A.M. No.

RTJ-92-802 July 5, 1993

OFFICE OF THE COURT ADMINISTRATOR, vs. HON. GENARO C. GINES,

PER CURIAM:

This case was initiated by the Office of the Court Administrator with the filing of an administrative
complaint which reads:

Pursuant to the Resolution of the Court En Banc, dated July 30, 1991, the undersigned hereby institutes
this administrative complaint against Judge Genaro C. Gines, Presiding Judge, Branch 26; Ma. Gorgonia
L. Flores, Court Interpreter and Officer-in- Charge, Branch 26; Rosie M. Munar, Stenographic Reporter,
Branch 26; Pacita B. Diaz, Staff Assistant IV, Office of the Clerk of Court; Ma. Concepcion B. Diaz, Staff
Assistant I, Branch 26; and Mr. Alfredo V. Lacsamana, Jr., Staff II, Branch 26, all of the RTC, San
Fernando, La Union, for Dishonesty; Violation of par. (e), Sec. 3 of R.A. 3019 (Anti-Graft and Corrupt
Practices Act) as amended; and Violation of Administrative Order No. 6, dated June 30, 1975, Circular
No. 7, dated September 23, 1974, and Administrative Order No. 1, dated January 28, 1988, by virtue of
their collective illegal acts involving deliberate and surreptitious assignment of cases at the Docketing
and Receiving Section, Office of the Clerk of Court, RTC, San Fernando, La Union.

1. This complaint is substantially anchored on the Report submitted by Atty. Aurora P. Sanglay,
Clerk of Court, RTC, San Fernando, La Union, relative to her investigation of the alleged anomaly in the
non-raffling of cases in the said Court, and the Affidavit-complaint of Ma. Concepcion B. Diaz dated
September 19, 1991, implicating other court personnel involved in the aforestated irregularity;

2. Atty. Sanglay, in her Report, averred that:

2.1. From April 3, 1989 to April, 1991, there were forty-four (44) Special Proceedings cases, twenty-
seven (27) Land Registration cases, six (6) Civil Cases, and three (3) Criminal Cases which were directly
assigned to the RTC, Branch 26, San Fernando, La Union, without passing through the mandatory,
raffling procedure, of cases except for three (3) special proceedings cases which were assigned to
Branch 27, which anomaly had been going on since 1986;

2.2. Pacita Diaz, Ma. Concepcion Diaz and Alfredo Lacsamana, Jr. were the court employees in-
charge in (sic) the receiving and docketing of the Land Registration Cases, Special Proceedings cases and
Civil Cases, respectively; and
2.3. There is a probability that the aforesaid clerks, who were in-charge of receiving the cases, did
not submit deliberately to the Officer-in-Charge, some of the cases received from mandatory raffling in
compliance with the Administrative Orders/Circulars of the Supreme Court.

3. In the Affidavit-Complaint dated September 19, 1991, of Ma. Concepcion B. Diaz, which was
received by the Office of the Court Administrator on September 20,1991, she asserted, inter alia, that:

3.1. She blamed Judge Genaro C. Gines, Presiding Judge, RTC, Branch 26, San Fernando, La Union,
Ma. Gorgonia Flores, Court Interpreter and Officer-In-Charge, same Court, and Rosie Munar,
Stenographic Reporter, same Court, for applying pressures and intimidations to her in order that the
cases of their choice may no longer be forwarded to the proper Officer-in-Charge;

3.2. Several petitions have been prepared by the (sic) Judge Gines himself in coordination with his
Stenographer Rosie Munar and Court Interpreter Ma. Gorgonia Flores, some of which are as follows:

3.2.1. Special Proceeding No. 1965 where the petitioner, who alleged himself to be a resident of San
Fernando, La Union, is actually a resident of Sta. Cruz, Ilocos Sur and the Aunt of Judge Gines. The
required bond of P500.00 therein has not yet been posted: and

3.2.2. Special Proceeding No. 1967 where the Office of the Solicitor General and other parties were
not furnished with copies of the petition upon the instruction of Judge Gines.

The respondents were then required to answer the complaint.

Separate motions for an extension of time to file their answers were made by the respondents, but only
respondents Pacita Diaz and Ma. Concepcion Diaz filed their Answer within the extended period. The
Resolution which granted the others the extension warned them that no further postponements would
be granted. Notwithstanding such caveat, however, they again asked for another extension. In the
Resolution of 28 May 1992, this Court ruled, inter alia, that:

It appearing that said respondents have not taken this case seriously, and considering the prior warning
in the Resolution of 7 May 1992, the above motions for another extension of time to file the Answers
are hereby DENIED. The respondent Judge and respondents Flores, Munar and Lacsamana are deemed
to have waived the filing of their Answer.
As it turned out, respondents Flores, Munar and Lacsamana were able to post their joint Answers on 15
May 1992 the last day of the additional period they had prayed for in their second motion which was
eventually denied in the aforementioned Resolution.

Respondents then filed a motion to reconsider the Resolution of 28 May 1992; the same was denied in
the Resolution of 14 July 1992. This latter resolution likewise denied the respondent Judge's motion to
reconsider the 7 May 1992 Resolution wherein he prayed that his answer (actually a Comment), dated
14 May 1992, be admitted. However, this Court resolved that the said comment be attached to the
record of the instant case.

In the same 14 July 1992 Resolution, the instant case was referred to Mr. Justice Nathanael P. De Pano,
Jr. of the Court of Appeals for investigation, report, and recommendation.

On 31 March 1993, Justice De Pano, Jr. submitted his 26-page REPORT. It appears therefrom that on 2
September 1992, he issued an order (a) requiring the parties to file respective affidavits which shall
serve as their direct testimonies in this case subject, however, to cross-examination by the adverse
parties and (b) setting the initial hearing of the case for 28 September 1992. Respondents Pacita Diaz
and Ma. Concepcion Diaz submitted their joint affidavit, dated 9 September 1992, as well as the
affidavits of Fortunata Gualberto, retired branch clerk of court of Branch 27 of the Regional Trial Court
(RTC) in San Fernando, La Union, and Consolacion M. Dulay, Clerk III of the same Branch 27.
Respondents Gorgonia Flores, Rosie Munar and Alfredo Lacsamana likewise submitted their individual
affidavits which are all dated 14 September 1992. Respondent Judge Gines, for his part, filed a
manifestation dated 17 September 1992, adopting his 14 May 1992 Comment as his direct testimony as
well as the aforesaid affidavits of respondents Flores, Munar and Lacsamana.

At the hearing on 28 September 1992, the parties entered into a stipulation of facts. They agreed on the
status and personal circumstances of the parties as stated in the affidavits, as well as the descriptions of
their respective positions in the RTC in San Fernando, La Union; the assumption into office of the
respondent Judge in January of 1987; the non-membership of the respondent Judge and the other
respondents in the raffle committee; and the procedure prescribed for the raffling of cases filed with the
RTC in San Fernando, La Union. The respondents then marked as exhibits their affidavits and other
documents.

It further appears from the REPORT that no testimonial evidence was offered by the parties. While the
complainant wanted to present Atty. Sanglay, the respondents admitted her report and agreed to
dispense with her testimony. The complainant then marked in evidence the following documents: (1)
the undated Report of Atty. Aurora Sanglay to the Executive Judge, as Exhibit "A"; (2) the 17 June 1991
Letter of Atty. Aurora Sanglay addressed to the Executive Judge, with annexes, as Exhibit "B"; (3) the
Joint Affidavit of Pacita and Ma. Concepcion Diaz dated 11 September 1992, as Exhibit "C"; (4) the
Compliance of respondents Flores, Munar and Lacsamana, Jr., as Exhibit "D"; (5) the Affidavit of
respondent Flores dated 14 September 1992, as Exhibit "E"; (6) the Affidavit of Romeo Hermosura dated
14 September 1992, as Exhibit "F"; (7) the Affidavit of Teodorico Basilio dated 14 September 1992, as
Exhibit "G"; (8) the Affidavit of respondent Munar, dated 14 September 1992, as Exhibit "H"; (9) the
Affidavit of respondent Lacsamana, Jr. dated 14 September 1992, as Exhibit "I"; and (10) the
Manifestation of respondent Judge Gines dated 17 September 1992, as Exhibit "J". It appears that
counsel for the complainant expressed a desire to cross-examine respondents Flores, Munar and
Lacsamana but that the latter's counsel objected on the ground of possible self-incrimination. These
three respondents further manifested that they were not presenting any evidence against the other
respondents. Respondents Pacita Diaz and Concepcion Diaz likewise manifested, through counsel, that
they will not present evidence on account of the possibility of self-incrimination. Respondent Judge
Gines did not present his evidence.

Justice De Pano, Jr. then made the following observations, findings and conclusions in his REPORT:

Executive Judge Braulio Yaranon of the San Fernando, La Union Regional Trial Court, in a letter dated
June 20, 1991, transmitted to the Court, the report dated June 17, 1991, of Attorney Aurora Sanglay, the
said Court's Clerk of Court, on the subject of cases that had not been raffled by the appropriate
committee on raffle but which nevertheless, found their way mostly, to Branch 26 of the said Court
(presided over by respondent Genaro Gines from January 1987) and Branch 27 (the letter and its
annexes were later marked Exhibit B). In 1986, the report states, 6 criminal cases, 9 civil cases, 51 special
proceeding cases and 9 land registration cases, (a total of 75 cases) did not pass through the raffle
committee but went directly to the branch which apparently acted on the cases without question. In
1987, 8 criminal cases, 9 civil cases, 13 special proceedings cases, 2 land registration cases (a total of 32
cases) did not pass through the raffle committee. In 1988, 9 civil cases, 18 special proceedings cases and
2 land registration cases (a total of 29 cases) went directly to the branches mentioned. A total of 136
cases from 1986 to 1988, Attorney Sanglay reports, went from filing/docketing direct to two branches
without undergoing the mandated raffle by the raffle committee.

The more germane report, one which demonstrates the continuing perpetuation of the above obviously
illegal and nefarious system of directing cases filed with the Regional Trial Court of San Fernando, La
Union to Branches 26 and 27 of that court, is the undated report of Clerk of Court Aurora P. Sanglay to
Executive Judge Braulio Yaranon, and received by his office on June 6, 1991. The letter, uncontroverted,
is marked Exhibit A, Court Administrator, and it reads thus:

In compliance to (sic) your memorandum dated May 23, 1991, directing the undersigned to make an
investigation re the matter of cases filed before my office (Office of the Clerk of Court), which did not
undergo the mandatory raffle procedure, herewith are my findings:
The period covered by my investigation is from April 3, 1989 to April 1991. In summary, during this
period, there were FORTY-FOUR (44) Special Cases, TWENTY-SEVEN (27) Land Registration Cases, SIX (6)
Civil Cases, and THREE (3) Criminal Cases which did not pass through raffle, but which were instead
directed to specific RTC Branches, particularly Branch 26 and Branch 27. A great majority of these cases
however were assigned to Branch 26.

Attached is the list of these cases mentioned for your reference. This data obtained (sic) by
counterchecking the Minutes of previous raffles covering the period of my investigation vis-a-vis the
corresponding docket books.

Until your memorandum dated May 24, 1991, the following persons were in-charge of receiving and
docketing the following kinds of cases:

Mrs. Pacita Diaz Land Registration Cases

Miss Ma. Concepcion Diaz Special Proceedings Cases

Mr. Alfredo Lacsamana Civil Cases

Criminal Cases were docketed by Mr. Vicente Tatunay of the Prosecutor's Office and received by either
Mr. Alfredo Lacsamana, Jr., the person handling all cases filed for raffle, or Mr. Oscarlito Fantastico or
any of the clerks in the OCC, in his absence.

Supposed to be, all these filed cases are to be turned over to Mr. Alfredo Lacsamana, Jr. for raffle, but as
per my findings, some of these cases were not at all included in the mandatory raffle, but were instead
directed to specific RTC Branches. The possibility is not remote that these clerks in-charge of receiving
their respective cases deliberately did not submit some of their received cases for raffle.

A lapse in the system and poor monitoring also provided for this thing to happen. Instances are common
where a client/lawyer is allowed possession of the papers to be filed at certain critical stages of the
receiving process, specifically after the docketing and payment of filing fees, and after said stages, the
possibility is not likewise remote that these papers are not submitted to the person in-charge of the
raffle.
The undersigned had already instituted procedures, i.e. centralized receiving, payment of filing fees,
docketing, and has strengthen (sic) monitoring of the cases and the number of cases filed to prevent
occurrence (sic) of similar nature. (Exhibit A, Court Administrator, pp. 76-77, rec., 3rd Folder.)

Clerk of Court Sanglay's report includes 44 special proceedings cases, 27 land registration cases, 6 civil
cases and 3 criminal cases or a total of 80 cases that did not pass through raffle from April, 1989 to April,
1991 but found their way directly to Branches 26 and 27 of the Regional Trial Court of San Fernando, La
union. Of these 80 cases, all, except 3, found their way to Branch 26, occupied by respondent Judge
Genaro Gines who, as he admits, was assigned in (sic) that branch since January, 1987.

The respondents here are Judge Genaro Gines, the incumbent presiding judge of Branch 26 of the RTC in
Judicial Region No. 1 based in San Fernando, La Union; Pacita Diaz, a staff member in that court now
retired in the period covered by the Sanglay report, in charge of filing and docketing of land registration
cases; Pacita Diaz's daughter, Ma. Concepcion Diaz, another staff member in Branch 26, during the
period covered by the Sanglay report, the clerk in charge of the filing and docketing of special
proceedings cases; Alfredo Lacsamana, Jr., in the period covered by the Sanglay report the clerk in-
charge of the filing and docketing of civil cases; Rosie Munar, court stenographic reporter; and Ma.
Gorgonia Flores, court interpreter and the Officer-in-Charge of Branch 26. Francisco Lacsamana, Jr.,
additionally, was assigned to gather all cases filed and docketed in the week civil, criminal, special
proceedings, land one day before the weekly raffle, and to transmit these newly filed cases to the
Committee on Raffle. Ma. Gorgonia Flores, Officer-in-Charge of Branch 26, oversees the administrative
machinery of Branch 26 (pp. 8-9, t.s.n., September 28, 1992).

The respondents felt that since the Court Administrator limited himself to the sworn statement and
report of Clerk of Court Attorney Aurora Sanglay, they were not called upon to present evidence in their
behalf as it would amount to self-incrimination. They refused to testify; they refused to be cross-
examined. Your investigator informs the Court that the Sanglay affidavit and report are uncontroverted.
Admissions in the sworn statements forming part of the record are utilized in this report in addition to
the stipulated facts.

The respondents are charged in the administrative complaint:

(1) for dishonesty, in violation of paragraph (e), section 3 of Republic Act No. 3019, the Anti-Graft
and Corrupt Practices Act, as amended;

(2) for violation of Administrative Order No. 6, dated June 30, 1975;
(3) for violation of Circular No. 7, dated September 23, 1974; and

(4) for violation of Administrative Order No. 1, dated January 28, 1988.

The last three, Supreme Court issues, have to do with the creation of a raffle committee in multi-branch
Regional Trial Courts, with supervision of the raffle of newly-filled cases; with the manner of raffling
cases, and establish the policy that no case, in multi-branch trial courts, may be assigned to any branch
or sala unless it had undergone the raffle process.

Supreme Court Circular No. 7, September 23, 1974 mandates that in courts with several branches, cases
shall be assigned to the different branches only by raffle. "No case may be assigned to any branch
without being raffled." (Part I) And immediately after raffle, the Executive Judge is mandated by the said
Circular to indicate the particular branch to which the case is raffled, "the same to be written in words
and in figures on the cover of the Rollo and on the first page of the original complaint or information and
initialled by the Executive Judge and the two other officers who attended said raffle." (Part III). The same
circular created a raffle committee of three, composed of the Executive Judge and two other judges of
the court. The Executive Judge, supervises the Raffle. Administrative Circular No. 1, (January 28, 1988)
reiterates strict compliance with Administrative Order No. 6 (June 30, 1975) and Circular No. 7
(September 23, 1974 Raffle of cases, this later Circular required, must be "in open session in the
presence of lawyers and spectators . . . . ." (Section 8.1). The Court in this later Circular restated the res
ipso loquitor (sic) rule regarding the conduct and removal of judges (Section 5.2).

It is therefore, beyond cavil, that under the rules governing the administration of courts, all cases filed in
court must go through the raffle committee for assignment. No case must be assigned, in multi-branch
courts, unless it is raffled by the Raffle Committee. The 80 cases involved in this case, filed from April
1989 to April 1991, were not raffled, but were directly assigned to, or taken by, Branch 26 (except 3)
under respondent Judge Gines. Respondent Judge Gines must know, under the above Supreme Court
acts, at a simple glance on the cover of the rollo and the first page of every such record, whether a case
was assigned to him after going through raffle or not. Cases assigned to his branch, after going through
the required raffle, show on the face of the rollo, in words and in figures, the branch to which the case is
assigned, authenticated by the initials of the Executive Judge and the two other members of the
Committee. From January 1987, when respondent Judge Gines was appointed to Branch 26, the
respondent judge had received unraffled cases, considered them and decided them. He had done so,
apparently, not because he was a maniac of a worker, nor because he loved his work but for reasons
unspoken in this case. Why should a sane judge accept additional cases for study and decision, in
addition to his regular load, without any benefit or consideration? Here obviously, the res ipso loquitor
(sic) doctrine applies.
Among the administrative officers charged here, Alfredo Lacsamana, Jr., as stipulated, gathers all the
cases filed and docketed in any particular week, for transmittal to the Committee on Raffle. He prepared
the cases for raffle, including the preparation of the pieces of paper properly written on, to be picked in
the raffle. It was his job to do so. He was assigned to do so; he admitted so. That he did not do so is
obvious from the Sanglay Report from 1989 to 1991, he failed to transmit 80 cases and these cases
found their way (except for 3) to respondent Judge Gines. The Sanglay report is not controverted. It was
Lacsamana's job to collect all cases docketed, and to transmit them to the Raffle Committee. 80 such
cases he did collect and failed to report to the Raffle Committee from April, 1989 to April, 1991.

The Diazes, in the period covered by the Sanglay report had apparently fallen out with respondent Judge
Gines and respondents Flores, Munar and Lacsamana. In an affidavit dated September 18, 1991
executed by respondent Ma. Concepcion Diaz, the following passages appear, to wit:

xxx xxx xxx

The conflict between the Diazes and the other respondents deem (sic) to have arisen from the suspicion
the respondent Judge entertained that the Diazes had 'squealed' on him to the Executive Judge, the
Honorable Braulio Yaranon. This is contained in the Diazes Joint Affidavit dated September 9, 1992
(Marked C-Diaz), in the following passage:

xxx xxx xxx

As to the two other respondents, respondents Ma. Gorgonia Flores, who is officer-in-charge of Branch
26 and Rosie Munar, court interpreter, there appears to be no evidence. The record shows that when
the Court Administrator's lawyers rested their case with the presentation of the Sanglay report, the
respondents refused to be cross-examined on their sworn statements. Consequently, each sworn
statement lost value as evidence against the other respondents. However, it may be easily inferred that
as court officer-in-charge, respondent Flores was in (sic)-duty bound to supervise the work of her
subalterns. The non-raffling of 80 cases during the period covered from April, 1989 to April 1991 reflects
her failure to do her job.

xxx xxx xxx

The Supreme Court orders and circulars complained of as having been violated, are directed to district
judges, while Section 3, paragraph (e) of RA 3019 is inclusive in scope, penalizing public officers for
causing undue injury to any party . . . . or giving any private party any unwarranted benefits, advantage
or preference in the discharge of his official, administrative a (sic) judicial functions through manifest
partiality, evident bad faith or gross inexcusable negligence. . . .

