Coronel vs. Intermediate Appellate Court

An action to quiet title or for reconveyance brought by a party in actual, open, and continuous possession of land is imprescriptible; the cause of action accrues only when the possessor becomes aware of a claim adverse to his own. Moreover, a Torrens certificate of title obtained through mistake or oversight that includes land belonging to another does not, by itself, vest ownership over the erroneously included portion, and a subsequent purchaser, even if in good faith, holds the title subject to the true owner’s equitable interest.

Bernabela Lontoc originally owned a 2/8 undivided share in a larger tract of the Naic Estate, which upon her death in 1945 passed to three groups of heirs: Bernardino Merlan; the children of Gabriel Merlan (including private respondents Jose and Brigido Merlan); and the children of Francisca Merlan, Daniel and Paz Anuat. In 1950, Bernardino Merlan and the Anuats sold their collective 2/3 interest in Lontoc’s share to spouses Ignacio Manalo and Marcela Nobelo. The 1/3 share belonging to the Merlan brothers was never sold. Despite the limited transfer, subsequent registrations led to the issuance of a certificate of title over the entire Lontoc share in the name of Mariano Manalo, who later sold the whole property to petitioner Rodolfo Coronel. The private respondents remained in possession of their portion as owners, unaware of any challenge to their title until Coronel filed a complaint for recovery of possession in 1975.

• The Original Co-ownership and Inheritance: The disputed lot, Lot 1950-A of the Naic Estate (12,189 square meters), constituted the 2/8 share of Bernabela Lontoc in a larger property covered by TCT No. 3116 (RT-5010). Lontoc died in 1945 and was survived by three sets of heirs: (1) Bernardino Merlan, grandson by her predeceased son Enrique; (2) the children of her son Gabriel — Jose Merlan, Brigido Merlan, Graciano Merlan, Agapito Merlan, and Corazon Merlan; and (3) Daniel Anuat and Paz Anuat, children of her daughter Francisca Merlan. The 1/3 undivided share in Lontoc’s 2/8 portion belonged to the heirs of Gabriel Merlan.

• The 1950 Sale and Its Scope: In 1950, Bernardino Merlan and the Anuat siblings sold their 2/3 undivided interest in Lontoc’s share to spouses Ignacio Manalo and Marcela Nobelo for P3,000.00. The deed of sale was annotated on TCT No. 3116 and later carried over to TCT No. T-1444. The annotation expressly described the transaction as covering only the “rights, interest and participation” of the three sellers. The Merlan brothers’ 1/3 share was not included.

• Mistaken Inclusion in Subsequent Titles: In 1968, Lot 1950 was subdivided; Bernabela Lontoc’s portion became Lot 1950-A. Sometime in 1970, Ignacio Manalo sold his interest to Mariano Manalo for P1,000.00. The 1970 deed of sale clearly stated that Ignacio Manalo was conveying only his rights under the 1950 annotation — that is, the 2/3 share originally sold by Bernardino Merlan and the Anuats. Despite this, when TCT No. T-1444 was cancelled and TCT No. T-41175 was issued in the name of Mariano Manalo, the certificate covered the entire Lot 1950-A without any reservation for the unsold 1/3 share of the Merlan heirs.

• Petitioner’s Purchase and the New Title: Relying on TCT No. T-41175 and a sketch plan, petitioner Rodolfo Coronel purchased the whole Lot 1950-A from Mariano Manalo for P27,000.00 in 1974. The sale was registered, TCT No. T-41175 was cancelled, and TCT No. T-75543 was issued in Coronel’s name, although he was at the time in the United States and was represented by his parents and counsel.

• Possession and Discovery of Adverse Claim: Private respondents Brigido Merlan and Jose Merlan remained in open, peaceful, and adverse possession of their 1/3 share continuously from 1950 onwards, exercising acts of ownership. They first learned of Coronel’s claim over the entire lot only in 1975 when they were served a copy of his complaint for recovery of possession. They promptly resisted the claim by asserting their ownership in their answer and counterclaim.

