Caladiao vs. Santos Vda. de Blas

A decree of registration obtained fraudulently by a vendor who has already sold the property does not bar an action for reconveyance by the true owner; the registered owner holds the property in a continuing and subsisting trust for the buyer, and the action is imprescriptible.

Prudencio Limpin originally held an unregistered fishpond in barrio San Pedro, Sexmoan, Pampanga, which Simeon Blas and his wife Maxima Santos later claimed under a 1932 pacto de retro sale. The property became the subject of conflicting registration proceedings: one initiated by Limpin and his conjugal partnership, and another by Maxima Santos after Blas's death. The governing statutory backdrop includes Section 38 of the Land Registration Act, which limits review of registration decrees, and Section 38 of Act No. 190, the old Code of Civil Procedure, which governs prescription and excepts continuing trusts and actions by a vendee in possession to obtain conveyance.

On September 30, 1932, Prudencio Limpin sold, ceded, and transferred to Simeon Blas, married to Maxima Santos, an unregistered fishpond of 126.546 sq. meters in barrio San Pedro, Sexmoan, Pampanga, for P4,440. The vendor reserved the right to repurchase within one year, with the explicit stipulation that if no repurchase was made within the agreed period the sale "would automatically become a sale absolute and irrevocable." The notarial deed of sale a retro (Exh. A, Exh. 5) was recorded in the Office of the Register of Deeds of Pampanga on January 28, 1933. With the deed, Limpin delivered to Blas the Spanish title to the land (Exh. B), and Blas took possession until his death on January 9, 1937. His widow, Maxima Santos, took over and paid taxes on the property until 1955. In 1940, the fishpond, with other property, was adjudicated to the widow by the court in the estate proceedings of the late Simeon Blas.

Despite the conveyance, Limpin applied for and obtained judicial registration of the same property in favor of the conjugal partnership of Prudencio Limpin and Juliana Caladiao in Case No. 1495, GLRO Rec. No. 47574, and secured Original Certificate of Title No. 21019 in their name on February 24, 1934 (Exh. T). Prudencio Limpin died on April 17, 1941, and was succeeded by his widow and children, in whose favor Transfer Certificate of Title No. 11118-R was later issued in 1954 (Exh. V). The Court of Appeals found that the Blas spouses were "undoubtedly unaware" of the registration in favor of Limpin and his wife.

On March 29, 1952, Maxima Santos Vda. de Blas applied for registration of the same fishpond in Case No. 118, GLRO Rec. No. 5415. Petitioners opposed. By decision on June 15, 1954 (Exh. I), the court overruled the opposition and adjudicated the property to the widow, expressly finding that Limpin had sold the property to the Blas spouses in 1932 and that, for failure of the vendor to repurchase, Blas and his wife had become absolute owners.

While the second registration case was pending, on October 24, 1952, the widow and children of Prudencio Limpin filed a complaint (Exh. L) in the Court of First Instance of Pampanga (Civil Case No. 509) against Maxima Santos Vda. de Blas for the return of the fishpond and annulment of the sale a retro executed by Limpin in 1932. The widow answered on October 29, 1952. The complaint was unqualifiedly dismissed on December 9, 1952 for non-appearance of plaintiffs at trial, and the dismissal became final.

On August 20, 1954, the court in Land Case No. 118 ordered issuance of the corresponding decree to Maxima Santos Vda. de Blas. Upon report of the Commissioner of Land Registration that the same land had been previously decreed in favor of Prudencio Limpin and his wife, however, the registration proceedings initiated by the widow Blas were dismissed. Whereupon, on August 20, 1954, the widow initiated the present action against the widow and heirs of Prudencio Limpin for reconveyance of the fishpond. Upon the death of plaintiff Maxima Santos on October 5, 1956, she was substituted by her administratrix, Rosalinda Santos. After trial, the Court of First Instance of Pampanga found for the plaintiff, ordered reconveyance, and awarded P3,000 as counsel fees. The Court of Appeals affirmed, and the Limpins resorted to the Supreme Court. The Court of Appeals explicitly found that possession of the property had been with Blas and his successors since the sale.

• Nature of the Transaction: Petitioners maintained that the transaction between Prudencio Limpin and Simeon Blas should have been declared an equitable mortgage merely, or at most a contract of antichresis, rather than a pacto de retro sale that became absolute.
• Incontrovertibility of the Registration Decree: Petitioners sought refuge behind the incontrovertibility of the decree of registration, notwithstanding the prior sale, and pointed to the Blas spouses' constructive notice by publication and failure to oppose the registration proceedings.
• Prescription: Petitioners urged that the action for reconveyance had prescribed because more than twenty years had elapsed since the spouses Limpin obtained a certificate of title in their name over the fishpond.