The prosecution had limited itself to presenting the Sanglay report. It is apparent that we must take the
Diazes' statement that they were pressured to do that which they had to do, and whatever it was, was
done without consent, and against their will. However, under the facts here, all the cases filed docketed
in Branch 26 were collected by respondent Lacsamana, Jr., who was in (sic) duty bound to forward the
cases to the Raffle Committee. That 80 such cases did not find their way to the Committee, but ended
up as 80 extra cases (except 3) in the docket load of the respondent judge, means at the very least that
Lacsamana, Jr., failed to perform his job. The respondent judge in accepting or securing, such 80 cases,
(minus 3) that did not pass through raffle, for his action and resolution, and which he eventually
resolved violated all the Supreme Court circulars on the matter with the help and cooperation of
respondent Lacsamana, Jr. Evidently, respondent judge must have received undue benefits and
advantages (which have not been demonstrated in this case) in securing this extra load of cases,
benefits and advantages coming from the party benefited (sic) by his action, and at the same time,
granted the parties involved in the some (sic) 80 cases that did not undergo raffle, undue and
unwarranted benefits resulting from the bias and partiality in their favor coming from the respondent
judge. As earlier observed, a single glance at the cover and first page of each of the 80 or so rollos would
show that they were unraffled, and yet, the respondent judge knowing that such cases were unraffled,
secured the said cases, considered them and decided or resolved them, in violation of law.

It would appear, therefore, that the respondent judge is guilty of the charges in the administrative
complaint. Along with him as guilty, is respondent Alfredo Lacsamana, Jr. This conclusion is bolstered by,
among other things, the Diazes' statement that cases were indeed directly secured by the respondent
judge without their undergoing raffle.

With respect to the other respondents, it could be deduced that the respondent Ma. Gorgonia Flores, as
officer-in-charge of Branch 26, would have known that Alfredo Lacsamana, Jr. was not doing his job of
forwarding all docketed cases to the Raffle Committee faithfully.

He then recommends:

WHEREFORE, it is respectfully recommended:

1. That respondent Judge Genaro C. Gines be appropriately penalized for violation of all the
Supreme Court orders and circulars mentioned in the Administrative Complaint for the period covered
from April 1989 to April 1991, plus apparent violation of Section 3, paragraph (e) of R.A. 3019;
2. That respondent Alfredo Lacsamana, Jr. for his apparent failure to do his job, be, likewise
appropriately penalized, at least with a 6-month suspension without pay; and

3. That respondent Ma. Gorgonia Flores be likewise penalized with a 3-month suspension without
pay; and

4. That the other respondents be warned against committing any such violations.

The continuing deliberate violations of Administrative Order No. 6 (dated 30 June 1975), Circular No. 7
(dated 23 September 1974) and Administrative Order No. 1 (dated 28 January 1988) for the years
reported in Atty. Sanglay's report, and their belated discovery boggle our minds. The irregularities
should have been easily discovered by the respondent Judge either because the fact that a case has not
been properly raffled off is at once discernible on the cover of the records and on the first page of the
original of the initial pleading (complaint, information, etc.), or because plain common sense would have
told him that something was wrong somewhere as an unusual number of cases of the same class had
been "assigned" to his sala. That he had failed to appreciate the physical evidence or, at the very least,
exhibit surprise at the unusual number of cases is quite amazing. Thus, we are loathe to grant him the
benefit of the doubt and conclude that he had no interest whatsoever in having those cases raffled off
to him and that he only loved to work more than the others. Given the circumstances of this case, we
cannot merely cut him some slack and assume good faith on his part; he deserves no such treatment. As
the investigating Justice himself assessed the situation:

. . . . The 80 cases involved in this case, filed from April 1989 to April 1991, were not raffled, but were
directly assigned to, or taken by, Branch 26 (except 3) under respondent Judge Gines. Respondent Judge
Gines, must know, under the above Supreme Court acts, at a simple glance on the cover of the rollo and
the first page of every such record, whether a case was assigned to him after going through raffle or not.
. . . From January 1987, when respondent Judge Gines was appointed to Branch 26, the respondent
judge had received unraffled cases, considered them and decided them. He had done so, apparently,
not because he was a maniac of a worker, nor because he loved his work but for reasons unspoken in
this case. Why should a sane judge accept additional cases for study and decision, in addition to his
regular load, without any benefit or consideration? Here, obviously, the res ipso loquitor (sic) doctrine
applies.

The irregularity and violations of the aforementioned administrative orders and circular could not have
been committed so blatantly, brazenly and openly for an unusually long period of time if the respondent
Judge did not have the cooperation of some of the court employees. We therefore agree with the
investigating Justice that such support and cooperation were extended by subordinates who likewise
had something to do with the raffle of cases. Hence, the findings on the degree of participation, either
by commission or omission, of respondents Flores and Lacsamana are sustained.

In his report, the investigating Justice absolves the Diazes and Munar from responsibility in the aforesaid
irregularities.

With respect to respondent Pacita Diaz, the case has become moot as she died on 10 February 1993. 1
Thus, the case is dismissed insofar as she is concerned.

On the other hand, while we find no evidence to link respondent Munar to the aforementioned
irregularities, we hold that respondent Ma. Concepcion Diaz is not entirely blameless. In her affidavit of
18 September 1991, the relevant portions of which are quoted in the REPORT of Justice de Pano, she
explicitly admitted:

11. In my explanation dated May 27, 1991 to the Memorandum of Judge Yaranon, while I might
have made an admission that I was the clerk receiving cases that later turned out to be unraffled, I
placed the direct blame on Judge Gines and my two officemates, namely, Mrs. Ma. Gorgonia L. Flores
and Mrs. Rosie Munar who had applied all sorts of pressures upon me, including series (sic) of
intimidation and, insinuations in order that cases of their choice receive (sic) by me may no longer be
forwarded to the proper officer-in-charge of the raffle, but to them directly in Branch 26. 2

It is to be noted that Ma. Concepcion did not elaborate on the nature of such intimidation and
insinuations. In view of the fact, however, that she was in charge of receiving and docketing special
proceedings cases, and that out of the controversial 80 unraffled cases, 44 were special proceedings
cases, her participation could, by no means, be considered as insignificant. And even if the alleged
"intimidation" and "insinuations" were true, they still would not exculpate her in view of the length of
time involved, the number of cases questioned and the absence of proof that such intimidation and
insinuations were persistent, continuous and irresistible. It is thus clear that she had, by neglecting her
duty, allowed herself to be used by the other respondents.

A far more serious matter which has escaped the attention of the investigating Justice involves the
charges set forth under paragraph 3 of the Administrative Complaint, particularly on the preparation by
the respondent Judge, allegedly in coordination with respondents Munar and Flores, of petitions in
certain cases, some of which are (a) Special Proceeding No. 1965 wherein it is made to appear that the
petitioner therein an aunt of the respondent Judge and a resident of Sta. Cruz, Ilocos Sur resides in
San Fernando, La Union, and (b) Special Proceeding No. 1967 wherein the Office of the Solicitor General
and the other parties were not furnished with copies of the petition upon order of the respondent
Judge. Not having undergone the prescribed raffle procedure, these two cases were directly assigned to
the respondent Judge who then acted thereon. The said petitions, the pertinent orders issued in the
course of the proceedings therein and the minutes thereof were attached by the respondent Judge to
his 14 May 1993 Comment, which he had adopted as his direct testimony pursuant to his 17 September
1992 Manifestation (Exhibit "J"). These documents provide conclusive proof of more serious
irregularities amounting to either gross ignorance or malicious disregard of applicable procedural laws,
grave misconduct, grave abuse of authority and conduct prejudicial to the best interest of the service.
The respondent Judge made a mockery of the judicial process as it is obvious that he had displayed a
special interest in these cases; in fact, he even caused the cases to be excluded from the raffle. A careful
review of the abovementioned petitions will reveal that the designation "Branch 26," indicating the
branch presided over by the respondent Judge, has been originally typewritten as part of the caption,
and not merely entered in the blank space reserved for the branch to which the case may subsequently
be raffled off. It is to be further observed that the petition in Special Proceeding No. 1965 was
subscribed and sworn to before respondent Flores in her capacity as the Officer-in-Charge of the Office
of the Clerk of Court, Branch 26.

Special Proceeding No. 1965 involves a petition for guardianship over the person and property of a
certain Juan R. Lagmay. The said petition was filed by Regina Lagmay Valdez who claims to be a
resident of Poblacion, San Fernando, La Union 3 on 24 September 1990, and alleges that Juan R.
Lagmay is "presently residing at No. 2579 Pamintuan Village, Mabalacat, Pampanga." Upon its filing, the
respondent Judge immediately issued an order (a) giving due course to the petition, (b) directing that
notices be served to Juan Lagmay's nearest of kin, namely Bonifacia Lagmay, Lilia Gumangan and
Mariano Lagmay, all residents of Las-ud, Sta. Cruz, Ilocos Sur and (c) directing the latter to submit their
opposition to the petition, if any, on or before 8 October 1990 at 8:30 a.m. 4 No order setting the case
for hearing at that particular date, time and place was issued. It would appear, however, that this 24
September 1990 order was considered by the respondent Judge as the order setting the case for hearing
on 8 October 1990 because respondent Flores prepared the Minutes of the alleged proceedings
conducted on 8 October

1990. 5 The said Minutes show that the following exhibits were offered for jurisdictional purposes,: (1)
Notice of hearing, as Exhibit "A" and (b) the dorsal side of Exhibit "A," purportedly to show that Juan
Lagmay's nearest of kin were furnished with the notice of hearing, as Exhibit "A-1. " Said Minutes further
disclose that the petitioner therein was not assisted by counsel; that respondent Flores acted as
Interpreter while respondent Munar acted as Stenographer; and that since no opposition was filed
therein, the testimony of the petitioner was received. The latter then allegedly declared that she is a
resident of Poblacion, San Fernando, La Union; she is Juan Lagmay's niece as he is her father's brother;
and Juan Lagmay is an American citizen, single, childless, a resident of 2579 Pamintuan Village,
Mabalacat, Pampanga and a retired seaman receiving pension from the Social Security Administration of
the United States of America in the amount of $550.00 a month. Thereafter, the respondent Judge
issued an order appointing petitioner Regina Valdez as the guardian of the person and property of Juan
R. Lagmay, and directing her to take her oath as such upon the filing of a bond of P500.00, after which
she would be issued letters of guardianship. Without the bond having first been filed, however,
respondent Flores administered the oath to Regina Valdez. 6 Thereafter, or on 18 October 1990,
respondent Flores issued to the latter her letters of guardianship. 7
A closer examination of the so-called proofs of notice of hearing to the nearest of kin, consisting
supposedly of "registry return receipts," reveals that there are no entries in the blanks reserved for
information on the name of sender, name of post office, municipality or province where the same post
office is located, registry number and case number. It is not likewise indicated therein when the
addressees received the "registered" letter. In view thereof, the conclusion that the so-called notices
were not sent at all is inevitable.

Respondent Judge knew or ought to have known that his court was not the proper venue for the case
because the person sought to be placed under guardianship was alleged to be a resident of Mabalacat,
Pampanga. Section 1, Rule 92 of the Revised Rules of Court provides that:

Guardianship of the person or estate of a minor or incompetent may be instituted in the Court of First
Instance of the province, or in the justice of the peace court of the municipality, or in the municipal
court of the chartered city where the minor or incompetent resides,. . . . (emphasis supplied).

Worse, the aforesaid Order of 24 September 1990 did not even direct that notice be served on Juan
Lagmay, the very party sought to be placed under guardianship. Such an omission, therefore, clearly
violated Section 3, Rule 93 of the Revised Rules of Court which directs the court to fix the time and place
for hearing and cause reasonable notice to be given to the person named in the petition, including the
minor if above 14 years of age or the incompetent himself. We have ruled that service of notice to the
minor above 14 years of age or the incompetent is jurisdictional. 8 Failing to have notice sent to Juan
Lagmay, respondent Judge had no jurisdiction to proceed with the hearing on 8 October 1990, receive
the petitioner's testimony, if he did at all, and thereafter appoint her as Juan Lagmay's guardian. Nor
was the respondent Judge justified in issuing on 22 January 1990 pursuant to the petitioner's 17
January 1990 motion 9 an order appointing deputy sheriffs Oscar Fantastico and Romualdo Baladad
as special sheriffs to take custody over the person of Juan Lagmay from one Florencio "Boy" Cortes of
Bolinao, Pangasinan. In the said order, respondent Judge further directed Boy Cortes "to release from
his custody and deliver the person of said Juan R. Lagmay, a.k.a. John R. Lagmay to the aforementioned
special sheriffs immediately upon receipt of this Order, under pain of contempt." 10 Based on the
special sheriffs' report, 11 however, Boy Cortes did not release Juan Lagmay because the latter was too
weak and sickly to travel. This refusal prompted the respondent Judge to order Boy Cortes' arrest (for
contempt) and confinement until he shall have complied with the said order. 12 It was respondent
Flores who forwarded the warrant of arrest to the PNP Regional Command at San Fernando, La Union
for its service. 13

Having acquired no jurisdiction to hear the case and appoint Regina Valdez as Juan Lagmay's guardian,
respondent Judge acted clearly beyond his authority when he designated special sheriffs to take custody
of Juan Lagmay, directed the person who had custody over the latter to deliver him to the said special
sheriffs and ordered the arrest of the said person who refused to surrender custody. And even if we are
to assume, for the sake of argument, that the respondent Judge had validly acquired jurisdiction over
the case and appointed Regina Lagmay as guardian, and that Boy Cortes did in fact refuse to deliver Juan
Lagmay to the special sheriffs, he (respondent Judge) would still be guilty of gross ignorance of the law
for ordering Cortes' arrest and confinement. In such a situation, the petitioner's remedy would be to file
a petition for habeas corpus, and not to have Boy Cortes cited for contempt, much less arrested.

We shall now focus our attention to Special Proceeding No. 1967. It is very strange proceeding. The case
involves a petition for the "judicial confirmation of the de facto adoption" of Cecilia Averion filed on 11
October 1990. The petitioner therein alleges that she and her late husband, Fernando Averion who
died in 1987 "adopted" Cecilia Averion in 1967; only 1 year and 3 months old at the time, Cecilia was
supposedly given up by her natural parents, the whereabouts of whom remain unknown. Petitioner
further avers that she and her husband, during his lifetime, reared the child and gave her all their love,
attention, care and understanding. They also provided her with an education and considered her as their
own child. Hence, the petition was filed "for the purpose of judicially confirming the de facto adoption
of Cecilia Averion by herein petitioner and her late husband." 14 The said petition was not accompanied
by the written consent of Cecilia Averion who, at the time of filing, was already of legal age. On the very
day the petition was filed, respondent Judge forthwith issued a Notice of Hearing which provided that
the petition would be heard on 31 October 1990; it was likewise ordered therein that "a copy of this
notice be published once a week for three consecutive weeks at the expense of the petitioner in a
newspaper of general circulation in La Union and in the Philippines." 15

From the so-called Minutes of the proceedings of 31 October 1990, 16 as prepared by respondent,
Flores, it appears that the following exhibits were offered to establish the jurisdiction of the court: (1)
the affidavit of the Editor of the North Tribune, "a newspaper of general circulation in La Union and
Northern Luzon provinces," published in San Fernando, La Union, as Exhibit "A"; (2) clippings of the
published order in the 10, 17 and 24 October 1990 issues of the North Tribune, as Exhibits "A-l," "A-2"
and "A-3," respectively; and (3) the entire issues of the North Tribune for 10, 17 and 24 October 1990, as
Exhibits "B," "B-1" and "B-2," respectively. It may further be gleaned from the said Minutes that since no
opposition was registered by any other party, the petitioner's testimony was received by the court. On 6
November 1990, the respondent Judge handed down a decision 17 granting the petition and decreeing
as follows:

WHEREFORE, this Court hereby approves the petition and hereby confirms the de facto adoption of
Cecilia Averion by herein petitioner and her late spouse Fernando Averion retroactive to the year 1967.

The remedy pursued in Special Proceeding No. 1967 is certainly unusual as we are not aware of any
prescribed action that may be instituted for the judicial confirmation of a de facto adoption. Nor do our
adjective and substantive laws on adoption provide for such a proceeding. In fact, the only proper and
authorized procedure relative to adoption is outlined in the rule on adoption itself. 18 That Cecilia
Averion had been treated by the petitioner and her husband as their own child during the former's
minority may only provide compelling reasons to grant the decree of adoption notwithstanding her
(Cecilia's) having attained the age of majority. This is one of the exceptions provided by the Family Code
to the rule that a person of legal age cannot be adopted. 19

In "confirming" the so-called de facto adoption and decreeing the same to be "retroactive to the year
1967," respondent Judge has carved a name for himself in history for, as already pointed out, no action
or proceeding for judicial confirmation of a de facto adoption is authorized in this jurisdiction.
Furthermore, by its very nature and purpose, a decree of adoption can never be made to retroact.
Lastly, considering that the petitioner's husband had died in 1987, or three years before the petition was
filed, he could not now be resurrected for purposes of the adoption, be in fact declared an adopter and
be subsequently bound by the decree to the prejudice of his heirs.

Then too, respondent Judge completely disregarded the fact that Cecilia Averion had submitted no
written consent to the adoption at the time of the filing of the petition or at any subsequent date a
manifest infirmity. Nor was Cecilia called to testify in the case. Moreover there seems to be an
irregularity in the publication of the notice of hearing. It is to be observed that as indicated in the upper
right hand corner of the first page of the petition, the proceeding was instituted on 11 October 1990. If
this were so, the notice of hearing which was issued by the respondent Judge on that same date 20
could not have been published in the North Tribune in its 10 October 1990 issue. In his affidavit, the
Editor of the said newspaper disclosed that the notice was indeed published on 10 October 1990.

All told, respondent Judge completely ignored the procedural rules on adoption and promulgated
guidelines for himself to suit his own purpose and design.

Hence, it is evident that Special Proceeding No. 1965 and Special Proceeding No. 1967 were not only
directly filed with the court of the respondent Judge without passing through the raffle procedure, the
two cases were also resolved by the latter in a manner that may be characterized by gross ignorance or
the brazen and blatant disregard of the applicable procedural laws, grave misconduct, palpable abuse of
authority and conduct prejudicial to the best interest of the service. He is therefore unfit to continue in
the service a day longer. He has evidently forgotten that the administration of justice is a sacred task.
Upon assumption to office, a judge ceases to be an ordinary mortal. He becomes "the visible
representation of the law and, more importantly, of justice." 21 A judge must be the embodiment of
competence, integrity and independence, 22 and should be studiously careful to avoid even the slightest
infraction of the law, lest it be a demoralizing example to others. 23

As shown in the above disquisitions, respondent Flores was a willing participant in the commission of
the irregularities in both proceedings. On the other hand, however, respondent Munar's participation
has not been substantiated.
Before closing, we would like to point out that per our Resolution of 2 March 1993, we referred to
Justice De Pano for inclusion in his investigation the 29 January 1993 letter of Executive Judge Braulio
Yaranon which was addressed to Deputy Court Administrator Juanito Bernard. 24 In his letter, Judge
Yaranon informs the latter about matters discovered in the course of the audit which are more serious
than the "illegal raffling" of cases. He then exposes alleged case fixing and illegal office practices
committed on a large scale by a syndicate composed principally of court officers and personnel, and
describes the modus operandi of those involved as follows:

The operation in a particular case, starts with "AMBULANCE CHASING"; after arrangements are made
with a prospective applicant/petitioner, a petition is prepared by the syndicate; the same is then signed
personally by the petitioner/applicant; and the oath for purposes of verification, is administered also by
the syndicate.

The petition/application is then filed with the Office of the Clerk of Court, where syndicate members
receive and docket the case in the docket book of Branch 26; the case is deliberately separated from the
cases that are turned over to the Raffle Committee, and is directly turned over to Branch 26. Care is
taken that the date of filing is made to coincide with the scheduled day for raffling of cases (Tuesdays).

On the same date of filing, the ORDER setting the case for initial hearing, is issued by Branch 26. On the
date of initial hearing, a lawyer-contact of the syndicate enters an appearance for the
petitioner/applicant, and he then presents jurisdictional facts.

On the very same day of initial hearing (in special proceedings) and without any ACTUAL HEARING (in
special proceedings and land registration cases), for the reception of evidence on the material
allegations of facts in the application/petition, a DECISION is forthwith issued.

