Spouses Lopez v. Spouses Lopez

Petition for Relief from Judgment; v. Action for Reconveyance · Forged Document may be a root of a valid title

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Case DigestWeek 3–4 — The Registries of Deeds and Original Registration

Spouses Lopez v. Spouses Lopez

G.R. No. 161925 · November 25, 2009 · Supreme Court — Third Division

Petition for Relief from Judgment; v. Action for Reconveyance · Forged Document may be a root of a valid title

Gist

The relationship of the case of Spouses Exequiel Lopez and Eusebia Lopez v. Spouses Eduardo Lopez and Marcelina R. Lopez, G.R. No. 161925, November 25, 2009, to the assigned syllabus topic of Section 32 of Presidential Decree No. 1529 (Review of Decree; Innocent Purchaser for Value; Action for Reconveyance) is DIRECT. The triggering controversy arose when Spouses Eduardo Lopez and Marcelina R. Lopez discovered in November 1992 that an eighty (80) square meter portion of residential land, which Spouses Eduardo Lopez and Marcelina R. Lopez owned and occupied, was wrongfully included in a free patent and resulting Original Certificate of Title No. RP-253 (P-8511) issued to Victor Villadares, who subsequently subdivided the land and sold a portion thereof to Spouses Exequiel Lopez and Eusebia Lopez. The Supreme Court of the Philippines Third Division partially granted the Petition for Review on Certiorari, modifying the Decision of the Court of Appeals by declaring the Deed of Absolute Sale of Portions of a Parcel of Land dated May 8, 1990 valid as to the portions not overlapping with the property of the rightful owners, but affirming the order of reconveyance of the eighty (80) square meter portion to Spouses Eduardo Lopez and Marcelina R. Lopez.

Core Doctrine

The Rule on Title Non-Vestment: The registration of land under the Torrens system does not create or vest title; certificates of title merely confirm or record a title already existing and vested, and the petitioners cannot be used to protect a usurper from the true owner or to permit unjust enrichment.

Facts

From 1977 Spouses Eduardo and Marcelina R. Lopez possessed and occupied an 80-square-metre residential lot in San Pascual, Hagonoy, Bulacan, acquired by donation inter vivos from Maria Alvarado and Agatona Caparas, in whose names it had been declared for taxation.
On March 8, 1978 the Bureau of Lands issued OCT No. RP-253 (P-8511) to Victor Villadares on a free patent over 885 square metres of public land — wrongfully taking in the Lopez spouses' 80-square-metre lot.
Villadares subdivided the parcel into Lot No. 9954-A (275 sq m, retained), Lot No. 9954-B (273 sq m) and Lot No. 9954-C (337 sq m).
On May 8, 1990 he executed a Deed of Absolute Sale of Portions of a Parcel of Land, conveying Lot No. 9954-B to Spouses Exequiel and Eusebia Lopez for ₱30,000.00 and Lot No. 9954-C to Filomena Caparas. OCT No. RP-253 was cancelled, and TCT Nos. T-5065, T-5066 and T-5067 issued to Villadares, the Exequiel Lopez spouses, and Caparas respectively.
In November 1992 the Eduardo Lopez spouses discovered the wrongful inclusion, the subdivision and the sales, and sued for reconveyance, nullity of the deed, cancellation of titles and damages in the RTC of Malolos, Bulacan.
At trial Pedro Manansala testified he had sold the Exequiel Lopez spouses only 168 square metres for ₱20,000.00 after Martial Law; Eusebia Lopez insisted it was 273 square metres, and admitted the couple had filed an administrative protest with the Bureau of Lands against Villadares's patent application, which Villadares settled by agreeing to sell them the disputed portion for ₱30,000.00 — testimony Villadares corroborated.
The RTC ruled for the Eduardo Lopez spouses, voiding the 1990 deed, ordering reconveyance of the 80 square metres, and cancelling TCT Nos. T-5065 and T-5066 with damages. On January 26, 2004 the CA affirmed in toto in CA-G.R. CV No. 68549. The Third Division decided on November 25, 2009.

Arguments of the Parties

Petitioners. The Exequiel Lopez spouses argued the CA ignored their and their predecessors' actual possession of the land now under TCT No. T-5066 for more than fifty years; that they paid the real estate taxes after buying from Pedro and Miguela Ayuson Manansala on August 2, 1974; that the CA miscounted the respondents' possession as under thirty years and so insufficient; that the 1990 deed was valid, executed to settle the conflict of ownership and speed the transfer to them; and that cancelling TCT Nos. T-5065 (275 sq m) and T-5066 (273 sq m) entirely was excessive when the claim ran to only 80 square metres.

Respondents. The Eduardo Lopez spouses argued they are absolute owners by donation inter vivos from Alvarado and Caparas; that they had held the lot openly, continuously and notoriously in the concept of owner since 1977; that Villadares obtained his patent by fraud, the land being already private and not of the public domain, so he could convey nothing of the 80 square metres; and that the 1990 deed was simulated, an afterthought to defeat their possession.

Common Ground / Stipulations (if any). Both admitted the 80-square-metre lot lies physically within the subdivided lots of the larger 885-square-metre parcel first registered to Villadares, and that the Eduardo Lopez spouses are in actual physical possession of it.

Issue

MAIN ISSUE (Remedy-centered). Whether reconveyance is the proper remedy to recover an 80-square-metre portion wrongfully registered under a free patent and later certificates, and whether a Torrens title shields the registered owner from it.

SECONDARY ISSUES. Whether the 1990 deed is absolutely simulated and void in its entirety under Articles 1345 and 1346, or remains valid as to the rest; and whether the petitioners' claim based on the 1974 purchase is barred by res judicata and is a prohibited collateral attack on the decree.

ANCILLARY / INCIDENTAL ISSUES (if any). None separately resolved.

Ruling

On the MAIN ISSUE: YES, reconveyance is proper. Being neighbours, the Exequiel Lopez spouses certainly knew the respondents occupied the lot; and Villadares, not owning it, could transfer nothing of the 80 square metres. Registration does not vest title — a certificate merely confirms or records a title already existing and vested — and the Torrens system cannot protect a usurper from the true owner, shield fraud, or let one enrich himself at another's expense. On simulation: NO — under Article 1345 simulation is absolute where there is a colourable contract but no substance and the parties never meant to be bound; here nothing shows that. Villadares surrendered whatever right he had, caused the titling and transfer of the tax declaration, took the price, and delivered the title and tax declaration; that he sold to settle a conflict of ownership does not negate the contract's efficacy, so it stands valid as to the remainder, subject to segregating and reconveying the 80 square metres. On res judicata: YES, barred — the petitioners took part in Villadares's registration case by filing an opposition, and a final judgment in a proceeding in rem is res judicata against the whole world; their pre-1978 possession was the very core of that opposition, and they cannot relitigate it or collaterally attack the decree here. The dispositive portion reads verbatim: "WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The Court of Appeals Decision dated January 26, 2004 is AFFIRMED WITH MODIFICATIONS. The Deed of Absolute Sale of Portions of a Parcel of Land dated May 8, 1990 is declared VALID but subject to our disposition hereunder. Petitioners and Victor Villadares are directed to cause a SURVEY of Lots 9954-A and 9954-B in order to determine the exact location of the 80-sq m portion pertaining to respondents. Thereafter, the Register of Deeds of Tabang, Guiguinto, Bulacan is ordered to ISSUE the corresponding transfer certificates of title in the names of petitioners, respondents and Victor Villadares, in accordance with said survey. SO ORDERED."

