Aboitiz vs. Po

An action for reconveyance based on an implied trust prescribes in ten years from the issuance of the Torrens title over the property, and the registered owner's subsequent purchasers for value are protected as innocent purchasers in good faith where the competing claim appears only in a tax declaration and not on the face of the certificate of title.

Lot No. 2835, located in Cabancalan, Mandaue City, originally belonged to Mariano Seno, who during his lifetime sold the property to his son Ciriaco Seno, who in turn sold it to the Spouses Peter and Victoria Po. After Mariano's death in 1982, the Mariano Heirs—including Ciriaco—executed separate deeds of sale in 1990 conveying the same lot to Roberto Aboitiz, who then caused its registration under the Torrens system and developed it into a subdivision. The competing claims of ownership over the same parcel of land, arising from Ciriaco's sale to the Spouses Po and the Mariano Heirs' subsequent sale to Roberto, form the core of the dispute.

Lot No. 2835, a parcel of land in Cabancalan, Mandaue City, originally belonged to Mariano Seno. On July 31, 1973, Mariano executed a Deed of Absolute Sale in favor of his son, Ciriaco Seno, over a 1.0120-hectare property in Cebu covered by Tax Declaration No. 43358, which included two lots: Lot No. 2807 and Lot No. 2835. On May 5, 1978, Ciriaco sold both lots to Victoria Po, the sale being embodied in a notarized Deed of Absolute Sale. Mariano died on July 15, 1982, survived by his five children—the Mariano Heirs—namely Esperanza Seno Vda. De Kuizon, Ramon Seno, Benita Seno Vda. De Lim, Simeon Seno, and Ciriaco.

In 1990, Peter Po discovered that Ciriaco had executed a quitclaim dated August 7, 1989, renouncing his interest over Lot No. 2807 in favor of Roberto Aboitiz. The Spouses Po confronted Ciriaco, and by way of remedy, they executed a Memorandum of Agreement dated June 28, 1990, in which Ciriaco agreed to pay Peter the difference between the amount the Spouses Po had paid for the entire property and the value of the land they were left with after the quitclaim. However, also in 1990, the Mariano Heirs, including Ciriaco, executed separate deeds of absolute sale in favor of Roberto over Lot No. 2835. Roberto immediately developed the lot as part of a subdivision called North Town Homes.

In 1991, the Spouses Po declared Lot No. 2835 for taxation purposes and were issued Tax Declaration No. 0634-A. In 1992, Roberto also declared the same lot for taxation purposes under Tax Declaration No. 1100, which was annotated with the statement that the tax declaration was "also declared in the name of Mrs. VICTORIA LEE PO married to PETER PO under [T]ax [Declaration] [N]o. 0634-A so that one may be considered a duplicate to the other." On April 19, 1993, Roberto filed an application for original registration of Lot No. 2835 with the Mandaue City RTC, Branch 28, docketed as LRC Case No. N-208. No one opposed the application. On October 28, 1993, the trial court granted the issuance of Original Certificate of Title No. 0-887 in Roberto's name. The lot was immediately subdivided, with portions sold to Ernesto Aboitiz and Jose Maria Moraza.

On November 19, 1996, the Spouses Po filed a complaint to recover the land and to declare nullity of title with damages, docketed as Civil Case No. MAN-2803 in Branch 55, RTC of Mandaue City. The trial court found that Ciriaco's sale to the Spouses Po was valid, that the Mariano Heirs were no longer owners when they sold to Roberto, and that Roberto was not a purchaser in good faith because he had been informed of the Spouses Po's ownership during barangay conciliation proceedings. The Court of Appeals affirmed these findings but ruled that Jose, Ernesto, and Isabel were innocent buyers in good faith whose titles should be respected.