• Prescription and Laches: Petitioner contended that the private respondents’ claim over the 1/3 share was barred by prescription or laches, as their co-owners’ sale was registered in 1950 and the deed of sale in favor of Mariano Manalo was registered more than five years before the suit; any action for annulment should have been brought within four years under Article 1391 of the New Civil Code.

• Purchaser in Good Faith: Petitioner argued that he was an innocent purchaser for value who relied on the clean Torrens title of his predecessor-in-interest, TCT No. T-41175, which bore no annotation of any lien or encumbrance; he could not be bound by an unregistered interest he had no means of discovering.

• Validity of Torrens Title: Petitioner maintained that the declaration of nullity of TCT No. T-75543 was erroneous because the title was lawfully issued under the Torrens system and must be given full faith and credit.

• Ownership Never Transferred: Private respondents countered that they and their predecessors never sold their 1/3 undivided share; what was sold to Ignacio Manalo, and later to Mariano Manalo, was only the 2/3 share of their co-heirs; the inclusion of their portion in the subsequent certificates of title was a mistake or oversight.

• Imprescriptibility of Action: They argued that their counterclaim was in the nature of an action to quiet title or for reconveyance, which is imprescriptible because they have remained in continuous possession of the disputed portion; the cause of action accrued only when they were made aware of the petitioner’s adverse claim in 1975.

• Laches Not Applicable: They maintained that there was no undue delay since they promptly asserted their right upon learning of the adverse claim; their uninterrupted possession for over 25 years negated any presumption of abandonment.

• Prescription and Laches: Whether the private respondents’ claim for reconveyance of their 1/3 share of Lot 1950-A was barred by prescription or laches.

• Status as Purchaser in Good Faith: Whether petitioner Rodolfo Coronel could defeat the private respondents’ unregistered equitable interest on the ground that he was a purchaser in good faith and for value relying on a clean Torrens title.

• Effect on the Torrens Title: Whether the declaration of nullity of Transfer Certificate of Title No. T-75543 was proper, or whether an order for segregation and issuance of new certificates was the appropriate remedy.

• Prescription and Laches: The action to quiet title was imprescriptible because the private respondents were in lawful, open, and peaceful possession of the 1/3 share as owners. Their cause of action accrued only in 1975 when they were served with the complaint and became aware of Coronel’s adverse claim; it was only from that point that the statutory period of prescription began to run. Laches did not apply because there was no unreasonable delay — the private respondents immediately resisted the claim upon learning of it, and their long, undisturbed possession afforded them a continuing right to seek judicial determination of the adverse claim.

• Status as Purchaser in Good Faith: Coronel’s reliance on a clean Torrens certificate did not defeat the private respondents’ rights. Their 1/3 share was never sold; the subsequent titles covering the entire lot arose from mistake or oversight. Under settled doctrine, a Torrens certificate does not vest ownership over land erroneously or fraudulently included in its coverage. Equitable considerations require that the true owner’s interest be respected, and a subsequent purchaser takes the title subject to that unregistered equitable interest, even if he had no actual knowledge of the defect at the time of purchase.

• Effect on the Torrens Title: The outright nullification of TCT No. T-75543 was modified. Instead of declaring the entire certificate void, the proper remedy was to order the segregation of the 1/3 portion (4,063 square meters) belonging to the private respondents from the remainder of the land, cancel TCT No. T-75543, and direct the issuance of two new certificates — one in favor of the heirs of Gabriel Merlan over the disputed 1/3 portion, and another in favor of Coronel over the undisputed 2/3 portion.

• Imprescriptibility of Action to Quiet Title by a Possessor — An action to quiet title to property in the possession of the plaintiff is imprescriptible. The undisturbed possession of an owner over a long period gives rise to a continuing right to seek the aid of a court of equity to ascertain and determine the nature of any adverse claim and the effect of the adverse claimant’s title. The cause of action accrues only when the possessor becomes aware of the adverse claim; prescription commences to run from that date.

