Republic of the Philippines

SUPREME COURT
Baguio City

SECOND DIVISION

G.R. No. 193787               April 7, 2014

SPOUSES JOSE C. ROQUE AND BEATRIZ DELA CRUZ ROQUE, with deceased Jose C. Roque
represented by his substitute heir JOVETTE ROQUE-LIBREA, Petitioners, 
vs.
MA. PAMELA P. AGUADO, FRUCTUOSO C. SABUG, JR., NATIONAL COUNCIL OF CHURCHES IN THE
PHILIPPINES (NCCP), represented by its Secretary General SHARON ROSE JOY RUIZ-DUREMDES,
LAND BANK OF THE PHILIPPINES (LBP), represented by Branch Manager EVELYN M. MONTERO,
ATTY. MARIO S.P. DIAZ, in his Official Capacity as Register of Deeds for Rizal, Morong Branch, and
CECILIO U. PULAN, in his Official Capacity as Sheriff, Office of the Clerk of Court, Regional Trial
Court, Binangonan, Rizal,Respondents.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari 1 are the Decision2 dated May 12, 2010 and the
Resolution3 dated September 15, 2010 of the Court of Appeals (CA) in CA G.R. CV No. 92113 which
affirmed the Decision4 dated July 8, 2008 of the Regional Trial Court of Binangonan, Rizal, Branch 69
(RTC) that dismissed Civil Case Nos. 03-022 and 05-003 for reconveyance, annulment of sale, deed of
real estate mortgage, foreclosure and certificate of sale, and damages.

The 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. 5

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 6 (1977
Deed of Conditional Sale) over a 1,231-sq. m. portion of Lot 18089 (subject portion) for a
consideration of ₱30,775.00. The parties agreed that Sps. Roque shall make an initial payment of
₱15,387.50 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. 7

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 8 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 Affidavit9 (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 10 (1999 Deed of
Absolute Sale), sold Lot 18089 to one Ma. Pamela P. Aguado (Aguado) for ₱2,500,000.00, 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 11 in her name.

Thereafter, Aguado obtained an ₱8,000,000.00 loan from the Land Bank of the Philippines (Land
Bank) secured by a mortgage over Lot 18089. 12 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-11589513 was issued in its name on July 21, 2003. 14

On June 16, 2003, Sps. Roque filed a complaint 15 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.

In defense, 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. 16

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 certificate 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. 17

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.18

Meanwhile, on January 18, 2005, NCCP filed a separate complaint 19 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
sale20 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).21 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.22 Upon knowledge of the purported sale of Lot 18089 to Aguado, Sabug, Jr. denied the
transaction and alleged forgery. Claiming that the Aguados 23 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 ₱38,092,002.00 representing the unrealized profit from the JVA. 24 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. 25 In its answer, Land
Bank reiterated its stance that Lot 18089 was used as collateral for the ₱8,000,000.00 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. Thus, it prayed for the dismissal of NCCP’s complaint. 26

On September 7, 2005, Civil Case Nos. 02-022 and 05-003 were ordered consolidated. 27

The RTC Ruling

After due proceedings, the RTC rendered a Decision 28 dated July 8, 2008, dismissing the complaints
of Sps. Roque and NCCP.

With respect to Sps. Roque’s complaint, the RTC found that the latter failed to establish their
ownership over the subject portion, considering the following: (a) the supposed owners-vendors,
i.e., Rivero, et al., who executed the 1977 Deed of Conditional Sale, had no proof of their title over
Lot 18089; (b) the 1977 Deed of Conditional Sale was not registered with the Office of the Register of
Deeds;29 (c) the 1977 Deed of Conditional Sale is neither a deed of conveyance nor a transfer
document, as it only gives the holder the right to compel the supposed vendors to execute a deed of
absolute sale upon full payment of the consideration; (d) neither Sps. Roque nor the alleged owners-
vendors, i.e., Rivero, et al., have paid real property taxes in relation to Lot 18089; and (e) Sps.
Roque’s occupation of the subject portion did not ripen into ownership that can be considered
superior to the ownership of Land Bank. 30 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-5955.31

On the other hand, regarding NCCP’s complaint, the RTC observed that while it anchored its claim of
ownership over Lot 18089 on the 1998 Deed of Absolute Sale, the said deed was not annotated on
OCT No. M-5955. Neither was any certificate of title issued in its name nor did it take possession of
Lot 18089 or paid the real property taxes therefor. Hence, NCCP’s claim cannot prevail against Land
Bank’s title, which was adjudged by the RTC as an innocent purchaser for value. Also, the RTC
disregarded NCCP’s allegation that the signature of Sabug, Jr. on the 1999 Deed of Absolute Sale in
favor of Aguado was forged because his signatures on both instruments bear semblances of
similarity and appear genuine. Besides, the examiner from the National Bureau of Investigation, who
purportedly found that Sabug, Jr.’s signature thereon was spurious leading to the dismissal of a
criminal case against him, was not presented as a witness in the civil action. 32

Finally, the RTC denied the parties’ respective claims for damages. 33

The CA Ruling

On appeal, the Court of Appeals (CA) affirmed the foregoing RTC findings in a Decision 34 dated May
12, 2010. While Land Bank was not regarded as a mortgagee/purchaser in good faith with respect to
the subject portion considering Sps. Roque’s possession thereof, 35 the CA did not order its
reconveyance or segregation in the latter’s favor 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.36

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. 37
Aggrieved, both Sps. Roque38 and NCCP39 moved for reconsideration but were denied by the CA in a
Resolution40dated September 15, 2010, prompting them to seek further recourse before the Court.

The Issue Before the Court

The central issue in this case is whether or not the CA erred in not ordering the reconveyance of the
subject portion in Sps. Roque’s favor.

