Salvatierra vs. Court of Appeals

An action for reconveyance of fraudulently registered real property based on an implied or constructive trust prescribes in ten (10) years from the date of issuance of the certificate of title, pursuant to Article 1144(2) of the Civil Code, not four years under Article 1391, which governs only voidable contracts.

Enrique Salvatierra died intestate in 1930, survived by his legitimate brothers Tomas, Bartolome, Venancio, and Macario, and sister Marcela, all surnamed Salvatierra. His estate consisted of three parcels of land — Lots 25, 26, and 27 — situated in Poblacion, San Leonardo, Nueva Ecija. Successive transfers among the heirs reduced the estate to three principal ownership blocs: Venancio (holding 2/5 shares, including Marcela's share), the heirs of Tomas (holding 2/5 shares, including Bartolome's share), and Macario (holding 1/5 share). An extrajudicial partition with confirmation of sale executed on September 24, 1968, allocated specific portions of each lot to these three groups and is the decisive document in the dispute.

In 1930, Enrique Salvatierra died intestate and without issue, survived by his legitimate brothers Tomas, Bartolome, Venancio, and Macario, and sister Marcela, all surnamed Salvatierra. His estate consisted of three parcels of land in Poblacion, San Leonardo, Nueva Ecija: Lot No. 25 (1,116 sq. m.), Lot No. 26 (749 sq. m.), and Lot No. 27 (670 sq. m.). Before the estate was partitioned, Marcela sold her 1/5 undivided share to Venancio, and after Bartolome's death, his heirs Catalina and Ignacia Marquez sold his 1/5 undivided share to Tomas and his wife Catalina Azarcon. On May 4, 1966, Macario sold Lot No. 26 to his son Anselmo Salvatierra by deed of sale for P1,000.00.

On September 24, 1968, the surviving legal heirs and descendants of Enrique executed an "Extrajudicial Partition with Confirmation of Sale," allocating: to Venancio — 1,041 sq. m. comprising Lot No. 27 and a portion of Lot No. 26; to Macario, now represented by Anselmo — 405 sq. m. as part of Lot No. 26; and to the heirs of Tomas — 1,116 sq. m., the whole of Lot No. 25. Anselmo was a signatory to this partition. The document was undisputed as to its existence, truth, correctness, and authenticity, with both parties in the subsequent litigation even presenting it as their own exhibit.

On June 15, 1970, Venancio sold the whole of Lot No. 27 and a 149-sq. m. portion of Lot No. 26 to respondent spouses Lino Longalong and Paciencia Mariano for P8,500.00. The Longalongs took possession of the lots. On May 20, 1980, Anselmo registered the May 4, 1966 deed of sale and obtained Original Certificate of Title No. 0-4221 covering the whole of Lot No. 26 (749 sq. m.), despite knowing from the 1968 extrajudicial partition that he was entitled to only 405 sq. m. A careful examination of the deed of sale revealed that the words and figure "SEVEN HUNDRED FORTY NINE (749)" appeared superimposed over erased words, with "FORTY NINE" inserted above the regular line, creating a strong conviction that the document had been altered to suit Anselmo's fraudulent design.

In 1982, a relocation survey disclosed that the 149-sq. m. portion of Lot No. 26 purchased by the Longalongs from Venancio fell outside their fence, as it was covered by Anselmo's title. Barangay-level settlement efforts proved futile because Purita Salvatierra, Anselmo's widow, refused to yield to the demand for return of the 149-sq. m. portion. On November 22, 1985, the Longalongs filed an action for reconveyance in the RTC. The trial court dismissed the case, finding that the Longalongs failed to establish ownership and that the four-year prescriptive period from discovery of the alleged fraud had elapsed. The Court of Appeals reversed, ordering reconveyance of the 149-sq. m. portion and payment of P5,000.00 as attorney's fees, finding that Anselmo fraudulently registered the entire Lot No. 26 and that the action was filed within the ten-year prescriptive period under Article 1144.

• Double Sale: Petitioners argued that the case involved a double sale of Lot No. 26 to both petitioners and respondents, invoking Articles 1134, 493, 1088, 1544, 1431, 1396, and 1391 of the New Civil Code.
• Prescription: Petitioners contended that the action for reconveyance had prescribed under Article 1391, which limits actions for annulment to four years from discovery of fraud, so that the filing on November 22, 1985 — five years after the issuance of OCT No. 0-4221 on May 20, 1980 — was beyond the prescriptive period.