Judge Yaranon then partly concludes:

Just one aspect of the matter is herein submitted for consideration. The issuance of a DECISION without
any previous hearing being held for the reception of evidence by the applicant/petitioner, constitutes
FALSIFICATION OF A PUBLIC DOCUMENT by a public officer, under Article 171, Revised Penal Code
committed by:

2. Causing it to appear that persons have participated in an act or proceeding when they did not in
fact so participate; . . . (par. 2, Art. 171, Revised Penal Code).
According to Justice De Pano, he received the 2 March 1993 Resolution just as he was about to write his
report in this case. He then suggests that the matter subject thereof be treated separately and that
"appropriate, charges be leveled against the respondent Judge principally, and his cohorts with the
Tanod Bayan, for criminal prosecution." 25 Indeed, the referral of Judge Yaranon's letter to Justice De
Pano may have been too late. In any event, the charges proffered therein may be separately dealt with.

IN THE LIGHT OF ALL THE FOREGOING, judgment is hereby rendered:

(1) DISMISSING from the service respondent Judge GENARO C. GINES with prejudice to re-
employment, in the government, including government-owned or controlled corporations, and with
forfeiture of all benefits except earned leave credits. This dismissal shall be immediately executory and
said respondent Judge is hereby ordered to forthwith vacate his position and desist from performing any
further official function;

(2) SUSPENDING from office respondents MA. GORGONIA L. FLORES and ALFREDO V. LACSAMANA,
JR. for a period of six (6) months each, without pay;

(3) SUSPENDING from office respondent MA. CONCEPCION B. DIAZ, for a period of three (3)
months, without, pay.

The foregoing suspensions shall take effect immediately upon the service of a copy of this Decision on
the aforenamed respondents MA. GORGONIA L. FLORES, ALFREDO V. LACSAMANA, JR. and MA.
CONCEPCION B. DIAZ. The periods of their respective suspensions shall not be charged against their
leave credits, if any;

(4) DISMISSING this case as against respondent PACITA B. DIAZ in view of her demise; and

(5) DISMISSING this case as against respondent ROSIE M. MUNAR for lack of substantial evidence.

The Office of the Court Administrator is hereby directed to evaluate the 29 January 1993 letter of
Executive Judge Braulio Yaranon subject of the 2 March 1993 Resolution of this Court in this case and
to submit to this Court appropriate recommendations thereon within fifteen (15) days from receipt of a
copy of this Decision.
REPUBLIC OF THE PHILIPPINES, vs. COURT OF APPEALS and MAXIMO WONG,

Petitioner seeks to set aside the judgment of respondent Court of

Appeals 1 in affirmance of the decision of the court a quo 2 granting the petition filed by herein private
respondent Maximo Wong for the change of his name to Maximo Alcala, Jr. which was his name prior to
his adoption by Hoong Wong and Concepcion Ty Wong.

The facts are undisputed. Private respondent Maximo Wong is the legitimate son of Maximo Alcala, Sr.
and Segundina Y. Alcala. When he was but two and a half years old and then known as Maximo Alcala,
Jr., and his sister Margaret Alcala, was then nine years old, they were, with the consent of their natural
parents 3 and by order of the court in Special Case No. 593 4 issued on September 9, 1967, adopted by
spouses Hoong Wong and Concepcion Ty Wong, both naturalized Filipinos. Hoong Wong, now deceased,
was an insurance agent while Concepcion Ty Wong was a high school teacher. They decided to adopt
the children as they remained childless after fifteen years of marriage. The couples showered their
adopted children with parental love and reared them as their own children.

Upon reaching the age of twenty-two, herein private respondent, by then married and a junior
Engineering student at Notre Dame University, Cotabato City, filed a petition to change his name to
Maximo Alcala, Jr. It was averred that his use of the surname Wong embarrassed and isolated him from
his relatives and friends, as the same suggests a Chinese ancestry when in truth and in fact he is a
Muslim Filipino residing in a Muslim community, and he wants to erase any implication whatsoever of
alien nationality; that he is being ridiculed for carrying a Chinese surname, thus hampering his business
and social life; and that his adoptive mother does not oppose his desire to revert to his former surname.

As earlier stated, on July 2, 1986, the matter was resolved in favor of private respondent, the trial court
decreeing that, the jurisdictional requirements having been fully complied with, petitioner's prayer to
change his name from Maximo Wong to Maximo Alcala, Jr. was granted. 5 On appeal to respondent
court, and over the opposition of petitioner Republic through the Solicitor General, the decision of the
court below was affirmed in full, hence, this petition for review on certiorari.

The lone issue to be settled is whether or not the reasons given by private respondent in his petition for
change of name are valid, sufficient and proper to warrant the granting of said petition.

The Solicitor General contends that private respondent's allegations of ridicule and/or isolation from
family and friends were unsubstantiated and cannot justify the petition for change of name. He claims
that for private respondent to cast aside the name of his adoptive father is crass ingratitude to the
memory of the latter and to his adoptive mother who is still alive, despite her consent to the petition for
change of name. Further, the Solicitor General posits that the reversion of Maximo Wong to his old
name violates Articles 341 and 365 of the Civil Code, which requires an adopted child to use the
surname of the adopter, and would identify him with his parents by nature, thus giving the impression
that he has severed his relationship with his adoptive parents. 6

In refutation, private respondent argues that he did as the law required, that is, upon adoption he used
the surname of the adopter. However, being already emancipated, he can now decide what is best for
and by himself. It is at this time that he realized that the Chinese name he carries causes him undue
ridicule and embarrassment and affects his business and social life. In fact, his adoptive mother, being
aware of his predicament, gave her consent to the petition for change of name, albeit making it clear
that the same shall in no way affect the legal adoption, and even underwent the rigors of trial to
substantiate her sworn statement. If his adoptive mother does not take offense nor feel any
resentment, abhorrence or insecurity about his desire to change his name, private respondent avers
that there can be no possible prejudice on her, much less the State. 7

We feel that we should preface our review of this case with a clear comprehension of the legal
significance of a person's name. For all practical and legal purposes, a man's name is the designation by
which he is known and called in the community in which be lives and is best known. It is defined as the
word or combination of words by which a person is distinguished from other individuals and, also, as the
label or appellation which he bears for the convenience of the world at large addressing him, of in
speaking of or dealing with him. 8 Names are used merely as one method of indicating the identity of
persons; they are descriptive of persons for identification, since, the identity is the essential thing and it
has frequently been held that, when identity is certain, a variance in, or misspelling of, the name is
immaterial. 9

The names of individuals usually have two parts: the given name or proper name, and the surname or
family name. The given or proper name is that which is given to the individual at birth or baptism, to
distinguish him from other individuals. The name or family name is that which identifies the family to
which he belongs and is continued from parent to child. The given name may be freely selected by the
parents for the child; but the surname to which the child is entitled is fixed by law. 10

A name is said to have the following characteristics: (1) It is absolute, intended to protect the individual
from being confused with others. (2) It is obligatory in certain respects, for nobody can be without a
name. (3) It is fixed, unchangeable, or immutable, at least at the start, and may be changed only for
good cause and by judicial proceedings. (4) It is outside the commerce of man, and, therefore,
inalienable and intransmissible by act inter vivos or mortis causa. (5) It is imprescriptible. 11

Title XIII, Book I of the Civil Code, in Articles 364 to 380, provides the substantive rules which regulate
the use of surnames. Considering the subject and personalities involved in this present review, particular
attention must be called to Article 365 which mandates that "(a)n adopted child shall bear the surname
of the adopter," in correlation with Article 341 on the effects of adoption, among which is to"(e)ntitle
the adopted person to use the adopter's surname." This same entitlement of an adopted child is
maintained in Article 39(3), Title II of Presidential Decree No. 603, otherwise known as the Child and
Youth Welfare Code. More recently, Executive Order No. 209, as amended by Executive Order No. 227,
or the Family Code, echoes the same statutory right of an adopted child to use the surname of the
adopter. 12 Clearly, from the very wordings of the law, it may be inferred that this use of the surname of
the adopter by the adopted child is both an obligation and a right.

Under Article 376 by the Civil Code, "(n)o person can change his name or surname without judicial
authority." The application for change of name thereunder involves a special proceeding governed by
and conducted under the strictures of Rule 103 of the Rules of Court and one which involves substantial
changes, with the declared objective of such judicial proceedings being the prevention of fraud. The
purpose of the statutory procedure authorizing a change of personal name is simply to have, wherever
possible, a record of the change, and in keeping with the object of the statute, court to which
application is made should normally make its decree recording such change of name. 13

A change of name is a special proceeding to establish the status of a person involving his relation with
others, that is, his legal position in, or with regard to, the rest of the community. It is a proceeding in
rem 14 and, as such, strict compliance with all jurisdictional requirements, particularly on publication, is
essential in order to vest the court with jurisdiction thereover. 15 For this purpose, the only name that
may be changed is the true or official name recorded in the civil register. 16

To digress a little for purposes of clarification, the change of name contemplated under Article 376 and
reglementarily implemented by Rule 103 must not be confused with and cannot be effected through the
summary proceeding proposed in Article 412 of the some Code, as procedurally regulated by Rule 108 of
the Rules, which refers only to correction of clerical errors, such as those which are visible to the eye or
obvious to the understanding, or an error made by a clerk or transcriber, or a mistake in copying or
writing, or some harmless or innocuous change, 17 and not those which will involve substantial changes.
18

Turning now to the case at bar, we are guided by the jurisprudential dictum that the State has an
interest in the names borne by individuals and entities for the purpose of identification, and a change of
name is not a matter of right but of sound judicial discretion, to be exercised in the light of reasons
adduced and the consequences that will likely follow; 19 it is a privilege which may be granted only upon
a showing of a proper or reasonable cause or compelling reason therefor. 20

We find unacceptable the assertion of the Solicitor General that private respondent's allegation of
ridicule and embarrassment due to the use of his present surname is unsubstantiated.
The testimony of private respondent in the lower court bears out the existence of valid cause in his bid
for change of name:

ATTY. DUMAMBA:

Q Now, after adoption, when you went to school, what did you use as your surname?

A "Wong," sir.

Q Now, after you adopted the surname "Wong?" in your studies, what did you observe?

A I observed that "Wong" as a surname embarrassed me to my friends and when I go with Chinese
friends I cannot talk Chinese. I am living in Campo Muslim, a Muslim community but no one can believe
that I am Muslim. I have a little business of Furniture but I have little (sic) customer because no one
believes me that I am Muslim.

Q You want to inform this Honorable Court that this family name you are using which is "Wong"
embarrassed you from (sic) your friends and relatives and also cause(d) damage to your business?

A Yes sir.

xxx xxx xxx

ATTY. DUMAMBA:

Q Now, considering that according to you, you are embarrassed because of the family name you
are using, your friends shy away from you and it is a handicap in your business, what is your desire for
the Court to do in order to help you?

A Change my family name.

Q From "Wong" to what do you want your surname changed?

A "Alcala, Jr.", sir.

xxx xxx xxx

COURT:

Q What is your purpose in changing your family name from Maximo Wong to Maximo Alcala, Jr.?

A I feel embarrassed to my friends and also to my relatives and as I said I have a little business of
furniture and only a few customers buying for the fact that they don't believe I am Muslim.

Cross.

ATTY. SERO:

With the permission of the Honorable Court.

Q Your father's name is Maximo Alcala, Sr., is he still alive?

A Yes, sir.

Q And what does your father say to this proposed changed (sic) of your name, your family name to
your real family name given to you?

A Yes, sir.

Q They have no objection to it?

A No, sir.

Q Stated before this Honorable Court, the purpose why you wanted to change your name from
"Wong" to "Alcala" is so that to avoid embarrassment because you are a Muslim and your Muslim
relatives think that you are Chinese.

A Yes, sir.

Q Not for the purpose to hide anything or what not?

A No, sir. 21

The foregoing testimony of private respondent is materially corroborated by the testimony of private
respondent's adoptive mother:

Q Now, what did you observe to (sic) your son Maximo Wong after you and your husband adopted
him?

A When I adopted him and he used the surname "Wong" I observed that some of his relatives,
cousins and friends seem to shy away from him and despise him in school that is why I agreed to change
his name. 22

We uphold these observations in the decision of respondent appellate court:

The purpose of the law an allowing of change of name as contemplated by the provisions of Rule 103 of
the Rules of Court is to give a person an opportunity to improve his personality and to provide his best
interest. (Calderon vs. Republic, 19 SCRA 721). In granting or denying the petition for change of name,
the question of proper and reasonable cause is left to the discretion of the court. The evidence
presented need only be satisfactory to the court and not all the best evidence available is required. (Uy
vs. Republic, L-22712, Nov. 25, 1965; Nacionales vs. Republic,

L-18067, April 29, 1966; both cases cited in 1 SCRA 843). In the present case, We believe that the court a
quo had exercised its discretion judiciously when it granted the petition.
From the testimony of petitioner-appellee and of his adopter mother Concepcion Ty-Wong, We discern
that said appellee was prompted to file the petition for change of name because of the embarrassment
and ridicule his family name "Wong" brings in his dealings with his relatives and friends, he being a
Muslim Filipino and living in a Muslim community. Another cause is his desire to improve his social and
business life. It has been held that in the absence of prejudice to the state or any individual, a sincere
desire to adopt a Filipino name to erase signs of a former alien nationality which only hamper(s) social
and business life, is a proper and reasonable cause for change of name (Uy vs. Republic, L-22712, Nov.
25, 1965, Que Liong Sian vs. Republic, L-23167, Aug. 17, 1967, 20 SCRA 1074). Justice dictates that a
person should be allowed to improve his social standing as long as in doing so, he does not cause
prejudice or injury to the interest of the State or other persons (Calderon vs. Republic, supra). Nothing
whatsoever is shown in the record of this case that such prejudice or injury to the interest of the state or
of other persons would result in the change of petitioner's name. 23

It bears stressing at this point that to justify a request for change of name, petitioner must show not
only some proper or compelling reason therefor but also that he will be prejudiced by the use of his true
and official name. 24 Among the grounds for change of name which have been held valid are: (a) When
the name is ridiculous, dishonorable or extremely difficult to write or pronounce; (b) When the change
results as a legal consequence, as in legitimation; (c) When the change will avoid confusion; 25 (d)
Having continuously used and been known since childhood by a Filipino name, unaware of her alien
parentage; 26 (e) A sincere desire to adopt a Filipino name to erase signs of former alienage, all in good
faith and without prejudicing anybody; 27 and (f) When the surname causes embarrassment and there
is no showing that the desired change of name was for a fraudulent purpose or that the change of name
would prejudice public interest. 28

In granting or denying petitions for change of name, the question of proper and reasonable cause is left
to the sound discretion of the court. The evidence presented need only be satisfactory to the court and
not all the best evidence available. 29 Summarizing, in special proceedings for change of name, what is
involved is not a mere matter of allowance or disallowance of the request, but a judicious evaluation of
the sufficiency and propriety of the justifications advanced in support thereof, mindful of the
consequent results in the event of its grant and with the sole prerogative for making such determination
being lodged in the courts.

While it is true that the statutory fiat under Article 365 of the Civil Code is to the effect that an adopted
child shall bear the surname of the adopter, it must nevertheless be borne in mind that the change of
the surname of the adopted child is more an incident rather than the object of adoption proceedings. 30
The act of adoption fixes a status, viz., that of parent and child. More technically, it is an act by which
relations of paternity and affiliation are recognized as legally existing between persons not so related by
nature. It has been defined as the taking into one's family of the child of another as son or daughter and
heir and conferring on it a title to the rights and privileges of such. The purpose of an adoption
proceeding is to effect this new status of relationship between the child and its adoptive parents, the
change of name which frequently accompanies adoption being more an incident than the object of the
proceeding. 31 The welfare of the child is the primary consideration in the determination of an
application for adoption. On this point, there is unanimous agreement. 32

It is the usual effect of a decree of adoption to transfer from the natural parents to the adoptive parents
the custody of the child's person, the duty of obedience owing by the child, and all other legal
consequences and incidents of the natural relation, in the same manner as if the child had been born of
such adoptive parents in lawful wedlock, subject, however, to such limitations and restrictions as may
be by statute imposed. 33 More specifically under the present state of our law, the Family Code,
superseding the pertinent provisions of the Civil Code and of the Child and Youth Welfare Code on the
matter, 34 relevantly provides in this wise with regard to the issue involved in this case:

Art. 189. Adoption shall have the following effects:

(1) For civil purposes, the adopted shall be deemed to be the legitimate child of the adopters and
both shall acquire the reciprocal rights and obligations arising from the relationship of parent and child,
including the right of the adopted to use the surname of the adopters; (Emphasis supplied.)

xxx xxx xxx

The Solicitor General maintains the position that to sustain the change of name would run counter to
the behest of Article 365 of the Civil Code and the ruling in Manuel vs. Republic 35 that "one should not
be allowed to use a surname which otherwise he is not permitted to employ under the law," and would
set a bad example to other persons who might also seek a change of their surnames on lame excuses. 36

While we appreciate the Solicitor General's apprehensions and concern, we find the same to be
unfounded. We do not believe that by reverting to his old name, private respondent would then be
using a name which he is prohibited by law from using. True, the law prescribes the surname that a
person may employ; but the law does not go so far as to unqualifiedly prohibit the use of any other
surname, and only subjects such recourse to the obtention of the requisite judicial sanction. What the
law does not prohibit, it permits.

If we were to follow the argument of the Solicitor General to its conclusion, then there will never be any
possibility or occasion for any person, regardless of status, to change his name, in view of the supposed
subsequent violation of the legal imperative on the use of surnames in the event that the petition is
granted. Rule 103 of the Rules of Court would then be rendered inutile. This could hardly have been the
intendment of the law.

A petition for change of name is a remedy allowed under our law only by way of exception to the
mandatory provisions of the Civil Code on the use of surnames. The law fixes the surname that may be
used by a person, at least inceptively, and it may be changed only upon judicial permission granted in
the exercise of sound discretion. Section 1 of Rule 103, in specifying the parties who may avail of said
remedy, uses the generic term "persons" to signify all natural persons regardless of status. If a legitimate
person may, under certain judicially accepted exceptional circumstances, petition the court for a change
of name, we do not see any legal basis or logic in discriminating against the availment of such a remedy
by an adopted child. In other words, Article 365 is not an exception, much less can it bar resort, to Rule
103.

We are of the view that the circumstances herein obtaining are within the ambit of the established
exceptions and find merit in private respondent's submission:

Rule 103 of the Rules of Court has its primordial purpose which (State) is to give a person in opportunity
to improve his personality and provide his best interest (Calderon vs. Republic, 19 SCRA 721). In the
instant case, the court a quo found the petition of Maximo Wong for change of name justifiable after
due hearing, thus its factual findings and appreciation of testimonies count heavily and need not be
disturbed unless for strong and cogent reasons because the trial court is in a better position to examine
real evidence as well as to observe the demeanor of the witnesses while testifying in the case (Baliwag
Transit, Inc. vs. CA, 147 SCRA 82). Moreover, the trial court could take judicial notice of other existing
factors in the community where herein respondent lives which it considers material in its judicious
determination of the case. . . .

Additionally, herein respondent is already of age and as such he can decide what is best for him. His
experience with regards (sic) his social and business dealings is personal and it is only him (sic) who can
attest to the same. Finding his predicament's proper remedy is solely through legal process, herein
respondent accordingly filed a petition pursuant to Rule 103 of the Rules of Court which was granted by
the Court a quo. 37

Besides, we have faith in the circumspection of our lower courts and that, in the exercise of their
discretion, said courts shall consider petitions for change of name only on cogent and meritorious
grounds as would justify the granting of such applications. We do not expect our trial courts to cater or
give in to the whim or caprice of an applicant, aside from the fact that there is always the safeguard and
corrective interdiction of appellate review.
It is not fair to construe the desired reversion of private respondent to the use of the name of his
parents by nature as cross ingratitude. To go by the Solicitor General's suggestion that private
respondent should have his adoption revoked if he wants to use the surname of his natural father would
be to exact too clear a toll for making use of an appropriate and valid remedy available under the law.

Herein private respondent, before he filed the petition for change of name, asked for his adoptive
mother's permission to do so:

Q Now, in filing this petition for change of surname, you had talked with your adopted mother?

A Yes, sir.

Q Did you ask permission from her whether she wants you to change the surname?

A Yes, sir. 38

True enough, the above testimony of private respondent was confirmed by his adoptive mother in this
manner:

Q How are you related to Maximo Wong?