• Jurisdiction: The Spouses Aboitiz argued that Branch 55, RTC of Mandaue City lacked jurisdiction to nullify the final and executory decision of Branch 28 in LRC Case No. N-208, asserting that only the Court of Appeals has jurisdiction to annul judgments of Regional Trial Courts.
• Prescription: The Spouses Aboitiz maintained that the Spouses Po's cause of action had prescribed, claiming that more than ten years had elapsed between the execution of the Deed of Absolute Sale on May 5, 1978, and the filing of the complaint on November 12, 1996.
• Estoppel and Laches: The Spouses Aboitiz insisted that estoppel and laches had set in, citing their open, continuous, public, peaceful, and adverse possession of the property for 46 years as of 1993, the utmost publicity of the North Town Homes Subdivision development, and the Spouses Po's failure to interpose any objection during the registration proceedings.
• Validity of the Deed of Sale: The Spouses Aboitiz posited that the Deed of Absolute Sale between Ciriaco and the Spouses Po was fake and fraudulent, citing certifications of its non-existence in the notarial books and the Spouses Po's failure to enforce their rights until 18 years later. They also claimed the deed was inadmissible for lack of documentary stamp tax.
• Res Judicata: The Spouses Aboitiz claimed that the land registration court's finding that Ciriaco held the property in trust for the Mariano Heirs was binding as res judicata because land registration proceedings are actions in rem.
• Indispensable Parties: The Spouses Aboitiz contended that the Mariano Heirs should have been impleaded as indispensable parties.
• Innocent Purchaser for Value (Spouses Po's Petition, G.R. No. 208497): The Spouses Po argued that Jose, Ernesto, and Isabel were not innocent purchasers for value because they knew of the defective title of Roberto through the annotation on his tax declaration referencing Victoria Po's tax declaration.

• Jurisdiction: The Spouses Po countered that the RTC had jurisdiction because the case filed by the Spouses Aboitiz was for land registration, while the case they filed was for reconveyance—a distinct action involving title to real property within the RTC's exclusive original jurisdiction.
• Prescription: The Spouses Po insisted that their action had not prescribed because an action for reconveyance prescribes in ten years from the date of issuance of the certificate of title over the property, which was issued in 1994, making their 1996 complaint timely.
• Laches: The Spouses Po argued that laches had not set in, asserting they had continuously asserted their rights through tax declarations, cultivation of the property, the Memorandum of Agreement with Ciriaco, and barangay conciliation proceedings.
• Validity of the Deed of Sale: The Spouses Po claimed that the notarized Deed of Absolute Sale was not fake or fraudulent and was admissible in evidence, with the Spouses Aboitiz having failed to overcome its presumption of regularity and due execution. They asserted that the documentary stamp tax had been paid.
• Indispensable Parties: The Spouses Po argued that the Mariano Heirs were not indispensable parties.
• Innocent Purchaser for Value (Spouses Aboitiz's Comment in G.R. No. 208497): The Spouses Aboitiz argued that there was no evidence they acted in bad faith, maintaining that subdivision lot buyers were not obliged to go beyond the Torrens title.

• Jurisdiction: Whether the Regional Trial Court had jurisdiction over the Spouses Po's complaint for reconveyance.
• Prescription: Whether the Spouses Po's action was barred by prescription.
• Laches: Whether the doctrines of estoppel and laches apply to bar the Spouses Po's claim.
• Res Judicata: Whether the land registration court's finding that Ciriaco held the property in trust for the Mariano Heirs is binding as res judicata in the reconveyance action.
• Admissibility of the Deed of Sale: Whether the Deed of Absolute Sale between Ciriaco and the Spouses Po should be considered as evidence of their entitlement to the property.
• Indispensable Parties: Whether the Mariano Heirs, as sellers in the deeds of conveyance, are indispensable parties.
• Innocent Purchaser for Value: Whether Jose Maria Moraza, Ernesto Aboitiz, and Isabel Aboitiz are innocent purchasers in good faith.

