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Philippine Economic Zone Authority vs. Fernandez
Philippine Economic Zone Authority vs. Fernandez
THIRD DIVISION
year period from its entry expires, still available is an equitable remedy
to compel the reconveyance of property to those who may have been
wrongfully deprived of it. This equitable remedy afforded by law is not
[G.R. No. 138971. June 6, 2001] without limitations, however.
PHILIPPINE ECONOMIC ZONE AUTHORITY Same; Same; Same; Same; Registration of real property is considered a
(PEZA), petitioner, vs. HON. RUMOLDO R. FERNANDEZ, constructive notice to all persons and, thus, the four-year period shall be
Regional Trial Court of Lapu-Lapu City (Branch 54); and counted therefrom.—An action for reconveyance resulting from fraud
the Heirs of the Deceased Spouses JUAN CUIZON and prescribes four years from the discovery of the fraud; such discovery is
FLORENTINA RAPAYA, respondents. deemed to have taken place upon the issuance of the certificate of title
over the property. Registration of real property is considered a
DECISION constructive notice to all persons and, thus, the four-year period shall be
counted therefrom. Clearly then, private respondents’ action for
Civil Law; Property; Reconveyance; Prescription; Persons unduly reconveyance based on fraud has already prescribed, considering that
deprived of their lawful participation in a settlement may assert their title to said property had been issued way back on August 11, 1982,
claim only within the two-year period after the settlement and while the reivindicatory suit was instituted only on July 29, 1996.
distribution of the estate; Prescription period does not apply to those
who had no part in or had no notice of the settlement.—A perusal of the
foregoing provision will show that persons unduly deprived of their
lawful participation in a settlement may assert their claim only within Same; Same; Same; Same; The imprescriptibility of an action for
the two-year period after the settlement and distribution of the estate. reconveyance based on implied or constructive trust applies only when
This prescription period does not apply, however, to those who had no the plaintiff or the person enforcing the trust is in possession of the
part in or had no notice of the settle of limitations. Moreover, by no property.—Even an action for reconveyance based on an implied
reason or logic can one contend that an extrajudicial partition, being constructive trust would have already prescribed just the same, because
merely an ex parte proceeding, would affect third persons who had no such action prescribes ten (10) years from the alleged fraudulent
knowledge thereof. Be that as it may, it cannot be denied, either, that by registration or date of issuance of the certificate of title over the
its registration in the manner provided by law, a transaction may be property. The imprescriptibility of an action for reconveyance based on
known actually or constructively. implied or constructive trust applies only when the plaintiff or the
person enforcing the trust is in possession of the property. In effect, the
action for reconveyance is an action to quiet the property title, which
does not prescribe.
Same; Same; Same; Same; An equitable remedy to compel the
reconveyance of property to those who may have been wrongfully Same; Same; Same; Same; For an action for reconveyance to prosper,
deprived of it is not without limitations.—The law recognizes the right the property should not have passed into the hands of an innocent
of a person who, by adjudication or confirmation of title obtained by purchaser for value.—It must be remembered that reconveyance is a
actual fraud, is deprived of an estate or an interest therein. Although a
remedy of those whose property has been wrongfully or erroneously Benito Lozano, Isabel Lozano, Pelagia Lozano, Augusto Lozano,
registered in the name of another. Such recourse, however, cannot be Valeriano Ybaez, Jesus Ybaez, Numeriano Ybaez, Martino Ybaez,
availed of once the property has passed to an innocent purchaser for Eutiquio Patalinghug, Celedonio Patalinghug, Santiago Patalinghug and
value. For an action for reconveyance to prosper, the property should Silvino Patalinghug. The lot has an area of 11,345 square meters, more
not have passed into the hands of an innocent purchaser for value. or less.
On May 15, 1982, Jorgea Igot-Soroo, Frisca Booc and Felix Cuizon
executed an Extrajudicial Partition, in which they declared themselves
PANGANIBAN, J.: as the only surviving heirs of the registered owners of the aforesaid
lot. Consequently, they were issued TCT No. 12467 on July 8, 1982.
