Abay vs. Young

A deed of sale that erroneously identifies the lot number of the property conveyed is valid and may be reformed to reflect the true intention of the parties, provided there was a meeting of minds, the instrument does not express the true intention, and the failure is due to mistake, fraud, inequitable conduct, or accident. A person buys real property as they see it in its actual setting with its visible monuments and boundaries, not by the mere lot number assigned to it in a certificate of title.

The subject property, Lot No. 7, forms part of Lot 6012-E of the Cebu Cadastre and was originally part of the estate of Lorenzo Lopez. Lorenzo's daughter, Margarita Lopez, inherited the property and married Isaac Caballes, with whom she had nine children: Crispin, Trinidad, Sabiniano, Isaac Jr., Emiliana, Gabino, Dolores, Angela, and Eulogio. Trinidad predeceased Margarita in the 1950s, and Trinidad's share passed to her children, the Gallardos. Margarita died on July 3, 1970, and her estate—including the subject property and Lot Nos. 6036-B-4 and 6036-B-5—was inherited by her nine children and the Gallardos as co-owners pro indiviso. The subject property was not yet individually titled in Margarita's name during the periods when petitioners purchased it; TCT No. 143076 was issued in her name only on January 31, 1997, following the inscription of a 1985 partition order among the heirs of Lorenzo Lopez.

The subject property is Lot No. 7, a 491-square-meter parcel forming part of Lot 6012-E of the Cebu Cadastre, originally part of the estate of Lorenzo Lopez. Lorenzo's daughter Margarita Lopez inherited the property and married Isaac Caballes, with whom she had nine children. Two of those children, Crispin and Trinidad, are central to this dispute. Trinidad predeceased Margarita in the 1950s, and her share passed to her children, the Gallardos. Margarita died on July 3, 1970, leaving her estate—including the subject property and Lot Nos. 6036-B-4 and 6036-B-5—to her nine children and the Gallardos as co-owners pro indiviso, each holding a 1/9 share.

Petitioners Spouses Genara and Felipe Abay, Sr., Felipe Abay, Jr., Gefe A. Gusay, and Mary Genafe Abay purchased the subject property from Crispin and the Gallardos through three deeds: the Deed of Absolute Sale dated September 15, 1979 (1979 DOAS), executed by the Gallardos selling their 1/9 pro indiviso share of 245.5 sqm for ₱15,000.00; the Absolute Deed of Sale dated January 23, 1981 (1981 DOAS), executed by Crispin selling his share of 245.5 sqm for ₱10,000.00; and the Extrajudicial Settlement and Sale dated September 22, 1982 (1982 DOAS), jointly executed by Crispin and the Gallardos for ₱5,000.00. All three deeds erroneously identified the property as Lot No. 6036-B. Before purchasing the property, Genara and Felipe Abay visited the site, where Crispin and Tomas Gallardo personally pointed out the monuments and boundaries of the land. Petitioners erected a bamboo fence around the property in 1979 and constructed a concrete perimeter fence with a gate in 1982, with Tomas Gallardo—one of the vendors—assisting in the construction. Petitioners occupied and possessed the property continuously for approximately 20 years and paid real estate taxes from the 1970s through the 1990s.

Meanwhile, on August 6, 1976, the seven other children of Margarita—Angela, Dolores, Isaac Jr., Emiliana, Gavino, Sabiniano, and Eulogio—executed an Extrajudicial Declaration of Heirs and Partition with Exchange covering Lot Nos. 6036-B-4 and 6036-B-5, dividing those lots among themselves without the participation of Crispin and the Gallardos. Individual titles were subsequently issued to each of the seven children for their respective portions. As for the subject property, the consolidation-subdivision plan approved by the Bureau of Lands on August 18, 1974, allocated Lot 7 of Lot 6012-E to Crispin and Trinidad's heirs, with the seven other children agreeing to compensate them for the difference in area. On March 21, 1985, Branch 17 of the RTC of Cebu City issued an Order of partition allocating Lot 7 to Margarita, which became final on April 15, 1985, but was inscribed on the titles only on January 16, 1997. TCT No. 143076 was then issued in Margarita's name on January 31, 1997.

