AGENCY & TRUST OCTOBER 3, 2015 1

G.R. No. 83122 October 19, 1990

ARTURO P. VALENZUELA and HOSPITALITA N. VALENZUELA, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, BIENVENIDO M. ARAGON, ROBERT
E. PARNELL, CARLOS K. CATOLICO and THE PHILIPPINE AMERICAN
GENERAL INSURANCE COMPANY, INC., respondents.
Albino B. Achas for petitioners.
Angara, Abello, Concepcion, Regala & Cruz for private respondents.

GUTIERREZ, JR., J.:

This is a petition for review of the January 29, 1988 decision of the Court of Appeals
and the April 27, 1988 resolution denying the petitioners' motion for reconsideration,
which decision and resolution reversed the decision dated June 23,1986 of the Court
of First Instance of Manila, Branch 34 in Civil Case No. 121126 upholding the
petitioners' causes of action and granting all the reliefs prayed for in their complaint
against private respondents.

In 1977, Philamgen started to become interested in and expressed its intent to share
in the commission due Valenzuela (Exhibits "III" and "III-1") on a fifty-fifty basis
(Exhibit "C"). Valenzuela refused (Exhibit "D").
On February 8, 1978 Philamgen and its President, Bienvenido M. Aragon insisted on
the sharing of the commission with Valenzuela (Exhibit E). This was followed by
another sharing proposal dated June 1, 1978. On June 16,1978, Valenzuela firmly
reiterated his objection to the proposals of respondents stating that: "It is with great
reluctance that I have to decline upon request to signify my conformity to your
alternative proposal regarding the payment of the commission due me. However, I
have no choice for to do otherwise would be violative of the Agency Agreement
executed between our goodselves." (Exhibit B-1)
Because of the refusal of Valenzuela, Philamgen and its officers, namely: Bienvenido
Aragon, Carlos Catolico and Robert E. Parnell took drastic action against Valenzuela.
They: (a) reversed the commission due him by not crediting in his account the
commission earned from the Delta Motors, Inc. insurance (Exhibit "J" and "2"); (b)
placed agency transactions on a cash and carry basis; (c) threatened the cancellation
of policies issued by his agency (Exhibits "H" to "H-2"); and (d) started to leak out
news that Valenzuela has a substantial account with Philamgen. All of these acts
resulted in the decline of his business as insurance agent (Exhibits "N", "O", "K" and
"K-8"). Then on December 27, 1978, Philamgen terminated the General Agency
Agreement of Valenzuela (Exhibit "J", pp. 1-3, Decision Trial Court dated June 23,
1986, Civil Case No. 121126, Annex I, Petition).

The antecedent facts of the case are as follows:

Petitioner Arturo P. Valenzuela (Valenzuela for short) is a General Agent of private
respondent Philippine American General Insurance Company, Inc. (Philamgen for
short) since 1965. As such, he was authorized to solicit and sell in behalf of
Philamgen all kinds of non-life insurance, and in consideration of services rendered
was entitled to receive the full agent's commission of 32.5% from Philamgen under
the scheduled commission rates (Exhibits "A" and "1"). From 1973 to 1975,
Valenzuela solicited marine insurance from one of his clients, the Delta Motors, Inc.
(Division of Electronics Airconditioning and Refrigeration) in the amount of P4.4
Million from which he was entitled to a commission of 32% (Exhibit "B"). However,
Valenzuela did not receive his full commission which amounted to P1.6 Million from
the P4.4 Million insurance coverage of the Delta Motors. During the period 1976 to
1978, premium payments amounting to P1,946,886.00 were paid directly to
Philamgen and Valenzuela's commission to which he is entitled amounted to
P632,737.00.

The petitioners sought relief by filing the complaint against the private respondents in
the court a quo (Complaint of January 24, 1979, Annex "F" Petition). After due
proceedings, the trial court found:
xxx xxx xxx
Defendants tried to justify the termination of plaintiff Arturo P.
Valenzuela as one of defendant PHILAMGEN's General Agent by
making it appear that plaintiff Arturo P. Valenzuela has a substantial
account with defendant PHILAMGEN particularly Delta Motors,
Inc.'s Account, thereby prejudicing defendant PHILAMGEN's
interest (Exhibits 6,"11","11- "12- A"and"13-A").
Defendants also invoked the provisions of the Civil Code of the
Philippines (Article 1868) and the provisions of the General Agency
Agreement as their basis for terminating plaintiff Arturo P.
Valenzuela as one of their General Agents.

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That defendants' position could have been justified had the
termination of plaintiff Arturo P. Valenzuela was (sic) based solely
on the provisions of the Civil Code and the conditions of the
General Agency Agreement. But the records will show that the
principal cause of the termination of the plaintiff as General Agent
of defendant PHILAMGEN was his refusal to share his Delta
commission.
That it should be noted that there were several attempts made by
defendant Bienvenido M. Aragon to share with the Delta
commission of plaintiff Arturo P. Valenzuela. He had persistently
pursued the sharing scheme to the point of terminating plaintiff
Arturo P. Valenzuela, and to make matters worse, defendants made
it appear that plaintiff Arturo P. Valenzuela had substantial accounts
with defendant PHILAMGEN.
Not only that, defendants have also started (a) to treat separately
the Delta Commission of plaintiff Arturo P. Valenzuela, (b) to
reverse the Delta commission due plaintiff Arturo P. Valenzuela by
not crediting or applying said commission earned to the account of
plaintiff Arturo P. Valenzuela, (c) placed plaintiff Arturo P.
Valenzuela's agency transactions on a "cash and carry basis", (d)
sending threats to cancel existing policies issued by plaintiff Arturo
P. Valenzuela's agency, (e) to divert plaintiff Arturo P. Valenzuela's
insurance business to other agencies, and (f) to spread wild and
malicious rumors that plaintiff Arturo P. Valenzuela has substantial
account with defendant PHILAMGEN to force plaintiff Arturo P.
Valenzuela into agreeing with the sharing of his Delta commission."
(pp. 9-10, Decision, Annex 1, Petition).

shall be liable for the resulting damage and loss of business of

plaintiff Arturo P. Valenzuela. (Arts. 2199/2200, Civil Code of the
Philippines). (Ibid, p. 11)
The court accordingly rendered judgment, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the
plaintiffs and against defendants ordering the latter to reinstate
plaintiff Arturo P. Valenzuela as its General Agent, and to pay
plaintiffs, jointly and severally, the following:
1. The amount of five hundred twenty-one thousand nine hundred
sixty four and 16/100 pesos (P521,964.16) representing plaintiff
Arturo P. Valenzuela's Delta Commission with interest at the legal
rate from the time of the filing of the complaint, which amount shall
be adjusted in accordance with Article 1250 of the Civil Code of the
Philippines;
2. The amount of seventy-five thousand pesos (P75,000.00) per
month as compensatory damages from 1980 until such time that
defendant Philamgen shall reinstate plaintiff Arturo P. Valenzuela as
one of its general agents;
3. The amount of three hundred fifty thousand pesos (P350,000.00)
for each plaintiff as moral damages;
4. The amount of seventy-five thousand pesos (P75,000.00) as and
for attorney's fees;

xxx xxx xxx

5. Costs of the suit. (Ibid., P. 12)

These acts of harrassment done by defendants on plaintiff Arturo P.