An action for reconveyance of land, an equitable remedy Considering that the said lot was among the objects of expropriation
recognized under our land registration laws, is subject to the applicable proceedings docketed as Civil Case No 510-L and pending before it,
rules on prescription. Moreover, the right to pursue such reivindicatory Branch XVI of the Regional Trial Court (RTC) of Lapu-Lapu City
action may be defeated when the property sought to be recovered has rendered a partial Decision on August 11, 1982. In that Decision, the
been conveyed to an innocent purchaser for value. RTC approved the Compromise Agreement entered into between the
Export Processing Zone Authority (EPZA) and the new registered
owners of Lot No. 4673; namely, Jorgea Igot-Soroo, Frisca Booc and
The Case Felix Cuizon. In accordance with the approved Compromise
Agreement, EPZA would pay P68,070 as just compensation for the
Before this Court is a Petition for Review on Certiorari under Rule expropriation of the subject property, which was to be used for an export
45 of the Rules of Court, seeking to set aside the June 8, 1999 processing zone to be established in Lapu-Lapu City.
Decision[1] of the Court of Appeals (CA) in CA-GR SP No. 47575. In As a consequence of the RTC Decision, petitioner acquired title
the said Decision, the CA sustained the January 12, 1998[2] and the over Lot No. 4673 and the corresponding Transfer Certificate of Title
March 31, 1998[3] Orders of the Regional Trial Court of Lapu-Lapu City (TCT) No. 12788 issued by the Register of Deeds of Lapu-Lapu City on
(Branch 54) in Civil Case No. 4534-L, which denied petitioners Motion October 13, 1982.
to Dismiss and Motion for Reconsideration, respectively. The
dispositive portion of the CA Decision reads as follows: On July 29, 1996, private respondents filed with the RTC of Lapu-
Lapu City a Complaint for Nullity of Documents, Redemption and
WHEREFORE, [there being] no abuse of discretion committed by Damages against petitioner and Jorgea-Igot Soroo et al. Docketed as
respondent court, the instant petition is hereby DISMISSED. Civil Case No. 4534-L, the Complaint alleged that herein private
respondents had been excluded from the extrajudicial settlement of the
estate. It likewise sought the nullification of several documents,
The Facts including TCT No. 12788 dated October 13, 1992, issued in the name
of herein petitioner.
The subject of the present controversy is Lot No. 4673 of the Opon On February 17, 1997, petitioner filed a Motion to Dismiss the
Cadastre situated in Lapu-Lapu City, covered by Original Certificate of Complaint on the ground of prescription. This Motion was denied by
Title (OCT) No. RO-2537 (May 19, 1982) and registered in the names respondent judge in the Order dated January 12, 1998. A Motion for
of Florentina Rapaya, Victorino Cuizon, Isidro Cuizon, Ursula Cuizon,
Reconsideration thereof was likewise denied in the Order dated March of his co-heirs, is deemed to hold the land in trust for the latter. The
31, 1998. excluded heirs action is imprescriptible.
On April 30, 1998, petitioner elevated the matter to the Court of
And if the action involve(s) the declaration of the nullity or inexistence
Appeals through a Petition for Certiorari. As earlier noted, the CA
of a void or inexistent contract which became the basis for the
dismissed the Petition.
fraudulent registration of the subject property, then the action is
Hence, this recourse.[4] imprescriptible. This finds codal support in Article 1410 of the Civil
Code, which declares that the action or defense for the declaration of
the inexistence of a void contract does not prescribe.
The CA Ruling
As to the constructive notice rule alleged by the petitioner, (the)
Supreme Court in the case of Juan vs. Zuniga, citing Sevilla vs.
In denying the Petition, the CA ratiocinated as follows: Angeles, has this to say:
Civil Case No. 4534-L although instituted in the guise of a complaint 'While this ruling is correct as applied to ordinary actions by
for Nullity of Documents, Redemption and Damages is in effect an recovery of real property which is covered by a torrens title
action for reconveyance of the property to plaintiffs of a portion which upon the theory that its registration under our registration
rightfully belong to them. It would be against good reason and system has the effect of constructive notice to the whole
conscience not to hold that defendants, Francisca Frisca Booc, heirs of world, the same cannot be applied x x x when the purpose of
deceased Jorg[e]a Igot-Soronio and heirs of Felix Cuizon committed a the action is to compel a trustee to convey the property
breach of trust which enabled them to execute a Deed of Extrajudicial registered in his name for the benefit of the cestui que
Partition[,] Special Power of Attorney and Deed of Absolute Sale in trust. In other words, the defense of prescription cannot be set
favor of EPZA to the prejudice of the plaintiffs as their co- up in an action whose purpose is to recover property held by
heirs.Therefore, in an action like this case, the private respondents may a person for the benefit of another.
be ordered to make reconveyance of the property to the person
rightfully entitled to it.
