Spouses Rosario v. Court of Appeals
REITERATIONFacts
The Antecedents: Petitioners Spouses Jose and Herminia Rosario filed an action for legal redemption with damages against respondents Villahermosas, claiming Herminia was the registered owner of one-half undivided share of Lot No. 77-A, co-owned with Filomena Lariosa. Herminia paid the balance of a GSIS loan secured by a mortgage on the lot after Filomena's death and began possessing the other half, believing she was the sole heir. Respondents claimed ownership of the other half based on a deed of sale dated July 28, 1976, allegedly executed by Filomena in favor of their father, Emilio Villahermosa, for P380.00, and petitioners offered to redeem the property. Respondents countered that Lot No. 77 originally belonged to their parents, Emilio and Paulina Villahermosa, with Filomena occupying half in trust, and that Filomena executed a simulated deed of sale to Herminia to enable her to secure a GSIS loan, later returning the lot to Emilio Villahermosa via a deed of sale dated July 28, 1976. Procedural History: The Regional Trial Court (RTC) ruled in favor of the petitioners, declaring Herminia Rosario the absolute owner of Lot No. 77-A and ordering the respondents to accept P380.00 and execute a deed of conveyance, finding that the Torrens title could not be collaterally attacked and that Herminia, as a registered co-owner, had the right to legal redemption. The Court of Appeals (CA) reversed the RTC decision, dismissing the complaint and recognizing the validity of the Deed of Sale dated July 28, 1976, finding that a trust was established between Filomena and Emilio Villahermosa. The Petition: Petitioners seek reversal of the CA decision, raising issues on whether respondents and their father are "strangers" for legal redemption purposes, whether an implied trust existed, and whether the redemption period was complied with.
Issue(s)
Whether an implied trust existed between Filomena Lariosa and Emilio Villahermosa over Lot No. 77-A. Whether an implied trust existed between Filomena Lariosa and petitioner Herminia Rosario for the benefit of the Villahermosas. Whether Emilio Villahermosa and his heirs are "strangers" within the contemplation of Article 1620 of the Civil Code for the purpose of legal redemption. Whether petitioner Herminia Rosario complied with the thirty (30) day period provided under Article 1623 of the Civil Code for exercising the right of legal redemption. Whether the Deed of Sale between Filomena Lariosa and petitioner Herminia Rosario was a valid transfer of ownership or a simulated contract.
Ruling
The petition is denied, and the decision of the Court of Appeals is affirmed. The Court held that the sale between Filomena Lariosa and Herminia Rosario was simulated, and thus, no co-ownership was created. Consequently, Herminia Rosario had no right of legal redemption. A trust was established, and Filomena's subsequent sale to Emilio Villahermosa was a valid fulfillment of that trust.
Ratio Decidendi
On the existence of an implied trust between Filomena Lariosa and Emilio Villahermosa: The Court affirmed the CA's finding that a trust was created. The transfer of Lot No. 77-A to Filomena was based on her promise to return or sell it back to Emilio Villahermosa. This was supported by the testimony of Lourdes Villahermosa and the opening paragraph of the Deed of Sale dated July 28, 1976, which explicitly stated it was in compliance with Filomena's promise. The petitioners did not contest the authenticity of this deed, and the circumstances, including the consideration of P380.00 remaining the same over twelve years and the inclusion of improvements in the 1976 sale, indicated compliance with the trust arrangement. The Court cited Article 1453 of the Civil Code, stating that when property is conveyed in reliance upon a declared intention to hold it for another or the grantor, an implied trust arises. On the existence of a trust between Filomena Lariosa and petitioner Herminia Rosario: The Court found that the Deed of Sale between Filomena and Herminia was a simulated contract, intended merely as an accommodation to facilitate Filomena's GSIS loan. The evidence showed that Filomena requested the transfer to secure the loan, and Herminia acted as a co-signer. Crucially, Filomena retained physical possession of the lot and house, paid the taxes, and never demanded a partition, despite the registration of the title in both their names. The subsequent deed of sale from Filomena to Emilio, which did not mention Herminia, further confirmed that the sale to Herminia was not intended to transfer ownership. The Court applied Article 1409 of the Civil Code, stating that simulated contracts are void and produce no legal effects. On whether Emilio Villahermosa and his heirs are "strangers" and the right of legal redemption: Since the sale between Filomena and Herminia was simulated, no co-ownership was created. Therefore, Herminia never became a co-owner of Lot No. 77-A. The right of legal redemption under Article 1620 of the Civil Code presupposes the existence of co-ownership. As Herminia was not a co-owner, she could not exercise the right of legal redemption when Filomena sold the property to Emilio Villahermosa. The Torrens system does not create title but merely confirms existing rights; it cannot be used to shield fraud or unjust enrichment. The Court found that Herminia's registration of a share based on a simulated deed impressed a constructive trust in favor of Filomena. On compliance with the thirty (30) day period for legal redemption: As the Court found that no co-ownership existed and the sale to Herminia was simulated, the right of legal redemption never arose. Consequently, the issue of compliance with the 30-day period under Article 1623 of the Civil Code became moot. The Court reiterated that the Torrens title does not vest ownership but merely records existing rights, and it cannot be used to defeat the claims of the true owner or to facilitate betrayal of trust. On whether the Deed of Sale between Filomena Lariosa and petitioner Herminia Rosario was a valid transfer of ownership or a simulated contract: The Court found that the Deed of Sale between Filomena and Herminia was a simulated contract, intended merely as an accommodation to facilitate Filomena's GSIS loan. The evidence showed that Filomena requested the transfer to secure the loan, and Herminia acted as a co-signer. Crucially, Filomena retained physical possession of the lot and house, paid the taxes, and never demanded a partition, despite the registration of the title in both their names. The subsequent deed of sale from Filomena to Emilio, which did not mention Herminia, further confirmed that the sale to Herminia was not intended to transfer ownership. The Court applied Article 1409 of the Civil Code, stating that simulated contracts are void and produce no legal effects.
Main Doctrine
A simulated sale, even if registered under the Torrens system, does not create co-ownership and does not give rise to the right of legal redemption, as the registration merely confirms existing rights and cannot be a shield for fraud or unjust enrichment. A constructive trust may be imposed to protect the true owner.