Spouses Fernandez v. Court of Appeals
REITERATIONFacts
The Antecedents: Petitioners Spouses Florentino and Vivencia Fernandez, along with private respondent Zenaida Angeles-Fernandez and her husband Justiniano Fernandez, jointly purchased a parcel of land (Lot 13, Block 19, Pagasa Subdivision, Quezon City) with an area of 310 square meters. Petitioners advanced the downpayment of P5,500.00. A Deed of Conditional Sale was executed in favor of both couples. Subsequently, a Deed of Absolute Sale was executed solely in favor of Zenaida and Justiniano Fernandez. Upon learning of this, Zenaida and Justiniano executed an affidavit acknowledging the sale of 110 square meters to petitioners and receipt of P5,500.00. Due to zoning restrictions, a duplex building was constructed on the lot, with one unit occupied by petitioners and the other by Zenaida and Justiniano. A Transfer Certificate of Title was later issued solely in the names of Zenaida and Justiniano. Zenaida and Justiniano filed for dissolution of their conjugal partnership, and a compromise agreement awarded the subject land to Zenaida. Zenaida subsequently demanded that petitioners vacate the premises. Procedural History: Petitioners filed an action to quiet title and damages against Zenaida. The Regional Trial Court (RTC) ruled that petitioners were owners of 1/3 portion (110 sq. meters) of the lot, subject to reimbursement, and that Zenaida owned the other half and both units of the duplex house. The RTC later amended its decision to award 1/3 portion or 110 square meters to petitioners, but retained the order for petitioners to pay P2,225.00. Both parties appealed. The Court of Appeals (CA) modified the RTC decision, declaring Zenaida as the sole owner of the property, but ordered her to return P5,500.00 with interest to petitioners. Petitioners' motion for reconsideration was denied. The Petition: Petitioners filed a petition for review, contending that the CA erred in not declaring them part owners of the lot despite the undisputed agreement for common purchase.
Issue(s)
Whether the Court of Appeals erred in not declaring petitioners as part owners of the subject property. Whether the cause of action of the petitioners had prescribed. Whether the affidavit acknowledging the sale of a portion of the land to petitioners was rendered ineffective by subsequent events and the issuance of a Torrens title solely in the names of Zenaida and Justiniano Fernandez. Whether the petitioners are entitled to reimbursement for their share in the construction of the duplex house.
Ruling
The petition is GRANTED. The decision of the Court of Appeals is REVERSED. Petitioners are declared owners of one-third (1/3) or 110 square meters of Lot 13, Block N-19 of Pag-asa Subdivision, presently occupied by them, covered by TCT No. 149347 of the Register of Deeds of Quezon City. They are also declared owners of the portion of the duplex house occupied by them after payment of the balance of P1,349.70 advanced by the husband of private respondent Zenaida Fernandez for the construction thereof, with interest at the legal rate from November 1969 until fully paid.
Ratio Decidendi
On the issue of petitioners' ownership of a portion of the lot: The Supreme Court held that the Court of Appeals erred in not declaring petitioners as part owners. The Court emphasized that the Deed of Conditional Sale and the Affidavit executed by Zenaida and Justiniano acknowledging the sale of 110 square meters to petitioners and receipt of consideration were sufficient evidence of petitioners' ownership. The Court noted that private respondent Zenaida Angeles-Fernandez admitted the genuineness and due execution of these documents. The subsequent execution of a Deed of Absolute Sale solely in favor of Zenaida and Justiniano, and the issuance of a Torrens title in their names, did not divest petitioners of their ownership, especially since they confronted Zenaida and Justiniano upon learning of the absolute deed, leading to the affidavit. The Court reiterated that the Torrens system cannot be used as a shield for fraud, and knowledge of an unregistered sale is equivalent to registration. The Court also found that Justiniano's demand for reimbursement for construction expenses and petitioners' payment of realty taxes further supported their claim of ownership. On the issue of prescription: The Supreme Court ruled that the cause of action of the petitioners had not prescribed. The Court reasoned that prescription cannot be invoked against a party who is in possession of the land under a claim of ownership, particularly in an action for reconveyance, which is in effect an action to quiet title. The Court pointed out that petitioners had been in possession of their portion of the premises since 1967 and continued to possess the same. The adverse claim by Zenaida Fernandez was considered to have been asserted only in 1977, which was well within the prescriptive period from the time of the acknowledgment of petitioners' rights. The Court cited jurisprudence holding that an action to quiet title by a lawful possessor is imprescriptible. On the effect of the Affidavit and Torrens Title: The Court held that the Affidavit executed by Justiniano Fernandez and Zenaida Angeles-Fernandez, acknowledging the sale of a portion of the land to petitioners and the receipt of P5,500.00, was binding upon them. The Court stated that private respondent was estopped from going against such declaration. While the Court of Appeals relied heavily on the Transfer Certificate of Title issued solely in the names of Zenaida and Justiniano, the Supreme Court clarified that the registration of a deed is the operative act to bind third persons, but knowledge of a prior unregistered interest is equivalent to registration as to the party with such knowledge. The Court emphasized that the Torrens system should not be used to perpetrate fraud, and the issuance of a title in their names did not preclude petitioners from asserting their right of ownership, especially given their possession. On the ownership of the duplex house and reimbursement: The Supreme Court found that the trial court erred in concluding that the entire duplex house belonged to private respondent Zenaida Angeles-Fernandez based on the insufficiency of petitioners' payment for construction. The Court noted that Justiniano Fernandez admitted petitioners' ownership of their portion of the duplex house in his demands for payment. While the amount paid by petitioners might have been insufficient for the construction, this insufficiency did not divest them of their ownership. The Supreme Court ordered that petitioners be declared owners of the portion of the duplex house they occupied, subject to their payment of the balance of the construction costs advanced by Justiniano Fernandez, with legal interest.
Main Doctrine
The registration of a deed is the operative act to bind or affect the land concerning third persons, but knowledge of a prior unregistered interest is equivalent to registration as to the party with such knowledge. The Torrens system cannot be used as a shield for fraud, and prescription cannot be invoked against a party in possession of the land under a claim of ownership, especially in an action for reconveyance which is in effect an action to quiet title.