• Jurisdiction: Yes. The RTC had jurisdiction because the Spouses Po's complaint was for reconveyance and annulment of title—an action involving title to real property within the RTC's exclusive original jurisdiction under Section 19 of Batas Pambansa Blg. 129—not for annulment of judgment, which belongs to the Court of Appeals.
• Prescription: No. The action had not prescribed. An action for reconveyance based on an implied trust prescribes in ten years from the issuance of the Torrens title, which was issued on April 6, 1994; the complaint filed on November 19, 1996 was well within the prescriptive period.
• Laches: No. The elements of laches were lacking. The Spouses Po had continuously asserted their rights through tax declarations, cultivation, the Memorandum of Agreement, and barangay conciliation, and filed the complaint less than three years from registration.
• Res Judicata: No. The land registration court's findings were not binding as res judicata because the Spouses Po had no knowledge of the registration proceedings and thus had no opportunity to present their claim; reconveyance allows relitigation of ownership without setting aside the decree of registration.
• Admissibility of the Deed of Sale: Yes. The notarized Deed of Absolute Sale was presumed regular and admissible, the Spouses Aboitiz having failed to present clear and convincing evidence to overturn the presumption; the certifications cited did not declare the document nonexistent but only noted the notary's failure to submit notarial reports.
• Indispensable Parties: No. The Mariano Heirs were not indispensable parties because they had already sold all their interests in the property; at most they were necessary parties or material witnesses, their interests being separable from those of the current registered owners.
• Innocent Purchaser for Value: Yes. Jose, Ernesto, and Isabel were innocent purchasers for value because the annotation referencing Victoria Po's tax declaration appeared on the tax declaration, not on the certificate of title; buyers of registered land are not obliged to look beyond the Torrens title.

• Jurisdiction: A complaint for reconveyance admits the registration of title in another's name but claims such registration was erroneous or wrongful, seeking transfer of title to the rightful owner. It is distinct from an action for annulment of judgment, which questions the validity of a judgment due to lack of jurisdiction or extrinsic fraud and falls within the Court of Appeals' exclusive original jurisdiction under Section 9 of Batas Pambansa Blg. 129. The Spouses Po's complaint asserted ownership and sought cancellation of the Spouses Aboitiz's title obtained through fraud, without questioning the validity of the registration proceeding itself. Because an action for reconveyance involves title to real property, the RTC had exclusive original jurisdiction under Section 19(2) of Batas Pambansa Blg. 129. The distinction drawn in Toledo vs. Court of Appeals confirmed that reconveyance targets the transfer of title issued in a valid proceeding, whereas annulment of judgment attacks the judgment itself.

• Prescription: Under Article 1456 of the Civil Code, a person who acquires property through fraud becomes a trustee of an implied trust for the true owner. Registration of property in another's name constitutes constructive notice to the whole world and signifies repudiation of the implied trust, causing the right of action to accrue at that point. Pursuant to Article 1144(2) of the Civil Code, an action upon an obligation created by law prescribes in ten years. The Torrens title over Lot No. 2835 was issued on April 6, 1994, and the complaint was filed on November 19, 1996—less than three years later—well within the ten-year prescriptive period. The Spouses Aboitiz's argument that prescription should run from the 1978 Deed of Sale was rejected because an action for reconveyance puts ownership and registration at issue, not the validity of the underlying contract.

• Laches: Laches requires (1) conduct giving rise to the situation complained of, (2) delay in asserting a right after knowledge and opportunity to sue, (3) lack of defendant's knowledge or notice that the complainant would assert the right, and (4) injury or prejudice to the defendant if relief is accorded. The Spouses Po had declared the property for taxation, cultivated it with fruit trees, executed a Memorandum of Agreement with Ciriaco to protect their interests, and referred the matter to barangay conciliation. The Spouses Aboitiz acquired their rights only in 1990, and the Spouses Po filed suit less than three years after registration in 1993. There was no delay in asserting the right, and the Spouses Aboitiz had knowledge of the Spouses Po's claim through the barangay conciliation. All elements of laches were therefore absent.

