Case Summary (G.R. No. 144773)
Applicable Law and Constitutional Basis
Applicable constitutional framework: 1987 Philippine Constitution (decision date is after 1990). Governing statutory and civil provisions implicated in the decision include Article 1456 (constructive or implied trust), Article 1144 (ten‑year prescription for obligations created by law), Article 1104 (partition preterition), Act No. 3344 (registration of unregistered lands), and the Land Registration Act (Act No. 496) and its successor provisions concerning registration under the Torrens system.
Property Transfer and Title Events
On March 3, 1964, purported heirs of the Aying siblings executed an Extra‑Judicial Partition of Real Estate with Deed of Absolute Sale conveying the subject parcel to Aznar Brothers Realty Company. That deed was registered with the Register of Deeds of Lapu‑Lapu City on March 6, 1964 under Act No. 3344. Petitioner thereafter paid real property taxes on the land. In 1988 petitioner filed for and obtained reconstitution of the lost original title, resulting in issuance of OCT No. RO‑2856 in the names of the Aying siblings.
Possession, Notices and Ejectment Proceedings
Petitioner, asserting ownership, sent notices to vacate in 1991 to persons occupying the property; when occupants did not vacate, petitioner filed ejectment proceedings in the MTC, which ordered ejectment on February 1, 1994. Petitioner’s possession claim was also recognized in a separate proceeding (G.R. No. 128102) where this Court declared petitioner the rightful possessor on March 7, 2000.
Respondents’ Claim Before the RTC
Respondents (descendants of the Aying siblings, numbering around 220) filed suit in the RTC for cancellation of the Extra‑Judicial Partition with Absolute Sale, recovery of ownership, injunction and damages. Their amended complaint alleged co‑ownership as heirs of the registered owners under OCT No. RO‑2856, continuous owner‑like possession since time immemorial, and that the 1964 sale was fraudulent or void because not all co‑owners joined or some purported signatories were deceased at the time of execution. They claimed disturbance only in the last quarter of 1991 when petitioner issued notices and conducted earthmoving activities.
Petitioner’s Defenses and Pleadings
Petitioner denied respondents’ title and asserted that the 1964 deed validly conveyed the property to it; it pointed to continuous tax payment and asserted limited tolerance of a few occupants later ejected by court order. Petitioner raised affirmative defenses including prescription (arguing an implied trust-based reconveyance action prescribes in four years from discovery of fraud or ten years where applicable) and failure to state a cause of action.
Pre‑Trial Issues Framed
The RTC narrowed issues to: heirsip/filiation of plaintiffs as co‑owners; ownership; estoppel and bad faith claims against Aznar; liability for damages and attorney’s fees; validity of the Extra‑Judicial Partition with Deed of Absolute Sale; and prescription of plaintiffs’ action.
RTC Judgment
The RTC (July 4, 1997) found that the 1964 partition with sale was not simulated or forged and thus valid as to those who participated in its execution. It ruled that respondents’ action had prescribed (treating the action as reconveyance based on implied/constructive trust prescribing in ten years from registration of the deed on March 6, 1964, or, if annulment for fraud, within four years from discovery). The RTC concluded respondents failed to prove filiation and therefore dismissed the amended complaint on prescription grounds, ordered cancellation of OCT No. RO‑2856 and registration of a TCT in petitioner’s name upon payment of fees, and dissolved the preliminary injunction.
Court of Appeals Disposition
The Court of Appeals (March 7, 2000) affirmed the RTC decision but modified it by declaring the heirs of Emiliano, Simeon and Roberta Aying lawful owners of the contested property to the extent of 3/8. The CA rejected prescription insofar as an action for recovery of possession of registered land is concerned (citing Section 44, Act No. 496), and held that, even when an implied trust is involved, prescription would not run in the absence of evidence that positive acts repudiate the trust and notified non‑participating heirs. The CA sustained the validity of the partition/sale except as to the shares of heirs who did not participate.
Issues on Supreme Court Review
Petitioner advanced three principal assignments of error: (1) the CA erred in not applying laches against heirs; (2) the CA erred in not treating registration of the partition deed as unequivocal repudiation of trust triggering prescription; and (3) the CA erred in not applying Article 1104 (that a partition preteriting compulsory heirs shall not be rescinded absent bad faith or fraud).