Sps. Roque maintain that the CA erred in not declaring them as the 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. 41 To bolster their claim, they also point
to the 1993 Joint Affidavit whereby Sabug, Jr. and Rivero acknowledged their ownership
thereof.42 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 ortgagee/purchaser in bad faith, pursuant
to Article 1544 of the Civil Code.43

In opposition, Land Bank espouses that the instant petition should be dismissed for raising questions
of fact, in violation of the proscription under Rule 45 of the Rules of Court which allows only pure
questions of law to be raised.44 Moreover, it denied that ownership over the subject portion had
been acquired by Sps. Roque who admittedly failed to pay the remaining balance of the purchase
price.45 Besides, Land Bank points out that Sps. Roque’s action for reconveyance had already
prescribed.46

Instead of traversing the arguments of Sps. Roque, NCCP, in its Comment 47 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, 48 and hence, will no longer be dealt with in this
case.

The Court’s Ruling

The petition lacks merit.

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.49 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. 50

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. The salient
portions of the said deed state:

DEED OF CONDITIONAL SALE OF REAL PROPERTY

KNOW ALL MEN BY THESE PRESENTS:

xxxx

That for and in consideration of the sum of THIRTY THOUSAND SEVEN HUNDRED SEVENTY FIVE
PESOS (₱30,775.00), Philippine Currency, payable in the manner hereinbelow specified, the
VENDORS do hereby sell, transfer and convey unto the VENDEE, or their heirs, executors,
administrators, or assignors, that unsegregated portion of the above lot, x x x.

That the aforesaid amount shall be paid in two installments, the first installment which is in the
amount of __________ (₱15,387.50) and the balance in the amount of __________ (₱15,387.50),
shall be paid as soon as the described portion of the property shall have been registered under the
Land Registration Act and a Certificate of Title issued accordingly;

That as soon as the total amount of the property has been paid and the Certificate of Title has been
issued, an absolute deed of sale shall be executed accordingly;

x x x x51

Examining its provisions, the Court finds that the stipulation above-highlighted shows that 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.52 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,53 as in this case. This treatment stems from the legal characterization of a contract
to sell, that is, a bilateral contract whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to
sell the subject property exclusively to the prospective buyer upon fulfillment of the condition
agreed upon, such as, the full payment of the purchase price. 54 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.55 Explaining the subject matter further, the Court, in Ursal v. CA, 56 held that:

[I]n 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 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. 57 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. 58

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, 59Sps. 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.60 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. Thus, in
view of the foregoing, Sabug, Jr. – as the registered owner of Lot 18089 borne by the grant of his
free patent application – could validly convey said property in its entirety to Aguado who, in turn,
mortgaged the same to Land Bank. Besides, as aptly observed by the RTC, Sps. Roque failed to
establish that the parties who sold the property to them, i.e., Rivero, et al., were indeed its true and
lawful owners.61 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.62 As applied in the case of Coronel v. CA:63

It is essential to distinguish between a contract to sell and a conditional contract of sale specially in
cases where the subject property is sold by the owner not to the party the seller contracted with,
but to a third person, as in the case at bench. In a contract to sell, there being no previous sale of the
property, a third person buying such property despite the fulfilment of the suspensive condition
such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith
and the prospective buyer cannot seek the relief of reconveyance of the property.

There is no double sale in such case.1âwphi1 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. (Emphasis supplied)

On the matter of double sales, suffice it to state that Sps. Roque’s reliance 64 on Article 154465 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, 66 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.

Finally, regarding Sps. Roque’s claims of acquisitive prescription and reimbursement for the value of
the improvements they have introduced on the subject property, 67 it is keenly observed that none of
the arguments therefor were raised before the trial court or the CA. 68 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. 69

With the conclusions herein reached, the Court need not belabor on the other points raised by the
parties, and ultimately finds it proper to proceed with the denial of the petition.

WHEREFORE, the petition is DENIED. The Decision dated May 12, 2010 and the Resolution dated
September 15, 2010 of the Court of Appeals in CAG.R. CV No. 92113 are hereby AFFIRMED.

SO ORDERED.
 

THIRD DIVISION

EMMA VER REYES and RAMON REYES,   G.R. No. 166516

Petitioners,  

  Present:

   

  YNARES-SANTIAGO, J.,

- versus - Chairperson,

  CHICO-NAZARIO,

  VELASCO, JR.,

  NACHURA, and

IRENE MONTEMAYOR and THE REGISTER OF PERALTA, JJ.

DEEDS OF CAVITE,
 
Respondents.
Promulgated:

September 3, 2009
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

DECISION

CHICO-NAZARIO, J.: 

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the
Decision[1] dated 20 May 2004, rendered by the Court of Appeals in CA-G.R. CV No. 54517, which
affirmed the Decision[2] dated 7 October 1996, of the Regional Trial Court (RTC), Branch 21, of Imus,
Cavite, in Civil Case No. 878-94, dismissing the Complaint for Reconveyance of petitioners, spouses
Emma Ver-Reyes (Emma) and Ramon Reyes (Ramon), and declaring private respondent Irene
Montemayor as the owner of the subject property.

 
On 18 February 1994, petitioners filed before the RTC a Complaint for Reconveyance [3] against
private respondent and the Register of Deeds of Cavite. The Complaint was docketed as Civil Case
No. 878-94. 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 [4]situated in Paliparan,
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.
[5]
 Thereafter, Marciano surrendered to petitioners the Owners 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 respondents 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.[6]

Hence, petitioners prayed for the cancellation of TCT No. T-369793 in private respondents name; the
issuance of a new certificate of title in petitioners names; the award of nominal damages
of P50,000.00 and exemplary damages of P100,000.00, by reason of the fraud employed by private
respondent in having the subject property registered in her name; the award of attorneys fees of not
less than P50,000; and the costs of suit. [7] 

On 18 April 1994, private respondent filed with the RTC her Answer with Counterclaim, wherein she
denied petitioners allegation that the signatures of the spouses Cuevas in the Deed of Absolute Sale
dated 10 November 1992 were forged. 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 certificate 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 attorneys fees, and costs of suit. [8]

After the conduct of pre-trial, petitioners offered the testimonies of Marciano, petitioner Emma, and
Carolyn Moldez-Pitoy (Carolyn).

