Republic of the Philippines

SUPREME COURT
Manila
G.R. No. L-33360 April 25, 1977
MAXIMINO CARANTES (Substituted by Engracia Mabanta Carantes), petitioner,
vs.
COURT OF APPEALS, BILAD CARANTES, LAURO CARANTES, EDUARDO CARANTES
and MICHAEL TUMPAO, respondents,
Sinforoso Fingonil and Sinai C. Hamada for petitioner.
Ruben C. Ayson for private respondents.

CASTRO, C.J:
This is an appeal by certiorari from the decision of the Court of Appeals in CA-G.R. 36078-R
promulgated on December 23, 1970 reversing the judgment of the Court of First Instance of
Baguio City, Branch II, in Civil Case 804, and from the appellate court's resolution dated March 7,
1971 denying herein petitioner's motion for reconsideration.
Mateo Carantes was the original owner of Lot No. 44 situated at Loakan, Baguio City, as
evidenced by Original Certificate of Title No. 3 issued in his name on September 22, 1910 by
virtue of Free Patent No. 5 granted to him on the same date. In 1913 Mateo died. He was
survived by his widow Ogasia and six children, namely, Bilad, Lauro, Crispino, Maximino, Apung
and Sianang, all surnamed Carantes.
In 1930 construction of the Loakan Airport was commenced by the Government. Because a
portion of Lot No. 44 was needed for the landing field, the Government instituted proceedings
(Civil Case 338) for its expropriation. For the purpose, Lot No. 44 was subdivided into Lots Nos.
44-A, 44-B, 44-C, 44-D and 44-E. The portion expropriated by the Government was Lot No. 44A.
In 1933 Special Proceedings Nos. 409 to 413 were filed with the court for the settlement of the
estate of the late Mateo Carantes. One of his sons, herein petitioner Maximino Carantes, was
appointed and qualified as judicial administrator of the estate. In his capacity as administrator,
Maximino filed on June 20, 1939 a project of partition wherein he listed as the heirs of Mateo
Carantes who were entitled to inherit the estate, himself and his brothers and sisters, or the
latter's surviving children Apparently because negotiations were, by that time, under way for the
purchase by the Government of Lots Nos. 44-B and 44-C for the purpose of widening the Loakan
Airport, the only property listed by Maximino in the project of partition was the remaining portion
of Lot No. 44.
On October 23, 1939 a deed denominated "Assignment of Right to Inheritance" was executed by
four of Mateo Carantes children, namely, Bilad, Sianang, Lauro and Crispino, and the heirs of
Apung Carantes (also a son of Mateo who died in 1923), namely, Pitag, Bill, Alson, Eduardo and
Juan, assigning to Maximino Carantes their rights to inheritance in Lot No. 44. The stated
monetary consideration for the assignment was P1.00. However, the document contains a recital
to the effect that the said lots, "by agreement of all the direct heirs and heirs by representation of
the deceased Mateo Carantes as expressed and conveyed verbally. by him during his lifetime,
rightly and exclusively belong to the particular heir, Maximino Carantes, now and in the past in

