Asuncion Atilano et al. vs. Ladislao Atilano and Gregorio M. Atilano

Where the true intention of the parties to a sale of registered land is ascertainable from their contemporaneous and subsequent acts, the erroneous lot number in the deed does not control; the property actually intended and delivered is the object of the contract, and the parties may be compelled to execute mutual deeds of conveyance to conform the titles to that intention. Such a mistake in designation does not vitiate consent or affect the validity and binding effect of the contract.

Eulogio Atilano I and Eulogio Atilano II were brothers. Eulogio Atilano I originally acquired and registered lot No. 535 of the Zamboanga cadastre, which he later subdivided into five parcels, including lots Nos. 535-A and 535-E. The property was registered under the Land Registration Act, a statutory backdrop that the trial court treated as decisive on the issue of prescription.

In 1916 Eulogio Atilano I acquired by purchase from Gerardo Villanueva lot No. 535 of the then municipality of Zamboanga cadastre, and transfer certificate of title No. 1134 was issued in his name. In 1920 he subdivided the land into five parts, identified as lots Nos. 535-A, 535-B, 535-C, 535-D, and 535-E. On May 18, 1920, after the subdivision, Eulogio Atilano I executed a deed of sale covering lot No. 535-E in favor of his brother Eulogio Atilano II for P150.00; Eulogio Atilano II thereupon obtained transfer certificate of title No. 3129 in his name. Lots Nos. 535-B, 535-C, and 535-D were sold to other persons, while Eulogio Atilano I retained the remaining portion, presumably lot No. 535-A. Upon his death, title to that retained lot passed to Ladislao Atilano, defendant, in whose name certificate No. T-5056 was issued.

On December 6, 1952, after Eulogio Atilano II had become a widower upon the death of his wife Luisa Bautista, he and his children obtained transfer certificate of title No. 4889 over lot No. 535-E in their names as co-owners. On July 16, 1959, desiring to end the co-ownership, they had the land resurveyed so that it could be properly subdivided. The resurvey revealed that the land they actually occupied under the 1920 deed was lot No. 535-A, not lot No. 535-E as stated in the deed, while the land that remained in the possession of the vendor, Eulogio Atilano I, and passed to Ladislao Atilano was lot No. 535-E, not lot No. 535-A.

On January 25, 1960, the heirs of Eulogio Atilano II, who was by then also deceased, filed the present action in the Court of First Instance of Zamboanga. They alleged that they had offered to surrender possession of lot No. 535-A to the defendants and demanded in return possession of lot No. 535-E, but the defendants refused the exchange. Their insistence was understandable because lot No. 535-E has an area of 2,612 square meters, compared to the 1,808-square-meter area of lot No. 535-A. In their answer, the defendants alleged that the reference to lot No. 535-E in the May 18, 1920 deed was an involuntary error; that the intention of the parties was to convey lot No. 535-A; that since 1916, when Eulogio Atilano I acquired the entirety of lot No. 535, and until his death, he had possessed and had his house on the portion designated as lot No. 535-E, after which the defendants succeeded in such possession; and that Eulogio Atilano I even increased the area under his possession when, on June 11, 1920, he bought a portion of adjoining lot No. 536 from its owner, Fruto del Carpio. The defendants interposed a counterclaim praying that the plaintiffs be ordered to execute in their favor the corresponding deed of transfer with respect to lot No. 535-E.

The parties' conflicting claims thus placed in issue the real intention behind the 1920 deed and the ownership and possession of lots Nos. 535-A and 535-E.

• Involuntary Error in the Deed: Defendants-appellants alleged that the reference to lot No. 535-E in the May 18, 1920 deed of sale was an involuntary error and that the intention of the parties was to convey lot No. 535-A.
• Possession and Intended Object: They maintained that since 1916, Eulogio Atilano I had possessed and had his house on the portion designated lot No. 535-E until his death, after which they succeeded in possession, and that he even increased the area by purchasing a portion of adjoining lot No. 536 on June 11, 1920.
• Adverse Possession and Counterclaim: Aside from alleging adverse possession, they interposed a counterclaim praying that the plaintiffs be ordered to execute in their favor the corresponding deed of transfer with respect to lot No. 535-E.

• Exchange of Possession: Plaintiffs-appellees alleged that they had offered to surrender possession of lot No. 535-A to the defendants and demanded in return possession of lot No. 535-E, but the defendants refused the exchange.
• Area Difference: They insisted on lot No. 535-E, which has an area of 2,612 square meters, compared to the 1,808-square-meter area of lot No. 535-A.

• Real Intention and Mistake in the Deed: Whether the real intention of the parties to the May 18, 1920 deed of sale was to convey lot No. 535-A despite the deed's designation of lot No. 535-E.
• Effect of Mistake and Reformation: Whether the erroneous designation of lot No. 535-E vitiated the consent of the parties or affected the validity and binding effect of the contract, and whether reformation or mutual deeds of conveyance was the proper remedy.
• Prescription and Registered Land: Whether the trial court correctly resolved the case for the plaintiffs solely on the ground that registered land cannot be acquired by prescription, notwithstanding the alleged error in the deed.

• Real Intention and Mistake in the Deed: No. The reference to lot No. 535-E was a simple mistake in drafting; the real intention was to convey lot No. 535-A, the portion then occupied by the vendee.
• Effect of Mistake and Reformation: No. The mistake did not vitiate consent or affect the contract's validity; reformation was unnecessary because the parties had retained possession according to their real intention, and mutual deeds of conveyance should be executed.
• Prescription and Registered Land: No, not as the decisive ground. Although registered land cannot be acquired by prescription, the controversy turned on the real intention of the parties to the 1920 sale, not on adverse possession.

