Gonzales vs. IAC

After Fausto Soy appeared as registered owner for more than thirty years, his title became indefeasible and could no longer be challenged; any implied constructive trust claim was barred by prescription and laches.

Private respondents trace their claimed pro-indiviso shares in Lot No. 6870-B to Emilia, Cornelia, and Anastacia Soy, sisters of Fausto Soy, while petitioners are spouses who acquired portions of the land from Fausto Soy and from Antonio Soy and Gregoria Miranda. The property was brought under the Torrens system in Fausto Soy’s name, and the dispute requires applying Article 1456 of the Civil Code on implied trusts and the rules on prescription and laches.

On April 14, 1965, private respondents Rosita Lopez, Gavino Cayabyab, Agueda Ubando, Felipa Ubando, Pedro Soriano, Teodosia Lopez, and Federico Ballesteros, as plaintiffs, filed a complaint for partition against Fausto Soy in Civil Case No. D-1724. They claimed a pro-indiviso share to the extent of three-fourths in Lot No. 6870-B, a 480-square-meter residential land in Dagupan City covered by TCT No. 9144. Their claim was anchored on Fausto Soy being the brother of Emilia Soy, deceased mother of Rosita Lopez; Cornelia Soy, deceased mother of Agueda Ubando, Amado Ubando, and Felipe Ubando; and Anastacia Soy, deceased mother of Teodosia Lopez. On the same day, a notice of lis pendens was annotated on TCT No. 9144.

Fausto Soy answered, contested the claims, and asserted exclusive title. He countered that the land was never registered in the names of his parents Eugenio Soy and Ambrosia Marcella; that he had been registered owner since 1932, when OCT No. 49661 was issued in his favor by the Register of Deeds of Pangasinan; and that his parents died more than 24 years earlier. During the pendency of the action, Fausto Soy died and was substituted by his children Jose, Antonio, Teofilo, Amparo, and Walter, all surnamed Soy; Walter later died and was substituted by his wife Susing Cornel and minor children Myrna, Linda, and Linly, all surnamed Soy.

On March 22, 1974, the trial court held that private respondents and Fausto Soy were co-owners of Lot No. 6870-B and ordered partition, directing the parties to submit a project of partition and, failing agreement, appointing commissioners. On execution, the sheriff could not apportion the property because petitioners Juanito and Coronacion Gonzales filed a third-party claim stating they were registered owners of 480 square meters of Lot No. 6870-B. In his October 10, 1974 report, the sheriff noted petitioners’ improvements: a 2-door apartment, a residential house, and a piggery. On April 11, 1975, petitioners moved to intervene, stating that at the time the case commenced they were already registered owners of 480 square meters under TCT No. 16922 dated January 29, 1960, pursuant to deeds of sale earlier executed by Fausto Soy; that Fausto Soy was no longer owner in fee simple when the suit was instituted; and that private respondents concealed the suit by not impleading them as indispensable parties under Sections 2 and 7 of Rule 3. They prayed that the March 22, 1974 decision be set aside or reconsidered, the case reopened, and they be allowed to intervene and present evidence.

On July 23, 1975, the trial court allowed the Gonzaleses to intervene as indispensable parties, vacated the March 22, 1974 judgment, and granted a new trial because the judgment was not complete without a final project of partition and because no valid decision could be rendered without the Gonzales spouses as indispensable parties. The parties then submitted a stipulation of facts. It established that the land was originally covered by OCT No. 49661 (now TCT No. 3904, Dagupan City), Record No. 916, Case No. 35, in Fausto Soy’s name; that on January 22, 1941, Fausto Soy sold 253 square meters to Francisco Landingin; that on July 22, 1954, Antonio Soy and Gregoria Miranda sold 240 square meters to Juanita Gonzales and Coronacion Ganaden, based on a deed of donation executed by Fausto Soy in the vendors’ favor; that on September 22, 1954, TCT No. 9141 was issued showing Fausto Soy with 480 square meters, Pio Siapno with 253 square meters, and Juanito Gonzales and Coronacion Ganaden with 240 square meters; that on March 3, 1958, the co-owners subdivided the land under a deed of confirmation and subdivision registered March 4, 1958; that on January 27, 1960, Fausto Soy sold 240 square meters to Juanita Gonzales and Coronacion Ganaden by Doc. No. 15, registered January 29, 1960; and that on January 29, 1960, TCT No. 16922 was issued to Juanita Gonzales, indicating his share as co-owner of 480 square meters, with Fausto Soy retaining 240 square meters.