the exclusive, continuous, peaceful and notorious possession of the same for more than ten
years."
On the same date Maximino Carantes sold to the Government Lots Nos. 44-B and 44-C and
divided the proceeds of the sale among himself and the other heirs of Mateo.
On February 6, 1940, upon joint petition of the heirs of Mateo Carantes, the Court of First
Instance of Baguio City issued an Order in another proceeding Administrative Case No. 368
cancelling O.C.T. No. 3. Pursuant thereto the said title was cancelled, and in its place Transfer
Certificate of Title No. 2533 was issued in the joint names of the five children of Mateo Carantes
and the children of Apung Carantes (representing their deceased father) as co-owners pro
indiviso, or one-sixth share for each child.
On March 16, 1940 Maximino Carantes registered the deed of "Assignment of Right to
Inheritance." Accordingly, T.C.T. No. 2533 in the names of the heirs was cancelled, and in lieu
thereof Transfer Certificate of Title No. 2540 was issued on the same date in the name of
Maximino Carantes. Also on the same date, Maximino, acting as exclusive owner of the land
covered by T.C.T. No. 2540, executed a formal deed of sale in favor of the Government over Lots
Nos. 44-B and 44-C.
On February 21, 1947, as a result of the approval of the Subdivision Survey Plan psd-16786, and
pursuant to the deed of sale executed in 1940 by Maximino Carantes in favor of the Government,
T.C.T. No. 2540 in Maximino's name was cancelled, and in lieu thereof Transfer Certificate of
Title No. T98, covering Lots Nos. 44-A, 44-B arid 44-C, was issued in the name of the
Government, while Transfer Certificate of Title No. T-99, covering the remaining Lots Nos. 44-D
(100, 345 square meters) and 44-E (10,070 square meters) was issued in the name of Maximino
Carantes, who has up to the present remained the registered owner of said lots.
On September 4, 1958 the present complaint was filed by three children of the late Mateo
Carantes, namely, Bilad, Lauro and Crispino, and by some of the surviving heirs of Apung and of
Sianang ('also children of Mateo Carantes). Maximino Carantes was named principal defendant,
and some of the heirs of Apung and Sianang were impleaded as parties-defendants in view of
their alleged reluctance to join as parties-plaintiffs.
In their complaint the plaintiffs alleged inter alia that they and/or their predecessors-in-interest
executed the deed of "Assignment of Right to Inheritance" on October 23, 1939, only because
they were made to believe by the defendant Maximino Carantes that the said instrument
embodied the understanding among the parties that it merely authorized the defendant Maximino
to convey portions of Lot No. 44 to the Government in their behalf to minimize expenses and
facilitate the transaction; and that it was only on February 18, 1958, when the plaintiffs secured a
copy of the deed, that they came to know that the same purported to assign in favor of Maximino
their rights to inheritance from Mateo Carantes. The plaintiffs prayed that the deed of
"Assignment of Right to Inheritance" be declared null and void; that Lots Nos. 44-D and 44-E
covered by T.C.T. No. T99 be ordered partitioned into six (6) equal shares and the defendant
Maximino Carantes be accordingly ordered to execute the necessary deeds of conveyance in
favor of the other distributees and that the said defendant be ordered to pay the plaintiffs the sum
of P1,000 as attorney's fees and the sum of P200 as costs of suit.
On September 10, 1958 the defendants filed a motion to dismiss on the grounds (1) that the
plaintiffs' cause of action is barred by the statute of limitations because the deed of assignment
was recorded in the Registry of Property at the latest on February 21, 1947, hence, plaintiffs'
cause of action accrued from the said date, and since pursuant to article 1144 of the new Civil
Code an action based on a written contract must be brought within ten years from the time the
right of action accrues, plaintiffs' right to file the complaint had already prescribed on September
4, 1958; and (2) that the complaint states no cause of action because ownership over the

property became vested in Maximino Carantes by acquisitive prescription ten years from its
registration in his name on February, 21, 1947.
In an Order dated September 30, 1958, the trial court denied the motion to dismiss on the
grounds that there are allegations of co-ownership and trust in the complaint, and, therefore,
prescription did not lie, and that the complaint alleges that the plaintiffs discovered the alleged
fraud only in February, 1958.
In their answer filed on October 7, 1958, the defendants traversed the material averments of the
complaint and alleged inter alia that the property of the deceased Mateo Carantes and his wife
had been divided and distributed among their six children; that the deed of "Assignment of Right
to Inheritance" was an acknowledgment of the fact of designation of the property therein
described as specifically pertaining or belonging by right of inheritance to the defendant
Maximino Carantes: that there was never any agreement between the assignors and the
assignee authorizing the latter to merely represent his co-heirs in negotiations with the
Government; and that the assignors knew fully well that the deed of assignment contained what,
on its face, it represented, By way of special defenses, the defendants alleged that any
supposed agreement between the plaintiffs and/or their predecessors-in-interest and the
defendant Maximino Carantes, other than the deed of assignment, is barred by the statute of
frauds and is null and void because not in writing, much less, in a public instrument; that the only
agreement between the parties is what appears in the deed of assignment; that the plaintiffs'
right of action has already prescribed; that the defendant Maximino Carantes acquired absolute
ownership over the property in question by acquisitive prescription and registration; and that any
obligation on the part of the defendants in relation to the property had been discharged by
novation, condonation and compensation. The defendants set up the counterclaim that in the
event the rights of the heirs are disturbed, the produce from the lands inherited by the plaintiffs
from Mateo Carantes as well as the real estate taxes on the land paid by the defendant
Maximino Carantes should be collated; and that the filing of the complaint being malicious, the
defendants should be awarded the sum of P4,500 by way of nominal, compensatory, moral and
corrective damages, including attorney's fees and expenses of litigation. The defendants prayed
for the dismissal of the complaint and payment of damages to them.
An answer to the counterclaim was filed by the plaintiffs on November 7, 1958 denying the
material allegations of the counterclaim.
After trial, the court rendered its decision on January 28, 1965. It was the trial court's opinion that
since an action based on fraud prescribes in four years from the discovery of the fraud, and in
this case the fraud allegedly perpetrated by the defendant Maximino Carantes must be deemed
to have been discovered on March 16, 1940 when the deed of assignment was registered, the
plaintiffs' right of action had already prescribed when they filed the action in 1958; and even
assuming that the land remained the common property of the plaintiffs and the defendant
Maximino Carantes notwithstanding the execution of the deed of assignment, the co-ownership
was completely repudiated by the said defendant by performance of several acts, the first of
which was his execution of a deed of sale in favor of the Government on October 23, 1939,
hence, ownership had vested in the defendant Maximino Carantes by acquisitive prescription.
The court accordingly dismissed the complaint. It likewise dismissed the counterclaim.
The plaintiffs moved for reconsideration. Their motion having been denied in an Order dated
March 8, 1965, they appealed to the Court of Appeals.
As adverted to above, the Court of Appeals reversed the judgment of the trial court, hence the
present recourse.
-I-