Ratio

Reconveyance concedes the decree. Unlike review under Section 32, it does not reopen the registration or set the decree aside, but shows only that the registrant is not the real owner — the certificate being cancelled merely to amend it and exclude what was wrongly included.
A certificate records ownership; it does not manufacture it. One who holds land wrongly included in his title holds it as a trustee under an implied trust for the person from whom it came.
Intention decides simulation, and conduct reveals intention. Payment made, title and tax declaration delivered, rights surrendered — these are the acts of parties who meant to be bound.
An in rem judgment binds the world, including those who opposed it. Having litigated their possession and lost, the petitioners cannot try the same question again under another name.

Doctrine

Doctrines / Rules / Principles Laid Down.

Registration creates no title — a certificate confirms a title already vested, and cannot be used to protect a usurper from the true owner or to permit unjust enrichment.
A sale is not void in its entirety for simulation merely because part of the land belongs to another; it stands valid as to the portion the seller owned.
And reconveyance for wrongful inclusion entails only segregating the portion wrongly included and amending the certificate, not revoking the registered owner's whole title.

Distinctions / Limitations / Qualifications.

Reconveyance is unavailable once the land has passed to an innocent purchaser for value — inapplicable here, the petitioners having had actual knowledge of the respondents' open and notorious possession.
And though the action ordinarily prescribes in ten years from issuance of the certificate, that does not run against a plaintiff in actual physical possession, whose suit is an imprescriptible action to quiet title.

Topic/Subtopic Integration (Mandatory).

DIRECT: where private land is wrongly swept into a title issued on a free patent, the owner's remedy under Section 32 is reconveyance of the disputed portion. Confining the relief to segregation and amendment rather than wholesale cancellation protects the actual possessor's substantive right while sparing the register unnecessary collateral attack.

Separate Opinions

None. The Third Division decided unanimously, with no separate concurring or dissenting opinion recorded.

Full Digest — Recitation Format

Facts

Sometime in the year 1977: Spouses Eduardo Lopez and Marcelina R. Lopez entered into possession and actual physical occupation of an eighty (80) square meter residential lot situated in San Pascual, Hagonoy, Bulacan.
On an unspecified date: Spouses Eduardo Lopez and Marcelina R. Lopez acquired the eighty (80) square meter property by virtue of a donation inter vivos executed in favor of Spouses Eduardo Lopez and Marcelina R. Lopez by Maria Alvarado and Agatona Caparas, in whose names the lot was previously declared for taxation purposes.
On March 8, 1978: The Bureau of Lands issued Original Certificate of Title (OCT) No. RP-253 (P-8511) in the name of Victor Villadares pursuant to a free patent grant over an eight hundred eighty-five (885) square meter parcel of public land, which patent and original certificate of title wrongfully included the eighty (80) square meter residential lot owned and occupied by Spouses Eduardo Lopez and Marcelina R. Lopez.
Sometime thereafter: Victor Villadares subdivided the entire eight hundred eighty-five (885) square meter parcel of land into three (3) distinct lots, namely: Lot No. 9954-A (retained by Victor Villadares, consisting of 275 square meters), Lot No. 9954-B (consisting of 273 square meters), and Lot No. 9954-C (consisting of 337 square meters).
On May 8, 1990: Victor Villadares executed a contract denominated as a Deed of Absolute Sale of Portions of a Parcel of Land, conveying Lot No. 9954-B with an area of 273 square meters to Spouses Exequiel Lopez and Eusebia Lopez for the purchase price of Thirty Thousand Pesos (₱30,000.00), and conveying Lot No. 9954-C with an area of 337 square meters to Filomena Caparas.
Sometime thereafter: Pursuant to the May 8, 1990 Deed of Absolute Sale, Original Certificate of Title No. RP-253 (P-8511) was cancelled. Consequently, Transfer Certificate of Title (TCT) No. T-5065 was issued in the name of Victor Villadares for Lot No. 9954-A; Transfer Certificate of Title (TCT) No. T-5066 was issued in the names of Spouses Exequiel Lopez and Eusebia Lopez for Lot No. 9954-B; and Transfer Certificate of Title (TCT) No. T-5067 was issued in the name of Filomena Caparas for Lot No. 9954-C.
In November 1992: Spouses Eduardo Lopez and Marcelina R. Lopez discovered that the eighty (80) square meter property was wrongfully included in the free patent granted to Victor Villadares, and that the land had been subdivided and subsequently sold.
Sometime thereafter: Spouses Eduardo Lopez and Marcelina R. Lopez filed an action for reconveyance, declaration of nullity of a deed of absolute sale, cancellation of titles, and damages against Victor Villadares and Spouses Exequiel Lopez and Eusebia Lopez before the Regional Trial Court of Malolos, Bulacan.
During the trial of the civil case: Pedro Manansala, a witness for Spouses Eduardo Lopez and Marcelina R. Lopez, testified that the lot of Spouses Exequiel Lopez and Eusebia Lopez consisted of one hundred sixty-eight (168) square meters only, which Spouses Exequiel Lopez and Eusebia Lopez purchased from Pedro Manansala for Twenty Thousand Pesos (₱20,000.00) sometime after the declaration of Martial Law.
During the trial: Petitioner Eusebia Lopez refuted the testimony of Pedro Manansala by asserting that Spouses Exequiel Lopez and Eusebia Lopez purchased a two hundred seventy-three (273) square meter lot from Pedro Manansala. Petitioner Eusebia Lopez admitted that Spouses Exequiel Lopez and Eusebia Lopez had filed an administrative protest with the Bureau of Lands against the free patent application of Victor Villadares, but that Victor Villadares subsequently agreed to sell the disputed portion of the land to Spouses Exequiel Lopez and Eusebia Lopez for Thirty Thousand Pesos (₱30,000.00).
During the trial: Victor Villadares corroborated the testimony of Petitioner Eusebia Lopez, testifying that when Spouses Exequiel Lopez and Eusebia Lopez showed proof of ownership over a portion of the lot registered under the name of Victor Villadares, Victor Villadares agreed to transfer the title of the said portion to the names of Spouses Exequiel Lopez and Eusebia Lopez.
On an unspecified date: The Regional Trial Court of Malolos, Bulacan rendered a decision in favor of Spouses Eduardo Lopez and Marcelina R. Lopez, declaring the May 8, 1990 Deed of Absolute Sale null and void, ordering the reconveyance of the eighty (80) square meter lot to Spouses Eduardo Lopez and Marcelina R. Lopez, ordering the Register of Deeds of Tabang, Guiguinto, Bulacan to cancel TCT No. T-5065 (Victor Villadares) and TCT No. T-5066 (Spouses Exequiel Lopez and Eusebia Lopez), and awarding moral damages, exemplary damages, attorney's fees, and costs of suit.
Sometime thereafter: Both Victor Villadares and Spouses Exequiel Lopez and Eusebia Lopez appealed the decision of the Regional Trial Court to the Court of Appeals.
On January 26, 2004: The Court of Appeals rendered a Decision in CA-G.R. CV No. 68549, affirming in toto the decision of the Regional Trial Court, on the ground that landowners cannot use land registration proceedings to shield fraud or permit the enrichment of a person at the expense of another.
Sometime thereafter: Victor Villadares filed a motion for reconsideration of the January 26, 2004 Decision with the Court of Appeals, which motion was held in abeyance. Spouses Exequiel Lopez and Eusebia Lopez did not file a motion for reconsideration but instead immediately elevated the case to the Supreme Court of the Philippines via a Petition for Review on Certiorari under Rule 45.
On November 25, 2009: The Supreme Court of the Philippines Third Division promulgated the Decision, partially granting the petition by declaring the May 8, 1990 Deed of Absolute Sale valid as to the portions not overlapping with the property of Spouses Eduardo Lopez and Marcelina R. Lopez, but affirming the order of reconveyance of the eighty (80) square meter portion to Spouses Eduardo Lopez and Marcelina R. Lopez.

