ESTRELLA TIONGCO YARED (DECEASED) SUBSTITUTED BY CARMEN M. TIONGCO A.K.A. CARMEN MATILDE B. TIONGCO, PETITIONER, VS. JOSE B. TIONGCO AND ANTONIO G. DORONILA, JR., RESPONDENTS.

Yared versus Tiongco

The Case

This is a petition for review on certiorari brought by Estrella Tiongco Yared, later substituted by Carmen M. Tiongco, against her nephew Jose B. Tiongco and Antonio G. Doronila, Junior. The action below was one for annulment of an affidavit of adjudication, of the deeds of sale that followed it, and of the transfer certificates of title issued on the strength of those documents, with reconveyance and damages. The case matters because it is the Supreme Court's cleanest statement of the exception to the prescriptive period for reconveyance: an action founded on an implied or constructive trust ordinarily prescribes in ten years from the issuance of the Torrens title, but not when the plaintiff has remained in possession of the land. It is also a stern lesson on the limits of the Torrens system as a shield for fraud.

Procedural History

Estrella filed her complaint in 1990 before the Regional Trial Court of Iloilo City, Branch 26. After trial, that court dismissed the complaint, holding that prescription had set in because the affidavit of adjudication had been registered in 1974, some sixteen years before suit. Estrella appealed to the Court of Appeals, which affirmed the dismissal in a decision dated August 28, 2003. The appellate court reasoned that when reconveyance is based on fraud it must be filed within four years from discovery, and discovery is deemed to have taken place upon registration, since registration is constructive notice to the whole world; and that when reconveyance rests on an implied or constructive trust, it prescribes in ten years from the issuance of the title. The Court of Appeals denied her motion for reconsideration on November 27, 2003. Estrella then came to the Supreme Court by petition for review on certiorari under Rule 45.

Facts

Matilde, Jose, Vicente, and Felipe, all surnamed Tiongco, were the children of Atanacio and Maria Luis Tiongco, and were known as the Heirs of Maria Luis de Tiongco. Three parcels of land in Iloilo City are involved: Lot 3244 and Lot 1404, originally covered by separate original certificates of title in the names of the four siblings, each holding one fourth undivided share, and Lot 3246, originally covered by a title in the name of the Heirs of Maria Luis de Tiongco. All four siblings had died, survived by children and descendants. Estrella was a daughter of Jose, while respondent Jose B. Tiongco was a grandson of Jose through his son Carmelo.

Sometime in 1965, Estrella built her house on Lot 1404 and supported herself by collecting rentals from the tenants of Lots 3244 and 3246. In 1968 she filed an adverse claim as an heir of her father, annotated on the titles covering Lots 3244 and 1404. In 1983, respondent Jose barred her from collecting rentals, and in December of that year he sued several tenants for recovery of possession and obtained a favorable judgment. He also filed an unlawful detainer case against Estrella over Lot 1404; the trial court ruled for him, but the Court of Appeals reversed and ruled for Estrella, so he never took possession.

In 1988, upon inquiry at the Register of Deeds, Estrella discovered that respondent Jose had executed an Affidavit of Adjudication dated April 17, 1974, declaring himself the only surviving heir of the registered owners and adjudicating to himself all three lots. The original certificates were cancelled and new transfer certificates were issued in his name. On the very day two of those titles were issued, he sold Lots 3244 and 1404 to Catalino Torre; later he sold Lot 3246 to respondent Antonio G. Doronila, Junior, who also acquired the other two lots from Torre. Within days, and again in January 1980, the lots were sold back to respondent Jose. Estrella sued in 1990, alleging that the affidavit was void from the beginning because respondent Jose knew other living heirs were entitled to the properties.

Issues

• Whether or not the action for reconveyance is barred by prescription, considering that the affidavit of adjudication and the titles issued pursuant to it were registered more than ten years before the complaint was filed.
• Whether or not the successive transfers of the properties to Catalino Torre and Antonio G. Doronila, Junior, and back to respondent Jose, cleansed the illegality of the adjudication and entitled respondent Jose to the protection of the law.

