Secuya vs. Vda. de Selma

A plaintiff in an action for quieting of title must show a legal or equitable title to, or interest in, the property; a claimant under an unregistered express trust cannot invoke the remedy where the trust has been repudiated and the property has passed through registered sales to a buyer in good faith. The Agreement of Partition, despite its name, created an express trust under Article 1444 of the Civil Code, and the beneficiary's inaction plus the trust's repudiation barred recovery.

The Secuya siblings, heirs of Dalmacio Secuya, claimed ownership of a 3,000-square-meter portion of Lot 5679, a 12,750-square-meter lot of the Talisay-Minglanilla Friar Lands Estate in Cebu originally sold and patented to Maxima Caballero Vda. de Cariño. Respondent Gerarda M. Vda. de Selma is the registered owner of Lot 5679-C-120, consisting of 9,302 square meters, under TCT No. T-35678, deriving her title from Cesaria Caballero, the widow of Silvestre Aro, the registered owner of the mother lot. The dispute turned on whether an unregistered 1938 agreement and a lost 1953 private deed could overcome respondent's Torrens title.

The disputed property is a 3,000-square-meter portion of Lot 5679 of the Talisay-Minglanilla Friar Lands Estate, a 12,750-square-meter lot originally sold, with its covering patent issued, to Maxima Caballero Vda. de Cariño. On January 5, 1938, Maxima executed a duly notarized "Agreement of Partition" with Paciencia Sabellona, under which Maxima bound herself to transfer one-third of Lot 5679 to Paciencia as soon as Maxima's application for private sale was approved by the Director of Lands, with the one-third portion to adjoin the municipal road and Paciencia to pay the government for her corresponding share after subdivision. Paciencia took possession and occupation of the one-third portion adjudicated to her.

On October 20, 1953, Paciencia sold the 3,000-square-meter portion to Dalmacio Secuya for P1,850 by means of a private document which was later lost; the sale was admitted and confirmed by Ramon Sabellona, alleged to be the sole voluntary heir of Paciencia under her Last Will and Testament dated July 9, 1954, through a "Confirmation of Sale of Undivided Shares" dated September 28, 1976. After the purchase, Dalmacio, who was then single, together with his brothers and sisters, took physical possession of the land and cultivated it. Dalmacio died on November 20, 1961, and his heirs — brothers, sisters, nephews and nieces — are the petitioners. In 1967, Edilberto Superales married Rufina Secuya, Dalmacio's niece, and with the Secuyas' permission constructed his house on the lot in January 1974, living there continuously thereafter.

Meanwhile, the certificate of sale covering Lot 5679 was issued in Maxima's name in 1954 — TCT No. 3087, dated March 9, 1954, whose memorandum of incumbrances carried no notation of the Agreement — but she never transferred the property to Paciencia during her lifetime. Instead, her heirs sold the entire Lot 5679 to Silvestre Aro in 1955, and TCT No. 4752 was issued in Aro's name in 1959. Upon Aro's death, his heirs executed an "Extrajudicial Partition and Deed of Absolute Sale" adjudicating one-half plus one-fifth of the lot to his widow, Cesaria Caballero, who thereafter entered into several mortgage and sales transactions with several banks and with Francisco Sioson, Edgar Adlawan, and respondent Gerarda Selma. Selma bought a 1,000-square-meter portion of Lot 5679 in 1972, and on February 19, 1975 bought the bigger bulk of 9,302 square meters from Cesaria Caballero through a notarized deed of absolute sale, for which TCT No. T-35678 was issued; she has been in possession since then. From 1954, when the sale certificate was issued, until 1985, Paciencia and her successors-in-interest did nothing to enforce their proprietary rights or consolidate ownership: they never registered the Agreement with the Registry of Property and were remiss in paying land taxes, while the property passed through several sales transactions and several transfer certificates of title without protest from them.

