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Brgy, Piapi v.

Talip September 7, 2005 Before us is a petition for review on certiorari[1] assailing the Orders dated January 12, 1999[2] and April 20, 1999[3] of the Regional Trial Court (RTC), Branch 18, Digos, Davao del Sur in Civil Case No. 3715 filed by the above-named petitioners against respondent Ignacio Talip representing the heirs of Juan Jayag. The factual antecedents as borne by the records are: On August 28, 1998, petitioners filed with the said RTC a complaint for reconveyance and damages with prayer for issuance of a temporary restraining order and/or writ of preliminary injunction against respondent, docketed as Civil Case No. 3715. The complaint alleges that petitioners and their predecessors-in-interest have been in actual, peaceful, continuous and open possession for more than 30 years of a parcel of land consisting of 3.2 hectares situated in Piapi, Padada, Davao del Sur. It is

covered by Original Certificate of Title (OCT) No. P-(3331)-4244 of the Registry of Deeds, same province, issued in the name of Juan Jayag and has a market value of P15,000.00. where the individual petitioners built their houses. gym and health center. The same land was subdivided into lots consisting of 100 square meters each, On the remaining portion were constructed their barangay center, multi-purpose

Respondent fraudulently obtained from the said Registry of Deeds a Transfer Certificate of Title (TCT) in his

name. In 1998, he paid real estate taxes and subsequently, he threatened to build a barb-wire fence around the land.

Instead of filing an answer, respondent moved to dismiss the complaint on the ground that the RTC has no jurisdiction over the case considering that the assessed value of the land is only P6,030.00. Respondent, citing Section 33 (3) of BP Blg. 129, as amended by R.A. No. 7691,[4] maintains that the case falls within the exclusive jurisdiction of the Municipal Circuit Trial Court of Padada-Kiblawan, Davao del Sur. In their opposition to the motion to dismiss, petitioners alleged that jurisdiction is vested in the RTC considering that the total assessed value of the property is P41,890.00, as shown by a Real Property Field Appraisal and Assessment Sheet dated August 20, 1996 issued by Atty. Marcos D. Risonar, Jr., Provincial Assessor of Davao del Sur.[5] On January 12, 1999, the trial court issued an Order dismissing the complaint for lack of jurisdiction. Petitioners then filed a motion for reconsideration but was denied in an Order dated April 20, 1999. Hence, petitioners directly filed with this Court the instant petition for review on certiorari assailing the trial courts Order dismissing the complaint for lack of jurisdiction. Petitioners contend that under Section 19 (1) of BP Blg. 129, as amended, the RTC has jurisdiction over the complaint for reconveyance since it is incapable of pecuniary estimation. The contention is bereft of merit. This case is analogous to Huguete vs. Embudo.[6] There, petitioners argued that a

complaint for annulment of a deed of sale and partition is incapable of pecuniary estimation, and thus falls within the exclusive jurisdiction of the RTC. However, we ruled that the nature of an action is not determined by what is stated in the caption of the

complaint but by the allegations of the complaint and the reliefs prayed for. Where the ultimate objective of the plaintiffs, like petitioners herein, is to obtain title to real property, it should be filed in the proper court having jurisdiction over the assessed value of the property subject thereof.

Indeed, basic as a hornbook principle is that the nature of an action, as well as which court or body has jurisdiction over it, is determined based on the allegations contained in the complaint of the plaintiff, irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims asserted therein.[7] Let us examine the pertinent allegations in petitioners complaint below: x x x xxx

2. Plaintiffs by themselves and/or thru their predecessors-in-interest have been in actual possession, in the concept of an owner, in good faith and in a manner that is open, peaceful, uninterrupted, public, adverse and continuous, for more than 30 years, the following described parcel of land, viz: A parcel of land containing an area of 3.2 hectares, more of less, covered by OCT No. P-(3331)-4244, in the name of Juan Jayag and situated in Piapi, Padada, Davao del Sur. 2a. The market value of the above-described land is Fifteen Thousand Pesos (P15,000.00).

3. The respective areas that private plaintiffs occupy consisted of an average of 100 square meters on which their homes and houses are built while a large chunk of the above-described property has been used or set aside for the barangay site of and other infrastructures for Piapi, Padada, Davao del Sur. xxx xxx

5. Defendant or his predecessor-in-interest has never been in possession, of the land in suit and except for the year 1998, has not paid taxes thereon nor declared the same for taxation purposes a clear index that defendants title over the same is not genuine. 6. Defendant, in procuring title to the land in suit did so by fraud, mistake and/or misrepresentation, hence, he holds the title for the benefit and in trust of the landowner that is, herein plaintiffs. 7. Defendant is by law under obligation to reconvey the land in suit in favor of herein plaintiffs, x x x. However, they failed

It can easily be discerned that petitioners complaint involves title to, or possession of, real property. to allege therein the assessed value of the subject property. P15,000.00. Section 19 (2) of Batas Pambansa Blg. 129, as amended provides:

Instead, what they stated is the market value of the land at

SEC. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive original jurisdiction: xxx xxx

(2) In all civil actions which involve the title to, or possession of, real property, or any interest thereon, where the assessed value of the property involved exceeds Twenty thousand pesos (P20,000.00) or for civil actions in Metro Manila, where such value exceeds Fifty thousand pesos (P50,000.00) except actions for forcible entry into and unlawful detainer of lands or buildings, original jurisdiction over which is conferred upon the Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts.

The Rule requires that the assessed value of the property, or if there is none, the estimated value thereof, shall be alleged by the claimant.[8] It bears reiterating that what determines jurisdiction is the allegations in the complaint and the reliefs prayed for. Petitioners complaint is for reconveyance of a parcel of land. Considering that their action involves the title to or However, they only specified the market value or

interest in real property, they should have alleged therein its assessed value. estimated value, which is P15,000.00.

Pursuant to the provision of Section 33 (3) quoted earlier, it is the Municipal Circuit Trial

Court of Padada-Kiblawan, Davao del Sur, not the RTC, which has jurisdiction over the case. WHEREFORE, the petition is DENIED. The assailed Orders dated January 12, 1999 and April 20, 1999 of the Regional Trial Court, Branch 18, Digos, Davao del Sur in Civil Case No. 3715 are hereby AFFIRMED. Costs against petitioners.

SO ORDERED

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-46439 April 24, 1984 ANDREA M. MOSCOSO, petitioner, vs. COURT OF APPEALS and MAXIMINA L. MORON, respondents. Jesus B. Velasco for petitioner. Custodio P. Caete for private respondent.

GUERRERO, J.:+.wph!1 Petition for review on certiorari of the decision of the defunct Court of Appeals 1 (now the Intermediate Appellate Court) in CAGR No. 52187-B entitled "Application for Land Registration Under Act No. 496-Andrea M. Moscoso, applicant-appellant versus Maximina L. Moron, et al., oppositors-appellees" which affirmed the judgment of the Court of First Instance of Tacloban City in Land Registration Case No. N 134. Sometime on March 22, 1966, petitioner applied for land registration of a 1,147 square meters residential lot situated in the poblacion of the municipality of Palo, province of Leyte, bounded and described in Survey Plan Psu-54699 of the then General Land Registration Office as verified and approved under date June 16, 1927. Her application substantially stated that petitioner is the owner in fee simple of the land and improvements thereon as her acquisition by inheritance from her father, the late Pascual Monge y Vigera who died on June 9, 1950, and that the same parcel of land is her share in a partial partition of estate she and her brothers and sisters executed on May 22, 1964 at Palo, Leyte (Exhibit "K"); that she and her predecessors in interest have been in continuous, public, actual and adverse possession of the land applied for since time immemorial until the present; that at the last assessment for taxation, said lot was assessed in her name under Tax Declaration No. 28260 dated May 24, 1964 (Exhibit H and that the taxes are fully paid up to the current year; that to the best of her knowledge and belief, there is no incumbrance or any kind whatsoever affecting said land nor any other person having interest therein, legal or equitable, in posession, remainder, reversion or expectancy; and that the land is now being rented by lessees of the applicant, namely, Angel Encenares, Olanda Bribe, Timoteo Noblejas, Felisa Adre, Celestina Solana, Baltazar Collado, all of Palo, Leyte. After due publication of the Notice of Initial Hearing of the petition in the Official Gazette, Vol. 62, Nos. 46 and 47, issues dated November 14 and 21, 1966 (Exhibit "C"), only the Highway District Engineer of Leyte as public oppositors, and Concordia Lanuncia, Flaviano L. Marchadesch, Jr., and herein private respondent Maximina L. Moron as private oppositors appeared for the initial hearing before the trial court. The trial court summarily dismissed the opposition of the Highway District Engineer who merely sought to secure a reservation for a road right-of-way in favor of the national government in view of petitioner's willingness to annotate the same on the certificate of title which might issue. The opposition of the private parties thus remained. The written opposition substantially allege that they, including one Mrs. Apolonia L. Marchadesch who died in 1963 and survived by her only issue, oppositor Flaviano L. Marchadesch, are the illegitimate children of the late Zenona Lanuncia and the recognized natural children of the late Pascual Monge who died in 1950 and father of applicant Andrea M. Moscoso; that the late Zenona Lanuncia, from the age of three, became a protegee of the late spouses, Saturnino Monge and Isidra Vigera Monge, letigimate parents of Pascual Monge and Juan Monge, now deceased; that Isidra Vigera Monge was the original owner of the parcel of land applied for; that Isidra Monge, long before she died on April 15, 1915, and after Pascual Monge legally got married to the mother of the applicant and brother and sisters, and in order to provide a home and subsistence to the oppositors, their sister and mother, all of which are girls, effected a verbal partition of her lands with her sons, Pascual, Juan and with the herein oppositor, who were already at their teens, which, by virtue of said partition, the land herein applied for registration passed to the hands of the oppositors for their home; that the oppositors have no knowledge that this parcel of land forms part of the inheritance of the applicant and of a partial partition among the applicant and her brother and sisters; that the oppositors have, if not legal, an equitable title to the land as judged from the circumstances surrounding the oppositors' case; they deny the allegation that applicant and her predecessors in interest have been in continuous, public, actual and adverse possession of the land from time immemorial, the truth being that the oppositors exercised exclusive dominion over the land and are in actual and continuous possession over it from time immemorial to the present and that should the verbal partition effected before the death of Isidra Vigera Monge in 1915 being insufficient to pass title to the oppositor, then by virtue of acquisitive prescription caused by the open, continuous, uninterrupted, peaceful and adverse possession in favor of oppositors, they are entitled to the land invoking the benefits of Chapter VIII of Commonwealth Act No. 141. 2 Upon the termination of the hearing on the merits, the Hon. Jesus N. Borromeo, then Presiding Judge of the CFI, Tacloban City, rendered his decision dated December 22, 1971, directing that the title over the land should not be registered exclusively in the name of the applicant since "it has been overwhelmingly established by them (the private oppositors) that they and their sister Apolonia, who died in 1963, are the children of Zenona Lanuncia and Pascual Monge resulting from the relations between the two prior to the marriage of the latter with Guadalupe Oliver, mother of herein petitioner and her brothers, Elpidio, Salvador, Remedios, Ruperto, and Abelardo (deceased), all surnamed Monge. 3 Hence, the judgment decreed: t.hqw IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered ordering the registration of title over the parcel of land situated in the poblacion of the municipality of Palo, Province of Leyte, as described in the Plan Psu-54699, Exhibit "E", and the technical