Supreme Court’s Deference to Established Findings
The Supreme Court noted that only the heirs of Emiliano, Simeon and Roberta were impleaded in the present petition; petitioner did not dispute the CA’s finding that these respondents are heirs of those three siblings. The Trial Court and CA findings that the partition deed was not forged and that the named heirs did not participate in execution were treated as established.
Constructive/Implied Trust Analysis and Applicable Prescription
The Court applied Article 1456 (if property is acquired through mistake or fraud, person obtaining it is a trustee by operation of law) and pertinent jurisprudence distinguishing express/resulting trusts from constructive implied trusts. The Court reiterated that reconveyance obligations arising from implied or constructive trusts fall under Article 1144’s ten‑year prescriptive period. The ten‑year period ordinarily runs from issuance of Torrens title or registration of the conveyance, but where the later instrument is not properly registered under the Torrens system, prescription runs from actual notice/discovery.
Effect of Registration Under Act No. 3344 Versus Torrens Registration
Because the 1964 partition with sale was registered under Act No. 3344 (for unregistered lands) rather than under the Land Registration Act (Act No. 496) despite the land being already Torrens‑titled, the Court held the 1964 registration did not constitute proper registration under the Torrens system and thus did not constitute constructive notice to third parties. Consequently, the ten‑year prescriptive period could not be reckoned from March 6, 1964; instead prescription began to run upon actual knowledge by the affected heirs.
Burden of Proof and Application to Heirs
The Court clarified that the party asserting an affirmative defense (here, petitioner asserting prescription) bears t
...continue readingCase Syllabus (G.R. No. 144773)
Case Caption, Court and Decision Reference
- Reported at 497 Phil. 788, Second Division, G.R. No. 144773, decided May 16, 2005.
- Decision authored by Justice Austria‑Martinez; concurring justices named in the reported decision: Puno (Chairman), Callejo, Sr., Tinga, and Chico‑Nazario.
- The petition is a petition for review on certiorari seeking modification of the Court of Appeals decision dated March 7, 2000 and the CA Resolution dated August 2, 2000 denying petitioner’s motion for reconsideration.
Subject Property and Early Title History
- Disputed property: Lot No. 4399, area 34,325 square meters, located at Dapdap, Lapu‑Lapu City.
- Original cadastral petition by Crisanta Maloloy‑on resulted in a Cadastral Court decision directing issuance of a decree in the names of Crisanta’s eight children (surnamed Aying): Juan, Celedonio, Emiliano, Francisco, Simeon, Bernabe, Roberta and Fausta.
- The original certificate of title was lost during the war.
- All heirs of the Aying siblings executed an Extra‑Judicial Partition of Real Estate with Deed of Absolute Sale dated March 3, 1964, conveying the subject parcel to Aznar Brothers Realty Company (petitioner).
- That deed was registered with the Register of Deeds of Lapu‑Lapu City on March 6, 1964 under Act No. 3344 (the registration statute for unregistered land).
- Petitioner paid real property taxes on the property continuously thereafter.
Reconstitution of Title; Subsequent Possessory Actions
- Petitioner filed a Petition for Reconstitution of the Original Title in 1988 because the original title had been lost during the war.
- On April 12, 1988, the court granted the petition and directed issuance of a reconstituted title in the names of the eight Aying siblings; Original Certificate of Title (OCT) No. RO‑2856 was issued.
- In 1991 petitioner sent notices to vacate to occupants of the property and, after noncompliance, filed an ejectment complaint in the Metropolitan Trial Court (MTC), Lapu‑Lapu City.
- On February 1, 1994, the MTC ordered the occupants to vacate.
- The ejectment case reached this Court as G.R. No. 128102, and on March 7, 2000, a decision was promulgated in favor of Aznar Brothers Realty Company, declaring petitioner the rightful possessor.
Respondents’ Action Before the RTC (Civil Case No. 2930‑L)
- Respondents, alleged descendants/heirs of the eight Aying siblings (in total around 220 persons), filed a complaint for cancellation of the Extra‑Judicial Partition with Deed of Absolute Sale, recovery of ownership, injunction and damages before the Regional Trial Court (RTC) of Lapu‑Lapu City.
- The complaint was dismissed twice without prejudice and re‑filed on August 19, 1993 as Civil Case No. 2930‑L; an amended complaint was later filed.