The dispute surfaced when respondent Selma lodged a complaint against the petitioners before the Barangay Captain of the place, and in the confrontation and conciliation proceedings before the Lupong Tagapayapa asserted ownership over the land the petitioners had long possessed in concept of owner — a claim the petitioners alleged was a cloud on their title. They accordingly filed their Complaint for Quieting of Title and Cancellation of Certificate of Title before the RTC of Cebu City in 1985. Respondent, for her part, presented herself as the registered owner of Lot 5679-C-120 under TCT No. T-35678, purchased in February 1975 from Cesaria Caballero, the widow of Silvestre Aro, the registered owner of the mother lot under TCT No. 4752. The RTC found the preponderance of evidence in favor of Selma, and the CA upheld her title as traceable to a valid TCT while ruling that petitioners' claim, anchored on the Agreement of Partition, was void for violating the Public Land Act's prohibition on alienating or encumbering land acquired under a free patent or homestead patent within five years from the issuance of the patent.

• Validity of the Agreement of Partition: Petitioners urged the Court to resolve whether there was a valid transfer or conveyance of one-third of Lot 5679 by Maxima Caballero in favor of Paciencia Sabellona by virtue of the Agreement of Partition dated January 5, 1938.
• Sale to Dalmacio Secuya: Petitioners insisted that Paciencia sold the disputed property to Dalmacio Secuya on October 20, 1953, embodied in a private document that had been lost, and presented the testimony of Miguel Secuya and a Deed confirming the sale executed by Ramon Sabellona, Paciencia's alleged heir.
• Long Possession as Owners: Petitioners insisted that they had been occupying the disputed property for forty-seven years before filing their Complaint, and argued they had been gathering the fruits of the property.
• Buyer in Bad Faith: Petitioners debunked respondent's title, alleging she was aware of their possession of the disputed property, and argued that the courts below committed grave abuse of discretion amounting to lack of jurisdiction in not finding her a buyer in bad faith.

• Agreement of Partition: Whether there was a valid transfer or conveyance of one-third of Lot 5679 by Maxima Caballero in favor of Paciencia Sabellona by virtue of the Agreement of Partition dated January 5, 1938.
• Deed of Confirmation of Sale: Whether petitioners proved that they are the rightful successors-in-interest of Paciencia Sabellona through the Deed of Confirmation of Sale executed by Ramon Sabellona.
• Buyer in Bad Faith: Whether the trial court and the appellate court committed grave abuse of discretion amounting to lack of jurisdiction in not finding respondent Gerarda M. Vda. de Selma a buyer in bad faith with respect to the disputed land.

• Agreement of Partition: No. The Agreement is not a partition but an express trust, since there was no property to partition and the parties were not co-owners. The trust was repudiated when Maxima's heirs sold the lot to a third person not privy to the Agreement, and the subsequent sales and titles must be upheld.
• Deed of Confirmation of Sale: No. Petitioners failed to prove they are Paciencia's rightful successors-in-interest: the lost private deed was never presented, and Ramon Sabellona's status as heir was not affirmatively established, making his confirming deed of doubtful probative value.
• Buyer in Bad Faith: No grave abuse of discretion. Even granting respondent knew of the occupants' presence, the vendor assured her they were mere tenants and petitioners' claim was not annotated on the title; her title is supported by clear evidence while petitioners' claim is barren of proof.

• Agreement of Partition: Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in another, and trust relations may be express or implied — an express trust created by the intention of the trustor or parties, an implied trust by operation of law. Under Article 1444 of the Civil Code, no particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended. The Agreement's terms show Maxima Caballero bound herself to give one-third of Lot 5679 to Paciencia Sabellona upon approval of the former's application, and Paciencia acquiesced to the covenant; the Agreement therefore created an express trust, with Maxima holding the specified portion as belonging to Paciencia once the application was approved and a sale certificate issued in her name. Although no time limit is imposed for the enforcement of rights under express trusts, prescription may bar a beneficiary's action for recovery if a repudiation of the trust is proven by clear and convincing evidence and made known to the beneficiary. Repudiation occurred when Maxima's heirs failed to deliver or transfer the property to Paciencia and instead sold it to a third person not privy to the Agreement: the memorandum of incumbrances of TCT No. 3087 contained no notation of the Agreement, the Agreement was unregistered and thus could not bind third persons, and there was no allegation that Silvestre Aro, the buyer from Maxima's heirs, knew of it. Consequently, the subsequent sales transactions and the titles covering the disputed land must be upheld in the absence of proof that they were fraudulent and irregular.