A My adopted son.

Q He is your adopted son, did your son talk to you when he filed this petition for change of his
surname?

A Yes, he even tried to ask me and I said, alright if you want to change.

xxx xxx xxx

Q Now, when you agreed to the filing of this petition for change of name, did you reduce your
consent in writing?

A Yes, sir, I agreed also so that his business will prosper because

he is already Alcila and not Wong because Wong they said is Chinese. 39

As proof of her assent to the filing of said petition (her husband having already passed away),
Concepcion Ty Vda. de Wong executed an affidavit in Cotabato City on May 27, 1985, with these textual
declarations:

That I am the same and identical person, who is the surviving adapted (sic) parent of Maximo Wong.

That I personally discovered it myself from the time my adapted (sic) son Maximo used the surname of
my late husband Wong, his relatives and childhood friends shy away from him because he is branded as
a son of a chinese which is different from them whose parents are muslim Filipinos;

That I pity my son who is often rediculed (sic) by his friends and relatives because of his family name
Wong, hence, in order not to humper (sic) his social and business life in the future, I am voluntarily and
of my own free will without being forced, coerced, or intimidated give (sic) my consent to his desire to
change his desire to change his surname without affecting however the legal adoption granted by the
Court on September 9, 1967, making him as one of my legal and compulsory heir (sic).

That I am executing this affidavit to attest to the truth of all the above mentioned facts and for all legal
intent (sic) and purposes. 40

There could be no other plausible reason for private respondent to first secure has adoptive mother's
consent before resorting to the questioned legal recourse other than the parental respect and reverence
which is owed by and to be expected of a dutiful child. If private respondent was such an ingrate, as the
Solicitor General would have us believe, he would not have bothered to seek his adoptive mother's
counsel. In the same breath, had his adoptive mother regarded him as an ungrateful adoptee, she would
not have executed the affidavit above quoted, much less testify in his behalf at the hearing of his
petition.

Moreover, worthy of note is the fact that private respondent's adoptive mother emphasized that she
executed the above affidavit "without affecting the legal adoption granted by the Court on September 9,
1967, making him as one of my legal and compulsory heir(s)." This is incontrovertible proof that she
never entertained any misgivings or reservations with respect to her consent to his petition. This
likewise dispels any possible confusion as to private respondent's legal status or adoptive paternity and
his successional rights. Concordantly, we have heretofore held that a change of name does not define or
effect a change in one's existing family relations or in the rights and duties flowing therefrom. It does
not alter one's legal capacity, civil status or citizenship; what is altered is only the name. 41

WHEREFORE, the petition is DENIED and the decision of respondent Court of Appeals is hereby
AFFIRMED in toto.

In the matter of the adoption of Stephanie Nathy Astorga Garcia. Honorato B. Catindig, petitioner

Facts: Honorato B. Catindig, filed a petition to adopt his minor illegitimate child Stephanie Nathy Astorga
Garcia. He alleged that Stephanie's middle name be changed to "Garcia," her mother's surname, and
that her surname be changed to "Catindig." the trial court granted the petition for adoption. Petitioner
then filed for clarification and/or reconsideration praying that Stephanie should be allowed to use the
surname of her biological mother as her middle name. The trial court denied petitioner's motion for
reconsideration as there is no law or jurisprudence allowing an adopted child to use the surname of his
biological mother as his middle name.

Issue: Whether an illegitimate child may use the surname of her mother as her middle name when she is
subsequently adopted by her natural father.

Ruling: There is no law prohibiting an illegitimate child adopted by her natural father, like Stephanie, to
use, as middle name her mother's surname. The court finds no reason why she should not be allowed to
do so.

IN THE MATTER OF THE ADOPTION OF STEPHANIE NATHY ASTORGA GARCIA

HONORATO B. CATINDIG, petitioner.

May an illegitimate child, upon adoption by her natural father, use the surname of her natural mother as
her middle name? This is the issue raised in the instant case.

The facts are undisputed.

On August 31, 2000, Honorato B. Catindig, herein petitioner, filed a petition[1] to adopt his minor
illegitimate child Stephanie Nathy Astorga Garcia. He alleged therein, among others, that Stephanie was
born on June 26, 1994;[2] that her mother is Gemma Astorga Garcia; that Stephanie has been using her
mothers middle name and surname; and that he is now a widower and qualified to be her adopting
parent. He prayed that Stephanies middle name Astorga be changed to Garcia, her mothers surname,
and that her surname Garcia be changed to Catindig, his surname.

On March 23, 2001,[3] the trial court rendered the assailed Decision granting the adoption, thus:

After a careful consideration of the evidence presented by the petitioner, and in the absence of any
opposition to the petition, this Court finds that the petitioner possesses all the qualifications and none
of the disqualification provided for by law as an adoptive parent, and that as such he is qualified to
maintain, care for and educate the child to be adopted; that the grant of this petition would redound to
the best interest and welfare of the minor Stephanie Nathy Astorga Garcia. The Court further holds that
the petitioners care and custody of the child since her birth up to the present constitute more than
enough compliance with the requirement of Article 35 of Presidential Decree No. 603.

WHEREFORE, finding the petition to be meritorious, the same is GRANTED. Henceforth, Stephanie Nathy
Astorga Garcia is hereby freed from all obligations of obedience and maintenance with respect to her
natural mother, and for civil purposes, shall henceforth be the petitioners legitimate child and legal heir.
Pursuant to Article 189 of the Family Code of the Philippines, the minor shall be known as STEPHANIE
NATHY CATINDIG.

Upon finality of this Decision, let the same be entered in the Local Civil Registrar concerned pursuant to
Rule 99 of the Rules of Court.

Let copy of this Decision be furnished the National Statistics Office for record purposes.

SO ORDERED.[4]

On April 20, 2001, petitioner filed a motion for clarification and/or reconsideration[5] praying that
Stephanie should be allowed to use the surname of her natural mother (GARCIA) as her middle name.
On May 28, 2001,[6] the trial court denied petitioners motion for reconsideration holding that there is
no law or jurisprudence allowing an adopted child to use the surname of his biological mother as his
middle name.

Hence, the present petition raising the issue of whether an illegitimate child may use the surname of her
mother as her middle name when she is subsequently adopted by her natural father.

Petitioner submits that the trial court erred in depriving Stephanie of a middle name as a consequence
of adoption because: (1) there is no law prohibiting an adopted child from having a middle name in case
there is only one adopting parent; (2) it is customary for every Filipino to have as middle name the
surname of the mother; (3) the middle name or initial is a part of the name of a person; (4) adoption is
for the benefit and best interest of the adopted child, hence, her right to bear a proper name should not
be violated; (5) permitting Stephanie to use the middle name Garcia (her mothers surname) avoids the
stigma of her illegitimacy; and; (6) her continued use of Garcia as her middle name is not opposed by
either the Catindig or Garcia families.

The Republic, through the Office of the Solicitor General (OSG), agrees with petitioner that Stephanie
should be permitted to use, as her middle name, the surname of her natural mother for the following
reasons:

First, it is necessary to preserve and maintain Stephanies filiation with her natural mother because
under Article 189 of the Family Code, she remains to be an intestate heir of the latter. Thus, to prevent
any confusion and needless hardship in the future, her relationship or proof of that relationship with her
natural mother should be maintained.

Second, there is no law expressly prohibiting Stephanie to use the surname of her natural mother as her
middle name. What the law does not prohibit, it allows.

Last, it is customary for every Filipino to have a middle name, which is ordinarily the surname of the
mother. This custom has been recognized by the Civil Code and Family Code. In fact, the Family Law
Committees agreed that the initial or surname of the mother should immediately precede the surname
of the father so that the second name, if any, will be before the surname of the mother.[7]

We find merit in the petition.

Use Of Surname Is Fixed By Law

For all practical and legal purposes, a man's name is the designation by which he is known and called in
the community in which he lives and is best known. It is defined as the word or combination of words by
which a person is distinguished from other individuals and, also, as the label or appellation which he
bears for the convenience of the world at large addressing him, or in speaking of or dealing with him.[8]
It is both of personal as well as public interest that every person must have a name.

The name of an individual has two parts: (1) the given or proper name and (2) the surname or family
name. The given or proper name is that which is given to the individual at birth or at baptism, to
distinguish him from other individuals. The surname or family name is that which identifies the family to
which he belongs and is continued from parent to child. The given name may be freely selected by the
parents for the child, but the surname to which the child is entitled is fixed by law.[9]

Thus, Articles 364 to 380 of the Civil Code provides the substantive rules which regulate the use of
surname[10] of an individual whatever may be his status in life, i.e., whether he may be legitimate or
illegitimate, an adopted child, a married woman or a previously married woman, or a widow, thus:

Art. 364. Legitimate and legitimated children shall principally use the surname of the father.

Art. 365. An adopted child shall bear the surname of the adopter.

xxx

Art. 369. Children conceived before the decree annulling a voidable marriage shall principally use the
surname of the father.

Art. 370. A married woman may use:

(1) Her maiden first name and surname and add her husband's surname, or

(2) Her maiden first name and her husband's surname or

(3) Her husband's full name, but prefixing a word indicating that she is his wife, such as Mrs.

Art. 371. In case of annulment of marriage, and the wife is the guilty party, she shall resume her maiden
name and surname. If she is the innocent spouse, she may resume her maiden name and surname.
However, she may choose to continue employing her former husband's surname, unless:

(1) The court decrees otherwise, or

(2) She or the former husband is married again to another person.

Art. 372. When legal separation has been granted, the wife shall continue using her name and surname
employed before the legal separation.

Art. 373. A widow may use the deceased husband's surname as though he were still living, in accordance
with Article 370.

Art. 374. In case of identity of names and surnames, the younger person shall be obliged to use such
additional name or surname as will avoid confusion.

Art. 375. In case of identity of names and surnames between ascendants and descendants, the word
Junior can be used only by a son. Grandsons and other direct male descendants shall either:

(1) Add a middle name or the mother's surname,

(2) Add the Roman numerals II, III, and so on.

xxx

Law Is Silent As To The Use Of

Middle Name
As correctly submitted by both parties, there is no law regulating the use of a middle name. Even Article
176[11] of the Family Code, as amended by Republic Act No. 9255, otherwise known as An Act Allowing
Illegitimate Children To Use The Surname Of Their Father, is silent as to what middle name a child may
use.

The middle name or the mothers surname is only considered in Article 375(1), quoted above, in case
there is identity of names and surnames between ascendants and descendants, in which case, the
middle name or the mothers surname shall be added.

Notably, the law is likewise silent as to what middle name an adoptee may use. Article 365 of the Civil
Code merely provides that an adopted child shall bear the surname of the adopter. Also, Article 189 of
the Family Code, enumerating the legal effects of adoption, is likewise silent on the matter, thus:

"(1) For civil purposes, the adopted shall be deemed to be a legitimate child of the adopters and both
shall acquire the reciprocal rights and obligations arising from the relationship of parent and child,
including the right of the adopted to use the surname of the adopters;

xxx

However, as correctly pointed out by the OSG, the members of the Civil Code and Family Law
Committees that drafted the Family Code recognized the Filipino custom of adding the surname of the
childs mother as his middle name. In the Minutes of the Joint Meeting of the Civil Code and Family Law
Committees, the members approved the suggestion that the initial or surname of the mother should
immediately precede the surname of the father, thus

Justice Caguioa commented that there is a difference between the use by the wife of the surname and
that of the child because the fathers surname indicates the family to which he belongs, for which reason
he would insist on the use of the fathers surname by the child but that, if he wants to, the child may also
use the surname of the mother.

Justice Puno posed the question: If the child chooses to use the surname of the mother, how will his
name be written? Justice Caguioa replied that it is up to him but that his point is that it should be
mandatory that the child uses the surname of the father and permissive in the case of the surname of
the mother.
Prof. Baviera remarked that Justice Caguioas point is covered by the present Article 364, which reads:

Legitimate and legitimated children shall principally use the surname of the father.

Justice Puno pointed out that many names change through no choice of the person himself precisely
because of this misunderstanding. He then cited the following example: Alfonso Ponce Enriles correct
surname is Ponce since the mothers surname is Enrile but everybody calls him Atty. Enrile. Justice Jose
Gutierrez Davids family name is Gutierrez and his mothers surname is David but they all call him Justice
David.

Justice Caguioa suggested that the proposed Article (12) be modified to the effect that it shall be
mandatory on the child to use the surname of the father but he may use the surname of the mother by
way of an initial or a middle name. Prof. Balane stated that they take note of this for inclusion in the
Chapter on Use of Surnames since in the proposed Article (10) they are just enumerating the rights of
legitimate children so that the details can be covered in the appropriate chapter.

xxx

Justice Puno remarked that there is logic in the simplification suggested by Justice Caguioa that the
surname of the father should always be last because there are so many traditions like the American
tradition where they like to use their second given name and the Latin tradition, which is also followed
by the Chinese wherein they even include the Clan name.

xxx

Justice Puno suggested that they agree in principle that in the Chapter on the Use of Surnames, they
should say that initial or surname of the mother should immediately precede the surname of the father
so that the second name, if any, will be before the surname of the mother. Prof. Balane added that this
is really the Filipino way. The Committee approved the suggestion.[12] (Emphasis supplied)

In the case of an adopted child, the law provides that the adopted shall bear the surname of the
adopters.[13] Again, it is silent whether he can use a middle name. What it only expressly allows, as a
matter of right and obligation, is for the adoptee to bear the surname of the adopter, upon issuance of
the decree of adoption.[14]
The Underlying Intent of

Adoption Is In Favor of the

Adopted Child

Adoption is defined as the process of making a child, whether related or not to the adopter, possess in
general, the rights accorded to a legitimate child.[15] It is a juridical act, a proceeding in rem which
creates between two persons a relationship similar to that which results from legitimate paternity and
filiation.[16] The modern trend is to consider adoption not merely as an act to establish a relationship of
paternity and filiation, but also as an act which endows the child with a legitimate status.[17] This was,
indeed, confirmed in 1989, when the Philippines, as a State Party to the Convention of the Rights of the
Child initiated by the United Nations, accepted the principle that adoption is impressed with social and
moral responsibility, and that its underlying intent is geared to favor the adopted child.[18] Republic Act
No. 8552, otherwise known as the Domestic Adoption Act of 1998,[19] secures these rights and
privileges for the adopted.[20]

One of the effects of adoption is that the adopted is deemed to be a legitimate child of the adopter for
all intents and purposes pursuant to Article 189[21] of the Family Code and Section 17[22] Article V of
RA 8552.[23]

Being a legitimate child by virtue of her adoption, it follows that Stephanie is entitled to all the rights
provided by law to a legitimate child without discrimination of any kind, including the right to bear the
surname of her father and her mother, as discussed above. This is consistent with the intention of the
members of the Civil Code and Family Law Committees as earlier discussed. In fact, it is a Filipino custom
that the initial or surname of the mother should immediately precede the surname of the father.

Additionally, as aptly stated by both parties, Stephanies continued use of her mothers surname (Garcia)
as her middle name will maintain her maternal lineage. It is to be noted that Article 189(3) of the Family
Code and Section 18[24], Article V of RA 8552 (law on adoption) provide that the adoptee remains an
intestate heir of his/her biological parent. Hence, Stephanie can well assert or claim her hereditary
rights from her natural mother in the future.

Moreover, records show that Stephanie and her mother are living together in the house built by
petitioner for them at 390 Tumana, San Jose, Baliuag, Bulacan. Petitioner provides for all their needs.
Stephanie is closely attached to both her mother and father. She calls them Mama and Papa. Indeed,
they are one normal happy family. Hence, to allow Stephanie to use her mothers surname as her middle
name will not only sustain her continued loving relationship with her mother but will also eliminate the
stigma of her illegitimacy.
Liberal Construction of

Adoption Statutes In Favor Of

Adoption

It is a settled rule that adoption statutes, being humane and salutary, should be liberally construed to
carry out the beneficent purposes of adoption.[25] The interests and welfare of the adopted child are of
primary and paramount consideration,[26] hence, every reasonable intendment should be sustained to
promote and fulfill these noble and compassionate objectives of the law.[27]

Lastly, Art. 10 of the New Civil Code provides that:

In case of doubt in the interpretation or application of laws, it is presumed that the lawmaking body
intended right and justice to prevail.

This provision, according to the Code Commission, is necessary so that it may tip the scales in favor of
right and justice when the law is doubtful or obscure. It will strengthen the determination of the courts
to avoid an injustice which may apparently be authorized by some way of interpreting the law.[28]

Hence, since there is no law prohibiting an illegitimate child adopted by her natural father, like
Stephanie, to use, as middle name her mothers surname, we find no reason why she should not be
allowed to do so.

WHEREFORE, the petition is GRANTED. The assailed Decision is partly MODIFIED in the sense that
Stephanie should be allowed to use her mothers surname GARCIA as her middle name.

Let the corresponding entry of her correct and complete name be entered in the decree of adoption.

ISABELITA S. LAHOM vs. JOSE MELVIN SIBULO (previously referred to as "DR. MELVIN S. LAHOM"),

The bliss of marriage and family would be to most less than complete without children. The realization
could have likely prodded the spouses Dr. Diosdado Lahom and Isabelita Lahom to take into their care
Isabelita's nephew Jose Melvin Sibulo and to bring him up as their own. At the tender age of two, Jose
Melvin enjoyed the warmth, love and support of the couple who treated the child like their own.
Indeed, for years, Dr. and Mrs. Lahom fancied on legally adopting Jose Melvin. Finally, in 1971, the
couple decided to file a petition for adoption. On 05 May 1972, an order granting the petition was issued
that made all the more intense than before the feeling of affection of the spouses for Melvin. In keeping
with the court order, the Civil Registrar of Naga City changed the name "Jose Melvin Sibulo" to "Jose
Melvin Lahom."

A sad turn of events came many years later. Eventually, in December of 1999, Mrs. Lahom commenced a
petition to rescind the decree of adoption before the Regional Trial Court (RTC), Branch 22, of Naga City.
In her petition, she averred

"7. That x x x despite the proddings and pleadings of said spouses, respondent refused to change his
surname from Sibulo to Lahom, to the frustrations of petitioner particularly her husband until the latter
died, and even before his death he had made known his desire to revoke respondent's adoption, but
was prevented by petitioner's supplication, however with his further request upon petitioner to give to
charity whatever properties or interest may pertain to respondent in the future.

xxx xxx xxx

"10. That respondent continued using his surname Sibulo to the utter disregard of the feelings of
herein petitioner, and his records with the Professional Regulation Commission showed his name as Jose
Melvin M. Sibulo originally issued in 1978 until the present, and in all his dealings and activities in
connection with his practice of his profession, he is Jose Melvin M. Sibulo.

xxx xxx xxx

"13. That herein petitioner being a widow, and living alone in this city with only her household helps
to attend to her, has yearned for the care and show of concern from a son, but respondent remained
indifferent and would only come to Naga to see her once a year.

"14. That for the last three or four years, the medical check-up of petitioner in Manila became more
frequent in view of a leg ailment, and those were the times when petitioner would need most the care
and support from a love one, but respondent all the more remained callous and utterly indifferent
towards petitioner which is not expected of a son.

"15. That herein respondent has recently been jealous of petitioner's nephews and nieces whenever
they would find time to visit her, respondent alleging that they were only motivated by their desire for
some material benefits from petitioner.
"16. That in view of respondent's insensible attitude resulting in a strained and uncomfortable
relationship between him and petitioner, the latter has suffered wounded feelings, knowing that after
all respondent's only motive to his adoption is his expectancy of his alleged rights over the properties of
herein petitioner and her late husband, clearly shown by his recent filing of Civil Case No. 99-4463 for
partition against petitioner, thereby totally eroding her love and affection towards respondent,
rendering the decree of adoption, considering respondent to be the child of petitioner, for all legal
purposes, has been negated for which reason there is no more basis for its existence, hence this petition
for revocation,"1

Prior to the institution of the case, specifically on 22 March 1998, Republic Act (R.A.) No. 8552, also
known as the Domestic Adoption Act, went into effect. The new statute deleted from the law the right
of adopters to rescind a decree of adoption.