Arguments of the Parties

Petitioner/Prosecution (Spouses Exequiel Lopez and Eusebia Lopez).

Continuous Long-Term Possession: The petitioners argue that the Court of Appeals failed to recognize the actual physical possession of the petitioners and predecessors-in-interest over the property now covered by TCT No. T-5066 for more than fifty (50) years.
Tax Payment Compliance: The petitioners contend that Spouses Exequiel Lopez and Eusebia Lopez paid real estate taxes on the subject property after the purchase of the property from Pedro Manansala and Miguela Ayuson Manansala on August 2, 1974.
Error in Possessory Computation: The petitioners assert that the Court of Appeals erred in considering the possession of the respondents for less than thirty (30) years, which was insufficient to establish ownership.
Validity of the Settlement Transaction: The petitioners maintain that the May 8, 1990 Deed of Absolute Sale executed by Victor Villadares in favor of the petitioners was valid because the contract was executed merely to settle the conflict of ownership over the property and to expedite the transfer of the property to the petitioners.
Excessive Remedy of Cancellation: The petitioners argue that the Court of Appeals erred in affirming the complete cancellation of TCT No. T-5065 (with an area of 275 square meters) and TCT No. T-5066 (with an area of 273 square meters) when the actual claim of the respondents was strictly limited to only eighty (80) square meters.

Respondent/Defense (Spouses Eduardo Lopez and Marcelina R. Lopez).

True Ownership and Title by Donation: The respondents argue that Spouses Eduardo Lopez and Marcelina R. Lopez are the absolute owners of the eighty (80) square meter lot, having acquired the property by donation inter vivos from Maria Alvarado and Agatona Caparas, in whose names the lot was previously declared for taxation purposes.
Prior Continuous Possession: The respondents contend that Spouses Eduardo Lopez and Marcelina R. Lopez occupied and possessed the eighty (80) square meter lot continuously, openly, and notoriously in the concept of owner since the year 1977.
Fraudulent Patent and Lack of Conveyable Title: The respondents assert that Victor Villadares obtained the free patent and original certificate of title over the property through fraud because the land was already private land and not part of the public domain. Consequently, Victor Villadares, not being the owner of the eighty (80) square meter portion of land, could not have transferred ownership of the eighty (80) square meter portion of land to the petitioners.
Simulation of the Sale: The respondents argue that the May 8, 1990 Deed of Absolute Sale between Victor Villadares and the petitioners was simulated and void because the execution of the deed of sale was only an afterthought to defeat the possession of the respondents.

Common Ground.

Physical Overlap: Both Spouses Exequiel Lopez and Eusebia Lopez and Spouses Eduardo Lopez and Marcelina R. Lopez admit that the eighty (80) square meter residential lot is physically located within the boundaries of the subdivided lots of the larger eight hundred eighty-five (885) square meter parcel of land originally registered under the name of Victor Villadares.
Actual Physical Occupancy: Both parties acknowledge that Spouses Eduardo Lopez and Marcelina R. Lopez are in actual physical possession of the eighty (80) square meter lot.

Issue

MAIN ISSUE.

Whether an action for reconveyance under Section 32 of Presidential Decree No. 1529 is the proper legal and equitable remedy to recover an eighty (80) square meter portion of residential land that has been wrongfully and erroneously registered in the name of another under a free patent and subsequent Transfer Certificate of Title, and whether a Torrens certificate of title can shield a registered owner from such action.

SECONDARY ISSUES.

Whether a contract of sale is absolutely simulated and void in the entire scope under Article 1345 and Article 1346 of the Civil Code when the seller is not the owner of a portion of the land conveyed, or whether the contract remains valid and binding as to the remaining portions of the property.
Whether the petitioners' claim of ownership over the property based on a prior 1974 purchase from a tax declarant is barred under the principle of res judicata and constitutes a prohibited collateral attack on the original decree of registration when raised in a subsequent action for reconveyance.

Ruling

MAIN ISSUE: YES. The Supreme Court of the Philippines ruled that an action for reconveyance is the proper legal and equitable remedy to recover the eighty (80) square meter portion of land. The Supreme Court of the Philippines held that since Spouses Exequiel Lopez and Eusebia Lopez were neighbors of Spouses Eduardo Lopez and Marcelina R. Lopez, Spouses Exequiel Lopez and Eusebia Lopez certainly would have known that Spouses Eduardo Lopez and Marcelina R. Lopez actually occupied the subject property. Thus, Victor Villadares, not being the owner of the subject property, could not have transferred ownership of the subject eighty (80) square meter portion of land to Spouses Exequiel Lopez and Eusebia Lopez. The Supreme Court of the Philippines reaffirmed that registration under the Torrens system does not vest title, as a certificate of title merely confirms or records a title already existing and vested. The Torrens system of registration cannot be used to protect a usurper from the true owner, and cannot be used as a shield for the commission of fraud, or to permit one to enrich oneself at the expense of others. Therefore, the reconveyance of the eighty (80) square meter portion to Spouses Eduardo Lopez and Marcelina R. Lopez is warranted.