• Deed of Confirmation of Sale: Even granting the express trust subsists, petitioners did not prove they are the rightful successors-in-interest of Paciencia Sabellona. The private document allegedly embodying the October 20, 1953 sale to Dalmacio Secuya — which would have been the best evidence of the transaction — was never presented in court, allegedly because it was lost; while a sale of land appearing in a private deed is binding between the parties, it cannot bind third persons if not embodied in a public instrument and recorded in the Registry of Property, per Article 709 of the Civil Code. To prove the sale, petitioners offered only the bare testimony of Miguel Secuya and the Deed executed by Ramon Sabellona ratifying the transaction; but Ramon's status as Paciencia's heir was not affirmatively established, and he was not presented in court and thus not quizzed on his knowledge — or lack thereof — of the 1953 transaction, making the Deed's probative value doubtful. Petitioners' claim of forty-seven years' possession likewise failed: there was no proof they exercised their rights and duties as owners, they were remiss in paying land taxes, and they did nothing to enforce whatever proprietary rights they had, in contrast to respondent who holds the necessary supporting documents.

• Buyer in Bad Faith: A party with actual knowledge of facts and circumstances that would move a reasonably cautious man to make an inquiry will not be protected by the Torrens system, per Sandoval vs. Court of Appeals: one who deals with registered land need only rely on the title and is charged with notice only of burdens and claims annotated on it, except when the purchaser has actual knowledge of facts impelling inquiry or of a defect or lack of title in the vendor. Granting arguendo that respondent knew petitioners, through Superales and his family, were actually occupying the disputed lot, the vendor Cesaria Caballero assured her that petitioners were just tenants, and respondent cannot be faulted for believing this representation since petitioners' claim was not noted on the certificate of title covering Lot No. 5679. Moreover, the lot, including the disputed portion, had been the subject of several sales transactions and several transfers of title without any protestation or complaint from petitioners. Respondent's title is amply supported by clear evidence, while petitioners' claim is barren of proof; petitioners therefore lack the requisite title to pursue an action for quieting of title.

• Quieting of title (Articles 476 and 477, Civil Code) — An action to quiet title may be brought whenever there is a cloud on title to real property by reason of any instrument, record, claim, encumbrance or proceeding apparently valid or effective but in truth invalid, ineffective, voidable or unenforceable, and prejudicial to the title. The plaintiff must have legal or equitable title to, or an interest in, the real property which is the subject matter of the action, though he need not be in possession of it, and must show that the instrument casting the cloud is in fact invalid or inoperative despite its prima facie appearance of validity. Applied here: petitioners alleged that respondent's TCT No. 5679-C-120 was a cloud on their title, but the SC dismissed the action because petitioners failed to demonstrate the requisite title.
• Express trust (Articles 1441 and 1444, Civil Code) — Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in another; it is a fiduciary relationship obliging the trustee to deal with the property for the benefit of the beneficiary. An express trust is created by the intention of the trustor or of the parties, and no particular words are required for its creation — it is sufficient that a trust is clearly intended. Applied here: the "Agreement of Partition" was in the nature of a trust agreement, not a partition, because there was no property to partition and the parties were not co-owners; Maxima Caballero held one-third of Lot 5679 in trust for Paciencia Sabellona.
• Repudiation of an express trust and prescription — While no time limit is imposed for the enforcement of rights under express trusts, prescription may bar a beneficiary's action for recovery if a repudiation of the trust is proven by clear and convincing evidence and made known to the beneficiary. Applied here: repudiation was established when Maxima's heirs sold the property to a third person not privy to the Agreement, the Agreement was unregistered and unannotated on the title, and nothing showed the buyer knew of it.
• Private instrument versus public instrument (Article 709, Civil Code) — A sale of a piece of land appearing in a private deed is binding between the parties but cannot be considered binding on third persons if it is not embodied in a public instrument and recorded in the Registry of Property. Applied here: the lost private document evidencing the 1953 sale to Dalmacio Secuya could not bind respondent or the prior registered owners.
• Innocent purchaser for value under the Torrens system and its exception — One who deals with property registered under the Torrens system need not go beyond the title and is charged with notice only of burdens and claims annotated on it; the exception is where the purchaser has actual knowledge of facts and circumstances that would impel a reasonably cautious man to inquire, or knowledge of a defect or lack of title in the vendor. Applied here: even if respondent knew of the occupants, the vendor's assurance that they were mere tenants and the absence of any annotation on the title preserved her good-faith purchaser status.