• Prescription of Reconveyance: Whether the prescriptive period for an action for reconveyance of fraudulently registered real property is four years under Article 1391 or ten years under Article 1144 of the Civil Code.
• Double Sale: Whether a double sale of Lot No. 26 occurred under the facts obtaining, such that Article 1544 of the Civil Code would apply.

• Prescription of Reconveyance: No, the action had not prescribed. The applicable prescriptive period is ten years under Article 1144(2), as an action for reconveyance based on an implied or constructive trust is an obligation created by law, and the complaint was filed within five years of the issuance of the title.
• Double Sale: No, no double sale occurred. Macario could sell only his pro indiviso share — 405 sq. m. of Lot No. 26 — to Anselmo, and Venancio sold 149 sq. m. from his rightful 344 sq. m. portion to the Longalongs; the two sales involved different portions of the same lot.

• Prescription of Reconveyance: The fraud committed by Anselmo in registering the entire Lot No. 26 gave rise to an implied trust under Article 1456, which provides that property acquired through fraud is held in trust for the benefit of the true owner. An action for reconveyance based on such an implied trust is an obligation created by law, falling under Article 1144(2), which prescribes in ten years from the time the right of action accrues. Section 53 of PD 1529 provides the remedy for registration procured by fraud and must be read in conjunction with Article 1456 and Article 1144. Article 1391, invoked by petitioners, applies only to voidable contracts under Article 1390 and is not in point. The registration of the instrument constitutes constructive notice to the whole world, and discovery of the fraud is deemed to have taken place at the time of registration. Since OCT No. 0-4221 was issued on May 20, 1980, and the complaint was filed on November 22, 1985 — only five years later — the action was well within the ten-year prescriptive period. The earlier rulings in Esconde vs. Barlongay and Balbin vs. Medalla, which applied a four-year period, were discredited for erroneously relying on Gerona vs. de Guzman, a case governed by the Old Code of Civil Procedure (Act No. 190) because the fraud therein was discovered before the effectivity of the New Civil Code.

• Double Sale: The extrajudicial partition of September 24, 1968, to which Anselmo was a signatory, clearly allocated only 405 sq. m. of Lot No. 26 to Macario/Anselmo and a portion of Lot No. 26 to Venancio in addition to Lot No. 27. Under Article 1370, the literal meaning of the partition's clear and unequivocal stipulations controls. Under Article 493, a co-owner may alienate only his pro indiviso share, and the effect of such alienation is limited to the portion allotted to him upon termination of co-ownership. Under Article 1078, the whole estate of a decedent is owned in common by the heirs before partition. Thus, Macario's 1966 sale to Anselmo transferred only Macario's share — later determined to be 405 sq. m. — not the entire 749 sq. m. of Lot No. 26. Venancio's sale of 149 sq. m. to the Longalongs was drawn from his rightful 344 sq. m. portion. The two sales involved distinct portions of the same lot, and Article 1544 on double sale was inapplicable. Anselmo's registration of the entire lot was done in evident bad faith, as shown by the altered deed of sale and his prior knowledge of the partition.

• Implied or Constructive Trust (Article 1456, Civil Code) — 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. A constructive trust arises not by agreement or intention but by operation of law, raised by construction of equity to satisfy the demands of justice. The Court applied this doctrine to Anselmo's fraudulent registration of the entire Lot No. 26, holding that a constructive trust was created in favor of the rightful owners, giving rise to an action for reconveyance.

• Prescription of Actions for Reconveyance Based on Implied Trust — An action for reconveyance of registered land based on an implied or constructive trust prescribes in ten (10) years from the date of issuance of the certificate of title, pursuant to Article 1144(2) of the Civil Code (obligation created by law). The registration of the instrument constitutes constructive notice to the whole world, and discovery of the fraud is deemed to have taken place at the time of registration. This ten-year period applies even if the decree of registration is no longer open to review. The four-year period under Article 1391 applies only to voidable contracts under Article 1390 and does not govern actions for reconveyance based on implied trust.