In her brief filed with this Court, the petitioner argues that the private respondents' action is not
actually one for annulment of the deed of "Assignment of Right to Inheritance" but for the
reformation thereof, hence, the said action has prescribed long before the filing of the complaint.
The petitioner's theory that the private respondents' action is for reformation of an instrument is a
new one, adopted by the petitioner for the first time on appeal to this Court. Her husband did not
raise it as a defense in his answer filed with the trial court, where, consequently, trial proceeded
on the theory that the action sought the declaration of nullity of the deed of assignment. When
the case reached the respondent court the petitioner likewise did not raise this issue, although in
truth, even had she done so, it would have been a belated and futile exercise. She cannot be
allowed to change her theory of the case at this stage of the proceedings.
The settled rule is that defenses not pleaded in the answer may not be raised for the first time on
appeal. 1 A party cannot, on appeal, change fundamentally the nature of the issue in the case. 2 When
a party deliberately adopts a certain theory and the case is decided upon that theory in the court
below, he will not be permitted to change the same on appeal, because to permit him to do so would
be unfair to the adverse party. 3
Consequently, we have to disregard the petitioner's theory that the action is for reformation of an
instrument, and must proceed on the basis of the issues properly raised and ventilated before
the trial court.
- II We do not agree with the respondent court's legal conclusion that the deed of "Assignment of
Right to Inheritance" is void ab initio and inexistent on the grounds that real consent was wanting
and the consideration of P1.00 is so shocking to the conscience that there was in fact no
consideration, hence, the action for the declaration of the contract's inexistence does not
prescribe pursuant to article 1410 of the new Civil Code.
Article 1409 (2) of the new Civil Code relied upon by the respondent court provides that contracts
"which are absolutely simulated or fictitious" are inexistent and void from the beginning. The
basic characteristic of simulation is the fact that the apparent contract is not really desired or
intended to produce legal effects or in any way alter the juridical situation of the parties. 4
The respondents' action may not be considered as one to declare the inexistence of a contract
for lack of consideration. It is total absence of cause or consideration that renders a contract
absolutely void and inexistent.5 In the case at bar consideration was not absent. The sum of P1.00
appears in the document as one of the considerations for the assignment of inheritance. In addition
and this of great legal import the document recites that the decedent Mateo Carantes had, during
his lifetime, expressed to the signatories to the contract that the property subject-matter thereof rightly
and exclusively belonged to the petitioner Maximino Carantes. This acknowledgment by the
signatories definitely constitutes valuable consideration for the contract.
- III The present action is one to annul the contract entitled "Assignment of Right to Inheritance" on
the ground of fraud.
Article 1390 of the new Civil code provides that a contract "where the consent is vitiated by
mistake, violence, intimidation, undue influence or fraud," is voidable or annullable. Even article
1359, which deals on reformation of instruments, provides in its paragraph 2 that "If mistake,
fraud, inequitable conduct, or accident has prevented a meeting of the minds of the parties, the
proper remedy is not reformation of the instrument but annulment of the contract," When the
consent to a contract was fraudulently obtained, the contract is avoidable. 6 Fraud or deceit does

not render a contract void ab initio and can only be a ground for rendering the contract voidable or
annullable pursuant to article 1390 of the new Civil Code by a proper action in court. 7

