MAXIMINO CARANTES (SUBSTITUTED BY ENGRACIA MABANTA CARANTES), PETITIONER, VS. COURT OF APPEALS, BILAD CARANTES, LAURO CARANTES, EDUARDO CARANTES AND MICHAEL TUMPAO, RESPONDENTS.

This is an appeal by certiorari from the decision of the
Court of Appeals in CA-G.R.
36078-R promulgated on December 23, 1970 reversing the
judgment of the Court of First Instance of Baguio
City, Branch II, in Civil Case 804, and from the appellate court’s resolution
dated March 7, 1971 denying
herein petitioner’s motion for reconsideration.

Mateo Carantes was the original owner
of Lot No. 44 situated at Loakan, Baguio City,
as evidenced by Original Certificate of Title No. 3 issued in his name on September 22, 1910 by virtue of Free
Patent No. 5 granted to him on the same date. 
In 1913 Mateo died.  He was
survived by his widow Ogasia and six children,
namely, Bilad, Lauro, Crispino, Maximino, Apung and Sianang, all surnamed Carantes.

In 1930 construction of the Loakan Airport
was commenced by the Government.  Because
a portion of Lot No. 44 was needed for the landing field, the Government
instituted proceedings (Civil Case 338) for its expropriation.  For the purpose, Lot No. 44 was subdivided into Lots Nos. 44-A, 44-B,
44-C, 44-D and 44-E.  The portion
expropriated by the Government was Lot No. 44-A.

In 1933 Special Proceedings Nos. 409 to 413 were filed with the
court for the settlement of the estate of the late Mateo Carantes.  One of his sons, herein petitioner Maximino Carantes, was appointed
and qualified as judicial administrator of the estate.  In his capacity as administrator, Maximino filed on June 20, 1939 a project of partition
wherein he listed as the heirs of Mateo Carantes who
were entitled to inherit the estate, himself and his brothers and sisters, or
the latter’s surviving children. 
Apparently because negotiations were, by that time, under way for the
purchase by the Govern­ment of Lots Nos. 44-B and 44-C for the purpose of
widening the Loakan Airport, the only property listed
by Maximino in the project of partition was the
remaining portion of Lot No. 44.

On October 23, 1939 a deed denominated “Assignment of Right
to Inheritance” was executed by four of Mateo Carantes‘
children, namely, Bilad, Sianang,
Lauro and Crispino, and the
heirs of Apung Carantes
(also a son of Mateo who died in 1923), namely, Pitag,
Bill, Alson, Eduardo and Juan, assigning to Maximino Carantes their rights to
inheritance in Lot No. 44.  The stated
monetary consideration for the assignment was P1.00.  However, the document contains a recital to
the effect that the said lots, “by agreement of all the direct heirs and
heirs by representation of the deceased Mateo Carantes
as expressed and conveyed verbally by him during his lifetime, rightly and
exclusively belong to the particular heir, Maximino Carantes, now and in the past in the exclusive, continuous,
peaceful and notorious possession of the same for more than ten years.”

On the same date Maximino Carantes sold to the Government Lots Nos. 44-B and 44-C and
divided the proceeds of the sale among himself and the other heirs of Mateo.

On February 6, 1940,
upon joint petition of the heirs of Mateo Carantes,
the Court of First Instance of Baguio City issued an
Order in another proceeding – Administrative Case No. 368 – cancelling
O.C.T. No. 3. 
Pursuant thereto the said title was cancelled, and in its place Transfer Certificate of Title No. 2533 was
issued in the joint names of the five children of Mateo Carantes
and the children of Apung Carantes
(representing their deceased father) as co-owners pro indiviso, or one-sixth share for each child.

On March
16, 1940 Maximino Carantes registered the
deed of “Assignment of Right to Inheritance.” Accordingly, T.C.T. No. 2533 in the names of the heirs was cancelled,
and in lieu thereof Transfer Certi­ficate of Title No. 2540 was issued on the same date in the name
of Maximino Carantes.  Also on the same date, Maximino,
acting as exclusive owner of the land covered by T.C.T.
No. 2540, executed a formal deed of sale in favor of the Government over Lots
Nos. 44-B and 44-C.