Section 19 of Article VI of R.A. No. 8552 now reads:

"SEC. 19. Grounds for Rescission of Adoption. Upon petition of the adoptee, with the
assistance of the Department if a minor or if over eighteen (18) years of age but is incapacitated, as
guardian/counsel, the adoption may be rescinded on any of the following grounds committed by the
adopter(s): (a) repeated physical and verbal maltreatment by the adopter(s) despite having undergone
counseling; (b) attempt on the life of the adoptee; (c) sexual assault or violence; or (d) abandonment
and failure to comply with parental obligations.

"Adoption, being in the best interest of the child, shall not be subject to rescission by the adopter(s).
However, the adopter(s) may disinherit the adoptee for causes provided in Article 919 of the Civil Code."
(emphasis supplied)

Jose Melvin moved for the dismissal of the petition, contending principally (a) that the trial court had no
jurisdiction over the case and (b) that the petitioner had no cause of action in view of the aforequoted
provisions of R.A. No. 8552. Petitioner asseverated, by way of opposition, that the proscription in R.A.
No. 8552 should not retroactively apply, i.e., to cases where the ground for rescission of the adoption
vested under the regime of then Article 3482 of the Civil Code and Article 1923 of the Family Code.

In an order, dated 28 April 2000, the trial court held thusly:

"On the issue of jurisdiction over the subject matter of the suit, Section 5(c) of R.A. No. 8369 confers
jurisdiction to this Court, having been designated Family Court in A.M. No. 99-11-07 SC.

"On the matter of no cause of action, the test on the sufficiency of the facts alleged in the complaint, is
whether or not, admitting the facts alleged, the Court could render a valid judgment in accordance with
the prayer of said complaint (De Jesus, et al. vs. Belarmino, et al., 95 Phil. 365).

"Admittedly, Section 19, Article VI of R.A. No. 8552 deleted the right of an adopter to rescind an
adoption earlier granted under the Family Code. Conformably, on the face of the petition, indeed there
is lack of cause of action.

"Petitioner however, insists that her right to rescind long acquired under the provisions of the Family
Code should be respected. Assuming for the sake of argument, that petitioner is entitled to rescind the
adoption of respondent granted on May 5, 1972, said right should have been exercised within the
period allowed by the Rules. From the averments in the petition, it appears clear that the legal grounds
for the petition have been discovered and known to petitioner for more than five (5) years, prior to the
filing of the instant petition on December 1, 1999, hence, the action if any, had already prescribed. (Sec.
5, Rule 100 Revised Rules of Court)

"WHEREFORE, in view of the foregoing consideration, the petition is ordered dismissed."4

Via a petition for review on certiorari under Rule 45 of the 1997 Rules of Court, petitioner raises the
following questions; viz:

1. May the subject adoption, decreed on 05 May 1972, still be revoked or rescinded by an adopter
after the effectivity of R.A. No. 8552?

2. In the affirmative, has the adopter's action prescribed?

A brief background on the law and its origins could provide some insights on the subject. In ancient
times, the Romans undertook adoption to assure male heirs in the family.5 The continuity of the
adopter's family was the primary purpose of adoption and all matters relating to it basically focused on
the rights of the adopter. There was hardly any mention about the rights of the adopted.6 Countries,
like Greece, France, Spain and England, in an effort to preserve inheritance within the family, neither
allowed nor recognized adoption.7 It was only much later when adoption was given an impetus in law
and still later when the welfare of the child became a paramount concern.8 Spain itself which previously
disfavored adoption ultimately relented and accepted the Roman law concept of adoption which,
subsequently, was to find its way to the archipelago. The Americans came and introduced their own
ideas on adoption which, unlike most countries in Europe, made the interests of the child an overriding
consideration.9 In the early part of the century just passed, the rights of children invited universal
attention; the Geneva Declaration of Rights of the Child of 1924 and the Universal Declaration of Human
Rights of 1948,10 followed by the United Nations Declarations of the Rights of the Child,11 were written
instruments that would also protect and safeguard the rights of adopted children. The Civil Code of the
Philippines12 of 1950 on adoption, later modified by the Child and Youth Welfare Code13 and then by
the Family Code of the Philippines,14 gave immediate statutory acknowledgment to the rights of the
adopted. In 1989, the United Nations initiated the Convention of the Rights of the Child. The Philippines,
a State Party to the Convention, accepted the principle that adoption was impressed with social and
moral responsibility, and that its underlying intent was geared to favor the adopted child. R.A. No. 8552
secured these rights and privileges for the adopted. Most importantly, it affirmed the legitimate status
of the adopted child, not only in his new family but also in the society as well. The new law withdrew the
right of an adopter to rescind the adoption decree and gave to the adopted child the sole right to sever
the legal ties created by adoption.

Petitioner, however, would insist that R.A. No. 8552 should not adversely affect her right to annul the
adoption decree, nor deprive the trial court of its jurisdiction to hear the case, both being vested under
the Civil Code and the Family Code, the laws then in force.

The concept of "vested right" is a consequence of the constitutional guaranty of due process15 that
expresses a present fixed interest which in right reason and natural justice is protected against arbitrary
state action;16 it includes not only legal or equitable title to the enforcement of a demand but also
exemptions from new obligations created after the right has become vested.17 Rights are considered
vested when the right to enjoyment is a present interest,18 absolute, unconditional, and perfect19 or
fixed and irrefutable.

In Republic vs. Court of Appeals,20 a petition to adopt Jason Condat was filed by Zenaida C. Bobiles on
02 February 1988 when the Child and Youth Welfare Code (Presidential Decree No. 603) allowed an
adoption to be sought by either spouse or both of them. After the trial court had rendered its decision
and while the case was still pending on appeal, the Family Code of the Philippines (Executive Order No.
209), mandating joint adoption by the husband and wife, took effect. Petitioner Republic argued that
the case should be dismissed for having been filed by Mrs. Bobiles alone and without being joined by the
husband. The Court concluded that the jurisdiction of the court is determined by the statute in force at
the time of the commencement of the action. The petition to adopt Jason, having been filed with the
court at the time when P.D. No. 603 was still in effect, the right of Mrs. Bobiles to file the petition,
without being joined by her husband, according to the Court had become vested. In Republic vs.
Miller,21 spouses Claude and Jumrus Miller, both aliens, sought to adopt Michael Madayag. On 29 July
1988, the couple filed a petition to formalize Michael's adoption having theretofore been taken into
their care. At the time the action was commenced, P.D. No. 603 allowed aliens to adopt. After the
decree of adoption and while on appeal before the Court of Appeals, the Family Code was enacted into
law on 08 August 1988 disqualifying aliens from adopting Filipino children. The Republic then prayed for
the withdrawal of the adoption decree. In discarding the argument posed by the Republic, the Supreme
Court ruled that the controversy should be resolved in the light of the law governing at the time the
petition was filed.

It was months after the effectivity of R.A. No. 8552 that herein petitioner filed an action to revoke the
decree of adoption granted in 1975. By then, the new law,22 had already abrogated and repealed the
right of an adopter under the Civil Code and the Family Code to rescind a decree of adoption.
Consistently with its earlier pronouncements, the Court should now hold that the action for rescission of
the adoption decree, having been initiated by petitioner after R.A. No. 8552 had come into force, no
longer could be pursued.

Interestingly, even before the passage of the statute, an action to set aside the adoption is subject to
the five-year bar rule under Rule 10023 of the Rules of Court and that the adopter would lose the right
to revoke the adoption decree after the lapse of that period. The exercise of the right within a
prescriptive period is a condition that could not fulfill the requirements of a vested right entitled to
protection. It must also be acknowledged that a person has no vested right in statutory privileges.24
While adoption has often been referred to in the context of a "right," the privilege to adopt is itself not
naturally innate or fundamental but rather a right merely created by statute.25 It is a privilege that is
governed by the state's determination on what it may deem to be for the best interest and welfare of
the child.26 Matters relating to adoption, including the withdrawal of the right of an adopter to nullify
the adoption decree, are subject to regulation by the State.27 Concomitantly, a right of action given by
statute may be taken away at anytime before it has been exercised.28

While R.A. No. 8552 has unqualifiedly withdrawn from an adopter a consequential right to rescind the
adoption decree even in cases where the adoption might clearly turn out to be undesirable, it remains,
nevertheless, the bounden duty of the Court to apply the law. Dura lex sed lex would be the hackneyed
truism that those caught in the law have to live with. It is still noteworthy, however, that an adopter,
while barred from severing the legal ties of adoption, can always for valid reasons cause the forfeiture of
certain benefits otherwise accruing to an undeserving child. For instance, upon the grounds recognized
by law, an adopter may deny to an adopted child his legitime and, by a will and testament, may freely
exclude him from having a share in the disposable portion of his estate.

WHEREFORE, the assailed judgment of the court a quo is AFFIRMED. No costs.

Diwata Ramos Landingin vs. Republic,

FACTS: Diwata Ramos Landingin, a citizen of the United States of America (USA), of Filipino parentage
and a resident of Guam, USA, filed a petition for the adoption of minors Elaine Dizon Ramos, Elma Dizon
Ramos and Eugene Dizon Ramos who was born on. The minors are the natural children of Manuel
Ramos, petitioners brother (deceased), and Amelia Ramos- who went to Italy, re-married there and
now has two children by her second marriage and no longer communicated with her children .

ISSUE: Whether or not the petition for adoption is invalid for lack of consent of the biological mother?

HELD:

No. The general requirement of consent and notice to the natural parents is intended to protect the
natural parental relationship from unwarranted interference by interlopers, and to insure the
opportunity to safeguard the best interests of the child in the manner of the proposed adoption. When
she filed her petition with the trial court, Rep. Act No. 8552 was already in effect. Section 9 thereof
provides that if the written consent of the biological parents cannot be obtained, the written consent of
the legal guardian of the minors will suffice. If, as claimed by petitioner, that the biological mother of the
minors had indeed abandoned them, she should, thus have adduced the written consent of their legal
guardian.

IN THE MATTER OF THE PETITION FOR A WRIT OF HABEAS CORPUS OF MINOR ANGELIE ANNE C.
CERVANTES, NELSON L. CERVANTES and ZENAIDA CARREON CERVANTES, petitioners,

vs.

GINA CARREON FAJARDO and CONRADO FAJARDO, respondents.

This is a petition for a writ of Habeas Corpus filed with this Court over the person of the minor Angelie
Anne Cervantes. In a resolution, dated 5 October 1987, the Court resolved to issue the writ returnable to
the Executive Judge, Regional Trial Court of Pasig at the hearing of 12 October 1987 at 8:30 a.m. Said
Judge was directed to hear the case and submit his report and recommendation to the Court.

On 3 December 1987, said Executive Judge, Regional Trial Court of Pasig submitted to the Court his
report and recommendation, also dated 3 December 1987.

It appears that the minor was born on 14 February 1987 to respondents Conrado Fajardo and Gina
Carreon, who are common-law husband and wife. Respondents offered the child for adoption to Gina
Carreon's sister and brother-in-law, the herein petitioners Zenaida Carreon-Cervantes and Nelson
Cervantes, spouses, who took care and custody of the child when she was barely two (2) weeks old. An
Affidavit of Consent to the adoption of the child by herein petitioners, was also executed by respondent
Gina Carreon on 29 April 1987. 1

The appropriate petition for adoption (Sp. Proc. No. 057-B) was filed by herein petitioners over the child
before the Regional Trial Court of Rizal, Fourth Judicial District, Branch 67 which, on 20 August 1987,
rendered a decision 2 granting the petition. The child was then known as Angelie Anne Fajardo. The
court ordered that the child be "freed from parental authority of her natural parents as well as from
legal obligation and maintenance to them and that from now on shall be, for all legal intents and
purposes, known as Angelie Anne Cervantes, a child of herein petitioners and capable of inheriting their
estate ." 3

Sometime in March or April 1987, the adoptive parents, herein petitioners Nelson and Zenaida
Cervantes, received a letter from the respondents demanding to be paid the amount of P150,000.00,
otherwise, they would get back their child. Petitioners refused to accede to the demand.

As a result, on 11 September 1987, while petitioners were out at work, the respondent Gina Carreon
took the child from her "yaya" at the petitioners' residence in Angono, Rizal, on the pretext that she was
instructed to do so by her mother. Respondent Gina Carreon brought the child to her house in
Paraaque. Petitioners thereupon demanded the return of the child, but Gina Carreon refused, saying
that she had no desire to give up her child for adoption and that the affidavit of consent to the adoption
she had executed was not fully explained to her. She sent word to the petitioners that she will, however,
return the child to the petitioners if she were paid the amount of P150,000.00.

Felisa Tansingco, the social worker who had conducted the case study on the adoption and submitted a
report thereon to the Regional Trial Court of Rizal in the adoption case, testified on 27 October 1987
before the Executive Judge, Regional Trial Court of Pasig in connection with the present petition. She
declared that she had interviewed respondent Gina Carreon on 24 June 1987 in connection with the
contemplated adoption of the child. During the interview, said respondent manifested to the social
worker her desire to have the child adopted by the petitioners. 4

In all cases involving the custody, care, education and property of children, the latter's welfare is
paramount. The provision that no mother shall be separated from a child under five (5) years of age, will
not apply where the Court finds compelling reasons to rule otherwise. 5 In all controversies regarding
the custody of minors, the foremost consideration is the moral, physical and social welfare of the child
concerned, taking into account the resources and moral as well as social standing of the contending
parents. Never has this Court deviated from this criterion. 6
It is undisputed that respondent Conrado Fajardo is legally married to a woman other than respondent
Gina Carreon, and his relationship with the latter is a common-law husband and wife relationship. His
open cohabitation with co-respondent Gina Carreon will not accord the minor that desirable
atmosphere where she can grow and develop into an upright and moral-minded person. Besides,
respondent Gina Carreon had previously given birth to another child by another married man with
whom she lived for almost three (3) years but who eventually left her and vanished. For a minor (like
Angelie Anne C. Cervantes) to grow up with a sister whose "father" is not her true father, could also
affect the moral outlook and values of said minor. Upon the other hand, petitioners who are legally
married appear to be morally, physically, financially, and socially capable of supporting the minor and
giving her a future better than what the natural mother (herein respondent Gina Carreon), who is not
only jobless but also maintains an illicit relation with a married man, can most likely give her.

Besides, the minor has been legally adopted by petitioners with the full knowledge and consent of
respondents. A decree of adoption has the effect, among others, of dissolving the authority vested in
natural parents over the adopted child, except where the adopting parent is the spouse of the natural
parent of the adopted, in which case, parental authority over the adopted shall be exercised jointly by
both spouses. 7 The adopting parents have the right to the care and custody of the adopted child 8 and
exercise parental authority and responsibility over him. 9

ACCORDINGLY, and as recommended by the Executive Judge, Regional Trial Court of Pasig, Hon.
Eutropio Migrino, the Petition is GRANTED. The custody and care of the minor Angelie Anne Cervantes
are hereby granted to petitioners to whom they properly belong, and respondents are ordered (if they
still have not) to deliver said minor to the petitioners immediately upon notice hereof This resolution is
immediately executory.

EUGENIO SAN JUAN GERONIMO, vs.KAREN SANTOS

At bar is a petition for review on certiorari of the Decision1 and Resolution2 of the Court of Appeals (CA)
in CA-G.R. CV No. 88650 promulgated on January 17, 2011 and May 24, 2011, respectively, which
affirmed the Decision3 of the Regional Trial Court (RTC) of Malolos City, Bulacan, Branch 8. Both courts a
quo ruled that the subject document titled Pagmamana sa Labas ng Hukuman is null and void, and
ordered herein petitioner Eugenio San Juan Geronimo (Eugenio), who was previously joined by his
brother Emiliano San Juan Geronimo (Emiliano) as codefendant, to vacate the one-half portion of the
subject 6,542-square meter property and surrender its possession to respondent Karen Santos. In a
Resolution4 dated November 28, 2011, this Court ordered the deletion of the name of Emiliano from
the title of the instant petition_ as co-petitioner, viz.:
x x x The Court resolves:

xxxx

(2) to AMEND the title of this petition to read "Eugenio San Juan Geronimo, petitioner vs. Karen Santos,
respondent," considering the sworn statement of Eugenio San Juan Geronimo that he does not know
whether his brother is still alive and that his brother did not verify the instant petition; x x x5

The following facts were found by the trial court and adopted by the appellate court in its assailed
Decision, viz.:

On April 17, 2001, plaintiff Karen Santos, claiming to be the only child of deceased Rufino and Caridad
Geronimo filed a complaint for annulment of document and recovery of possession against the
defendants Eugenio and Emiliano Geronimo who are the brothers of her father. She alleged that with
the death of her parents, the property consisting of one half of the parcel of land located at San Jose,
Paombong, Bulacan with Tax Declaration No. 99-02017-00219 and belonging to her parents was passed
on to her by the law on intestacy; that lately, she discovered that defendants executed a document
entitled Pagmamana sa Labas ng Hukuman declaring themselves as the only heirs of spouses Rufino and
Caridad and adjudicating to themselves the property in question; and that consequently[,] they took
possession and were able to transfer the tax declaration of the subject property to their names. She
prayed that the document Exhibit C be annulled and the tax declaration of the land transferred to her,
and that the defendants vacate the property and pay her damages.

In an amended answer, the defendants denied the allegation that plaintiff was the only child and sole
heir of their brother. They disclosed that the deceased Rufino and Caridad Geronimo were childless and
took in as their ward the plaintiff who was in truth, the child of Caridads sister. They claimed that the
birth certificate of the plaintiff was a simulated document. It was allegedly impossible for Rufino and
Caridad to have registered the plaintiff in Sta. Maria, Ilocos Sur because they had never lived or
sojourned in the place and Caridad, who was an elementary teacher in Bulacan never filed any maternity
leave during the period of her service from August 1963 until October 1984.

The plaintiff took the stand and testified that her parents were Rufino and Caridad Geronimo. The
defendants Eugenio and Emiliano were the half-brothers of her father Rufino, being the children of
Rufinos father Marciano Geronimo with another woman Carmen San Juan. Rufino co-owned Lot 1716
with the defendants mother Carmen, and upon his death in 1980, when the plaintiff was only 8 years
old, his share in the property devolved on his heirs. In 1998, some 18 years later, Caridad and she
executed an extra-judicial settlement of Rufinos estate entitled Pagmamanahan Sa Labas ng Hukuman
Na May Pagtalikod Sa Karapatan, whereby the plaintiffs mother Caridad waived all her rights to Rufinos
share and in the land in question to her daughter the plaintiff. Be that as it may, in 1985, guardianship
proceedings appeared to have been instituted with the Regional Trial Court of Malolos by Caridad in
which it was established that the plaintiff was the minor child of Caridad with her late husband Rufino.
Caridad was thus appointed guardian of the person and estate of the plaintiff.

The plaintiff further declared that she and her mother had been paying the real estate taxes on the
property, but in 2000, the defendants took possession of the land and had the tax declaration
transferred to them. This compelled her to file the present case.

Eugenio Geronimo, the defendant, disputes the allegation that the plaintiff is the only child and legal
heir of his brother Rufino. He disclosed that when Rufinos wife could not bear a child, the couple
decided to adopt the plaintiff who was Caridads niece from Sta. Maria, Ilocos Sur. It was in 1972, 13
years after the marriage, when Karen joined her adoptive parents household. Believing that in the
absence of a direct heir, his brother Emiliano and he should succeed to the estate of their brother, they
executed in 2000 an extra-judicial settlement called

Pagmamana sa Labas ng Hukuman.

Eugenio was able to obtain a copy of the plaintiffs alleged birth certificate. It had irregular features,
such as that it was written in pentel pen, the entry in the box date of birth was erased and the word and
figure April 6, 1972 written and the name Emma Dao was superimposed on the entry in the box
intended for the informants signature.