• Nature of the Transaction: Whether the transaction between Prudencio Limpin and Simeon Blas should be declared an equitable mortgage or a contract of antichresis rather than a pacto de retro sale that became absolute.
• Incontrovertibility of the Registration Decree: Whether an action for reconveyance of property wrongfully registered in the name of the vendor may prosper despite the decree of registration and the lapse of the one-year period under Section 38 of the Land Registration Act.
• Res Judicata: Whether the final dismissal of Civil Case No. 509 for failure to prosecute operates as res judicata and settles the superiority of respondent's rights.
• Prescription: Whether the action for reconveyance has prescribed because more than twenty years elapsed since the certificate of title was issued to the Limpins.

• Nature of the Transaction: No. The Court of Appeals' findings of fact that Limpin sold under pacto de retro and Blas became absolute owner are conclusive; the transaction cannot be recharacterized as equitable mortgage or antichresis.
• Incontrovertibility of the Registration Decree: No. A decree of registration in favor of one party is no bar to an action in personam for reconveyance to the true owner, even after the one-year period under Section 38 of the Land Registration Act, if the registration is wrongful and the property has not passed to an innocent third party for value.
• Res Judicata: Yes. The dismissal of Civil Case No. 509 for failure to prosecute operates as an adjudication on the merits and res judicata, the court not having provided otherwise.
• Prescription: No. The action is imprescriptible because Limpin held the property in a continuing and subsisting trust for the Blas spouses; moreover, the vendee and successors were in possession, and Act No. 190, section 38 excepts actions by a vendee in possession to obtain conveyance.

• Nature of the Transaction: The Court of Appeals explicitly found that Prudencio Limpin had sold the property to Simeon Blas under pacto de retro and that Blas became absolute owner because of Limpin's failure to repurchase. These findings of fact are conclusive in the Supreme Court, so the review was limited to questions of law. Petitioners' contention that the transaction should be declared an equitable mortgage or, at most, a contract of antichresis could not be entertained.
• Incontrovertibility of the Registration Decree: It is a well-settled doctrine that the existence of a decree of registration in favor of one party is no bar to an action to compel reconveyance of the property to the true owner. Such an action is in personam and may be instituted even after the year fixed by Section 38 of the Land Registration Act as a limit to review of the registration decree, provided the registration is wrongful and the property sought to be reconveyed has not passed to an innocent third party holder for value. Because Limpin knew he had previously sold the property to Blas in 1932, his subsequent application for and obtention of the decree in his name was fraudulent and in utter bad faith. He and his widow and heirs, who are bound to respect the original sale, may be compelled to reconvey the property to the true owner. The registration did not annul the conveyance in favor of Blas; after registration, the Limpins held the property in trust for the true owners. They could not seek refuge behind the incontrovertibility of the decree. The Blas spouses' failure to appear and oppose Limpin's application was explained by the Court of Appeals' finding that they were "undoubtedly unaware" of the proceedings. Constructive notice by publication was irrelevant because the action for reconveyance does not seek to undermine the validity of the decree of registration.
• Res Judicata: The superiority of respondent's rights over those of petitioners was also settled by the final dismissal in 1952 of Civil Case No. 509, which petitioners had filed against Maxima Santos Vda. de Blas seeking annulment of the pacto de retro sale and repossession of the property. Although the dismissal was for failure to prosecute, it had the effect of an adjudication on the merits and operated as res judicata, the court not having provided otherwise under Rule 30, sections 3 and 4.
• Prescription: The contention that the action for reconveyance had prescribed because more than twenty years had elapsed since the Limpins obtained a certificate of title was without merit. The application for registration was in bad faith, so the certificate of title issued to Limpin in 1934 was in law issued to and held by him in behalf and in trust for the benefit of the buyers, Simeon Blas and Maxima. Under Act No. 190 (the old Code of Civil Procedure), section 38, the governing statute, prescription does not apply to "continuing and subsisting trusts"; actions against a trustee to recover trust property held by him are imprescriptible. Actions for reconveyance of property wrongfully registered fall within this category. Moreover, the Court of Appeals explicitly found that possession of the property had been with Blas and his successors since the sale, so the action could not be deemed extinguished by prescription because section 38, Act No. 190 provides that its provisions on prescription shall not apply "to an action by the vendee of real property in possession thereof to obtain the conveyance of it."

