SOTERO ARMAMENTO, Plaintiff-Appellant, v. CIPRIANO GUERRERO, defendant-appellee.

(G.R. No. L-34228 February 21, 1980)

Facts: The Complaint alleges that plaintiff is the possessor-actual occupant of, and the homestead
applicant, over Lot No. 974, having continuously possessed and cultivated the same since 1955 and
having filed his Homestead Application No. 37-31, therefore on July 7, 1979; that the aforesaid
application was approved by the Bureau of Lands on July 7, 1959 the (correct date is January 6, 1964);
that when he was following up his homestead Application, he was shocked to discover that defendant,
through fraud and misrepresentation, succeeded in obtaining Free Patent No. V-19129 and OCT No. V-
16135 by falsely stating in his Free Patent Application that he had continuously possessed the lot in
question since July 4, 1945 or prior thereto, when, in truth and in fact, defendant was never in
possession thereof. He then prayed that the Court order defendant to reconvey the disputed lot to him,
or if reconveyance is improper that the lot be declared in trust for the benefit of the Republic of the
Philippines, and for him, who is clearly entitled thereto. Defendant, in his Answer, denied that he was
not in possession, alleging that he had been in occupation of said lot and had even authorized Macario
Caangay to administer the same while he was temporarily away for missionary work in Cagayan de Oro
that he had filed his application on August 1, 1958 prior to plaintiff's application filed on July 7, 1959,
and that title was issued in his favor on July 20, 1961. Defendant also attached to his Answer a
Certification dated April 1, 1967, issued by the Acting District Land Officer, District Land Office VIII-4
General Santos, Cotabato, to the effect that the parties' conflicting claims are under investigation in
D.L.O. Conflict No. 15 (N).

It will thus be seen that the disputed land was the subject of two Patent Applications. Defendant filed
his Free Patent Application on August 1, 1958. Plaintiff filed his Homestead Patent Application
approximately one year later or on July 7, 1959. Defendant was issued Free Patent No. V-19129 on July
20, 1961 and Original Certificate of Title No. V-16135 on February 23, 1962. Plaintiff's Homestead
Application was approved on January 6, 1964. The present suit was instituted on January 27, 1967. The
lower court dismissed the complaint on the ground that plaintiff has no personality to file the action for
reconveyance, the proper party being the Republic of the Philippines; that plaintiff has no cause of
action in the absence of privity of contract between the parties; that defendant's title, issued in 1962,
has become indefeasible, consequently, the Court is powerless to cancel the same; and that even if the
suit were based on fraud, the action has prescribed

Issue: 1. WON plaintiff has the cause of action to file an action for reconveyance

2. WON an implied trust exist

Held: It is true that the basic rule is that after the lapse of one year, a decree of registration is no longer
open to review or attack, although its issuance is attended with fraud. This does not mean, however,
that the aggrieved party is without remedy at law. If the property has not as yet passed to an innocent
purchaser for value, an action for reconveyance is still available. The sole remedy of the land owner
whose property has been wrongfully or erroneously registered in another's name is, after one year from
the date of the decree, not to set aside the decree, ... but, respecting the decree as incontrovertible and
no longer open to review, to bring an ordinary action in the ordinary court of justice for reconveyance
or, if the property has passed into the hands of an innocent purchaser for value, for damages. This is
exactly what plaintiff has done. He has instituted this action for reconveyance alleging that defendant
had succeeded in obtaining title through fraud and misrepresentation by falsely stating in his free patent
application that he had continuously possessed the land since July 4, 1945 when, in truth and in fact,
defendant had never been in possession. Plaintiff has been unable to prove his charges of fraud and
misrepresentation because of the dismissal Order of the trial Court without benefit of a full-dress
hearing.

While plaintiff is not the "owner" of the land he is claiming so that, strictly speaking, he has no
personality to file this action, 5 he pleads for equity and invokes the doctrine of implied trust enunciated
in Article 1456 of the Civil Code as follows 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.The particular circumstances obtaining herein impel us to
exercise our equity jurisdiction to the end that substantial justice may be dispended to the party
litigants. To affirm the trial Court's Order of dismissal would leave the present controversy unresolved
and pending investigation at the administrative level. Aside from the length of time it would pr probably
take for the case to reach the highest administrative authority, any final adjudication rendered by the
latter may eventually be raised to the appellate Courts for judicial review. This circuitous and tedious
process can be eliminated for the sake of the speedy administration of justice by remanding the case to
the trial Court for determination on the merits of the issue of validity of the issuance of Free Patent No.
V-19129 and of the title which followed as a matter of course. A court of equity which has taken
jurisdiction and cognizance of a cause for any purpose will ordinarily retain jurisdiction for all purposes
(Texas v. Florida, 306 US 298; Yarnell v. Hillsborough Packing Co., 92 ALR 1475; Erkskine v. Upham 132 P
2d 219, and other cases cited), decide all issues which are involved in the subject matter of the dispute
between the litigants (Russel v. Clark, 3 L ed 271 and other cases cited), and award, relief which is
complete and finally disposes of the litigation Katchen v. Landy 382 US 323 and other cases cited so as to
accomplish full justice between the parties litigants, (Hepburn v. Dunlop [US] 4 L ed 65; Henderson v.
Henderson, 46 SE 2d 10 and other cases cited), prevent future litigation (Sonnicksen v. Sonnicksen, 113
P 2d 495 and other cases cited), and make performance of the court's decree perfectly safe to those
who may be compelled to obey it (Wright v. Scotton 121 A 69; Olsen v. National Memorial Gardens, Inc.
115 NW 2d 312) (cited in 27 Am Jur 2d Equity, sec. 108).

Likewise to satisfy the demands of justice, the doctrine of implied trust may be made to operate in
plaintiff's favor, assuming that he can prove his allegation that defendant had acquired legal title by
fraud. A constructive trust is a trust 'raised by construction of law, or arising by operation of law. In a
more restricted sense and as contra-distinguished from a resulting trust, a constructive trust is a trust
not created by any words, either expressly or impliedly evincing a direct intention to create a trust, but
by the construction of equity in order to satisfy the demands of justice. It does not arise by agreement
or intention but by operation by law.' (89 C.J.S. 726- 727). "If a person obtains legal title to property by
fraud or concealment, courts of equity will impress upon the title a so-called constructive trust in favor
of the defrauded party." A constructive trust is not a trust in the technical sense (Gayondato vs.
Treasurer of the Phil., 49 Phil. 244; see Art, 1456 of the Civil Code.) Plaintiff's action for reconveyance
may not be said to have prescribed, for, basing the present action on implied trust, the prescriptive
period is ten years. 7Title was obtained by defen dant on February 23, 1962. Plaintiff commenced this
suit for reconveyance on January 27, 1967. And if plaintiff's cause of action is based on fraud, which
should ordinarily be brought within four years from the discovery of the fraud, deemed to have taken
place when the certificate of title was issued, 8 it need only be recalled that the conflicting rights of the
parties were already pending investigation before District Land Office VIII-4 General Santos, Cotabato,
even before plaintiff instituted the present suit for reconveyance.