Two more witnesses were adduced. Atty. Elmer Lopez, a legal consultant of the DECS in Bulacan brought
the plaintiff's service record as an elementary school teacher at Paombong[,] Bulacan to show that she
did not have any maternity leave during the period of her service from March 11, 1963 to October 24,
1984, and a certification from the Schools Division Superintendent that the plaintiff did not file any
maternity leave during her service. He declared that as far as the service record is concerned, it reflects
the entry and exit from the service as well as the leaves that she availed of. Upon inquiry by the court,
he clarified that the leaves were reflected but the absences were not. Testifying on the plaintiffs birth
certificate, Exhibit 14, Arturo Reyes, a representative of the NSO, confirmed that there was an alteration
in the date of birth and signature of the informant. In view of the alterations, he considered the
document questionable.6

On October 27, 2006, the trial court ruled in favor of respondent, viz.:

WHEREFORE, judgment is hereby rendered as follows:

1. Declaring the document Pagmamana sa Labas ng Hukuman dated March 9, 2000 executed in favor of
Eugenio San Juan-Geronimo and Emilio San Juan-Geronimo as null and void;

2. Annulling Tax Declaration No. 99-02017-01453 of the subject property in the names of Eugenio San
Juan-Geronimo and Emiliano San Juan-Geronimo;

3. Ordering defendants Eugenio San Juan-Geronimo and Emiliano San Juan-Geronimo to vacate the
portion of the subject property and to surrender the possession to the plaintiff;

4. Ordering the defendants to pay the plaintiff the amount of [P]30,000.00 as attorneys fees;

5. To pay the costs of the suit.

SO ORDERED.7

The trial court ruled that respondent is the legal heir being the legitimate child of the deceased
spouses Rufino and Caridad Geronimo (spouses Rufino and Caridad). It found that respondents filiation
was duly established by the certificate of live birth which was presented in evidence. The RTC dismissed
the claim of petitioner that the birth certificate appeared to have been tampered, specifically on the
entries pertaining to the date of birth of respondent and the name of the informant. The trial court held
that petitioner failed to adduce evidence to explain how the erasures were done. Petitioner also failed
to prove that the alterations were due to the fault of respondent or another person who was
responsible for the act. In the absence of such contrary evidence, the RTC relied on the prima facie
presumption of the veracity and regularity of the birth certificate as a public document.

The trial court further stated that even granting arguendo that the birth certificate is questionable, the
filiation of respondent has already been sufficiently proven by evidence of her open and continuous
possession of the status of a legitimate child under Article 172 of the Family Code of the Philippines. The
RTC considered the following overt acts of the deceased spouses as acts of recognition that respondent
is their legitimate child: they sent her to school and paid for her tuition fees; Caridad made respondent a
beneficiary of her burial benefits from the Government Service Insurance System; and, Caridad filed a
petition for guardianship of respondent after the death of her husband Rufino. Lastly, the trial court
held that to be allowed to impugn the filiation and status of respondent, petitioner should have brought
an action for the purpose under Articles 170 and 171 of the Family Code. Since petitioner failed to file
such action, the trial court ruled that respondent alone is entitled to the ownership and possession of
the subject land owned by Rufino. The extrajudicial settlement executed by petitioner and his brother
was therefore declared not valid and binding as respondent is Rufinos only compulsory heir.

On appeal, petitioner raised the issue on the alterations in the birth certificate of respondent and the
offered evidence of a mere certification from the Office of the Civil Registry instead of the birth
certificate itself.

According to petitioner, respondents open and continuous possession of the status of a legitimate child
is only secondary evidence to the birth certificate itself. Respondent questioned if it was legally
permissible for petitioner to question her filiation as a legitimate child of the spouses Rufino and Caridad
in the same action for annulment of document and recovery of possession that she herself filed against
petitioner and his then co-defendant.

Respondent argued that the conditions enumerated under Articles 170 and 171 of the Family Code,
giving the putative father and his heirs the right to bring an action to impugn the legitimacy of the child,
are not present in the instant case. She further asserted that the Family Code contemplates a direct
action, thus her civil status may not be assailed indirectly or collaterally in this suit.

In the assailed Decision dated January 17, 2011, the appellate court held that under Article 170, the
action to impugn the legitimacy of the child must be reckoned from either of these two dates: the date
the child was born to the mother during the marriage, or the date when the birth of such child was
recorded in the civil registry. The CA found no evidence or admission that Caridad indeed gave birth to
respondent on a specific date. It further resolved that the birth certificate presented in this case, Exhibit
14, does not qualify as the valid registration of birth in the civil register as envisioned by the law, viz.:

x x x The reason is that under the statute establishing the civil register, Act No. 3753, the declaration of
the physician or midwife in attendance at the birth or in default thereof, that declaration of either
parent of the newborn child, shall be sufficient for the registration of birth in the civil register. The
document in question was signed by one Emma Dao who was not identified as either the parent of the
plaintiff or the physician or midwife who attended to her birth. Exhibit 14, legally, cannot be the birth
certificate envisioned by the law; otherwise, with an informant as shadowy as Emma Dao, the
floodgates to spurious filiations will be opened. Neither may the order of the court Exhibit E be treated
as the final judgment mentioned in Article 172 as another proof of filiation.

The final judgment mentioned refers to a decision of a competent court finding the child legitimate.
Exhibit G is merely an order granting letters of guardianship to the parent Caridad based on her
representations that she is the mother of the plaintiff.8
Noting the absence of such record of birth, final judgment or admission in a public or private document
that respondent is the legitimate child of the spouses Rufino and Caridad, the appellate court similar
to the trial court relied on Article 172 of the Family Code which allows the introduction and admission
of secondary evidence to prove ones legitimate filiation via open and continuous possession of the
status of a legitimate child. The CA agreed with the trial court that respondent has proven her legitimate
filiation, viz.:

We agree with the lower court that the plaintiff has proven her filiation by open and continuous
possession of the status of a legitimate child. The evidence consists of the following: (1) the plaintiff was
allowed by her putative parents to bear their family name Geronimo; (2) they supported her and sent
her to school paying for her tuition fees and other school expenses; (3) she was the beneficiary of the
burial benefits of Caridad before the GSIS; (4) after the death of Rufino, Caridad applied for and was
appointed legal guardian of the person and property of the plaintiff from the estate left by Rufino; and
(5) both Caridad and the plaintiff executed an extrajudicial settlement of the estate of Rufino on the
basis of the fact that they are both the legal heirs of the deceased.

It is clear that the status enjoyed by the plaintiff as the legitimate child of Rufino and Caridad has been
open and continuous. x x x The conclusion follows that the plaintiff is entitled to the property left by
Rufino to the exclusion of his brothers, the defendants, which consists of a one-half share in Lot 1716.9

Petitioners moved for reconsideration10 but the motion was denied in the assailed Resolution dated
May 24, 2011. Hence, this petition raising the following assignment of errors:

I. THAT THE COURT OF APPEALS GRAVELY ERRED AND ABUSED ITS DISCRETION, AMOUNTING TO LACK
OF JURISDICTION, WHEN IT ALLOWED THE INTRODUCTION OF SECONDARY EVIDENCE AND RENDERED
JUDGMENT BASED THEREON NOTWITHSTANDING THE EXISTENCE OF PRIMARY EVIDENCE OF BIRTH
CERTIFICATE [EXHIBIT 14].

II. THAT THE COURT OF APPEALS GRAVELY ERRED AND ABUSED ITS DISCRETION, AMOUNTING TO LACK
OF JURISDICTION WHEN IT RULED THAT PETITIONERS HAVE NO PERSONALITY TO IMPUGN
RESPONDENTS LEGITIMATE FILIATION.11

On the first issue, petitioner argues that secondary evidence to prove ones filiation is admissible only if
there is no primary evidence, i.e, a record of birth or an authentic admission in writing.12 Petitioner
asserts that herein respondents birth certificate, Exhibit 14, constitutes the primary evidence
enumerated under Article 172 of the Family Code and the ruling of both courts a quo that the document
is not the one "envisioned by law" should have barred the introduction of secondary evidence.
Petitioner expounds this proposition, viz.:

The findings of the courts a quo that the birth certificate [Exhibit 14] is not [the] one envisioned by law
finds support in numerous cases decided by the Honorable Supreme Court. Thus, a certificate of live
birth purportedly identifying the putative father is not competent evidence as to the issue of paternity,
when there is no showing that the putative father had a hand in the preparation of said certificates, and
the Local Civil Registrar is devoid of authority to record the paternity of an illegitimate child upon the
information of a third person. Where the birth certificate and the baptismal certificate are per se
inadmissible in evidence as proof of filiation, they cannot be admitted indirectly as circumstantial
evidence to prove the same. x x x

x x x The birth certificate Exhibit 14 contains erasures. The date of birth originally written in ball pen was
erased and the date April 6, 1972 was superimposed using a pentel pen; the entry on the informant also
originally written in ball pen was erased and the name E. Dano was superimposed using also a pentel
pen; there is no signature as to who received it from the office of the registry. Worst, respondent Karen
confirms the existence of her birth certificate when she introduced in evidence [Exhibit A] a mere
Certification from the Office of the Local Civil Registrar of Sta. Maria, Ilocos Sur, which highlighted more
suspicions of its existence, thus leading to conclusion and presumption that if such evidence is
presented, it would be adverse to her claim. True to the suspicion, when Exhibit 14 was introduced by
the petitioner and testified on by no less than the NSO representative, Mr. Arturo Reyes, and confirmed
that there were alterations which renders the birth certificate questionable.

Argued differently, with the declaration that the birth certificate is a nullity or falsity, the courts a quo
should have stopped there, ruled that respondent Karen is not the child of Rufino, and therefore not
entitled to inherit from the estate.13

On the second issue, petitioner alleges that the CA gravely erred and abused its discretion amounting to
lack of jurisdiction when it ruled that he does not have personality to impugn respondents legitimate
filiation.14

While petitioner admits that the CA "did not directly rule on this particular issue,"15 he nonetheless
raises the said issue as an error since the appellate court affirmed the decision of the trial court.
Petitioner argues that in so affirming, the CA also adopted the ruling of the trial court that the filiation of
respondent is strictly personal to respondents alleged father and his heirs under Articles 170 and 171 of
the Family Code,16 thereby denying petitioner the "right to impugn or question the filiation and status
of the plaintiff."17 Petitioner argues, viz.:
x x x [T]he lower courts reliance on Articles 170 and 171 of the Family Code is totally misplaced, with
due respect. It should be read in conjunction with the other articles in the same chapter on paternity
and filiation of the Family Code. A careful reading of said chapter would reveal that it contemplates
situations where a doubt exists that a child is indeed a mans child, and the father [or, in proper cases,
his heirs] denies the childs filiation. It does not refer to situations where a child is alleged not to be the
child at all of a particular couple. Petitioners are asserting not merely that respondent Karen is not a
legitimate child of, but that she is not a child of Rufino Geronimo at all. x x x18

We grant the petition.

Despite its finding that the birth certificate which respondent offered in evidence is questionable, the
trial court ruled that respondent is a legitimate child and the sole heir of deceased spouses Rufino and
Caridad. The RTC based this conclusion on secondary evidence that is similar to proof admissible under
the second paragraph of Article 172 of the Family Code to prove the filiation of legitimate children, viz.:

ART. 172. The filiation of legitimate children is established by any of the following:

(1) The record of birth appearing in the civil register or a final judgment; or

(2) An admission of legitimate filiation in a public document or a private handwritten instrument and
signed by the parent concerned.

In the absence of the following evidence, the legitimate filiation shall be proved by:

(1) The open and continuous possession of the status of a legitimate child; or

(2) Any other means allowed by the Rules of Court and special laws.

Petitioner argues that such secondary evidence may be admitted only in a direct action under Article
172 because the said provision of law is meant to be instituted as a separate action, and proof of
filiation cannot be raised as a collateral issue as in the instant case which is an action for annulment of
document and recovery of possession.
Petitioner is correct that proof of legitimacy under Article 172, or illegitimacy under Article 175, should
only be raised in a direct and separate action instituted to prove the filiation of a child. The rationale
behind this procedural prescription is stated in the case of Tison v. Court of Appeals,19 viz.:

x x x [W]ell settled is the rule that the issue of legitimacy cannot be attacked collaterally.

The rationale for these rules has been explained in this wise:

"The presumption of legitimacy in the Family Code x x x actually fixes a civil status for the child born in
wedlock, and that civil status cannot be attacked collaterally. The legitimacy of the child can be
impugned only in a direct action brought for that purpose, by the proper parties, and within the period
limited by law.

The legitimacy of the child cannot be contested by way of defense or as a collateral issue in another
action for a different purpose. The necessity of an independent action directly impugning the legitimacy
is more clearly expressed in the Mexican Code (Article 335) which provides: The contest of the
legitimacy of a child by the husband or his heirs must be made by proper complaint before the
competent court; any contest made in any other way is void. This principle applies under our Family
Code. Articles 170 and 171 of the code confirm this view, because they refer to "the action to impugn
the legitimacy."

This action can be brought only by the husband or his heirs and within the periods fixed in the present
articles.

Upon the expiration of the periods provided in Article 170, the action to impugn the legitimacy of a child
can no longer be brought. The status conferred by the presumption, therefore, becomes fixed, and can
no longer be questioned.1wphi1 The obvious intention of the law is to prevent the status of a child
born in wedlock from being in a state of uncertainty for a long time. It also aims to force early action to
settle any doubt as to the paternity of such child, so that the evidence material to the matter, which
must necessarily be facts occurring during the period of the conception of the child, may still be easily
available.

xxxx
Only the husband can contest the legitimacy of a child born to his wife. He is the one directly confronted
with the scandal and ridicule which the infidelity of his wife produces; and he should decide whether to
conceal that infidelity or expose it, in view of the moral and economic interest involved. It is only in
exceptional cases that his heirs are allowed to contest such legitimacy. Outside of these cases, none
even his heirs can impugn legitimacy; that would amount to an insult to his memory."20

What petitioner failed to recognize, however, is that this procedural rule is applicable only to actions
where the legitimacy or illegitimacy of a child is at issue. This situation does not obtain in the case at
bar.

In the instant case, the filiation of a child herein respondent is not at issue. Petitioner does not claim
that respondent is not the legitimate child of his deceased brother Rufino and his wife Caridad. What
petitioner alleges is that respondent is not the child of the deceased spouses Rufino and Caridad at all.
He proffers this allegation in his Amended Answer before the trial court by way of defense that
respondent is not an heir to his brother Rufino. When petitioner alleged that respondent is not a child of
the deceased spouses Rufino and Caridad in the proceedings below, jurisprudence shows that the trial
court was correct in admitting and ruling on the secondary evidence of respondent even if such proof
is similar to the evidence admissible under the second paragraph of Article 172 and despite the instant
case not being a direct action to prove ones filiation. In the following cases, the courts a quo and this
Court did not bar the introduction of secondary evidence in actions which involve allegations that the
opposing party is not the child of a particular couple even if such evidence is similar to the kind of
proof admissible under the second paragraph of Article 172.

In the 1994 case of Benitez-Badua v. Court of Appeals,21 therein deceased spouses Vicente Benitez
(Vicente) and Isabel Chipongian (Isabel) owned various properties while they were still living. Isabel
departed in 1982, while Vicente died intestate in 1989. In 1990, Vicentes sister (Victoria Benitez-Lirio)
and nephew (Feodor Benitez Aguilar) instituted an action before the trial court for the issuance of
letters of administration of his estate in favor of Feodor. In the said proceedings, they alleged that
Vicente was "survived by no other heirs or relatives be they ascendants or descendants, whether
legitimate, illegitimate or legally adopted x x x."22 They further argued that one "Marissa Benitez[-
]Badua who was raised and cared for by them since childhood is, in fact, not related to them by blood,
nor legally adopted, and is therefore not a legal heir [of Vicente]."23 Marissa opposed the petition and
proffered evidence to prove that she is an heir of Vicente. Marissa submitted the following evidence,
viz.:

1. her Certificate of Live Birth (Exh. 3);

2. Baptismal Certificate (Exh. 4);

3. Income Tax Returns and Information Sheet for Membership with the GSIS of the late Vicente naming
her as his daughter (Exhs. 10 to 21); and

4. School Records (Exhs. 5 & 6).

She also testified that the said spouses reared and continuously treated her as their legitimate
daughter.24

Feodor and his mother Victoria offered mostly testimonial evidence to show that the spouses Vicente
and Isabel failed to beget a child during their marriage. They testified that the late Isabel, when she was
36 years old, was even referred to an obstetrician-gynecologist for treatment. Victoria, who was 77
years old at the time of her testimony, also categorically stated that Marissa was not the biological child
of the said spouses who were unable to physically procreate.25

The trial court, relying on Articles 166 and 170 of the Family Code, declared Marissa as the legitimate
daughter and sole heir of the spouses Vicente and Isabel. The appellate court reversed the RTCs ruling
holding that the trial court erred in applying Articles 166 and 170 of the Family Code. On appeal to this
Court, we affirmed the reversal made by the appellate court, viz.:

A careful reading of the above articles will show that they do not contemplate a situation, like in the
instant case, where a child is alleged not to be the child of nature or biological child of a certain couple.

Rather, these articles govern a situation where a husband (or his heirs) denies as his own a child of his
wife. Thus, under Article 166, it is the husband who can impugn the legitimacy of said child by proving:
(1) it was physically impossible for him to have sexual intercourse, with his wife within the first 120 days
of the 300 days which immediately preceded the birth of the child; (2) that for biological or other
scientific reasons, the child could not have been his child; (3) that in case of children conceived through
artificial insemination, the written authorization or ratification by either parent was obtained through
mistake, fraud, violence, intimidation or undue influence. Articles 170 and 171 reinforce this reading as
they speak of the prescriptive period within which the husband or any of his heirs should file the action
impugning the legitimacy of said child. Doubtless then, the appellate court did not err when it refused to
apply these articles to the case at bench. For the case at bench is not one where the heirs of the late
Vicente are contending that petitioner is not his child by Isabel. Rather, their clear submission is that
petitioner was not born to Vicente and Isabel. Our ruling in Cabatbat- Lim vs. Intermediate Appellate
Court, 166 SCRA 451, 457 cited in the impugned decision is apropos, viz:
"Petitioners recourse to Article 263 of the New Civil Code [now Art. 170 of the Family Code] is not
welltaken.

This legal provision refers to an action to impugn legitimacy. It is inapplicable to this case because this is
not an action to impugn the legitimacy of a child, but an action of the private respondents to claim their
inheritance as legal heirs of their childless deceased aunt. They do not claim that petitioner Violeta
Cabatbat Lim is an illegitimate child of the deceased, but that she is not the decedent's child at all. Being
neither legally adopted child, nor an acknowledged natural child, nor a child by legal fiction of Esperanza
Cabatbat, Violeta is not a legal heir of the deceased."26

Similarly, the 2001 case of Labagala v. Santiago27 originated from a complaint for recovery of title,
ownership and possession before the trial court. Respondents therein contended that petitioner is not
the daughter of the decedent Jose and sought to recover from her the 1/3 portion of the subject
property pertaining to Jose but which came into petitioners sole possession upon Joses death.
Respondents sought to prove that petitioner is not the daughter of the decedent as evidenced by her
birth certificate which did not itself indicate the name of Jose as her father. Citing the case of Sayson v.
Court of Appeals and Article 263 of the Civil Code (now Article 170 of the Family Code),28 petitioner
argued that respondents cannot impugn her filiation collaterally since the case was not an action
impugning a childs legitimacy but one for recovery of title, ownership and possession of property. We
ruled in this case that petitioners reliance on Article 263 of the Civil Code is misplaced and respondents
may impugn the petitioners filiation in an action for recovery of title and possession. Thus, we affirmed
the ruling of the appellate court that the birth certificate of petitioner Labagala proved that she "was
born of different parents, not Jose and his wife."29 Citing the aforecited cases of Benitez-Badua and Lim
v. Intermediate Appellate Court,30 we stated, viz.:

This article should be read in conjunction with the other articles in the same chapter on paternity and
filiation in the Civil Code. A careful reading of said chapter would reveal that it contemplates situations
where a doubt exists that a child is indeed a mans child by his wife, and the husband (or, in proper
cases, his heirs) denies the childs filiation. It does not refer to situations where a child is alleged not to
be the child at all of a particular couple.31

Article 263 refers to an action to impugn the legitimacy of a child, to assert and prove that a person is
not a mans child by his wife. However, the present case is not one impugning petitioners legitimacy.
Respondents are asserting not merely that petitioner is not a legitimate child of Jose, but that she is not
a child of Jose at all.

x x x32
Be that as it may, even if both courts a quo were correct in admitting secondary evidence similar to the
proof admissible under Article 172 of the Family Code in this action for annulment of document and
recovery of possession, we are constrained to rule after a meticulous examination of the evidence on
record that all proof points to the conclusion that herein respondent is not a child of the deceased
spouses Rufino and Caridad.