- In the amended complaint respondents alleged, inter alia:
- They are co‑owners of the property as descendants of the registered owners under OCT No. RO‑2856.
- They had been in actual, peaceful, open, continuous possession in concept of owner since time immemorial.
- Their possession was disturbed only in late 1991 when petitioner sent notices to vacate and later undertook earthmoving and demolition activity together with Sta. Lucia Realty and Development, Inc.
- The Extra‑Judicial Partition with Deed of Absolute Sale was fraudulent and void ab initio because not all co‑owners signed and some signatories were already dead at the time of execution.
- Petitioner entered the land in bad faith, using force, threat and intimidation, and respondents suffered moral damages.
Petitioner’s Answer and Affirmative Defenses at Trial
- Petitioner denied respondents’ ownership claims and asserted:
- Petitioner had been in actual possession as owner by virtue of the extra‑judicial partition and deed of absolute sale.
- Petitioner had been paying taxes religiously.
- Petitioner tolerated about six persons on the land who were later ejected by court order.
- Petitioner raised affirmative defenses including failure to state a cause of action and prescription, asserting respondents delayed 27 years, 10 months and 27 days to file, and that an action to recover property based on an implied trust must be instituted within four years from discovery of the fraud (petitioner’s contention).
Pre‑Trial Issues Framed by the RTC
- The Pre‑Trial Order dated January 30, 1995 narrowed issues to, among others:
- Whether plaintiffs (respondents) are heirs of the registered owners of Lot No. 4399.
- Whether plaintiffs are the owners of Lot No. 4399.
- Whether defendant Aznar is estopped to claim Lot No. 4399.
- Whether defendant Aznar is a builder in bad faith.
- Whether defendants are liable for damages and attorney’s fees.
- Whether the Extra‑Judicial Partition with Deed of Absolute Sale is valid and conveyed Lot No. 4399 to Aznar.
- Whether plaintiffs’ action has prescribed.
RTC Decision (July 4, 1997) — Findings and Disposition
- The RTC found that:
- Respondents failed to prove that the extra‑judicial partition with deed of absolute sale was totally simulated or fictitious; the document was valid and effectively conveyed the property to petitioner.
- Respondents’ action had prescribed: characterized as reconveyance based on implied or constructive trust, it prescribed in ten years from registration of the deed on March 6, 1964; if considered an action for annulment on ground of fraud, it should have been filed within four years from discovery of the fraud.
- Respondents failed to present admissible proof of filiation and thus could not prove heirship to the registered owners under OCT No. RO‑2856.
- Dispositive portion of the RTC Decision (as reproduced in the record):
- Judgment dismissing the amended complaint on the ground of prescription.
- Declared the Extra‑Judicial Partition of Real Estate with Deed of Absolute Sale dated March 3, 1964 as valid and binding and adjudged that Lot 4399 had been validly conveyed to and in favor of Aznar Brothers Realty Company.
- Directed the Register of Deeds to register the deed and cancel OCT No. RO‑2856 and to issue a transfer certificate of title in the name of Aznar upon payment of fees.
- Ordered dissolution of the writ of preliminary injunction and dismissed plaintiffs’ motion for contempt; costs against plaintiffs.
Court of Appeals Decision (March 7, 2000) — Ruling and Reasoning
- The CA affirmed the RTC decision but modified it by declaring the heirs of Emiliano Aying, Simeon Aying and Roberta Aying as lawful owners of the contested property equivalent only to 3/8.
- CA rationale regarding prescription and trusts:
- Held that an action for recovery of possession of registered land never prescribes under Section 44, Act No. 496 (now Sec. 47, PD 1520): "no title to registered land in derogation to that of a registered owner shall be acquired by prescription."
- Even if the action is deemed based on implied trust, prescription did not begin to run because there was no evidence of positive acts of repudiation made known to heirs who did not participate in the execution of the partition/sale.
- The CA struck down the RTC’s dismissal for prescription, held respondents’ action had not prescribed, and nonetheless upheld validity of the partition deed except as to those heirs who did not participate in executing it.
Petition to the Supreme Court — Issues Raised by Petitioner
- Petitioner’s grounds in the petition for review on certiorari to the Supreme Court:
- I. Alleged error by the CA in failing to apply the rule that an heir of the original registered owner may lose his right to recover a titled property by reason of laches.
- II. Alleged error in failing to apply the rule that registration of the deed of parti