On February 21, 1947, as
a result of the approval of the Subdivision Survey Plan psd-16786, and pursuant
to the deed of sale executed in 1940 by Maximino Carantes in favor of the Government, T.C.T.
No. 2540 in Maximino’s name was cancelled, and in
lieu thereof Transfer Certificate of Title No. T-98, covering Lots Nos. 44-A,
44-B and 44-C, was issued in the name of the Government, while Transfer
Certificate of Title No. T-99, covering the remaining Lots Nos. 44-D (100, 345
square meters) and 44-E (10,070 square meters) was issued in the name of Maximino Carantes, who has up to
the present remained the registered owner of said lots.

On September
4, 1958 the present
complaint was filed by three children of the late Mateo Carantes,
namely, Bilad, Lauro and Crispino, and by some of the surviving heirs of Apung and of Sianang (also
children of Mateo Carantes).  Maximino Carantes was named principal defendant, and some of the heirs
of Apung and Sianang were impleaded as parties-defendants in view of their alleged
reluctance to join as parties-plaintiffs.

In their complaint the
plaintiffs alleged inter alia that they
and/or their predecessors-in-interest executed the deed of “Assignment of
Right to Inheritance” on October 23, 1939, only because they were made to
believe by the defendant Maximino Carantes
that the said instrument embodied the understanding among the parties that it
merely authorized the defendant Maximino to convey
portions of Lot No. 44 to the
Government in their behalf to minimize expenses and facilitate the
transaction; and that it was only on February 18, 1958, when the plaintiffs
secured a copy of the deed, that they came to know that the same purported to
assign in favor of Maximino their rights to
inheritance from Mateo Carantes.  The plaintiffs prayed that the deed of
“Assignment of Right to Inheritance” be declared null and void; that
Lots Nos. 44-D and 44-E covered
by T.C.T. No. T-99 be ordered partitioned into six
(6) equal shares and the defendant Maximino Carantes be
accordingly ordered to execute the necessary deeds of conveyance in favor of
the other distributees; and that the said defendant
be ordered to pay the plaintiffs
the sum of P1,000 as attorney’s fees and the sum of P200 as
costs of suit.

On September 10, 1958 the
defendants filed a motion to
dismiss on the grounds (1) that the plaintiffs’ cause of action is barred by
the statute of limitations because the deed of assignment was recorded in the
Registry of Property at the latest on February 21, 1947, hence, plaintiffs’
cause of action accrued from the said date, and since pursuant to article 1144 of
the new Civil Code an action based on a
written contract must be brought within ten years from the time the right of
action accrues, plaintiffs’ right to file the complaint had already prescribed
on September 4, 1958; and (2) that the complaint states no cause of action
because ownership over the property became vested in Maximino
Carantes by acquisitive prescription ten years from
its regis­tration in his name on February 21, 1947.

In an Order dated September
30, 1958, the trial
court denied the motion to dismiss on the grounds that there are allegations of
co-ownership and trust in the complaint, and, therefore, prescrip­tion did not
lie, and that the complaint alleges that the plaintiffs discovered the alleged
fraud only in February, 1958.

In their answer filed on
October 7, 1958, the defendants traversed the material averments of the
complaint and alleged inter alia that the property of the deceased Mateo Carantes
and his wife had been divided and distributed among their six children; that
the deed of “Assignment of Right to Inheritance” was an
acknowledgment of the fact of designation of the property therein described as
specifically pertaining or belonging by right of inheritance to the defendant Maximino Carantes; that there was
never any agreement between the assignors and the assignee authorizing the
latter to merely represent his co-heirs in negotiations with the Government;
and that the assignors knew fully well that the deed of assign­ment contained
what, on its face, it represented.  By
way of special defenses, the defendants alleged that any supposed agreement
between the plaintiffs and/or their predecessors-in-interest and the defendant Maximino Carantes, other than the
deed of assignment, is barred by the statute of frauds and is null and void
because not in writing, much less, in a public instrument; that the only
agreement between the parties is what appears in the deed of assignment; that
the plaintiffs’ right of action has already prescribed; that the defendant Maximino Carantes acquired
absolute ownership over the property in question by acquisitive prescription
and registration; and that any obligation on the part of the defendants in
relation to the property had been discharged by novation,
condonation and compensation.  The defendants set up the counterclaim that
in the event the rights of the heirs are disturbed, the produce from the lands
inherited by the plaintiffs from Mateo Carantes as
well as the real estate taxes on the land paid by the defendant Maximino Carantes should be
collated; and that the filing of the complaint being malicious, the defendants
should be awarded the sum of P4,500 by way of nominal,
compensatory, moral and corrective damages, including attorney’s fees and
expenses of litigation.  The defendants
prayed for the dismissal of the complaint and payment of damages to them.