On December 21, 1999, the seven other children of Margarita—together with Fe Gallardo acting as attorney-in-fact for the other Gallardos and the surviving heirs of Crispin—executed the 1999 Extrajudicial Settlement and Sale, selling the subject property to Jacinto S. Young for ₱350,000.00. Spouses Young relied on TCT No. 143076, which was still in the name of the deceased Margarita. They visited the property and saw the concrete fence and gate erected by petitioners but did not investigate who built them or inquire about the occupants. TCT No. 143076 was cancelled and TCT No. 155087 was issued in the name of Spouses Young on February 18, 2000. In May 2000, workers hired by Spouses Young forcibly entered the property by breaking through the gate and erecting posts, prompting petitioners to file a complaint with the Barangay Captain, where they discovered the registration of the property in Spouses Young's name. Petitioners filed an Adverse Claim on May 25, 2000, and subsequently filed their Complaint for Cancellation of Title, Damages with Preliminary Injunction, and Issuance of a New Transfer Certificate of Title on June 19, 2001.

• Ownership and Possession: Petitioners maintained that they own and possess the subject property, having purchased it from Crispin and the Gallardos, who inherited it from the estate of Margarita Lopez, who in turn inherited it from her father Lorenzo Lopez. They asserted that they have been openly and continuously living on the fenced property for over 20 years in a manner visible to the public and have paid real estate taxes on the subject property.
• Fraudulent Title and Bad Faith of Spouses Young: Petitioners argued that the title issued to Spouses Young is fraudulent and a mistake, that Spouses Young bought the subject property in bad faith despite being aware of petitioners' prior ownership and possession and the fence they had built, and that the principle of indefeasibility of a Torrens title cannot apply in favor of Spouses Young.
• Damages: Petitioners insisted that respondents are liable for damages because Spouses Young forcibly entered the subject property, destroyed the fence, and caused them anxiety and sleepless nights.

• Finality of Factual Findings (Gallardos): The Gallardos emphasized that the factual findings of the trial court, as affirmed by the CA, are generally considered final and conclusive, and that the present petition explicitly asks the Court to review facts regarding who has a better right to the subject property.
• Sufficiency of Evidence (Spouses Young): Spouses Young asserted that the CA correctly determined that they provided sufficient evidence, including the 1999 Extrajudicial Settlement and Sale and TCT No. 155087, and that petitioners failed to demonstrate ownership for over two decades or substantiate that they purchased the subject property from the proper party.
• Distinct Properties and Preponderance of Evidence (Spouses Young): Spouses Young argued that the CA accurately established that Lot No. 6036-B and Lot No. 7—portion of Lot 6012—were distinct properties and that the preponderance of evidence favored them due to their proactive and thoroughly documented claim.

• Identity of the Property Sold: Whether the object of the sale between petitioners, Crispin, and the Gallardos was the subject property (Lot 7 of Lot 6012-E) or Lot No. 6036-B, as indicated in the deeds of sale.
• Reformation of Contract: Whether the deeds of sale executed in 1979, 1981, and 1982 may be reformed to correct the erroneous lot designation and reflect the true intention of the parties.
• Partition of Margarita's Estate: Whether the estate of Margarita Lopez had been partitioned among her heirs as early as 1976, such that only Crispin and the Gallardos retained ownership of the subject property and could validly convey it to petitioners.
• Good Faith of Spouses Young: Whether Spouses Young were innocent purchasers for value who could claim protection under the Torrens system.
• Laches and Prescription: Whether petitioners' action was barred by inordinate delay or laches.