SECONDARY ISSUE NO. 1: NO. The Supreme Court of the Philippines ruled that the May 8, 1990 Deed of Absolute Sale is not absolutely simulated or void in the entire scope. The Supreme Court of the Philippines held that under Article 1345 of the Civil Code, simulation may be absolute or relative. In absolute simulation, there is a colorable contract but no substance, as the parties have no intention to be bound. In this case, the contract can hardly be considered simulated because there is no showing that the parties did not intend to be bound by the contract and to comply with the terms of the contract. Victor Villadares surrendered to the petitioners any right Victor Villadares had over the property, caused the titling and transfer of the tax declaration, accepted the purchase price, and delivered the certificate of title and the tax declaration to the petitioners. The fact that Victor Villadares agreed to sell the lot to settle the conflict of ownership does not negate the contractual efficacy of the contract. Therefore, the contract is valid as to the remaining portion of the lot, subject only to the segregation and reconveyance of the eighty (80) square meter portion of Spouses Eduardo Lopez and Marcelina R. Lopez.

SECONDARY ISSUE NO. 2: YES. The Supreme Court of the Philippines held that the petitioners' claim of ownership over the entire lot based on the alleged 1974 purchase from Pedro Manansala constitutes a prohibited collateral attack on the original decree of registration. The Supreme Court of the Philippines held that the petitioners had participated in the original land registration proceedings by filing an opposition to Victor Villadares' application. In a proceeding for land registration, the final judgment of the court confirming the title of the applicant constitutes res judicata against the whole world. The alleged possession of the petitioners prior to the registration was the very core of the opposition of the petitioners in that proceeding, and the petitioners cannot subsequently relitigate or collaterally attack the final decree in this reconveyance case.

Dispositive portion (verbatim). The final dispositive portion of the Supreme Court of the Philippines in G.R. No. 161925, dated November 25, 2009, is quoted verbatim as follows:

"WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The Court of Appeals Decision dated January 26, 2004 is AFFIRMED WITH MODIFICATIONS. The Deed of Absolute Sale of Portions of a Parcel of Land dated May 8, 1990 is declared VALID but subject to our disposition hereunder. Petitioners and Victor Villadares are directed to cause a SURVEY of Lots 9954-A and 9954-B in order to determine the exact location of the 80-sq m portion pertaining to respondents. Thereafter, the Register of Deeds of Tabang, Guiguinto, Bulacan is ordered to ISSUE the corresponding transfer certificates of title in the names of petitioners, respondents and Victor Villadares, in accordance with said survey.

SO ORDERED."

Ratio

The Scope and Purpose of an Action for Reconveyance under Section 32: An action for reconveyance is a legal and equitable remedy granted to a rightful landowner, whose land was wrongfully or erroneously registered in the name of another, to compel the registered owner to transfer or reconvey the land to the rightful owner. Unlike a petition for review of a decree of registration under Section 32 of Presidential Decree No. 1529, an action for reconveyance does not aim or purport to reopen the registration proceeding and set aside the decree of registration, but only purports to show that the person who secured the registration of the property in controversy is not the real owner thereof. In an action for reconveyance, the decree of registration is respected as incontrovertible, but the certificate of title will be cancelled for the purpose of amending the certificate to exclude the portion wrongfully included therein.
The Principle that Registration Does Not Vest Title: Registration under the Torrens system does not create or vest title because registration is not a mode of acquiring ownership. A certificate of title is merely evidence of an ownership or title already existing and vested. The Torrens system of registration cannot be used to protect a usurper from the true owner, and cannot be used as a shield for the commission of fraud, or to permit one to enrich oneself at the expense of others. When a parcel of land has been wrongfully included in a certificate of title, the registered owner holds the land as a mere trustee of an implied trust for the benefit of the person from whom the property comes under Article 1456 of the Civil Code.
The Intention of the Parties in Contractual Simulation: Under Article 1345 of the Civil Code, simulation of a contract may be absolute or relative. The primary consideration in determining the true nature of a contract is the intention of the parties, which is determined not only from the express terms of the agreement, but also from the contemporaneous and subsequent acts of the parties. Absolute simulation takes place when there is a colorable contract but no substance, as the parties have no intention to be bound. In this case, because the parties complied with the terms of the May 8, 1990 Deed of Absolute Sale—wherein Victor Villadares surrendered the duplicate title and tax declarations, and the petitioners paid the purchase price and accepted the documents—the contract is valid as to the portions not overlapping with the property of Spouses Eduardo Lopez and Marcelina R. Lopez.
The Binding Effect of Land Registration Judgments as Res Judicata: A land registration proceeding is a proceeding in rem, and a final judgment confirming the title of an applicant or oppositor constitutes res judicata against the whole world. Since the petitioners had actively participated in the original registration case of Victor Villadares by filing an opposition based on the alleged prior possession, the petitioners are barred from relitigating the claim of possession prior to 1978 in the reconveyance proceeding. Assailing the final decree of registration in a subsequent action for reconveyance constitutes an impermissible collateral attack on the Torrens title.

Doctrine

Doctrines / Rules / Principles Laid Down.

The Rule on Title Non-Vestment: The registration of land under the Torrens system does not create or vest title; certificates of title merely confirm or record a title already existing and vested, and the petitioners cannot be used to protect a usurper from the true owner or to permit unjust enrichment.
The Rule on Partial Validity of Conveyances: A contract of sale is not void in the entire scope on the ground of simulation simply because a portion of the land sold belongs to another person; the contract remains valid and enforceable between the contracting parties and the successors-in-interest as to the portion of the land owned by the seller.
The Rule on the Limit of Reconveyance Remedies: The remedy of reconveyance in case of wrongful inclusion of land in a certificate of title only entails the segregation of the portion wrongfully included, and the certificate of title will be cancelled for the purpose of amending the title to exclude the portion wrongfully included, rather than absolutely revoking the entire title of the registered owner.

Distinctions / Limitations / Qualifications.

The Innocent Purchaser for Value Exception: The remedy of reconveyance cannot be availed of by an aggrieved claimant once the property has passed into the hands of an innocent purchaser for value and in good faith, whose rights may be prejudiced. Because the petitioners had actual knowledge of the respondents' open and notorious possession of the eighty (80) square meter portion, the petitioners were not buyers in good faith, making the remedy of reconveyance fully available against the petitioners.
The Non-Prescription of Reconveyance in Possession: An action for reconveyance based on an implied or constructive trust under Article 1456 of the Civil Code generally prescribes in ten (10) years from the date of the issuance of the certificate of title, but this prescriptive period does not apply if the plaintiff is in actual physical possession of the land to be reconveyed, in which case the action is treated as an imprescriptible suit to quiet title.