• Res Judicata: While a final judgment in a land registration proceeding is binding on the whole world as an action in rem, this conclusiveness is not absolute. An action for reconveyance is available to a person whose property was wrongfully registered in another's name, even after the registration decree becomes final, provided the property has not passed to an innocent third party for value. The decree of registration is respected as incontrovertible; what is sought is the transfer of the property to its rightful owner. The Spouses Po were unaware of the registration proceedings and thus had no opportunity to present their claim. The documents they offered—the Deed of Sale from Mariano to Ciriaco, the Deed of Absolute Sale from Ciriaco to the Spouses Po, and the tax declaration in Victoria's name—were not considered by the land registration court. Because the Spouses Po never had the opportunity to litigate their claim in the registration case, res judicata cannot bar their action for reconveyance.

• Admissibility of the Deed of Sale: The Spouses Aboitiz raised questions of fact regarding the authenticity of the Deed of Absolute Sale, which are not reviewable under Rule 45 absent a showing that the factual findings are unsupported by evidence or based on a misapprehension of facts. No such exception was demonstrated. The certifications presented by the Spouses Aboitiz did not state that the document did not exist in the notarial books; they only noted that the notary public had not submitted his notarial reports for 1978–1979 and that the document had not been transferred to the archives. Under Rule 132, Section 30 of the Rules of Court, a notarized document is prima facie evidence of its execution and is admissible without further proof. The failure of the notary public to submit notarial reports does not affect the act of notarization or prejudice the parties who appeared before him. Clear, convincing, and more than merely preponderant evidence is required to overturn the presumption of regularity, which the Spouses Aboitiz failed to present. The lower courts' factual findings—that Mariano sold the property to Ciriaco in 1973, and Ciriaco sold it to the Spouses Po in 1978—were thus binding, establishing that the Mariano Heirs had no capacity to sell the property to Roberto in 1990.

• Indispensable Parties: An indispensable party is one whose legal presence is so necessary that the action cannot be finally determined without him or her. The registered owners against whom reconveyance is sought are indispensable parties, but a seller who has already transferred all interests is not. The Mariano Heirs had sold their interests to the Spouses Aboitiz and would not be affected by any ruling on reconveyance. Their interests had become separable from those of Jose, Ernesto, and Isabel, the current registered owners. At most, the Mariano Heirs were necessary parties under Rule 3, Section 8, or material witnesses who could testify as to the deeds of sale they executed.

• Innocent Purchaser for Value: Under Section 44 of Presidential Decree No. 1529, every subsequent purchaser of registered land taking a certificate of title for value and in good faith holds the same free from all encumbrances except those noted on the certificate. A purchaser of registered land is not obliged to look beyond the transfer certificate of title. The only exception is when the purchaser has actual knowledge of a defect or circumstances that would cause a reasonably cautious person to inquire further. The annotation referencing Victoria Po's tax declaration appeared on the tax declaration, not on the certificate of title. There was no showing that Jose, Ernesto, and Isabel had actual knowledge of any defect in Roberto's title. Because the Torrens system's purpose is to quiet title and allow reliance on the certificate's correctness, these buyers were innocent purchasers for value whose titles were entitled to protection.

• Action for Reconveyance — A legal and equitable remedy granted to the rightful owner of land wrongfully or erroneously registered in another's name, compelling the latter to transfer or reconvey the land. It admits the registration but claims it was erroneous; it does not seek to set aside the decree of registration, which is respected as incontrovertible. Reconveyance is available as long as the property has not passed to an innocent third person for value. The Court applied this doctrine to hold that the RTC had jurisdiction and that the Spouses Po were entitled to prove their ownership despite the finality of the registration decree.

• Implied Trust under Article 1456 — When property is acquired through fraud or mistake, the person obtaining it is, by force of law, a trustee of an implied trust for the benefit of the true owner. Registration of property in another's name creates a constructive trust and constitutes constructive notice to the world, repudiating the trust and causing the right of action to accrue. The action to enforce this trust prescribes in ten years from the date of registration pursuant to Article 1144(2) of the Civil Code. The Court applied this to hold that the Spouses Po's action accrued upon issuance of the Torrens title in 1994, not upon execution of the 1978 deed.

