CAPULONG VS CA

Between November 19, 1964 and May 28, 1965, plaintiff-appellant Jovita Ponce Vda. de Capulong
obtained a series of loans in varied amounts from Dr. Delfin which amounted to P16,250.00. The loans
were secured by a continuing mortgage on plaintiff's 950.3 square meter titled property in barrio
Concepcion, municipality of Baliuag, Bulacan. Capulong failed to liquidate the mortgage upon maturity.
Dr. Tolentino accepted her proposal to sell to him the mortgaged property. On February 18, 1967, the
notarial document of absolute sale now assailed as an equitable mortgage, was executed by Capulong
whereby title to the property in question was transferred to Dr. Tolentino for P21,300.00, which amount
was P1,000.00 more than Capulong's mortgage indebtedness. In another document Capulong was given
an option to purchase the property on or before November 20, 1967, for the same price of P21,300.00
but Capulong failed to exercise the option in due time. Her efforts to secure an extension of time proved
futile. On January 28, 1968, Dr. Tolentino sold (Exh O) the land in question to defendants spouses
Ricardo G. Tolentino and Pilar de Joya in whose names it is now titled. On February 1, 1968, Jovita Ponce
Vda. de Capulong, predecessor-in-interest of the petitioners, filed the complaint for annulment of
usurious contracts, declaration of the deed of sale as an equitable mortgage, reconveyance, and
damages with the Court of First Instance of Bulacan against respondent Delfin G. Tolentino. In addition,
Mrs. Capulong filed an amended complaint alleging inter alia that the subject property was sold by
Delfin Tolentino to the spouses Ricardo G. Tolentino and Pilar de Joya under a fictitious deed of sale. She
also impleaded said spouses as additional defendants. As response, the private respondents filed their
answer alleging inter alia that the transactions adverted to are not usurious and that the deed of
absolute sale between them and Jovita Capulong is a true and valid sale representing the real intention
of the parties.

ISSUE:

Whether or not the sale between the parties is an equeitable mortgage?

HELD:

In the case at bar, the records show that over a six month period, the mother of petitioners borrowed
money on no less than ten separate occasions from Delfin G. Tolentino. The evidence presented by Mrs.
Jovita Ponce Vda. De Capulong alleged that her total borrowing of P13,000.00 were added to what she
claims were serious interests amounting to P3,250.00, the kited total of P16,250.00 was made to appear
as P21,300.00 purchase price for the lot when actually no money outside of the ten earlier loan
transactions was exchanged between the parties. The added fact that Jovita Capulong remained in
actual possession of the land and enjoyed the fruits thereof confirms the real intention of the parties to
secure payment of the loans with the land as security. The records show that the private respondents
waited for the period of redemption to expire before taking possession of the land. Had the petitioner's
mother really executed an absolute sale in favor of respondent Delfin Tolentino the land which is the
subject of the transaction should have been delivered to Tolentino and he would assume immediate
possession after the execution of the questioned deed of sale. The deed of sale taken together with the
companion "right to redeem" contract is only an equitable mortgage.
DAVID VS BANDIN

ISSUE:

During their lifetime, the spouses Juan Ramos, who died on March 5, 1919, and Fortunata Calibo, who
died before 1919, were the owners of two parcels of land situated in Las Piñas, Rizal: 1) A parcel of land
situated in Barrio Talon, and 2) A parcel of land situated in Barrio Laong. Both spouses died intestate,
leaving as heirs two legitimate children, Candida and Victoriana Ramos, and granddaughter, Agapita
Ramos, daughter of their deceased son, Anastacio. Upon the death of the said spouses, their daughter,
Candida Ramos, assumed administration of the properties until her death on February 16, 1955.
Victoriana Ramos died on December 12, 1931.The record shows that sometime in 1943, Candida Ramos
prevailed upon her niece, Agapita Ramos, and her nephew, Eulogio Bandin, to sell a portion of the Talon
property to the spouses Rufino O. Miranda and Natividad Guinto. This portion was divided into three
lots. The remaining portion of the Talon property was extra-judicially partitioned on September 17, 1955
among the heirs of Candida Ramos. The Laong property was sold by Candida Ramos and her children on
December 19, 1943 to Hermogenes Lucena, husband of Juanita Martin, one of the daughters of Candida.
On September 23, 1959, Juanita (then widowed) sold the property to the spouses Gregorio and Mary
Venturanza. From the foregoing facts as established by the evidence, the trial court held that the Talon
and Laong properties formed part of the estate of the spouses Juan Ramos and Fortunata Calibo, which
after their death devolved by right of succession upon their heirs, namely, Candida Ramos, Victoriana
Ramos and Agapita Ramos, each of whom was entitled to onethird\ (1/3) pro-indiviso share of the
properties. The estate of the deceased spouses was never judicially or extrajudicially settled among their
heirs, who, therefore, remained proindiviso co-owners of the said properties, and upon the death of
Victoriana and Candida, their respective shares in turn passed to their heirs. Accordingly, the trial court
declared the plaintiffs, Agapita Ramos, and the heirs of Victoriana Ramos, entitled to two-thirds (2/3)
pro-indiviso share of the Talon and Laong properties, and ordered the defendants heirs of Candida
Ramos to reconvey to plaintiffs their shares in those properties. However such reconveyance was no
longer possible with respect to the portions which, in the meantime, had been sold and disposed of to
third parties who were purchasers in good faith and for value.

ISSUE:

W/n a purchaser who claims to be in good faith is considered an IPV even if the land sold is
unregistered?

Held:

As the record shows, petitioners bought the property when it was still unregistered land. The defense of
having purchased the property in good faith may be availed of only where registered land is involved
and the buyer had relied in good faith on the clear title of the registered owner. One who purchases an
unregistered land does so at his peril. His claim of having bought the land in good faith, i.e. without
notice that some other person has a right to, or interest in, the property, would not protect him if it
turns out that the seller does not actually own the property. This is what happened in the case at bar.
DE LEON VS SALVADOR

FACTS:

A judgment for P35,000.00-actual, moral and exemplary damages obtained by Enrique de Leon against
private respondent Eusebio Bernabe by Judge Fernando A. Cruz, having become 􀀹nal and executory, a
writ of execution was issued by said court. Pursuant thereto, the city sheriff, on November 8, 1966
levied on execution on two parcels of land of 682.5 square meters each registered in the names of
Bernabe. At the execution sale held on February 14, 1967, the city sheriff sold the said properties to
herein petitioner, Aurora (sister of the judgment creditor) as the highest bidder for the total sumof
P30,194.00, (the property then being subject to an existing mortgage lien in the amount of
P120,000.00). The sheriff executed the corresponding certificate of sale in her favor, which was duly
registered on February 21, 1967 with the Caloocan City register of deeds. On February 7, 1968, just
about two weeks before the expiration of the one-year period to redeem the properties sold in
execution, the judgment debtor Bernabe 􀀹led a separate civil action docketed as Civil Case No. C-1217
against his judgment creditor Enrique de Leon, herein petitioner Aurora P. de Leon as purchaser and the
sheriff as defendants for the setting aside or annulment of the execution sale on February 14, 1967 "for
being anomalous and irregular," Pending his decision, Judge Salvador issued on May 20, 1969 an order
granting two exparte motions of Bernabe of May 12, and May 15, 1969 and ordering the sheriff to allow
Bernabe to redeem the two properties sold at public auction more than two years ago on February 14,
1967 under the writ of execution issued by Judge Cruz' court in the first case. Bernabe paid the
redemption price and registered the same in the registry of deeds. On May 30, 1969, Aurora also 􀀹led in
the 􀀹rst case before Judge Cruz' court a motion with proper notice for consolidation of title and for the
court to order the sheriff to issue in her favor a 􀀹nal deed of sale over the subject parcels of land. Judge
Cruz' order of September 5, 1969, granting Aurora's motion over Bernabe's opposition that he had
redeemed on May 21, 1969 the said properties by virtue of Judge Salvador's order of May 20, 1969 in
the second case and ordering Bernabe to surrender his owner's duplicates of title for transfer to Aurora

ISSUE:

Who is the rightful owner of the parcel of land in dispute?