• Reconveyance Despite a Torrens Decree — A decree of registration in favor of one party does not bar an action to compel reconveyance of the property to the true owner. The action is in personam and may be brought even after the one-year period under Section 38 of the Land Registration Act, provided the registration is wrongful and the property has not passed to an innocent third party holder for value. The Court applied this because Limpin fraudulently registered property he had already sold to Blas.
• Constructive/Implied Trust from Fraudulent Registration — Where a vendor fraudulently obtains registration of land already sold, the certificate is in law issued to and held by him in trust for the buyer. The registered owner and his heirs are bound to respect the original sale and may be compelled to reconvey. The Court applied this to the Limpins.
• Imprescriptibility of Actions on Continuing and Subsisting Trusts — Under Section 38 of Act No. 190 (old Code of Civil Procedure), prescription does not apply to continuing and subsisting trusts, so actions against a trustee to recover trust property are imprescriptible. Actions for reconveyance of wrongfully registered property belong to this category. The Court applied this to reject the twenty-year prescription defense.
• Exception for Vendee in Possession — Section 38 of Act No. 190 also provides that prescription does not apply to an action by the vendee of real property in possession thereof to obtain conveyance. Because Blas and his successors possessed the fishpond since the sale, the reconveyance action was not extinguished by prescription.
• Res Judicata by Dismissal for Failure to Prosecute — A dismissal for failure to prosecute has the effect of an adjudication on the merits and operates as res judicata unless the court provides otherwise. The Court applied this to the final dismissal of Civil Case No. 509, which settled the superiority of respondent's rights.
• Conclusiveness of Court of Appeals Findings of Fact — Findings of fact of the Court of Appeals are conclusive on the Supreme Court, limiting review to questions of law. The Court applied this to reject petitioners' attempt to recharacterize the transaction as equitable mortgage or antichresis.

• "the existence of a decree of registration in favor of one party is no bar to an action to compel reconveyance of the property to the true owner, which is an action in personam, even if such action be instituted after the year fixed by Section 38 of the Land Registration Act as a limit to the review of the registration decree, provided it is shown that the registration is wrongful and the property sought to be reconveyed has not passed to an innocent third party holder for value" — This passage states the ratio decidendi for allowing reconveyance notwithstanding the Torrens decree and the one-year limitation.
• "Since he knew that he had previously sold the property to Simeon Blas in 1932, it is incontrovertible that Prudencio Limpin subsequently applied for, and obtained, the decree of registration in his name fraudulently and in utter bad faith; wherefore, he and his widow and heirs, who are bound to respect the original sale, may be compelled to reconvey it to the true owner" — This passage establishes the fraudulent registration and the consequent obligation of the vendor and his heirs to reconvey.
• "Under Act 190 (the old Code of Civil Procedure), section 38, which is the governing statute, prescription does not apply to 'continuing and subsisting trusts'; so that actions against a trustee to recover trust property held by him are imprescriptible." — This passage defines the prescription rule applied to the trust relationship created by the wrongful registration.
• "While the dismissal was for failure to prosecute, the same has the effect of an adjudication on the merits, and operates as res judicata, the court not having provided otherwise (Rule 30, secs. 3 and 4)." — This passage states the res judicata effect of the dismissal of Civil Case No. 509.

• Cabanos vs. Register of Deeds, 40 Phil. 620 — Cited for the rule that registration of property does not annul a prior conveyance and that reconveyance may be compelled despite the decree.
• Dizon vs. Lacap, 50 Phil. 193 — Cited as part of the line of cases holding that a decree of registration is no bar to an action for reconveyance by the true owner.
• Bagaya vs. Guilao, 64 Phil. 347 — Cited to support the same doctrine that reconveyance lies notwithstanding a registration decree.
• Escobar vs. Locsin, 74 Phil. 86 — Cited among the authorities for the in personam reconveyance action.
• Sumira vs. Vistan, 74 Phil. 138 — Cited for the same rule.
• Palma vs. Cristobal, 77 Phil. 712 — Cited for the same rule.
• Aban vs. Cendana, L-11989, May 23, 1958 — Cited as continuing authority for reconveyance despite the decree.
• Manabang vs. Canlas, 50 Off. Gaz., 1980 — Cited for treating actions for reconveyance of wrongfully registered property as actions on continuing and subsisting trusts, hence imprescriptible.

• Section 38, Land Registration Act — Limits review of a registration decree to one year; held not to bar an action in personam for reconveyance after that period where the registration is wrongful and the property has not passed to an innocent third party for value.
• Section 38, Act No. 190 (old Code of Civil Procedure) — Governs prescription; does not apply to continuing and subsisting trusts, making actions against a trustee to recover trust property imprescriptible; also excepts an action by the vendee of real property in possession to obtain conveyance.
• Rule 30, sections 3 and 4 — Cited to hold that a dismissal for failure to prosecute has the effect of an adjudication on the merits and operates as res judicata unless the court provides otherwise.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Barrera, Paredes, Dizon, Regala, and Makalintal, JJ., concurred.