Paz Galvez vs. Court of Appeals

A co-owner cannot acquire by prescription the share of other co-owners absent a clear repudiation of the co-ownership duly communicated to the other co-owners, and the execution of an affidavit of self-adjudication coupled with the issuance of tax declarations does not constitute such sufficient repudiation; the prescriptive period for an action to recover the property runs from the date of registration of the Torrens title in favor of a third-party buyer, not from the date of the self-adjudication.

Timotea F. Galvez died intestate on 28 April 1965, leaving two heirs: her daughter Paz Galvez and her grandson Porfirio Galvez, the latter succeeding by right of representation to the share of his father Ulpiano Galvez, who had predeceased Timotea in 1959. The estate included a parcel of unirrigated riceland situated at Pagdaraoan, San Fernando, La Union, covered by Tax Declaration No. 39645, with an area of 4,304.5 square meters. All other compulsory heirs had already received their respective shares, leaving this property to pass by succession to Paz and Porfirio as co-heirs.

• Nature of the Property and Intestacy: Timotea F. Galvez died intestate on 28 April 1965. Her son Ulpiano had predeceased her on 24 July 1959. Timotea left a parcel of unirrigated riceland in Pagdaraoan, San Fernando, La Union, covered by Tax Declaration No. 39645, with an area of 4,304.5 square meters. All other compulsory heirs having received their shares, the property passed to Timotea's daughter, Paz Galvez, and her grandson, Porfirio Galvez, the latter succeeding by right of representation as Ulpiano's son.

• The Affidavit of Self-Adjudication: On 4 May 1970, Paz Galvez executed an affidavit of adjudication declaring herself the true and lawful owner of the subject property to the exclusion of Porfirio. Tax Declarations No. 15749 and No. 12342 were subsequently issued in her name. No written notice of this adjudication was given to Porfirio.

• The Sale to Carlos Tam: On 22 June 1992, without the knowledge and consent of Porfirio, Paz Galvez sold the entire property to Carlos Tam for a consideration of Ten Thousand Pesos (₱10,000.00) by way of a Deed of Absolute Sale. Carlos Tam filed an application for registration of the property under Land Registration Case No. 2278 before the RTC of San Fernando, La Union. On 21 January 1994, Original Certificate of Title No. 0-2602 was issued in the name of Carlos Tam.

• The Sale to Tycoon Properties, Inc.: On 27 September 1994, five days after receiving summons and the complaint in Civil Case No. 4895, Carlos Tam sold the property to Tycoon Properties, Inc., a corporation in which he held a 45% ownership interest. TCT No. T-40390 was issued in favor of Tycoon Properties, Inc. A notice of lis pendens dated 8 July 1997 was inscribed on TCT No. T-40390. Despite this inscription, Tycoon Properties, Inc. mortgaged the land to Far East Bank and Trust Company for ₱11,172,600.00.

• Discovery and Complaint: Porfirio Galvez discovered the sale on 12 May 1994 and filed a complaint for Legal Redemption with Damages and Cancellation of Documents, later amended to include Tycoon Properties, Inc. He sought reconveyance of his one-half share and subrogation to the share sold by Paz to Carlos Tam upon reimbursement of the purchase price.

• Prescription: Petitioners argued that an implied or constructive trust under Article 1451 of the Civil Code was established between Paz and Porfirio Galvez, which prescribed in ten years. The trust was repudiated on 4 May 1970 when Paz executed the Affidavit of Self-Adjudication, registered it with the Register of Deeds, and secured new tax declarations in her name. Since the complaint was filed only on 12 May 1994—24 years later—the action was barred by prescription.

• Laches: Petitioners maintained that Porfirio's failure to assert his alleged right for almost 24 years constituted laches, barring his claim.

• Good Faith: Carlos Tam and Tycoon Properties, Inc. claimed they were buyers in good faith and for value who had the right to rely on the face of the title.

• Extent of Nullity: Petitioners contended that even if the sale were nullified, nullification should apply only to Porfirio's one-half share, not to Paz Galvez's share, which she manifested her intention to dispose of by selling the property.

• Co-ownership Governs: Respondent Porfirio Galvez's position, as adopted by the trial and appellate courts, was that the relationship between the parties was one of co-ownership, not implied trust. Under Article 494 of the Civil Code, prescription does not run in favor of a co-owner against another co-owner absent clear repudiation of the co-ownership.

• No Sufficient Repudiation: The affidavit of self-adjudication and issuance of tax declarations did not constitute the unequivocal repudiation required by law to commence the prescriptive period against a co-heir.