HELD:

Aurora is the rightful owner of the land in dispute. Judge Salvador's order of May 20, 1969 granting two
ex-parte motions of the judgment debtor Bernabe and directing the sheriff to allow the redemption of
the properties notwithstanding that the one-year redemption period had already lapsed more than one
year ago was equally untenable. It must be noted that Bernabe's action in Judge Salvador's court 􀀹led on
February 7, 1968 two weeks before the expiration of the redemption period sought to set aside the
execution sale and to have a new auction sale ordered, on the grounds that the sheriff had allegedly
sold the two parcels of land jointly instead of separately, and that the total sales price of P30,194.00 was
shocking to the conscience. Aside from the basic lack of jurisdiction of Judge Salvador's court to issue
the redemption order, the order per se suffered from other grave flaws.
LAO VS CA

Facts:

Better Homes Realty and Housing Corporation filed with the Metropolitan Trial Court of Quezon City, a
complaint for unlawful detainer, on the ground Petitioner Manuel Lao occupied their property in
Quezon City without rent, but on pure liberality with the understanding that he would vacate the
property upon demand, but despite demand to vacate made by letter received by (refused to vacate the
premises.

In his answer to the complaint, Manuel Lao claimed that he is the true owner of the house and lot
located at Unit I, No. 21 N. Domingo Street, Quezon City; that the (herein private respondent) purchased
the same from N. Domingo Realty and Development Corporation but the agreement was actually a loan
secured by mortgage; and that plaintiffs cause of action is for accion publiciana, outside the jurisdiction
of an inferior court.

On October 9, 1992, the Metropolitan Trial Court of Quezon City rendered judgment ordering the
(petitioner) to vacate the premises located at Unit I, No. 21 N. Domingo Street, Quezon City; to pay
(private respondent) the sum of P300.00 a day starting on January 31, 1992, as reasonable rent for the
use and occupation of the premises; to pay plaintiff P5,000.00, as attorneys fees, and costs.

In its decision, the Regional Trial Court held that the subject property was acquired by (private
respondent) from N. Domingo Realty and Development Corporation, by a deed of sale, and (private
respondent) is now the registered owner under Transfer Certificate of Title No. 316634 of the Registry of
Deeds of Quezon City, but in truth the (petitioner) is the beneficial owner of the property because the
real transaction over the subject property was not a sale but a loan secured by a mortgage thereon.

ISSUE:

Whether or not petitioner should be ejected from the premises in question

HELD:

No, he should not be ejected.

Private Respondent Better Homes Realty and Housing Corporation anchored its right in the ejectment
suit on a contract of sale in which petitioner (through their family corporation) transferred the title of
the property in question. Petitioner contends, however, that their transaction was not an absolute sale,
but an equitable mortgage. In determining the nature of a contract, the Court looks at the intent of the
parties and not at the nomenclature used to describe it. Pivotal to deciding this issue is the true aim and
purpose of the contracting parties as shown by the terminology used in the covenant, as well as by their
conduct, words, actions and deeds prior to, during and immediately after executing the agreement.

Based on the previous discussion, there was no sale of the disputed property. Hence, it still belongs to
petitioners family corporation, N. Domingo Realty & Development Corporation. Private respondent,
being a mere mortgagee, has no right to eject petitioner. Private respondent, as a creditor and
mortgagee, x x x cannot appropriate the things given by way of pledge or mortgage, or dispose of them.
Any stipulation to the contrary is null and void.[
LAYUG VS IAC
Layug v IAC: Mojica
DOCTRINE: Even in residential properties, RA 6552 recognizes and reaffirms the vendor’s
right to cancel the contract to sell upon breach and non-payment of the stipulated
instalments. The one who fails to pay the rest of the instalments as agreed upon is left only to
a right to a refund of the cash surrender value of the payments on the property
equivalent to 50% of the total payments already made.

