G.R. No. 96306 - Berico vs. Court of Appeals

Jose de los Santos owned a 98,254 square-meter parcel of land (Lot No. 785, PLs-32) located at Balo-Andang, San Ramon, San Pascual (now Claveria), Masbate, as evidenced by Original Certificate of Title (OCT) No. P-671 issued on May 31, 1956.
On October 31, 1961, Jose de los Santos sold, via a private document, a 214-hectare portion of the property to private respondents, Ciriaco Flores and Felisa Bareja.
The private respondents promptly took possession, declared the property for taxation in the name of respondent Flores, and timely paid the required taxes.

On January 3, 1963, Jose de los Santos sold one-half of Lot No. 785 to petitioner Lorenzo Berico, and on March 30, 1963 (or thereafter), the minor children of Jose de los Santos sold the remaining half to Berico.
Despite being aware of the 1961 sale and the respondents’ possession of a portion of the property—as evidenced by confrontations at the property boundaries and the planting of coconut trees by both parties—Berico proceeded with the acquisition.

On June 5, 1968, Berico caused the cancellation of OCT No. P-671 and secured the issuance of Transfer Certificate of Title (TCT) No. T-1346 in his name, thereby including within it the portion sold in 1961 to the private respondents.
Although Berico’s registration was executed despite his evident knowledge of the prior sale, he only paid taxes on the property from 1973 onward and declared it for taxation in his wife’s name in 1968.
On November 8, 1978, upon discovering the cancellation of the original title and the issuance of TCT No. T-1346, the private respondents registered the deed of sale in their favor.

On December 14, 1978, the private respondents filed a complaint for annulment of the disputed TCT before the then Court of First Instance (now Regional Trial Court), seeking annulment of TCT No. T-1346 insofar as it affected their property and requesting recognition of their superior right and possession.
After trial, the lower court ruled in favor of the private respondents, annulling TCT No. T-1346 and ordering the cancellation of the title, thereby affirming the respondents’ rights based on their prior possession and the principle of “good faith.”
The petitioners then appealed, contending two main issues: (a) that the respondents’ action was barred by prescription as it was filed long after the issuance of TCT, and (b) that Berico’s acquisition was not tainted by bad faith since the title appeared “clean” at the time of his purchase.

The Court of Appeals (CA) upheld the trial court decision but modified the remedy by ordering Berico to execute a deed of reconveyance for 2.25 hectares out of the land under dispute, pending proper partition and subdivision.
In addressing the issues, the CA and subsequently the Supreme Court analyzed whether the prescriptive period should be computed from the issuance of TCT or from the discovery of fraud and whether the requirement of good faith for registration under Article 1544 was met by Berico.
Alongside the majority opinion, a dissenting opinion (Justice Melo) and a separate concurring opinion (Justice Romero) were rendered, highlighting distinct views regarding prescription and the application of constructive trust principles.

Does the prescription bar the private respondents’ action for annulment of TCT No. T-1346, given that the complaint was filed after a lapse of over ten years from the issuance of the title?
Should the prescriptive period be computed from the issuance of TCT or from the respondents’ discovery of Berico’s bad faith, namely on November 8, 1978?

Was petitioner Berico’s registration of the deeds of sale in bad faith, considering his prior knowledge of the sale and possession by the private respondents?
Can the fact that Berico was aware of the 1961 sale and the respondents’ occupation invalidate his title under Article 1544, which requires good faith for preferential rights in the case of double sales?

Is the invocation of a constructive or implied trust appropriate in this case, or does the clear mandate of Article 1544 exclude such equitable remedies given the absence of requisite fraud elements and the presence of bad faith?