G.R. No. L-29052. July 30, 1976.
Caridad Arguelles, plaintiff-appellee, vs. Guillermo Timbancaya, defendant-appellant.

FACTS

The case originated from Special Proceedings No. 211 for the intestate estate of Jose Arguelles. The parties, Caridad Arguelles and the Timbancayas (Guillermo and Alberto), entered into a compromise agreement, which was approved by the court in a September 11, 1950 decision. The judgment declared and adjudicated one-half of the subject land to Arguelles (the northern portion) and the other half to the Timbancayas (the southern portion). The parties fully complied with this judgment: they paid each other for coconut trees planted on relinquished areas, physically divided the land with a fence, conducted a survey with approved subdivision plans, and Arguelles declared her share for taxation and paid realty taxes thereon since 1952.
Despite this full implementation, Guillermo Timbancaya subsequently caused the cancellation of the original certificate of title and secured Transfer Certificate of Title (TCT) No. 1053 on June 5, 1961, in his and his brother’s names alone, covering the entire property. Upon discovering this, Arguelles filed an action for reconveyance on April 30, 1965. Timbancaya defended by arguing Arguelles was not an heir, and that her action was barred by the statute of limitations and laches, and that the Torrens title had become indefeasible.

ISSUE

The core issue is whether an action for reconveyance based on fraud is proper and not barred, despite the issuance of a Torrens title and the lapse of time, when the property has not passed to an innocent purchaser for value.

RULING

The Supreme Court affirmed the trial court’s decision ordering the cancellation of TCT No. 1053 and the reconveyance of Arguelles’s half. The Court held that the action for reconveyance was not barred. First, the factual findings of the trial court, including the validity of the compromise judgment and the parties’ compliance, were deemed conclusive as the appeal was taken solely on questions of law. Timbancaya’s belated challenge to Arguelles’s status as an heir was foreclosed by the final compromise judgment in the special proceedings.
Second, the Court distinguished an action for reconveyance based on fraud from a petition for review of a decree of title. An action for reconveyance under Section 55 of the Land Registration Act ( Act No. 496 ) is a legal and equitable remedy available to the defrauded owner against the party who procured registration by fraud, provided the property has not been transferred to an innocent purchaser for value. This remedy prescribes in ten years from the issuance of the title. Since TCT No. 1053 was issued on June 5, 1961, and the complaint was filed on April 30, 1965, the action was well within the prescriptive period. The defense of laches also failed because Arguelles had been in open, continuous possession of her half, and she acted promptly upon discovering the fraudulent title. The Court emphasized that a Torrens title cannot be used as a shield for fraud or breach of trust.