description Exhibit "F", in the name of the co-ownership of: (1) Andrea M. Moscoso, Filipino citizen, of legal age, married to Salvador Moscoso, with postal address at Bupsong, Antique for three-fourth (3/4) share; (2) Concordia Lanuncia, Filipino citizen, of legal age, single, and a resident of Palo, Leyte, for one-twelfth (1/12) share; (3) Maximina L. Moron, Filipino citizen, of legal age, married, and a resident of Palo, Leyte, for (1/12) share; and, (4) Flaviano L. Marchadesch, Jr., son of the late Apolonia L. Marchadesch, for onetwelfth (1/12) share, subject to a reservation of a road right-of-way in favor of the Government of the Republic of the Philippines. After this judgment shall have become final, let the corresponding decree of registration be issued. SO ORDERED. 4 The trial court ruled that the verbal donation made by Isidra Vigera Vda, de Monge in favor of Zenona Lanuncia and the latter's daughters by Pascual Monge because they are of weaker sex, was ineffectual to transmit title of ownership over the land in question and that their adverse claim of ownership even under extraordinary prescription of over thirty years could not favor them because such claim is disputable due to their failure to declare the property for tax purposes in their name after the death of Isidra Monge. The trial court, however, gave significant weight to the carbon copy of a power of attorney executed and signed by the late Pascual Monge on February 11, 1945 (Exhibit "2", "2-A" to "2-C" in favor of Maximina L. Moron, wherein he stated that Maximins is his daughter and appointed her as his Attorney-in-Fact to transact with the United States Armed Forces in the Philippines in his behalf for the collection of rentals and other war damage claims due and payable to him. The court ruled that the power of attorney was an authentic writing wherein Maximina Lanuncia was voluntarily recognized as the daughter of Pascual Monge. As found by the trial court thus, t.hqw Precisely, it would appear that, in his power of attorney executed on February 11, 1945 in favor of Maximina L. Moron, Exhibit "2", Pascual Monge stated that Maximina is his daughter. The contention of petitioner that said power of attorney was fraudulently altered in order to inse therein the words "my daughter . . ." does not seem to be well-taken because, from an examination of the document, the Court does not notice concrete indications of alteration having been made in order to suit the ends of the herein oppositors. Thus, the Court is of the view that the late Pascual Monge, who had no impediment to marry Zenona Lanuncia when Maximina was conceived (Art. 119, Old Civil Code; Art, 269, New Civil Code) had voluntarily recognized Maximina Lanuncia Moron as his child when in his power of attorney executed on February 11, 1945, he mentioned her as his daughter. ... 5 Petitioner assailed the Court's decision in his motion for reconsideration, contending that the disposition of the estate should be governed by the Old Civil Code (Spanish Civil Code of 1889) since he died on June 9, 1950 while the New Civil Code took effect only on August, 1950; that assuming that the New Civil Code applies in the case at bar the power of attorney (Exhibit "2") is not an authentic document to support voluntary recognition because the words "my daughter" reveals a clear sign of erasure and is a product of falsification as presented in the rebuttal testimony of her brother Elpidio Monge and that said document is not even a public document because it was merely acknowledged by the Municipal Mayor of Palo, Leyte who had no authority to authenticate writings as public documents which could be done only by a notary public. Acting upon the aforesaid motion for reconsideration, the Court modified its decision in the Order dated May 25, 1972 with the following dispositive portion: t.hqw IN VIEW OF THE FOREGOING, the judgment of December 22, 1971 is hereby amended in the sense that the Court hereby orders the registration of title over the parcel of land situated in the poblacion of the municipality of Palo, Province of Leyte, as described in the Plan Psu-54699, Exhibit "E", and the technical description Exhibit "F" in the name of the co- ownership of (1) Andrea M. Moscoso, Filipino citizen, of legal age, married to Salvador Moscoso, with postal address at Bugasong, Antique, for 13/14 share; and (2) Maximina L. Moron for for share, subject to the reservation of a road right-of-way in favor of the government of the Philippines. After this judgment shall have become final, let the corresponding decree of registration be issued. SO ORDERED.1wph1.t Not satisfied with the amended judgment, petitioner elevated the case to the defunct Court of Appeals which affirmed the judgment of the lower court. Hence, the instant petition before Us. Petitioner assigns practically the same errors allegedly committed by the trial court which were presented before the respondent Court of Appeals, to wit: t.hqw I. The lower court erred in holding that Pascual Monge voluntarily recognized Maximina Lanuncia Moron as his natural child by virtue of the power of attorney (Exhibit "2") executed by him in favor of the latter. II. The lower court erred in holding that said power of attorney (Exhibit "2") is not materially altered when in fact it was erased to suit the ends of the oppositors. III. The lower court erred in appreciating said power of attorney (Exhibit "2") as a public document. IV. The lower court erred in making judicial pronouncements that Maximina Lanuncia Moron as the acknowledged natural child of Pascual Monge conferring upon her legal right to inherit from the whole estate of the late Pascual Monge who died on June 9, 1950 when her claim over the land subject of this land registration proceeding is that it was given to their mother Zenona Lanuncia by Isidra Vigera and for their long continuous possession acquired the same by acquisitive prescription. V. The lower court erred in making judicial pronouncement of recognition without a formal complaint, hearing on the merit and neither has Maximina Lanuncia Moron the status of a continuous possession of a natural child.

