Yared v. Tiongco
REITERATIONFacts
1. The Antecedents: The underlying dispute concerns three parcels of land in Iloilo City: Lots 3244, 3246, and 1404. These lots were originally registered under Original Certificates of Title (OCTs) in the names of Matilde, Jose, Vicente, and Felipe Tiongco, each holding a ¼ undivided share, or under the name of "Heirs of Maria Luis de Tiongco." The petitioner, Estrella Tiongco Yared, claimed to be an heir of Jose Tiongco and asserted her right to these properties, on which she had built her house and collected rentals. The conflict escalated when respondent Jose B. Tiongco prohibited her from collecting rentals and initiated legal actions against tenants and the petitioner herself. A key event was the discovery by the petitioner that respondent Jose had executed an Affidavit of Adjudication in 1974, declaring himself the sole surviving heir and adjudicating all three lots to himself. This led to the cancellation of the OCTs and the issuance of new Transfer Certificates of Title (TCTs) in his name, followed by subsequent sales to Catalino Torre and then to respondent Antonio G. Doronila, Jr., before the properties were eventually sold back to respondent Jose. 2. Procedural History: The petitioner filed a complaint on October 2, 1990, before the Regional Trial Court (RTC) of Iloilo City, seeking the annulment of the Affidavit of Adjudication, deeds of sale, and TCTs, along with reconveyance and damages. The petitioner argued that the Affidavit of Adjudication was fraudulent and void, as respondent Jose was not the sole surviving heir. Respondent Jose, however, contended that he was the only legitimate son and denied the fraudulent nature of the transactions. The RTC dismissed the petitioner's complaint, ruling that the action had prescribed, as it was filed 16 years after the registration of the Affidavit of Adjudication. The petitioner appealed to the Court of Appeals (CA), which affirmed the RTC's decision, agreeing that actions for reconveyance based on fraud or implied/constructive trust are subject to prescription periods, particularly from the discovery of fraud or issuance of title. The CA denied the petitioner's motion for reconsideration. 3. The Petition: The petitioner seeks review of the CA's decision through a petition for review on certiorari under Rule 45 of the Rules of Court. The core arguments raised are that the CA erred in affirming the lower court's finding that the Affidavit of Adjudication was merely voidable, asserting it was a complete nullity due to respondent Jose's malicious and bad-faith actions. Furthermore, the petitioner argues that the CA erred in dismissing the complaint on the ground of prescription, contending that an action to declare a nullity and subsequent transactions arising from it does not prescribe, especially since the petitioner remained in possession of the lots. Even if the affidavit were considered voidable, the petitioner argues that respondent Jose, as a lawyer aware of her rights, became an implied trustee, and an action for reconveyance based on trust does not prescribe when the beneficiary is in actual possession.
Issue(s)
Whether the action for annulment of the Affidavit of Adjudication and reconveyance has prescribed; and whether the petitioner's continued possession of the property affects the prescriptive period for her action. Whether the Affidavit of Adjudication executed by respondent Jose B. Tiongco is void or merely voidable; and whether respondent Jose B. Tiongco, by adjudicating the properties to himself, became a constructive trustee for the benefit of other heirs, including the petitioner. Whether the subsequent sales to third parties cured the nullity of the certificates of title obtained through fraudulent means; and whether the third parties can be considered innocent purchasers for value. Whether respondent Jose B. Tiongco can claim lack of knowledge of the defects surrounding the cancellation of the Original Certificates of Title (OCTs) and benefit from his fraudulent actions.
Ruling
The petition is meritorious. The Court reversed and set aside the decisions of the Court of Appeals and the Regional Trial Court. The Register of Deeds of Iloilo City is ordered to restore the Original Certificates of Title for Lots 3244, 3244, and 3246 under the names of the original registered owners. Respondent Atty. Jose B. Tiongco is ordered to show cause why he should not be sanctioned as a member of the bar.
Ratio Decidendi
On the issue of prescription and possession: The Court reiterated the established rule that an action for reconveyance based on implied or constructive trust generally prescribes in ten (10) years from the issuance of the Torrens title. However, an exception exists: prescription cannot be invoked if the plaintiff is in actual possession of the land to be reconveyed. In such cases, the action for reconveyance is considered an action to quiet title, which is imprescriptible. The Court cited Heirs of Pomposa Saludares v. Court of Appeals, Millena v. Court of Appeals, Alfredo v. Borras, Vda. de Cabrera v. Court of Appeals, and David v. Malay to support this exception. The petitioner's possession was disturbed in 1983 when respondent Jose filed a case for recovery of possession, prompting her to file the complaint to protect her rights and clear doubts cast on her title. Her undisturbed possession, despite the adverse claim, gave her a continuing right to seek judicial aid. On the validity of the Affidavit of Adjudication and the nature of the trust: The Court found that the Affidavit of Adjudication executed by respondent Jose was based on false allegations, as admitted by the RTC which found that Jose was not the only surviving heir. The Court noted the unusual circuitous sale transactions which could not cleanse the illegality of Jose's act of adjudicating the properties to himself. Even if the affidavit were merely voidable, Jose, being a lawyer aware of the other heirs and the petitioner's possession, became a constructive trustee of the property for the benefit of the petitioner. The Court emphasized that registration proceedings cannot be used as a shield for fraud or for enriching oneself at the expense of another. On the protection of innocent purchasers for value: The Court defined an innocent purchaser for value and reiterated that while a person dealing with a Torrens title need not inquire further, this rule has exceptions. If a party has actual knowledge of facts that would impel a reasonably cautious man to inquire, or has knowledge of a defect in the vendor's title, they cannot claim to be acting in good faith. In this case, the fact that respondent Jose was not in possession of the properties when they were sold to Catalino Torre and Doronila should have put the vendees on guard. Regardless, the properties eventually reverted to Jose. On Jose's knowledge and benefit from fraudulent actions: Jose could not claim lack of knowledge of the defects surrounding the cancellation of the OCTs and benefit from his fraudulent actions.
Main Doctrine
An action for reconveyance based on fraud or constructive trust generally prescribes within ten (10) years from the issuance of the title. However, this prescriptive period does not apply if the plaintiff remains in actual possession of the property, in which case the action is considered an action to quiet title, which is imprescriptible.