Valenzuela to force him to agree to the sharing of his Delta
commission, which culminated in the termination of plaintiff Arturo
P. Valenzuela as one of defendant PHILAMGEN's General Agent,
do not justify said termination of the General Agency Agreement
entered into by defendant PHILAMGEN and plaintiff Arturo P.
Valenzuela.

From the aforesaid decision of the trial court, Bienvenido Aragon,

Robert E. Parnell, Carlos K. Catolico and PHILAMGEN
respondents herein, and defendants-appellants below, interposed
an appeal on the following:
ASSIGNMENT OF ERRORS
I

That since defendants are not justified in the termination of plaintiff

Arturo P. Valenzuela as one of their General Agents, defendants

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THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF
ARTURO P. VALENZUELA HAD NO OUTSTANDING ACCOUNT
WITH DEFENDANT PHILAMGEN AT THE TIME OF THE
TERMINATION OF THE AGENCY.

1. Plaintiff-appellee Valenzuela to pay defendant-appellant

Philamgen the sum of one million nine hundred thirty two thousand
five hundred thirty-two pesos and seventeen centavos
(P1,902,532.17), with legal interest thereon from the date of finality
of this judgment until fully paid.

II
THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF
ARTURO P. VALENZUELA IS ENTITLED TO THE FULL
COMMISSION OF 32.5% ON THE DELTA ACCOUNT.

2. Both plaintiff-appellees to pay jointly and severally defendantsappellants the sum of fifty thousand pesos (P50,000.00) as and by
way of attorney's fees.
No pronouncement is made as to costs. (p. 44, Rollo)

III
THE LOWER COURT ERRED IN HOLDING THAT THE
TERMINATION OF PLAINTIFF ARTURO P. VALENZUELA WAS
NOT JUSTIFIED AND THAT CONSEQUENTLY DEFENDANTS
ARE LIABLE FOR ACTUAL AND MORAL DAMAGES,
ATTORNEYS FEES AND COSTS.
IV
ASSUMING ARGUENDO THAT THE AWARD OF DAMAGES
AGAINST DEFENDANT PHILAMGEN WAS PROPER, THE
LOWER COURT ERRED IN AWARDING DAMAGES EVEN
AGAINST THE INDIVIDUAL DEFENDANTS WHO ARE MERE
CORPORATE AGENTS ACTING WITHIN THE SCOPE OF THEIR
AUTHORITY.
V
ASSUMING ARGUENDO THAT THE AWARD OF DAMAGES IN
FAVOR OF PLAINTIFF ARTURO P. VALENZUELA WAS PROPER,
THE LOWER COURT ERRED IN AWARDING DAMAGES IN
FAVOR OF HOSPITALITA VALENZUELA, WHO, NOT BEING THE
REAL PARTY IN INTEREST IS NOT TO OBTAIN RELIEF.
On January 29, 1988, respondent Court of Appeals promulgated its decision in the
appealed case. The dispositive portion of the decision reads:
WHEREFORE, the decision appealed from is hereby modified
accordingly and judgment is hereby rendered ordering:

There is in this instance irreconcilable divergence in the findings and conclusions of

the Court of Appeals, vis-a-visthose of the trial court particularly on the pivotal issue
whether or not Philamgen and/or its officers can be held liable for damages due to the
termination of the General Agency Agreement it entered into with the petitioners. In its
questioned decision the Court of Appeals observed that:
In any event the principal's power to revoke an agency at will is so
pervasive, that the Supreme Court has consistently held that
termination may be effected even if the principal acts in bad faith,
subject only to the principal's liability for damages (Danon v.
Antonio A. Brimo & Co., 42 Phil. 133; Reyes v. Mosqueda, 53 O.G.
2158 and Infante V. Cunanan, 93 Phil. 691, cited in Paras, Vol. V,
Civil Code of the Philippines Annotated [1986] 696).
The lower court, however, thought the termination of Valenzuela as
General Agent improper because the record will show the principal
cause of the termination of the plaintiff as General Agent of
defendant Philamgen was his refusal to share his Delta
commission. (Decision, p. 9; p. 13, Rollo, 41)
Because of the conflicting conclusions, this Court deemed it necessary in the interest
of substantial justice to scrutinize the evidence and records of the cases. While it is
an established principle that the factual findings of the Court of Appeals are final and
may not be reviewed on appeal to this Court, there are however certain exceptions to
the rule which this Court has recognized and accepted, among which, are when the
judgment is based on a misapprehension of facts and when the findings of the
appellate court, are contrary to those of the trial court (Manlapaz v. Court of Appeals,
147 SCRA 236 [1987]); Guita v. Court of Appeals, 139 SCRA 576 [1986]). Where the
findings of the Court of Appeals and the trial court are contrary to each other, this
Court may scrutinize the evidence on record (Cruz v. Court of Appeals, 129 SCRA

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222 [1984]; Mendoza v. Court of Appeals, 156 SCRA 597 [1987]; Maclan v. Santos,
156 SCRA 542 [1987]). When the conclusion of the Court of Appeals is grounded
entirely on speculation, surmises or conjectures, or when the inference made is
manifestly mistaken, absurd or impossible, or when there is grave abuse of discretion,
or when the judgment is based on a misapprehension of facts, and when the findings
of facts are conflict the exception also applies (Malaysian Airline System Bernad v.
Court of Appeals, 156 SCRA 321 [1987]).

threatened to be cancelled (Exhibits "H" and "14"; TSN., March 26, 1979, pp. 29-30).
The Valenzuela business was threatened with diversion to other agencies. (Exhibit
"NNN"). Rumors were also spread about alleged accounts of the Valenzuela agency
(TSN., January 25, 1980, p. 41). The petitioners consistently opposed the pressures
to hand over the agency or half of their commissions and for a treatment of the Delta
account distinct from other accounts. The pressures and demands, however,
continued until the agency agreement itself was finally terminated.

After a painstaking review of the entire records of the case and the findings of facts of
both the court a quo and respondent appellate court, we are constrained to affirm the
trial court's findings and rule for the petitioners.

It is also evident from the records that the agency involving petitioner and private
respondent is one "coupled with an interest," and, therefore, should not be freely
revocable at the unilateral will of the latter.