• Identity of the Property Sold: Yes. The object of the sale was the subject property, Lot 7 of Lot 6012-E, not Lot No. 6036-B, because a person buys real property as they see it in its actual setting with its visible monuments and boundaries, not by the mere lot number in the deed.
• Reformation of Contract: Yes. All three requisites of reformation were present: a meeting of the minds, the instrument's failure to express the true intention, and the failure being due to mistake, as the property was not yet individually titled at the time of the sales and the parties were laypersons unfamiliar with surveying.
• Partition of Margarita's Estate: Yes. The estate was partitioned among Margarita's heirs as early as 1976, terminating the co-ownership and leaving only Crispin and the Gallardos as co-owners of the subject property with the capacity to convey their shares to petitioners.
• Good Faith of Spouses Young: No. Spouses Young were not innocent purchasers for value because the title they relied on was in the name of the deceased Margarita, and they failed to investigate the visible concrete fence and structures on the property despite being put on notice.
• Laches and Prescription: No. Petitioners' action was not barred by laches or prescription because they were in actual possession of the property until disturbed in May 2000, and they filed their complaint on June 19, 2001, well within the applicable prescriptive periods for reconveyance and reformation.

• Identity of the Property Sold: The Court applied the settled doctrine that a person buys real property as they see it in its actual setting, with its visible monuments, boundaries, and improvements—not by the mere lot number assigned in a certificate of title. The lot number appearing in the deed of sale is not determinative of the identity of the land conveyed. The contemporaneous and subsequent acts of the parties demonstrated that the subject property was the true object of the sale: Genara Abay testified that she and her husband visited the land before purchase, where Crispin and Tomas personally pointed out the four monuments marking the property; petitioners built a bamboo fence in 1979 and a concrete fence in 1982; Tomas Gallardo, one of the vendors, assisted in constructing the concrete fence—an act constituting clear acknowledgment of petitioners' rights as buyers; and petitioners paid real estate taxes from the 1970s through the 1990s. The combined shares sold under the 1979 and 1981 DOAS—245.5 sqm each—total 491 sqm, exactly matching the area of Lot 7 as described in TCT No. 143076. In contrast, Lot No. 6036-B has an area of 4,450 sqm, manifestly larger than the land area in the deeds. Furthermore, Lot No. 6036-B could not have been the object of the sale because the seven other children of Margarita had already partitioned and individually titled that property in 1976, years before the execution of the deeds in favor of petitioners.

• Reformation of Contract: The Court found all three requisites of reformation present. First, there was a meeting of the minds, evidenced by the 1979, 1981, and 1982 DOAS, which reveal the intent of Crispin and the Gallardos to transfer their respective shares for a price certain, satisfying all elements of a contract under Article 1318 of the Civil Code—consent, object certain, and cause. Second, the deeds did not express the true intention of the parties, as gleaned from their contemporaneous and subsequent acts under Article 1371 of the Civil Code: the physical identification of the land by the vendors, petitioners' fencing and occupation, Tomas's assistance in building the fence, and the payment of real estate taxes. Third, the failure of the deeds to express the true intention was due to mistake: at the time of the sales, the subject property was not yet individually titled in Margarita's name and was still part of the consolidated Lots 6012-E covered by TCT Nos. T-57313 and T-57316 in the name of Lorenzo's heirs. The parties, as ordinary laypersons, could not be expected to comprehend the technical descriptions of the lots' boundaries. The overlapping inheritance over portions of both Lot Nos. 6036-B and 6012-E contributed to the genuine confusion. The Court relied on Atilano vs. Atilano, Sarming vs. Dy, and Banico vs. Stager, where sales were upheld despite erroneous lot designations, with reformation ordered to conform the written instrument to the parties' actual agreement. The Court held that the issue of reformation was inseparable from the central question of ownership and was properly before it, as petitioners had raised the erroneous description in their Complaint and the Pre-Trial Order included the issue of whether petitioners acquired the property for valuable consideration.