• Real Intention and Mistake in the Deed: The Court reasoned that when one sells or buys real property, one sells or buys it as he sees it, in its actual setting and by its physical metes and bounds, not by the mere lot number assigned in the certificate of title. The portion correctly referred to as lot No. 535-A was already in the possession of the vendee, Eulogio Atilano II, who had constructed his residence therein even before the sale and before the subdivision of lot No. 535. The vendor, Eulogio Atilano I, had his house on the portion correctly identified as lot No. 535-E and even added to its area by purchasing a portion of adjoining lot No. 536. The two brothers continued in possession of their respective portions for the rest of their lives, apparently ignorant of the initial mistake until 1959. The object of the sale, as intended and understood by the parties, was therefore the specific portion where the vendee was already residing, where he reconstructed his house after the war, and where his heirs continued to reside—lot No. 535-A—and its designation as lot No. 535-E was a simple mistake in drafting.
• Effect of Mistake and Reformation: The mistake did not vitiate the consent of the parties or affect the validity and binding effect of the contract. The New Civil Code provides a remedy for such a situation through reformation of the instrument when, there having been a meeting of minds, the true intention is not expressed in the instrument by reason of mistake, fraud, inequitable conduct, or accident under Article 1359 et seq. In this case, however, the 1920 deed need no longer be reformed. The parties had retained possession of their respective properties conformably to the real intention of the sale, and all they should do was execute mutual deeds of conveyance.
• Prescription and Registered Land: The trial court rendered judgment for the plaintiffs on the sole ground that, because the property was registered under the Land Registration Act, the defendants could not acquire it through prescription. There was no dispute as to the correctness of that legal proposition. But the defendants, aside from alleging adverse possession, also alleged error in the 1920 deed. The real issue was not adverse possession but the real intention of the parties to the sale. The prescription ground therefore did not resolve the controversy.

• Real Intention Controls Over Erroneous Lot Number — In a sale of real property, the property is bought and sold as the parties see it, in its actual setting and by its physical metes and bounds, not by the mere lot number assigned in the certificate of title. The Court applied this principle to hold that the 1920 deed's reference to lot No. 535-E was a drafting mistake and that the parties intended to convey lot No. 535-A.
• Mistake in Drafting Does Not Vitiate Consent — A simple mistake in the designation of the property in a deed does not affect the validity and binding effect of the contract where the parties' true intention is ascertainable. The Court held that the mistake did not invalidate the sale.
• Reformation of Instruments Under Article 1359, et seq., New Civil Code — Reformation is available when there has been a meeting of minds but the true intention is not expressed in the instrument by reason of mistake, fraud, inequitable conduct, or accident. The Court held that formal reformation was unnecessary because the parties had retained possession according to their real intention; mutual deeds of conveyance sufficed.
• Registered Land Cannot Be Acquired by Prescription — The Court acknowledged the trial court's legal proposition that registered property under the Land Registration Act cannot be acquired through prescription, but held that it was not the decisive issue because the case concerned the real intention of the parties, not adverse possession.
• Mutual Deeds of Conveyance to Correct Mistake — Where the parties have retained possession conformably to their real intention, the proper remedy is not necessarily reformation but the execution of mutual deeds of conveyance to conform the titles to the actual agreement. The Court ordered the plaintiffs to convey lot No. 535-E to the defendants and the defendants to convey the other lot to the plaintiffs.

• "When one sells or buys real property — a piece of land, for example — one sells or buys the property as he sees it, in its actual setting and by its physical metes and bounds, and not by the mere lot number assigned to it in the certificate of title." — This is the Court's canonical formulation of the principle that the actual property intended, not the lot number in the title, controls the object of a sale.
• "The real issue here is not adverse possession, but the real intention of the parties to that sale." — This identifies the decisive issue and explains why the trial court's prescription ruling did not resolve the case.
• "The mistake did not vitiate the consent of the parties, or affect the validity and binding effect of the contract between them." — This states the ratio on the effect of the erroneous lot designation: the contract remained valid despite the mistake.
• "In this case, the deed of sale executed in 1920 need no longer reformed. The parties have retained possession of their respective properties conformably to the real intention of the parties to that sale, and all they should do is to execute mutual deeds of conveyance." — This states the remedy adopted: because possession already conformed to the real intention, mutual conveyances rather than formal reformation were required.

• Article 1359, et seq., New Civil Code — Provides the remedy of reformation when there has been a meeting of minds but the true intention is not expressed in the instrument by reason of mistake, fraud, inequitable conduct, or accident. The Court cited it to explain that the erroneous deed could be corrected, but held that formal reformation was unnecessary because possession already conformed to the real intention and mutual deeds of conveyance would suffice.
• Land Registration Act — The trial court relied on this law to rule that registered land cannot be acquired by prescription. The Supreme Court acknowledged the correctness of that proposition but held that it did not resolve the case, which turned on the real intention of the parties to the 1920 sale rather than on adverse possession.

Reyes, J.B.L.; Dizon; Zaldivar; Sanchez; Fernando; and Capistrano, JJ., concurred. Teehankee and Barredo, JJ., took no part. Concepcion, C.J., and Castro, J., were on leave.