Tejido vs. Zamacoma

A conveyance of private registered agricultural land to an alien before the 1935 Constitution took effect is not invalidated by the 1935 Constitution's alien-land prohibition or by Public Land Act No. 2874, which applies only to public agricultural lands; nor is a post-foreclosure compromise conveying mortgaged property in satisfaction of judgment a pactum commissorium under the Old Civil Code. An action to annul such a long-registered conveyance is barred by laches after about 45 years.

Plaintiffs-appellants Emilio Tejido and Jose Tejido, Jr. claim through the original registered owners of Haciendas Candelaria and Caridad, while defendants-appellees hold subdivided portions as transferees under Torrens titles. The legal backdrop includes Public Land Act No. 2874, the 1935 Constitution's alien-land prohibition, and the Old Civil Code's pactum commissorium rule, which the SC had to apply to a pre-1935 private-land conveyance.

Haciendas Candelaria and Caridad, two big tracts in the then municipalities of La Carlota and Pontevedra, Negros Occidental, were originally registered under the Torrens system as early as June 14, 1907 in the names of the predecessors-in-interest of plaintiffs-appellants Emilio Tejido and Jose Tejido, Jr. Prior to March 20, 1925, those registered owners obtained a loan from the late Pedro Uriarte, predecessor-in-interest of defendants-appellees, and mortgaged both haciendas in his favor.

When the registered owners failed to pay the loan at maturity, Pedro Uriarte filed on March 20, 1925 Civil Case No. 3391 before the Court of First Instance of Negros Occidental for "Ejecucion de Hipoteca." On November 12, 1925, judgment was rendered in that case in favor of Pedro Uriarte, ordering the registered owners to pay the mortgage debt plus interests. The registered owners appealed, but they later desisted from pursuing the appeal and instead entered into a Compromise Agreement on February 26, 1926 with Pedro Uriarte. Under that agreement, for and in consideration of certain concessions and the amounts adjudged against them, they ceded, transferred, and conveyed ownership of Haciendas Candelaria and Caridad to Pedro Uriarte.

Consequently, the certificates of title covering the haciendas in the names of the previous owners were cancelled, and Transfer Certificate of Title Nos. 61 and 62 were issued in the name of Pedro Uriarte. Thereafter, Pedro Uriarte made subsequent transfers, among them in favor of defendants-appellees, who purchased the greater portions of the two haciendas. The haciendas were subdivided; Transfer Certificate of Title Nos. 61 and 62 were cancelled, and new certificates of title were issued for the subdivided lots.

On February 16, 1971, plaintiffs-appellants filed before the Court of First Instance of Negros Occidental a complaint for "Recovery of Inheritance, Accounting and Damages" against several defendants, including the herein defendants-appellees, seeking to recover eighteen parcels of land comprising what was originally known and identified as Haciendas Candelaria and Caridad. The complaint was later superseded by an Amended Complaint dated September 30, 1972, which impleaded additional parties, and on December 18, 1972, the Amended Complaint was supplemented by a Bill of Particulars specifying the names of plaintiffs-appellants' predecessors-in-interest and the certificates of title originally issued for the subject parcels.

In a verified motion dated December 19, 1972, defendants moved to dismiss the complaint on three grounds: (1) that the complaint states no cause of action; (2) that the cause of action is barred by a prior judgment; and (3) that the cause of action is barred by the statute of limitations by reason of prescription and laches. A hearing was held on February 19, 1973, and the parties submitted documentary evidence on the second and third grounds.

Plaintiffs-appellants' complaint and amended complaint sought to recover the eighteen parcels on the theory that the amicable deed of conveyance was null and void because Pedro Uriarte was an alien and because the deed allegedly constituted a pactum commissorium under Articles 1858 and 1859 of the Old Civil Code. The trial court found that the deed of conveyance was executed on February 26, 1926; that Pedro Uriarte was then a Spanish citizen; that the haciendas were originally registered under the Torrens system as early as June 14, 1907, and also in 1913 and 1914; that the subdivided lots in defendants' possession were covered by corresponding transfer certificates of title; that there was no allegation that defendants were transferees in bad faith or with knowledge of the alleged defect in their transferor's title; and that the transaction sought to be set aside took place in 1926, about forty-five years before the original complaint was filed in 1971.