• Partition of Margarita's Estate: The Court held that Margarita's estate had been partitioned among her heirs as early as 1976, terminating the co-ownership over the subject property. Three pieces of evidence established this: (1) the August 6, 1976 Extrajudicial Declaration of Heirs and Partition with Exchange, whereby the seven other children of Margarita divided Lot Nos. 6036-B-4 and 6036-B-5 among themselves, excluding Crispin and the Gallardos, with individual TCTs subsequently issued to each of the seven children; (2) the consolidation-subdivision plan approved by the Bureau of Lands on August 18, 1974, which allocated Lot 7 of Lot 6012-E specifically to Crispin and Trinidad's heirs, with the seven other children agreeing to compensate them for the area difference; and (3) petitioners' open, exclusive, and uninterrupted possession of the subject property since 1979, tolerated by the other heirs who never objected to the construction of permanent improvements or the sale by Crispin and the Gallardos. Under Article 1078 of the Civil Code, co-ownership exists among heirs before partition; after partition, co-ownership is terminated and each heir acquires exclusive ownership of the portion adjudicated to them. The Court applied the doctrine that every act intended to end indivision among co-heirs is deemed a partition, and that the construction of permanent improvements on definite portions by one heir, unchallenged by co-heirs for a long period, is strong evidence of partition. Consequently, at the time of the 1979, 1981, and 1982 DOAS, only Crispin and the Gallardos were co-owners of the subject property who could lawfully transfer title to petitioners. The 1999 Extrajudicial Settlement and Sale in favor of Spouses Young was executed by heirs who had long ceased to be co-owners of the subject property and thus had no transmissible right to convey.

• Good Faith of Spouses Young: The Court held that Spouses Young could not be regarded as buyers in good faith. The protection of the Torrens system for an innocent purchaser for value requires three conditions: (1) the seller is the registered owner; (2) the land is in the possession of the registered owner; and (3) the buyer was not aware of any claim or interest of another person in the property. The first condition was absent because TCT No. 143076 was in the name of Margarita, who had long been deceased by 1999 and was incapable of owning or conveying property. This anomaly should have alerted Spouses Young to inquire further. Moreover, Spouses Young failed to exercise due diligence: during their visits to the property, they saw the concrete fence and gate erected by petitioners but did not investigate who built them, did not ask the vendors about the fence, and did not inquire from the neighborhood about the occupants. Jacinto Young himself admitted on cross-examination that he merely assumed the fence belonged to the lot owner and did not investigate. The Court also noted that the 1999 Extrajudicial Settlement and Sale was signed by heirs who no longer owned the subject property, as well as by the Gallardos and Crispin's heirs, who had already conveyed their pro indiviso interests to petitioners through the 1979–1982 DOAS. Under Article 1496 in relation to Article 1497, ownership passes upon delivery, and petitioners took possession in 1982 by fencing the property. The principle nemo dat quod non habet applies: neither Crispin's heirs nor the Gallardos could convey to Spouses Young a right they had already transmitted to petitioners. Non-registration of the earlier sales did not diminish their validity, as registration under the Torrens system is not a mode of acquiring ownership but a system of recording that binds third persons in good faith. Even under Article 1544 on double sale, petitioners prevailed because they had both the older titles and prior possession since 1982, and Spouses Young's registration was invalid for lack of good faith.

• Laches and Prescription: The Court rejected the CA's conclusion that petitioners were guilty of inordinate delay. The elementary principle applies that one in actual possession of land on a claim of ownership may wait until possession is disturbed or title is attacked before vindicating their right. Petitioners were in prior, open, continuous, peaceful, and notorious possession until Spouses Young forcibly entered in May 2000. A delay within the prescriptive period is sanctioned by law and is not considered a delay that would bar relief. TCT No. 155087 was issued on February 18, 2000, and petitioners filed their complaint on June 19, 2001—barely one year and four months later—well within the four-year prescriptive period for reconveyance based on fraud and the ten-year period for constructive trust. Moreover, an action for reconveyance based on fraud is imprescriptible where the plaintiff is in possession of the property, and the prescriptive period does not run until possession is disturbed. The action for reformation of a written contract prescribes in ten years from discovery of the mistake, and petitioners discovered the misidentification only upon dispossession in May 2000, making their June 2001 filing well within the period.