Topic/Subtopic Integration (Mandatory).

Classification of Relationship: DIRECT.
Integration: The case of Spouses Lopez v. Spouses Lopez is a direct and controlling authority on the application of the remedy of reconveyance under Section 32 of Presidential Decree No. 1529. The decision establishes that when a portion of private land is wrongfully included in a Torrens title issued pursuant to a free patent, the remedy of the rightful owner is an action for reconveyance to compel the registered owner to transfer the title of the disputed portion back to the rightful owner. By clarifying that the remedy of reconveyance only entails the segregation of the portion wrongfully registered and the amendment—rather than the absolute cancellation—of the entire transfer certificate of title, the Supreme Court of the Philippines preserved both the substantive rights of the actual possessors and the integrity of the Torrens system from unnecessary collateral attacks.

Separate Opinions

NOT APPLICABLE / NOT IN RECORD. (The Decision was rendered unanimously by the Third Division of the Supreme Court of the Philippines, and no separate concurring or dissenting opinions are recorded in the text of the decision).

Cited Laws & Provisions

Every statute, rule, and issuance the decision turns on — the text as written, and the work it does in this case.

Civil Code

Article 1456, Civil Code

Civil Code of the Philippines (R.A. No. 386), Book IV (Obligations and Contracts), Title V (Trusts (N)), Chapter 3 (Implied Trusts)

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.

Why it is cited here

The remedy for land wrongly swept into someone else's patent.

"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."

An 80-square-metre portion owned and occupied by Eduardo and Marcelina Lopez was wrongfully included in a free patent and OCT No. RP-253 (P-8511) issued to Victor Villadares.

Note that the article says "mistake or fraud" — the trust arises either way. A patent that erroneously swallows a neighbour's occupied lot creates the trust even if nobody meant to take anything, which is what makes reconveyance the natural remedy for overlap cases.

Reconveyance is in personam: it accepts the certificate and sues the holder to convey what he holds for another. It therefore reaches the portion wrongly included without disturbing the rest of the patent — which is exactly the partial relief the Court granted.

Special Law

Section 32, P.D. No. 1529

Review of decree of registration; Innocent purchaser for value

Presidential Decree No. 1529 (Property Registration Decree, 1978)

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.

Upon the expiration of said period of one year, the decree of registration and the certificate of title issued shall become incontrovertible. Any person aggrieved by such decree of registration in any case may pursue his remedy by action for damages against the applicant or any other persons responsible for the fraud.

Why it is cited here

Why reconveyance rather than review, and where the innocent-purchaser limit bites.

Review lies for actual fraud within one year after entry, and never against an innocent purchaser for value; afterwards the decree is incontrovertible and the remedy lies against the person.

The true owners discovered the inclusion only in November 1992, well after any one-year window, so Section 32 review was unavailable and reconveyance was the only route.

The complication is that Villadares had subdivided and sold a portion to Exequiel and Eusebia Lopez. The trust does not follow the land into the hands of a buyer in good faith, so the outcome had to be worked out portion by portion.

Hence the modified judgment: the Deed of Absolute Sale declared valid as to the portions not overlapping the true owners' lot, and ineffective as to what overlapped. The remedy is shaped to the land actually affected, not applied to the whole instrument.

Special Law

Section 91, C.A. No. 141

Commonwealth Act No. 141 (Public Land Act, 1936)

The statements made in the application shall be considered as essential conditions and parts of any concession, title, or permit issued on the basis of such application, and any false statements therein or omission of facts altering, changing, or modifying the consideration of the facts set forth in such statements, and any subsequent modification, alteration, or change of the material facts set forth in the application shall ipso facto produce the cancellation of the concession, title, or permit granted. It shall be the duty of the Director of Lands, from time to time and whenever he may deem it advisable, to make the necessary investigations for the purpose of ascertaining whether the material facts set out in the application are true, or whether they continue to exist and are maintained and preserved in good faith, and for the purposes of such investigation, the Director of Lands is hereby empowered to issue subpoenas and subpoenas duces tecum and, if necessary, to obtain compulsory process from the courts. In every investigation made in accordance with this section, the existence of bad faith, fraud, concealment, or fraudulent and illegal modification of essential facts shall be presumed if the grantee or possessor of the land shall refuse or fail to obey a subpoena or subpoena duces tecum lawfully issued by the Director of Lands or his authorized delegates or agents, or shall refuse or fail to give direct and specific answers to pertinent questions, and on the basis of such presumption, an order of cancellation may issue without further proceedings.

The Public Land Act has been amended many times — most consequentially for land registration by R.A. No. 1942, P.D. No. 1073 and, in 2021, by R.A. No. 11573, which rewrote the possession period in Section 48(b). LawPhil carries the 1936 text, so check the date of the decision against the amendment before relying on the wording quoted here.

Why it is cited here

The public-land dimension, and the route the true owners did not have to take.

"The statements made in the application shall be considered as essential conditions and parts of any concession, title, or permit issued on the basis of such application, and any false statements therein or omission of facts … shall ipso facto produce the cancellation of the concession, title, or permit."

A free patent obtained on an application that failed to disclose a neighbour's occupied portion is vulnerable under this section. But cancellation on that ground returns the land to the public domain, and under Section 101 only the Solicitor General may sue for it.

That is why the true owners pleaded reconveyance instead, and the choice is the practical lesson. Ask who gets the land if you win. Cancellation gives it to the State; reconveyance gives it to you — but only if you can show the portion was already yours before the patent issued.

Here they could: they owned and occupied the 80 square metres, so the land was never validly part of the public domain granted to Villadares.

Source: Spouses Lopez v. Spouses Lopez, G.R. No. 161925, November 25, 2009

Cited laws & provisions

Article 1456, Civil Code

Civil Code

Civil Code of the Philippines (R.A. No. 386), Book IV (Obligations and Contracts), Title V (Trusts (N)), Chapter 3 (Implied Trusts)

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.

Why it is cited here

The remedy for land wrongly swept into someone else's patent.

An 80-square-metre portion owned and occupied by Eduardo and Marcelina Lopez was wrongfully included in a free patent and OCT No. RP-253 (P-8511) issued to Victor Villadares.

Full entry below ↓

Section 32, P.D. No. 1529

Special Law

Review of decree of registration; Innocent purchaser for value

Presidential Decree No. 1529 (Property Registration Decree, 1978)

Why it is cited here

Why reconveyance rather than review, and where the innocent-purchaser limit bites.

The true owners discovered the inclusion only in November 1992, well after any one-year window, so Section 32 review was unavailable and reconveyance was the only route.

