HEIRS OF MAXIMO LABANON, REPRESENTED BY ALICIA LABANON CAÑEDO AND THE PROVINCIAL PETITIONERS, VS. HEIRS OF CONSTANCIO PROMULGATED: LABA REPRESENTED BY ALBERTO MAKILANG, RESPONDE…

Heirs of Labanon versus Heirs of Labanon

The Case

This is a petition for review on certiorari brought by the heirs of Maximo Labanon, represented by Alicia Labanon Cañedo, together with the Provincial Assessor of Cotabato, against the heirs of Constancio Labanon, represented by Alberto Makilang. The action below was one for specific performance, recovery of ownership, attorney's fees and damages, arising from a parcel of homestead land registered in the name of one brother but held, by the brothers' own written agreement, for the benefit of the other. The case matters because it gathers into one decision three doctrines a reviewee must command: the limits of the indefeasibility of a Torrens title, the nature and enforceability of an express trust, and the rule that an unrepudiated written express trust does not prescribe.

Procedural History

The heirs of Constancio Labanon, through Alberto Makilang, filed the complaint before the Regional Trial Court of Kidapawan City, Cotabato, Branch 17. After hearing, the trial court ruled for the heirs of Maximo Labanon. It dismissed the complaint for lack of merit, dismissed the case against the Provincial Assessor on the ground that his duties are ministerial and that the presumption of regularity stands in his favor, and ordered the plaintiffs to pay twenty thousand pesos in exemplary damages, ten thousand pesos in attorney's fees, five hundred pesos per court appearance, and the costs of suit.

Aggrieved, the plaintiffs elevated the judgment to the Court of Appeals. The Court of Appeals reversed and set aside the trial court's decision and entered a new one: recognizing the lawful possession of the plaintiffs over the eastern portion of the property; declaring them owners of that portion by reason of lawful possession; ordering the Provincial Assessor to reinstate the tax declaration in the name of Alberto Makilang and declaring the other tax declaration void; and ordering the defendants to pay twenty thousand pesos in moral damages, ten thousand pesos in attorney's fees, five hundred pesos per appearance, and the costs. The Court of Appeals denied the motion for reconsideration. The heirs of Maximo Labanon then came to the Supreme Court by petition for review on certiorari under Rule 45.

Facts

Before the Second World War, Constancio Labanon settled upon, cultivated, and improved a piece of alienable and disposable public agricultural land in Barrio Lanao, Kidapawan, Cotabato. Having very limited education, he asked his better educated brother, Maximo Labanon, to file the public land application in Maximo's name, under the express agreement that the brothers would divide the lot as soon as it became feasible. Constancio continued to cultivate the land to comply with the cultivation requirement of the homestead law. On June 6, 1941, Homestead Application No. 244742 of Maximo was approved with Homestead Patent No. 67512, and eventually Original Certificate of Title No. P-14320 was issued in the name of Maximo Labanon.

On February 11, 1955, Maximo executed a notarized document denominated Assignment of Rights and Ownership, conveying to Constancio, his heirs and assigns, the eastern portion of the lot, measuring two and one half hectares, more or less, in consideration of the expenses Constancio had incurred for clearing, cultivating, and improving that portion. On April 25, 1962, Maximo executed a sworn statement reiterating that the eastern half portion belongs to Constancio and his heirs, and requesting the Director of Lands and the Land Title Commission to issue separate titles to the two families.

After Constancio's death, his heirs executed an extrajudicial settlement with simultaneous sale of the eastern portion in favor of Alberto Makilang, who declared the land for taxation purposes. In March 1991, the heirs of Maximo caused the cancellation of that tax declaration, and the Provincial Assessor cancelled it without verifying the legality of the basis. When the heirs of Maximo refused to surrender the owner's copy of the certificate of title, the heirs of Constancio sued.

Issues

• Whether or not Original Certificate of Title No. P-14320, issued in the name of Maximo Labanon, is now indefeasible and conclusive so as to preclude the respondents from challenging it.
• Whether or not the trust agreement between Constancio Labanon and Maximo Labanon has prescribed.