We agree with the court a quo that the principal cause of the termination of
Valenzuela as General Agent of Philamgen arose from his refusal to share his Delta
commission. The records sustain the conclusions of the trial court on the
apparent bad faith of the private respondents in terminating the General Agency
Agreement of petitioners. It is axiomatic that the findings of fact of a trial judge are
entitled to great weight (People v. Atanacio, 128 SCRA 22 [1984]) and should not be
disturbed on appeal unless for strong and cogent reasons, because the trial court is in
a better position to examine the evidence as well as to observe the demeanor of the
witnesses while testifying (Chase v. Buencamino, Sr., 136 SCRA 365 [1985]; People
v. Pimentel, 147 SCRA 25 [1987]; and Baliwag Trans., Inc. v. Court of Appeals, 147
SCRA 82 [1987]). In the case at bar, the records show that the findings and
conclusions of the trial court are supported by substantial evidence and there appears
to be no cogent reason to disturb them (Mendoza v. Court of Appeals. 156 SCRA 597
[1987]).

In the insurance business in the Philippines, the most difficult and frustrating period is
the solicitation and persuasion of the prospective clients to buy insurance policies.
Normally, agents would encounter much embarrassment, difficulties, and oftentimes
frustrations in the solicitation and procurement of the insurance policies. To sell
policies, an agent exerts great effort, patience, perseverance, ingenuity, tact,
imagination, time and money. In the case of Valenzuela, he was able to build up an
Agency from scratch in 1965 to a highly productive enterprise with gross billings of
about Two Million Five Hundred Thousand Pesos (P2,500,000.00) premiums per
annum. The records sustain the finding that the private respondent started to covet a
share of the insurance business that Valenzuela had built up, developed and nurtured
to profitability through over thirteen (13) years of patient work and perseverance.
When Valenzuela refused to share his commission in the Delta account, the boom
suddenly fell on him.

As early as September 30,1977, Philamgen told the petitioners of its desire to share
the Delta Commission with them. It stated that should Delta back out from the
agreement, the petitioners would be charged interests through a reduced commission
after full payment by Delta.
On January 23, 1978 Philamgen proposed reducing the petitioners' commissions by
50% thus giving them an agent's commission of 16.25%. On February 8, 1978,
Philamgen insisted on the reduction scheme followed on June 1, 1978 by still another
insistence on reducing commissions and proposing two alternative schemes for
reduction. There were other pressures. Demands to settle accounts, to confer and
thresh out differences regarding the petitioners' income and the threat to terminate
the agency followed. The petitioners were told that the Delta commissions would not
be credited to their account (Exhibit "J"). They were informed that the Valenzuela
agency would be placed on a cash and carry basis thus removing the 60-day credit
for premiums due. (TSN., March 26, 1979, pp. 54-57). Existing policies were

The private respondents by the simple expedient of terminating the General Agency
Agreement appropriated the entire insurance business of Valenzuela. With the
termination of the General Agency Agreement, Valenzuela would no longer be entitled
to commission on the renewal of insurance policies of clients sourced from his
agency. Worse, despite the termination of the agency, Philamgen continued to hold
Valenzuela jointly and severally liable with the insured for unpaid premiums. Under
these circumstances, it is clear that Valenzuela had an interest in the continuation of
the agency when it was unceremoniously terminated not only because of the
commissions he should continue to receive from the insurance business he has
solicited and procured but also for the fact that by the very acts of the respondents,
he was made liable to Philamgen in the event the insured fail to pay the premiums
due. They are estopped by their own positive averments and claims for damages.
Therefore, the respondents cannot state that the agency relationship between
Valenzuela and Philamgen is not coupled with interest. "There may be cases in which
an agent has been induced to assume a responsibility or incur a liability, in reliance
upon the continuance of the authority under such circumstances that, if the authority

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be withdrawn, the agent will be exposed to personal loss or liability" (See MEC 569 p.
406).
Furthermore, there is an exception to the principle that an agency is revocable at will
and that is when the agency has been given not only for the interest of the principal
but for the interest of third persons or for the mutual interest of the principal and the
agent. In these cases, it is evident that the agency ceases to be freely revocable by
the sole will of the principal (See Padilla, Civil Code Annotated, 56 ed., Vol. IV p. 350).
The following citations are apropos:
The principal may not defeat the agent's right to indemnification by
a termination of the contract of agency (Erskine v. Chevrolet Motors
Co. 185 NC 479, 117 SE 706, 32 ALR 196).
Where the principal terminates or repudiates the agent's
employment in violation of the contract of employment and without
cause ... the agent is entitled to receive either the amount of net
losses caused and gains prevented by the breach, or the
reasonable value of the services rendered. Thus, the agent is
entitled to prospective profits which he would have made except for
such wrongful termination provided that such profits are not
conjectural, or speculative but are capable of determination upon
some fairly reliable basis. And a principal's revocation of the agency
agreement made to avoid payment of compensation for a result
which he has actually accomplished (Hildendorf v. Hague, 293 NW
2d 272; Newhall v. Journal Printing Co., 105 Minn 44,117 NW 228;
Gaylen Machinery Corp. v. Pitman-Moore Co. [C.A. 2 NY] 273 F 2d
340)
If a principal violates a contractual or quasi-contractual duty which
he owes his agent, the agent may as a rule bring an appropriate
action for the breach of that duty. The agent may in a proper case
maintain an action at law for compensation or damages ... A
wrongfully discharged agent has a right of action for damages and
in such action the measure and element of damages are controlled
generally by the rules governing any other action for the employer's
breach of an employment contract. (Riggs v. Lindsay, 11 US 500,
3L Ed 419; Tiffin Glass Co. v. Stoehr, 54 Ohio 157, 43 NE 2798)
At any rate, the question of whether or not the agency agreement is coupled with
interest is helpful to the petitioners' cause but is not the primary and compelling
reason. For the pivotal factor rendering Philamgen and the other private respondents

liable in damages is that the termination by them of the General Agency Agreement
was tainted with bad faith. Hence, if a principal acts in bad faith and with abuse of
right in terminating the agency, then he is liable in damages. This is in accordance
with the precepts in Human Relations enshrined in our Civil Code that "every person
must in the exercise of his rights and in the performance of his duties act with justice,
give every one his due, and observe honesty and good faith: (Art. 19, Civil Code), and
every person who, contrary to law, wilfully or negligently causes damages to another,
shall indemnify the latter for the same (Art. 20, id). "Any person who wilfully causes
loss or injury to another in a manner contrary to morals, good customs and public
policy shall compensate the latter for the damages" (Art. 21, id.).
As to the issue of whether or not the petitioners are liable to Philamgen for the unpaid
and uncollected premiums which the respondent court ordered Valenzuela to pay
Philamgen the amount of One Million Nine Hundred Thirty-Two Thousand Five
Hundred Thirty-Two and 17/100 Pesos (P1,932,532,17) with legal interest thereon
until fully paid (Decision-January 20, 1988, p. 16; Petition, Annex "A"), we rule that the
respondent court erred in holding Valenzuela liable. We find no factual and legal basis
for the award. Under Section 77 of the Insurance Code, the remedy for the nonpayment of premiums is to put an end to and render the insurance policy not binding

