SECOND DIVISION
G.R. No. 214315, August 14, 2019
HEIRS OF BENIGNO SUMAGANG, REPRESENTED BY JESUS S. ABELLANOSA, MARINA BELLITA, RESURRECION CAVAN, ALEX MAPAIT AND TEODORICO SUMAGANG, PETITIONERS, v. AZNAR ENTERPRISES, INC., AZNAR BROTHERS REALTY COMPANY, STA. LUCIA REALTY AND DEVELOPMENT INC., (CO-DEFENDANTS AND CROSS-CLAIM DEFENDANTS), HEIRS OF PERFECTA LABAYA, WITH ATTORNEY-IN-FACT IN THE PERSON OF FRANCIS R. PESTAÑO (COMPLAINANTS), TERESITA DELA CALZADA-REYES,** ET AL. (1st COMPLAINANTS-INTERVENORS), AND CELSO DEIPARINE *** (2ND COMPLAINANT-INTERVENOR), RESPONDENTS.
D E C I S I O N
REYES, J. JR., J.:
Assailed in this Petition for Review on Certiorari are the June 22, 2011 Decision1 and the July 30, 2014 Resolution2 of the Court of Appeals-Cebu City (CA) in CA-G.R. CEB-CV No. 00381 which affirmed the March 8, 2004 Decision3 of the Regional Trial Court, Cebu City, Branch 5 (RTC) in Civil Case No. CEB-21695.
WHEREFORE, judgment is hereby rendered against plaintiffs, the intervenors and the defendants and cross-claimants heirs of Benigno Sumagang and in favor of defendants Aznar Brothers Realty Company and Aznar Development Corporation, declaring them the lawful registered owners of Lot 4, as amended, plan Psu-192448, LR Case No. N-524, LRC Record No. N-25474, containing an area of 154,689 square meters, located at Pardo, Cebu City and upholding the validity of Original Certificate of Title No. 251 issued on June 17, 1971 in the name of defendants Aznar.
However, the counterclaims of defendants Aznar are denied for want of proof.
No pronouncement as to costs.
IT IS SO ORDERED.11
WHEREFORE, in view of the foregoing, the instant appeal is hereby DISMISSED.
SO ORDERED.12
SEC. 48. Certificate not subject to collateral attack. — A certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or canceled except in a direct proceeding in accordance with law.
Section 48 of P.D. 1529, the Property Registration Decree, provides that a certificate of title shall not be subject to collateral attack and cannot be altered, modified, or canceled except in a direct proceeding. An action is an attack on a title when the object of the action is to nullify the title, and thus challenge the judgment or proceeding pursuant to which the title was decreed. The attack is direct when the object of an action is to annul or set aside such judgment, or enjoin its enforcement. On the other hand, the attack is indirect or collateral when, in an action to obtain a different relief, an attack on the judgment or proceeding is nevertheless made as an incident thereof.
x x x A counterclaim can be considered a direct attack on the title. In Development Bank of the Philippines v. Court Appeals, we ruled on the validity of a certificate of title despite the fact that the nullity thereof was raised only as a counterclaim. It was held that a counterclaim is considered a complaint, only this time, it is the original defendant who becomes the plaintiff. It stands on the same footing and is to be tested by the same rules as if it were an independent action.16 x x x (Citation omitted; emphases supplied)
While Section 47 of Act No. 496 provides that a certificate of title shall not be subject to collateral attack, the rule is that an action is an attack on a title if its object is to nullify the same, and thus challenge the proceeding pursuant to which the title was decreed. The attack is considered direct when the object of an action is to annul or set aside such proceeding, or enjoin its enforcement. On the other hand, an attack is indirect or collateral when, in an action to obtain a different relief, an attack on the proceeding is nevertheless made as an incident thereof. Such action to attack a certificate of title may be an original action or a counterclaim in which a certificate of title is assailed as void. A counterclaim is considered a new suit in which the defendant is the plaintiff and the plaintiff in the complaint becomes the defendant. It stands on the same footing and is to be tested by the same rules as if it were an independent action. Furthermore, since all the essential facts of the case for the determination of the title's validity are now before the Court, to require the party to institute cancellation proceedings would be pointlessly circuitous and against the best interest of justice.
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 an equivalent phrase occurs in this Decree, it shall be deemed to include an innocent lessee, mortgagee, or other encumbrancer for value.
Upon the expiration of said period of one year, the decree of registration and the certificate of title issued shall become incontrovertible. Any person aggrieved by such decree of registration in any case may pursue his remedy by action for damages against the applicant or any other persons responsible for the fraud.
"[A]n action for reconveyance [x x x] prescribes in [10] years from the issuance of the Torrens title over the property." The basis for this is Section 53, Paragraph 3 of Presidential Decree No. 1529 in relation to Articles 1456 and 1144(2) of the Civil Code.
Under Presidential Decree No. 1529 (Property Registration Decree), the owner of a property may avail of legal remedies against a registration procured by fraud:SECTION 53. Presentation of Owner's Duplicate Upon Entry of New Certificate. — [x x x]
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[. x x x]
Article 1456 of the Civil Code provides that a person acquiring a property through fraud becomes an implied trustee of the property's true and lawful owner.
An implied trust is based on equity and is either (i) a constructive trust, or (ii) a resulting trust. A resulting trust is created by implication of law and is presumed as intended by the parties. A constructive trust is created by force of law such as when a title is registered in favor of a person other than the true owner.