• Innocent Purchaser for Value — A buyer who pays the full and fair price for property without notice of another person's right or interest in it, believing the seller is the owner and can transfer title. A purchaser of registered land is not obliged to look beyond the certificate of title. The exception applies only when the purchaser has actual knowledge of a defect or circumstances arousing suspicion that would cause a reasonably cautious person to inquire further. The Court held that Jose, Ernesto, and Isabel were innocent purchasers because the competing claim appeared only in a tax declaration, not on the Torrens title.

• Laches — The failure or neglect, for an unreasonable and unexplained length of time, to assert a right, warranting the presumption that the right has been abandoned. Its elements are: (1) conduct of the defendant giving rise to the situation; (2) delay in asserting a right after knowledge and opportunity to sue; (3) lack of defendant's knowledge or notice that the complainant would assert the right; and (4) injury or prejudice to the defendant if relief is accorded. Laches is distinct from prescription: prescription is concerned with the fact of delay, while laches is concerned with the effect of delay and the inequity of permitting a claim to be enforced. The Court found all elements absent.

• Res Judicata in Land Registration Proceedings — While a final judgment in an in rem land registration proceeding is binding on the whole world, this conclusiveness is not absolute. An action for reconveyance is available to a party who had no knowledge of the registration and thus no opportunity to contest it. The exception applies where the aggrieved party was deprived of the opportunity to present evidence; res judicata will only bar a subsequent claim if the party had the opportunity to litigate the issue in the registration case.

• "An action for reconveyance based on implied or constructive trust prescribes in ten years from the alleged fraudulent registration or date of issuance of the certificate of title over the property." — This passage, quoting Crisostomo vs. Garcia, Jr., establishes the canonical rule for computing the prescriptive period in reconveyance actions based on implied trust, tying accrual to the act of registration rather than the underlying contract.

• "In an action for reconveyance, the decree of registration is respected as incontrovertible and is not being questioned. What is being sought is the transfer of the property wrongfully or erroneously registered in another's name to its rightful owner or to the one with a better right." — This passage, quoting Hortizuela vs. Tagufa, defines the essential character of a reconveyance action: it does not assail the decree but compels transfer of title, clarifying why res judicata from the registration case does not necessarily bar it.

• "Registration of a piece of land under the Torrens System does not create or vest title, because it is not a mode of acquiring ownership. A certificate of title is merely an evidence of ownership or title over the particular property described therein." — This passage, quoting Naval vs. Court of Appeals, articulates the foundational principle that registration is evidentiary, not vestitive, of ownership—central to the rationale that a Torrens title wrongfully issued does not defeat the true owner's right to reconveyance.

• "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 behind the certificate to determine the condition of the property." — This passage, quoting Cruz vs. Court of Appeals, states the rule protecting innocent purchasers for value, which the Court applied to shield Jose, Ernesto, and Isabel because the competing claim appeared only in a tax declaration and not on the title.

• Toledo vs. Court of Appeals, G.R. No. 167838, August 5, 2015, 765 SCRA 104 — Followed. Distinguished between an action for annulment of judgment (within the Court of Appeals' jurisdiction) and an action for reconveyance (within the RTC's jurisdiction), confirming that the Spouses Po's complaint was for reconveyance.

• Crisostomo vs. Garcia, Jr., 516 Phil. 743 (2006) — Followed. Established that an action for reconveyance based on implied trust prescribes in ten years from the date of registration, not from the execution of the underlying contract.

• Duque vs. Domingo, 170 Phil. 676 (1977) — Followed. Held that registration constitutes constructive notice and repudiation of the implied trust, commencing the prescriptive period.

• Racoma vs. Fortich, 148-A Phil. 454 (1971) — Followed. Held that res judicata cannot bar an action for reconveyance where the complainant had no knowledge of the registration proceedings.

• People vs. Cainglet, 123 Phil. 568 (1966) — Followed. Explained that while in rem registration judgments are binding on the world, public policy also dictates that those unjustly deprived of property rights be afforded remedies such as reconveyance.

