C. N. HODGES, PETITIONER, VS. DY BUNCIO & CO., INC. AND THE COURT OF APPEALS, RESPONDENTS.

Under Rule 46 C. N. Hodges seeks reversal of a judgment rendered on
21 August 1959 by the Court of Appeals (CA-G. R. No. 22306-R) which
affirmed that rendered by the Court of First Instance of Iloilo
declaring the respondent Dy Buncio & Co., Inc. owner of the parcel
of land subject of the litigation (civil case No. 3395).

The trial court and the Court of Appeals found that on 13 July 1927
Veronica Bareza sold to Go Po a parcel of land identified or known as
Lot No. 3329 of the cadastral survey of Iloilo (Cad. Case No. 1,
G.L.R.O. Cad. Rec. No. 1), described in original certificate of title
No. 15327 issued in her name by the Registrar of Deeds in and for the
province of Iloilo. Original certificate of title No. 15327 was
cancelled and in lieu thereof transfer certificate of title No. 5254
was issued in the name of Go Po. On 31 October 1929 Go Po sold the
parcel of land to Go Lao alias Diwa to whom transfer
certificate of title No. 9767 was issued in lieu of transfer
certificate of title No. 5254. In a case pending in the same court
where Dy Buncio & Co., Inc. was plaintiff and Go Lao alias
Diwa, defendant (civil No. 9599), on 31 August 1933 the said parcel of
land was attached and thereafter sold at public auction on 3 January
1936 to Dy Buncio & Co., Inc. On 10 January 1936 transfer
certificate of title No. T-15148 was issued in the name of Dy Buncio
& Co., Inc., later on changed as to number only to T-4768 when the
numbers of land titles in Iloilo City were revised.

On 5 January 1950, in the Court of First Instance of Iloilo acting
as cadastral court, Veronica Bareza filed a motion averring that she is
the registered owner of Lot No. 3329 of the cadastral survey of Iloilo
described in original certificate of title No. 15327; that on 7 July
1931, for and in consideration of P2,025 payable in installment, she
sold the parcel of land to Go Lao alias Diwa in whose name
transfer certificate of title No. 9767 was issued in lieu of her
original certificate of title No. 15327; that Go Lao alias
Diwa paid P500 only and desisted from paying the balance of the
purchase price, and for that reason he resold the parcel of land to
her; that she lost the deed of sale executed in her favor by Go Lao alias
Diwa during the war; that the purchase at public auction sale of the
parcel of land by Dy Buncio & Co., Inc. was not known to her; that
she and not Dy Buncio & Co., Inc. always had been in possession of
the parcel of land; that while in possession of Dy Buncio & Co.,
Inc. transfer certificate of title No. T-15148 was perhaps lost; and
that Dy Buncio & Co., Inc. did not exist in Iloilo City; and
praying that a duplicate of the lost or missing transfer certificate of
title No. 15148 in the name of Dy Buncio & Co., Inc. be issued and
thereafter cancelled and a new transfer certificate of title be issued
in her name. On 11 February 1950 the trial court ordered that the
petition be published, as it was published, in the “Liberator,” a
newspaper of general circulation in the City and Province of Iloilo,
once a week for three consecutive weeks on 15 and 22 February and 1
March 1950 so that any person interested in Lot No. 3329 may appear on
4 March and show cause why the motion of Veronica Bareza should not be
granted (Exhibit 2). On 6 March 1950 Veronica Bareza testified in
support of her motion. On 15 March 1950 the trial court directed the
Registrar of Deeds in and for the City of Iloilo to issue another
owner’s duplicate of certificate of title No. 15148 in the name of Dy
Buncio & Co., Inc. in lieu of the one lost and thereafter to cancel
it and issue another in its stead in the name of Veronica Bareza. On 17
March 1950 transfer certificate of title No. T-4769 was issued in the
name of Veronica Bareza. On 18 April 1950, for and in consideration of
P6,100, Veronica Bareza sold the parcel of land to C. N. Hodges and her
transfer certificate of title No. T-4769 was cancelled and another
T-4847 issued in the name of C. N. Hodges. The parcel of land was
subdivided into four lots numbered 3329-A, 3329-B, 3329-C and 3329-D,
for which transfer certificates of title Nos. T-6545, T-6546, T-6547
and T-6548, respectively, were issued in the name of C. N. Hodges. The
parcel of land was in possession of Yao Chuan, the manager of Dy Buncio
& Co., Inc., from 1936 to 1949, when Yao Chuan died. It paid realty
tax on the parcel of land from then to 1941 when war broke out, and
from 1945 to 1950.