The Issues
It is undeniable that defendants defrauded plaintiffs by falsely
representing that they were the only heirs of deceased Juan Cuizon and
Florentina Rapaya, succeeded in having the original title cancelled and Petitioner interposes the following issues for the consideration of
enabling them to appropriate the land in favor of EPZA and a new one this Court:
issued in the name of the latter (EPZA). This way of acquiring title
I
create[s] what is called constructive trust in favor of the defrauded
party and grants the latter the right to vindicate [itself] x x x regardless
Whether or not the appellate court erred in not holding that private
of the lapse of time. Thus, it has been held that if a person obtain(s) a
respondents claim against expropriated property had prescribed.
legal title to the property by fraud or concealment, courts of equity will
impress upon the title a so called trust in favor of the defrauded
II
party. In fact, it has long been held that a co-heir who through fraud,
succeeds in obtaining a certificate of title in his name to the prejudice
Whether or not the appellate court erred in not holding that payment thereof, and may issue execution, if circumstances require,
reconveyance does not lie against the expropriated property.[5] against the bond provided in the preceding section or against the real
estate belonging to the deceased, or both. Such bond and such real
estate shall remain charged with a liability to creditors, heirs, or other
The Courts Ruling persons for the full period of two (2) years after such distribution,
notwithstanding any transfers of real estate that may have been made.
(Emphasis supplied)
The Petition is meritorious.
A perusal of the foregoing provision will show that persons unduly
deprived of their lawful participation in a settlement may assert their
First Issue: Prescription claim only within the two-year period after the settlement and
distribution of the estate. This prescription period does not apply,
Petitioner avers that private respondents claim against the subject however, to those who had no part in or had no notice of the
property has already prescribed, because the two-year period within settlement. Section 4, Rule 74 of the Rules of Court, is not meant to be
which an unduly excluded heir may seek a new settlement of the estate a statute of limitations. Moreover, by no reason or logic can one contend
had already lapsed by the time private respondents filed their action with that an extrajudicial partition, being merely an ex parte proceeding,
the trial court. Petitioner further argues that private respondents would affect third persons who had no knowledge thereof.[6] Be that as
received constructive notice in view of the registration of the it may, it cannot be denied, either, that by its registration in the manner
extrajudicial partition with the Registry of Deeds. According to provided by law, a transaction may be known actually or constructively.
petitioner, the two-year period commenced from July 8, 1982, the date In the present case, private respondents are deemed to have been
of inscription of the extrajudicial settlement on OCT No. 2537. constructively notified of the extrajudicial settlement by reason of its
The pertinent provisions of Section 4, Rule 74 of the Rules of Court, registration and annotation in the certificate of title over the subject
are reproduced for easy reference, as follows: lot.From the time of registration, private respondents had two (2) years
or until July 8, 1984, within which to file their objections or to demand
Section 4. Liability of distributees and estate. - If it shall appear at the appropriate settlement of the estate.
any time within two (2) years after the settlement and distribution of On the matter of constructive notice vis--vis prescription of an
an estate in accordance with the provisions of either of the first two action to contest an extrajudicial partition, a leading authority on land
sections of this rule, that an heir or other person has been unduly registration elucidates as follows:
deprived of his lawful participation in the estate, such heir or such
other person may compel the settlement of the estate in the courts in While it may be true that an extrajudicial partition is an ex parte
the manner hereinafter provided for the purpose of satisfying such proceeding, yet after its registration under the Torrens system and
lawful participation. And if within the same time of two (2) years, it the annotation on the new certificate of title of the contingent liability
shall appear that there are debts outstanding against the estate which of the estate for a period of two years as prescribed in Rule 74, Section
have not been paid, or that an heir or other person has been unduly 4, of the Rules of Court, by operation of law a constructive notice is
deprived of his lawful participation payable in money, the court having deemed made to all the world, so that upon the expiration of said
jurisdiction of the estate may, by order for that purpose, after hearing, period all third persons should be barred [from going] after the
settle the amount of such debts or lawful participation and order how particular property, except where title thereto still remains in the
much and in what manner each distributee shall contribute in the names of the alleged heirs who executed the partition tainted with
fraud, or their transferees who may not qualify as innocent purchasers available is an equitable remedy to compel the reconveyance of property
for value. If the liability of the registered property should extend to those who may have been wrongfully deprived of it.[11] This equitable
indefinitely beyond that period, then such constructive notice which remedy afforded by law is not without limitations, however.
binds the whole world by virtue of registration would be meaningless
An action for reconveyance resulting from fraud prescribes four
and illusory. x x x.[7] (Emphasis supplied)
years from the discovery of the fraud; such discovery is deemed to have
taken place upon the issuance of the certificate of title over the
The only exception to the above-mentioned prescription is when the
property. Registration of real property is considered a constructive
title remains in the hands of the heirs who have fraudulently caused the
notice to all persons and, thus, the four-year period shall be counted
partition of the subject property or in those of their transferees who
therefrom.[12] Clearly then, private respondents action for reconveyance
cannot be considered innocent purchasers for value.