Sec. 77 ... [N]otwithstanding any agreement to the contrary, no

policy or contract of insurance is valid and binding unless and until
the premiums thereof have been paid except in the case of a life or
industrial life policy whenever the grace period provision applies
(P.D. 612, as amended otherwise known as the Insurance Code of
1974)
In Philippine Phoenix Surety and Insurance, Inc. v. Woodworks, Inc. (92 SCRA 419
[1979]) we held that the non-payment of premium does not merely suspend but puts
an end to an insurance contract since the time of the payment is peculiarly of the
essence of the contract. And in Arce v. The Capital Insurance and Surety Co. Inc.(117
SCRA 63, [1982]), we reiterated the rule that unless premium is paid, an insurance
contract does not take effect. Thus:
It is to be noted that Delgado (Capital Insurance & Surety Co., Inc.
v. Delgado, 9 SCRA 177 [1963] was decided in the light of the
Insurance Act before Sec. 72 was amended by the underscored
portion. Supra. Prior to the Amendment, an insurance contract was
effective even if the premium had not been paid so that an insurer
was obligated to pay indemnity in case of loss and correlatively he
had also the right to sue for payment of the premium. But the

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amendment to Sec. 72 has radically changed the legal regime in
that unless the premium is paid there is no insurance. " (Arce v.
Capitol Insurance and Surety Co., Inc., 117 SCRA 66; Emphasis
supplied)
In Philippine Phoenix Surety case, we held:
Moreover, an insurer cannot treat a contract as valid for the
purpose of collecting premiums and invalid for the purpose of
indemnity. (Citing Insurance Law and Practice by John Alan
Appleman, Vol. 15, p. 331; Emphasis supplied)
The foregoing findings are buttressed by Section 776 of the
insurance Code (Presidential Decree No. 612, promulgated on
December 18, 1974), which now provides that no contract of
Insurance by an insurance company is valid and binding unless and
until the premium thereof has been paid, notwithstanding any
agreement to the contrary (Ibid., 92 SCRA 425)
Perforce, since admittedly the premiums have not been paid, the policies issued have
lapsed. The insurance coverage did not go into effect or did not continue and the
obligation of Philamgen as insurer ceased. Hence, for Philamgen which had no more
liability under the lapsed and inexistent policies to demand, much less sue Valenzuela
for the unpaid premiums would be the height of injustice and unfair dealing. In this
instance, with the lapsing of the policies through the nonpayment of premiums by the
insured there were no more insurance contracts to speak of. As this Court held in
the Philippine Phoenix Surety case, supra "the non-payment of premiums does not
merely suspend but puts an end to an insurance contract since the time of the
payment is peculiarly of the essence of the contract."
The respondent appellate court also seriously erred in according undue reliance to
the report of Banaria and Banaria and Company, auditors, that as of December 31,
1978, Valenzuela owed Philamgen P1,528,698.40. This audit report of Banaria was
commissioned by Philamgen after Valenzuela was almost through with the
presentation of his evidence. In essence, the Banaria report started with an
unconfirmed and unaudited beginning balance of account of P1,758,185.43 as of
August 20, 1976. But even with that unaudited and unconfirmed beginning balance of
P1,758,185.43, Banaria still came up with the amount of P3,865.49 as Valenzuela's
balance as of December 1978 with Philamgen (Exh. "38-A-3"). In fact, as of
December 31, 1976, and December 31, 1977, Valenzuela had no unpaid account with
Philamgen (Ref: Annexes "D", "D-1", "E", Petitioner's Memorandum). But even
disregarding these annexes which are records of Philamgen and addressed to

Valenzuela in due course of business, the facts show that as of July 1977, the
beginning balance of Valenzuela's account with Philamgen amounted to P744,159.80.
This was confirmed by Philamgen itself not only once but four (4) times on different
occasions, as shown by the records.
On April 3,1978, Philamgen sent Valenzuela a statement of account with a beginning
balance of P744,159-80 as of July 1977.
On May 23, 1978, another statement of account with exactly the same beginning
balance was sent to Valenzuela.
On November 17, 1978, Philamgen sent still another statement of account with
P744,159.80 as the beginning balance.
And on December 20, 1978, a statement of account with exactly the same figure was
sent to Valenzuela.
It was only after the filing of the complaint that a radically different statement of
accounts surfaced in court. Certainly, Philamgen's own statements made by its own
accountants over a long period of time and covering examinations made on four
different occasions must prevail over unconfirmed and unaudited statements made to
support a position made in the course of defending against a lawsuit.
It is not correct to say that Valenzuela should have presented its own records to refute
the unconfirmed and unaudited finding of the Banaria auditor. The records of
Philamgen itself are the best refutation against figures made as an afterthought in the
course of litigation. Moreover, Valenzuela asked for a meeting where the figures
would be reconciled. Philamgen refused to meet with him and, instead, terminated the
agency agreement.
After off-setting the amount of P744,159.80, beginning balance as of July 1977, by
way of credits representing the commission due from Delta and other accounts,
Valenzuela had overpaid Philamgen the amount of P530,040.37 as of November 30,
1978. Philamgen cannot later be heard to complain that it committed a mistake in its
computation. The alleged error may be given credence if committed only once. But as
earlier stated, the reconciliation of accounts was arrived at four (4) times on different
occasions where Philamgen was duly represented by its account executives. On the
basis of these admissions and representations, Philamgen cannot later on assume a
different posture and claim that it was mistaken in its representation with respect to
the correct beginning balance as of July 1977 amounting to P744,159.80. The
Banaria audit report commissioned by Philamgen is unreliable since its results are