• Reformation of Contracts — Reformation is proper when (1) there was a meeting of the minds of the parties to the contract; (2) the instrument does not express the true intention of the parties; and (3) the failure of the instrument to express the true intention is due to mistake, fraud, inequitable conduct, or accident. The Court applied this doctrine to correct the erroneous lot designation in the 1979, 1981, and 1982 deeds of sale, changing the property description from "Lot No. 6036-B" to "Lot 7, Pcs-07-01-00008 Amd., being a portion of the consolidation of Lots 1 and 4 (LRC), Pcs-13865."

• Identity of Property in Sale of Land — A person buys real property as they see it in its actual setting, with its visible monuments, boundaries, and improvements, not by the mere lot number assigned in a certificate of title. The lot number in the deed of sale is not determinative of the identity of the land conveyed. The Court relied on this doctrine to hold that the subject property, not Lot No. 6036-B, was the true object of the sale, as established by the vendors' physical identification of the land and petitioners' subsequent acts of ownership.

• Partition by Acts of Heirs — Every act intended to put an end to indivision among co-heirs is deemed a partition, although it should purport to be a sale, exchange, compromise, or any other transaction. The construction of permanent improvements on definite portions by one heir, unchallenged by co-heirs for a long period, is strong evidence of partition. Partition legally made confers upon each heir exclusive ownership of the property adjudicated. The Court applied this doctrine to hold that the 1976 Extrajudicial Declaration of Heirs and Partition with Exchange terminated the co-ownership over the subject property, leaving only Crispin and the Gallardos as co-owners who could validly convey their shares.

• Innocent Purchaser for Value — The protection of the Torrens system for an innocent purchaser for value requires: (1) the seller is the registered owner; (2) the land is in the possession of the registered owner; and (3) the buyer was not aware of any claim or interest of another person in the property. Absent any condition, the buyer is put on notice and obliged to exercise a higher degree of diligence. The Court held that Spouses Young failed to meet these conditions because the title was in the name of a deceased person and they did not investigate the visible fence and structures on the property.

• Double Sale (Article 1544) — In a double sale of immovable property, ownership belongs to the person who first records in good faith; in the absence of registration, to the one who first takes possession in good faith; and in default thereof, to the one who presents the oldest title, provided there is good faith. Good faith must coincide with registration. The Court held that petitioners prevailed because they had older titles (1979–1982) and prior possession since 1982, and Spouses Young's registration was invalid for lack of good faith.

• Imprescriptibility of Reconveyance While in Possession — An action for annulment of title or reconveyance based on fraud is imprescriptible where the plaintiff is in possession of the property. The prescriptive period does not run until the plaintiff's possession is disturbed. The Court applied this to hold that petitioners' action was timely, as their possession was disturbed only in May 2000 and they filed suit in June 2001.

• "It is settled that a person buys real property not by its technical lot number but as they see the property in its actual setting, with its visible monuments, boundaries, and improvements. The lot number appearing in the document of sale is not, by itself, determinative of the identity of the land conveyed." — This passage articulates the controlling doctrine on the identity of property in a sale of land, forming the ratio decidendi for the Court's conclusion that the subject property, not Lot No. 6036-B, was the true object of the sale.

• "The act of Tomas in building the fence for petitioners on the subject property strongly suggests that the object of the deeds of sale among petitioners, Crispin, and the Gallardos, pertains to the subject property, i.e., Lot 7 of Lot 6012-E, not Lot No. 6036-B." — This passage explains how the contemporaneous acts of a vendor—assisting the buyers in constructing permanent improvements on the land—serve as concrete proof of the parties' true intention regarding the identity of the property sold.

• "Nemo dat quod non habet therefore applies with full force: neither Crispin's heirs nor the Gallardos could convey to Spouses Young a right that they had already transmitted to petitioners years before." — This passage applies the principle that no one can give what one does not have, establishing that the 1999 sale to Spouses Young was ineffective because the sellers had already parted with their interests through the earlier deeds of sale to petitioners.

