G.R. No. 20783. October 16, 1923

The rather unusual situation which arises in the instant case can best be
understood and decision can best be made by a chronological narration of the
controlling facts.

In September, 1912, Felix Laureano sold to Eugenio Kilayco a piece of
property situated in the city of Iloilo. Shortly thereafter, the property was
brought under the Torrens system by a petition presented by Kilayco to the
proper court which ordered the registration of the property in his name.
Adjoining the property of Kilayco was other property belonging to Laureano.

When the cadastral survey was initiated in Iloilo in 1914, Kilayco made
proper representations to confirm the title to his property. Thereafter, title
was issued to him, but later, for some unknown reason, the certificate of title
was ordered cancelled and a new one was issued. Then, presumably by mistake, the
title was made to include not only Kilayco’s property but property belonging to
his neighbor, Laureano. The final decree to this effect was issued on August 29,
1916.

Creditors of Kilayco, becoming aware of the existence of the title to the
property above-mentioned, instituted actions and obtained writs of execution
during the month of May, 1922. The proper annotations were made in the office of
the register of deeds on the title to the property. The sale of the property was
set for October 18, 1922.

During all of this time, Laureano had done nothing to protect his interests
in the property which had been wrongfully adjudicated to Kilayco. He claims to
have been absent in Spain at the time of the hearing in the cadastral case and
to have known nothing of it. He only awakened to his danger following the levies
made by the creditors of Kilayco on the property which Laureano claimed was his.
On June 3, 1922, Laureano brought action in the Court of First Instance of Uoilo
against Kilayco to obtain a judgment, declaring him to be the owner of the
parcels of land, and ordering the cancellation of the certificate of title
theretofore issued in the name of Kilayco. Kilayco in turn confessed judgment
which accordingly was rendered practically in the terms of the complaint. The
trial judge, however, failed to accede to a request to cancel the annotations on
the certificate of title in favor of the creditors of Kilayco for the very good
reason that the creditors were not parties to the action.

The present action arises from the foregoing facts. The object was to secure
a preliminary injunction afterwards to be made permanent, stopping the sale of
the property at public auction, to annul the levies made on the property, to
obtain the cancellation in the registry of property of the annotations made, and
to secure a new title for the plaintiff without these encumbrances. After trial,
judgment was handed down in favor of the plaintiff. Defendants appealed.

The fundamental principles governing the Torrens system are well known.
Ordinarily if one takes no steps to protect his property interests at the time
of the cadastral survey, he is estopped to dispute the title. He has one year
from the issuance of the decree to allege and prove fraud. But he may not wait
longer than this period to assert his rights. And were this an ordinary
registration case, we would reach a conclusion satisfactory to the appellants.
But we think that there is more to the case than this.

It must not be forgotten that Kilayco never laid claim to this property; that
the two lots Nos. 4267 and 4289 covered by the certificate of title No. 830 were
mistakenly registered in the name of Eugenio Kilayco; that the court did not
have jurisdiction to confirm the title of said two lots either in favor of
Eugenio Kilayco or of anybody else, for the reason that no petition for title
was filed, no trial was held, no evidence was presented, and no judgment was
rendered regarding these two lots in the land registration proceedings; that
Kilayco never asserted any right of ownership over the property; that the rent
was paid to Laureano; and that judgment was obtained in the courts in favor of
Laureano through the acquiescence and consent of Kilayco. Kilayco was, in
effect, merely holding the title of the property in trust for Laureano. The
creditors of Kilayco could acquire no higher or better right than Kilayco had in
the property, which, in this case, was nothing.

We are of the opinion that this was a proper case for the issuance of an
injunction to prevent the execution of judgments which would be against
conscience, and that it is just and legal to give to plaintiff Laureano full
right and title to his property.

Finding no reversible error, judgment is affirmed with costs against the
appellants. So ordered.

Johnson, Avanceña, Villamor, Johns, and
Romualdez, JJ., concur.

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STREET, J.:

I concur and wish merely to add that in my
view the case is controlled by the same rule that would govern if the property
had been held by any other species of title than a Torrens title. By mistake
property in which Kilayco had no interest or right whatever had become
registered in Kilayco’s name. In him this title was a nude title, the beneficial
interest being in the true owner, Felix Laureano. Under these circumstances it
was entirely legitimate and honest for Kilayco to confess judgment in the action
brought by Laureano to correct the mistake. It is rudimentary that an execution
creditor acquires only the interest which the execution debtor has in the
property which is the subject of levy; and the purchaser at the execution sale
in this case, if the property had been sold, would in any event have taken the
property subject to the equitable right of Laureano to have the mistake
corrected. This must be true regardless of the form of the title by which the
property was held. Section 70 of Act No. 496 plainly shows that, generally
speaking, registered land is held subject to the same rights and liabilities as
unregistered land; and this case supplies a good illustration of a right and
liability identical as regards both.