Ney vs. Quijano

An action for reconveyance filed by a person in actual possession of the property, claiming to be its owner, is in the nature of an action to quiet title and does not prescribe, because the possessor's undisturbed possession gives him a continuing right to seek equitable relief until his possession is disturbed or his title is attacked.

Petitioners Manuel P. Ney and Romulo P. Ney are the registered owners of a 120-square-meter residential lot at 1648 Main Street, Paco, Manila, covered by TCT No. 122489. A three-door apartment was constructed on the lot — one door for Manuel, one for Romulo, and one for their sister Mina N. Quijano and her husband Celso P. Quijano. Although the property was purchased with contributions from all three siblings, only the names of Manuel and Romulo appeared on the deed of sale and the resulting certificate of title, Celso Quijano's name having been omitted.

Petitioners Manuel P. Ney and Romulo P. Ney are the registered owners of a residential lot located at 1648 Main Street, Paco, Manila, with an area of approximately 120 square meters, covered by TCT No. 122489. A three-door apartment was constructed on the lot — one unit for Manuel, one for Romulo, and one for their sister Mina N. Quijano and her husband Celso P. Quijano. Although all three siblings contributed to the purchase of the property, only the names of Manuel and Romulo appeared on the deed of sale and the resulting certificate of title; Celso Quijano's name was omitted when the deed was executed.

According to respondents, the true purchase price was ₱50,000, of which ₱40,000 was paid as down payment and the balance of ₱10,000 was due on or before July 14, 1976. Celso Quijano paid ₱5,000 on that due date. However, when the deed of absolute sale was executed, Celso's name was omitted and the purchase price stated therein was only ₱20,000 — at the instance of the vendor, with the consent of the vendees. Celso was able to secure a certification from the vendor, Luz J. Lim, confirming that the true selling price was ₱50,000 and that the vendees were Manuel, Romulo, and Celso. When the deed was presented to the Register of Deeds, only the names of Manuel and Romulo appeared as registered owners in TCT No. 122489.

Sometime in March 1991, respondents requested petitioners to segregate the title to the one-third portion of the lot where their house stood, measuring approximately 40 square meters. Petitioners agreed and executed a Deed of Reconveyance, but when Celso presented the document to the Register of Deeds, it was rejected because he could not present the owner's copy of the title. Respondents later discovered that the entire property had been mortgaged with Metropolitan Bank & Trust Company, prompting them to execute and register an adverse claim with the Register of Deeds. The Register of Deeds notified petitioners to surrender the owner's duplicate copy of TCT No. 122489 for annotation of the adverse claim, but petitioners refused.

On October 8, 1999, respondents filed with the RTC of Manila a complaint for reconveyance, partition, and damages against petitioners, alleging co-ownership of a one-third pro indiviso portion of the lot and seeking the segregation and reconveyance of their share. Petitioners denied co-ownership, asserting that Celso was never a vendee and that respondents occupied the property by mere tolerance, and raised the defenses of prescription and laches. The RTC dismissed the complaint, but the CA reversed, finding sufficient evidence of co-ownership and treating the action as one for quieting of title, which is imprescriptible. The CA relied heavily on the Deed of Reconveyance executed by petitioners, which explicitly acknowledged Celso's co-ownership and which petitioners never denied executing.

• Mischaracterization of the Action: Petitioners argued that the CA committed reversible error by treating respondents' action as one for quieting of title, when the complaint sought only reconveyance and partition. They asserted that nowhere in the complaint did respondents seek to quiet their title, and that the CA thereby ruled on an issue not raised in the pleadings and substituted respondents' action with an entirely new one.
• Denial of Co-ownership: Petitioners denied that Celso Quijano was a co-owner or vendee of the subject lot, maintaining that his name did not appear on the title because he was never a buyer. They asserted that respondents possessed the property by mere tolerance and that any cause of action had already been barred by prescription and/or laches.

• Co-ownership and Inadvertent Omission: Respondents averred that they are co-owners of the subject property having paid part of its purchase price, and that Celso's name was inadvertently omitted as one of the buyers in the execution of the deed of sale, resulting in TCT No. 122489 being issued only in the names of Manuel and Romulo.
• Imprescriptibility of the Action: Citing Heirs of Jose Olviga vs. Court of Appeals, respondents asserted that their right to institute an action for reconveyance is imprescriptible because they are in possession of the claimed portion of the property, and faulted the RTC for declaring their action barred by prescription and laches.

• Nature of the Action: Whether the CA committed reversible error in treating respondents' action for reconveyance as an action for quieting of title.
• Co-ownership: Whether respondents are co-owners of the subject property entitled to reconveyance of a one-third portion.

• Nature of the Action: No. The CA did not err in treating the action for reconveyance as one in the nature of an action to quiet title, because respondents remained in actual possession of the claimed portion, rendering the action imprescriptible.
• Co-ownership: Yes. Respondents are co-owners of a one-third portion of the subject lot, their co-ownership being conclusively established by the Deed of Reconveyance voluntarily executed by petitioners, who never denied its due execution and admitted their signatures thereon.