Full entry below ↓

Section 91, C.A. No. 141

Special Law

Commonwealth Act No. 141 (Public Land Act, 1936)

Why it is cited here

The public-land dimension, and the route the true owners did not have to take.

Here they could: they owned and occupied the 80 square metres, so the land was never validly part of the public domain granted to Villadares.

Full entry below ↓

Facts

From 1977 Spouses Eduardo and Marcelina R. Lopez possessed and occupied an 80-square-metre residential lot in San Pascual, Hagonoy, Bulacan, acquired by donation inter vivos from Maria Alvarado and Agatona Caparas, in whose names it had been declared for taxation.
On March 8, 1978 the Bureau of Lands issued OCT No. RP-253 (P-8511) to Victor Villadares on a free patent over 885 square metres of public land — wrongfully taking in the Lopez spouses' 80-square-metre lot.
Villadares subdivided the parcel into Lot No. 9954-A (275 sq m, retained), Lot No. 9954-B (273 sq m) and Lot No. 9954-C (337 sq m).
On May 8, 1990 he executed a Deed of Absolute Sale of Portions of a Parcel of Land, conveying Lot No. 9954-B to Spouses Exequiel and Eusebia Lopez for ₱30,000.00 and Lot No. 9954-C to Filomena Caparas. OCT No. RP-253 was cancelled, and TCT Nos. T-5065, T-5066 and T-5067 issued to Villadares, the Exequiel Lopez spouses, and Caparas respectively.
In November 1992 the Eduardo Lopez spouses discovered the wrongful inclusion, the subdivision and the sales, and sued for reconveyance, nullity of the deed, cancellation of titles and damages in the RTC of Malolos, Bulacan.
At trial Pedro Manansala testified he had sold the Exequiel Lopez spouses only 168 square metres for ₱20,000.00 after Martial Law; Eusebia Lopez insisted it was 273 square metres, and admitted the couple had filed an administrative protest with the Bureau of Lands against Villadares's patent application, which Villadares settled by agreeing to sell them the disputed portion for ₱30,000.00 — testimony Villadares corroborated.
The RTC ruled for the Eduardo Lopez spouses, voiding the 1990 deed, ordering reconveyance of the 80 square metres, and cancelling TCT Nos. T-5065 and T-5066 with damages. On January 26, 2004 the CA affirmed in toto in CA-G.R. CV No. 68549. The Third Division decided on November 25, 2009.

Arguments of the Parties

Issue

ANCILLARY / INCIDENTAL ISSUES (if any). None separately resolved.

Ruling

Ratio

Reconveyance concedes the decree. Unlike review under Section 32, it does not reopen the registration or set the decree aside, but shows only that the registrant is not the real owner — the certificate being cancelled merely to amend it and exclude what was wrongly included.
A certificate records ownership; it does not manufacture it. One who holds land wrongly included in his title holds it as a trustee under an implied trust for the person from whom it came.
Intention decides simulation, and conduct reveals intention. Payment made, title and tax declaration delivered, rights surrendered — these are the acts of parties who meant to be bound.
An in rem judgment binds the world, including those who opposed it. Having litigated their possession and lost, the petitioners cannot try the same question again under another name.

Doctrine

Doctrines / Rules / Principles Laid Down.

Registration creates no title — a certificate confirms a title already vested, and cannot be used to protect a usurper from the true owner or to permit unjust enrichment.
A sale is not void in its entirety for simulation merely because part of the land belongs to another; it stands valid as to the portion the seller owned.
And reconveyance for wrongful inclusion entails only segregating the portion wrongly included and amending the certificate, not revoking the registered owner's whole title.

Distinctions / Limitations / Qualifications.

Reconveyance is unavailable once the land has passed to an innocent purchaser for value — inapplicable here, the petitioners having had actual knowledge of the respondents' open and notorious possession.
And though the action ordinarily prescribes in ten years from issuance of the certificate, that does not run against a plaintiff in actual physical possession, whose suit is an imprescriptible action to quiet title.

Topic/Subtopic Integration (Mandatory).

DIRECT: where private land is wrongly swept into a title issued on a free patent, the owner's remedy under Section 32 is reconveyance of the disputed portion. Confining the relief to segregation and amendment rather than wholesale cancellation protects the actual possessor's substantive right while sparing the register unnecessary collateral attack.

Separate Opinions

None. The Third Division decided unanimously, with no separate concurring or dissenting opinion recorded.