• Co-owner's Limited Right to Alienate (Article 493, Civil Code) — Each co-owner has full ownership of his part and may alienate, assign, or mortgage it, but the effect of the alienation or mortgage, with respect to the co-owners, is limited to the portion which may be allotted to him in the division upon termination of the co-ownership. A co-owner can sell only his pro indiviso share, not more. The Court applied this to hold that Macario's sale to Anselmo transferred only Macario's eventual allotment of 405 sq. m., not the entire 749 sq. m. of Lot No. 26.

• "An action for reconveyance based on an implied or constructive trust must perforce prescribe in ten years and not otherwise." — This passage articulates the controlling rule on prescription of reconveyance actions, directly resolving the conflict between Article 1144 and Article 1391.

• "Undoubtedly, it is now well-settled that an action for reconveyance based on an implied or constructive trust prescribes in ten years from the issuance of the Torrens title over the property." — This formulation establishes the point of reference for the prescriptive period — the date of issuance of the Torrens title — and is frequently cited in subsequent jurisprudence.

• "Correlating Section 53, paragraph 3 of Presidential Decree No. 1529 and Article 1456 of the Civil Code with Article 1144 (2) of the Civil Code, supra, the prescriptive period for the reconveyance of fraudulently registered real property is ten (10) years reckoned from the date of the issuance of the certificate of title." — This passage ties together the three statutory bases — PD 1529, Article 1456, and Article 1144 — that jointly establish the ten-year prescriptive period for reconveyance of fraudulently registered land.

• Caro vs. CA, 180 SCRA 401 — Controlling precedent cited at length for clarifying the prescriptive period for actions for reconveyance, establishing that the ten-year period under Article 1144 governs and discrediting the four-year rule derived from earlier cases.
• Tale vs. CA, G.R. No. 101028 (April 23, 1992) — Followed; reaffirmed the ruling in Caro vs. CA regarding the ten-year prescriptive period for reconveyance actions.
• Esconde vs. Barlongay, 152 SCRA 603 — Distinguished and discredited; erroneously applied the four-year prescriptive period for reconveyance actions by relying on Balbin vs. Medalla.
• Balbin vs. Medalla, 108 SCRA 666 — Distinguished and discredited; mistakenly limited the prescriptive period to four years based on erroneous reliance on Gerona vs. de Guzman, a case governed by the Old Code of Civil Procedure.
• Armamento vs. Central Bank, 96 SCRA 178 — Followed; held that an action for reconveyance of registered land based on implied trust prescribes in ten years even if the decree of registration is no longer open to review.
• Duque vs. Domingo, 80 SCRA 654 — Followed; held that registration constitutes constructive notice to the whole world, and an action on an implied or constructive trust prescribes in ten years from the date the right of action accrued.
• Segura vs. Segura, 165 SCRA 368 — Cited by the Court of Appeals for the principle that a vendor can sell only what he owns or is authorized to sell.
• Pamplona vs. Moreto, 96 SCRA 775 — Cited for the principle that a co-owner can sell his pro indiviso share but cannot sell more than his share therein.

• Article 1144, Civil Code — Provides that actions upon an obligation created by law must be brought within ten years from the time the right of action accrues. Applied as the prescriptive period for an action for reconveyance based on an implied or constructive trust, which is an obligation created by law under Article 1456.
• 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. Applied to Anselmo's fraudulent registration of the entire Lot No. 26, creating a constructive trust in favor of the rightful owners.
• Article 1391, Civil Code — Provides that the action for annulment shall be brought within four years, reckoned from discovery of fraud. Ruled inapplicable; it governs voidable contracts under Article 1390, not actions for reconveyance based on implied trust.
• Article 493, Civil Code — Provides that each co-owner may alienate his part but the effect of alienation is limited to the portion allotted to him upon termination of co-ownership. Applied to hold that Macario's sale to Anselmo transferred only Macario's pro indiviso share.
• Article 1370, Civil Code — Provides that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control. Applied to the extrajudicial partition, whose terms were clear and unambiguous.
• Article 1078, Civil Code — Provides that where there are two or more heirs, the whole estate of the decedent is, before its partition, owned in common by such heirs. Cited to support the principle that co-owners hold the estate in common before partition.
• Section 53, PD 1529 (Property Registration Decree) — Provides that in all cases of registration procured by fraud, the owner may pursue all legal and equitable remedies against the parties to such fraud. Read in conjunction with Article 1456 and Article 1144 to establish the ten-year prescriptive period for reconveyance.

Padilla, Vitug, and Kapunan, JJ., concurred. Bellosillo, J., took no part.