• Alien Citizenship and Public Land Act No. 2874: Petitioners argued that the acquisition of the lands by the late Pedro Uriarte y Gote, a Spanish citizen, in 1926 was illegal, invoking Krivenko vs. Register of Deeds of Manila and Sections 120 and 121 of Public Land Act No. 2874.
• Derivative Acquisition by Juan Uriarte Zamacoma: Petitioners argued that the acquisition by defendant-appellee Juan Uriarte Zamacoma of the lands from his late father, Pedro Uriarte, was likewise illegal.
• Pactum Commissorium: Petitioners assailed the amicable deed of conveyance as a pactum commissorium violative of Articles 1858 and 1859 of the Old Civil Code.
• Laches: Petitioners argued that the trial court erred in holding them guilty of laches for delaying the filing of the action.
• Recovery of Ownership and Possession: Petitioners argued that, from the facts, they were entitled to recover ownership and possession of the lands.
• Dismissal of the Amended Complaint: Petitioners argued that the trial court erred in ordering the dismissal of their Amended Complaint.

• No Cause of Action: Respondents argued that the complaint states no cause of action.
• Prior Judgment: Respondents argued that the cause of action is barred by a prior judgment.
• Prescription and Laches: Respondents argued that the cause of action is barred by the statute of limitations by reason of prescription and laches.

• Alien Citizenship and Public Land Act No. 2874: Whether the 1926 acquisition of the haciendas by Pedro Uriarte, a Spanish citizen, was illegal under Krivenko vs. Register of Deeds of Manila and Sections 120 and 121 of Public Land Act No. 2874.
• Derivative Acquisition by Juan Uriarte Zamacoma: Whether Juan Uriarte Zamacoma's acquisition of the lands from Pedro Uriarte was likewise illegal.
• Pactum Commissorium: Whether the amicable deed of conveyance constituted a pactum commissorium violative of Articles 1858 and 1859 of the Old Civil Code.
• Laches and Prescription: Whether plaintiffs-appellants' action was barred by prescription or laches.
• Recovery of Ownership and Possession: Whether plaintiffs-appellants were entitled to recover ownership and possession of the lands.
• Dismissal for Failure to State a Cause of Action: Whether the trial court erred in dismissing the Amended Complaint for failure to state a sufficient cause of action.

• Alien Citizenship and Public Land Act No. 2874: No. The 1926 conveyance to Pedro Uriarte, a Spanish citizen, was not invalidated by the 1935 Constitution, effective only on November 15, 1935, or by Public Land Act No. 2874, which applied only to public agricultural lands and not to private registered land.
• Derivative Acquisition by Juan Uriarte Zamacoma: No. Pedro Uriarte's acquisition was not shown illegal, and in any event the property is now held by Filipino citizens, including Juan Uriarte Zamacoma, who became a Filipino citizen on October 20, 1936.
• Pactum Commissorium: No. Articles 1858 and 1859 of the Old Civil Code did not apply because foreclosure proceedings were instituted, a judgment was rendered, and the parties later entered a compromise conveying the mortgaged property in satisfaction of the judgment.
• Laches and Prescription: Yes, by laches. Plaintiffs slept on their rights for about 45 years from 1926 to 1971; registration under the Torrens system operated as notice to the whole world.
• Recovery of Ownership and Possession: No. Plaintiffs were not entitled to recover; the SC declared defendants-appellees the lawful owners of the disputed parcels.
• Dismissal for Failure to State a Cause of Action: No error. The amended complaint failed to state a sufficient cause of action, and the dismissal was affirmed.