The implied trustee only acquires the right "to the beneficial enjoyment of [the] property." The legal title remains with the true owner. In Crisostomo v. Garcia, Jr.:Art. 1456 of the Civil Code provides:
Art. 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.
Thus, it was held that when a party uses fraud or concealment to obtain a certificate of title of property, a constructive trust is created in favor of the defrauded party.
Constructive trusts are "created by the construction of equity in order to satisfy the demands of justice and prevent unjust enrichment. They arise contrary to intention against one who, by fraud, duress or abuse of confidence, obtains or holds the legal right to property which he ought not, in equity and good conscience, to hold."
When property is registered in another's name, an implied or constructive trust is created by law in favor of the true owner. The action for reconveyance of the title to the rightful owner prescribes in 10 years from the issuance of the title.
Thus, the law creates a trust in favor of the property's true owner.
The prescriptive period to enforce this trust is 10 years from the time the right of action accrues. Article 1144 of the Civil Code provides: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.
In an action for reconveyance, the right of action accrues from the time the property is registered.
In Crisostomo, the petitioners were able to transfer the property under their names without knowledge of the respondent. The respondent filed an action for reconveyance. In arguing that the action for reconveyance had prescribed, the petitioners claimed that the cause of action of the respondent should be based on the latter's Deed of Sale and thus the respondent's right of action should have accrued from its execution. This Court, however, ruled that the right of action accrued from the time the property was registered because registration is the act that signifies that the adverse party repudiates the implied trust:In the case at bar, respondent's action which is for Reconveyance and Cancellation of Title is based on an implied trust under Art. 1456 of the Civil Code since he averred in his complaint that through fraud petitioners were able to obtain a Certificate of Title over the property. He does not seek the annulment of a voidable contract whereby Articles 1390 and 1391 of the Civil Code would find application such that the cause of action would prescribe in four years.
[x x x x ]
An action for reconveyance based on implied or constructive trust prescribes in ten years from the alleged fraudulent registration or date of issuance of the certificate of title over the property.
It is now well-settled that the prescriptive period to recover property obtained by fraud or mistake, giving rise to an implied trust under Art. 1456 of the Civil Code, is 10 years pursuant to Art. 1144. This ten-year prescriptive period begins to run from the date the adverse party repudiates the implied trust, which repudiation takes place when the adverse party registers the land.
Likewise, in Duque v. Domingo:The registration of an instrument in the Office of the Register of Deeds constitutes constructive notice to the whole world, and, therefore, discovery of the fraud is deemed to have taken place at the time of registration. Such registration is deemed to be a constructive notice that the alleged fiduciary or trust relationship has been repudiated. It is now settled that an action on an implied or constructive trust prescribes in ten (10) years from the date the right of action accrued. The issuance of Transfer Certificate of Title No. 7501 in 1931 to Mariano Duque commenced the effective assertion of adverse title for the purpose of the statute of limitations. x x x
Registration of the property is a "constructive notice to the whole world." Thus, in registering the property, the adverse party repudiates the implied trust. Necessarily, the cause of action accrues upon registration.
An action for reconveyance and annulment of title does not seek to question the contract which allowed the adverse party to obtain the title to the property. What is put on issue in an action for reconveyance and cancellation of title is the ownership of the property and its registration. It does not question any fraudulent contract. Should that be the case, the applicable provisions are Articles 1390 and 1391 of the Civil Code.
Thus, an action for reconveyance and cancellation of title prescribes in 10 years from the time of the issuance of the Torrens title over the property.19 (Citations omitted; emphases supplied)
Endnotes:
* Per Special Order No. 2688 dated July 30, 2019.
** Also referred to as "Teresita de la Calzada-Reyes" in some parts of the rollo.
*** Also referred to as "Celso Dieparine" in some parts of the rollo.
1 Penned by Associate Justice Victoria Isabel A. Paredes, with Associate Justices Edgardo L. Delos Santos and Ramon Paul L. Hernando (now a Member of the Court), concurring; rollo, pp. 54-66.
2 Penned by Associate Justice Edgardo L. Delos Santos, with Associate Justices Ramon Paul L. Hernando and Renato C. Francisco, concurring; id. at 50-53.
3 The RTC Decision was not attached.
4 Id. at 55.
5 Id.
6 Id. at 56.
7 Id.
8 Id.
9 Id. at 57.
10 Id. at 57-58.
11 Id. at 58-59.
12 Id. at 65-66.
13Arangote v. Spouses Maglunob, 599 Phil. 91, 111 (2009).
14 RULES OF COURT, Rule 6, Section 8. Cross-claim. — A cross-claim is any claim by one party against a co-party arising out of the transaction or occurrence that is the subject matter either of the original action or of a counterclaim therein. Such cross-claim may include a claim that the party against whom it is asserted is or may be liable to the cross-claimant for all or part of a claim asserted in the action against the cross-claimant.
15Heirs of Simplicio Santiago v. Heirs of Mariano E. Santiago, 452 Phil. 238 (2003).
16 Id. at 252-253.
17Leyson v. Bontuyan, 492 Phil. 238, 257 (2005).
18Spouses Aboitiz v. Spouses Po, 810 Phil. 123 (2017).
19 Id. at 142-147.