In 1954 Dy Buncio & Co., Inc. went to the City Treasurer of
Iloilo to pay the realty tax on the parcel of land described in
transfer certificate of title No. T-4768 but was informed that C. N.
Hodges already had paid them. Upon learning this, on 15 February 1955
Dy Buncio & Co., Inc. brought an action against C. N. Hodges and
Verdnica Bareza for the annulment of the order entered by the Court of
First Instance on 11 February 1950 ordering the publication in the
newspaper of the petition filed by Veronica Bareza and that entered on
15 March 1950 directing the Register of Deeds in and for the City of
Iloilo to issue another owner’s duplicate of transfer certificate of
title No. 15148 in the name of Dy Buncio & Co., Inc. and, after
cancelling it, to issue another in the name of Veronica Bareza, and of
all subsequent transactions and transfer of ownership to C. N. Hodges;
for a declaration that the plaintiff is the owner of the parcel of land
described in transfer certificate of title No. 15148; for an order to
C. N. Hodges to pay to the plaintiff a monthly sum of P100 until the
possession of the parcel of land shall have been restored to it, and to
the defendants, jointly and severally, to pay the plaintiff the sum of
P1,000 as attorney’s fees and expenses of litigation, and the costs;
and for any other just and equitable remedy.

On 18 February 1955 C. N. Hodges filed an answer, amended on 28
September 1956, with a counterclaim of P15,000 for moral damages and
Pl,0,00i as attorney’s fees, together with a cross-claim against his
co-defendant Veronica Bareza of P15,000 for moral damages and
attorney’s fees, she having warranted title to the parcel of land she
had sold to him. On 25 October 1955 the defendant Veronica Bareza filed
an answer, amended on 6 September 1956, claiming and alleging that she
was the owner of the parcel of land when she sold it to her
co-defendant and praying for moral damages and attorney’s fees in the
sum of P3,500 and the dismissal of the complaint. On 22 February 1955
the plaintiff answered the counter-claim set up by the defendant C. N.
Hodges and on 31 October 1955 that set up by the defendant Veronica
Bareza, praying that both be dismissed. On 8 November 1955 Veronica
Bareza answered the cross-claim filed against her by her co-defendant
C. N. Hodges. After trial, the court rendered judgment—

* * * declaring Transfer Certificates of Title Nos.
6545, 6546, 6547 and 6548, in the name of defendant Hodges, and
Transfer Certificate of Title No. 4769 in the name of defendant
Veronica Bareza, null and void and orders the Register of Deeds of
Iloilo to cancel said certificates.

The Court declares that
Transfer Certificate of Title No. T-4768 (T-15148) in the name of
plaintiff Dy Buncio & Co., Inc. as valid, efficacious and
subsisting and the Register of Deeds is ordered to reinstate said
titles as it was before its cancellation.

Defendant Veronica Bareza is condemned to pay attorney’s fees to the plaintiff in the amount of P600.00 and costs.

Defendant
Veronica Bareza is ordered to return to her co-defendant C. N. Hodges
the amount of P6,100.00 which she had received as purchase price for
the land, with interest at the legal rate from April 18, 1950 until
fully paid, and to pay C. N. Hodges as exemplary or corrective damages
the amount of P2,000.00 and costs.

On appeal the Court of Appeals affirmed the judgment of the trial
court. Hence this appeal by certiorari as stated at the outset of this
opinion.

As a major premise the petitioner lays down the proposition that as
the action brought by the respondent Dy Buncio & Co., Inc. arose
from fraud claimed to have been committed by the defendant Veronica
Bareza, the same is barred after four years from the time the right of
action accrued, for section 43, paragraph 3, of Act No. 190 provides
that—

Civil actions other than for the recovery of real
property can only be brought within the following periods after the
right of action accrues:
* * *

3. Within four
years: * * * An action for relief on the ground of fraud, but the right
of action in such case shall not be deemed to have accrued until the
discovery of the fraud; * * *

As a minor premise he states that from 17 March 1950, when transfer
certificate of title No. T-4769 was issued in the name of Veronica
Bareza, to 15 February 1955, when the respondent Dy Buncio & Co.,
Inc. brought the action against her and petitioner C. N. Hodges, more
than four years already had elapsed. And he concludes his syllogism
that the respondent’s action is barred by the statute of limitations.
Conversely, the respondent Dy Buncio & Co., Inc. contends that its
action is based not on fraud but on lack or want of jurisdiction of the
cadastral court in ordering the cancellation of transfer certificate of
title No. T-4768 issued in the name of Dy Buncio & Co., Inc. and
the registration and issuance of another No. T-4769 in the name of
Veronica Bareza and in support of its contention invokes section 40 of
Act No. 190 which provides that—

An action for recovery of title to, or possession
of, real property, or an interest therein, can only be brought within
ten years after the cause of such action accrues.

