cause in light of the evidence that the deed of sale between the petitioners
and Miguela used the Caparas survey plan that clearly identified the parcel of land sold to them was different from the
subject property.
Even granting that the Caparas survey plan did erroneously switch the positions of the petitioners and the
spouses Perezs respective landholdings, we agree with the RTC that reconveyance was still an inappropriate remedy.
The petitioners recourse should have been to file the proper action before the Department of Environment and
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RSPol
Natural Resources-Land Management Bureau for the cancellation of the Caparas survey plan and for the
approval of a new survey plan that correctly reflects the position of their respective landholdings. For until the
Caparas survey plan has been cancelled, the petitioners claim of encroachment has no basis.

Land Titles: Action for Reconveyance

RSPol