AGENCY & TRUST OCTOBER 3, 2015 7

admittedly based on an unconfirmed and unaudited beginning balance of
P1,758,185.43 as of August 20,1976.
As so aptly stated by the trial court in its decision:
Defendants also conducted an audit of accounts of plaintiff Arturo P.
Valenzuela after the controversy has started. In fact, after hearing
plaintiffs have already rested their case.
The results of said audit were presented in Court to show plaintiff
Arturo P. Valenzuela's accountability to defendant PHILAMGEN.
However, the auditor, when presented as witness in this case
testified that the beginning balance of their audit report was based
on an unaudited amount of P1,758,185.43 (Exhibit 46-A) as of
August 20, 1976, which was unverified and merely supplied by the
officers of defendant PHILAMGEN.
Even defendants very own Exhibit 38- A-3, showed that plaintiff
Arturo P. Valenzuela's balance as of 1978 amounted to only
P3,865.59, not P826,128.46 as stated in defendant Bienvenido M.
Aragon's letter dated December 20,1978 (Exhibit 14) or
P1,528,698.40 as reflected in defendant's Exhibit 46 (Audit Report
of Banaria dated December 24, 1980).
These glaring discrepancy (sic) in the accountability of plaintiff
Arturo P. Valenzuela to defendant PHILAMGEN only lends
credence to the claim of plaintiff Arturo P. Valenzuela that he has no
outstanding account with defendant PHILAMGEN when the latter,
thru defendant Bienvenido M. Aragon, terminated the General
Agency Agreement entered into by plaintiff (Exhibit A) effective
January 31, 1979 (see Exhibits "2" and "2-A"). Plaintiff Arturo P.
Valenzuela has shown that as of October 31, 1978, he has
overpaid defendant PHILAMGEN in the amount of P53,040.37
(Exhibit "EEE", which computation was based on defendant
PHILAMGEN's balance of P744,159.80 furnished on several
occasions to plaintiff Arturo P. Valenzuela by defendant
PHILAMGEN (Exhibits H-1, VV, VV-1, WW, WW-1 , YY , YY-2 , ZZ
and , ZZ-2).
Prescinding from the foregoing, and considering that the private respondents
terminated Valenzuela with evidentmala fide it necessarily follows that the former are
liable in damages. Respondent Philamgen has been appropriating for itself all these

years the gross billings and income that it unceremoniously took away from the
petitioners. The preponderance of the authorities sustain the preposition that a
principal can be held liable for damages in cases of unjust termination of agency.
In Danon v. Brimo, 42 Phil. 133 [1921]), this Court ruled that where no time for the
continuance of the contract is fixed by its terms, either party is at liberty to terminate it
at will, subject only to the ordinary requirements of good faith. The right of the
principal to terminate his authority is absolute and unrestricted, except only that he
may not do so in bad faith.
The trial court in its decision awarded to Valenzuela the amount of Seventy Five
Thousand Pesos (P75,000,00) per month as compensatory damages from June 1980
until its decision becomes final and executory. This award is justified in the light of the
evidence extant on record (Exhibits "N", "N-10", "0", "0-1", "P" and "P-1") showing that
the average gross premium collection monthly of Valenzuela over a period of four (4)
months from December 1978 to February 1979, amounted to over P300,000.00 from
which he is entitled to a commission of P100,000.00 more or less per month.
Moreover, his annual sales production amounted to P2,500,000.00 from where he
was given 32.5% commissions. Under Article 2200 of the new Civil Code,
"indemnification for damages shall comprehend not only the value of the loss
suffered, but also that of the profits which the obligee failed to obtain."
The circumstances of the case, however, require that the contractual relationship
between the parties shall be terminated upon the satisfaction of the judgment. No
more claims arising from or as a result of the agency shall be entertained by the
courts after that date.
ACCORDINGLY, the petition is GRANTED. The impugned decision of January 29,
1988 and resolution of April 27, 1988 of respondent court are hereby SET ASIDE. The
decision of the trial court dated January 23, 1986 in Civil Case No. 121126 is
REINSTATED with the MODIFICATIONS that the amount of FIVE HUNDRED
TWENTY ONE THOUSAND NINE HUNDRED SIXTY-FOUR AND 16/100 PESOS
(P521,964.16) representing the petitioners Delta commission shall earn only legal
interests without any adjustments under Article 1250 of the Civil Code and that the
contractual relationship between Arturo P. Valenzuela and Philippine American
General Insurance Company shall be deemed terminated upon the satisfaction of the
judgment as modified.
SO ORDERED.

AGENCY & TRUST OCTOBER 3, 2015 8

G.R. No. 148788

November 23, 2007

SOLEDAD CAEZO, substituted by WILLIAM CAEZO and VICTORIANO

CAEZO Petitioners,
vs.
CONCEPCION ROJAS, Respondent.
DECISION
NACHURA, J.:
This is a petition for review on certiorari from the Decision1 of the Court of Appeals,
dated September 7, 2000, in CA-G.R. SP No. 53236, and Resolution dated May 9,
2001.
On January 29, 1997, petitioner Soledad Caezo filed a Complaint 2 for the recovery
of real property plus damages with the Municipal Trial Court (MTC) of Naval, Biliran,
against her fathers second wife, respondent Concepcion Rojas. The subject property

AGENCY & TRUST OCTOBER 3, 2015 9

is an unregistered land with an area of 4,169 square meters, situated at Higatangan,
Naval, Biliran. Caezo attached to the complaint a Joint Affidavit 3 executed on May
10, 1979 by Isidro Catandijan and Maximina Caezo attesting to her acquisition of the
property.
In her complaint, the petitioner alleged that she bought the parcel of land in 1939 from
Crisogono Limpiado, although the transaction was not reduced into writing.
Thereafter, she immediately took possession of the property. When she and her
husband left for Mindanao in 1948, she entrusted the said land to her father,
Crispulo4 Rojas, who took possession of, and cultivated, the property. In 1980, she
found out that the respondent, her stepmother, was in possession of the property and
was cultivating the same. She also discovered that the tax declaration over the
property was already in the name of Crispulo Rojas.5
In her Answer, the respondent asserted that, contrary to the petitioners claim, it was
her husband, Crispulo Rojas, who bought the property from Crisogono Limpiado in
1948, which accounts for the tax declaration being in Crispulos name. From then on,
until his death in 1978, Crispulo possessed and cultivated the property. Upon his
death, the property was included in his estate, which was administered by a special
administrator, Bienvenido Ricafort. The petitioner, as heir, even received her share in
the produce of the estate. The respondent further contended that the petitioner ought
to have impleaded all of the heirs as defendants. She also argued that the fact that
petitioner filed the complaint only in 1997 means that she had already abandoned her
right over the property.6
On July 3, 1998, after hearing, the MTC rendered a Decision in favor of the petitioner,
thus:
WHEREFORE, premises considered, the Court finds a preponderance of evidence in
favor of plaintiff Soledad Caezo and against defendant Concepcion Rojas by
declaring plaintiff the true and lawful owner of the land more particularly described
under paragraph 5 of the complaint and hereby orders defendant Concepcion Rojas:
a) To vacate and surrender possession of the land to plaintiff;
b) To pay plaintiff the sum of P34,000.00 actual damages, P10,000.00 for
attorneys fees and litigation expenses; and