• Alien Citizenship and Public Land Act No. 2874: The SC held that the prohibition in Act No. 2874 against aliens was limited to public agricultural lands or lands of the public domain. It relied on Central Capiz vs. Ramirez and Gavino Tan Yungquip vs. Director of Lands, which held that Act No. 2874 applied to public lands only, that private lands held in ownership are no part of the public domain, and that any provision attempting to restrain disposition of private lands was null and void and had no retroactive effect. Since the land subject of the deed was private agricultural land, it was not within Act No. 2874. The SC also held that Krivenko vs. Register of Deeds of Manila was misplaced because it involved acquisition of a residential lot in December 1941, after the 1935 Constitution took effect on November 15, 1935, and Section 5, Article XIII of the 1935 Constitution prohibited transfer of private agricultural land to aliens. The deed in this case was executed in February 1926, before the Constitution, and the constitutional prohibition has no retroactive effect; Herrera vs. Luy Kim Guan held that acquisition of land by an alien before the Constitution cannot be attacked on account of citizenship.
• Derivative Acquisition by Juan Uriarte Zamacoma: Even assuming Pedro Uriarte was disqualified to acquire and own the parcels by reason of alien citizenship, the SC held that the factual situation had changed because the litigated property is now in the hands of Filipino citizens. Defendant Juan Uriarte Zamacoma, who owns the bigger portions, became a Filipino citizen as of October 20, 1936, and the other defendants, by the very allegation of plaintiffs' complaint, are all Filipino citizens. Therefore, there would be no more public policy served in allowing plaintiffs-appellants to recover the land as it is already in the hands of qualified persons. The SC applied by analogy Vasquez vs. Giap & Li Seng Giap & Sons, which held that the aim of preserving the nation's lands for future generations of Filipinos would not be thwarted but achieved by making lawful the acquisition of real estate by aliens who become Filipino citizens by naturalization.
• Pactum Commissorium: The SC held that Article 1858 of the Old Civil Code prohibited parties from expressly stipulating in a contract of mortgage that, if the principal obligation became due, the creditor could appropriate to himself the things given in pledge or mortgaged property in satisfaction of the indebtedness. It did not apply where foreclosure proceedings were in fact instituted, resulting in a judgment, and the parties thereafter entered a compromise agreement whereby the judgment debtor conveyed the property subject of the mortgage to the judgment creditor in satisfaction of the full amount of the judgment. Here, Pedro Uriarte filed Civil Case No. 3391 for Ejecucion de Hipoteca, obtained judgment on November 12, 1925, and the registered owners later entered the February 26, 1926 Compromise Agreement conveying the haciendas to him. Thus, the deed was not a pactum commissorium.
• Laches and Prescription: The SC held that the transaction sought to be set aside took place in 1926, about 45 years before the original complaint was filed in 1971. The transactions were recorded in the Registry of Property because the properties are registered under the Torrens system; registration of the document operates not only as notice to the parties but also as against the whole world, and any action to annul a conveyance of registered land should be counted from the date of registration, citing De Guinoo vs. Court of Appeals. The SC rejected the argument that the action to declare a void-ab-initio contract does not prescribe under Article 1410 of the New Civil Code: Article 1410 was a new provision not embodied in the Old Civil Code, the law in force when the cause of action allegedly accrued, and no finding of an inexistent or void-ab-initio contract was warranted. Even granting that the statute of limitations could not be invoked, laches applied because plaintiffs or their predecessors-in-interest allowed over 45 years to pass before impugning the deed. The SC defined laches as the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it, citing Tijam vs. Sibonghanoy (cited in Sotto vs. Teves).
• Recovery of Ownership and Possession: Because the amicable deed of conveyance was not invalidated by Pedro Uriarte's alien citizenship or by the pactum commissorium prohibition, and because plaintiffs' action was barred by laches, plaintiffs had no right to recover ownership and possession. The SC concluded that defendants-appellees must be declared the lawful owners of the disputed parcels.
• Dismissal for Failure to State a Cause of Action: The SC held that the averment in the amended complaint that the amicable deed of conveyance was null and void as against existing law and could not be validated by court approval was a mere conclusion of law, not a statement of ultimate facts sufficient to constitute a cause of action. The amended complaint admitted that the subdivided parcels were in defendants' possession and that defendants held transfer certificates of title in their names as transferees of Pedro Uriarte, but it did not allege that defendants were transferees in bad faith or with knowledge of the alleged defect in their transferor's title. Because of the indefeasibility of a Torrens certificate of title, to challenge a transferee's title by virtue of a defect in the predecessor's title, it must be both alleged and proved that the transferee was chargeable with notice of the alleged defect. The complaint failed to do so; hence it did not state a sufficient cause of action.

• Public Land Act No. 2874 applies only to public agricultural lands — The alien-disqualification provisions of Act No. 2874 are limited to public agricultural lands or lands of the public domain; they do not restrain the disposition of private lands already segregated from the public domain and have no retroactive effect. The SC applied this because Haciendas Candelaria and Caridad were private agricultural lands registered under the Torrens system, so the 1926 conveyance to Pedro Uriarte was not covered by Act No. 2874.
• Non-retroactivity of the 1935 Constitution's alien-land prohibition — Section 5, Article XIII of the 1935 Constitution, effective November 15, 1935, prohibits transfers of private agricultural land to aliens, but it does not retroactively invalidate conveyances made before that date. The SC applied this because the deed to Pedro Uriarte was executed on February 26, 1926, before the Constitution; Krivenko vs. Register of Deeds of Manila involved a post-1935 acquisition and was inapplicable.
• Pactum commissorium under the Old Civil Code — Article 1858 of the Old Civil Code prohibits an express stipulation in a mortgage that the creditor may appropriate the mortgaged property upon default; it does not apply where foreclosure proceedings are instituted, judgment is rendered, and the parties later enter a compromise conveying the property in satisfaction of the judgment. The SC applied this because Pedro Uriarte first obtained a foreclosure judgment before the 1926 compromise deed.
• Torrens registration as notice to the whole world — Registration of a document under the Torrens system operates as notice to the parties and to the whole world, and an action to annul a conveyance of registered land is counted from the date of registration. The SC applied this to count the delay from the 1926 transaction and to support laches.
• Laches — Laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it. The SC applied laches because plaintiffs waited about 45 years from 1926 to 1971 to impugn the conveyance.
• Acquisition by an alien before the 1935 Constitution; subsequent Filipino ownership — An alien's acquisition of private land before the 1935 Constitution cannot be attacked on citizenship grounds, and even if there were a disqualification, no public policy is served by allowing recovery where the land is already held by Filipino citizens. The SC applied this because Pedro Uriarte acquired in 1926, Juan Uriarte Zamacoma became a Filipino citizen on October 20, 1936, and the other defendants are Filipino citizens.
• Indefeasibility of Torrens title and notice to transferee — A transferee's Torrens title cannot be challenged based on a defect in the predecessor's title unless the transferee is alleged and proved to be chargeable with notice of the defect. The SC applied this because the complaint did not allege bad faith or knowledge on the part of defendants.