FACTS
1) Gabuya brought a suit against Layug for annulment of the contract and for recovery of
damages because Layug failed to pay the rest of the instalments for the purchase of 12 lots in
Iligan City (agreed to cost P120,000 payable in three yearly instalments). Layug only paid the
first 2 installments (P80,000) and failed to pay the last instalment of P40,000.
2) The TC ruled in favour of Gabuya. This was affirmed by the CA.
3) Layug is relying on the stipulation in the contract a) granting him, as vendee, a 30days grace
period within which to pay any yearly instalment not paid within the time fixed therefor, and b)
declaring him liable, in the event of his failure to pay within the grace period, “for interest at the
legal rate.” He argues that the stipulation indicates that rescission was not
envisioned as a remedy against a failure to pay instalments and that such failure
was not a ground for abrogating the contract but merely generated liability for
interest at legal rate…”

ISSUE
Whether or not Gabuya had the right to rescind the contract and should this happen, whether
Layug should be entitled to get back the ENTIRE amount he already paid?
HELD
Yes Gabuya could rescind the contract. No, Layug should not be entitled to the entire amount he
already paid.
The SC: The grace period clause should be read conjointly with the stipulation on rescission, and
in such a manner as to give full effect. The patent and logical import of both provisions, taken
together, is that when the vendee fails to pay any instalment on its due date, he becomes
entitled to a grace period of 30 days to cure default by paying the amount of the instalment plus
interest, but that if he should still fail to pay within the grace period, then
rescission of the contract takes place.
Layug cannot be permitted to claim that all his payments should be credited to
him in their entirety without regard whatever to the damages his default might
have caused to Gabuya.
R.A. 6552 governs sales of real estate on installments. It recognizes the vendor's right to cancel
such contracts upon failure of the vendee to comply with the terms of the sale, but imposes,
chiefly for the latter's protection, certain conditions thereon. We have had occasion to rule that
"even in residential properties the Act" recognizes and reaffirms the vendor's right to cancel the
contract to sell upon breach and nonpayment of the stipulated installments. ..."
The law provides inter alia that "in all transactions or contracts involving the sale or financing of
real estate on installment payments, including residential condominium apartments, ..., 15 where
the buyer has paid at least two years of installments, the buyer is entitled to the following rights
in case he defaults in the payment of succeeding installments:
[Grace Period]
(a) To pay, without additional interest, the unpaid installments due within the
total grace period earned by him which is hereby fixed at the rate of one
month grace period for every year of installment payments made :
Provided , That this right shall be exercised by the buyer only
once in every five years of the life of the contract and its
extensions, if any;
[Refund of "Cash Surrender Value"]
(b) If the contract is cancelled, the seller shall refund to the buyer
the cash surrender value of the payments on the property
equivalent to fifty percent of the total payments made and, after
five years of installments, an additional five per cent every year but not
to exceed ninety per cent of the total payments made; Provided, That the
actual cancellation of the contract shall take place after thirty days from
receipt by the buyer of the notice of cancellation or the demand for rescission
of the contract by a notarial act and upon full payment of the cash surrender
value to the buyer.
In the case at bar, Layug had paid two (2) annual installments of P40,000.00 each. He is deemed
therefore, in the words of the law, to have "paid at least two years of installments." He therefore
had a grace period of "one month .. for every year of installment payments made," or two (2)
months (corresponding to the two years of installments paid) within which to pay the final
installment. He has thus been left only with the right to a refund of the " cash
surrender value of the payments on the property equivalent to fifty percent of the
total payments made ," or P40,000.00 (i.e., ½ of the total payments of P80,000.00). Such
refund will be the operative act to make effective the cancellation of the contract by Gabuya,
conformably with the terms of the law.
RAMOS VS CA

FACTS:

Sometime in January, 1959, private respondent Adelaida Ramos borrowed from her brother, petitioner
Oscar D. Ramos, the amounts of P5,000.00 and P9,000.00. As security for said loan, private respondent
Adelaida Ramos executed in favor of petitioners two (2) deeds of conditional sale over a parcel of land in
Paniqui, Tarlac. Upon the failure of said private respondent as vendor a retro to exercise her right of
repurchase within the redemption period, aforenamed petitioner filed a petition for consolidation and
approval of the conditional sale. Private respondents had been and remained in possession of these
properties until sometime in 1964 when petitioner took possession thereof. On February 28, 1968,
private respondent filed Civil Case No. 4168 with the then Court of First Instance of Tarlac for
declaration of nullity of orders, reformation of instrument, recovery of possession with preliminary
injunction and damages. The complaint therein alleged that the deeds of conditional sale, dated May 27,
1959 and August 30, 1959, are mere mortgages and were vitiated by misrepresentation, fraud and
undue influence and that the orders dated January 22, 1960 and April 18, 1960, respectively issued by
the probate and cadastral courts, were null and void for lack of jurisdiction.