Marciano testified that he and his wife Virginia signed, on 8 October 1976, a Deed of Absolute Sale
covering the subject property in petitioner Emmas 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 respondents favor, flatly stated
that the signatures found therein were not his or his wifes.  [9]
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 respondents name. Upon examining the Deed of Absolute Sale dated 10
November 1992, supposedly executed by the spouses Cuevas over the subject property in private
respondents 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 respondents 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. [10] 

Carolyn introduced herself as a Senior Document Examiner in the National Bureau of Investigation
(NBI), performing, among her other duties, handwriting analysis. She admitted to preparing
Questioned Documents Report No. 548-795, dated 18 July 1995.[11] 

Questioned Documents Report No. 548-795, prepared by Carolyn, was submitted by petitioners as
evidence and was marked as Exhibit G. [12] They had obtained the report for the purpose of finding
out whether (1) the signatures of the spouses Cuevas in the Deed of Absolute Sale dated 10
November 1992, which they purportedly executed in private respondents favor; and (2) the
signature of Escolastico Cuevas (Escolastico), Registrar of Deeds (ROD) of Cavite, in the Owners
Duplicate Copy of TCT No. T-58459, which Mariano surrendered to petitioners in 1972, were forged,
by comparing them with the specimen signatures given by the spouses Cuevas and ROD
Escolastico. As stated in her Report, Carolyn found that:

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 were

written by one and the same person.

3.       No definite opinion on MARCIANO CUEVAS per above stated findings no. 3. [13]

On the other hand, private respondent offered the testimonies of Jaime Laudato (Jaime) and
Angelina Cortez (Angelina) in support of her version of events.

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 respondents favor, and directed Jaime to pay the obligatory taxes and to register
the subject property in private respondents 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.[14]
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
respondents 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.[15]

The RTC rendered a Decision[16] in Civil Case No. 878-94 on 7 October 1996, dismissing petitioners
Complaint. The RTC found that the statements of their witness Marciano and the results of
Questioned Documents Report No. 548-795 issued by the NBI were contradictory. 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 Virginias; 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 Marcianos denial of the
sale of the subject property to private respondent, on the ground that it was self-serving. Although
the RTC did observe differences in Marcianos signature in the Kasunduan ng Bilihan ng
Lupa dated 15 June 1971 and the Deed of Absolute Sale dated 10 November 1992, the trial court
dismissed the same as mere changes in a persons penmanship or signature that could occur over the
years. The RTC concluded that Civil Case No. 878-94 involved a double sale of the subject property,
wherein private respondent, an innocent purchaser for value who first registered the property in her
name, should be adjudged to have a better title. The dispositive part of the RTC Decision dated 7
October 1996 reads: 

WHEREFORE, judgment is hereby rendered dismissing this case and declaring that the true and
lawful owner of the subject property as described in, and covered by, TCT No. T-369793 is [herein
respondent] Irene Montemayor.

All other claims of the parties are dismissed for inadequate substantiation. [18] 

On 11 July 1997, petitioners filed an appeal with the Court of Appeals, docketed as CA-G.R. CV No.
54517, which challenged the afore-mentioned RTC judgment.

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
respondents 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 Engracias title to the subject property and, thus, private respondent
relinquished her right over it to Engracia and the latters 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 respondents name; issued TCT No. T-784707 in the names of Engracias heirs; and annotated
on the latest certificate of title private respondents Waiver and Quitclaim dated 15 January 1998. 

On 18 November 1998, Perfecto Dumay-as, Deputy ROD of Trece Martires City, Cavite, filed a
Comment/Manifestation stating that Civil Case No. 878-94 was not inscribed on private respondents
TCT No. T-369793, since the case before the RTC had already been resolved in favor of private
respondent, thus, the presentation of the owners original certificate of title along with the
Waiver/Quitclaim, dated 15 January 1998, complied with the requirements of a voluntary
transaction, justifying the issuance of TCT No. T-784707 in the name of Engracias heirs. [20]

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 Marcianos denial of the sale of the
subject property in private respondents favor as self-serving. The appellate court also pointed out
that the findings of the NBI were not definite as regards the alleged forgery of Marcianos signature
in the Deed of Absolute Sale dated 10 November 1992. Lastly, the Court of Appeals took judicial
notice of the Comment/Manifestation of Perfecto Dumay-as, Deputy ROD
of Trece Martires City, Cavite, stating that Civil Case No. 878-94 was not inscribed on private
respondents TCT No. T-369793, since the case before the RTC had already been resolved in favor of
private respondent, and the acquisition by Engracias heirs of the subject property and TCT No. T-
784707 over the same was in good faith and, therefore, valid. The Court of Appeals decreed:

WHEREFORE, premises considered, the appealed Decision dated October 7, 1996 of the Regional
Trial Court of Cavite is hereby AFFIRMED.[21]

Petitioners filed a Motion for Reconsideration[22] of the foregoing Decision on 25 June 2004, which
the Court of Appeals denied in a Resolution [23] dated 28 December 2004. 