Applicable Provisions

Section 32 of Presidential Decree No. 1529, amending the Land Registration Act, provides:

Section 32. Review of decree of registration; Innocent purchaser for value. The decree of registration shall not be reopened or revised by reason of absence, minority, or other disability of any person adversely affected thereby, nor by any proceeding in any court for reversing judgments, subject, however, to the right of any person, including the government and the branches thereof, deprived of land or of any estate or interest therein by such adjudication or confirmation of title obtained by actual fraud, to file in the proper Court of First Instance a petition for reopening and review of the decree of registration not later than one year from and after the date of the entry of such decree of registration, but in no case shall such petition be entertained by the court where an innocent purchaser for value has acquired the land or an interest therein, whose rights may be prejudiced. Whenever the phrase "innocent purchaser for value" or an equivalent phrase occurs in this Decree, it shall be deemed to include an innocent lessee, mortgagee, or other encumbrancer for value.

This provision fixes the one year limit on reopening a decree of registration, and the Court reads it as not foreclosing an action for reconveyance.

Article 1444 of the New Civil Code provides:

No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended.

This provision supports the finding that the two written documents created an express trust despite the absence of the word trust.

Section 31, Rule 130 of the Rules of Court provides:

Where one derives title to property from another, the act, declaration, or omission of the latter, while holding the title, in relation to the property, is evidence against the former.

This provision binds the petitioners to their father's own declarations recognizing Constancio's ownership.

Article 1371 of the Civil Code provides:

Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law.

This provision binds the heirs of Maximo to the stipulations of the Assignment of Rights and Ownership.

Ruling

On the first issue, the Court held that the respondents are not precluded from challenging the title. The principle of indefeasibility does not totally deprive a party of any remedy to recover property fraudulently registered in another's name. Section 32 of Presidential Decree No. 1529 merely precludes the reopening of the registration proceedings; it does not foreclose other remedies for reconveyance to the rightful owner. The Court quoted its earlier ruling that the acceptability of the Torrens System would be impaired if it were utilized to perpetuate fraud against the real owners, and that the remedy of the land owner whose property has been wrongfully or erroneously registered in another's name is, after one year from the decree, not to set aside the decree but to bring an ordinary action for reconveyance, or for damages if the land has passed to an innocent purchaser for value. The action for recovery of ownership before the trial court was therefore the appropriate remedy.

On the second issue, the Court held that the trust may still be enforced. A trust is the legal relationship between one person having equitable ownership in property and another owning the legal title, the former being entitled to the performance of certain duties by the latter. Trusts are either express or implied, and the classification determines the prescriptive period. An express trust is created by the direct and positive acts of the parties, by some writing or deed or by words evidencing an intention to create a trust; the use of the word trust is not required. Here, the intention to create an express trust, with Maximo as trustee and Constancio as trustor, appears in not one but two written documents, the Assignment of Rights and Ownership and the sworn statement of April 25, 1962. Maximo never repudiated the trust, and after his death the trust could no longer be renounced, so the right to enforce it is not barred by prescription. The Court also held that the petitioners cannot question their father's positive declarations, which were never impugned during his lifetime, and that as heirs they merely stepped into his shoes and are bound by his commitments, for the spring cannot rise higher than its source.

Doctrine

First, the indefeasibility of a Torrens title under Section 32 of Presidential Decree No. 1529 bars the reopening of the registration decree after one year, but it does not bar an ordinary action for reconveyance by the true owner; the Torrens System must not be used to perpetuate fraud.

Second, an express trust requires no particular words; it is enough that a trust is clearly intended, as Article 1444 provides, and it may be established by written deeds and sworn statements recognizing another's equitable ownership while the trustee holds legal title.

Third, an unrepudiated written express trust is imprescriptible; where repudiation occurs, the ten year period runs from the repudiation, and after the trustee's death renunciation is no longer possible.

Fourth, under Section 31, Rule 130, the declarations of a predecessor in interest made while holding the title are evidence against his heirs, who are bound by his contracts under Article 1371 of the Civil Code.

Disposition

The petition was denied, and the Court of Appeals decision and resolution were affirmed with the modification that the trial court is directed to have the certificate of title segregated and subdivided into two lots according to the Assignment of Rights and Ownership, and thereafter to order the Register of Deeds to cancel the original certificate and issue one title each to the petitioners and the respondents, with costs against the petitioners.

Remember This

Memorize this line: the Torrens title does not shield fraud, and an unrepudiated written express trust does not prescribe. Examiners use this case to test the one year limit on reopening a decree of registration against the remedy of reconveyance, and to test the distinction between express and implied trusts for purposes of prescription.