Applicable Provisions

The decision does not quote a statute; it applies the settled rule on reconveyance based on an implied or constructive trust, which the Court states in these terms:

In a long line of cases decided by this Court, we ruled that an action for reconveyance based on implied or constructive trust must perforce prescribe in ten (10) years from the issuance of the Torrens title over the property.

That ten-year period is the rule the trial court and the Court of Appeals applied, and the rule the Supreme Court accepts as the starting point before carving out its exception.

The Court then states the exception, drawn from its earlier decisions, in these words:

There is but one instance when prescription cannot be invoked in an action for reconveyance, that is, when the plaintiff is in possession of the land to be reconveyed.

This is the provision of jurisprudence on which the entire case turns, because Estrella never lost possession of the properties.

Finally, on the status of a buyer of registered land, the Court restates the exception to the rule that a purchaser may rely solely on the Torrens title:

The exception is when the party has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry or when the purchaser has some knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the property in litigation.

This governs whether the successive vendees, and respondent Jose himself, may claim the protection of an innocent purchaser for value.

Ruling

On the first issue, the Court ruled that prescription had not set in. It accepted that reconveyance based on an implied or constructive trust prescribes in ten years from the issuance of the Torrens title, but held that the rule admits of one exception: when the plaintiff is in possession of the land to be reconveyed. The Court explained that prescription does not run against a plaintiff in actual possession, because his undisturbed possession gives him a continuing right to seek the aid of a court of equity to determine the nature of an adverse claim and its effect on his title. In that situation, the action for reconveyance is in effect an action to quiet title, which does not prescribe. The Court found that Estrella's possession was disturbed only in 1983, when respondent Jose filed the case for recovery of possession, and that she never lost possession; the Court of Appeals itself had ruled in her favor in the unlawful detainer case in 1991. She was therefore in a position to sue to clear the cloud cast on her title.

On the second issue, the Court ruled that the circuitous sales did not cleanse the illegality. Respondent Jose himself admitted that other heirs of the registered owners existed, and the trial court had found that the allegations in his affidavit of adjudication were false because he was not the only surviving heir. The Court defined an innocent purchaser for value as one who buys without notice of another's right or interest and pays a full and fair price before receiving such notice, and held that a purchaser cannot close his eyes to facts that should put a reasonable man on his guard. When the properties were sold to Catalino Torre and then to Doronila, respondent Jose was not in possession, a fact that should have prompted inquiry. In any event, the properties reverted to respondent Jose, who cannot claim ignorance of the defects surrounding the cancellation of the original titles. The subsequent sales could not cure the nullity of the titles he obtained through a false and fraudulent affidavit.

Doctrine

An action for reconveyance based on an implied or constructive trust prescribes in ten years from the issuance of the Torrens title over the property. That period, however, does not run against a plaintiff who is in actual possession of the land to be reconveyed. In such a case the action partakes of the nature of an action to quiet title, which is imprescriptible, and the right to sue accrues only when the possessor's title is disturbed or attacked. Registration is constructive notice to the whole world, but it cannot be used as a shield for fraud or to enrich one person at the expense of another. A buyer of registered land may rely on the Torrens title, except when facts and circumstances would impel a reasonably cautious man to inquire; one who falls within the exception is neither an innocent purchaser for value nor a purchaser in good faith, and does not merit the protection of the law.

Disposition

The petition was granted; the Court of Appeals decision and resolution were reversed and set aside; the Register of Deeds of Iloilo City was ordered to restore the original certificates of title over the three lots in the names of the original registered owners; and respondent Jose B. Tiongco was ordered to show cause why he should not be sanctioned as a member of the bar for executing and registering the affidavit of adjudication.

Remember This

Memorize the single line: an action for reconveyance based on an implied or constructive trust prescribes in ten years from the issuance of the title, unless the plaintiff is in possession of the land, in which case the action is one to quiet title and does not prescribe. Examiners use this case to test the prescriptive period for reconveyance, the inapplicability of the Torrens system as a shield for fraud, and the requisites of an innocent purchaser for value.