ISSUE:

W/N the sale is an equitable mortgage?

HELD:

Yes, the sale is one of an equitable mortgage. Settled is the rule that to create the presumption
enunciated by Article 1602, the existence of one circumstance is enough. The said article expressly
provides therefor "in any of the following cases," hence the existence of any of the circumstances
enumerated therein, not a concurrence nor an overwhelming number of such circumstances, suffices to
give rise to the presumption that the contract with the right of repurchase is an equitable mortgage. The
contracts purport to be sales with pacto de retro; however, since the samewere actually executed in
consideration of the aforesaid loans said contracts are indubitably equitable mortgages. The rule is
firmly settled that whenever it is clearly shown that a deed of sale with pacto de retro, regular on its
face, is given as security for a loan, it must be regarded as an equitable mortgage.
SPS. VALDEZ VS CA

Spouses Francisco Ante and Manuela Ante were the registered owners of a parcel of land located in
Quezon City. Said spouses executed a special power of attorney in favor of their son, Antonio Ante, a
lawyer, authorizing him to execute any document conveying by way of mortgage or sale a portion or the
whole of said property, to receive payment and dispose of the same as he may deem fit and proper
under the premises. Antonio Ante subdivided the Land into Lot A and B and offered to sell the lots to
Eliseo Viernes, who was occupying the same with the permission of Ante. Viernes, however, turned
down the offer as he did not have money. Antonio Ante, as attorney in fact, executed a deed of sale of
the lot in favor of spouses Pastor Valdez and Virginia Valdez. The Valdez spouses demanded from
Antonio Ante the delivery of the owner’s duplicate copy of TCT covering said lot. Ante promised them
that he will deliver the title to them in a few days. In the meanwhile petitioners started fencing the
whole lot with cement hollow blocks in the presence of spouses Eliseo and Felicidad Viernes. On said
occasion the Viernes spouses were informed by the Valdez spouses that they were fencing the same as
they purchased the land from Antonio Ante.

The Valdez spouses registered the two deeds of sale dated June 15, 1980 and February 12, 1981 with
the Register of Deeds of Quezon City by presenting the owner’s duplicate copy of the title. They were,
however, informed that the said owner’s duplicate certificate of title had been declared null and void
per order of Judge Tutaan dated November 10, 1982. They also found out that spouses Francisco and
Manuela Ante earlier filed a petition for the issuance of a new owner’s duplicate certificate of title and
to declare null and void the lost owner’s duplicate certificate of title. The Valdez spouses also
discovered that the Register of Deeds cancelled TCT. No. 141582 and in lieu thereof issued TCT No.
293889 in the name of Felicidad Viernes on the basis of a deed of assignment of the same property
dated February 17, 1982 executed by Antonio Ante in her favor.

When Virginia Valdez inquired from Antonio Ante why he executed the said deed of assignment when
he had previously sold the same lot to them, Ante replied that they could sue him in court. Thus, the
Valdezes filed their adverse claim over the lot covered by TCT No. 293889 in the name of Felicidad
Viernes. After trial on the merits before which the Antes were declared in default, a decision was
rendered by the trial court on April 9, 1986.

Issue:

1. As between plaintiff-spouses Pastor and Virginia Valdez, petitioners in this case and defendant
Felicidad Viernes, one of the private respondents, who is entitled to the subject lot?

Ruling:

The petition is impressed with merit. Petitioner Spouses Pastor and Virginia Valdez are entitled to the
subject lot.
Article 1544 of the Civil Code provides as follows:

"Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should be
movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who in good
faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership, shall pertain to the person who in good faith was first in
the possession; and, in the absence thereof, to the person who presents the oldest title provided there
is good faith."