VI. The lower court erred in ordering the registration of the land applied for registration in favor of the applicant, Andrea M. Moscoso, only 13/14 share and to oppositor Maximina Lanuncia Moron 1/14 share in co-ownership. The principal or decisive issue to be resolved herein is whether or not oppositor-appellee Maximina L. Moron had been acknowledged by her illegitimate father, Pascual Monge (now deceased) in view of which, as held by the trial court and affirmed by the respondent appellate court, being an acknowledged natural daughter, she would be entitled to 1/14 share in the land in question as her inheritance. In resolving this issue, We are guided and must comply with the well-established rule that findings of fact of the Court of Appeals may not be reviewed by the Supreme Court in an appeal by certiorari where such findings are ably supported by substantial evidence on record, the same being binding, final and conclusive. 6 Hence, the finding of the appellate court that the power of attorney, Exhibit "2", was not materially altered before the same was presented to the court below; that it is "more likely that a mistake was committed in the preparation thereof; that the person who typed the document had to make a slight erasure and correction in typing correctly the word "daughter" and that t e power of attorney, as corrected, was then given to Pascual Monge and Maximina L. Moron for their signature. As such, the correction cannot be considered a deliberate alteration or falsification as depicted by appellant", is a finding of fact which cannot be disturbed. We agree with the court that said power of attorney is an authentic writing wherein the father, Pascual Monge, voluntarily recognized Maximina L. Moron as his daughter, and since Pascual Monge had the legal capacity to contract marriage at the time of the conception, Maximina is a natural child, entitled to share in the inheritance of the property in question. It may be so as argued by the petitioner that where the findings of the Court of Appeals are contrary to those of the trial court, a minute scrutiny by the Supreme Court is in order and resort to the duly proven evidence becomes necessary, citing Gonlalez vs. CA, G.R. No. 37453, May 25, 1979, 90 SCRA 183 and cases cited therein. We have in fact noted that the trial court found no alteration in the power of attorney, Exhibit "2", when it ruled that "from an examination of the document, the court does not notice concrete indication of alteration having been made therein in order to suit the ends of the herein oppositor." (Decision, pp. 21-22, Record on Appeal), whereas respondent appellate court held that "(w)e find it more likely that a mistake was committed in the preparation of the power of attorney that the person who typed the document had to make a slight erasure and correction in typing correctly the word "daughter" and that the power of attorney, as corrected was then given to Pascual Monge and Maximina L. Moron for their signature. As such, correction cannot be considered a deliberate falsification, as depicted by appellant. "(CA Decision, p. 8) We have indeed scrutinized minutely the documentary evidence in question, Exhibit "2", as We have ordered the elevation of the original records before Us. We affirm the holding of the appellate court that "What clearly appears to be the case, upon clear examination, is that there is no erasure of the portion whereon "my" was typed. If, really, such 14-letter word was erased and in lieu thereof the word "daughter" was typed or superimposed, the erasure would be very noticeable and visible as the word "daughter", which is shorter by six letters, cannot fully cover the space occupied by 1, administratrix". This could be easily seen by the naked eye when the document, as in the instant case, was executed more than 25 years ago and has turned yellow with age. But this is not the case." There is no inconsistency between the two findings of the trial and appellate courts. Both support the authenticity of the document in ruling that there was no deliberate falsification, which We uphold. Petitioner's contention that the Court of First Instance, acting as a land registration court, has no jurisdiction to pass upon the issue whether the oppositor is the acknowledged natural child of Pascual Monge, is untenable. We have a number of cases that answer petitioner's position. Thus, in the case of Florentino vs. Encarnacion, G.R. No. L-27697, Sept. 30,1977, 79 SCRA 193, 204-205, We ruled: t.hqw Petitioner-appellants' third assignment of error is not well taken. Firstly, the otherwise rigid rule that the jurisdiction of the Land Registration Court, being special and limited in character and proceedings thereon summary in nature, does not extend to cases involving issues properly litigable in other independent suits or ordinary civil actions, has time and again been relaxed in special and exceptional circumstances, (See Government of P.I. vs. Serafica, 61 Phil. 93 (1934); Caoibes vs. Sison, 102 Phil. 19 (1957); Luna vs. Santos, 102 Phil. 588 (1957); Cruz vs. Tan, 93 Phil. 348 (1953); Gurbax Singh Pabla and Co. vs. Reyes, 92 Phil. 117 (1952)). From these cases, it may be gleaned and gathered that the peculiarity of the exceptions is based not alone on the fact that the Land Registration Courts are likewise the same Courts of First Instance, but also the following premises: (1) Mutual consent of the parties or their acquiescence in submitting the aforesaid issues for the determination by the court in the registration proceedings; (2) Full opportunity given to the parties in the presentation of their respective sides of the issues and of the evidence in support thereto; (3) Consideration by the court that the evidence already of record is sufficient and adequate for rendering a decision upon these issues. (Aglipay vs. De Los Reyes, L-12776, March 23, 1960) ... Upon a scrutiny of the proceedings in the trial court, We find that petitioner filed a Motion for New Trial and/or Reconsideration wherein she assailed the ruling of the trial court that based upon Exhibit "2", the power of attorney, the oppositor was an acknowledged natural child of the late Pascual Monge and entitled to a portion of the land subject of the land registration proceedings. She claimed that the document was not authentic and not a public document. In effect, petitioner acquiesced in submitting the issue as to the status of the oppositor as an acknowledged natural child entitled to successional rights and had the full opportunity to dispute the authenticity of the document in question as in fact, applicant's brother, Elpidio Monge, gave rebuttal testimony to support petitioner's theory that the document was a product of a falsification, which the trial court did not believe. Moreover, the court considered and deemed the evidence already of record sufficient and adequate for rendering a decision upon the issue thus raised. In doing so, We find no abuse of discretion committed by the trial court. In addition, considerations of speedy justice and avoidance of multiplicity of suits impel Us to hold and rule that under the facts of the case at bar, the trial court, acting as a land registration court, may adjudicate the land sought to be registered to either or both of the applicant and oppositor, in whole or in part, based on evidence submitted to the court showing that the party has proper title for registration. (Section 37, Act 496.) In any event, as the Supreme Court said in Nicanor T. Santos vs. Rosa Ganayo, L-31854, Sept. 9. 1972, 116 SCRA 431, "Whether a particular matter should be resolved by the Court of First Instance in the exercise of its general jurisdiction or of its limited jurisdiction as a special court (Probate, Land Registration, etc.) is in reality not a jurisdictional question. It is in essence a procedural question involving a mode of p- practice which may be waived." In meeting the issue raised by the oppositor as to her status as an acknowledged natural child as a result of her voluntary recognition appearing in Exhibit "2", the oppositor (now the petitioner herein) had waived the procedural question and she may not be allowed to raise the same in the present petition. The proceedings for the registration of title to land under the Torrens system is an action in rem not in personam hence, personal notice to all claimants of the res is not necessary to give the court jurisdiction to deal with and dispose of the res, and neither may lack of such personal notice vitiate or invalidate the decree or title issued in a registration proceeding, for the State, as sovereign over the land situated within it, may provide for the adjudication of title in a proceeding in rem or in the nature of a proceeding in rem which shall be binding upon all persons, known or unknown. (City of Manila vs. Lack et al., 19

Phil. 324, 337; Roxas vs. Enriquez, 29 Phil. 31; Director of Lands vs. Roman Catholic Archbishop of Manila, 41 Phil. 120; Aguilar vs. Caogdan, 105 Phil. 661). Under the above doctrine, petitioner's assailment that "(t)he judicial pronouncement (referring to the holding that the oppositor Maximins L. Moron is the acknowledged natural child of Pascual Monge) which will become conclusive and far-reaching and in effect binds the other heirs of Pascual Monge consisting of the brothers and sisters as well as the nephews and nieces of the petitioner who are not parties in this prayer proceedings " is untenable. Earlier, We have affirmed the ruling of the appellate court that Exhibit "2" which is the power of attorney is an authentic writing wherein the father, Pascual Monge, voluntarily recognized Maximina L. Moron as his daughter, applying the provisions of Article 278, New Civil Code, which provides that recognition shall be made in the record of birth, a will, a statement before a court of record, or in any authentic writing. We apply Article 278, New Civil Code retroactively to the case of Maximina L. Moron although she was born before the effectivity of the New Civil Code in view of the provisions of Article 2260 of the New Civil Code, which states: t.hqw Art. 2260. The voluntary recognition of a natural child shall take place according to this Code, even if the child was born before the effectivity of this body of laws. The reason for giving retroactive effect to Article 2260 is indicated in the Report of the Code Commission, page 169, thus: "The liberalized mode of recognition is in harmony with the aim of the proposed code to do justice to illegitimate children. Hence, its retroactive effect." (See Civil Code Annotated by Padilla, Vol. VII, 1975 Ed., p. 709). In Caridad Cruz Vda. de Sy-Quia vs. Court of Appeals and Jose Pedro Reynaldo Sy-Quia, G.R. No. 62283, Nov. 25, 1983, the Supreme Court squarely held: t.hqw ... Article 2260 of (the Civil Code of the Philippines) provides that 'the voluntary recognition of a natural child shall take place according to this Code, even if the child was born before the effectivity of this body of laws' or before August 30, 1950. Hence, Article 278 may be given retroactive effect (p. 169, Report of the Code Commission, 7 Padilla, Civil Code, 1975 Ed., p. 709). Under the Spanish Civil Code of 1889, an acknowledged natural child is entitled to ... "3. To receive the hereditary portion determined by this Code." (Article 134). This hereditary portion is fixed under Article 840 which states: t.hqw Art. 840. When the testator leaves legitimate children or descendants, and also natural children, legally acknowledged, each of the latter shall be entitled to one-half of the portion pertaining to each of the legitimate children who have not received any betterment, provided that it may be included within the freely disposable portion, from which it must be taken after the burial and funeral expenses have been paid. The same share which is one-half of the legitime of each of the legitimate children or descendants is given to each of the acknowledged natural children under Article 895 of the New Civil Code, which reads: t.hqw Art. 895. The legitime of each of the acknowledged natural children and each of the natural children by legal fiction shall consist of onehalf of the legitime of each of the legitimate children or descendants. The final adjudication made by the trial court in its Order dated May 25, 1975 (affirmed by the Court of Appeals) directed the registration of the land in question in the name of the co-ownership of petitioner Andrea M. Moscoso for 13/14 share and Maximina L. Moron, the oppositor, for 1/14 share in view of the court's realization that no documentary evidence was presented to prove that the other oppositors, Concordia Lanuncia and Apolonia Lanuncia (decease) and mother of oppositor Flaviano Marchadesch, Jr. were acknowledged by Pascual Monge, In the interest of justice, We must modify the above sharing in order to give the legal share of the oppositor as an acknowledged natural child. Since there are six (6) legitimate children including the petitioner Andrea M. Moscoso who had previously acquired the shares of her five (5) co-heirs, and one (1) acknowledged natural child, the oppositor Maximina L. Moron, herein private respondent who is entitled to one-half (1/2) the share of each of the legitimate children (Article 840, Spanish Civil Code; Article 895, New Civil Code), the proper sharing should be 12/13 to Andrea M. Moscoso and 1/13 to Maximina L. Moron. WHEREFORE, IN VIEW OF THE FOREGOING, the decision appealed from is hereby MODIFIED in the sense that the adjudication of the land subject of the land registration proceedings shall be in the co-ownership of petitioner-applicant Andrea M. Moscoso for 12/13 share and to oppositor-private respondent Maximina L. Moron for 1/13 share. In all other aspects, the decision appealed from is hereby AFFIRMED. Costs against petitioner. SO ORDERED.1wph1.t Makasiar, (Chairman), Concepcion, Jr., De Castro and Escolin, JJ., concur. Abad Santos J., took no part.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

G.R. No. 114299 September 24, 1999 TRADERS ROYAL BANK, petitioner, vs. HON. COURT OF APPEALS, PATRIA, RUBY ANN, MARGARITA, ROSARIO, CYNTHIA, LINDA JOY, all surnamed CAPAY and RAMON A. GONZALES, respondents. G.R. No. 118862 September 24, 1999 PATRIA, RUBY ANN, MARGARITA, ROSARIO, CYNTHIA, LINDA JOY, all surnamed CAPAY, and RAMON A. GONZALES, petitioners, vs. SPS. HONORATO D. SANTOS and MARIA CRISTINA S. SANTOS, SPS. CECILIO L. PE and JOSEFINA L. PE, FLORA LARON WESCOMBE, SPS. TELESFORO P. ALFELOR II and LIZA R. ALFELOR, SPS. DEAN RODERICK FERNANDO and LAARNI MAGDAMO FERNANDO, REMEDIOS OCA, DEVELOPMENT BANK OF THE PHILIPPINES and TRADERS ROYAL BANK, respondents.