Full Digest — Recitation Format

Facts

Sometime in the year 1977: Spouses Eduardo Lopez and Marcelina R. Lopez entered into possession and actual physical occupation of an eighty (80) square meter residential lot situated in San Pascual, Hagonoy, Bulacan.
On an unspecified date: Spouses Eduardo Lopez and Marcelina R. Lopez acquired the eighty (80) square meter property by virtue of a donation inter vivos executed in favor of Spouses Eduardo Lopez and Marcelina R. Lopez by Maria Alvarado and Agatona Caparas, in whose names the lot was previously declared for taxation purposes.
On March 8, 1978: The Bureau of Lands issued Original Certificate of Title (OCT) No. RP-253 (P-8511) in the name of Victor Villadares pursuant to a free patent grant over an eight hundred eighty-five (885) square meter parcel of public land, which patent and original certificate of title wrongfully included the eighty (80) square meter residential lot owned and occupied by Spouses Eduardo Lopez and Marcelina R. Lopez.
Sometime thereafter: Victor Villadares subdivided the entire eight hundred eighty-five (885) square meter parcel of land into three (3) distinct lots, namely: Lot No. 9954-A (retained by Victor Villadares, consisting of 275 square meters), Lot No. 9954-B (consisting of 273 square meters), and Lot No. 9954-C (consisting of 337 square meters).
On May 8, 1990: Victor Villadares executed a contract denominated as a Deed of Absolute Sale of Portions of a Parcel of Land, conveying Lot No. 9954-B with an area of 273 square meters to Spouses Exequiel Lopez and Eusebia Lopez for the purchase price of Thirty Thousand Pesos (₱30,000.00), and conveying Lot No. 9954-C with an area of 337 square meters to Filomena Caparas.
Sometime thereafter: Pursuant to the May 8, 1990 Deed of Absolute Sale, Original Certificate of Title No. RP-253 (P-8511) was cancelled. Consequently, Transfer Certificate of Title (TCT) No. T-5065 was issued in the name of Victor Villadares for Lot No. 9954-A; Transfer Certificate of Title (TCT) No. T-5066 was issued in the names of Spouses Exequiel Lopez and Eusebia Lopez for Lot No. 9954-B; and Transfer Certificate of Title (TCT) No. T-5067 was issued in the name of Filomena Caparas for Lot No. 9954-C.
In November 1992: Spouses Eduardo Lopez and Marcelina R. Lopez discovered that the eighty (80) square meter property was wrongfully included in the free patent granted to Victor Villadares, and that the land had been subdivided and subsequently sold.
Sometime thereafter: Spouses Eduardo Lopez and Marcelina R. Lopez filed an action for reconveyance, declaration of nullity of a deed of absolute sale, cancellation of titles, and damages against Victor Villadares and Spouses Exequiel Lopez and Eusebia Lopez before the Regional Trial Court of Malolos, Bulacan.
During the trial of the civil case: Pedro Manansala, a witness for Spouses Eduardo Lopez and Marcelina R. Lopez, testified that the lot of Spouses Exequiel Lopez and Eusebia Lopez consisted of one hundred sixty-eight (168) square meters only, which Spouses Exequiel Lopez and Eusebia Lopez purchased from Pedro Manansala for Twenty Thousand Pesos (₱20,000.00) sometime after the declaration of Martial Law.
During the trial: Petitioner Eusebia Lopez refuted the testimony of Pedro Manansala by asserting that Spouses Exequiel Lopez and Eusebia Lopez purchased a two hundred seventy-three (273) square meter lot from Pedro Manansala. Petitioner Eusebia Lopez admitted that Spouses Exequiel Lopez and Eusebia Lopez had filed an administrative protest with the Bureau of Lands against the free patent application of Victor Villadares, but that Victor Villadares subsequently agreed to sell the disputed portion of the land to Spouses Exequiel Lopez and Eusebia Lopez for Thirty Thousand Pesos (₱30,000.00).
During the trial: Victor Villadares corroborated the testimony of Petitioner Eusebia Lopez, testifying that when Spouses Exequiel Lopez and Eusebia Lopez showed proof of ownership over a portion of the lot registered under the name of Victor Villadares, Victor Villadares agreed to transfer the title of the said portion to the names of Spouses Exequiel Lopez and Eusebia Lopez.
On an unspecified date: The Regional Trial Court of Malolos, Bulacan rendered a decision in favor of Spouses Eduardo Lopez and Marcelina R. Lopez, declaring the May 8, 1990 Deed of Absolute Sale null and void, ordering the reconveyance of the eighty (80) square meter lot to Spouses Eduardo Lopez and Marcelina R. Lopez, ordering the Register of Deeds of Tabang, Guiguinto, Bulacan to cancel TCT No. T-5065 (Victor Villadares) and TCT No. T-5066 (Spouses Exequiel Lopez and Eusebia Lopez), and awarding moral damages, exemplary damages, attorney's fees, and costs of suit.
Sometime thereafter: Both Victor Villadares and Spouses Exequiel Lopez and Eusebia Lopez appealed the decision of the Regional Trial Court to the Court of Appeals.
On January 26, 2004: The Court of Appeals rendered a Decision in CA-G.R. CV No. 68549, affirming in toto the decision of the Regional Trial Court, on the ground that landowners cannot use land registration proceedings to shield fraud or permit the enrichment of a person at the expense of another.
Sometime thereafter: Victor Villadares filed a motion for reconsideration of the January 26, 2004 Decision with the Court of Appeals, which motion was held in abeyance. Spouses Exequiel Lopez and Eusebia Lopez did not file a motion for reconsideration but instead immediately elevated the case to the Supreme Court of the Philippines via a Petition for Review on Certiorari under Rule 45.
On November 25, 2009: The Supreme Court of the Philippines Third Division promulgated the Decision, partially granting the petition by declaring the May 8, 1990 Deed of Absolute Sale valid as to the portions not overlapping with the property of Spouses Eduardo Lopez and Marcelina R. Lopez, but affirming the order of reconveyance of the eighty (80) square meter portion to Spouses Eduardo Lopez and Marcelina R. Lopez.

Arguments of the Parties

Petitioner/Prosecution (Spouses Exequiel Lopez and Eusebia Lopez).

Continuous Long-Term Possession: The petitioners argue that the Court of Appeals failed to recognize the actual physical possession of the petitioners and predecessors-in-interest over the property now covered by TCT No. T-5066 for more than fifty (50) years.
Tax Payment Compliance: The petitioners contend that Spouses Exequiel Lopez and Eusebia Lopez paid real estate taxes on the subject property after the purchase of the property from Pedro Manansala and Miguela Ayuson Manansala on August 2, 1974.
Error in Possessory Computation: The petitioners assert that the Court of Appeals erred in considering the possession of the respondents for less than thirty (30) years, which was insufficient to establish ownership.
Validity of the Settlement Transaction: The petitioners maintain that the May 8, 1990 Deed of Absolute Sale executed by Victor Villadares in favor of the petitioners was valid because the contract was executed merely to settle the conflict of ownership over the property and to expedite the transfer of the property to the petitioners.
Excessive Remedy of Cancellation: The petitioners argue that the Court of Appeals erred in affirming the complete cancellation of TCT No. T-5065 (with an area of 275 square meters) and TCT No. T-5066 (with an area of 273 square meters) when the actual claim of the respondents was strictly limited to only eighty (80) square meters.

Respondent/Defense (Spouses Eduardo Lopez and Marcelina R. Lopez).

True Ownership and Title by Donation: The respondents argue that Spouses Eduardo Lopez and Marcelina R. Lopez are the absolute owners of the eighty (80) square meter lot, having acquired the property by donation inter vivos from Maria Alvarado and Agatona Caparas, in whose names the lot was previously declared for taxation purposes.
Prior Continuous Possession: The respondents contend that Spouses Eduardo Lopez and Marcelina R. Lopez occupied and possessed the eighty (80) square meter lot continuously, openly, and notoriously in the concept of owner since the year 1977.
Fraudulent Patent and Lack of Conveyable Title: The respondents assert that Victor Villadares obtained the free patent and original certificate of title over the property through fraud because the land was already private land and not part of the public domain. Consequently, Victor Villadares, not being the owner of the eighty (80) square meter portion of land, could not have transferred ownership of the eighty (80) square meter portion of land to the petitioners.
Simulation of the Sale: The respondents argue that the May 8, 1990 Deed of Absolute Sale between Victor Villadares and the petitioners was simulated and void because the execution of the deed of sale was only an afterthought to defeat the possession of the respondents.

Common Ground.

Physical Overlap: Both Spouses Exequiel Lopez and Eusebia Lopez and Spouses Eduardo Lopez and Marcelina R. Lopez admit that the eighty (80) square meter residential lot is physically located within the boundaries of the subdivided lots of the larger eight hundred eighty-five (885) square meter parcel of land originally registered under the name of Victor Villadares.
Actual Physical Occupancy: Both parties acknowledge that Spouses Eduardo Lopez and Marcelina R. Lopez are in actual physical possession of the eighty (80) square meter lot.

Issue

MAIN ISSUE.