While we ascribe to the general principle that this Court is not a trier of facts,33 this rule admits of the
following exceptions where findings of fact may be passed upon and reviewed by this Court, viz.:

(1) When the conclusion is a finding grounded entirely on speculation, surmises or conjectures (Joaquin
v. Navarro, 93 Phil. 257 [1953]); (2) When the inference made is manifestly mistaken, absurd or
impossible (Luna v. Linatok, 74 Phil. 15 [1942]); (3) Where there is a grave abuse of discretion (Buyco v.
People, 95 Phil. 453 [1955]); (4)

When the judgment is based on a misapprehension of facts (Cruz v. Sosing, L-4875, Nov. 27, 1953); (5)
When the findings of fact areconflicting (Casica v. Villaseca, L-9590 Ap. 30, 1957; unrep.); (6) Whenthe
Court of Appeals, in making its findings, went beyond the issues of thecase and the same is contrary to
the admissions of both appellant andappellee (Evangelista v. Alto Surety and Insurance Co., 103 Phil.
401[1958]); (7) The findings of the Court of Appeals are contrary to those ofthe trial court (Garcia v.
Court of Appeals, 33 SCRA 622 [1970]; Sacay v. Sandiganbayan, 142 SCRA 593 [1986]); (8) When the
findings of fact are conclusions without citation of specific evidence on which they are based (Ibid.,); (9)
When the facts set forth in the petition as well as in the petitioners main and reply briefs are not
disputed by the respondents (Ibid.,); and (10) The finding of fact of the Court of Appeals is premised on
the supposed absence of evidence and is contradicted by the evidence on record (Salazar v. Gutierrez,
33 SCRA 242 [1970]).34

It is clear in the case at bar that the ruling of both courts a quo declaring respondent as a legitimate child
and sole heir of the deceasedspouses Rufino and Caridad is one based on a misapprehension of facts.

A mere cursory reading of the birth certificate of respondent would show that it was tampered
specifically on the entries pertaining to the date of birth of respondent and the name of the informant.
Using pentel ink, the date of birth of respondent April 6, 1972 and the name of the informant
Emma Dao were both superimposed on the document. Despite these glaring erasures, the trial court
still relied on the prima facie presumption of the veracity and regularity of the birth certificate for failure
of petitioner to explain how the erasures were done and if the alterations were due to the fault of
respondent. It thus ruled that respondents filiation was duly established by the birth certificate. The
appellate court did not agree with this finding and instead ruled that the birth certificate presented does
not qualify as the valid registration of birth in the civil register as envisioned by the law. We reiterate the
relevant pronouncement of the CA, viz.:
x x x The document in question was signed by one Emma Dao who was not identified as either the
parent of the plaintiff or the physician or midwife who attended to her birth. Exhibit 14, legally, cannot
be the birth certificate envisioned by the law; otherwise, with an informant as shadowy as Emma Dao,
the floodgates to spurious filiations will be opened. Neither may the order of the court Exhibit E be
treated as the final judgment mentioned in Article 172 as another proof of filiation. The final judgment
mentioned refers to a decision of a competent court finding the child legitimate. Exhibit G is merely an
order granting letters of guardianship to the parent Caridad based on her representations that she is the
mother of the plaintiff.35

Nonetheless, the appellate court agreed with the trial court that respondent has proven her filiation by
showing that she has enjoyed that open and continuous possession of the status of a legitimate child of
the deceased spouses Rufino and Caridad, viz.:

x x x The evidence consists of the following: (1) the plaintiff was allowed by her putative parents to bear
their family name Geronimo; (2) they supported her and sent her to school paying for her tuition fees
and other school expenses; (3) she was the beneficiary of the burial benefits of Caridad before the GSIS;
(4) after the death of Rufino, Caridad applied for and was appointed legal guardian of the person and
property of the plaintiff from the estate left by Rufino; and (5) both Caridad and the plaintiff executed
an extrajudicial settlement of the estate of Rufino on the basis of the fact that they are both the legal
heirs of the deceased.36

We do not agree with the conclusion of both courts a quo. The appellate court itself ruled that the
irregularities consisting of the superimposed entries on the date of birth and the name of the informant
made the document questionable. The corroborating testimony of Arturo Reyes, a representative of the
NSO, further confirmed that the entries on the date of birth and the signature of the informant are
alterations on the birth certificate which rendered the document questionable. To be sure, even the
respondent herself did not offer any evidence to explain such irregularities on her own birth certificate.
These irregularities and the totality of the following circumstances surrounding the alleged birth of
respondent are sufficient to overthrow the presumption of regularity attached to respondents birth
certificate, viz.:

1. The identity of one Emma Dao, whose name was superimposed as the informant regarding the birth
of respondent, remains unknown.

2. The testimony of Atty. Elmer De Dios Lopez, a legal consultant of the Department of Education in
Bulacan, proved that the deceased Caridad did not have any maternity leave during the period of her
service from March 11, 1963 to October 24, 1984 as shown by her Service Record as an elementary
school teacher at Paombong, Bulacan. This was corroborated by a certification from Dr. Teofila R.
Villanueva, Schools Division Superintendent, that she did not file any maternity leave during her service.
No testimonial or documentary evidence was also offered to prove that the deceased Caridad ever had
a pregnancy.

3. Based on the birth certificate, respondent was born in 1972 or 13 years into the marriage of the
deceased spouses Rufino and Caridad. When respondent was born, Caridad was already 40 years old.
There are no hospital records of Caridads delivery, and while it may have been possible for her to have
given birth at her own home, this could have been proven by medical or non-medical records or
testimony if they do, in fact, exist.

4. It is worthy to note that respondent was the sole witness for herself in the instant case.

Finally, we also find that the concurrence of the secondary evidence relied upon by both courts a quo
does not sufficiently establish the one crucial fact in this case: that respondent is indeed a child of the
deceased spouses. Both the RTC and the CA ruled that respondent is a legitimate child of her putative
parents because she was allowed to bear their family name "Geronimo", they supported her and her
education, she was the beneficiary of the burial benefits of Caridad in her GSIS policy, Caridad applied
for and was appointed as her legal guardian in relation to the estate left by Rufino, and she and Caridad
executed an extrajudicial settlement of the estate of Rufino as his legal heirs.

In the case of Rivera v. Heirs of Romualdo Villanueva37 which incisively discussed its parallelisms and
contrasts with the case of Benitez- Badua v. Court of Appeals,38 we ruled that the presence of a similar
set of circumstances which were relied upon as secondary proof by both courts a quo in the case at
bar does not establish that one is a child of the putativeparents. Our discussion in the Rivera case is
instructive, viz.:

In Benitez-Badua v. Court of Appeals, Marissa Benitez-Badua, in attempting to prove that she was the
sole heir of the late Vicente Benitez, submitted a certificate of live birth, a baptismal certificate, income
tax returns and an information sheet for membership in the Government Service Insurance System of
the decedent naming her as his daughter, and her school records. She also testified that she had been
reared and continuously treated as Vicentes daughter.

By testimonial evidence alone, to the effect that Benitez-Baduas alleged parents had been unable to
beget children, the siblings of Benitez- Baduas supposed father were able to rebut all of the
documentary evidence indicating her filiation. One fact that was counted against Benitez-Badua was
that her supposed mother Isabel Chipongian, unable to bear any children even after ten years of
marriage, all of a sudden conceived and gave birth to her at the age of 36.
Of great significance to this controversy was the following pronouncement:

But definitely, the mere registration of a child in his or her birth certificate as the child of the supposed
parents is not a valid adoption, does not confer upon the child the status of an adopted child and the
legal rights of such child, and even amounts to simulation of the child's birth or falsification of his or her
birth certificate, which is a public document.(emphasis ours)

Furthermore, it is well-settled that a record of birth is merely a prima facie evidence of the facts
contained therein. It is not conclusive evidence of the truthfulness of the statements made there by the
interestedparties. Following the logic of Benitez, respondent Angelina and her codefendants in SD-857
should have adduced evidence of her adoption, in view of the contents of her birth certificate. The
records, however, are bereft of any such evidence.

There are several parallels between this case and Benitez- Badua that are simply too compelling to
ignore. First, both Benitez-Baduaand respondent Angelina submitted birth certificates as evidence
offiliation. Second, both claimed to be children of parents relativelyadvanced in age. Third, both claimed
to have been born after their allegedparents had lived together childless for several years.

There are, however, also crucial differences between BenitezBadua and this case which ineluctably
support the conclusion thatrespondent Angelina was not Gonzales' daughter, whether illegitimate
oradopted. Gonzales, unlike Benitez-Badua's alleged mother Chipongian,was not only 36 years old but
44 years old, and on the verge of menopauseat the time of the alleged birth. Unlike Chipongian who had
been marriedto Vicente Benitez for only 10 years, Gonzales had been living childlesswith Villanueva for
20 years. Under the circumstances, we hold that it was not sufficiently established that respondent
Angelina was Gonzales' biological daughter, nor even her adopted daughter. Thus, she cannot inherit
from Gonzales. Since she could not have validly participated in Gonzales' estate, the extrajudicial
partition which she executed with Villanueva on August 8, 1980 was invalid.39

In view of these premises, we are constrained to disagree with both courts a quo and rule that the
confluence of the circumstances and the proof presented in this case do not lead to the conclusion that
respondent is a child of the deceased spouses.

WHEREFORE, the petition is hereby GRANTED. The assailed Decision and Resolution of the Court of
Appeals in CA-G.R. CV No. 88650 dated January 17, 2011 and May 24, 2011, respectively, are REVERSED
and SET ASIDE. The Complaint in Civil Case No. 268-M-2001 for Annulment of Document and Recovery
of Possession is hereby ordered DISMISSED.
SEPARATE CONCURRING OPINION

CARPIO, J.:

I concur in the result of the majority opinion that IEMELIF, a corporation sole, may be converted into a
corporation aggregate by a mere amendment of its articles of incorporation. However, I maintain that
the amendment can be effected by the corporation sole without the concurrence of two-thirds of the
members of the religious denomination, sect or church that the corporation sole represents.

Section 110 of the Corporation Code1 defines a corporation sole as one formed by the chief archbishop,
bishop, priest, minister, rabbi or other presiding elder of a religious denomination, sect or church for the
purpose of administering and managing, as trustee, the affairs, property and temporalities of such
religious denomination, sect or church. It is a special form of corporation designed to facilitate the
exercise of the functions of ownership carried on by the clerics for and on behalf of the church which is
regarded as the property owner.2

As its designation implies, a corporation sole "consists of a single member."3 It consists of one person
only, and his successors (who will always be one at a time) in some particular station, incorporated by
law to be given some legal capacities and advantages, particularly that of perpetuity, so that the
successor becomes the corporation on the persons death or resignation.4

A corporation aggregate, on the other hand, is a religious corporation composed of two or more
persons.5 The creation of a corporation aggregate or religious society is sanctioned by Section 116 of
the Corporation Code.

To convert a corporation sole to a corporation aggregate is to increase corporate membership from one
to two or more, and to transfer the duties of administering and managing the affairs, properties and
temporalities of the religious entity, from one to several trustees. I agree with the majority opinion that
the conversion can be done through a mere amendment of the articles of incorporation of the
corporation sole. No dissolution of the corporation is necessary. The resulting changes from such a
conversion, carried out in accordance with law, will not affect the corporations responsibilities to third
parties.

The majority opinion, however, holds that the amendment of the articles of incorporation can be
executed by the corporation sole, albeit with the concurrence of at least two thirds of the members of
the religious entity.
I do not subscribe to this view.

First, Section 110 of the Corporation Code provides that a corporation sole administers and manages, as
trustee, the affairs, properties and temporalities of the religious denomination, sect or church. As a
trustee, a corporation sole can exercise such corporate powers as maybe necessary to carry out its
duties of administering and managing the affairs, properties and temporalities of the religious
organization, provided that such powers are not inconsistent with the law and the Constitution. One of
the powers authorized under Section 36 of the Corporation Code is the power to amend the articles of
incorporation.6

Second, as pointed out in the majority opinion, Section 109 of the Code allows the application to
religious corporations of the general provisions governing non-stock corporations, insofar as they may
be applicable. The lack of specific provision on amendments of articles of incorporation of a corporation
sole calls for the suppletory application of relevant provisions on non-stock corporations. Thus, Section
16 of the Code applies, to wit:

Sec. 16. Amendment of Articles of Incorporation. Unless otherwise prescribed by this Code or by special
law, and for legitimate purposes, any provision or matter stated in the articles of incorporation may be
amended by a majority vote of the board of directors or trustees and the vote or written assent of the
stockholders representing at least two-thirds (2/3) of the outstanding capital stock, without prejudice to
the appraisal right of dissenting stockholders in accordance with the provisions of this Code, or the vote
or written assent of at least two-thirds (2/3) of the members if it be a non-stock corporation.

x x x (Italics supplied)

The majority opinion holds that applying the above provision, amendment can be made by the
corporation sole with the concurrence of at least two-thirds of the members of the religious
organization it represents.

I do not agree. Section 16 requires the majority vote of the board of trustees and the vote or written
assent of at least two-thirds of the members of a non-stock corporation. Applying this, a corporation
sole, as the lone trustee and member of the corporation, can amend its articles of incorporation.
Section 16 refers to the members of the corporation. Again, in the case of a corporation sole, there is
only one memberthe chief archbishop, bishop, priest, minister, rabbi or presiding elderwho is also
the trustee of the corporation.

The religious denomination, sect or church represented by the corporation sole has members who are
distinct and different from the member of the corporation sole. The members of the religious
organization should not be considered for purposes of Section 16. Thus, the votes of those members are
not necessary in amending the articles of incorporation of the corporation sole, the vote of the latter
being sufficient in effecting the amendment.

It bears emphasizing that once the conversion from corporation sole to corporation aggregate is
perfected, the provisions of the Corporation Code specifically designed for a corporation sole cease to
apply to the corporation aggregate, and the latter shall be governed by the relevant provisions on non-
stock or even stock corporations.7

For instance, the rules on the sale of properties of a corporation sole are governed by Section 113 of the
Code.8 The corporation sole may sell or mortgage real properties held by it in accordance with the rules,
regulations and discipline of the religious denomination, sect or church concerned. It is only in the
absence of such rules that court intervention becomes necessary, and real properties are sold or
mortgaged by obtaining an order from the Regional Trial Court of the province where the property is
situated. On the other hand, the sale or other disposition of all or substantially all of the properties and
assets of a corporation aggregate shall be governed by Section 40 of the Code which applies to stock and
non-stock corporations. Under this section, the sale, lease, exchange, mortgage, pledge or disposition of
all or substantially all of the properties and assets of the corporation may generally be done through a
majority vote of its board of trustees, and the vote of at least two-thirds of its members in a members
meeting duly called for that purpose. Hence, unlike in the case of a corporation sole, a corporation
aggregate may not apply its own rules, regulations and discipline in selling all or substantially all of its
properties, as this process shall be governed by secular principles and rules of law.

Accordingly, I vote to DENY the petition.

JOSEPH GOYANKO, JR., as administrator of the Estate of Joseph Goyanko, Sr.,

vs.

UNITED COCONUT PLANTERS BANK, MANGO AVENUE BRANCH,

We resolve the petition for review on certiorari1 filed by petitioner Joseph Goyanko, Jr., administrator of
the Estate of Joseph Goyanko, Sr., to nullify the decision2 dated February 20, 2007 and the resolution3
dated July 31, 2007 of the Court of Appeals (CA) in CA-G.R. CV. No. 00257 affirming the decision4 of the
Regional Trial Court of Cebu City, Branch 16(RTC) in Civil Case No. CEB-22277. The RTC dismissed the
petitioners complaint for recovery of sum money against United Coconut Planters Bank, Mango Avenue
Branch (UCPB).

The Factual Antecedents

In 1995, the late Joseph Goyanko, Sr. (Goyanko) invested Two Million Pesos (P2,000,000.00) with
Philippine Asia Lending Investors, Inc. family, represented by the petitioner, and his illegitimate family
presented conflicting claims to PALII for the release of the investment. Pending the investigation of the
conflicting claims, PALII deposited the proceeds of the investment with UCPB on October 29, 19965
under the name "Phil Asia: ITF (In Trust For) The Heirs of Joseph Goyanko, Sr." (ACCOUNT). On
September 27, 1997, the deposit under the ACCOUNT was P1,509,318.76.

On December 11, 1997, UCPB allowed PALII to withdraw One Million Five Hundred Thousand Pesos
(P1,500,000.00) from the Account, leaving a balance of only P9,318.76. When UCPB refused the demand
to restore the amount withdrawn plus legal interest from December 11, 1997, the petitioner filed a
complaint before the RTC. In its answer to the complaint, UCPB admitted, among others, the opening of
the ACCOUNT under the name "ITF (In Trust For) The Heirs of Joseph Goyanko, Sr.," (ITF HEIRS) and the
withdrawal on December 11, 1997.

The RTC Ruling

In its August 27, 2003 decision, the RTC dismissed the petitioners complaint and awarded UCPB
attorneys fees, litigation expenses and the costs of the suit.6 The RTC did not consider the words "ITF
HEIRS" sufficient to charge UCPB with knowledge of any trust relation between PALII and Goyankos
heirs (HEIRS). It concluded that UCPB merely performed its duty as a depository bank in allowing PALII to
withdraw from the ACCOUNT, as the contract of deposit was officially only between PALII, in its own
capacity, and UCPB. The petitioner appealed his case to the CA.

The CAs Ruling

Before the CA, the petitioner maintained that by opening the ACCOUNT, PALII established a trust by
which it was the "trustee" and the HEIRS are the "trustors-beneficiaries;" thus, UCPB should be liable for
allowing the withdrawal.
The CA partially granted the petitioners appeal. It affirmed the August 27, 2003 decision of the RTC, but
deleted the award of attorneys fees and litigation expenses. The CA held that no express trust was
created between the HEIRS and PALII. For a trust to be established, the law requires, among others, a
competent trustor and trustee and a clear intention to create a trust, which were absent in this case.
Quoting the RTC with approval, the CA noted that the contract of deposit was only between PALII in its
own capacity and UCPB, and the words "ITF HEIRS" were insufficient to establish the existence of a trust.
The CA concluded that as no trust existed, expressly or impliedly, UCPB is not liable for the amount
withdrawn.7

In its July 31, 2007 resolution,8 the CA denied the petitioners motion for reconsideration. Hence, the
petitioners present recourse.

The Petition

The petitioner argues in his petition that: first, an express trust was created, as clearly shown by PALIIs
March 28, 1996 and November 15, 1996 letters.9 Citing jurisprudence, the petitioner emphasizes that
from the established definition of a trust,10 PALII is clearly the trustor as it created the trust; UCPB is the
trustee as it is the party in whom confidence is reposed as regards the property for the benefit of
another; and the HEIRS are the beneficiaries as they are the persons for whose benefit the trust is
created.11 Also, quoting Development Bank of the Philippines v. Commission on Audit,12 the petitioner
argues that the naming of the cestui que trust is not necessary as it suffices that they are adequately
certain or identifiable.13

Second, UCPB was negligent and in bad faith in allowing the withdrawal and in failing to inquire into the
nature of the ACCOUNT.14 The petitioner maintains that the surrounding facts, the testimony of UCPBs
witness, and UCPBs own records showed that: (1) UCPB was aware of the trust relation between PALII
and the HEIRS; and (2) PALII held the ACCOUNT in a trust capacity. Finally, the CA erred in affirming the
RTCs dismissal of his case for lack of cause of action. The petitioner insists that since an express trust
clearly exists, UCPB, the trustee, should not have allowed the withdrawal.