• Nature of the Action: An action for reconveyance seeks to transfer property wrongfully registered by another to its rightful and legal owner, and is distinct from an action for quieting of title, which is filed to remove a cloud on title caused by an instrument or claim that is apparently valid but in truth invalid, voidable, or unenforceable. However, the Court has consistently held that the ten-year prescriptive period for reconveyance applies only when the person enforcing the trust is not in possession of the property. When the plaintiff claiming ownership is in actual possession, the right to seek reconveyance — which in effect seeks to quiet title — does not prescribe, because the possessor may wait until his possession is disturbed or his title is attacked before vindicating his right. His undisturbed possession gives him a continuing right to seek equitable relief. Since respondents were in actual possession of the portion they claimed, the CA's characterization of their action as one in the nature of quieting of title — and therefore imprescriptible — was not erroneous. The Court found that the allegations in the complaint, particularly the assertion of co-ownership and the prayer for reconveyance and partition, sufficiently made out a case for reconveyance, and that the CA's treatment of it as an action to quiet title was consistent with established jurisprudence.

• Co-ownership: The Deed of Reconveyance executed by Manuel and Romulo explicitly acknowledged and recognized Celso P. Quijano's rights, interests, and participation as a co-owner of a one-third portion of the lot, stating that he had paid the corresponding amount for the acquisition costs but whose name did not appear in the deed of sale, resulting in the non-inclusion of his name in TCT No. 122489. Petitioners never denied the due execution of the Deed of Reconveyance and admitted that the signatures appearing therein were theirs. The CA therefore correctly declared respondents as co-owners, as it merely confirmed and enforced a deed voluntarily executed by petitioners. The certificate of title merely evidences title and does not vest ownership; the Torrens system was not designed to shield and protect one who had committed fraud or misrepresentation and thus holds title in bad faith. The Deed of Reconveyance outweighed the evidentiary value of the transfer certificate of title held by petitioners.

• Action for Reconveyance vs. Action for Quieting of Title — An action for reconveyance seeks to transfer property wrongfully registered by another to its rightful and legal owner. An action for quieting of title is filed whenever there is a cloud on title to real property by reason of any instrument, record, claim, encumbrance, or proceeding which is apparently valid but is in truth invalid, ineffective, voidable, or unenforceable. While distinct, an action for reconveyance filed by a plaintiff in actual possession of the property is in the nature of a suit for quieting of title and is imprescriptible. The ten-year prescriptive period for reconveyance based on implied trust applies only when the person enforcing the trust is not in possession; when the plaintiff remains in possession, the prescriptive period does not run against him.

• Torrens System Does Not Shield Fraud — The Torrens system of registration was not designed to shield and protect one who had committed fraud or misrepresentation and thus holds title in bad faith. The Court has ordered reconveyance of property to the true owner or to one with a better right where the property had been erroneously or fraudulently titled in another person's name. A certificate of title merely evidences title; it does not vest ownership.

• "The Court has ruled that the 10-year prescriptive period applies only when the person enforcing the trust is not in possession of the property. If a person claiming to be its owner is in actual possession of the property, the right to seek reconveyance, which in effect seeks to quiet title to the property, does not prescribe." — This passage, quoting Mendizabel vs. Apao, articulates the controlling rule on the imprescriptibility of reconveyance when the plaintiff is in possession, and is the ratio decidendi for the Court's affirmance of the CA's characterization of the action.

• "The Torrens system was not designed to shield and protect one who had committed fraud or misrepresentation and thus holds title in bad faith." — This formulation encapsulates the principle that the certificate of title is not an absolute shield against the true owner's right to reconveyance, and is frequently cited in subsequent property law jurisprudence.

• "It is settled that it is not the certificate of title that vests ownership. It merely evidences such title." — This statement, adopted by the Court from the CA's ruling, defines the evidentiary nature of the Torrens title and supports the conclusion that the Deed of Reconveyance outweighed the certificate of title held by petitioners.

• Mendizabel vs. Apao, G.R. No. 143185, February 20, 2006 — Controlling precedent followed. The Court relied on this case for the proposition that an action for reconveyance filed by a person in actual possession of the property is in the nature of an action to quiet title and does not prescribe. The Court also cited this case for the principle that the Torrens system does not shield a fraudulent titleholder.

• Lasquite vs. Victory Hills, Inc., G.R. No. 175375, June 23, 2009 — Followed. The Court cited this case to reiterate that an action for reconveyance based on implied trust prescribes in ten years, but the prescriptive period applies only if the plaintiff is not in possession; if the plaintiff remains in possession, the action is in the nature of a suit for quieting of title and is imprescriptible.

• Sps. Alfredo vs. Sps. Borras, 452 Phil. 178 (2003) — Cited for the definition of an action for reconveyance as one that seeks to transfer property wrongfully registered by another to its rightful and legal owner.

• Heirs of Jose Olviga vs. Court of Appeals — Cited by respondents in the CA for the proposition that the right to institute an action for reconveyance is imprescriptible when the plaintiff is in possession of the claimed portion.

• Article 476, Civil Code — Defines an action to quiet title as one filed whenever there is a cloud on title to real property or any interest therein by reason of any instrument, record, claim, encumbrance, or proceeding which is apparently valid or effective but is in truth and in fact invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said title. The Court cited this provision to distinguish quieting of title from reconveyance, while affirming that the two actions overlap when the plaintiff is in actual possession.

Justice Antonio T. Carpio (Chairperson), Justice Diosdado M. Peralta, Justice Roberto A. Abad, and Justice Jose Catral Mendoza concurred in the decision.