KAPUNAN, J.: The present controversy has its roots in a mortgage executed by the spouses Maximo and Patria Capay in favor of Traders Royal Bank (TRB) pursuant to a loan extended by the latter to the former. The mortgage covered several properties, including a parcel of land, the subject of the present dispute. 1 The loan became due on January 8, 1964 and the same having remained unpaid, TRB instituted extra-judicial foreclosure proceedings upon the mortgaged property.1wphi1.nt To prevent the property's sale by public auction, the Capays, on September 22, 1966, filed a petition for prohibition with preliminary injunction (Civil Case No. Q-10453) before the Court of First Instance (CFI) of Rizal, alleging that the mortgage was void since they did not receive the proceeds of the loan. The trial court initially granted the Capays' prayer for preliminary injunction. On March 17, 1967, the Capays caused to be filed in the Register of Deeds of Baguio City a notice of lis pendens over the disputed property. Said notice was entered in the Day Book, as well as in the Capays' certificate of title. Subsequently, the injunction issued by the trial court was lifted thus allowing the foreclosure sale to proceed. Foreclosure proceedings were initiated and on October 17, 1968, the property was sold to TRB which was the highest bidder at the auction sale. A sheriff certificate of sale was issued in its name on the same day. On February 25, 1970, the property was consolidated in the name of TRB, the sole bidder in the sale. TCT No. T-6595 in the name of the Capay spouses was then cancelled and a new one, TCT No. T-16272, 2 was entered in the bank's name. The notice of lis pendens, however, was not carried over in the certificate of title issued in the name TRB. Thereafter, the Capays filed with the CFI a supplemental complaint praying for the recovery of the property with damages and attorney's fees. Trial in Civil Case No. Q-10453 proceeded and, on October 3, 1977, the CFI rendered its decision declaring the mortgage void for want of consideration. The CFI ordered, among other things, the cancellation of TCT No. T-16272 in the name of TRB and the issuance of new certificates of title in the name of the Capay spouses. TRB appealed to the Court of Appeals. While the case was pending in the Court of Appeals, TRB on March 17, 1982 sold the land to Emelita Santiago in whose name a new certificate of title, TCT No. 33774, 3 was issued, also, without any notice of lis pendens annotated thereon. Santiago in turn divided the land into six (6) lots and sold these to Marcial Alcantara, Armando Cruz and Artemio Sanchez, who became co-owners thereof. 4 Alcantara and his coowners developed the property and thereafter sold the six (6) lots to seperate buyers who issued seperate titles, again, bearing no notice of lis pendens. 5 On July 30, 1982, the Court of Appeals rendered its decision modifying the decision of the trial court as to the award of damages but affirming the same in all other respects. For having been filed out of time and for lack of merit, the petition for certiorari filed by TRB before this Court 6 was denied in a Resolution dated September 12, 1983. TRB's motion for reconsideration was similarly denied in a Resolution dated October 12, 1983. The Court's September 12, 1983 Resolution having become final and executory on November 9, 1983, the trial court issued a writ of execution directing the Register of Deeds of Baguio City to cancel TCT No. 16272 in the name of TRB, and to issue a new one in the name of the Capay spouses. Said writ, however, could not be implemented because of the successive subsequent transfers of the subdivided property to buyers who obtained separate titles thereto. Thus, a complaint for recovery of possession ownership dated 8 June 1985 was filed before the Quezon City Regional Trial Court against TRB and the subsequent transferees of the property, the respondents in G.R. No. 118862 (hereinafter, "the non-bank respondents"). Plaintiffs in said case were Patria Capay, her children by Maximo 7 who succeeded him upon his death on August 25, 1976, and Ramon Gonzales, counsel of the spouses in Civil Case No. Q-10453 who become co-owner of the property to the extent of 35% thereof as his attorney's fees (collectively, "the Capays"). On March 27, 1991, the trial court rendered its decision, the dispositive portion of which states:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs against the defendants and ordering the Register of Deeds for Baguio to cancel TCT No. T-36177, Books 198, Page 177 in the names of defendants Spouses Honorato D. Santos and Maria Cristina Santos; to cancel TCT No. 36707, Book 201, Page 107 in the names of defendant Spouses Cecilio Pe and Josefina L. Pe; to cancel TCT No. T-36051, Book 198, Page 51 in the name of Flora Laron Wescombe, married to Kevin Lind Wescombe (now deceased); to cancel TCT No. 36147, Book 198, page 147 in the names of Spouses Telesforo P. Alfelor II and Liza R. Alfelor; to cancel TCT No. T-36730, Book 201, Page 130 in the names of Spouses Dean Roderick Fernando and Laarni Magdamo Fernando; to cancel TCT No. 37437, Book 205, Page 37 in the name of Remedios Oca, and issue new ones free from all liens and encumbrances, together with all the improvements therein in the names of plaintiffs sharing pro indiviso as follows: 35% to Ramon A. Gonzales, married to Lilia Y. Gonzales, of legal age, with postal address at 23 Sunrise Hill, New Manila, Quezon City 37.92% to Patria B. Capay, of legal age, widow, Filipino; 5.41% each to Ruby Ann Capay, of legal age, Filipino married to Pokka Vainio, Finnish citizen; Chona Margarita Capay, of legal age, Filipino, married to Waldo Flores; Rosario Capay of legal age, Filipino, married to Jose Cuaycong, Jr.; Cynthia Capay, of legal age, Filipino, married to Raul Flores; Linda Joy Capay, of legal age, Filipino, married to Pedro Duran, all with postal address at 37 Sampaguita St., Capitolville Subd., Bacolod City, ordering said defendants to vacate the premises in question and restoring plaintiffs thereto and for defendant Traders Royal Bank to pay each of the plaintiffs moral damages in the amount of P100,000.00, P40,000.00 in exemplary damages and P40,000.00 as attorney's fees, all with legal interest from the filing of the complaint, with costs against defendants. SO ORDERED. 8 TRB and the non-bank respondents appealed to the Court of Appeals. In a Decision promulgated on February 24, 1994 in CA-G.R. CV No. 33920, the appellate court affirmed the decision of the trial court in toto. 9 It ruled that the non-bank respondents cannot be considered as purchasers for value and in good faith, having purchased the property subsequent to the action in Civil Case No. Q-10453 and that while the notice of lis pendens was not carried over to TRB's certificate of title, as well as to the subsequent transferees' titles, it was entered in the Day Book which is sufficient to constitute registration and notice to all persons of such adverse claim, citing the cases of Villasor vs. Camon, 10 Levin vs. Bass 11 and Director of Lands vs. Reyes. 12 As regard TRB, the Court of Appeals said that the bank was in bad faith when it sold the property knowing that it was under the litigation and without informing the buyer of that fact. On April 26, 1994, TRB filed with this Court a petition for review to set aside the CA decision, docketed herein as G.R. No. 114299, invoking the following grounds: I. THE RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS ERROR OF LAW IN PROMULGATING THE DISPUTED DECISION AND THEREBY DECIDED A QUESTION OF SUBSTANCE WHOLLY CONTRARY TO SETTLED JURISPRUDENCE AND TOTALLY NOT IN ACCORD WITH APPLICABLE DECISION OF THIS HONORABLE SUPREME COURT. II. THE RESPONDENT HONORABLE COURT OF APPEALS HAS COMMITTED SO GRAVE AND SERIOUS ERRORS OF LAW IN SANCTIONING A DEPARTURE FROM THE USUAL AND ACCEPTED COURSE OF JUDICIAL PROCEEDING AS TO CALL FOR THE EXERCISE OF THE POWER OF BY THIS HONORABLE SUPREME COURT. a) The public respondent has plainly and manifestly acted whimsically, arbitrarily, capriciously, with grave abuse of discretion, in excess of jurisdiction tantamount to lack of jurisdiction. xxx xxx xxx b) The public respondent erred in not finding that it was not the fault of petitioner when the notice of lis pendens was not carried over to its new title. xxx xxx xxx c) The public respondent erred in not finding that PD No. 1271 had legally caused the invalidation of the Capay's property and the subsequent validation of TRB's title over the same property was effective even as against the Capays. 13 Meanwhile, the non-bank respondents moved for a reconsideration of the Court of Appeals' decision. Convinced of the movants' arguments, the Court of Appeals in a Resolution promulgated on August 10, 1994 granted the motion for reconsideration and dismissed the complaint as against them. The dispositive portion of the resolution states: ACCORDINGLY, in view of the foregoing disquisitions and finding merit in the motion for reconsideration, the same is hereby GRANTED. Consequently, the decision of this Court, promulgated on February 24, 1994, is hereby RECONSIDERED. The complaint filed against defendants-appellants with the court a quo is hereby ordered DISMISSED, and the certificate of titles originally issued to them in their individual names are hereby ordered restored and duly respected. We make no pronouncement as to costs.

SO ORDERED. 14 The Capays thus filed with this Court a petition for review, docketed as G.R. No. 118862 to set aside the resolution of the Court of Appeals raising the following errors: I THE COURT OF APPEALS PALPABLY ERRED IN REVERSING ITSELF BY NOW HOLDING THAT TUAZON VS. REYES, 48 PHIL. 814 AND RIVERA VS. MORAN, 48 PHIL. 836 ARE NOT APPLICABLE HEREOF, WHILE PINO VS. COURT OF APPEALS, 198 SCRA 436, IS APPLICABLE. II THE COURT OF APPEALS PALPABLY ERRED IN REVERSING ITSELF BY NOW HOLDING THAT ATUN VS. MUNOZ, 97 PHIL. 762 AND LAROZA VS. GUIA, 134 SCRA 34, ARE NOT APPLICABLE. III THE COURT OF APPEALS PALPABLY ERRED IN REVERSING ITSELF BY NOW HOLDING THAT LEVIN VS. BASS, 91 PHIL. 419 VILLASOR VS. CAMON, 89 PHIL. 404 AND DIRECTOR OF LANDS VS. REYES, 68 SCRA 73, ARE NOT APPLICABLE HEREOF. IV THE COURT OF APPEALS PALPABLY ERRED IN REVERSING ITSELF BY NOW HOLDING THAT PETITIONERS ARE GUILTY OF LACHES. V THE COURT OF APPEALS PALPABLY ERRED IN REVERSING ITSELF BY NOW HOLDING THAT THERE IS NO DISTINCTION IN THE REGISTRATION OF VOLUNTARY INSTRUMENTS VIS-A-VIS INVOLUNTARY INSTRUMENTS. VI THE COURT OF APPEALS PALPABLY ERRED IN REVERSING ITSELF BY NOW HOLDING THAT RESPONDENTS WHO ARE LAWYERS, RESPONSIBLE CITIZENS AND WELL-RESPECTED RESIDENTS IN THE COMMUNITY, ARE EXEMPTED FROM THE EFFECTS OF THE CONSTRUCTIVE NOTICE ARISING FROM REGISTRATION. VII THE COURT OF APPEALS PALPABLY ERRED IN REVERSING ITSELF WITH REGARDS TO TRADERS ROYAL BANK, AFTER THE LATTER HAS PERFECTED ITS APPEAL TO THE SUPREME COURT. VIII THE COURT OF APPEALS PALPABLY ERRED IN NOT RULING ON THE COUNTER-ASSIGNMENT OF ERROR THAT: B) THE LOWER COURT ERRED IN NOT HOLDING THAT DEFENDANTS ARE BOUND BY THE DECISION IN CIVIL CASE NO. Q-10453. Subsequently, G.R. No. 118862 was consolidated with G.R No. 114299, pursuant to this Court's Resolution dated July 3, 1996. 15 The consolidated cases primarily involve two issues: (1) who, as between the Capays and the non-bank respondents, has a better right to the disputed property, and (2) whether or not TRB is liable to the Capays for damages. On the first issue, we rule for the non-bank respondents. I First, when TRB purchased the property at the foreclosure sale, the notice of lis pendens that the Capays caused to be annotated on their certificate of title was not carried to the new one issued to TRB. Neither did the certificate of title of Emelita Santiago, who purchased the property from TRB, contain any such notice. When Santiago caused the property to be divided, six (6) new certificates of title were issued, none of which contained any notice of lis pendens. Santiago then sold the lots to Marcial Alcantara and his co-owners who next sold each of these to the non-bank respondents. The non-bank respondents, therefore, could not have been aware that the property in question was the subject of litigation when they acquired their respective portions of said property. There was nothing in the certificates of title or respective predecessors-in-interest that could have aroused their suspicion. The non-bank respondents had a right to rely on what appeared on the face of the title of their respective predecessors-in-interest, and were not bound to go beyond the same. To hold otherwise would defeat one of the principal objects of the Torrens system of land registration, that is, to facilitate transactions involving lands.