Hence, the present Petition, where petitioners made the following assignment of errors: 

RESPONDENT COURT COMMITTED SERIOUS ERROR IN RENDERING THE DECISION AND RESOLUTION
IN QUESTION IN COMPLETE DISREGARD OF LAW AND JURISPRUDENCE BY SUSTAINING THE ORDER
OF THE REGIONAL TRIAL COURT (BRANCH 21) OF CAVITE NOTWITHSTANDING THE CLEAR AND
AUTHENTIC RECORDS PRESENTED DURING TRIAL WHICH NEGATE AND CONTRADICT ITS FINDINGS. 

II

RESPONDENT COURT COMMITED GRAVE AND REVERSIBLE ERROR IN RENDERING THE DECISION AND
RESOLUTION IN QUESTION IN VIOLATION OF LAW AND JURISPRUDENCE BY SUSTAINING THE ORDER
OF THE REGIONAL TRIAL COURT (BRANCH 21) OF CAVITE THEREBY IGNORING THE EVIDENCE ON
RECORD SHOWING THE PETITIONERS CLEAR RIGHTS OF OWNERSHIP OVER THE SUBJECT PROPERTY. 

III 

RESPONDENT COURT COMMITTED SERIOUS ERROR IN AFFIRMING THAT THE TRUE AND LAWFUL
OWNER OVER (sic) THE SUBJECT PROPERTY AS DESCRIBED IN AND COVERED BY TCT NO. T-369793 IS
PRIVATE RESPONDENT IRENE MONTEMAYOR DESPITE DOCUMENTARY AND TESTIMONIAL EVIDENCE
TO THE CONTRARY.[24] 

The fundamental issue for resolution of this Court in this case is who has better right to the subject
property. Before the Court can settle the same, it must first determine the question of whether
there was a double sale of the subject property to both petitioners and private respondent, which is
essentially a question of fact requiring the Court to review, examine and evaluate, or weigh the
probative value of the evidence presented by the parties.

Rule 45 of the Rules of Court provides that only questions of law shall be raised in a Petition for
Review before this Court. This rule, however, admits of certain exceptions, namely, (1) when the
findings are grounded entirely on speculations, surmises, or conjectures; (2) when the inference
made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4)
when the judgment is based on a misappreciation of facts; (5) when the findings of fact are
conflicting; (6) when, in making its findings, the same are contrary to the admissions of both
appellant and appellee; (7) when the findings are contrary to those of the trial court; (8) when the
findings are conclusions without citation of specific evidence on which they are based; (9) when the
facts set forth in the petition as well as in the petitioners main and reply briefs are not disputed by
the respondent; and (10) when the findings of fact are premised on the supposed absence of
evidence and contradicted by the evidence on record. [25] 

While as a general rule appellate courts do not usually disturb the lower court's findings of fact,
unless said findings are not supported by or are totally devoid of or inconsistent with the evidence
on record, such finding must of necessity be modified to conform with the evidence if the reviewing
tribunal were to arrive at the proper and just resolution of the controversy. [26] Thus, although the
findings of fact of the Court of Appeals are generally conclusive on this Court, which is not a trier of
facts, if said factual findings do not conform to the evidence on record, this Court will not hesitate to
review and reverse the factual findings of the lower courts. In the instant case, the Court finds
sufficient basis to deviate from the rule since the extant evidence and prevailing law support a
finding different from the conclusion of the Court of Appeals and the RTC. [27] 

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. 

Marcianos 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 respondents 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 respondents 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 respondents favor. 

The pronouncement of the RTC, affirmed by the Court of Appeals, that Marcianos testimony was
self-serving was utterly baseless. Neither the RTC nor the Court of Appeals explained how Marcianos
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 Marcianos 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. 

Additionally, although Questioned Documents Report No. 548-795 of the NBI did not make a
definitive finding on whether Marcianos 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. [28] 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 Virginias 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. This, taken together with Marcianos candid and categorical
testimony that he and his wife did not sell the subject property to private respondent or executed
any deed to evidence the same, strongly militates against the existence of a second sale of the
subject property to private respondent. 

In comparison, the circumstances surrounding the alleged second sale of the subject property by the
spouses Cuevas to private respondent are sketchy at best. 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 respondents 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 respondents 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 Owners Duplicate Copy thereof was with petitioners. When a
certificate of title is cancelled, the owners duplicate must also be surrendered to the Register of
Deeds for cancellation, in accordance with Section 53 [29] of Presidential Decree No. 1529, otherwise
known as the Property Registration Decree, as amended.

Other than the forged Deed of Absolute Sale dated 10 November 1992, private respondents 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 Engracias heirs, to wit [30]:

1.        That, I am the holder of Transfer Certificate of Title No. 369793 covering a parcel of land (Lot
No. 6961-N) with an area of Forty One Thousand Eight Hundred and Thirty Seven square meters (41,
837 sq. m.) situated in Barangay Paliparan, Dasmarias, Cavite and declared for taxation purposes
under Tax Declaration No. 151746 Dasmarias, Cavite;
2.        That, I know (sic) from the very beginning the dubiousness of my title to the above
described roperty (sic); 

3.        That, I have neither legal or equitable title to the said property as the previous document
(Deed of Conveyance) which is the basis of immediate transfer from OCT No. 1002 is of questionable
origin;

4.        That, all documents relative to the issuance of subsequent transfer certificate of titles
including TCT No. 369793 under my name were in reality, entirely simulated and fictitious; 

5.        That, I am recognizing the genuineness of Transfer Certificate of Title No. 769357-3911 in the
name of ENGRACIA ISIP with Tax Declaration No. 151745, which has been transferred to her heirs,
APOLONIA I.R. ALCARAZ, ELIZA I. REYES-GLORIA, VICTOR ISIP REYES and EPITACIO ISIP REYES,
covered by TCT. No. T-784707; 

6.        That, in the light of the foregoing, I do hereby waive and renounce, now and forever, all claims
of whatever nature to the said property in favor of the said ENGRACIA ISIP, her heirs, executors,
administrator or assigns.

