Facts

• The dispute concerned a parcel of land in Mandaue City.
• Respondents Spouses Peter and Victoria Po (the claimed beneficiaries) claimed to have purchased the property from its original owner.
• Petitioners Spouses Roberto Aboitiz and Maria Cristina Cabarrus (the claimed constructive trustees) later acquired the same land, secured its registration, and obtained a certificate of title in their names. (Registration confirms title; it does not create it — so a registrant who is not the true owner is treated as holding for the one who is.)
• Portions were thereafter conveyed to other parties, including Jose Maria Moraza and Spouses Ernesto and Isabel Aboitiz (the subsequent transferees, whose standing as buyers in good faith is a separate question from the trust).
• The Spouses Po sued to recover the property, contending that the Aboitizes' registration was made in derogation of their prior right and that the registered owners held the land in trust for them.
• Regional Trial Court — the Pos are the rightful owners. The Regional Trial Court declared the Spouses Po the rightful owners.
• Court of Appeals — judgment modified. The Court of Appeals modified the judgment.
• Before the Supreme Court. Both sides sought review, the consolidated petitions raising the validity of the registration, the availability of reconveyance, prescription, and the status of the subsequent transferees.

Issue

1. Whether an action for reconveyance lies against a registered owner, and on what basis.
2. Whether the action had prescribed.
3. Whether the subsequent transferees are protected as innocent purchasers for value.

Ruling

Ratio

• Article 1456§ provides that if property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes.
• Registration does not vest title; it merely confirms one already existing.
• A person who registers land in derogation of another's right holds it as trustee for the true owner.
• 2. Reconveyance Does Not Attack the Decree — Citing Hortizuela v. Tagufa.
• The Court invoked Hortizuela v. Tagufa for the character of the remedy: an action for reconveyance is a recognised remedy, an action in personam, available to a person whose property has been wrongfully registered in another's name.
• This is the doctrinal heart of the case.
• Reconveyance does not seek to reopen the registration proceedings or to set aside the decree — which, after one year, becomes incontrovertible.
• It accepts the decree as valid and instead operates against the person of the registered owner, compelling him to transfer the property he holds for another.
• The conclusiveness of a judgment in land registration is therefore not absolute: the aggrieved party may sue for reconveyance, or for damages against the party who registered the property through fraud.

• An action for reconveyance based on an implied or constructive trust prescribes in ten years, counted from the alleged fraudulent registration or the date of issuance of the certificate of title, since registration constitutes constructive notice to the world.
• The Court measured the Spouses Po's action against this period and found it timely.

• The trust binds the wrongful registrant, but the remedy is not available against a buyer in good faith and for value who acquired the property relying on a clean title.
• As to those transferees, the Court protected their titles, leaving the aggrieved owners to their remedy in damages against the parties responsible.

Doctrine

• Article 1456§. Property acquired through mistake or fraud places the acquirer under an implied (constructive) trust in favour of the true owner.
• Reconveyance is an action in personam (Hortizuela v. Tagufa). It does not assail the decree of registration but compels the registered owner to convey the property to its rightful owner; the conclusiveness of registration is therefore not absolute.
• Prescription. Reconveyance based on implied trust§ prescribes in ten years from the issuance of the certificate of title (registration being constructive notice).
• Limits. The action fails against an innocent purchaser for value; the remedy then converts into an action for damages against the person who procured the fraudulent registration.