• "The Krivenko doctrine finds no applicability to the instant case which involves an acquisition of private lands as early as 1926 and long before the adoption of the 1935 Constitution." — The SC distinguishes Krivenko and holds that the 1935 Constitution's alien-land prohibition does not reach the 1926 conveyance.
• "For what was prohibited by Article 1858 of the Old Civil Code was for the parties to expressly stipulate in a contract of mortgage that in case the principal obligation should become due, the creditor could appropriate to himself the things given in pledge or mortgaged property in satisfaction of the indebtedness was forbidden. It did not apply to a case where foreclosure proceedings were in fact instituted resulting in a judgment and the parties thereafter entered a compromise agreement whereby the judgment debtor conveyed unto the judgement creditor the property subject of the mortgage in satisfaction of the full amount of the judgment." — The SC defines the scope of the Old Civil Code's pactum commissorium prohibition and explains why a post-foreclosure compromise is not covered.
• "Laches has been defined as the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it." — The SC states the canonical definition of laches and applies it to the 45-year delay.
• "The transactions were recorded in the Registry of Property as the properties are registered under the Torrens System hence the registration of the document in the Registry Office operates, not only as notice to the parties to the same but also as against the whole world. Any action to annul a conveyance of registered land should be counted from the date of registration of the same." — The SC explains why Torrens registration makes the delay count from the registration of the conveyance.

• Krivenko vs. Register of Deeds of Manila, 79 Phil. 461 — Distinguished; it involved a post-1935 acquisition of residential land, not a 1926 private-land conveyance.
• Central Capiz vs. Ramirez, 40 Phil. 883 — Followed; Act No. 2874 applies to public lands only.
• Gavino Tan Yungquip vs. Director of Lands, 42 Phil. 129 — Followed; same public-land-only doctrine.
• Herrera vs. Luy Kim Guan, 1 SCRA 413 — Followed; a pre-Constitution acquisition by an alien cannot be attacked on citizenship grounds.
• Vasquez vs. Giap & Li Seng Giap & Sons, 96 Phil. 447 — Applied by analogy; no public policy is served by recovering land now held by Filipino citizens.
• De Guinoo vs. Court of Appeals, 97 Phil. 235 — Followed; an action to annul a conveyance of registered land is counted from the date of registration.
• Tijam vs. Sibonghanoy, No. L-21450, April 25, 1968, 23 SCRA 29, 35 — Cited for the definition of laches.
• Sotto vs. Teves, 86 SCRA 154 (1978) — Cited in connection with laches.

• Section 5, Article XIII, 1935 Constitution — Prohibits transfer of private agricultural land to aliens except by hereditary succession; the SC held it effective November 15, 1935 and not retroactive, so it did not invalidate the February 26, 1926 deed.
• Sections 120 and 121, Public Land Act No. 2874 — Restrict alienation or encumbrance of lands acquired under the Public Land Act to qualified persons; the SC held the restrictions applied only to public agricultural lands or lands of the public domain, not private registered land.
• Articles 1858 and 1859, Old Civil Code — Prohibit pactum commissorium; the SC held they were not violated by a compromise conveying mortgaged property after foreclosure judgment in satisfaction of the judgment.
• Article 1410, New Civil Code — Provides that an action to declare a contract inexistent or null and void does not prescribe; the SC held it was a new provision not in the Old Civil Code in force when the cause accrued, and laches applied in any event.

• Justice Aquino (Concurring) — Justice Aquino concurred but stated that the majority's statement that aliens were allowed to acquire private agricultural lands before the 1935 Constitution and Krivenko vs. Register of Deeds is not correct. He cited Li Seng Giap & Co. vs. Director of Lands as ruling that an alien cannot register private agricultural lands under the Philippine Bill of 1902 and as revoking Central Capiz vs. Ramirez, Tan Yungquip vs. Director of Lands, and Agari vs. Director of Lands; he also said the Krivenko ruling was first announced in Levy Hermanos vs. Ledesma. He nevertheless concurred because the sale to Pedro Uriarte, though void, involved land now held by Filipino citizens whose valid titles bar the action, citing Vasquez vs. Giap and Li Seng Giap.