The main purpose of the Torrens system is to avoid possible conflicts of title to real estate and to facilitate transactions relative thereto by giving the public the right to rely upon the face of a Torrens certificate of title and to dispense with the need of inquiring further, except when the party concerned has actual knowledge of facts and circumstances that should impel a reasonably cautious man to make such further inquiry. Where innocent third persons, relying on the correctness of the certificate of title thus issued, acquire rights over the property, the court cannot disregard such rights and order the total cancellation of the certificate. The effect of such an outright cancellation would be to impair public confidence in the certificate of title, for everyone dealing with property registered under the Torrens system would have to inquire in every instance as to whether the title has been regularly or irregularly issued by the court. Every person dealing with registered land may safely rely on the correctness of the certificate of title issued therefor and the law will in no way oblige him to go beyond the certificate to determine the condition of the property. The Torrens system was adopted in this country because it was believed to be the most effective measure to guarantee the integrity of land titles and to protect their indefeasibility once the claim of ownership is established and recognized. If a person purchases a piece of land on the assurance that the seller's title thereto is valid, he should not run the risk of being told later that his acquisition was ineffectual after all. This would not only be unfair to him. What is worse is that if this were permitted, public confidence in the system would be eroded and land transactions would have to be attended by complicated and not necessarily conclusive investigations and proof of ownership. The further consequence would be that land conflicts could be even more numerous and complex than they are now and possibly also more abrasive, if not even violent. The Government, recognizing the worthy purposes of the Torrens system, should be the first to accept the validity of titles issued thereunder once the conditions laid down by the law are satisfied. 16 Second, the foregoing rule notwithstanding, the non-bank respondents nevertheless physically inspected the properties and inquired from the register of Deeds to ascertain the absence of any defect in the title of the property they were purchasing an exercise of diligence above that required by law. Thus, respondent Aida Fernando Meeks, who bought Lot 5 for her son Dean, testified: Q How did you come to live in Baguio City, particulary in Kim. 2.5 San Luis, Baguio City? A In one of my visits to my sister who has been residing here for twelve (12) years now, I got interested in buying a property here. Q How did you come to know of this property at Asin Road where you now reside? A My sister, Ruth Ann Valdez, sir. Q When this particular property was bought by you, when was that? A I do not remember the exact date, but it was in 1984, sir. Q At the time when you went to see the place where you now reside, how did it look? A This particular property that I bought was then a small one (1) room structure, it is a two (2)-storey one (1) bedroom structure. Q What kind of structure with regards to material? A It is a semi-concrete structure, sir. Q And aside from this two (2)-storey one (1)-room structure, how did the surrounding area look like at the time you visited? A There were stone walls from the road and there were stone walls in front of the property and beside the property. Q At the time you went to see the property with your agent, rather your sister Ruth Ann Valdez did you come to know the owner? A We did because at the time we went there, Mr. Alcantara was there supervising the workers. Q And who? A Amado Cruz sir. Q After you saw this property, what else did you do? A My first concern then was am I buying a property with a clean title.

Q In regards to this concern of yours, did you find an answer to this concern of yours? A At first; I asked Mr. Alcantara and I was answered by him. Q What was his answer? A That it was a property with a clean title, that he has shown me the mother title and it is a clean title. Q Aside from being informed that it is a property with a clean title, did you do anything to answer your question? A Yes, sit. Q What did you do? A Well, the first step I did was to go to the Land Registration Office. Q Are you referring to the City Hall of Baguio? A Yes, the City Hall of Baguio. Q And what did you do in the Registry of Deeds? A We looked for the title, the original title, sir. Q When you say we, who was your companion? A Mr. Alcantara and my present husband, sir. Q The three (3) of you? A Yes, sir. Q What title did you see there? A We saw the title that was made up in favor of Amado Cruz, sir. Q And what was the result of your looking up for this title in the name of Amado Cruz? A We had to be reassured that it was a genuine one, so we asked Atty. Diomampo who heads the office. We showed him a copy of that title and we were also reassured by him that anything that was signed by him was as good as it is. Q Did this Atty. Diomampo reassure you that the title was good? A He did. Q After your conversation with the Register of Deeds, what did you do? A The second step we did was to confer with our lawyer, a friend from RCBC Binondo, Manila this is Atty. Nelson Waje. Q What is your purpose in going to this lawyer? A We wanted an assurance that we were getting a valid title just in case we think of buying the property. Q What was the result of your conference with this lawyer? A He was absolutely certain that was a valid title. Q Mrs. Meeks, after looking at the place, going to the Register of Deeds, looking at the title and seeing your lawyer friend, what decision did you finally make regarding the property?

A We wanted more reassurances, so we proceeded to Banaue, as advised by that same lawyer, there is another office of the Bureau of Lands. I cannot recall the office but it has something to do with registration of the old. Q What is your purpose in going to this Office in Banaue? A I wanted more reassuances that I was getting a valid title. Q What was the result of your visit to the Banaue Office? A We found the title of this property and there was reassurance that it was a clean title and we saw the mother title under the Hilario family. Q Mrs. Meeks, when you say Banaue, what particular place is this Banaue? A It is in Banaue Street in Quezon City, sir. Q And when you saw the title to this property and the mother title, what was the result of your investigation, the investigation that you made? A We were reassured that we were purchasing a valid title, we had a genuine title. Q When you were able to determine that you had a valid, authentic or genuine title, what did you do? A That is when I finally thought of purchasing the property. 17 Telesforo Alfelor II, the purchaser of Lot 4, narrated going through a similar routine: Q How did you come to know of this place as Asin Road where you are presently residing? A It was actually through Mrs. Flory Recto who is presently the Branch Manager of CocoBank. She informed my wife that there is a property for sale at Asin Road, and she was the one who introduced to us Mr. Alcantara, sir. Q When you were informed by Mrs. Recto and when you met with Mr. Alcantara, did you see the property that was being offered for sale? A Yes, sir. Q When did you specifically see the property, if you can recall? A I would say it is around the third quarter of 1983, sir. Q When you went to see the place, could you please describe what you saw at that time? A When we went there the area is still being developed by Mr. Alcantara. As a matter of fact the road leading to the property is still not passable considering that during that time it was rainy season and it was muddy, we fell on our way going to the property and walked to have an ocular inspection and physical check on the area, sir. xxx xxx xxx Q What was the improvement, if any, that was in that parcel which you are going to purchase? A During that time, the riprap of the property is already there, the one-half of the riprap sir. Q Do you know who was making this improvement at the time that you went there? A I would understand that it was Marcial Alcantara, sir. Q After you saw the place riprap and you were in the course of deciding to purchase this property, what else did you do? A First, I have to consider that the property is clean. Q How did you go about determining whether the title of the property is clean?

A Considering that Marcial Alcantara is a real estate broker, I went to his office and checked the documents he has regarding the property. Q And what was the result of your checking as to whether the title of the property is clean? A He showed me the copy of the title and it was clean, sir. Q Aside from going to Mr. Alcantara to check up the title of the property, what else did you do? A Well, the next thing is I requested his wife to accompany me to the Bureau of Lands or rather the Registry of Deeds, sir. Q What registry of Deeds are you referring to? A The Registry of Deeds of Baguio City, sir. Q And were you able to see the Register of Deeds regarding what you would like to know? A Yes, and we were given a certification regarding this particular area that it was clean, sir. Q What Certification are you referring to? A It is a Certification duly signed by the employee of the Registry of Deeds Adelina Tabangin, sir. Q Do you have a copy of that Certification? A Yes, I have, sir. 18 The testimonies of Honorato Santos 19 and Josefina Pe 20 were to the same effect. The non-bank respondent predecessor-in-interest, Marcial Alcantara, was less thorough: Q And will you give a brief description of what you do? A I normally acquire land, quite big tract of land and subdivide it into smaller lots and sold it to some interested parties. Q Specifically, Mr. Alcantara will you please inform the Court in what place in Baguio have you acquired and subdivided and sold lots? A Dominican Hill, Leonila Hill, Cristal Cave and Asin Road, sir. Q You mentioned Asin Road, what particular place in Asin Road are you referring? A That property I bought from Emelita Santiago, sir. Q When you say you bought it from Emelita Santiago, how did you come to know that Emelita Santiago is disposing of the property? A Because of the father, he is the one who offered me the property, sir, Armando Gabriel. Q Is he also a resident of Baguio? A He is from Buyagan, La Trinidad sir, Q How did you come to know of this Armando Gabriel wanting to sell a property in Asin? A He approached me in the house, sir. He has acquired a title from the Traders Royal Bank. Q Can you inform the Honorable Court when you had this conversation with Armando Gabriel on the sale of the property at Asin Road? A Later part of March, 1983, sir.