• "In an action to quiet title, the plaintiffs or complainants must demonstrate a legal or an equitable title to, or an interest in, the subject real property. Likewise, they must show that the deed, claim, encumbrance or proceeding that purportedly casts a cloud on their title is in fact invalid or inoperative despite its prima facie appearance of validity or legal efficacy." — This passage states the twin requisites of an action for quieting of title, which petitioners failed to satisfy and on which the dismissal of the petition rests.
• "No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended." — Quoting Article 1444 of the Civil Code, the SC used this rule to recharacterize the "Agreement of Partition" as an express trust despite its nomenclature.
• "While no time limit is imposed for the enforcement of rights under express trusts, prescription may, however, bar a beneficiary's action for recovery, if a repudiation of the trust is proven by clear and convincing evidence and made known to the beneficiary." — This passage states the rule that defeated the beneficiaries' claim despite the normally imprescriptible character of express trusts.
• "One who falls within the exception can neither be denominated an innocent purchaser for value nor a purchaser in good faith; and hence does not merit the protection of the law." — Quoting Sandoval vs. Court of Appeals, this passage defines the actual-knowledge exception to Torrens reliance, which the SC found inapplicable to respondent on these facts.

• Sandoval vs. Court of Appeals, 260 SCRA 283, August 1, 1996 — Followed as controlling precedent on the Torrens system's good-faith purchaser rule and its actual-knowledge exception.
• Rizal Surety & Insurance Company vs. CA, 261 SCRA 69, August 28, 1996 — Cited for the definition of a trust as a fiduciary relationship.
• Mindanao Development Authority vs. CA, 113 SCRA 429, April 5, 1982 — Cited for the rule that prescription may bar a trust beneficiary's action upon a repudiation proven by clear and convincing evidence and made known to the beneficiary.

• Article 476, Civil Code — Defines the action to quiet title or remove a cloud: it lies when an apparently valid but in truth invalid instrument, record, claim, encumbrance or proceeding prejudices title to real property. The SC applied it as the statutory framework for petitioners' complaint, which alleged respondent's TCT as the cloud.
• Article 477, Civil Code — Requires that the plaintiff have legal or equitable title to, or an interest in, the real property subject of the action, though possession is not required. The SC applied it to conclude that petitioners, lacking proven title, could not maintain the action.
• Article 1441, Civil Code — Defines trust and distinguishes express trusts (created by the intention of the trustor or parties) from implied trusts (arising by operation of law). The SC used it to classify the Agreement of Partition as an express trust.
• Article 1444, Civil Code — Provides that no particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended. The SC applied it to find that Maxima Caballero held one-third of Lot 5679 in trust for Paciencia Sabellona despite the Agreement's label.
• Article 709, Civil Code — Makes a sale of land in a private deed binding only between the parties and ineffective against third persons unless embodied in a public instrument and recorded in the Registry of Property. The SC applied it to the lost private document evidencing the 1953 sale to Dalmacio Secuya.
• Public Land Act — Prohibits the alienation or encumbrance of land acquired under a free patent or homestead patent for five years from the issuance of the patent. The CA relied on it in ruling the Agreement of Partition void; the SC's disposition rested on the trust and title rulings.
• Article 2217 and Article 2208 No. 11, Civil Code — Bases for the moral damages and attorney's fees, respectively, awarded by the RTC in the decision affirmed by the SC.