An answer to the counterclaim was filed by the plaintiffs on November 7, 1958 denying the material
allegations of the counterclaim.

After trial, the court rendered its decision on January 28,
1965.  It was the
trial court’s opinion that since an
action based on fraud prescribes in four years from the discovery of the fraud,
and in this case the fraud allegedly perpetrated by the defendant Maximino Carantes must be deemed
to have been discovered on March 16, 1940 when the deed of assignment was
registered, the plaintiffs’ right of action had already prescribed when they
filed the action in 1958; and even assuming that the land remained the common
property of the plaintiffs and the defendant Maximino
Carantes notwithstanding the execution of the deed of assignment, the
co-ownership was completely repudiated by the said defendant by performance of
several acts, the first of which was his execution of a deed of sale in favor
of the Government on October 23, 1939, hence, ownership had vested in the
defendant Maximino Carantes
by acquisitive prescription.  The court
accordingly dismissed the complaint.  It
likewise dismissed the counterclaim.

The plaintiffs moved for
reconsideration.  Their motion having
been denied in an Order dated March 8, 1965, they appealed to the Court of Appeals.

As adverted to above, the
Court of Appeals reversed the judgment of the trial court, hence the present recourse.

– I –

In her brief filed with
this Court, the petitioner argues that the private respondents’ action is not
actually one for annulment of the deed of “Assignment of Right to
Inheritance” but for the reformation thereof, hence, the said action has
prescribed long before the filing of the complaint.

The petitioner’s theory
that the private respondents’ action is for reformation of an instrument is a
new one, adopted by the petitioner for the first time on appeal to this
Court.  Her husband did not raise it as a
defense in his answer filed with the trial court, where, consequently, trial
proceeded on the theory that the action sought the declaration of nullity of
the deed of assignment.  When the case
reached the respondent court the petitioner likewise did not raise this issue,
although in truth, even had she done so, it would have been a belated and
futile exercise.  She cannot be allowed
to change her theory of the case at this stage of the proceedings.

The settled rule is that
defenses not pleaded in the answer may
not be raised for the first time on appeal.^[1] A party cannot, on appeal, change fundamentally the nature of the issue
in the case.^[2]
When a party deliberately adopts a
certain theory and the case is decided upon that theory in the court below, he
will not be permitted to change the same on appeal, because to permit him to do
so would be unfair to the adverse party.^[3]

Consequently, we have to
disregard the petitioner’s theory that the action is for reformation of
an instrument, and must proceed on the basis of the issues properly raised and ventilated before the trial court.

– II –

We do not agree with the respondent court’s
legal conclusion that the deed of
“Assignment of Right to
Inheritance” is void ab initio and
inexistent on the grounds that real consent was wanting and the consideration
of P1.00 is so shocking to the conscience that there was in
fact no consideration, hence, the action for the declaration of the contract’s
inexistence does not prescribe pursuant to article 1410 of the new Civil
Code.

Article 1409 (2) of the new Civil Code relied upon by the respondent court provides that
contracts “which are absolutely simulated or fictitious” are
inexistent and void from the beginning. 
The basic characteristic of simulation is the fact that the apparent
contract is not really desired or intended to produce legal effects or in any way
alter the juridical situation of the parties.^[4]

The respondents’ action
may not be considered as one to declare the inexistence of a contract for lack
of consideration.  It is total absence of
cause or consideration that
renders a contract absolutely void and inexistent.^[5]
In the case at bar con­sideration was
not absent.  The sum of P1.00 appears in the
document as one of the considerations for the assignment of inheritance.  In addition – and this of great legal import
– the document recites that the decedent Mateo Carantes
had, during his life­time, expressed to the signatories to the contract that
the property subject-matter thereof rightly and exclusively belonged to the
petitioner Maximino Carantes.  This acknowledgment by the signatories
definitely constitutes valuable consideration for the contract.

– III –

The present action is one
to annul the contract entitled “Assignment
of Right to Inheritance” on the
ground of fraud.