Whether an action for reconveyance under Section 32 of Presidential Decree No. 1529 is the proper legal and equitable remedy to recover an eighty (80) square meter portion of residential land that has been wrongfully and erroneously registered in the name of another under a free patent and subsequent Transfer Certificate of Title, and whether a Torrens certificate of title can shield a registered owner from such action.

SECONDARY ISSUES.

Whether a contract of sale is absolutely simulated and void in the entire scope under Article 1345 and Article 1346 of the Civil Code when the seller is not the owner of a portion of the land conveyed, or whether the contract remains valid and binding as to the remaining portions of the property.
Whether the petitioners' claim of ownership over the property based on a prior 1974 purchase from a tax declarant is barred under the principle of res judicata and constitutes a prohibited collateral attack on the original decree of registration when raised in a subsequent action for reconveyance.

Ruling

Dispositive portion (verbatim). The final dispositive portion of the Supreme Court of the Philippines in G.R. No. 161925, dated November 25, 2009, is quoted verbatim as follows:

"WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The Court of Appeals Decision dated January 26, 2004 is AFFIRMED WITH MODIFICATIONS. The Deed of Absolute Sale of Portions of a Parcel of Land dated May 8, 1990 is declared VALID but subject to our disposition hereunder. Petitioners and Victor Villadares are directed to cause a SURVEY of Lots 9954-A and 9954-B in order to determine the exact location of the 80-sq m portion pertaining to respondents. Thereafter, the Register of Deeds of Tabang, Guiguinto, Bulacan is ordered to ISSUE the corresponding transfer certificates of title in the names of petitioners, respondents and Victor Villadares, in accordance with said survey.

SO ORDERED."

Ratio

The Scope and Purpose of an Action for Reconveyance under Section 32: An action for reconveyance is a legal and equitable remedy granted to a rightful landowner, whose land was wrongfully or erroneously registered in the name of another, to compel the registered owner to transfer or reconvey the land to the rightful owner. Unlike a petition for review of a decree of registration under Section 32 of Presidential Decree No. 1529, an action for reconveyance does not aim or purport to reopen the registration proceeding and set aside the decree of registration, but only purports to show that the person who secured the registration of the property in controversy is not the real owner thereof. In an action for reconveyance, the decree of registration is respected as incontrovertible, but the certificate of title will be cancelled for the purpose of amending the certificate to exclude the portion wrongfully included therein.
The Principle that Registration Does Not Vest Title: Registration under the Torrens system does not create or vest title because registration is not a mode of acquiring ownership. A certificate of title is merely evidence of an ownership or title already existing and vested. The Torrens system of registration cannot be used to protect a usurper from the true owner, and cannot be used as a shield for the commission of fraud, or to permit one to enrich oneself at the expense of others. When a parcel of land has been wrongfully included in a certificate of title, the registered owner holds the land as a mere trustee of an implied trust for the benefit of the person from whom the property comes under Article 1456 of the Civil Code.
The Intention of the Parties in Contractual Simulation: Under Article 1345 of the Civil Code, simulation of a contract may be absolute or relative. The primary consideration in determining the true nature of a contract is the intention of the parties, which is determined not only from the express terms of the agreement, but also from the contemporaneous and subsequent acts of the parties. Absolute simulation takes place when there is a colorable contract but no substance, as the parties have no intention to be bound. In this case, because the parties complied with the terms of the May 8, 1990 Deed of Absolute Sale—wherein Victor Villadares surrendered the duplicate title and tax declarations, and the petitioners paid the purchase price and accepted the documents—the contract is valid as to the portions not overlapping with the property of Spouses Eduardo Lopez and Marcelina R. Lopez.
The Binding Effect of Land Registration Judgments as Res Judicata: A land registration proceeding is a proceeding in rem, and a final judgment confirming the title of an applicant or oppositor constitutes res judicata against the whole world. Since the petitioners had actively participated in the original registration case of Victor Villadares by filing an opposition based on the alleged prior possession, the petitioners are barred from relitigating the claim of possession prior to 1978 in the reconveyance proceeding. Assailing the final decree of registration in a subsequent action for reconveyance constitutes an impermissible collateral attack on the Torrens title.

Doctrine

Doctrines / Rules / Principles Laid Down.

The Rule on Title Non-Vestment: The registration of land under the Torrens system does not create or vest title; certificates of title merely confirm or record a title already existing and vested, and the petitioners cannot be used to protect a usurper from the true owner or to permit unjust enrichment.
The Rule on Partial Validity of Conveyances: A contract of sale is not void in the entire scope on the ground of simulation simply because a portion of the land sold belongs to another person; the contract remains valid and enforceable between the contracting parties and the successors-in-interest as to the portion of the land owned by the seller.
The Rule on the Limit of Reconveyance Remedies: The remedy of reconveyance in case of wrongful inclusion of land in a certificate of title only entails the segregation of the portion wrongfully included, and the certificate of title will be cancelled for the purpose of amending the title to exclude the portion wrongfully included, rather than absolutely revoking the entire title of the registered owner.

Distinctions / Limitations / Qualifications.

The Innocent Purchaser for Value Exception: The remedy of reconveyance cannot be availed of by an aggrieved claimant once the property has passed into the hands of an innocent purchaser for value and in good faith, whose rights may be prejudiced. Because the petitioners had actual knowledge of the respondents' open and notorious possession of the eighty (80) square meter portion, the petitioners were not buyers in good faith, making the remedy of reconveyance fully available against the petitioners.
The Non-Prescription of Reconveyance in Possession: An action for reconveyance based on an implied or constructive trust under Article 1456 of the Civil Code generally prescribes in ten (10) years from the date of the issuance of the certificate of title, but this prescriptive period does not apply if the plaintiff is in actual physical possession of the land to be reconveyed, in which case the action is treated as an imprescriptible suit to quiet title.

Topic/Subtopic Integration (Mandatory).

Classification of Relationship: DIRECT.
Integration: The case of Spouses Lopez v. Spouses Lopez is a direct and controlling authority on the application of the remedy of reconveyance under Section 32 of Presidential Decree No. 1529. The decision establishes that when a portion of private land is wrongfully included in a Torrens title issued pursuant to a free patent, the remedy of the rightful owner is an action for reconveyance to compel the registered owner to transfer the title of the disputed portion back to the rightful owner. By clarifying that the remedy of reconveyance only entails the segregation of the portion wrongfully registered and the amendment—rather than the absolute cancellation—of the entire transfer certificate of title, the Supreme Court of the Philippines preserved both the substantive rights of the actual possessors and the integrity of the Torrens system from unnecessary collateral attacks.

Separate Opinions

NOT APPLICABLE / NOT IN RECORD. (The Decision was rendered unanimously by the Third Division of the Supreme Court of the Philippines, and no separate concurring or dissenting opinions are recorded in the text of the decision).