• "one who is in actual possession of a piece of land on a claim of ownership thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right." — This passage states the doctrine negating the defense of laches against a possessor who has not yet been dispossessed, supporting the Court's rejection of the CA's finding of inordinate delay.

• Atilano vs. Atilano, 138 Phil. 240 (1969) — Followed. The Court applied the principle that a sale of land is valid despite the deed erroneously identifying the lot number, where the vendee actually occupied the property intended to be sold. Reformation was allowed to correct the lot designation.

• Sarming vs. Dy, 432 Phil. 685 (2002) — Followed. The deed of sale identified the wrong lot and title number, but the Court upheld the sale and ordered reformation because the vendees actually occupied the property intended to be conveyed.

• Banico vs. Stager, 885 Phil. 372 (2020) — Followed. The Court applied the three-part test for reformation and the doctrine that a person buys real property as they see it in its actual setting, not by its lot number. The Court extensively quoted this decision's formulation of the requisites of reformation.

• Co Tao vs. Chico, 83 Phil. 543 (1949) — Cited for the proposition that ordinary persons cannot be expected to discern the identity of land by its technical description or determine the exact location of property from a written instrument.

• Cruz vs. Court of Appeals, 496 Phil. 72 (2005) — Cited for the doctrine that partition may be made judicially or extrajudicially, and that every act intended to end indivision among co-heirs is deemed a partition. Also cited for the principle that partition confers exclusive ownership upon each heir.

• Mazy's Capital, Inc. vs. Republic, 957 Phil. 37 (2024) — Cited for the three conditions required for the protection of an innocent purchaser for value under the Torrens system.

• Aqualab Phil., Inc. vs. Heirs of Pagobo, 618 Phil. 442 (2009) — Cited for the doctrine that an action for reconveyance based on fraud is imprescriptible where the plaintiff is in possession of the property, and that the prescriptive period does not run until possession is disturbed.

• Article 1318, Civil Code — Sets forth the requisites of a contract: consent of the contracting parties, object certain which is the subject matter of the contract, and cause of the obligation which is established. The Court found all three elements present in the 1979, 1981, and 1982 deeds of sale.

• Article 1371, Civil Code — Provides that to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered. The Court applied this provision to determine the true intention of the parties from their acts of possession, fencing, and tax payment.

• Article 1078, Civil Code — Provides that where there are two or more heirs, the whole estate is, before partition, owned in common by such heirs. The Court used this provision to establish the co-ownership among Margarita's heirs before the 1976 partition.

• Article 1082, Civil Code — Provides that every act intended to put an end to indivision among co-heirs is deemed to be a partition, although it should purport to be a sale, exchange, compromise, or any other transaction. The Court applied this to characterize the 1976 Extrajudicial Declaration of Heirs and Partition with Exchange as a valid partition.

• Article 1091, Civil Code — Provides that partition legally made confers upon each heir exclusive ownership of the property adjudicated. The Court applied this to hold that after the 1976 partition, only Crispin and the Gallardos retained ownership of the subject property.

• Article 1496, Civil Code — Provides that ownership of the thing sold is acquired by the vendee from the moment it is delivered. The Court applied this to hold that petitioners acquired ownership upon taking possession and fencing the property in 1982.

• Article 1497, Civil Code — Provides that the thing sold is understood as delivered when it is placed in the control and possession of the vendee. The Court used this in relation to Article 1496 to establish that delivery was accomplished when petitioners fenced and occupied the property.

• Article 1544, Civil Code — Governs double sale of immovable property, providing that ownership belongs to the person who first records in good faith; in the absence of registration, to the one who first takes possession in good faith; and in default thereof, to the one who presents the oldest title, provided there is good faith. The Court applied this to hold that petitioners prevailed over Spouses Young because they had older titles and prior possession, and Spouses Young lacked good faith.

• Rule 45, Rules of Court — Governs petitions for review on certiorari, limiting review to questions of law. The Court noted this rule but exercised its authority to review the evidence because the factual findings of the CA and RTC were conflicting.

Caguioa (Chairperson), Gaerlan, Dimaampao, and Singh, JJ., concurred.