From the aforesaid provision of the law, should the subject of the sale be immovable property, the
ownership shall vest in the person acquiring it who in good faith first recorded it in the registry of
property. From the foregoing set of facts there can be no question that the sale of the subject lot to
petitioners was made long before the execution of the Deed of Assignment of said lot to respondent
Viernes and that petitioners annotated their adverse claim as vendees of the property as early as
September 6, 1982 with the Register of Deeds of Quezon City. On the other hand the deed of
Assignment in favor of Viernes of the said lot was registered with the Register of Deeds of Quezon City
only on November 11, 1982 whereby a new title was issued in the name of Viernes as above stated.

The rule is clear that a prior right is accorded to the vendee who first recorded his right in good faith
over an immovable property. In this case, the petitioners acquired subject lot in good faith and for
valuable consideration from the Antes and as such owners petitioners fenced the property taking
possession thereof. Thus, when petitioners annotated their adverse claim in the Register of Deeds of
Quezon City they thereby established a superior right to the property in question as against respondent
Viernes.

On the other hand, respondent Viernes cannot claim good faith in the purchase of the subject lot and
the subsequent registration of the Deed of Assignment in her favor. Even before the petitioners
purchased the lot from the Antes respondent Viernes’ husband was first given the option to purchase
the same by Antonio Ante but he declined because he had no money and so he was informed that it
would be sold to petitioners. After petitioners purchased the lot they immediately fenced the same
with the knowledge and without objection of respondent Viernes and her husband and they were
informed by the petitioners about their purchase of the same. Moreover, when petitioners annotated
their adverse claim as vendees of the property with the Register of Deeds of Quezon City, it was
effectively a notice to the whole world including respondent Viernes.
OCCENA VS ESPONILLA

Facts: After the death of the Tordesillas spouses, thelot was inherited by their children Harod and
Angela,and grandchildren Arnold and Lilia. In 1951, theheirs executed a Deed of Pacto de Retro Sale1
infavor of Alberta Morales covering the southwesternportion of the lot in 1954, Arnold and Lilia
executed a Deed of DefiniteSale of Shares, Rights, Interests and Participations2over the same 748 sq. m.
lot in favor of AlbertaMorales. Alberta possessed the lot as owner, constructed ahouse on it and
appointed a caretaker to oversee herproperty. Thereafter, in July 1956, vendor Arnold dela Flor
borrowed the OCT from Alberta covering thelot. He executed an Affidavit3 acknowledging receiptof the
OCT in trust and undertook to return said title free from changes, modifications or cancellations. Arnold
and Angela, nephew and daughter respectivelyof the Tordesillas spouses, without the knowledge
of Alberta, executed a Deed of ExtrajudicialSettlement4 declaring the two of them as the onlyco-owners
of the undivided 1,198 sq. m. lot no. 265, without acknowledging their previous sale of 748 sq.m.
thereof to Alberta. In 1985, vendee Alberta Morales died. Her nieces-heirs, Lydia, Elsa and Dafrosa,
succeeded in theownership of the lot. Months later, as the heirs wereabout to leave for the United
States, they asked Arnold to deliver to them the title to the land sothey can register it in their name.
Arnold repeatedlypromised to do so but failed to deliver the title tothem.On December 4, 1986, after
Alberta’s heirs left forthe States, Arnold used the OCT he borrowed fromthe deceased vendee Alberta
Morales, subdivided theentire lot no. 265 into three sublots, and registeredthem all under his name, viz:
lot no. 265-A (with TCTNo. 16895), lot no. 265-B (with TCT No. 16896) andlot no. 265-C (with TCT No.
16897). He then paid thereal estate taxes on the property. After the death of Arnold, the three (3)
nieces-heirsof Alberta Morales learned about the second sale oftheir lot to the Occeña spouses when
they werenotified by caretaker Abas that they were beingejected from the land. The heirs filed a case7
forannulment of sale and cancellation of titles, withdamages, against the second vendees
Occeñaspouses. In their complaint, they alleged that the Occeñas purchased the land in bad faith as they
wereaware that the lots sold to them had already beensold to Alberta Morales in 1954. They averred
that before the sale, when Tomas Occeña conducted anocular inspection of the lots, Morito Abas,
thecaretaker appointed by Alberta Morales to overseeher property, warned them not to push through
withthe sale as the land was no longer owned by vendor Arnold as the latter had previously sold the lot
to Alberta Morales who had a house constructedthereon.For their part, the Occeña spouses claimed
that theOCT in the name of the original owners of the lots,the Tordesillas spouses, was cancelled after it
wassubdivided between Angela and Arnold in 1969; thatnew TCTs had been issued in the latter’s names;
thatthey were unaware that the subject lots were alreadypreviously sold to Morales as they denied that
Tomashad a talk with caretaker Abas on the matter; that asof December 4, 1987, the TCTs covering the
lots were in the name of Arnold and his wife, without anyadverse claim annotated thereon; that vendor
Arnoldrepresented to them that the occupants they saw onthe land were squatters and that he merely
toleratedtheir presence; that they did not personallyinvestigate the alleged squatters on the land and
merely relied on the representation of vendor Arnold;that sometime in 1966-1967, Arnold and his co-
heir Angela caused the survey of the original lot andsubdivided it into 3 lots, without opposition
fromMorales or her heirs. Thus, three (3) TCTs wereissued in 1969 to Arnold and Angela and, two of
thelots were then sold to the Occeña spouses, again without objection from Alberta Morales. The
Occeña spouses alleged that they were buyers ingood faith as the titles to the subject lots were
freefrom liens or encumbrances when they purchasedthem. They claimed that in 1989, Arnold offered
tosell the subject lots to them. On August 13, 1990,after they verified with the Antique Registry ofDeeds
that Arnold’s TCTs were clean andunencumbered, Arnold signed the instrument of saleover the subject
lots in favor of the Occeñas forP100,000.00 and new titles were issued in theirnames. The Occeñas
likewise set up the defenses of lachesand prescription. They argue that Alberta andplaintiffs-heirs were
barred from prosecuting theiraction as they failed to assert their right for forty(40) years.