Despite the respondents objection that the verbal sale cannot be proven without
infringing the Statute of Frauds, the MTC gave credence to the testimony of the
petitioners two witnesses attesting to the fact that Crisogono Limpiado sold the
property to the petitioner in 1939. The MTC also found no evidence to show that
Crispulo Rojas bought the property from Crisogono Limpiado in 1948. It held that the
1948 tax declaration in Crispulos name had little significance on respondents claim,
considering that in 1948, the "country was then rehabilitating itself from the ravages of
the Second World War" and "the government was more interested in the increase in
tax collection than the observance of the niceties of law."8
The respondent appealed the case to the Regional Trial Court (RTC) of Naval, Biliran.
On October 12, 1998, the RTC reversed the MTC decision on the ground that the
action had already prescribed and acquisitive prescription had set in. The dispositive
portion of the Decision reads:
WHEREFORE, premises considered, the decision of the Municipal Trial Court of
Naval, Biliran awarding ownership of the disputed land to the plaintiff and further
allowing recovery of damages is hereby REVERSED in toto. There is no award of
damages.
The said property remains as the legitime of the defendant Concepcion Rojas and her
children.
SO ORDERED.9
However, acting on petitioners motion for reconsideration, the RTC amended its
original decision on December 14, 1998.10 This time, it held that the action had not yet
prescribed considering that the petitioner merely entrusted the property to her father.
The ten-year prescriptive period for the recovery of a property held in trust would
commence to run only from the time the trustee repudiates the trust. The RTC found
no evidence on record showing that Crispulo Rojas ever ousted the petitioner from
the property. The dispositive portion of the amended decision reads as follows:
WHEREFORE, in view of the foregoing considerations, the decision of this Court
dated October 12, 1998 is hereby set aside and another is hereby entered modifying
the decision of the Court a quo and declaring Soledad Rojas Vda. De Caezo as the
true and lawful owner of a parcel of land, more particularly described and bounded as
follows:

c) To pay the costs.

SO ORDERED.7

A parcel of land situated at Higatangan, Naval, Biliran, bounded on the North by

Policarpio Limpiado; on the South by Fidel Limpiado; on the East by Seashore; and
on the West by Crispolo (sic) Limpiado with an approximate area of 4,169 square

AGENCY & TRUST OCTOBER 3, 2015 10

meters per Tax Declaration No. 2258, later under Tax Declaration No. 4073 in the
name of Crispolo Rojas and later in the name of the Heirs of Crispolo Rojas.
Further, ordering defendant-appellant Concepcion Rojas and all persons claiming
rights or interest under her to vacate and surrender possession of the land aforecited
to the plaintiff or any of her authorized representatives, Ordering the Provincial and/or
Municipal Assessors Office to cancel the present existing Tax Declaration in the
name of Heirs of Crispolo Rojas referring to the above-described property in favor of
the name of Soledad Rojas Vda. De Caezo, Ordering the defendant-appellant
Concepcion Rojas to pay the plaintiff-appellee the sum ofP34,000.00 in actual
damages, and to pay for the loss of her share in money value of the products of the
coconuts of said land from 1979 to 1997 and to pay further until the case is
terminated at the rate of P200.00 per quarter based on the regular remittances of the
late Crispolo Rojas to the plaintiff-appellee, and to pay the costs.
SO ORDERED.11
The respondent filed a motion to reconsider the Amended Decision but the RTC
denied the same in an Order dated April 25, 1999.
She then filed a petition for review with the Court of Appeals (CA), which reversed the
Amended Decision of the RTC on September 7, 2000, thus:
WHEREFORE, the amended decision dated December 14, 1998 rendered in Civil
Case No. B-1041 is hereby REVERSED and SET ASIDE. The complaint filed by
Soledad Caezo before the Municipal Trial Court of Naval, Biliran is hereby
DISMISSED on grounds of laches and prescription and for lack of merit.
SO ORDERED.12
The CA held that the petitioners inaction for several years casts a serious doubt on
her claim of ownership over the parcel of land. It noted that 17 years lapsed since she
discovered that respondent was in adverse possession of the property before she
instituted an action to recover the same. And during the probate proceedings, the
petitioner did not even contest the inclusion of the property in the estate of Crispulo
Rojas. 13
The CA was convinced that Crispulo Rojas owned the property, having bought the
same from Crisogono Limpiado in 1948. Supporting this conclusion, the appellate
court cited the following circumstances: (1) the property was declared for taxation
purposes in Crispulos name and he had been paying the taxes thereon from 1948

until his death in 1978; (2) Crispulo adversely possessed the same property from
1948 until his death in 1978; and (3) upon his death in 1978, the property was
included in his estate, the proceeds of which were distributed among his heirs.14
The CA further held that, assuming that there was an implied trust between the
petitioner and her father over the property, her right of action to recover the same
would still be barred by prescription since 49 years had already lapsed since Crispulo
adversely possessed the contested property in 1948.15
On May 9, 2001, the CA denied the petitioners motion for reconsideration for lack of
merit.16
In this petition for review, the petitioner, substituted by her heirs, assigns the following
errors:
That the Court of Appeals committed grave abuse of discretion in setting aside
petitioners contention that the Petition for Review filed by respondent CONCEPCION
ROJAS before the Court of Appeals was FILED OUT OF TIME;
That the Court of Appeals erred and committed grave abuse of discretion amounting
to lack or excess of jurisdiction when it decided that the filing of the case by
SOLEDAD CAEZO for Recovery of Real Property was already barred by
PRESCRIPTION AND LACHES.17
The petitioner insists that the respondents petition for review before the CA was filed
out of time. The petitioner posits that the CA may not grant an additional extension of
time to file the petition except for the most compelling reason. She contends that the
fact that respondents counsel needed additional time to secure the certified copy of
his annexes cannot be considered as a compelling reason that would justify an
additional period of
extension. She admits, though, that this issue was raised for the first time in their
motion for reconsideration, but insists that it can be raised at any time since it
concerns the jurisdiction of the CA over the petition.
The petitioner further posits that prescription and laches are unavailing because there
was an express trust relationship between the petitioner and Crispulo Rojas and his
heirs, and express trusts do not prescribe. Even assuming that it was not an express
trust, there was a resulting trust which generally does not prescribe unless there is
repudiation by the trustee.