Q Now, when this Armando Gabriel informed you that he wants his property to be sold, what did you do? A I went to the place with the agent, sir. Q When you say you went to the place with the agent, what place? A Kilometer 2, Asin Road sir. Q And when you went there to see the place, did you actually go there to see the place? A By walking, I parked my car a kilometer away, sir. Q Is it my understanding that when you went to see the property there were no roads? A None, sir. xxx xxx xxx Q Mr. Alcantara, when you went to see this place at Asin Road last week of March, 1983, will you please briefly describe how this place looked like at that time? A The place was mountainous, grassy, there were cogon trees, some of the roads were eroding already, so we cannot possibly enter the property, sir. Q At the time you entered the place, was there any visible sign of claim by anyone? A None, sir. Q In terms of fence in the area? A There is no such, sir. xxx xxx xxx Q Aside from looking or going to the property, what else did you do to this property prior to your purchase? A I investigated it with the Register of Deeds, sir. Q What is your purpose in investigating it with the Register of Deeds? A To see if the paper in clean and there are no encumbrances, sir. Q To whom did you talk? A To Atty. Ernesto Diomampo, sir. Q And when you went to the Registry of Deeds to investigate and check, did you have occasion to talk with Atty. Diomampo? A Yes, sir. Q And what was the result of your talk with Atty. Diomampo? A The papers are clean except to the annotation at the back with the road right of way, sir. Q After making this investigation with the Register of Deeds and talking with Atty. Diomampo, what else transpired? A We bought the property, sir. Q After purchasing the property from Emelita Santiago, could you please tell the Honorable Court what you did with that deed of sale?

A We registered it with the Register of Deeds for the Certificate of Title because at that time when we bought the property, Emelita Santiago had it subdivided into six (6) lots, sir. Q Is it our understanding that prior to your purchase the property was subdivided into six (6) parcels? A Yes, sir. Q Could you please inform the Honorable Court if you have any buyers in the subdivision of this property prior to your purchase? A Yes, I have. Q This subdivision of this property, to what office was it brought for action? A Bureau of Lands, San Fernando, La Union, sir. Q Now, Mr. Alcantara, at the time that you had this property subdivided by the owner, could you please inform the Court if there was any claim by any other party opposing the subdivision or claiming the property? A None, sir. Q When the Deed of Sale was executed and you said that you presented it to the Register of Deeds and after the subdivision already, what action did the Register of Deeds have regarding the matter? A They approved it and registered it already in six (6) titles, sir. Q In whose names? A One (1) title under my name, Amado Cruz and Dr. Sanchez, sir. Q Initially, Mr. Alcantara, you said that you are the sole purchaser of this entire area of One Thousand Five Hundred Ninety One (1,591) Square Meters. Now, you are informing this Honorable Court that one Amado Cruz and one Dr. Sanchez were also issued two (2) titles. Could you explain how these titles came into their possession? A Actually, two (2) are our co-owners, sir. Q So, is it our understanding that the Deed of Sale from Emelita Santiago is in favor of these two (2) Atty. Cruz and Dr. Sanchez? A Yes, sir. 21 Third, between two innocent persons, the one who made it possible for the wrong to be done should be the one to bear the resulting loss. 22 The Capays filed the notice of lis pendens way back on March 17, 1967 but the same was not TRB's title. The Capays and their counsel Atty. Ramon A. Gonzales knew in 1968 of the extra-judicial foreclosure sale of the property to TRB and the consolidation of title in the bank's name following the lapse of the one-year period of redemption. But in the next fifteen (15) years or so, they did not bother to find out the status of their title or whether the liens noted on the original certificate of title were still existing considering that the property had already been foreclosed. In the meantime, the subject property had undergone a series of transfers to buyers in good and for value. It was not until after the land was subdivided and developed with the buyers building their houses on the other lots when the Capays suddenly appeared and questioned the occupants' titles. At the very least, the Capays are guilty of laches. Laches has been defined as the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could nor should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting presumption that the party entitled to it either has abandoned it or declined to assert it. 23 Verily, the principle on prescription of actions is designed to cover situations such as the case at bar, where there have been a series of transfers to innocent purchasers for value. To set aside these transactions only to accommodate a party who has slept on his rights is anathema to good order. Independently of the principle of prescription of actions working against petitioners, the doctrine of laches may further be counted against them, which latter tenet finds application even to imprescriptible actions. . . . 24 In De La Calzada-Cierras vs. Court of Appeals, 25 we held: While it is true that under the law it is the act of registration of the deed of conveyance that serves as the operative act to convey the land registered under the Torrens System (Davao Grains, Inc. vs. Intermediate Appellate Court, 171 SCRA 612), the petitioners cannot invoke said dictum because their action to recover Lot 4362 is barred by the equitable doctrine of laches.

The act of registering the conveyance to Rosendo was constructive notice to the whole world of the fact of such conveyance (Heirs of Maria Marasigan vs. Intermediate Appellate Court, 152 SCRA 253). But the petitioners' complaint to recover the title and possession of Lot 4362 was filed only on July 21, 1981, twelve (12) years after the registration of the sale to Rosendo. The petitioners failed and neglected for an unreasonably long time to assert their right, if any, to the property in Rosendo's possession. Being guilty of laches, the Capays cannot invoke the ruling in Villasor vs. Camon Levin Bass and Director of Lands vs. Reyes 26 to the effect that entry of the notice of lis pendens in the day book (primary entry book) is sufficient to constitute registration and such entry is notice to all persons of such adverse claim. Certainly, it is most iniquitous for the Capays who, after sleeping on their rights for fifteen years to assert ownership over the property that has undergone several transfers made in good faith and for value and already subdivided into several lots with improvements introduced thereon by their owners. In the same vein, the cases cited by the Capays in their first two (2) assignment of errors, do not help them any, as the transferees in said cases were not innocent purchasers for value and in good faith. In Tuazon vs. Reyes and Siochi, 27 where the land involved therein was sold by Petronilo David to Vicente Tuazon, it was with a deed containing the recital that the land was in dispute between the vendor and Roberto Siochi. Tuazon, who was merely subrogated to the rights of the vendor was aware of the dispute and, furthermore, David did not warrant the title to the same. In Rivera vs. Moran, 28 Rivera acquired interest in the land before the final decree was entered in the cadastral proceedings. Rivera, the transferee, was aware of the pending litigation and, consequently, could not have been considered a purchaser in good faith. Similarly, in Atun, et al. vs. Nuez, et al. 29 and Laroza vs. Guia, 30 the buyers of the property at the time of their acquisition knew of the existence of the notice of lis pendens. In contrast to the cited cases, the non-bank respondents in the case at bar acquired their respective portions of the land with clean title from their predecessors-in-interest. II We come now to TRB's liability towards the Capays. The Bank unconvincingly tries to wash its hands off the present controversy, and attempts to shift the blame on the Capays, thus: xxx xxx xxx 23. The petitioner Bank, during all the time that it was holding the title for over fourteen (14) years that there was no legal impediment for it to sell said property, Central Bank regulations require that real properties of banks should not he held for more than five (5) years: 24. The fault of the Register of Deeds in not carrying over the Notice of Lis Pendens to the new title of the petitioner Bank should not be absorbed by the latter considering that in all good faith, it was not aware of the existence of said annotation during all the time that said title was in its possession for almost fourteen (14) years before the property was sold to Emelita G. Santiago. . . . 31 TRB concludes that "(t)he inaction and negligence of private respondents allowing ownership to pass for almost 15 years constitute prescription of action and/or laches." 32 Sec. 25 of the General Banking Act, 33 provides that no bank "shall hold the possession of any real estate under mortgage or trust, deed, or the title and possession of any real estate purchased to secure any debt due to it, for a longer period than five years." TRB, however, admits hoding on to the foreclosed property for twelve (12) years after consolidating title in its name. The bank is, therefore, estopped from involving banking laws and regulations to justify its belated disposition of the property. It cannot be allowed to hide behind the law which it itself violated. TRB cannot feign ignorance of the existence of the lis pendens because when the property was foreclosed by it, the notice of lis pendens was annotated on the title. But when TCT No. T-6595 in the name of the Capay spouses was cancelled after the foreclosure, TCT No. T-16272 which was issued in place thereof in the name of TRB did not carry over the notice of lis pendens. We do not find the Capays guilty of "inaction and negligence" as against TRB. It may be recalled that upon the commencement of foreclosure proceedings by TRB, the Capays filed an action for prohibition on September 22, 1966 against the TRB before the CFI to stop the foreclosure sale. Failing in that attempt, the Capays filed a supplemental complaint for the recovery of the property. The case reached this Court. Prescription or laches could not have worked against the Capays because they had persistently pursued their suit against TRB to recover their property. On the other hand, it is difficult to believe TRB's assertion that after holding on to the property for more than ten (10) years, it suddenly realized that it was acting in violation of the General Bank Act. What is apparent is that TRB took advantage of the absence of the notice of lis pendens at the back of their certificate of title and sold the property to an unwary purchaser. This notwithstanding the adverse decision of the trial court and the pendency of its appeal. TRB, whose timing indeed smacks of bad faith, thus transferred caused the property without the lis pendens annotated on its title to put it beyond the Capays' reach. Clearly, the bank acted in a manner contrary to morals, good customs and public policy and should be held liable for damages. 34 Considering however, that the mortgage in favor of TRB had been declared null and void for want of consideration and, consequently, the foreclosure proceedings did not have a valid effect, the Capays would ordinarily be entitled to the recovery of their property. Nevertheless, this remedy is not now available to the Capays inasmuch as title to said property has passed into the hands of third parties who acquired the same in good faith and for value. Such being the case, TRB is duty bound to pay the Capays the fair market value of the property at the time it was sold to Emelita Santiago, the transferee of TRB.