Article 1390 of the new
Civil Code provides that a contract “where the consent is vitiated by
mistake, violence, intimidation, undue influence or fraud,” is voidable or annullable. 
Even article 1359, which deals on reformation of instruments, provides
in its paragraph 2 that “If mistake, fraud, inequitable conduct, or
accident has prevented a meeting of the minds of the parties, the proper remedy
is not reformation of the instrument but annulment of the contract.” When
the consent to a contract was fraudulently obtained, the contract is voidable.^[6] Fraud or deceit does not render a contract
void ab initio, and can only be a ground for rendering the contract voidable or annullable pursuant to article 1390 of
the new Civil Code by a proper action in court.^[7]

The present action being
one to annul a contract on the ground of fraud, its prescriptive period is four years from the time of the
discovery of the fraud.^[8]

The next question that must be resolved is:  from what time must fraud, assuming that
there was fraud, be deemed to have been discovered in the case at bar?  From February, 1958, when, according to the
private respondents, and as found by the respondent court, the private respondents actually discovered that they were
defrauded by the petitioner Maximino Carantes when rumors spread that he was selling the
property for half a million pesos?  Or
from March 16, 1940,
when, as admitted by the parties and found by both the trial court and the
respondent court, the deed of “Assignment of Right to Inheritance”
was registered by the petitioner in the Office of the Register of Deeds?

The weight of authorities is to the effect that the registration
of an instrument in the Office of the Register of Deeds constitutes constructive notice to the whole world,
and, therefore, discovery of the fraud is deemed to have taken place at the
time of the registration.^[9]
In this case the deed of assignment was registered on March 16, 1940, and in fact on the same date T.C.T. No. 2533 in the names of the heirs of Mateo Carantes was cancelled, and T.C.T.
No. 2540 in the name of the petitioner was issued in lieu thereof.  The four-year period within which the private
respondents could have filed the present action consequently commenced on March 16, 1940; and since they filed
it only on September 4, 1958,
it follows that the same is barred by the statute of limitations.

The respondent court refused to accord recognition to the rule of
constructive notice, because, according to it, there was a fiduciary
relationship between the parties.  Upon
this premise it concluded that the four-year prescriptive period should be deemed
to have commenced in February, 1958 when private respondents had actual notice of the fraud.  Without resolving the
question of whether or not constructive notice applies when a fiduciary
relationship exists between the parties – a point which is not in issue in this
case – we hold that the respondent court’s conclusion, lacking the necessary
premise upon which it should be predicated, is erroneous.

Definitely, no express
trust was created in favor of the private respondents.  If trust there was, it could only be – as
held by respondent court – a constructive trust, which is imposed by law.  In constructive trusts there is neither
promise nor fiduciary relation; the so-called trustee does not recognize any trust and has no intent to hold the property for the beneficiary.^[10] In at least two cases, the rule of
constructive notice was applied by this Court although a constructive trust had
been created.  Thus, in Lopez, et al. vs. Gonzaga,
et al.,^[11] where the plaintiffs and the defendants were
co-heirs and the decedent owner of the lands had merely allowed the principal
defendant to use the products and rentals of the lands for purposes of coconut
oil experimentation, but said defendant later caused the transfer of the
certificates of title in his own name through the registration of certain
judicial orders, this Court held that the recording of the judicial orders
sufficed as notice to the other heirs, for the rule is that knowledge of what
might have been revealed by proper inquiry is imputable to the inquirer.  In Gerona, et al. vs. De Guzman, et al., supra, the petitioners and the
private respondents were co-heirs, and the petitioners’ action for partition
and reconveyance was based upon a constructive trust
resulting from fraud.  This Court held
that the discovery of the fraud “is
deemed to have taken place, in
the case at bar, on June 25, 1948, when said instrument was filed with the
Register of Deeds and new certificates of title were issued in the name of
respondents exclusively, for the registration of the deed of extrajudicial
settlement constituted constructive notice to the whole world.”

– IV –

The decision under review found that a constructive trust was
created in favor of the private respondents, and, holding that an action for reconveyance based on constructive
trust is imprescriptible, recognized the right of the
private respondents to file an action for reconveyance
regardless of the lapse of time, citing Gayandato
vs. Treasurer of the Philippine Islands,
et al.^[12]

We have examined Gayandato, and
have failed to find support therein for the holding of the re­spondent
court.  In any event, it is now settled
that an action for reconveyance based on implied or
constructive trust is prescriptible; it prescribes in
ten years.^[13]
In this case the ten-year pres­criptive period began on March 16, 1940, when the petitioner registered
the deed of “Assignment of Right to Inheritance” and secured the
cancellation of the certificate of title in the joint names of the heirs of
Mateo Carantes, and, in lieu thereof, the issuance of
a new title exclusively in his name.^[14]
Since the present action was commenced only on September 4, 1958, it is clear that the same is barred by
extinctive prescription.

