Heirs of Clemente Ermac vs. Heirs of Vicente Ermac

A certificate of title under the Torrens System does not vest ownership, since registration is not a mode of acquiring ownership; where a party uses fraud or concealment to obtain a certificate of title in his own name over property in which others hold valid and adverse interests, a constructive trust is created in favor of the defrauded parties, and their action to enforce the trust, recover the property, and quiet title does not prescribe so long as they are in actual possession.

The parties are two branches of the Ermac family claiming portions of Lot No. 666 (Plan II-5121 Amd. 2) in Mandaue City, Cebu: petitioners are the heirs of Clemente Ermac, while respondents are the heirs of Vicente Ermac and other occupants and purchasers who trace their titles to the children of Claudio Ermac. The dispute is set against the Torrens System of land registration, under which a certificate of title issued in the name of one person does not foreclose the possibility that the property is co-owned with persons not named therein or is held in trust for another by the registered owner. Section 32 of Presidential Decree No. 1529 provides that a decree of registration becomes incontrovertible one year after issuance, and the case required the reconciliation of that rule with the rights of parties whose interests were disregarded in the registration proceedings.

Lot No. 666 (Plan II-5121 Amd. 2), situated in Mandaue City, Cebu, originally belonged to Claudio Ermac. Upon his death, the lot was inherited and partitioned among his three children — Esteban, Pedro, and Balbina. Pedro and Balbina asked their brother Esteban to have their title over the property registered, but Esteban was unable to do so, and the task eventually fell to his son, Clemente Ermac. Clemente applied for registration of the title, but did so in his own name, without including his father's brother and sister or his cousins. Despite having registered the lot in his name, Clemente did not disturb or claim ownership over those portions occupied by his uncle, aunt, and cousins even up to the time of his death.

Among the occupants of Lot No. 666 were the respondents in this case. The heirs of Vicente Ermac claimed ownership over the portions they occupied by right of succession as direct descendants of the original owner, Claudio Ermac. Luisa Del Castillo and Estaneslao Dionson allegedly derived their title by purchase from the children of Claudio Ermac. Vicente Dionson, for his part, bought his land from the heirs of Pedro Ermac, while Emigdio Bustillo and Liza Parajele derived their ownership from the Heirs of Balbina Ermac-Dabon.

The respondents' ownership and possession had been peaceful and undisturbed until the petitioners, the heirs of Clemente Ermac, filed an action for ejectment against them. The filing of that ejectment case caused a cloud of doubt upon the respondents' ownership over their respective parcels of land, prompting them to file the present action for quieting of title.

The petitioners denied the material allegations of the complaint and claimed that the respondents had no cause of action against them. According to the petitioners, it was Clemente Ermac, and not his grandfather Claudio Ermac, who was the original claimant of dominion over Lot No. 666. During his lifetime, Clemente was in actual, peaceful, adverse, and continuous possession of the entire lot in the concept of an owner, and with the help of his children he cultivated it and planted corn, peanuts, cassava, and fruit products. Clemente also effected the registration of the subject lot in his name. Upon his death, the petitioners inherited Lot No. 666 and constructed their residential houses thereon. The petitioners claimed that the respondents' recent occupation of some portions of the lot was merely tolerated by Clemente and by them, and that they had never surrendered ownership or possession of the property. They also set up the defenses of prescription and laches.

After trial, the Regional Trial Court found that the original owner of the lot in question was Claudio Ermac and that, upon his death, the property was inherited by his children Esteban, Balbina, and Pedro, so that all the heirs of Claudio Ermac should share in the ownership of Lot No. 666 by right of succession. That ruling was supported by the admissions of Irenea Seno, a witness for the petitioners and daughter of Clemente Ermac, which established that the petitioners and their predecessor Clemente did not own the entire property but that the other heirs of Claudio Ermac were entitled to two-thirds (2/3) of the lot. Because the entire lot was registered in the name of Clemente Ermac, the shares belonging to the other heirs of Claudio Ermac — some of which had already been purchased by some of the respondents — were being held in trust by the petitioners in favor of the actual occupants.