Private respondents 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.[31] 

Based on the foregoing, the preponderance of evidence in this case is in petitioners favor. The
spouses Cuevas only sold the subject property to them 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 respondents
fraudulent registration of the subject property in her name.

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 persons 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 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. [33] A Torrens title does not furnish a shield for fraud,
notwithstanding the long-standing 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. [34] 
It has long been established that the sole remedy of the landowner whose property has been
wrongfully or erroneously registered in another's name is to bring an ordinary action in an ordinary
court of justice for reconveyance or, if the property has passed into the hands of an innocent
purchaser for value, for damages. It is one thing to protect an innocent third party; it is entirely a
different matter and one devoid of justification if deceit would be rewarded by allowing the
perpetrator to enjoy the fruits of his nefarious deed. [35] 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. [36] Evidently,
petitioners, being the rightful owners of the subject property, are entitled to the reconveyance of
the title over the same. 

However, as a further demonstration of private respondents 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, in which she admitted that her title to the said
property was void and, instead, recognized the title of Engracia, who owned the subject property
prior to the spouses Cuevas. Pursuant to said Waiver and Quitclaim, the Register of
Deeds cancelled TCT No. T-369793 in private respondents name and issued TCT No. T-784707 in the
names of Engracias heirs. 

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.[37] There is also nothing in the records that would show that after Engracias
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 Engracias title, which was
transferred to her heirs, was genuine. The only fact that said Waiver and Quitclaim established was
private respondents bad faith in having the subject property registered in her name. For the Court to
make such finding of bad faith on private respondents part, it need not actually be true that all titles
to the subject property, prior to private respondents, 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.,
Engracias heirs, and defeat any judgment granting the petitioners the remedy of reconveyance of
the subject property. 

In connection therewith, this Court expresses its disfavor over the cavalier attitude of the Register of
Deeds of Cavite in canceling TCT No. T-369793 in private respondents nameand issuing TCT No. T-
784707 in the names of Engracias heirs, on the sole basis of the Waiver and Quitclaim dated 15
January 1998, executed by private respondent. 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. 

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 anothers
name. Reconveyance is always available as long as the property has not passed to an innocent
person for value.[38]

Engracias heirs cannot be considered innocent persons or persons who acquired the subject
property for value. Engracias heirs re-acquired the subject property by virtue of the private
respondents 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 Engracias 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 Engracias heirs for value, it appearing to
have been executed by private respondent in favor of Engracias heirs without any consideration at
all. Hence, the cancellation of TCT No. T-369793 in private respondents name and the issuance
of TCT No. T-784707 in the names of Engracias 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.[39] The Court may deem Engracias heirs as private respondents
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.

Since private respondents fraudulent registration of the subject property in her name violated
petitioners right to remain in peaceful possession of the subject property, petitioners are entitled to
nominal damages under Article 2221 of the Civil Code, which provides:

Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff which has been
violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him.

This Court finds that petitioners prayer for nominal damages in the amount of P50,000.00 is proper
and reasonable.

The award of attorneys fees is also in order because private respondent acted in gross and evident
bad faith in refusing to satisfy petitioners plainly valid, just and demandable claim. [40] Given the time
spent on the present case, which lasted for more than 15 years, the extent of services rendered by
petitioners lawyers, the benefits resulting in favor of the client, as well as said lawyers professional
standing, the award of P100,000.00 is proper.[41]

However, exemplary damages cannot be imposed in this case, where petitioners only prayed for the
award of nominal damages and attorneys fees, but not for moral, temperate, liquidated, or
compensatory damages. Article 2229 of the Civil Code imposes exemplary damages only under the
following circumstances:
 

Art. 2229. Exemplary or corrective damages are imposed, by way of example or correction for public
good, in addition to the moral, temperate, liquidated or compensatory damages.

IN VIEW OF THE FOREGOING, the instant Petition is GRANTED. The assailed Decision dated 20 May
2004 of the Court of Appeals in CA-G.R. CV No. 54517 is REVERSED and SET ASIDE. The Register of
Deeds is ORDERED to (1) CANCEL TCT No. T-784707 over the subject property in the name of
Engracias heirs, which was derived, not in good faith or for value, but from the fraudulently procured
TCT No. T-369793 in private respondents name; and (2) ISSUE a new certificate of title over the
subject property in the name of petitioners, the rightful owners thereof. Private respondent
is ORDERED to PAY petitioners nominal damages in the amount of P50,000.00 and attorneys fees in
the amount of P100,000.00. Costs against private respondent.

SO ORDERED.
IRST DIVISION

JESSIE GASATAYA, G.R. No. 148147

Petitioner,

Present:

PUNO, C.J., Chairperson,

SANDOVAL-GUTIERREZ,

- v e r s u s - CORONA,

AZCUNA and

GARCIA, JJ.

EDITHA MABASA,

Respondent. Promulgated:

February 16, 2007

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CORONA, J.:

Before us is an appeal by certiorari under Rule 45 of the 1997 Rules of Civil Procedure assailing the
decision[1] of the Court of Appeals (CA) in CA-G.R. CV No. 55055 which, in turn, affirmed the decision
of the Regional Trial Court (RTC) of Lanao del Norte, Branch 7.[2]

The facts follow.

Respondent Editha Mabasas father, Buenaventura Mabasa, was granted a homestead patent on Lots

279, 272 and 972 located in Lala, Lanao del Norte. Buenaventura Mabasamortgaged 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, respondents 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.[3]

Subsequently, respondent entered into an agreement with petitioners father, Sabas Gasataya, for

the latter to assume payment of her obligation to DBP. They further agreed
that SabasGasataya 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 SabasGasataya had to pay DBP on her behalf.

Upon representation by Sabas Gasataya that respondents 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[4] 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 DBPs refusal to accept payments thereon.