AGENCY & TRUST OCTOBER 3, 2015 11

For her part, the respondent argues that the petitioners are now estopped from
questioning the CA Resolution granting her second motion for extension to file the
petition for review. She notes that the petitioner did not raise this issue in the
comment that she filed in the CA. In any case, the grant of the second extension of
time was warranted considering that the certified true copy of the assailed RTC
orders did not arrive at the office of respondents counsel in Cebu City in time for the
filing of the petition.
On the merits, the respondent asserts that the complaint is barred by prescription,
laches and estoppel. From 1948 until his death in 1978, Crispulo cultivated the
property and was in adverse, peaceful and continuous possession thereof in the
concept of owner. It took the petitioner 49 years from 1948 before she filed the
complaint for recovery of the property in 1997. Granting that it was only in 1980 that
she found out that the respondent adversely possessed the property, still petitioner
allowed 17 years to elapse before she asserted her alleged right over the property.
Finally, the respondent maintains that the other co-owners are indispensable parties
to the case; and because they were not impleaded, the case should be dismissed.

Thus, the resolution of the second issue hinges on our determination of the existence
of a trust over the property --- express or implied --- between the petitioner and her
father.
A trust is the legal relationship between one person having an equitable ownership of
property and another person owning the legal title to such property, the equitable
ownership of the former entitling him to the performance of certain duties and the
exercise of certain powers by the latter.21 Trusts are either express or
implied.22 Express trusts are those which are created by the direct and positive acts of
the parties, by some writing or deed, or will, or by words evincing an intention to
create a trust.23 Implied trusts are those which, without being expressed, are
deducible from the nature of the transaction as matters of intent or, independently, of
the particular intention of the parties, as being superinduced on the transaction by
operation of law basically by reason of equity.24 An implied trust may either be a
resulting trust or a constructive trust.
It is true that in express trusts and resulting trusts, a trustee cannot acquire by
prescription a property entrusted to him unless he repudiates the trust. 25 The following
discussion is instructive:

The petition has no merit.

On the procedural issue raised by the petitioner, we find no reversible error in the
grant by the CA of the second motion for extension of time to file the respondents
petition. The grant or denial of a motion for extension of time is addressed to the
sound discretion of the court.18 The CA obviously considered the difficulty in securing
a certified true copy of the assailed decision because of the distance between the
office of respondents counsel and the trial court as a compelling reason for the
request. In the absence of any showing that the CA granted the motion for extension
capriciously, such exercise of discretion will not be disturbed by this Court.
On the second issue, the petitioner insists that her right of action to recover the
property cannot be barred by prescription or laches even with the respondents
uninterrupted possession of the property for 49 years because there existed between
her and her father an express trust or a resulting trust. Indeed, if no trust relations
existed, the possession of the property by the respondent, through her predecessor,
which dates back to 1948, would already have given rise to acquisitive prescription in
accordance with Act No. 190 (Code of Civil Procedure). 19Under Section 40 of Act No.
190, an action for recovery of real property, or of an interest therein, can be brought
only within ten years after the cause of action accrues. This period coincides with the
ten-year period for acquisitive prescription provided under Section 41 20 of the same
Act.

There is a rule that a trustee cannot acquire by prescription the ownership of property
entrusted to him, or that an action to compel a trustee to convey property registered in
his name in trust for the benefit of the cestui que trust does not prescribe, or that the
defense of prescription cannot be set up in an action to recover property held by a
person in trust for the benefit of another, or that property held in trust can be
recovered by the beneficiary regardless of the lapse of time.
That rule applies squarely to express trusts. The basis of the rule is that the
possession of a trustee is not adverse. Not being adverse, he does not acquire by
prescription the property held in trust. Thus, Section 38 of Act 190 provides that the
law of prescription does not apply "in the case of a continuing and subsisting trust."
The rule of imprescriptibility of the action to recover property held in trust may
possibly apply to resulting trusts as long as the trustee has not repudiated the trust.
xxxx
Acquisitive prescription may bar the action of the beneficiary against the trustee in an
express trust for the recovery of the property held in trust where (a) the trustee has
performed unequivocal acts of repudiation amounting to an ouster of the cestui que
trust; (b) such positive acts of repudiation have been made known to the cestui que
trust, and (c) the evidence thereon is clear and conclusive.26

AGENCY & TRUST OCTOBER 3, 2015 12

As a rule, however, the burden of proving the existence of a trust is on the party
asserting its existence, and such proof must be clear and satisfactorily show the
existence of the trust and its elements.27 The presence of the following elements must
be proved: (1) a trustor or settlor who executes the instrument creating the trust; (2) a
trustee, who is the person expressly designated to carry out the trust; (3) the trust res,
consisting of duly identified and definite real properties; and (4) the cestui que trust, or
beneficiaries whose identity must be clear.28Accordingly, it was incumbent upon
petitioner to prove the existence of the trust relationship. And petitioner sadly failed to
discharge that burden.
The existence of express trusts concerning real property may not be established by
parol evidence.29 It must be proven by some writing or deed. In this case, the only
evidence to support the claim that an express trust existed between the petitioner and
her father was the self-serving testimony of the petitioner. Bare allegations do not
constitute evidence adequate to support a conclusion. They are not equivalent to
proof under the Rules of Court.30
In one case, the Court allowed oral testimony to prove the existence of a trust, which
had been partially performed. It was stressed therein that what is important is that
there should be an intention to create a trust, thus:
What is crucial is the intention to create a trust. While oftentimes the intention is
manifested by the trustor in express or explicit language, such intention may be
manifested by inference from what the trustor has said or done, from the nature of the
transaction, or from the circumstances surrounding the creation of the purported trust.
However, an inference of the intention to create a trust, made from language, conduct
or circumstances, must be made with reasonable certainty. It cannot rest on vague,
uncertain or indefinite declarations. An inference of intention to create a trust,
predicated only on circumstances, can be made only where they admit of no other
interpretation.31
Although no particular words are required for the creation of an express trust, a clear
intention to create a trust must be shown; and the proof of fiduciary relationship must
be clear and convincing. The creation of an express trust must be manifested with
reasonable certainty and cannot be inferred from loose and vague declarations or
from ambiguous circumstances susceptible of other interpretations.32
In the case at bench, an intention to create a trust cannot be inferred from the
petitioners testimony and the attendant facts and circumstances. The petitioner
testified only to the effect that her agreement with her father was that she will be
given a share in the produce of the property, thus:

Q: What was your agreement with your father Crispulo Rojas when you left
this property to him?
A: Every time that they will make copra, they will give a share.
Q: In what particular part in Mindanao [did] you stay with your husband?
A: Bansalan, Davao del Sur.
Q: And while you were in Bansalan, Davao del Sur, did Crispolo Rojas
comply with his obligation of giving your share the proceeds of the land?
A: When he was still alive, he gave us
sometimes P200.00 and sometimes P300.00.33

every

three

months

This allegation, standing alone as it does, is inadequate to establish the existence of

a trust because profit-sharing per se, does not necessarily translate to a trust relation.
It could also be present in other relations, such as in deposit.
What distinguishes a trust from other relations is the separation of the legal title and
equitable ownership of the property. In a trust relation, legal title is vested in the
fiduciary while equitable ownership is vested in a cestui que trust. Such is not true in
this case. The petitioner alleged in her complaint that the tax declaration of the land
was transferred to the name of Crispulo without her consent. Had it been her intention
to create a trust and make Crispulo her trustee, she would not have made an issue
out of this because in a trust agreement, legal title is vested in the trustee. The trustee
would necessarily have the right to transfer the tax declaration in his name and to pay
the taxes on the property. These acts would be treated as beneficial to the cestui que
trust and would not amount to an adverse possession.34
Neither can it be deduced from the circumstances of the case that a resulting trust
was created.1wphi1 A resulting trust is a species of implied trust that is presumed
always to have been contemplated by the parties, the intention as to which can be
found in the nature of their transaction although not expressed in a deed or
instrument of conveyance. A resulting trust is based on the equitable doctrine that it is
the more valuable consideration than the legal title that determines the equitable
interest in property.35
While implied trusts may be proved by oral evidence, the evidence must be
trustworthy and received by the courts with extreme caution, and should not be made
to rest on loose, equivocal or indefinite declarations. Trustworthy evidence is required

AGENCY & TRUST OCTOBER 3, 2015 13

because oral evidence can easily be fabricated.36 In order to establish an implied trust
in real property by parol evidence, the proof should be as fully convincing as if the
acts giving rise to the trust obligation are proven by an authentic document. An
implied trust, in fine, cannot be established upon vague and inconclusive proof. 37 In
the present case, there was no evidence of any transaction between the petitioner
and her father from which it can be inferred that a resulting trust was intended.
In light of the disquisitions, we hold that there was no express trust or resulting trust
established between the petitioner and her father. Thus, in the absence of a trust
relation, we can only conclude that Crispulos uninterrupted possession of the subject
property for 49 years, coupled with the performance of acts of ownership, such as
payment of real estate taxes, ripened into ownership. The statutory period of
prescription commences when a person who has neither title nor good faith, secures
a tax declaration in his name and may, therefore, be said to have adversely claimed
ownership of the lot.38 While tax declarations and receipts are not conclusive
evidence of ownership and do not prove title to the land, nevertheless, when coupled
with actual possession, they constitute evidence of great weight and can be the basis
of a claim of ownership through prescription. 39Moreover, Section 41 of Act No. 190
allows adverse possession in any character to ripen into ownership after the lapse of
ten years. There could be prescription under the said section even in the absence of
good faith and just title.40
All the foregoing notwithstanding, even if we sustain petitioners claim that she was
the owner of the property and that she constituted a trust over the property with her
father as the trustee, such a finding still would not advance her case.
Assuming that such a relation existed, it terminated upon Crispulos death in 1978. A
trust terminates upon the death of the trustee where the trust is personal to the
trustee in the sense that the trustor intended no other person to administer it.41 If
Crispulo was indeed appointed as trustee of the property, it cannot be said that such
appointment was intended to be conveyed to the respondent or any of Crispulos
other heirs. Hence, after Crispulos death, the respondent had no right to retain
possession of the property. At such point, a constructive trust would be created over
the property by operation of law. Where one mistakenly retains property which
rightfully belongs to another, a constructive trust is the proper remedial device to
correct the situation.42
A constructive trust is one created not by any word or phrase, either expressly or
impliedly, evincing a direct intention to create a trust, but one which arises in order to
satisfy the demands of justice. It does not come about by agreement or intention but
in the main by operation of law, construed against one who, by fraud, duress or abuse

of confidence, obtains or holds the legal right to property which he ought not, in equity
and good conscience, to hold.43
As previously stated, the rule that a trustee cannot, by prescription, acquire ownership
over property entrusted to him until and unless he repudiates the trust, applies to
express trusts and resulting implied trusts. However, in constructive implied trusts,
prescription may supervene even if the trustee does not repudiate the relationship.
Necessarily, repudiation of the said trust is not a condition precedent to the running of
the prescriptive period.44 A constructive trust, unlike an express trust, does not
emanate from, or generate a fiduciary relation. While in an express trust, a beneficiary
and a trustee are linked by confidential or fiduciary relations, in a constructive trust,
there is neither a promise nor any fiduciary relation to speak of and the so-called
trustee neither accepts any trust nor intends holding the property for the
beneficiary.45 The relation of trustee and cestui que trust does not in fact exist, and the
holding of a constructive trust is for the trustee himself, and therefore, at all times
adverse.
In addition, a number of other factors militate against the petitioners case. First, the
petitioner is estopped from asserting ownership over the subject property by her
failure to protest its inclusion in the estate of Crispulo. The CA, thus, correctly
observed that:
Even in the probate proceedings instituted by the heirs of Crispulo Rojas, which
included her as a daughter of the first marriage, Caezo never contested the inclusion
of the contested property in the estate of her father. She even participated in the
project of partition of her fathers estate which was approved by the probate court in
1984. After personally receiving her share in the proceeds of the estate for 12 years,
she suddenly claims ownership of part of her fathers estate in 1997.
The principle of estoppel in pais applies when -- by ones acts, representations,
admissions, or silence when there is a need to speak out -- one, intentionally or
through culpable negligence, induces another to believe certain facts to exist; and the
latter rightfully relies and acts on such belief, so as to be prejudiced if the former is
permitted to deny the existence of those facts. 46 Such a situation obtains in the instant
case.
Second, the action is barred by laches. The petitioner allegedly discovered that the
property was being possessed by the respondent in 1980.47 However, it was only in
1997 that she filed the action to recover the property. Laches is negligence or
omission to assert a right within a reasonable time, warranting a presumption that the
party entitled to it has either abandoned or declined to assert it.48

AGENCY & TRUST OCTOBER 3, 2015 14

Finally, the respondent asserts that the court a quo ought to have dismissed the
complaint for failure to implead the other heirs who are indispensable parties. We
agree. We note that the complaint filed by the petitioner sought to recover ownership,
not just possession of the property; thus, the suit is in the nature of an action for
reconveyance. It is axiomatic that owners of property over which reconveyance is
asserted are indispensable parties. Without them being impleaded, no relief is
available, for the court cannot render valid judgment. Being indispensable parties,
their absence in the suit renders all subsequent actions of the trial court null and void
for want of authority to act, not only as to the absent parties but even as to those
present. Thus, when indispensable parties are not before the court, the action should
be dismissed.49 At any rate, a resolution of this issue is now purely academic in light

of our finding that the complaint is already barred by prescription, estoppel and
laches.
WHEREFORE, premises considered, the petition is DENIED. The Decision of the
Court of Appeals, dated September 7, 2000, and Resolution dated May 9, 2001, are
AFFIRMED.
SO ORDERED.