CANDIDA SEVILLA, ET AL., PLAINTIFFS AND APPELLANTS, VS. CONCORDIA DE LOS ANGELES, DEFENDANT AND APPELLEE.

On August 21, 1951, plaintiffs instituted this action in the Court of First
Instance of Camarines Sur seeking to recover a parcel of land containing an area
of 41 hectares, 14 ares and 92 centares and the cancellation of Transfer
Certificate of Title No. 577 which was allegedly procured by the defendant
through fraudulent representation.

On December 21, 1951, defendant put in an answer setting up certain
affirmative defenses. On August 20, 1952, defendant filed a motion to dismiss on
the ground that the complaint states no cause of action and, if so, the same is
already barred by prescription. Plaintiffs objected to the motion to dismiss,
and, finding it to be without merit, the court denied the motion. However, when
defendant filed a second motion to dismiss wherein she reiterated her plea that
the action had prescribed, the court, in an order entered on October 20,1953,
reconsidered its previous ruling and dismissed the case on the ground of
prescription. This is the order subject of the present appeal.

The facts, as may be gathered from the complaint, are: Plaintiffs are the
legitimate children of spouses Felix Sevilla and Ciriaca Ramos. During their
marriage, the spouses applied for a homestead in Siruma, Camarines Sur, from the
Bureau of Lands. Ciriaca Ramos died before the issuance of the patent, but
notwithstanding her death her husband continued the prosecution of the homestead
and on April 27, 1934 the patent was granted and Original Certificate of Title
No. 1056 issued in the name of the “heirs of Felix Sevilla.” But, before the
patent and title were issued as aforesaid, Felix Sevilla married the defendant.
Shortly thereafter, Felix Sevilla died and, availing herself of fraud and
misrepresentation, or pretending to be the sole heir of the deceased, defendant
succeeded in having Original Certificate of Title No. 1056 cancelled and
Transfer Certificate of Title No. 577 issued in her name. Because of such
fraudulent representation she was able to possess the land and to appropriate
the produce since 1936 up to the present time.

In considering that the action of the plaintiffs had already prescribed even
if the complaint does not expressly state the date when the alleged fraud was
discovered by them, the court made the following comment: “The complaint does
not allege when plaintiffs discovered the commission of the fraud, that is, the
fraudulent cancellation of Original Certificate of Title No.’ 1056 and the
issuance of T. C. T. No. 577 in the name of the defendant. The property,
however, is covered by a certificate of title duly registered in the office of
the Register of Deeds, and therefore, open to examination by any party
interested therein. As.the records of the Register of Deeds are public records
and open to the inspection and examination of interested parties, there can be
no concealment.” In other words, since it appears that the aforesaid Certificate
of Title No. 577 was issued in 1936 as a result of the fraud practised by
defendant and the plaintiffs have taken the present action only in 1951, the
action, in the opinion of the court, is now barred upon the theory that
plaintiffs had had constructive notice of the fraud for more than 14 years or
since the issuance in 1936 of said Certificate of Title No. 577.

While this ruling is correct if applied to ordinary actions of recovery of
real property which is covered by a torrens title upon the theory that its
registration under our registration system has the effect of a constructive
notice to the whole world, the same cannot be availed of when the purpose of the
action is to compel a trustee to convey the property registered in his name in
trust for the benefit of the cestui que trust. In other words, the
defense of prescription cannot be set up in an action whose purpose is to
recover property held by a person in trust for the benefit of another.

“The action brought by the plaintiffs is clearly an action for the specific
conveyance of the property registered in the name of defendants’ predecessor in
interest. The deceased vendor was issued the certificate of title for and in
behalf, and in trust for the benefit, of the plaintiffs. The action is one to
compel a trustee to convey the property registered in his name in trust for the
benefit of the cestui que trust, and the same does not prescribe.”
(Feliciano Manalang, et al. vs. Gercia Canlas, et al., G. R. No.
L-6307, April 20, 1954.)

“As against the beneficiary prescription is not effective in favor of a
person who is acting as trustee, of a continuing and subsisting trust.”
(Cristobal vs. Gomez, 50 Phil., 810.)

“Prescription does not run in favor of one who holds in trust for others; and
a denial of the trust made by the trustee to one of the beneficiaries who, at
the time of such repudiation of the trust is a minor, does not have the effect
of abrogating the trust relation.” (Castro vs. Castro, 57 Phil.,
675.)

A similar situation obtains in the present case. The complaint alleges that
the patent of the land was granted on April 27, 1934 and to implement it
Original Certificate of Title No. 1056 was issued in the name of the “heirs of
Felix Sevilla,”—meaning the plaintiffs herein who are at that time minors,—and
that sometime in 1936, defendant through fraudulent representation, or by
pretending to be the sole heir of the deceased, succeeded in having the original
title cancelled and a new one issued in her name thereby enabling her to possess
the land and appropriate its produce. This way of acquiring title creates what
is called “constructive trust” in favor of the defrauded party and grants to the
latter a right to vindicate the property regardless of the lapse of time. Thus,
it has been held that “if a person obtains legal title to property by fraud or
concealment, courts of equity will impress upon the title a so-called
constructive trust in favor of the defrauded party. The use of the word ‘trust’
in this sense is not technically accurate: * * * but as courts are agreed in
administering the same remedy in a certain class of frauds as are administered
in fraudulent breaches of trusts, and as courts and the profession have
concurred in calling such frauds constructive trusts, there can be no
misapprehension in continuing the same phraseology, while a change might lead to
confusion and misunderstanding.” (Cayondato vs. Treasurer of the
Philippine Islands, 49 Phil, 244, 249.) This ruling applies squarely to the case
at bar.^[1]

“In the case before us the title was acquired by Heald tortiously, or in
violation of every well-settled principle of Law. It never was trust property.
Strictly speaking, he was not a trustee, any more than a trespasser or other
wrongdoer. The wrongdoer who becomes possessed of property under such
circumstances has been styled a ‘trustee;’ but this is for want of a better
term, and because he has no title to property, and really holds it for the true
owner. It might as well be said that, where two persons conspire to possess
themselves of the personal property of another when he brings trover for its
recovery, they should be styled ‘trustees,’ instead of ‘tort feasors,’ and
should be permitted to claim the benefit of a lien for care or for provender.”
(Henninger vs. Heald, 30 Atlantic, 809, quoted in Gayondato
vs. Treasurer of the Philippine Islands,
supra.)

Considering that the present case was dismissed merely on a motion to dismiss
filed by defendant even after she had filed her answer to the complaint, it is
our considered opinion that the same should be remanded to the lower court in
order that evidence may be presented on the matter affecting the alleged
fiduciary relation or trust and the equities of the parties determined in the
light of such evidence.

Wherefore, the order appealed from is hereby set aside. The case shall be
remanded to the lower court for further proceedings, without pronouncement as to
costs.

Paras, C. J., Bengzon, Padilla, Montemayor, Reyes, A., Jugo, Labrador,
Concepcion, and Reyes, J. B. L., JJ., concur.

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^[1] It is not correct that this issue
was raised by appellants in this appeal for the first time. It was raised by
them in their opposition to the motion to dismiss in the lower court.