The stipulation further stated that on March 11, 1965, Fausto Soy sold 140 square meters to the intervenors by Doc. No. 112, registered October 31, 1967; that private respondents filed the complaint on April 14, 1965 and annotated a notice of lis pendens on TCT No. 9144; that on May 15, 1965, Fausto Soy filed his answer; that on December 8, 1967, the case was dismissed for failure of the parties to appear; that on December 15, 1967, the court in Cadastral Case No. 35, Record No. 916, cancelled the lis pendens upon petition of the intervenors; that on November 28, 1967, private respondents moved to reconsider the dismissal; that on January 18, 1968, private respondents filed a notice of Fausto Soy’s death; that on March 18, 1968, the court reopened the case; that on October 31, 1968, private respondents filed an amended complaint; that on November 16, 1973, the case was again dismissed for non-appearance, but the dismissal was set aside on the same date; that on January 9, 1974, the defendants did not appear and private respondents were allowed to present evidence ex-parte; and that on March 22, 1974, the case was decided on the ex-parte evidence. The stipulation also stated that the intervenors had been in possession of 620 square meters on the various acquisition dates up to the present, had paid real estate taxes and declared the property for taxation in their names, and that their possession was open and public. Private respondents stipulated that the original plaintiffs and original defendant were brother and sisters; that the disputed property was Cadastral Lot No. 6870, TCT No. 9144; that the January 27, 1960 purchase of 240 square meters by the intervenors from Fausto Soy was for P900.00; that TCT No. 9144 was cancelled by TCT Nos. 9178 and 16922, the latter in the names of the intervenors and Fausto Soy, with 480 square meters for Fausto Soy; that the intervenors purchased the remaining 140 square meters in Fausto Soy’s name after the lis pendens annotation; and that the intervenors obtained TCT No. 19848 in their names over the entire property by filing a petition for cancellation of lis pendens when the case was dismissed, which cancellation was entered as Entry No. 39511.

Private respondent Rosita Lopez testified that while Fausto Soy might have secured title in his sole name, he nonetheless recognized the co-ownership between him and his sisters. The trial court found no proof that private respondents were co-owners and noted that the land had long been covered by OCT in Fausto Soy’s name since 1932.

• Ownership: Petitioners argued that at the time the case was commenced they were already the registered owners of 480 square meters under TCT No. 16922 dated January 29, 1960, pursuant to deeds of sale executed earlier by Fausto Soy, and that Fausto Soy was no longer owner in fee simple when the suit was instituted.
• Indispensable Parties: Petitioners argued that private respondents concealed the suit by not impleading them as indispensable parties under Sections 2 and 7 of Rule 3, and that without their presence no valid judgment could be rendered.

• Co-ownership: Private respondents argued that the trial court erred in finding that they had not established co-ownership of the property in question.
• Lis Pendens and Reconveyance: Private respondents argued that the trial court erred in not declaring invalid the sale of 140 square meters even after the annotation of lis pendens, and in not ordering petitioners to reconvey the 140 square meters covered by lis pendens.

• Implied Trust: Whether Lot No. 6870-B was held in trust by Fausto Soy for his sisters Emilia, Cornelia, and Anastacia.
• Indefeasibility of Title: Whether Fausto Soy’s registered title, issued in 1932 and unchallenged for more than thirty years, had become indefeasible and could no longer be challenged.
• Prescription: Whether private respondents’ action for reconveyance/partition to enforce an implied trust was barred by prescription.
• Laches: Whether private respondents’ claim was barred by laches.

• Implied Trust: No. The SC refused to allow any insinuation of an implied constructive trust after Fausto Soy’s registered title had become indefeasible; Article 1456 did not create a technical trust.
• Indefeasibility of Title: Yes. After Fausto Soy appeared as registered owner for more than thirty years, his title became indefeasible and his dominical rights could no longer be challenged.
• Prescription: Yes. An action for reconveyance to enforce an implied trust prescribes in ten years from issuance of the adverse title, which operated as constructive notice; OCT No. 49661 was issued in 1932.
• Laches: Yes. Private respondents slept on their rights from 1932 to 1965, or thirty-three years, and were deemed to have acquiesced in Fausto Soy’s title.

• Implied Trust: The SC rejected the IAC’s theory that Lot No. 6870-B was impressed with a trust in favor of Fausto Soy’s sisters from the time it was brought under the Land Registration Act in his name alone. Private respondents invoked Article 1456 of the Civil Code, which provides that if property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. The SC characterized the trust as a constructive trust arising by operation of law, not a trust in the technical sense. It held that after Fausto Soy had appeared as registered owner for more than thirty years, his title had become indefeasible and his dominical rights could no longer be challenged; any insinuation as to the existence of an implied constructive trust should not be allowed.
• Indefeasibility of Title: The SC held that after Fausto Soy, petitioners’ predecessor-in-interest, had appeared to be the registered owner of the lot for more than thirty years, his title had become indefeasible and his dominical rights over it could no longer be challenged. The adverse title was OCT No. 49661 issued in Fausto Soy’s name in 1932, to the exclusion of his three sisters. The SC thus rejected the IAC’s premise that the land remained impressed with a trust in favor of the sisters or their children.
• Prescription: Even assuming an implied trust existed, the SC held that private respondents’ attempt at reconveyance was barred by prescription. An action for partition is both an action for declaration of co-ownership and for segregation and conveyance of a determinate portion of the subject property, as held in Roque vs. IAC. An action for reconveyance of real property to enforce an implied trust prescribes in ten years, reckoned from the issuance of the adverse title, which operates as constructive notice. The assertion of adverse title took place when OCT No. 49661 was issued in Fausto Soy’s name in 1932, to the exclusion of his three sisters. Private respondents filed the complaint only on April 14, 1965, beyond the ten-year period.
• Laches: Even if there was no repudiation, the SC held that an action to enforce an implied trust may be barred not only by prescription but also by laches, in which case repudiation is not required. From 1932 to 1965, or thirty-three years, private respondents had slept on their rights, presuming they had any. They could no longer dispute the conclusive and incontrovertible character of Fausto Soy’s title because their unreasonably long inaction amounted to acquiescence. The SC added that the law protects those who are vigilant of their rights and that undue delay is strongly indicative of a lack of merit in the claim.