• Timely Filing: The complaint was filed on 12 May 1994, well within ten years from the issuance of OCT No. 0-2602 to Carlos Tam on 21 January 1994.

• Legal Redemption: Porfirio, as a co-heir, was entitled under Articles 1088 and 1620 of the Civil Code to exercise the right of legal redemption over Paz's share sold to a stranger. No written notice of the sale was given to him as required by Article 1623, so his right to redeem had not prescribed.

• Prescription: Whether Porfirio Galvez's claim was barred by prescription, the action having been filed 24 years after Paz Galvez executed the Affidavit of Self-Adjudication.

• Laches: Whether Porfirio Galvez's claim was barred by laches due to his failure to assert his right for nearly 24 years.

• Good Faith: Whether Carlos Tam and Tycoon Properties, Inc. were buyers in good faith and for value entitled to rely on the Torrens title.

• Extent of Nullity: Whether the nullity of the sale extended to the share of Paz Galvez or should be limited to Porfirio's one-half share.

• Prescription: The action was not barred by prescription. The case was governed by the rules on co-ownership, not implied trust, since both Paz and Porfirio were co-heirs of Timotea Galvez. Under Article 494 of the Civil Code, prescription does not run in favor of a co-owner against another co-owner absent clear repudiation. The requisites for repudiation are: (1) a co-owner repudiates the co-ownership; (2) the repudiation is clearly made known to the other co-owners; (3) the evidence is clear and conclusive; and (4) the repudiating co-owner has been in open, continuous, exclusive, and notorious possession for the prescriptive period. Paz Galvez's affidavit of self-adjudication, not communicated to Porfirio, did not constitute sufficient repudiation. Even were an implied trust to be recognized, the ten-year prescriptive period commenced from the issuance of the certificate of title to Carlos Tam on 21 January 1994, making the complaint filed on 12 May 1994 well within the period.

• Laches: Laches was unavailing. As an equitable remedy, laches cannot be used to defeat justice or perpetrate fraud and injustice. It cannot prevent a rightful owner from recovering property fraudulently registered in another's name.

• Good Faith: Carlos Tam and Tycoon Properties, Inc. were not buyers in good faith. A purchaser in good faith buys without notice of another's right or interest in the property and pays a fair price before notice of adverse claims. Both lower courts found that Tam did not exert efforts to determine the property's previous ownership and relied solely on tax declarations. Tam received summons on 22 September 1994 yet sold the property to Tycoon Properties, Inc.—a corporation in which he held a 45% interest—on 27 September 1994. Despite the annotation of a notice of lis pendens on TCT No. T-40390, Tycoon mortgaged the property for ₱11,172,600.00. These circumstances negated any claim of good faith.

• Extent of Nullity: The entire sale was properly nullified. Under Article 1088 of the Civil Code, any co-heir may be subrogated to the rights of a purchaser of hereditary rights sold to a stranger by reimbursing the price, provided written notice of the sale is given. No written notice was sent by Paz to Porfirio. The right of legal redemption under Article 1620 allows a co-owner to redeem shares sold to a third person. Since no written notice was given as mandated by Article 1623, the redemption period commenced only when Porfirio filed the complaint. The policy of the law is to aid the redemptioner in exercising this right, and legal redemption under Article 1088 is a one-way street in favor of the redemptioner.

• Requisites for Effective Repudiation of Co-ownership — For a co-owner's possession to ripen into ownership by prescription, four conditions must be satisfied: (1) a co-owner repudiates the co-ownership; (2) the act of repudiation is clearly made known to the other co-owners; (3) the evidence of repudiation is clear and conclusive; and (4) the repudiating co-owner has been in possession through open, continuous, exclusive, and notorious possession for the period required by law. Applied here, Paz Galvez's affidavit of self-adjudication and procurement of tax declarations failed to meet the second and third requisites, as Porfirio was never categorically advised of her exclusive claim.

• Acts Constituting Repudiation — Drawing from Pangan v. Court of Appeals, acts that constitute repudiation include: filing an action against a trustor to quiet title; issuance of a certificate of title in one's own name after cancellation of a title in the name of beneficiaries; execution of a deed of partition resulting in new titles excluding one co-owner; and acts of possession unequivocally amounting to an ouster or deprivation of the other co-owner's rights. The mere execution of an affidavit of self-adjudication and procurement of tax declarations do not, without more, fall within these recognized categories.