The trial court ruled in favor of respondent finding that the Gasatayas failed to controvert her claim
that they defrauded her just so petitioner could acquire the lots at public auction. [5] According to the
trial court, the Gasatayas failed to prove that DBP indeed rejected payments from Sabas Gasataya.
The trial court ruled:
 

WHEREFORE, judgment is hereby rendered in favor of the [respondent] and against [the Gasatayas]
ordering [them] to wit:

a.    Ordering [petitioner] to reconvey to [respondent] TCT. No.[T-11720] and TCT No. T-11721, both
of the Registry of Deeds for the Province of Lanao del Norte, upon tender to and receipt by
[petitioner] of the amount of P37,200.00 Philippine money;

b.   Ordering the Registrar of Deeds for the Province of Lanao del Norte to procure and cause the
transfer and registration of the aforesaid transfer certificates of title in favor and in the name of
herein [respondent] Editha S. Mabasa;

c.    Ordering [the Gasatayas] to cede, transfer and reconvey to [respondent] the physical possession

and occupancy of Lot 279, 272 and Lot 972as covered by the aforesaid certificates of title;

d.   Ordering [the Gasatayas] to pay [respondent] the sum of P5,000.00 for attorneys fees; P5,000.00
as litigation expenses;

e.    Ordering [the Gasatayas] to pay costs of this proceeding[s].

SO ORDERED.[6]

Petitioner and his father appealed to the CA which affirmed the RTCs 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.

xxx xxx xxx

Moreover, [the Gasatayas] are in possession of said land[s] by virtue of a Deed of Sale with a Right to
Repurchase and not because the DBP granted it to them[T]o facilitate their acquisition of the land in
question, [they] deliberately defaulted in the payment of the assumed obligation to the damage and
prejudice of [respondent]. Consequently, the lands in question were subjected to public bidding
wherein [petitioner] participated and eventually won[the Gasatayas] committed a breach of trust
amounting to fraud which would warrant an action for reconveyance.[7]

Petitioner alone came to us via this appeal by certiorari seeking the reversal of the CA decision.

Before us, petitioner contests the CA decision affirming the trial courts order to reconvey his titles on
the disputed lots to respondent who, according to him, is not the owner thereof.

We affirm the CA.

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. [8] 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.

The trial courts findings, as affirmed by the CA, that petitioner and his father deceived respondent to
acquire the disputed lots bind us. Well-settled is the rule that factual conclusions of the trial court
deserve respect and become irrefutable especially when affirmed by the CA. [9] Absent any evidence
that the CA overlooked salient matters that could justify a reversal of the outcome of this case, we
decline to disturb such factual conclusions.

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.

We disagree.

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 respondents right to repurchase the lots under said
deed because of the deceitful maneuverings that he and his father employed. If we were to sustain
petitioners argument, then we would, in effect, reward him for his misdeed.

Neither can this Court uphold petitioners 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 fathers fraudulent schemes.
 

The registration of the properties in petitioners 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, [10] which in this case was the conscious
representation by petitioners father (Sabas Gasataya) that respondents 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.[11] Consequently, fraud is a ground for reconveyance.[12]

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 persons claim.[13] Obviously, petitioner was not an innocent purchaser for value.

As a final point, the Court takes significant note of the fact that respondents 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 CAs disquisition that courts should lend a stout shoulder to help keep a homestead in the
homesteaders 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.[14] 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.

WHEREFORE, the assailed decision of the Court of Appeals in CA-G.R. CV No. 55055 is
hereby AFFIRMED.

Costs against petitioner.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-33261 September 30, 1987

LIWALUG AMEROL, MACATANTO AMEROL, TAIB AMEROL, DIBARATUN AMEROL, DIBARATUN,

MATABALAO, MINDALANO DIBARATUN, DIPUNDUGUN MORO, and MANUCAO
MORO, petitioners, 
vs.
MOLOK BAGUMBARAN, respondent.

SARMIENTO, J.:

This is a petition for review on certiorari of the decision 1 of the then Court of First Instance of Lanao
del Sur, Branch III, Marawi City, in Civil Case No. 1354, entitled, "Molok Bagumbaran vs. Liwalug
Amerol et al.," under Republic Act No. 5400, "as only question of law is raised." 2

The only issue for resolution is the prescriptive period of an action for reconveyance of real property
which has been wrongfully 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, corrolarily reference. The petitioners herein,
defendants in the trial court, assert that they have ten years to bring the action, while the
respondent, plaintiff in the court below, claims the prescriptive period is four years. The trial court
ruled tor the plaintiff, now respondent.

We reverse. 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.

There is no issue as to the facts, this case having been elevated to this Court, as aforestated, on
purely a question of law. Be that as it may, in order to satisfy constitutional requirements as well as
to place the question of law in proper perspective, there is need to state the facts of the case. On
this regard, the findings of the trial court would best serve the stated purposes.

xxx xxx xxx

From the evidence submitted during the trial there is no dispute concerning the fact relative to the
Identity of the land in litigation. It is commonly known as Lot No. 524, Pls-126 and technically
described and bounded in the sketch (Exh. "7 "). This is the very tract of land alleged by the plaintiff
to have been forcibly entered into by the defendants and which plaintiff now w&s to recover
possession thereof. It has also been proven that the same lot was covered by two free patent
applications: — (l) 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 mm 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 Tondo, said defendant has been and up to the present
in con. tinuous 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 (Exh. "12", p. 408, Record) 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.

First question to be resolved is whether or not the plaintiff is guilty of fraud or misrepresentation in
securing the Free Patent No. V-19050 covering the land in question.