– V –

It was also held by the respondent court that the petitioner was
merely holding the property in trust for
the benefit of his co-heirs as administrator, hence, there was a continuing and
subsisting trust, and pursuant to section 38 of the Code of Civil Procedure,
the provisions of the said Code on prescription (Secs.
40-41) do not apply.  It is our view,
however, that there was no continuing and subsisting trust.

From March 16, 1940,
when the petitioner registered the deed of assignment and had the cer­tificate
of title in the names of the heirs cancelled and a new certificate of title
issued in his own name, he began to hold the property in open and clear
repudiation of any trust.^[15]
It will be noted that on the same date, the petitioner also executed a formal
deed of sale over portions of Lot No. 44 in favor of the Government.  In 1948 he mortgaged Lot No. 44-D with the
Philippine National Bank as his exclusive property.  The petitioner’s exercise of such rights of
dominion is anathema to the concept of a continuing and subsisting trust.  The circumstances, found by the respondent
court, that the name of Mateo Carantes still appeared
in the tax declaration as owner of the land and the name of the petitioner as
administrator, that the real estate taxes were shared by the other heirs with
the petitioner, and that some of
the heirs are living in houses erected by them on the land, wane in legal
significance in the face of the petitioner’s aforesaid uncontroverted
acts of strict dominion.  In connection
with the payment of real estate taxes, it is to be noted that the respondent
court also found that all the receipts were issued in the name of the
petitioner.  The circumstances mentioned
above do not make out a case of a continuing and subsisting trust.

ACCORDINGLY, the judgment of the Court of Appeals appealed
from is set aside, and another entered dismissing the complaint in Civil Case
No. 804 of the Court of First Instance of Baguio.  No costs.

Makasiar, Muñoz
Palma, and Martin, JJ., concur.

Teehankee, J., concurs on the ground that respondents’ action based
on constructive trust prescribed after ten years.

^[1]
Central Bank of the Philippines
vs. Court of Appeals, et al., L-33022, April 22, 1975, 63 SCRA 431,
442.

^[2]
Republic vs. Venturanza, et
al., L-20417, May 30, 1966, 17 SCRA 322, 325.

^[3]
Philippine Rabbit Bus Lines, Inc., et al. vs.
Philippine American Forwarders, Inc., et al., L-25142, March 25, 1975, 63 SCRA 231, 234.

^[4]
Vda.
de Rodriguez vs. Rodriguez, et al., L-23002, July 31, 1967, 20 SCRA
908, 914.

^[5]
Garanciang,
et al. vs. Garanciang, et al., L-22351, May 21, 1969, 28 SCRA 229, 230.

^[6]
Mapalo, et al. vs. Mapalo,
et al., L-21489 & L-21628, May 19, 1966, 17 SCRA
114, 118.

^[7]
Tumalad,
et al. vs. Vicencio, et al., L-30173, September 30, 1971, 41 SCRA 143, 151.

^[8]
Art. 1391, new Civil Code.

^[9]
De Guinoo vs. Court of
Appeals, 97 Phil. 235, 238; Avecilla, etc. vs.
Yatco, et
al., 103 Phil. 666, 670; Gerona, et al. vs. De Guzman, et al., L-19060, May 29, 1964, 11 SCRA 153, 157.

^[10]
Diaz, et al. vs. Gorricho,
et al., 103 Phil. 261, 266.

^[11]
L-18788, January 31, 1964, 10 SCRA 167, 169, 178.

^[12]
49 Phil. 244.

^[13]
Escay, et al. vs. Court of Appeals, et al.,
L-37504, December 18, 1974, 61 SCRA 369, 387-388, citing
Boñaga vs. Soler, et
al., L-15717, June 30, 1961; J.M. Tuason
& Co., Inc. vs. Magdangal, L-15539,
January 30, 1962; Alzona vs. Capunitan, L-10228, February 28, 1963; Bueno
vs. Reyes, L-22587, April 28, 1969, 27 SCRA
1179.

^[14]
Castrillo, et al. vs. Court of Appeals, et
al., L-18046, March 31, 1964,
10 SCRA 549, 555.

^[15]
Lopez, et al. vs. Gonzaga,
et al., supra, p. 179.