• Preliminary Injunction: Petitioners assailed the validity of the Writ of Preliminary Injunction dated February 5, 1996 issued by the Regional Trial Court, Branch 28, which directed the Municipal Trial Court in Cities, Branch 2, to cease and desist from conducting further proceedings in Civil Case No. 2401.
• Indefeasibility and Incontrovertibility of Title: Petitioners maintained that pursuant to Section 32 of Presidential Decree No. 1529, the certificate of title issued in favor of their predecessor-in-interest, Clemente Ermac, became incontrovertible after the lapse of one year from its issuance and could no longer be challenged.
• Insufficiency of Tax Declarations and Tax Receipts: Petitioners argued that the alleged tax declarations and tax receipts were insufficient to defeat the title over the property held in the names of their predecessors-in-interest, Spouses Clemente Ermac and Anunciacion Suyco.
• Prescription and Laches: Petitioners asserted that the claims of respondents over portions of Lot No. 666 were barred by prescription and laches, the former having taken fifty-seven (57) years to bring the action.
• Reliance on Hearsay Testimony: Petitioners claimed that the Court of Appeals erred in relying on the hearsay and unsubstantiated testimony of respondents, as well as on tax declarations and realty tax receipts, in ruling that the land was owned by Claudio Ermac.

• Preliminary Injunction: Whether the Writ of Preliminary Injunction dated February 5, 1996 issued by the Regional Trial Court, Branch 28, directing the Municipal Trial Court in Cities, Branch 2, to cease and desist from conducting further proceedings in Civil Case No. 2401, is valid.
• Indefeasibility and Incontrovertibility of Title: Whether O.C.T. No. RO-752 issued in the names of Spouses Clemente Ermac and Anunciacion Suyco is indefeasible and incontrovertible under the Torrens System.
• Sufficiency of Tax Declarations and Tax Receipts: Whether the alleged tax declarations and tax receipts are sufficient to defeat the title over the property in the names of petitioners' predecessors-in-interest, Spouses Clemente Ermac and Anunciacion Suyco.
• Prescription and Laches: Whether laches has set in on the claims by the respondents over portions of Lot No. 666.

• Preliminary Injunction: No. The question was raised late and had become moot; the proper remedy was a special civil action for certiorari within the reglementary period, and any ruling at this point would not touch the merits of the case.
• Indefeasibility and Incontrovertibility of Title: No. While Section 32 of Presidential Decree No. 1529 makes the decree of registration incontrovertible after one year, that provision does not altogether deprive an aggrieved party of a remedy in law, and registration under the Torrens System does not vest ownership.
• Sufficiency of Tax Declarations and Tax Receipts: No. Tax declarations and realty tax receipts do not conclusively prove ownership, but they may constitute strong evidence of ownership when accompanied by possession for a period sufficient for prescription, as in this case.
• Prescription and Laches: No. The registration of the land in Clemente Ermac's name created a constructive trust in favor of the defrauded heirs; because respondents were in actual possession, the action to enforce the trust and quiet title does not prescribe, and laches cannot be invoked to perpetuate fraud or injustice.

• Preliminary Injunction: The validity of the writ was raised not only late but also moot. Had petitioners truly believed that its issuance was tainted with grave abuse of discretion, they should have challenged it by a special civil action for certiorari within the reglementary period. Any ruling by the Court at this point would be moot and academic, because the resolution of the issue would not involve the merits of the case, which the appeal as it now stands touches upon.

• Indefeasibility and Incontrovertibility of Title: Section 32 of Presidential Decree No. 1529 provides that the decree of registration becomes incontrovertible after one year, but it does not altogether deprive an aggrieved party of a remedy in law. The acceptability of the Torrens System would be impaired if it were utilized to perpetuate fraud against the real owners. Ownership is not the same as a certificate of title: registering a piece of land under the Torrens System does not create or vest title, because registration is not a mode of acquiring ownership. A certificate of title is merely evidence of ownership or title over the particular property described therein, and its issuance in favor of a particular person does not foreclose the possibility that the real property may be co-owned with persons not named in the certificate, or that it may be held in trust for another person by the registered owner.