based on fraud has already prescribed, considering that title to said
In this regard, title to the property in the present case was no longer property had been issued way back on August 11, 1982, while the
in the name of the allegedly fraudulent heirs, but already in that of an reivindicatory suit was instituted only on July 29, 1996.
innocent purchaser for value the government. Moreover, the
Even an action for reconveyance based on an implied or a
government is presumed to have acted in good faith in the acquisition
constructive trust would have already prescribed just the same,
of the lot, considering that title thereto was obtained through a
because such action prescribes ten (10) years from the alleged
Compromise Agreement judicially approved in proper expropriation
fraudulent registration or date of issuance of the certificate of title over
proceedings.
the property.[13] The imprescriptibility of an action for reconveyance
Even assuming that there was in fact fraud on the part of the other based on implied or constructive trust applies only when the plaintiff or
heirs, private respondents may proceed only against the defrauding the person enforcing the trust is in possession of the property. In effect,
heirs, not against petitioner which had no participation in or knowledge the action for reconveyance is an action to quiet the property title, which
of the alleged fraud. The fact that the co-heirs title to the property was does not prescribe.[14] Undisputedly, private respondents are not in
fraudulently secured cannot prejudice the rights of petitioner which, possession of the disputed property. In fact, they do not even claim to
absent any showing that it had knowledge or participation in the be in possession of it, even if to do so would enable them to justify the
irregularity, is considered a purchaser in good faith and for value.[8] imprescriptibility of their action.
The remedy of an owner alleged to have been prejudiced or Accordingly, the CA Decisions reliance on Juan v. Zuiga,[15] as
fraudulently deprived of property that was subsequently sold to an regards the imprescriptibility of an action for reconveyance based on
innocent purchaser for value is an action for damages against the person implied or constructive trust, is utterly misplaced in the light of the
or persons who perpetrated the fraud.[9] foregoing rulings of the Court declaring a ten-year period of prescription
for such action. Moreover, the principle enunciated therein has no
application to the instant case, considering that the supposed trustee
Second Issue: Limitations on Reconveyance herein has effectively repudiated the so-called trust by directly
performing an act of ownership; that is, by conveying the property to
the government through expropriation. An action to compel, for the
The law recognizes the right of a person, who, by adjudication or benefit of the cestui que trust, the conveyance of property registered in
confirmation of title obtained by actual fraud, is deprived of an estate or the trustees name does not prescribe unless the trustee repudiates the
an interest therein.[10] Although a review of the decree of registration is trust.[16] Thus, private respondents cannot invoke the imprescriptibility
no longer possible after the one-year period from its entry expires, still of their action for reconveyance, irrespective of their basis for it.
Finally, it must be remembered that reconveyance is a remedy of
those whose property has been wrongfully or erroneously registered in
the name of another. Such recourse, however, cannot be availed of once
the property has passed to an innocent purchaser for value. For an action
for reconveyance to prosper, the property should not have passed into
the hands of an innocent purchaser for value.[17]
Indubitably, we find that the property has already been conveyed to
the government in appropriate expropriation proceedings, the regularity
or validity of which has not been questioned. Petitioner should,
therefore, enjoy the security afforded to innocent third persons under
our registration laws. Equally important, its title to the property must be
rightfully preserved.
Hence, private respondents action to recover the subject property
from the government cannot be maintained, not only because of the
prescription of the action, but on account of the protection given to
innocent purchasers for value granted under our land registration
laws. Indeed, the inevitable consequences of the Torrens system of land
registration must be upheld in order to give stability to it and provide
finality to land disputes.
This ruling notwithstanding, private respondents are not without
recourse. They may sue for damages their co-heirs who have allegedly
perpetrated fraud in Civil Case No. 4534-L pending before the RTC.The
right and the extent of damages to be awarded to private respondents
shall be determined by the trial court, subject to the evidence duly
established during the proceedings.
WHEREFORE, the Petition is hereby GRANTED and the assailed
Decision of the Court of Appeals REVERSED. The Orders of the
Regional Trial Court of Lapu-Lapu City (Branch 54) in Civil Case No.
4534-L, dated January 12, 1998 and March 31, 1998, are SET
ASIDE and the said Civil Case, as against petitioner, is DISMISSED. No
costs.
SO ORDERED.