• Legal Redemption by Co-heirs — Under Articles 1088, 1620, and 1623 of the Civil Code, a co-heir has the right to be subrogated to the rights of a stranger who purchases hereditary rights before partition, upon reimbursement of the purchase price. Written notice of the sale from the vendor to the co-heir is mandatory. Absent such notice, the one-month redemption period does not begin to run, and the redemptioner may assert the right by filing a complaint even years after the consummation of the sale. The right of legal redemption is liberally construed in favor of the redemptioner.

• "Prescription, as a mode of terminating a relation of co-ownership, must have been preceded by repudiation (of the co-ownership). The act of repudiation, in turn, is subject to certain conditions: (1) a co-owner repudiates the co-ownership; (2) such an act of repudiation is clearly made known to the other co-owners; (3) the evidence thereon is clear and conclusive; and (4) he has been in possession through open, continuous, exclusive, and notorious possession of the property for the period required by law." — This passage, quoting Santos v. Santos, articulates the controlling standard for prescription among co-owners and formed the principal basis for rejecting petitioners' prescription defense.

• "Laches cannot be used to defeat justice or perpetrate fraud and injustice. Neither should its application be used to prevent the rightful owners of a property from recovering what has been fraudulently registered in the name of another." — This statement captures the Court's refusal to apply the equitable doctrine of laches where it would sanction fraud committed by a co-heir.

• "A purchaser in good faith and for value is one who buys the property without notice that some other person has a right to or interest in such property and pays its fair price before he has notice of the adverse claims and interest of another person in the same property." — The definition applied to reject the claim of good faith by Carlos Tam and Tycoon Properties, Inc.

• Adille v. Court of Appeals, G.R. No. L-44546, 29 January 1988, 157 SCRA 455 — Followed. Established that the act of a co-heir excluding another co-heir by representing himself as the sole heir does not constitute repudiation. On all fours with the present case.

• Santos v. Santos, 396 Phil. 928 (2000) — Followed. Enumerated the four requisites for effective repudiation of co-ownership, which were applied to determine that Paz Galvez's acts were insufficient.

• Pangan v. Court of Appeals, G.R. No. L-39299, 18 October 1988, 166 SCRA 375 — Followed. Provided the enumeration of acts that constitute repudiation, none of which were present in this case.

• Salvador v. Court of Appeals, 313 Phil. 36 (1995) — Followed. Reiterated that a co-owner's possession is like that of a trustee and is not adverse to the other co-owners.

• Huang v. Court of Appeals, G.R. No. 108525, 13 September 1994, 236 SCRA 420 — Followed. Provided the comprehensive definition of trusts—express and implied, constructive and resulting—cited to frame the distinction between implied trust and co-ownership.

• Hermoso v. Court of Appeals, 360 Phil. 703 (1998) — Followed. Interpreted Article 1088 on legal redemption, establishing that the purpose is to keep strangers out of family co-ownership and that the right is a one-way street in favor of the redemptioner.

• Alzona v. Capunitan, G.R. No. L-10228, 28 February 1962 — Distinguished. The pronouncement therein that an action for reconveyance based on implied trust prescribes in ten years involved a property registered under the Torrens system and an express repudiation of the trust, unlike the present case involving unregistered land with no sufficient repudiation.

• Article 494, Civil Code — Provides that no prescription shall run in favor of a co-owner or co-heir against his co-owners or co-heirs as long as he expressly or impliedly recognizes the co-ownership. Applied to hold that prescription did not run against Porfirio absent clear repudiation by Paz.

• Article 1088, Civil Code — Provides that any or all co-heirs may be subrogated to the rights of a purchaser of hereditary rights sold to a stranger by reimbursing the price, provided they do so within one month from written notice of the sale by the vendor. Applied to uphold Porfirio's right of legal redemption, as no written notice was given.

• Article 1620, Civil Code — Grants a co-owner the right of redemption when shares of other co-owners are sold to a third person. Applied in conjunction with Article 1088 to affirm Porfirio's right to redeem Paz's share.

• Article 1623, Civil Code — Requires written notice of sale to co-owners; the redemption period does not commence until such notice is given. Applied to hold that Porfirio's right to redeem had not prescribed since no written notice was sent by Paz Galvez.

• Article 1451, Civil Code — Provides that when land passes by succession and legal title is placed in the name of another, a trust is established by implication of law for the benefit of the true owner. Raised by petitioners but held inapplicable, as the relationship was one of co-ownership, not trust.

Chief Justice Artemio V. Panganiban (Chairperson), Justice Consuelo Ynares-Santiago, Justice Ma. Alicia Austria-Martinez, and Justice Romeo J. Callejo, Sr.

N/A — The decision was unanimous.