• Sufficiency of Tax Declarations and Tax Receipts: The credence given to the testimony of the witnesses for respondents is a factual issue already passed upon and resolved by the trial and the appellate courts. Only questions of law are entertained in appeals by certiorari under Rule 45 of the Rules of Court, and the trial court's findings of fact, which the Court of Appeals affirmed, are generally conclusive and binding upon the Supreme Court. While tax declarations and realty tax receipts do not conclusively prove ownership, they may constitute strong evidence of ownership when accompanied by possession for a period sufficient for prescription. Considering that respondents had been in possession of the property for a long period of time, there was legal basis for their use of tax declarations and realty tax receipts as additional evidence to support their claim of ownership.

• Prescription and Laches: When a party uses fraud or concealment to obtain a certificate of title to property, a constructive trust is created in favor of the defrauded party. Since Claudio Ermac had already been established as the original owner of the land, the registration in the name of Clemente Ermac meant that the latter held the land in trust for all the heirs of the former. Because respondents were in actual possession of the property, the action to enforce the trust, recover the property, and thereby quiet title thereto does not prescribe. Laches is an equitable doctrine, and its application is controlled by equitable considerations; it cannot be used to defeat justice or to perpetuate fraud and injustice, and its application should not prevent the rightful owners of a property from recovering what has been fraudulently registered in the name of another.

• Torrens Registration Is Not a Mode of Acquiring Ownership — Registration under the Torrens System does not create or vest title; it merely confirms and records an existing ownership. The Court applied this rule to hold that the registration of Lot No. 666 in the name of Clemente Ermac did not make him the owner of the entire lot, since the land had already passed by succession to all the heirs of Claudio Ermac.
• Certificate of Title as Mere Evidence of Ownership — A certificate of title is merely evidence of ownership or title over the particular property described therein, and its issuance in favor of a particular person does not foreclose the possibility that the real property may be co-owned with persons not named in the certificate, or that it may be held in trust for another person by the registered owner. The Court relied on this principle to sustain the respondents' claim notwithstanding O.C.T. No. RO-752 in the names of the Spouses Clemente Ermac and Anunciacion Suyco.
• Constructive Trust Arising from Fraudulent Registration — When a party uses fraud or concealment to obtain a certificate of title to property, a constructive trust is created in favor of the defrauded party. Because Clemente Ermac registered the lot in his own name in derogation of the rights of his co-heirs, he was deemed to hold the land in trust for all the heirs of Claudio Ermac, including the respondents and their predecessors-in-interest.
• Imprescriptibility of the Action to Enforce a Constructive Trust — The action to enforce a constructive trust, recover the property, and quiet title thereto does not prescribe where the aggrieved party is in actual possession of the property. The Court held that because respondents were in actual possession, their action was not barred despite the lapse of fifty-seven years.
• Laches as an Equitable Doctrine — Laches is an equitable doctrine whose application is controlled by equitable considerations; it cannot be used to defeat justice or to perpetuate fraud and injustice, nor should its application prevent the rightful owners of a property from recovering what has been fraudulently registered in the name of another.
• Incontrovertibility of a Decree of Registration under Section 32, PD 1529 — Although the decree of registration and the certificate of title issued become incontrovertible upon the expiration of one year, that rule does not altogether deprive an aggrieved party of a remedy in law, since the acceptability of the Torrens System would be impaired if it were utilized to perpetuate fraud against the real owners.
• Tax Declarations as Evidence of Ownership — Tax declarations and realty tax receipts do not conclusively prove ownership, but they may constitute strong evidence of ownership when accompanied by possession for a period sufficient for prescription.
• Conclusiveness of Factual Findings on Appeal under Rule 45 — Only questions of law are entertained in appeals by certiorari under Rule 45 of the Rules of Court; the trial court's findings of fact, affirmed by the Court of Appeals, are generally conclusive and binding upon the Supreme Court. This includes the credence given to the testimony of witnesses, which is a factual issue.