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
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 knew that the land in question
which was covered by his free patent application was then actually occupied and cultivated by
defendant Liwalug Datomanong 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 (Tax Declaration No. 1529, Record) and stated in said tax declaration (Exhs. "8"
and "8-A," p. 414, Record) 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 above-
stated tax declaration and secured another (Tax Declaration No. 1794, Exh. "9" and "9-A," p. 413,
Record) and still plaintiff stated therein that his boundary land owner on the north is Hadji Abdul
Gani. 3 [a.k.a.Liwalug Datomanong(Amerol)]. 4

xxx xxx xxx

Notwithstanding the aforequoted findings, very unequivocal to be sure, the trial court denied the
counterclaim of the defendants, now petitioners, for the affirmative relief of reconveyance on the
ground of prescription. Said the court:

xxx xxx xxx

The patent of the plaintiff having been registered back in 1955 and in contemplation of law
registration thereof is notice to the whole world and yet defendant 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. 5

xxx xxx xxx

Thus, the dispositive portion of the assailed decision stated:

xxx xxx xxx

PREMISES CONSIDERED, judgment is hereby rendered as follows: (1) declaring the herein plaintiff
the registered owner of Lot No. 524, Pls-126 and sustaining and respecting the validity of the
plaintiff's Original Certificate of Title No. P-466 covering the said land; (2) ordering the defendants to
vacate the premises of Lot No. 524; Pls-126 and deliver possession thereof to the herein plaintiff
under certain terms and conditions herein below stated; (3) denying and hereby dismissing the
counterclaim of the herein defendants and consequently the prayer to annul the title and/or for
reconveyance of the land to said defendant Liwalug Datomanong must Likewise be denied; (4) that
before plaintiff could take possession of said premises he must reimburse defendant Liwalug
Datomanong the total sum of Six Thousand Seven Hundred Fifty-Two Pesos and Sixty-Two Centavos
(P6,752.62) which he incurred for the necessary and useful expenses on the land in question with
the right of said defendant to retain possession of the premises if said reimbursement be not
completely made. No pronouncement as to costs. 6

xxx xxx xxx

Hence, this petition. 7

The petitioners in their Brief 8 assign the following two errors allegedly committed by the trial court:

I.

THE COURT ERRED IN ITS CONCLUSION OF LAW TOTHE EFFECT THAT PETITIONERS RIGHT OF ACTION
FOR RECONVEYANCE FOR VIOLATION OF AN IMPLIED TRUST PRESCRIBED AFTER FOUR YEARS FROM
THE REGISTRATION OF THE PATENT OF RESPONDENT.

II.
THE COURT ERRED IN NOT REQUIRING THE INTRODUCTION OF EVIDENCE AS BASIS IN THE
ASSESSMENT OF THE FAIR MARKET VALUE OF THE IMPROVEMENT INTRODUCED ON THE LAND IN
GOOD FAITH BY PETITIONERS INSTEAD OF BASING SUCH ASSESSMENT UPON PURE AND SIMPLE
GUESS WORKS AND WILD ESTIMATIONS.

The first assignment of error is well-taken as adverted to at the outset.

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, 9 reconveyance does
not work to set aside and put under review 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, 10 or to one with a
better right. That is what reconveyance is all about.

Yet, the right to seek reconveyance based on an implied or constructive trust is not absolute. It is
subject to extinctive prescription. 11 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 vs. Fabian, 12 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 vs. Court of Appeals, 13 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  14 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 belong — scan 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." 15

Significantly, the three cases cited by the respondent to buttress his position and support the ruling
of the trial court have a common denominator, so to speak. The cause of action assailing the frauds
committed and impugning the Torrens titles issued in those cases, all accrued prior to the effectivity
of the present Civil Code. 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. It provided:

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: x x x 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;

xxx xxx xxx

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.

xxx xxx xxx

(Emphasis supplied)
An action for reconveyance based on an implied or constructive trust must perforce prescribed 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. 16 The only discordant note, it seems, is Balbin vs. Medalla, 17 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. 18 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 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.

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. 19 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 lien 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.

Premises considered, we deemed it superfluous to rule on the second assignment of error raised by
the petitioners.

WHEREFORE, the petition is GRANTED and the Decision dated June 3, 1970 of the then Court of First
Instance of Lanao del Sur in Civil Case No. 1354 is hereby ANNULLED and SET ASIDE and a new one
entered ORDERING the respondent to RECONVEY Original Certificate of Title No. P-466 in favor of
petitioner Liwalug Datomanong, free of any encumbrance. Costs against the respondent.

SO ORDERED.

G.R. No. 140457             January 19, 2005

HEIRS OF MAXIMO SANJORJO, namely, VICENTE SANJORJO, MACARIA SANJORJO, DOMINGO
SANJORJO, ALFREDO CASTRO, and SPOUSES SANTOS AND LOLITA INOT, petitioners, 
vs.
HEIRS OF MANUEL Y. QUIJANO, namely, ROSA Q. LEDESMA, MILAGROS Q. YULIONGSIU, ALAN P.
QUIJANO AND GWENDOLYN P. ENRIQUEZ, and VICENTE Z. GULBE, respondents.

DECISION

CALLEJO, SR., J.:

This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court of the
Decision1 dated February 17, 1999 of the Court of Appeals (CA) in CA-G.R. CV No. 50246 and its
Resolution2 dated October 12, 1999 denying the petitioners’ motion for reconsideration.

The Antecedents

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, 1988.3 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. 4

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, as well as
Free Patent No. VII-4-3088, and for the dismissal of the free patent applications over Lots 376 and
378.5 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 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. They prayed that:

WHEREFORE, premises considered and after hearing on the merits, it is most respectfully prayed of
this most Honorable Office to render judgment ordering:

1. The cancellation of Free Patent Titles Nos. VII-4-2974 and VII-4-3088 issued to respondents Alan P.
Quijano and Gwendolyn Quijano Enriquez concerning Lot Nos. 374 and 379, respectively.