The present action being one to annul a contract on the ground of fraud, its prescriptive period is
four years from the time of the discovery of the fraud. 8
The next question that must be resolved is: from what time must fraud, assuming that there was
fraud, be deemed to have been discovered in the case at bar? From February, 1958, when,
according to the private respondents, and as found by the respondent court, the private
respondents actually discovered that they were defrauded by the petitioner Maximino Carantes
when rumors spread that he was selling the property for half a million pesos? Or from March 16,
1940, when, as admitted by the parties and found by both the trial court and the respondent
court, the deed of "Assignment of Right to Inheritance" was registered by the petitioner in the
Office of the Register of Deeds?
The weight of authorities is to the effect that the registration of an instrument in the Office of the
Register of Deeds constitutes constructive notice to the whole world, and, therefore, discovery of
the fraud is deemed to have taken place at the time of the registration. 9 In this case the deed of
assignment was registered on March 16, 1940, and in fact on the same date T.C.T. No. 2533 in the
names of the heirs of Mateo Carantes was cancelled, and T.C.T. No. 2540 in the name of the
petitioner was issued in lieu thereof. The four-year period within which the private respondents could
have filed the present action consequently commenced on March 16, 1940; and since they filed it only
on September 4, 1958, it follows that the same is barred by the statute of limitations.
The respondent court refused to accord recognition to the rule of constructive notice, because,
according to it, there was a fiduciary relationship between the parties. Upon this premise it
concluded that the four-year prescriptive period should be deemed to have commenced in
February, 1958 when private respondents had actual notice of the fraud. Without resolving the
question of whether or not constructive notice applies when a fiduciary relationship exists
between the parties a point which is not in issue in this case we hold that the respondent
court's conclusion, lacking the necessary premise upon which it should be predicated, is
erroneous.
Definitely, no express trust was created in favor of the private respondents. If trust there was, it
could only be as held by respondent court a constructive trust, which is imposed by law. In
constructive trusts there is neither promise nor fiduciary relations; the so-called trustee does not
recognize any trust and has no intent to hold the property for the beneficiary. 10 In at least two
cases, the rule of constructive notice was applied by this Court although a constructive trust had been
created. Thus, in Lopez, et al. vs. Gonzaga, et al., 11 where the plaintiffs and the defendants were coheirs and the decedent owner of the lands had merely allowed the principal defendant to use the
products and rentals of the lands for purposes of coconut oil experimentation, but said defendant later
caused the transfer of the certificates of title in his own name through the registration of certain judicial
orders, this Court held that the recording of the judicial orders sufficed as notice to the other heirs, for
the rule is that knowledge of what might have been revealed by proper inquiry is imputable to the
inquirer. In Gerona, et al. vs. De Guzman, et a., supra, the petitioners and the private respondents
were co-heirs, and the petitioners' action for partition and reconveyance was based upon a
constructive trust resulting from fraud. This Court held that the discovery of the fraud "is deemed to
have taken place, in the case at bar, on June 25, 1948, when said instrument was filed with the
Register of Deeds and new certificates of title were issued in the name of respondents exclusively, for
the registration of the deed of extra-judicial settlement constituted constructive notice to the whole
world."
- IV The decision under review found that a constructive trust was created in favor of the private
respondents, and, holding that an action for reconveyance based on constructive trust is

imprescriptible, recognized the right of the private respondents to file an action for reconveyance
regardless of the lapse of time, citing Gayandato vs. Treasurer of the Philippine Islands, et al. 12
We have examined Gayandato, and have failed to find support therein for the holding of the
respondent court. In any event, it is now settled that an action for reconveyance based on
implied or constructive trust is prescriptible it prescribes in ten years. 13 In this case the ten-year
prescriptive period began on March 16, 1940, when the petitioner registered the deed of "Assignment
of Right to Inheritance" and secured the cancellation of the certificate of title in the joint names of the
heirs of Mateo Carantes, and, in lieu thereof, the issuance of a new title exclusively in his
name. 14 Since the present action was commenced only on September 4, 1958, it is clear that the
same is barred by extinctive prescription.
-VIt was also held by the respondent court that the petitioner was merely holding the property in
trust for the benefit of his co-heirs as administrator, hence, there was a continuing and subsisting
trust, and pursuant to section 38 of the Code of Civil Procedure, the provisions of the said Code
on prescription (Secs. 40-41) do not apply. It is our view, however, that there was no continuing
and subsisting trust.
From March 16, 1940, when the petitioner registered the deed of assignment and had the
Certificate of title in the names of the heirs cancelled and a new certificate of title issued in his
own name, he began to hold the property in open and clear repudiation of any trust. 15 It will be
noted that on the same date, the petitioner also executed a formal deed of sale over portions of Lot
No. 44 in favor of the Government. In 1948 he mortgaged Lot No. 44-D with the Philippine National
Bank as his exclusive property. The petitioner's exercise of such rights of dominion is anathema to the
concept of a continuing and subsisting trust. The circumstances, found by the respondent court, that
the name of Mateo Carantes still appeared in the tax declaration as owner of the land and the name
of the petitioner as administrator, that the real estate taxes, were shared by the other heirs with the
petitioner, and that some of the heirs are living in houses erected by them on the land, wane in legal
significance in the face of the petitioner's aforesaid uncontroverted acts of strict dominion. In
connection with the payment of real estate taxes, it is to be noted that the respondent court also found
that all the receipts were issued in the name of the petitioner. The circumstances mentioned above do
not make out a case of a continuing and subsisting trust.
ACCORDINGLY, the judgment of the Court of Appeals appealed from is set aside, and another
entered dismissing the complaint in Civil Case No. 804 of the Court of First Instance of Baguio.
No costs.