• "Ownership should not be confused with a certificate of title. Registering land under the Torrens System does not create or vest title, because registration 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 states the ponencia's core ratio, distinguishing ownership from the certificate of title and supplying the doctrinal foundation for the ruling that Clemente Ermac's registration did not defeat the rights of his co-heirs.
• "While it is true that Section 32 of PD 1529 provides that the decree of registration becomes incontrovertible after a year, it does not altogether deprive an aggrieved party of a remedy in law." — This is the Court's resolution of the second issue, holding that the one-year incontrovertibility rule under the Property Registration Decree is not an absolute bar to relief for parties whose interests were disregarded in the registration.
• "When a party uses fraud or concealment to obtain a certificate of title to property, a constructive trust is created in favor of the defrauded party." — This is the canonical formulation of the constructive-trust rule applied to defeat petitioners' defenses of prescription and laches, and it is the basis for the holding that Clemente held the land in trust for all the heirs of Claudio Ermac.
• "Because laches is an equitable doctrine, its application is controlled by equitable considerations. It cannot be used to defeat justice or to perpetuate fraud and injustice." — This passage articulates the equitable limitation on the defense of laches, which the Court invoked in rejecting petitioners' claim that respondents' fifty-seven-year delay barred their action.

• Heirs of Ramon Durano Sr. vs. Uy, 344 SCRA 238 (October 24, 2000) — Cited, together with other cases, to support the proposition that the incontrovertibility of the decree of registration under Section 32 of Presidential Decree No. 1529 does not altogether deprive an aggrieved party of a remedy in law.
• Vda. de Cabrera vs. Court of Appeals, 335 Phil. 19 (February 3, 1997) — Cited for the proposition that where the respondents are in possession of the land, the proper remedy is an action for reconveyance, which is in effect an action to quiet title to property.
• Heirs of Jose Olviga vs. Court of Appeals, 227 SCRA 330 (October 21, 1993) — Cited alongside Vda. de Cabrera for the same proposition that an action for reconveyance by a party in possession is in effect an action to quiet title.
• Heirs of Teodoro de la Cruz vs. Court of Appeals, 358 Phil. 652 (October 21, 1998) — Cited for the rule that registration under the Torrens System is not a mode of acquiring ownership.
• Lee Tek Sheng vs. Court of Appeals, 354 Phil. 556 (July 15, 1998) — Cited for the rule that the issuance of a certificate of title in favor of a particular person does not foreclose the possibility that the real property may be co-owned with persons not named in the certificate, or that it may be held in trust for another person by the registered owner.
• Bayoca vs. Nogales, 340 SCRA 154 (September 12, 2000) — Cited, with Baguio vs. Republic of the Philippines and Esquivias vs. Court of Appeals, for the rule that the acceptability of the Torrens System would be impaired if it were utilized to perpetuate fraud against the real owners.
• Juan vs. Zuñiga, 114 Phil. 1163 (April 28, 1962) — Cited for the rule that a constructive trust is created in favor of the defrauded party when fraud or concealment is used to obtain a certificate of title to property.
• Reyes vs. Court of Appeals, 315 SCRA 626 (September 30, 1999) — Cited for the rule that the action to enforce a constructive trust and recover the property does not prescribe where the aggrieved parties are in actual possession.
• Abejaron vs. Nabasa, 411 Phil. 552 (June 20, 2001) — Cited for the rule that tax declarations and realty tax receipts, while not conclusive proof of ownership, may constitute strong evidence of ownership when accompanied by possession for a period sufficient for prescription.
• Flores vs. Uy, 368 SCRA 347 (October 26, 2001) — Cited, with Santos vs. Reyes and Urbanes Jr. vs. Court of Appeals, for the rule that the trial court's findings of fact, affirmed by the Court of Appeals, are generally conclusive and binding upon the Supreme Court.

• Section 32, Presidential Decree No. 1529 (Property Registration Decree) — Provides that upon the expiration of one year from the issuance of the decree of registration, the decree and the certificate of title issued shall become incontrovertible, and that any person aggrieved by such decree may pursue a remedy by action for damages against the applicant or any other persons responsible for the fraud. The Court applied the provision by holding that the one-year period does not altogether deprive an aggrieved party of a remedy in law, since the Torrens System may not be utilized to perpetuate fraud against the real owners.
• Rule 45, Rules of Court — Governs appeals by certiorari to the Supreme Court, which may raise only questions of law. The Court applied the rule in rejecting petitioners' challenge to the credibility of respondents' witnesses and to the weight of the tax declarations and receipts, these being factual matters already resolved by the trial and appellate courts and therefore conclusive and binding.

• Justice Puno
• Justice Carpio-Morales

Justices Sandoval-Gutierrez and Corona were on leave.