2. The cancellation of Free Patent Application Nos. VII-4-3152, VII-4-3152-A, and VII-1-18277-I of
respondents concerning Lot Nos. 376 and 378.

3. The return of possession and ownership of these lots to the complainants/protestants who are
the rightful owners by inheritance.
Protestants further pray for other relief, just and equitable, under the premises. 6

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 decision7 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. The dispositive portion of the decision reads:

WHEREFORE, it is hereby ordered that the above-entitled administrative case be dismissed and
dropped from the records. It is further ordered that the Free Patent Application of applicants-
respondents over Lot Nos. 376 and 378 be given due course for being in the actual adverse and
continuous possession of the land in controversy. 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.8

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, and
alleged, inter alia –

3. That the plaintiffs are the owners of several parcels of land in Antipolo, Medellin, Cebu, which are
more particularly described as follows:

(a) Lot No. 374 with an area of 14,179 sq.m. and covered by Tax Declaration No. 00718 in the name
of PONCIANO DEMIAR and Tax Declaration No. 01042 in the name of TRANQUILINA SANJORJO;

(b) Lot No. 376 with an area of 6,177 sq.m. and covered by Tax Declaration No. 01038 in the name of
MAURO SANJORJO;

(c) Lot No. 378 with an area of 3,201 sq.m. and covered by Tax Declaration No. 01035 in the name of
FLORENTINO SANJORJO;

(d) Lot No. 379 with an area of 6,640 sq.m. and covered by Tax Declaration No. 00772 in the name of
SANTOS INOT and Tax Declaration No. 01039 in the name of SABINIANO SANJORJO;

The said Tax Declarations are hereto attached and marked as Annexes "A," "B," "C," "D," "E" and "F,"
respectively, and made integral parts of this complaint;

4. That the aforestated 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;

5. 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 ₱4,500.00 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;
6. 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, as follows:

(a) Lot No. 374 is now covered by OCT No. OP-38221 in the name of defendant ALAN P. QUIJANO. A
copy of the title is hereto attached and marked as Annex "G" and made an integral part of this
complaint;

(b) Lot No. 376 is now covered by Tax Declaration No. 10015 in the name of MANUEL Y. QUIJANO
married to FLAVIANA P. QUIJANO. A copy of the said tax declaration is hereto attached and marked
as Annex "H" and made an integral part of this complaint;

(c) Lot No. 379 is now covered by OCT No. OP-39847 in the name of GWENDOLYN Q. ENRIQUEZ. A
copy of the title is hereto attached and marked as Annex "I" and made an integral part of this
complaint;

7. That the plaintiffs nor their ascendants have never sold, donated, or mortgaged any of these lots
in question to the defendants or their ascendants;

8. That sometime in September 1991, the defendant ALAN QUIJANO charged plaintiff ALFREDO
CASTRO 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;

9. 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;

10. That upon their discovery of defendants’ fraudulent acts, plaintiffs demanded the return of their
properties but the defendants have failed and refused and continue to fail and refuse to do so. 9

The petitioners prayed that, after due proceedings, judgment be rendered in their favor:

(a) Ordering the cancellation of OCT Nos. OP-38221 and OP-39847 and Tax Declaration No. 10015;

(b) Ordering the defendants to pay rentals to the plaintiffs in the amount of ₱4,500.00 per year from
1983 up to the time the properties are returned to the plaintiffs; and

(c) Ordering the defendants to pay the plaintiffs moral damages in the amount of not less than
₱20,000.00.

Plaintiffs further pray for such other relief and remedies as this Court may deem just and equitable
under the premises.10

The private respondents 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.
The petitioners opposed the motion. In their reply to such opposition, the private respondents
invoked another ground – that the petitioners’ action was barred by the issuance of OCT No. OP-
38221 covering Lot 374 on August 29, 1988, and OCT No. OP-39847 covering Lot 379 on November
11, 1988.

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.

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.

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. 1529,11 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. 12

When their motion for reconsideration of the said decision of the CA was denied, 13 the petitioners
filed the instant petition for review, contending that:

THE HONORABLE COURT OF APPEALS (THIRD DIVISION) GRAVELY ERRED IN AFFIRMING THE
DECISION OF THE REGIONAL TRIAL COURT, BRANCH 13, CEBU CITY, DATED SEPTEMBER 13, 1994.

PETITIONERS BEG THAT THIS PETITION BE GIVEN DUE COURSE IN THE INTEREST OF SUBSTANTIAL
JUSTICE, [SINCE] THE DECISION OF THE COURT OF APPEALS, IF NOT CORRECTED, WOULD CAUSE
IRREPARABLE INJURY TO THE PREJUDICE OF HEREIN PETITIONERS WHO ARE THE REAL OWNERS OF
THE LOTS IN QUESTION.14

The petitioners maintain that the appellate court erred in holding that their action in Civil Case No.
CEB 14580 was barred by the Decision dated April 14, 1992 of the DENR Regional Executive Director.
They contend that the latter decision is not a decision on its merits so as to bar their complaint.

We agree.

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. 15

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. 16

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. 17 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.

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. 18

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.19 The order or decision of the DENR granting an application for a free
patent can be reviewed only within one 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. Thus:

… 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 personamand 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.20

An action for reconveyance is one that seeks to transfer property, wrongfully registered by another,
to its rightful and legal owner.21 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.22 The body of the pleading or complaint determines the nature of an action, not its
title or heading.23 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.24 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. 25 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,26 the complaint filed on September 13, 1993 is, therefore, well within the prescriptive period.

IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The Decision of the Court of
Appeals is MODIFIED. Accordingly, the Regional Trial Court of Cebu City, Branch 13, is DIRECTED to
reinstate the complaint insofar as Lots 374 and 379 are concerned. No costs.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.