Issue:

Whether Or Not The Period Of More ThanForty (40) Years Without Positive Action Taken
ByRespondents, As Well As By Alberta Morales, ToProtect Their Interest Can Be Considered Laches
And Thus Their Present Action Has Prescribed

Ruling:

the action to annul title filed by respondents-heirs is not barred by laches and prescription.Firstly,
laches is a creation of equity and itsapplication is controlled by equitable considerations.Laches cannot
be used to defeat justice or perpetuatefraud and injustice. Neither should its application beused to
prevent the rightful owners of a propertyfrom recovering what has been fraudulentlyregistered in the
name of another.17 Secondly,prescription does not apply when the person seekingannulment of title or
reconveyance is in possessionof the lot because the action partakes of a suit toquiet title which is
imprescriptible.18 In this case,Morales had actual possession of the land when shehad a house built
thereon and had appointed acaretaker to oversee her property. Her undisturbedpossession of the land
for a period of fifty (50) longyears gave her and her heirs a continuing right toseek the aid of a court of
equity to determine thenature of the claim of ownership of petitioner-spouses.In the case at bar,
Morales’ caretaker became awareof the second sale to petitioner-spouses only in 1991 when he
received from the latter a notice to vacatethe land. Respondents-heirs did not sleep on theirrights for in
1994, they filed their action to annulpetitioners’ title over the land. It likewise bears tostress that when
vendor Arnold reacquired title tothe subject property by means of fraud andconcealment after he has
sold it to Alberta Morales, aconstructive trust was created in favor of Moralesand her heirs. As the
defrauded parties who were inactual possession of the property, an action of therespondents-heirs to
enforce the trust and recoverthe property cannot prescribe. They may vindicatetheir right over the
property regardless of the lapseof time.21 Hence, the rule that registration of theproperty has the effect
of constructive notice to the whole world cannot be availed of by petitioners andthe defense of
prescription cannot be successfullyraised against respondents.