The Court of Appeals upheld the respondent’s contention when it said:

* * * We have here a true action for recovery of
title to real property, which plaintiff could attain not only through
its averment of fraud on the part of defendant Veronica Bareza, but
primarily through the issue of jurisdiction of the Cadastral Court. It
might not be amiss to state that in almost all reindicatory cases that
have passed judicial scrutiny fraud has a hand in the transmission or
deprivation of rights. * * *

The claim of indefeasibility of the petitioner’s title under the
Torrens land title system would be correct if previous valid title to
the same parcel of land did not exist. The respondent had a valid title
(transfer certificate of title No. T-15148 later on changed to No.
T-4768) to the parcel of land (Lot No. 3329) issued to it on 10 January
1936 after purchasing the parcel of land at public auction sale. It
never parted with it; it never handed or delivered to anyone its
owner’s duplicate of the transfer certificate of title; it could not be
charged with negligence in the keeping of its duplicate certificate of
title or with any act which could have brought about the issuance of
another certificate upon which a purchaser in good faith and for value
could rely. If the petitioner’s contention as to indefeasibility of his
title should be upheld, then registered owners without the least fault
on their part could be divested of their title and deprived of their
property. Such disastrous results which would shake and destroy the
stability of land titles had not been foreseen by those who had endowed
with indefeasibility land titles issued under the Torrens system.
Veronica Bareza perpetrated the fraud by making false representations
in her petition and the title issued to her being the product of fraud
could not vest in her valid and legal title to the parcel of land in
litigation. As she had no title to the parcel of land, in the same way
that a thief does not own or have title to the stolen goods, she could
not transmit title which she did not have nor possess. Moreover, the
petitioner cannot claim not to be at fault in the purchase of the
parcel of land from his co-defendant Veronica Bareza, to say it mildly,
or he cannot be deemed to be a purchaser in good faith and for value,
because as correctly found by the Court of Appeals he is not an
innocent purchaser:

* * * appellant insists that he had exercised
prudence in ascertaining the right of Veronica Bareza. True, appellant,
had exercised prudence before he bought the land from Bareza, but the
evidence would show that his prudence had yielded certain facts
sufficient to put him upon his guard and to delve deeper into Bareza’s
acquisition. As aptly concluded by the lower court, “Had he done so he
could have avoided the situation in which he is in now.” Ruth Deocaris
admitted that appellant sent her to see said appellant’s lawyer about
Bareza’s offer. Appellant’s lawyer advised Deocaris to examine Bareza’s
title in the office of the Register of Deeds of Iloilo. Deocaris was
informed by Vicente G. Cabardo, after going over the records with
Deocaris besidehim, that the land in question “was formerly the
property of Dy Buncio & Co., Inc.,” that Bareza bad acquired the
same “by purchase before the war”; and, that title was transferred in
Bareza’s name “by Court’s order” (Exhibit 1). Deocaris also admitted
that she found out that the land is still declared in the name by (of)
Dy Buncio & Co. (Exhibit D-2, for the year 1948), and that she
imparted this information to appellant C. N. Hodges together with
Cabardo’s certificate (Exhibit 1). The lower court acted correctly in
rejecting appellant’s pretense of good faith.

This finding of fact cannot be reviewed.

Before concluding, this Court wishes to state that the court that
acted as cadastral court was remiss in its duty to scrutinize the
allegations made by Veronica Bareza in her motion. Had it done so, it
would not have fallen into the error it committed. The allegations in
her motion that she sold the parcel of land to Go Lao alias
Diwa who paid her P500 only; that her original certificate of title No.
15327 was cancelled and transfer certificate of title No. 9767 was
issued to Go Lao alias Diwa; that the latter desisted from
paying the balance of P2,025, the purchase price, so he resold the
parcel of land to her; that she lost the deed of resale during the war;
that she did not know the purchase of the parcel of land at public
auction sale made by the respondent Dy Buncio & Co., Inc. that had
never been in possession of the parcel of land but that she alone had
been in possession thereof; that transfer certificate of title No.
T-15148 issued in the name and in possession of Dy Buncio & Co.,
Inc. was perhaps lost, were sufficient to put the court on guard and
rigidly scrutinize the evidence or the testimony of the movant Veronica
Bareza. How could the court believe that transfer certificate of title
No. 9767 was issued in the name of Go Lao alias Diwa when
transfer certificate of title No. T-15148 later on changed to T-4768 of
the same parcel of land was issued in the name of the respondent Dy
Buncio & Co., Inc.? This apparent anomaly should have led a
conscientious judge to inquire from the Registrar of Deeds the reason
for the issuance of two certificates of title on the same parcel of
land in the names of two different owners. And how could she allege
that transfer certificate of title No. T-15148 in the possession of Dy
Buncio & Co., Inc. was lost? The least that the court could have
done is to order that notice of the motion be served personally or by
registered mail on Dy Buncio & Co., Inc., the one holding the
owner’s duplicate of the certificate of title to the parcel of land, in
the same way that actual notice of an application for registration is
served upon “all persons who appear to have interest in or claims to
the land included in the application.Notice to such persons by mail
shall be by registered letter if practicable.” ^[1]

The judgment appealed from is affirmed, with costs against the petitioner.

Bengzon, C.J., Bautista Angelo, Labrador, Concepcion, Reyes, J. B. L., Barrera, Paredes, Dizon and Regala, JJ., concur.