• Hortizuela vs. Tagufa, 754 Phil. 499 (2015) — Followed. Defined reconveyance as an action in personam that respects the decree of registration as incontrovertible and seeks only the transfer of title to the rightful owner.

• Naval vs. Court of Appeals, 518 Phil. 271 (2006) — Followed. Held that registration does not create or vest ownership and that a certificate of title is merely evidence of ownership.

• Spring Homes Subdivision Co., Inc. vs. Spouses Tablada, Jr., G.R. No. 200009, January 23, 2017 — Followed. Held that a seller who has transferred all interests in the property is not an indispensable party but at most a necessary party.

• Cruz vs. Court of Appeals, 346 Phil. 506 (1997) — Followed. Stated that a purchaser of registered land need not look beyond the certificate of title and may rely on its correctness.

• Leong vs. See, G.R. No. 194077, December 3, 2014, 743 SCRA 677 — Followed. Explained that the protection of innocent purchasers in good faith is grounded on the social interest in the indefeasibility of titles.

• Ignacio vs. Basilio, 418 Phil. 256 (2001) — Followed. Enumerated the four elements of laches.

• Nielson & Co., Inc. vs. Lepanto Consolidated Mining Co., 125 Phil. 204 (1966) — Followed. Distinguished laches from prescription: prescription is concerned with the fact of delay; laches with the effect of delay.

• Section 19(2), Batas Pambansa Blg. 129 (Judiciary Reorganization Act) — Grants Regional Trial Courts exclusive original jurisdiction over civil actions involving title to or possession of real property. Applied to confirm RTC jurisdiction over the Spouses Po's complaint for reconveyance.

• Section 9(2), Batas Pambansa Blg. 129 — Grants the Court of Appeals exclusive original jurisdiction over actions for annulment of judgments of Regional Trial Courts. Distinguished from reconveyance actions, which remain with the RTC.

• Section 53, Presidential Decree No. 1529 (Property Registration Decree) — Provides that in cases of registration procured by fraud, the owner may pursue all legal and equitable remedies against the parties to such fraud, without prejudice to the rights of innocent holders for value. Applied as the statutory basis for the remedy of reconveyance.

• Section 44, Presidential Decree No. 1529 — Provides that every subsequent purchaser of registered land taking a certificate of title for value and in good faith holds the same free from all encumbrances except those noted on the certificate. Applied to protect Jose, Ernesto, and Isabel as innocent purchasers for value.

• Article 1456, Civil Code — Provides that if property is acquired through mistake or fraud, the person obtaining it is considered a trustee of an implied trust for the benefit of the true owner. Applied to establish the constructive trust in favor of the Spouses Po arising from the fraudulent registration.

• Article 1144(2), Civil Code — Provides that actions upon an obligation created by law must be brought within ten years from the time the right of action accrues. Applied to set the ten-year prescriptive period for the action for reconveyance based on implied trust.

• Rule 3, Section 7, Rules of Court — Defines compulsory joinder of indispensable parties as those without whom no final determination of an action can be had. Applied to hold that the Mariano Heirs were not indispensable parties.

• Rule 3, Section 8, Rules of Court — Defines necessary parties as those who ought to be joined for complete relief but whose interests are separable. Applied to classify the Mariano Heirs as at most necessary parties.

• Rule 39, Section 47, Rules of Court — Governs the effect of judgments or final orders, covering bar by prior judgment and conclusiveness of judgment. Applied in analyzing whether res judicata precluded the Spouses Po's action.

• Rule 132, Section 30, Rules of Court — Provides that a notarized document may be presented in evidence without further proof, the certificate of acknowledgment being prima facie evidence of execution. Applied to uphold the admissibility and presumptive regularity of the Deed of Absolute Sale.

Justice Antonio T. Carpio (Chairperson), Justice Diosdado M. Peralta (on official leave), Justice Jose Catral Mendoza (on official leave), and Justice Samuel R. Martires concurred. No separate concurring opinions were noted.