TOMASA BANCAIREN, ET AL., PLAINTIFFS AND APPELLANTS, VS. FRANCISCO DIONES, ET AL., DEFENDANTS AND APPELLEES.

On September 1, 1950, Tomasa Bancairen, et al., instituted an action in the
Court of First Instance of Negros Oriental against Francisca Diones, et al. for
the reconveyance of Lot No. 1983 of the cadastre of Sibulan of said province.
The complaint was amended on March 19, 1951 by including as party-defendant one
Angel Campoy who allegedly bought said lot with knowledge of the circumstances
vitiating the title of the transferors over said lot.

On April 10, 1951, defendants, through counsel, filed a motion to dismiss on
the grounds (1) that the action was already barred by a prior judgment, and (2)
that the cause of action was also barred by the statute of limitations. On May
5,1951, the court issvied an order sustaining the motion to dismiss, and, their
motion for reconsideration having been denied, plaintiffs brought the case to
the Court of Appeals, who later certified it to this Court on the ground that
the appeal involves purely legal questions.

Joaquina Bancairen was originally the owner of a tract of land situated in
Sibulan, Negros Oriental. Victoriano Diones was her overseer. When the cadastral
survey reached the municipality of Sibulan, Diones was entrusted by Joaquina as
overseer to indicate to the survey party the boundaries of the land for purposes
of its registration in her name. But instead of following her instructions,
Diones caused the surveyor to divide the land into two lots—Lots Nos. 1983 and
1984. Joaquina Bancairen and her successors-in-interest had always thought that
the land only consisted of Lot No. 1984 because such was the information given
them by Diones and so Joaquina applied for the registration only of said lot in
the corresponding cadastral proceedings, while Victoriano Diones applied for the
registration in his name of Lot No. 1983. By virtue of this misrepresentation,
Diones succeeded in registering this lot in his name for which Original
Certificate of Title No. 16353 was issued to him in 1940.

In spite thereof, however, it was Joaquina Bancairen and her
successors-in-interest who had been in the material and actual possession, of
the land, had paid taxes thereon, and enjoyed’ all its produce, and when in
March, 1949 Tomasa Bancairen and Maria Bancairen discovered such fraudulent
registration, on March 19, 1949 they filed an action for reconveyance against
the successors-in-interest of Victoriano Diones who inherited the property upon
the latter’s death. That case was dismissed on May 7, 1949 for lack of a cause
of action and on the ground of prescription. No further action was taken in the
case because, according to plaintiffs, their counsel was not properly notified
of the order of dismissal.

On September 1, 1950, Tomasa Bancairen, Maria Bancairen and. the other
co-owners of the land instituted the present action also for reconveyance
against the same defendants wherein they alleged practically the game facts
averred in the previous complaint. As previously stated, defendants also filed a
motion to dismiss and the same was sustained on the grounds already stated in
the early part of this decision.

The issue to be determined is whether the trial court acted properly in
dismissing the action on the grounds
(1) that the action was barred by a
prior judgment, and (2) that the cause of action was further barred by the
statute of limitations and by Section 38 of the Land Registration Act.

The first ground refers to the first case for reconveyance instituted by
Tomasa Bancairen and Maria Baneairen against the defendants as heirs of
Victoriano Diones. The case refers to the same property herein involved. But it
sfiould be noted that that property was originally owned by Joaquina Bancairen
who upon her death was inherited by Tomasa Bancairen and Maria Bancairen, and by
other nine heirs who were the children of the late Agustin Bancairen and Tito
Bancairen. Tomasa and Maria were the first ones to know of the fraudulent
registration and so they brought the first action for reconveyance. The other
heirs came to know of the fraud only in June, 1950 and so on September 1 of the
same,year they brought a similar action for reconveyance even if Tomasa and
Maria were joined as party-plaintiffs. It may thus be seen that while the
dismissal of the first case may have the effect of estoppel with regard to
Tomasa and Maria under the theory of prior judgment, the same cannot have that
effect with regard to the other heirs who were not made parties in the first
case. The order of the court dismissing the case-as to them is therefore
erroneous and the same should be set aside in so far as it deprived them of
their right to continue with the case.

With regard to the second ground for dismissal, it is true that Victoriano
Diones, the predecessors-in-interest of defendants, was able to register the lot
in question in 1940 for which he obtained Original Certificate of Title No.
16353, whereas the second action for reconveyance was filed by the plaintiffs
only 10 years thereafter and apparently the action is already barred by the
statute of limitations, but such a defense 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. Garcia Canlas, et al., 94 Phil., 776,
April 20, 1964.)

“As against the beneficiary, prescription is not effective in favor of a
person who is acting as trustee of a continuing and subsi&ting 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
Victoriano Diones was the overseer of Joaquina Bancairen who was entrusted by
the latter to attend to the survey of the land and indicate to the official
surveyors its boundaries for purposes of registration but that, through
fraudulent representation, he had the land divided into two lots and succeeded
in registering one of them in his name in utter breach of the trust reposed in
him by the owner. 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’
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.” (Gayondato vs. Treasurer of the Philippine Islands,
49 Phil., 244, 249.)

As regards the claim that the land in question has already been sold to one
Angel Campoy who as purchaser for value cannot be deprived thereof under Section
38 of the Land Registration Act,., suffice it to say that the record shows that
he bought the land in bad faith knowing the existence of a notice of lis
pendens in connection with the first case of reconveyance.

Considering that the present case was dismissed merely on a motion to dismiss
filed foy defendants, it is our considered opinion that the same should be
remanded to the lower court in order that the case may be tried on the merits
and the equities of the parties determined as alleged in the pleadings. To this
effect, defendants should be given a reasonable time within which to file their
answer to the complaint.

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.

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