• Indefeasibility of a Registered Title by Lapse of Time — A registered owner’s title becomes indefeasible after the owner has appeared as such for more than thirty years, and his dominical rights can no longer be challenged. Applied to Fausto Soy, whose OCT No. 49661 was issued in 1932 and who remained registered owner for more than thirty years before the 1965 complaint.
• Implied or Constructive Trust under Article 1456 — If property is acquired through mistake or fraud, the person obtaining it is by force of law a trustee of an implied trust for the benefit of the person from whom the property comes. The SC characterized this as a constructive trust by operation of law, not a technical trust, and refused to allow the claim after the registered title became indefeasible.
• Prescription of Action for Reconveyance Based on Implied Trust — An action for reconveyance of real property to enforce an implied trust prescribes in ten years from the issuance of the adverse title, which operates as constructive notice. The period is reckoned from the issuance of OCT No. 49661 in 1932, not from the 1965 complaint.
• Laches Barring Implied Trust Claims — Even without repudiation, an action to enforce an implied trust may be barred by laches. Private respondents’ thirty-three-year inaction from 1932 to 1965 amounted to acquiescence in Fausto Soy’s title.
• Partition as Reconveyance — An action for partition is both an action for declaration of co-ownership and for segregation and conveyance of a determinate portion of the subject property. This characterization brought private respondents’ partition suit within the ten-year prescriptive period for reconveyance based on implied trust.

• "We hold that after Fausto Soy, the predecessor-in-interest of herein petitioners, had appeared to be the registered owner of the lot for more than thirty years, his title had become indefeasible and his dominical rights over it could no longer be challenged. Any insinuation as to the existence of an implied constructive trust should not be allowed." — The SC’s core ruling rejecting the implied constructive trust after Fausto Soy’s registered title became indefeasible.
• "It is well-settled that an action for reconveyance of real property to enforce an implied trust prescribes in ten years, the period reckoned from the issuance of the adverse title to the property which operates as a constructive notice." — The SC states the ten-year prescriptive period and the reckoning point for an implied-trust reconveyance.
• "But even if there were no repudiation — as private respondent Rosita Lopez would have us believe when she testified in court that while Fausto Soy might have succeeded in securing title his sole name, he nonetheless recognized the co-ownership between him and his sisters — the rule in this jurisdiction is that an action to enforce an implied trust may be circumscribed not only by prescription but also by laches, in which case repudiation is not even required." — The SC holds that laches can bar an implied-trust claim even without repudiation.
• "Prescription is rightly regarded as a statute of repose whose object is to suppress fraudulent and stale claims from springing up at great distances of time and surprising the parties or their representatives when the facts have become obscure from the lapse of time or the defective memory or death or removal of witnesses." — The SC explains the policy underlying prescription as a bar to stale claims.

• Roque vs. IAC, G.R. No. 75886, August 30, 1988, 165 SCRA 118 — Cited to characterize an action for partition as both an action for declaration of co-ownership and for segregation and conveyance of a determinate portion of the subject property.
• Gayondato vs. Treasurer of the P.I., 49 Phil. 244 — Cited for the principle that prescription is a statute of repose that suppresses fraudulent and stale claims.
• Sinaon vs. Sorogon, G.R. No. 59879, May 13, 1985, 136 SCRA 407, 410 — Cited in support of the ten-year prescriptive period for an action for reconveyance to enforce an implied trust.
• Amerol vs. Bagumbaran, No. L-33261, September 30, 1967, 154 SCRA 396 — Cited for the rule that an action for reconveyance based on implied trust prescribes in ten years from issuance of the adverse title.
• Lebrilla vs. IAC, G.R. No. 72633, December 18, 1989, 180 SCRA 188 — Cited for the same ten-year prescriptive period.
• Paz Villagonzalo, et al. vs. IAC, G.R. No. 71110, November 22, 1988, 167 SCRA 535 — Cited for the rule that an action to enforce an implied trust may be barred by laches even without repudiation.
• Salao vs. Salao, No. L-26699, March 16, 1976, 70 SCRA 65, 85 — Cited for the principle that the law protects those who are vigilant of their rights and that undue delay indicates lack of merit.

• Article 1456, Civil Code — Provides that if property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. The SC applied it by characterizing the alleged trust as a constructive trust by operation of law, not a technical trust, and held that the claim could not be allowed after Fausto Soy’s title became indefeasible and was barred by prescription and laches.
• Land Registration Act — The property was brought under the operation of the Land Registration Act in Fausto Soy’s name, and OCT No. 49661 issued in 1932 served as the adverse title and constructive notice. After more than thirty years, his registered title became indefeasible.