• Laches — Requisites and Application — Laches is defined as the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption of abandonment. It did not apply here because the private respondents remained in open, peaceful possession and immediately resisted the adverse claim upon learning of it in 1975.

• Torrens Title Does Not Cure Void Inclusion — A Torrens certificate of title does not conclusively make the registered owner the true owner of all the property described therein. If a person obtains a title under the Torrens system that, by mistake or oversight, includes land belonging to another, the registered owner does not, by virtue of the certificate alone, become the owner of the land illegally included. The true owner retains the right to seek reconveyance.

• Equitable Interest Prevails Over a Clean Title Obtained through Error — Even a purchaser in good faith and for value who relies on a clean Torrens title may be bound to recognize an equitable lien or ownership interest that was mistakenly excluded from the certificate, where the inclusion was the result of fraud, mistake, or oversight. The highest concept of fairness and equity mitigates the strict application of the Torrens system to prevent it from being used as an instrument of injustice.

• “The simple possession of a certificate of title, under the Torrens System, does not necessarily make the possessor a true owner of all the property described therein. If a person obtains a title, under the Torrens system, which includes by mistake or oversight land which cannot be registered under the Torrens systems, he does not, by virtue of said certificate alone, become the owner of the lands illegally included.” (quoting Ledesma v. Municipality of Iloilo, 49 Phil. 769, 773). This passage distills the core principle that a Torrens certificate is not a sword to acquire property never validly conveyed.

• “Nor does the mere fact that respondent-appellee Marcelo Coral could show a certificate of Torrens Title in his favor conclude the matter, the question of fraud having been seasonably raised and the remedy of reconveyance sought. … It would be a sad day for the law if it were to be oblivious to the demands of justice. The acceptance accorded the Torrens system of registration would certainly be impaired if it could be utilized to perpetrate fraud and chicanery. … Deceit is not to be countenanced; duplicity is not to be rewarded.” (quoting Philippine Commercial and Industrial Bank v. Villalva, 48 SCRA 31, 39). The excerpt underscores that equity tempers the inflexibility of the Torrens system to prevent it from sheltering wrongdoing.

• Sapto, et al. v. Fabiana, 103 Phil. 683; Faja v. Court of Appeals, 75 SCRA 441; Caragay-Layno v. Court of Appeals, 133 SCRA 718 — Followed. These cases established the rule that an action to quiet title by one in possession is imprescriptible and that the prescriptive period commences only when the possessor is made aware of the adverse claim.

• Tejido v. Zamacoma, 138 SCRA 78 — Followed for the definition of laches.

• Monticenes v. Court of Appeals, 53 SCRA 14 — Followed for the proposition that equitable considerations may override a Torrens title where fraud or mistake is involved, especially when reconveyance is sought.

• Ledesma v. Municipality of Iloilo, 49 Phil. 769 — Followed for the principle that a Torrens certificate does not convey ownership over land illegally or mistakenly included in it.

• Philippine Commercial and Industrial Bank v. Villalva, 48 SCRA 31 — Cited and quoted extensively to support the application of equity over the strict letter of the Torrens law.

• Article 1391, New Civil Code — Invoked by petitioner to argue that the action for annulment of the sale should have been brought within four years. The Court did not apply this provision because the private respondents’ counterclaim was for reconveyance and quieting of title, not an action for annulment of contract; the prescriptive period for an action to quiet title by a possessor is imprescriptible.

• Article 845, New Civil Code — Referred to by the Intermediate Appellate Court in its modified dispositive portion declaring the private respondents owners of the 1/3 share. The Supreme Court’s decision did not expressly rely on this provision, but the high court affirmed the trial and appellate courts’ recognition of the private respondents’ ownership as a matter of succession and equity.

Justices Fernan, Bidin, and Cortes concurred. Justice Feliciano was on leave.