WHEREFORE, the Decision of the Court of Appeals dated Frebruary 24, 1994 in CA-G.R. CV No. 33920, as modified by its Resolution dated August 10, 1994 is hereby AFFIRMED. In addition, Traders Royal Bank is ordered to pay the Capays the fair market value of the property at the time it was sold to Emelita Santiago. This Decision is without prejudice to whatever criminal, civil or administrative action against the Register of Deeds and or his assistants that may be taken by the party or parties prejudiced by the failure of the former to carry over the notice of lis pendens to the certificate of title in the name of TRB.1wphi1.nt Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 144773 May 16, 2005

AZNAR BROTHERS REALTY COMPANY, petitioner, vs. LAURENCIO AYING, IN HIS OWN BEHALF AND IN BEHALF OF THE OTHER HEIRS OF EMILIANO AYING, PAULINO AYING, IN HIS OWN BEHALF AND IN BEHALF OF THE OTHER HEIRS OF SIMEON AYING, AND WENCESLAO SUMALINOG, IN HIS OWN BEHALF AND IN BEHALF OF THE OTHER HEIRS OF ROBERTA AYING, respondents. DECISION AUSTRIA-MARTINEZ, J.: This resolves the petition for review on certiorari seeking the modification of the Decision1 of the Court of Appeals (CA) dated March 7, 2000 which affirmed with modification the Decision of the Regional Trial Court (RTC) of Lapu-Lapu City, Branch 27 in Civil Case No. 2930-L; and the Resolution dated August 2, 2000 denying petitioners motion for reconsideration of the aforementioned decision. The antecedent facts are as follows: The disputed property is Lot No. 4399 with an area of 34,325 square meters located at Dapdap, Lapu-Lapu City. Crisanta Maloloy-on petitioned for the issuance of a cadastral decree in her favor over said parcel of land. After her death in 1930, the Cadastral Court issued a Decision directing the issuance of a decree in the name of Crisanta Maloloy-ons eight children, namely: Juan, Celedonio, Emiliano, Francisco, Simeon, Bernabe, Roberta and Fausta, all surnamed Aying. The certificate of title was, however, lost during the war. Subsequently, all the heirs of the Aying siblings executed an Extra-Judicial Partition of Real Estate with Deed of Absolute Sale dated March 3, 1964, conveying the subject parcel of land to herein petitioner Aznar Brothers Realty Company. Said deed was registered with the Register of Deeds of LapuLapu City on March 6, 1964 under Act No. 3344 (the law governing registration for unregistered land), and since then, petitioner had been religiously paying real property taxes on said property. In 1988, herein petitioner filed a Petition for Reconstitution of the Original Title as the original title over the subject property had been lost during the war. On April 12, 1988, the court granted said petition, thereby directing the Register of Deeds of Lapu-Lapu City to issue a reconstituted title in the name of the abovementioned Aying siblings. Thus, Original Certificate of Title (OCT) No. RO-2856 was issued. In 1991, petitioner, claiming to be the rightful owner of the subject property, sent out notices to vacate, addressed to persons occupying the property. Unheeded, petitioner then filed a complaint for ejectment against the occupants before the Metropolitan Trial Court (MTC), Lapu-Lapu City. On February 1, 1994, the MTC ordered the occupants to vacate the property. The case eventually reached this Court, docketed as G.R. No. 128102, entitled Aznar Brothers Realty Company vs. Court of Appeals, Luis Aying, Demetrio Sida, Felomino Augusto, Federico Abing, and Romeo Augusto.2 On March 7, 2000, a Decision was promulgated in favor of herein petitioner, declaring it as the rightful possessor of the parcel of land in question. Meanwhile, herein respondents, along with other persons claiming to be descendants of the eight Aying siblings, all in all numbering around 220 persons, had filed a complaint for cancellation of the Extra-Judicial Partition with Absolute Sale, recovery of ownership, injunction and damages with the RTC of Lapu-Lapu City. The complaint was dismissed twice without prejudice. Said complaint was re-filed on August 19, 1993, docketed as Civil Case No. 2930-L. In their amended complaint, herein respondents (plaintiffs before the RTC) alleged that: they are co-owners of subject property, being descendants of the registered owners thereof under OCT No. RO-2856; they had been in actual, peaceful, physical, open, adverse, continuous and uninterrupted possession in concept of owner of subject parcel of land since time immemorial; their possession was disturbed only in the last quarter of 1991 when some of them received notices to vacate from petitioner and several weeks thereafter, earthmoving equipment entered the disputed land, bulldozing the same and destroying plants, trees and concrete monuments ("mohon"); respondents discovered that such activities were being undertaken by petitioner together with Sta. Lucia Realty and Development, Inc.; petitioner claimed to be the owner of subject property by virtue of an extra-judicial partition of real estate with deed of absolute sale executed in petitioners favor by the alleged heirs of Crisanta Maloloy-on; the aforementioned extra-judicial partition of real estate with deed of absolute sale is a fraud and is null and void ab initio because not all the co-owners of subject property affixed their signature on said document and some of the co-owners who supposedly signed said document had been dead at the time of the execution thereof; petitioner entered subject land in bad faith, knowing fully well that it did not have any right to the land and used force, threat and intimidation against respondents; and they suffered moral damages.3 Petitioner (defendant before the RTC) filed its Answer, denying that respondents are the lawful owners of subject parcel of land by virtue of their being descendants or heirs of the registered owners of subject property. Instead, petitioner alleged that it had been in actual possession of subject land as owner

thereof by virtue of the extra-judicial partition of real property and deed of absolute sale executed in its favor; that in fact, it had been paying taxes thereon religiously; that it tolerated about 6 persons to live on said land but said persons were eventually ejected by court order. Petitioner then raised the affirmative defenses of failure to state cause of action and prescription, as it took respondents 27 years, 10 months and 27 days to file the action to recover subject property, when an action to recover property based on an implied trust should be instituted within 4 years from discovery of the fraud.4 In the Pre-Trial Order dated January 30, 1995 of the RTC, the issues were narrowed down to the following: 1. Whether or not the plaintiffs [herein respondents] are the heirs of the registered owners of Lot No. 4399. 2. Whether or not plaintiffs are the owners of Lot No. 4399. 3. Whether or not the defendant Aznar [herein petitioner] is estopped to make any claim on Lot No. 4399. 4. Whether or not the defendant Aznar is a builder in bad faith. 5. Whether or not the defendants are liable for damages and attorneys fees in favor of the plaintiffs. 6. Whether or not the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale is valid and had, in effect, validly conveyed to defendant Aznar Lot No. 4399. 7. Whether or not the plaintiffs action has prescribed.5 After trial, the RTC rendered a Decision dated July 4, 1997, ruling that respondents evidence failed to prove that the extra-judicial partition with deed of absolute sale was a totally simulated or fictitious contract and concluded that said document is valid, thus, effectively conveying to petitioner the property in question. It further held that respondents action had prescribed in that the action is considered as one for reconveyance based on implied or constructive trust, it prescribed in 10 years from the registration of the deed on March 6, 1964; and if the action is considered as one for annulment of contract on the ground of fraud, it should have been filed within 4 years from discovery of the fraud. The trial court also ruled that respondents failed to present any admissible proof of filiation, hence, they were not able to prove that they are indeed heirs of the eight Aying siblings who appear as the registered owners under OCT No. RO-2856. The dispositive portion of the RTC Decision reads as follows: WHEREFORE, judgment is hereby rendered dismissing the amended complaint on the ground of prescription, and declaring the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale dated March 3, 1964 as valid and binding, adjudging that Lot 4399 with an area of 34,325 square meters located at Dapdap, Mactan, Lapu-Lapu City had been validly conveyed to and in favor of Aznar Brothers Realty Company, and directing the Register of Deeds of Lapu-Lapu City to register the above-mentioned deed in accordance with law and to cancel Original Certificate of Title No. RO-2856, and to issue a transfer certificate of title in the name of Aznar Brothers Realty Company upon payment of the necessary registration fees pursuant thereto. The Writ of Preliminary Injunction issued in this case is hereby ordered dissolved. The Motion for Contempt filed by the plaintiffs against defendants is dismissed for want of factual and legal basis. Costs against the plaintiffs. SO ORDERED.6 Herein respondents appealed the foregoing decision to the CA and on March 7, 2000, said court promulgated its Decision, the dispositive portion of which is reproduced hereunder: THE FOREGOING CONSIDERED, the contested Decision while AFFIRMED is hereby MODIFIED. The heirs of Emiliano Aying, Simeon Aying and Roberta Aying are hereby declared as the lawful owners of the contested property but equivalent only to 3/8. SO ORDERED. In modifying the RTC judgment, the CA ratiocinated that "an action for recovery of possession of registered land never prescribes in view of the provision of Section 44, Act No. 496 (now Sec. 47, PD 1520), to the effect that no title to registered land in derogation to that of a registered owner shall be acquired by prescription." The CA further ruled that even if the action is deemed to be based on implied trust, prescription did not begin to run since there is no evidence that positive acts of repudiation were made known to the heirs who did not participate in the execution of the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale. Thus, striking down the RTCs ruling that the respondents complaint is dismissible on the ground of prescription, the CA held instead that herein respondents action had not prescribed but upheld the validity of the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale, except as to the shares of the heirs of Emiliano, Simeon and Roberta, who did not participate in the execution of said document. Herein petitioners motion for reconsideration of the CA decision was denied per Resolution dated August 2, 2000. Hence, the present petition for review on certiorari assailing the CA decision on the following grounds:

I THE COURT OF APPEALS ERRED IN FAILING TO APPLY THE RULE THAT AN HEIR OF THE ORIGINAL REGISTERED OWNER MAY LOSE HIS RIGHT TO RECOVER A TITLED PROPERTY BY REASON OF LACHES; II THE COURT OF APPEALS ERRED IN FAILING TO APPLY THE RULE THAT THE ACT OF REGISTRATION OF THE DEED OF PARTITION WITH SALE MAY BE CONSIDERED AN UNEQUIVOCAL REPUDIATION OF THE TRUST GIVING RISE TO PRESCRIPTION; III THE COURT OF APPEALS ERRED IN FAILING TO APPLY THE PROVISIONS OF ARTICLE 1104 OF THE CIVIL CODE TO THE EFFECT THAT IN THE ABSENCE OF BAD FAITH OR FRAUD, THE PARTITION WITH PRETERITION OF ANY COMPULSORY HEIR SHALL NOT BE RESCINDED.7 In their Comment, respondents argue that this case is an action to declare as null and void the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale, hence, under Article 1410 of the Civil Code, an action for declaration of an inexistent contract does not prescribe. Respondents further posit that the principle of laches should be applied against petitioner and not against them, as they (respondents) had been in actual possession of the subject property, while petitioner merely brought action to eject them more than 29 years after the alleged execution of the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale. They also refuted petitioners arguments regarding the application of the principles of implied and constructive trusts in this case. At the outset, it should be stressed that not all the plaintiffs who filed the amended complaint before the trial court had been impleaded as respondents in the present petition. The only parties impleaded are the heirs of Emiliano, Simeon and Roberta Aying, whom the CA adjudged as owners of a 3/8 portion of the land in dispute for not having participated in the execution of the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale. It is significant to note that herein petitioner does not question the CA conclusion that respondents are heirs of the aforementioned three Aying siblings. Hence, the trial court and appellate courts findings that the Extra- Judicial Partition of Real Estate with Deed of Absolute Sale was not forged nor simulated and that the heirs of Emiliano, Simeon and Roberta Aying did not participate in the execution thereof, are now beyond cavil. The issues raised by petitioner for the Courts resolution are (1) whether or not respondents cause of action is imprescriptible; and (2) if their right to bring action is indeed imprescriptible, may the principle of laches apply. Respondents alleged in their amended complaint that not all the co-owners of the land in question signed or executed the document conveying ownership thereof to petitioner and made the conclusion that said document is null and void. We agree with the ruling of the RTC and the CA that the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale is valid and binding only as to the heirs who participated in the execution thereof, hence, the heirs of Emiliano, Simeon and Roberta Aying, who undisputedly did not participate therein, cannot be bound by said document. However, the facts on record show that petitioner acquired the entire parcel of land with the mistaken belief that all the heirs have executed the subject document. Thus, the trial court is correct that the provision of law applicable to this case is Article 1456 of the Civil Code which states: ART. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. In Vda. De Esconde vs. Court of Appeals,8 the Court expounded thus: Construing this provision of the Civil Code, in Philippine National Bank v. Court of Appeals, the Court stated: A deeper analysis of Article 1456 reveals that it is not a trust in the technical sense for in a typical trust, confidence is reposed in one person who is named a trustee for the benefit of another who is called the cestui que trust, respecting property which is held by the trustee for the benefit of the cestui que trust. A constructive trust, unlike an express trust, does not emanate from, or generate a fiduciary relation. While in an express trust, a beneficiary and a trustee are linked by confidential or fiduciary relations, in a constructive trust, there is neither a promise nor any fiduciary relation to speak of and the so-called trustee neither accepts any trust nor intends holding the property for the beneficiary.9 The concept of constructive trusts was further elucidated in the same case, as follows: . . . implied trusts are those which, without being expressed, are deducible from the nature of the transaction as matters of intent or which are superinduced on the transaction by operation of law as matters of equity, independently of the particular intention of the parties. In turn, implied trusts are either resulting or constructive trusts. These two are differentiated from each other as follows: Resulting trusts are based on the equitable doctrine that valuable consideration and not legal title determines the equitable title or interest and are presumed always to have been contemplated by the parties. They arise from the nature of circumstances of the consideration involved in a transaction whereby one person thereby becomes invested with legal title but is obligated in equity to hold his legal title for the benefit of another. On the other hand, constructive trusts are created by the construction of equity in order to satisfy the demands of justice and prevent unjust enrichment. They arise contrary to intention against one who, by fraud, duress or abuse of confidence, obtains or holds the legal right to property which he ought not, in equity and good conscience, to hold.10 (Emphasis supplied)

Based on such concept of constructive trusts, the Court ruled in said case that: The rule that a trustee cannot acquire by prescription ownership over property entrusted to him until and unless he repudiates the trust, applies to express trusts and resulting implied trusts. However, in constructive implied trusts, prescription may supervene even if the trustee does not repudiate the relationship. Necessarily, repudiation of said trust is not a condition precedent to the running of the prescriptive period.11 The next question is, what is the applicable prescriptive period? In Amerol vs. Bagumbaran,12 the Court expounded on the prescriptive period within which to bring an action for reconveyance of property based on implied or constructive trust, to wit: . . . 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--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

An action for reconveyance based on an implied or constructive trust must perforce prescribe 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.13 It has also been ruled that the ten-year prescriptive period begins to run from the date of registration of the deed or the date of the issuance of the certificate of title over the property, but if the person claiming to be the owner thereof is in actual possession of the property, the right to seek reconveyance, which in effect seeks to quiet title to the property, does not prescribe.14 In the present case, respondents Wenceslao Sumalinog, an heir of Roberta Aying; Laurencio Aying, an heir of Emiliano Aying; and Paulino Aying, an heir of Simeon Aying, all testified that they had never occupied or been in possession of the land in dispute.15 Hence, the prescriptive period of ten years would apply to herein respondents. The question then arises as to the date from which the ten-year period should be reckoned, considering that the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale was registered under Act No. 3344 and not under Act No. 496 (Land Registration Act), despite the fact the land in dispute was already titled under Act No. 496 in the names of the Aying siblings at the time the subject document was executed. In Spouses Abrigo vs. De Vera,16 it was held that registration of instruments must be done in the proper registry, in order to affect and bind the land and, thus, operate as constructive notice to the world.17 Therein, the Court ruled: x x x If the land is registered under the Land Registration Act (and has therefore a Torrens Title), and it is sold but the subsequent sale is registered not under the Land Registration Act but under Act 3344, as amended, such sale is not considered REGISTERED x x x .18 In this case, since the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale was registered under Act No. 3344 and not under Act No. 496, said document is deemed not registered. Accordingly, the ten-year prescriptive period cannot be reckoned from March 6, 1964, the date of registration of the subject document under Act No. 3344. The prescriptive period only began to run from the time respondents had actual notice of the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale. The only evidence on record as to when such prescriptive period commenced as to each of the respondents are Wenceslao Sumalinogs (heir of Roberta Aying) testimony that about three years after 1964, they already learned of the existence of the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale;19 and Laurencio Ayings (heir of Emiliano Aying) admission that he found out about the sale of the land in dispute a long time ago and can only estimate that it must be after martial law.20 Paulino Aying (heir of Simeon Aying) gave no testimony whatsoever as to when the children of Simeon Aying actually learned of the existence of the document of sale. On the other hand, petitioner did not present any other evidence to prove the date when respondents were notified of the execution of the subject document. In view of the lack of unambiguous evidence of when the heirs of Emiliano Aying and Simeon Aying discovered the existence of the document of sale, it must be determined which party had the burden of proof to establish such fact. The test for determining where the burden of proof lies is to ask which party to an action or suit will fail if he offers no evidence competent to show the facts averred as the basis for the relief he seeks to obtain.21 Moreover, one alleging a fact that is denied has the burden of proving it and unless the party asserting the affirmative of an issue sustains the burden of proof of that issue by a preponderance of the evidence, his cause will not succeed.22 Thus, the defendant bears the burden of proof as to all affirmative defenses which he sets up in answer to the plaintiffs claim or cause of action; he being the party who asserts the truth of the matter he has alleged, the burden is upon him to establish the facts on which that matter is predicated and if he fails to do so, the plaintiff is entitled to a verdict or decision in his favor.23

In the case at bar, it was petitioner, as the defendant before the RTC, which set up in its Answer the affirmative defense of prescription. It was, therefore, incumbent upon petitioner to prove the date from which the prescriptive period began to run. Evidence as to the date when the ten-year prescriptive period began exists only as to the heirs of Roberta Aying, as Wenceslao Sumalinog admitted that they learned of the existence of the document of sale in the year 1967. As to the heirs of Emiliano Aying and Simeon Aying, there is no clear evidence of the date when they discovered the document conveying the subject land to petitioner. Petitioner miserably failed to adduce proof of when the heirs of Emiliano Aying and Simeon Aying were notified of the subject document. Hence, with regard to said heirs, the Court may consider the admission in the amended complaint that they learned of the conveyance of the disputed land only in 1991 when petitioner sent notices to vacate to the occupants of the subject land, as the date from which the ten-year prescriptive period should be reckoned. Respondents filed their Amended Complaint on December 6, 1993.24 Thus, with regard to respondent heirs of Roberta Aying who had knowledge of the conveyance as far back as 1967, their cause of action is already barred by prescription when said amended complaint was filed as they only had until 1977 within which to bring action. As to the respondent heirs of Emiliano and Simeon Aying, they were able to initiate their action for reconveyance of property based on implied or constructive trust well within the ten-year prescriptive period reckoned from 1991 when they were sent by petitioner a notice to vacate the subject property. Evidently, laches cannot be applied against respondent heirs of Emiliano and Simeon Aying, as they took action to protect their interest well within the period accorded them by law. With regard to petitioners argument that the provision of Article 1104 of the Civil Code, stating that a partition made with preterition of any of the compulsory heirs shall not be rescinded, should be applied, suffice it to say that the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale is not being rescinded. In fact, its validity had been upheld but only as to the parties who participated in the execution of the same. As discussed above, what was conveyed to petitioner was ownership over the shares of the heirs who executed the subject document. Thus, the law, particularly, Article 1456 of the Civil Code, imposed the obligation upon petitioner to act as a trustee for the benefit of respondent heirs of Emiliano and Simeon Aying who, having brought their action within the prescriptive period, are now entitled to the reconveyance of their share in the land in dispute. IN VIEW OF THE FOREGOING, the petition is PARTIALLY GRANTED and the Decision of the Court of Appeals dated March 7, 2000 is MODIFIED, as follows: The amended complaint of the heirs of Roberta Aying is DISMISSED on the ground of prescription. However, the heirs of Emiliano Aying and Simeon Aying, having instituted the action for reconveyance within the prescriptive period, are hereby DECLARED as the LAWFUL OWNERS of a 2/8 portion of the parcel of land covered by Original Certificate of Title No. RO-2856. SO ORDERED. Puno, (Chairman), Callejo, Sr., Tinga, and Chico-Nazario, JJ., concur