The Case for UCPB

UCPB posits, in defense, that the ACCOUNT involves an ordinary deposit contract between PALII and
UCPB only, which created a debtor-creditor relationship obligating UCPB to return the proceeds to the
account holder-PALII. Thus, it was not negligent in handling the ACCOUNT when it allowed the
withdrawal. The mere designation of the ACCOUNT as "ITF" is insufficient to establish the existence of
an express trust or charge it with knowledge of the relation between PALII and the HEIRS.
UCPB also argues that the petitioner changed the theory of his case. Before the CA, the petitioner
argued that the HEIRS are the trustors-beneficiaries, and PALII is the trustee. Here, the petitioner
maintains that PALII is the trustor, UCPB is the trustee, and the HEIRS are the beneficiaries. Contrary to
the petitioners assertion, the records failed to show that PALII and UCPB executed a trust agreement,
and PALIIs letters made it clear that PALII, on its own, intended to turn-over the proceeds of the
ACCOUNT to its rightful owners.

The Courts Ruling

The issue before us is whether UCPB should be held liable for the amount withdrawn because a trust
agreement existed between PALII and UCPB, in favor of the HEIRS, when PALII opened the ACCOUNT
with UCPB.

We rule in the negative.

We first address the procedural issues. We stress the settled rule that a petition for review on certiorari
under Rule 45 of the Rules of Court resolves only questions of law, not questions of fact.15 A question,
to be one of law, must not examine the probative value of the evidence presented by the parties;16
otherwise, the question is one of fact.17 Whether an express trust exists in this case is a question of fact
whose resolution is not proper in a petition under Rule 45. Reinforcing this is the equally settled rule
that factual findings of the lower tribunals are conclusive on the parties and are not generally
reviewable by this Court,18 especially when, as here, the CA affirmed these findings. The plain reason is
that this Court is not a trier of facts.19 While this Court has, at times, permitted exceptions from the
restriction,20 we find that none of these exceptions obtain in the present case.

Second, we find that the petitioner changed the theory of his case. The petitioner argued before the
lower courts that an express trust exists between PALII as the trustee and the HEIRS as the trustor-
beneficiary.21 The petitioner now asserts that the express trust exists between PALII as the trustor and
UCPB as the trustee, with the HEIRS as the beneficiaries.22 At this stage of the case, such change of
theory is simply not allowed as it violates basic rules of fair play, justice and due process. Our rulings are
clear - "a party who deliberately adopts a certain theory upon which the case was decided by the lower
court will not be permitted to change [it] on appeal";23 otherwise, the lower courts will effectively be
deprived of the opportunity to decide the merits of the case fairly.24 Besides, courts of justice are
devoid of jurisdiction to resolve a question not in issue.25 For these reasons, the petition must fail.
Independently of these, the petition must still be denied.
No express trust exists; UCPB exercised the required diligence in handling the ACCOUNT; petitioner has
no cause of action against UCPB

A trust, either express or implied,26 is the fiduciary relationship "x x x 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."27 Express or direct trusts are created by the direct and positive acts of the
trustor or of the parties.28 No written words are required to create an express trust. This is clear from
Article 1444 of the Civil Code,29 but, the creation of an express trust must be firmly shown; it cannot be
assumed from loose and vague declarations or circumstances capable of other interpretations.30

In Rizal Surety & Insurance Co. v. CA,31 we laid down the requirements before an express trust will be
recognized:

Basically, these elements include a competent trustor and trustee, an ascertainable trust res, and
sufficiently certain beneficiaries. xxx each of the above elements is required to be established, and, if
any one of them is missing, it is fatal to the trusts (sic). Furthermore, there must be a present and
complete disposition of the trust property, notwithstanding that the enjoyment in the beneficiary will
take place in the future. It is essential, too, that the purpose be an active one to prevent trust from
being executed into a legal estate or interest, and one that is not in contravention of some prohibition of
statute or rule of public policy. There must also be some power of administration other than a mere
duty to perform a contract although the contract is for a thirdparty beneficiary. A declaration of terms is
essential, and these must be stated with reasonable certainty in order that the trustee may administer,
and that the court, if called upon so to do, may enforce, the trust. [emphasis ours]

Under these standards, we hold that no express trust was created. First, while an ascertainable trust res
and sufficiently certain beneficiaries may exist, a competent trustor and trustee do not. Second, UCPB,
as trustee of the ACCOUNT, was never under any equitable duty to deal with or given any power of
administration over it. On the contrary, it was PALII that undertook the duty to hold the title to the
ACCOUNT for the benefit of the HEIRS. Third, PALII, as the trustor, did not have the right to the
beneficial enjoyment of the ACCOUNT. Finally, the terms by which UCPB is to administer the ACCOUNT
was not shown with reasonable certainty. While we agree with the petitioner that a trusts beneficiaries
need not be particularly identified for a trust to exist, the intention to create an express trust must first
be firmly established, along with the other elements laid above; absent these, no express trust exists.

Contrary to the petitioners contention, PALIIs letters and UCPBs records established UCPBs
participation as a mere depositary of the proceeds of the investment. In the March 28, 1996 letter, PALII
manifested its intention to pursue an active role in and up to the turnover of those proceeds to their
rightful owners,32 while in the November 15, 1996 letter, PALII begged the petitioner to trust it with the
safekeeping of the investment proceeds and documents.33 Had it been PALIIs intention to create a
trust in favor of the HEIRS, it would have relinquished any right or claim over the proceeds in UCPBs
favor as the trustee. As matters stand, PALII never did.

UCPBs records and the testimony of UCPBs witness34 likewise lead us to the same conclusion. While
the words "ITF HEIRS" may have created the impression that a trust account was created, a closer
scrutiny reveals that it is an ordinary savings account.35 We give credence to UCPBs explanation that
the word "ITF" was merely used to distinguish the ACCOUNT from PALIIs other accounts with UCPB. A
trust can be created without using the word "trust" or "trustee," but the mere use of these words does
not automatically reveal an intention to create a trust.36 If at all, these words showed a trustee-
beneficiary relationship between PALII and the HEIRS.

Contrary to the petitioners position, UCPB did not become a trustee by the mere opening of the
ACCOUNT.1wphi1 While this may seem to be the case, by reason of the fiduciary nature of the banks
relationship with its depositors,37 this fiduciary relationship does not "convert the contract between the
bank and its depositors from a simple loan to a trust agreement, whether express or implied."38 It
simply means that the bank is obliged to observe "high standards of integrity and performance" in
complying with its obligations under the contract of simple loan.39 Per Article 1980 of the Civil Code,40
a creditor-debtor relationship exists between the bank and its depositor.41 The savings deposit
agreement is between the bank and the depositor;42 by receiving the deposit, the bank impliedly agrees
to pay upon demand and only upon the depositors order.43

Since the records and the petitioners own admission showed that the ACCOUNT was opened by PALII,
UCPBs receipt of the deposit signified that it agreed to pay PALII upon its demand and only upon its
order. Thus, when UCPB allowed PALII to withdraw from the ACCOUNT, it was merely performing its
contractual obligation under their savings deposit agreement. No negligence or bad faith44 can be
imputed to UCPB for this action. As far as UCPB was concerned, PALII is the account holder and not the
HEIRS. As we held in Falton Iron Works Co. v. China Banking Corporation.45 the banks duty is to its
creditor-depositor and not to third persons. Third persons, like the HEIRS here, who may have a right to
the money deposited, cannot hold the bank responsible unless there is a court order or garnishment.46
The petitioners recourse is to go before a court of competent jurisdiction to prove his valid right over
the money deposited.

In these lights, we find the third assignment of error mooted. A cause of action requires that there be a
right existing in favor of the plaintiff, the defendants obligation to respect that right, and an act or
omission of the defendant in breach of that right.47 We reiterate that UCPBs obligation was towards
PALII as its creditor-depositor. While the HEIRS may have a valid claim over the proceeds of the
investment, the obligation to turn-over those proceeds lies with PALII. Since no trust exists the
petitioners complaint was correctly dismissed and the CA did not commit any reversible error in
affirming the RTC decision. One final note, the burden to prove the existence of an express trust lies
with the petitioner.48 For his failure to discharge this burden, the petition must fail.

WHEREFORE, in view of these considerations, we hereby DENY the petition and AFFIRM the decision
dated February 20, 2007 and the resolution dated July 31, 2007 of the Court of Appeals in CA-G.R. CV.
No. 00257. Costs against the petitioner.

ANDRADA, versus PILHINO SALES CORPORATION,

An appeal by petition for review on certiorari under Rule 45 shall raise only questions of law. Thus, the
herein petition for review must fail for raising a question essentially of fact.

Antecedents

On December 28, 1990, respondent Pilhino Sales Corporation (Pilhino) sued Jose Andrada, Jr. and his
wife, Maxima, in the Regional Trial Court in Davao City (RTC) to recover the principal sum of
P240,863.00, plus interest and incidental charges (Civil Case No. 20,489-90). Upon Pilhinos application,
the RTC issued a writ of preliminary attachment, which came to be implemented against a Hino truck
and a Fuso truck both owned by Jose Andrada, Jr. However, the levies on attachment were lifted after
Jose filed a counter-attachment bond.

In due course, the RTC rendered a decision against Jose Andrada, Jr. and his wife. Pilhino opted to
enforce the writ of execution against the properties of the Andradas instead of claiming against the
counter-attachment bond considering that the premium on the bond had not been paid. As a result, the
sheriff seized the Hino truck and sold it at the ensuing public auction, with Pilhino as the highest bidder.
However, the Hino truck could not be transferred to Pilhinos name due to its having been already
registered in the name of petitioner Moises Andrada. It appears that the Hino truck had been
meanwhile sold by Jose Andrada, Jr. to Moises Andrada, which sale was unknown to Pilhino, and that
Moises had mortgaged the truck to BA Finance Corporation (BA Finance) to secure his own obligation.

BA Finance sued Moises Andrada for his failure to pay the loan (Civil Case No. 5117). After a decision
was rendered in the action in favor of BA Finance, a writ of execution issued, by which the sheriff levied
upon and seized the Hino truck while it was in the possession of Pilhino and sold it at public auction,
with BA Finance as the highest bidder.
Consequently, Pilhino instituted this action in the RTC in Davao City against Spouses Jose Andrada, Jr.
and Maxima Andrada, Spouses Moises Andrada and Clemencia Andrada, Jose Andrada, Sr., BA Finance,
Land Transportation Office (in Surallah, South Cotabato), and the Registrar of Deeds of General Santos
City to annul the following: (a) the deed of sale between Jose Andrada, Jr. and Moises Andrada; (b) the
chattel mortgage involving the Hino truck between Moises Andrada and BA Finance; (c) the deed of
conveyance executed by Jose Andrada, Jr. in favor of his father, Jose Andrada, Sr., involving a hard-top
jeep; and (d) the certificate of registration of the Hino truck in the name of Moises Andrada as well as
the registration of the chattel mortgage with the Registry of Deeds of General Santos City. The action
was docketed as Civil Case No. 21,898-93.

Of the Andradas who were defendants in Civil Case No. 21,898-93, only Moises Andrada and his wife
filed their responsive pleading. Later on, Jose Andrada, Jr. and his wife and Pilhino submitted a
compromise agreement dated August 20, 1993. They submitted a second compromise agreement dated
March 4, 1994 because the first was found to be defective and incomplete. The RTC thereafter rendered
a partial judgment on March 21, 1994 based on the second compromise agreement. After that, further
proceedings were taken in Civil Case No. 21,898-93 only with respect to Moises Andrada and his wife,
and BA Finance.

Moises Andrada and his wife averred as defenses that they had already acquired the Hino truck from
Jose Andrada, Jr. free from any lien or encumbrance prior to its seizure by the sheriff pursuant to the
writ of execution issued in Civil Case No. 20,489-90; that their acquisition had been made in good faith,
considering that at the time of the sale the preliminary attachment had already been lifted; and that
Pilhinos recourse was to proceed against the counter-attachment bond.

For its part, BA Finance claimed lack of knowledge of the truth of the material allegations of the
complaint of Pilhino; and insisted that the Hino truck had been validly mortgaged to it by Moises
Andrada, the lawful owner, to secure his own valid obligation.

On March 25, 1998, the RTC, citing the compromise agreement between Pilhino and Jose Andrada, Jr.
that had settled all the claims of Pilhino against Jose Andrada, Jr., and the good faith of Pilhino and BA
Finance in filing their respective actions, rendered its decision in Civil Case No. 21,898-93,[1] disposing:

WHEREFORE, judgment is rendered dismissing this case insofar as the spouses Moises Andrada and
Clemencia Andrada, Jose Andrada, Sr. and BA Finance Corporation, now accordingly BA Savings Bank,
including the counterclaims.

SO ORDERED.
Spouses Moises and Clemencia Andrada appealed the decision rendered on March 25, 1998 to the
extent that the RTC thereby: (a) dismissed their counterclaim; (b) declared that the deed of sale of the
Hino truck between Jose Andrada, Jr. and Moises Andrada had been simulated; and (c) approved the
compromise agreement between Pilhino and Spouses Jose Andrada, Jr. and Maxima Andrada.

On December 13, 2001, the Court of Appeals (CA) promulgated its decision, as follows:[2]

WHEREFORE, the judgment appealed from is AFFIRMED with the modification that the sale of the Hino
truck by defendant Jose Andrada, Jr. in favor of defendant-appellant Moises Andrada is declared valid,
subject to the rights of BA Finance as mortgagee and highest bidder.

SO ORDERED.

Spouses Moises and Clemencia Andrada are now before the Court via petition for review on certiorari to
pose the following issues: [3]

1. Whether or not Pilhino should be held liable for the damages the petitioners sustained from
Pilhinos levy on execution upon the Hino truck under Civil Case No. 20,489-90; and

2. Whether or not Pilhino was guilty of bad faith when it proceeded with the levy on execution upon
the Hino truck owned by Moises Andrada.

Ruling

We find no merit in the petition for review.

The petitioners assail the decision promulgated by the CA to the extent that it denied their claim for the
damages they had sought by way of counterclaim. They anchored their claim on Article 21 of the Civil
Code, which provides that any person who willfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy shall compensate the latter for damage.
Article 21 of the Civil Code, in conjunction with Article 19 of the Civil Code, is part of the cause of action
known in this jurisdiction as abuse of rights. The elements of abuse of rights are: (a) there is a legal right
or duty; (b) exercised in bad faith; and (c) for the sole intent of prejudicing or injuring another.[4]

In its assailed decision, the CA found that Pilhino had acted in good faith in bringing Civil Case No.
21,898-93 to annul the deed of sale involving the Hino truck executed by Jose Andrada, Jr. in favor of
Moises Andrada, considering that Pilhino had believed that the sale in favor of defendants-appellants
[had been] resorted to so that Jose Andrada [might] evade his obligations.[5] The CA concluded that no
remedy was available for any damages that the petitioners sustained from the filing of Civil Case No.
21,898-93 against them because the law affords no remedy for such damages resulting from an act
which does not amount to a legal injury or wrong.[6]

Worthy to note is that the CAs finding and conclusion rested on the RTCs own persuasion that the sale
of the Hino truck to Moises Andrada had been simulated.[7]

Yet, the petitioners still insist in this appeal that both lower courts erred in their conclusion on the
absence of bad faith on the part of Pilhino.

We cannot side with the petitioners. Their insistence, which represents their disagreement with the CAs
declaration that the second and third elements of abuse of rights, supra, were not established, requires
the consideration and review of factual issues. Hence, this appeal cannot succeed, for an appeal by
petition for review on certiorari cannot determine factual issues. In the exercise of its power of review,
the Court is not a trier of facts and does not normally undertake the re-examination of the evidence
presented by the contending parties during the trial. Perforce, the findings of fact by the CA are
conclusive and binding on the Court. This restriction of the review to questions of law has been
institutionalized in Section 1, Rule 45 of the Rules of Court, viz:

Section 1. Filing of petition with Supreme Court. A party desiring to appeal by certiorari from a judgment
or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other
courts whenever authorized by law, may file with the Supreme Court a verified petition for review on
certiorari. The petition shall raise only questions of law which must be distinctly set forth. (1a, 2a)[8]

It is true that the Court has, at times, allowed exceptions from the restriction. Among the recognized
exceptions are the following, to wit:[9]
(a) When the findings are grounded entirely on speculation, surmises, or conjectures;

(b) When the inference made is manifestly mistaken, absurd, or impossible;

(c) When there is grave abuse of discretion;

(d) When the judgment is based on a misapprehension of facts;

(e) When the findings of facts are conflicting;

(f) When in making its findings the CA went beyond the issues of the case, or its findings are contrary to
the admissions of both the appellant and the appellee;

(g) When the CAs findings are contrary to those by the trial court;

(h) When the findings are conclusions without citation of specific evidence on which they are based;

(i) When the facts set forth in the petition as well as in the petitioners main and reply briefs are not
disputed by the respondent;

(j) When the findings of fact are premised on the supposed absence of evidence and contradicted by the
evidence on record; or

(k) When the CA manifestly overlooked certain relevant facts not disputed by the parties, which, if
properly considered, would justify a different conclusion.

However, the circumstances of this case do not warrant reversing or modifying the findings of the CA,
which are consistent with the established facts. Verily, the petitioners did not prove the concurrence of
the elements of abuse of rights.
The petitioners further seek attorneys fees based on Article 2208 (4) of the Civil Code, which provides
that in the absence of stipulation, attorneys fees and expenses of litigation, other than judicial costs,
cannot be recovered, except xxx (4) in cases of clearly unfounded civil action or proceeding against the
plaintiff xxx.

The petitioners are not entitled to attorneys fees.

It is well accepted in this jurisdiction that no premium should be placed on the right to litigate and that
not every winning party is entitled to an automatic grant of attorneys fees.[10] Indeed, before the
effectivity of the new Civil Code, such fees could not be recovered in the absence of a stipulation.[11] It
was only with the advent of the new Civil Code that the right to collect attorneys fees in the instances
mentioned in Article 2208 was recognized,[12] and such fees are now included in the concept of actual
damages.[13] One such instance is where the defendant is guilty of gross and evident bad faith in
refusing to satisfy the plaintiffs plainly valid, just and demandable claim.[14] This is a corollary of the
general principle expressed in Article 19 of the Civil Code that everyone must, in the performance of his
duties, observe honesty and good faith and the rule embodied in Article 1170 that anyone guilty of fraud
(bad faith) in the performance of his obligation shall be liable for damages.

But, as noted by the Court in Morales v. Court of Appeals,[15] the award of attorneys fees is the
exception rather than the rule. The power of a court to award attorneys fees under Article 2208 of the
Civil Code demands factual, legal, and equitable justification; its basis cannot be left to speculation and
conjecture.[16] The general rule is that attorneys fees cannot be recovered as part of damages because
of the policy that no premium should be placed on the right to litigate.[17]

Herein, the element of bad faith on the part of Pilhino in commencing and prosecuting Civil Case No.
21,898-93, which was necessary to predicate the lawful grant of attorneys fees based on Article 2208 (4)
of the Civil Code, was not established. Accordingly, the petitioners demand for attorneys fees must fail.

WHEREFORE, we deny the petition for review on certiorari for its lack of merit, and affirm the decision
of the Court of Appeals.

PHILIPPINE COMMERCIAL INTERNATIONAL BANK, versus ANTONIO B. BALMACEDA and ROLANDO N.

RAMOS,
Before us is a petition for review on certiorari,[1] filed by the Philippine Commercial International
Bank[2] (Bank or PCIB), to reverse and set aside the decision[3] dated April 29, 2003 of the Court of
Appeals (CA) in CA-G.R. CV No. 69955. The CA overturned the September 22, 2000 decision of the
Regional Trial Court (RTC) of Makati City, Branch 148, in Civil Case No. 93-3181, which held respondent
Rolando Ramos liable to PCIB for the amount of P895,000.00.

FACTUAL ANTECEDENTS

On September 10, 1993, PCIB filed an action for recovery of sum of money with damages before the RTC
against Antonio Balmaceda, the Branch Manager of its Sta. Cruz, Manila branch. In its complaint, PCIB
alleged that between 1991 and 1993, Balmaceda, by taking advantage of his position as branch
manager, fraudulently obtained and encashed 31 Managers checks in the total amount of Ten Million
Seven Hundred Eighty Two Thousand One Hundred Fifty Pesos (P10,782,150.00).

On February 28, 1994, PCIB moved to be allowed to file an amended complaint to implead Rolando
Ramos as one of the recipients of a portion of the proceeds from Balmacedas alleged fraud. PCIB also
increased the number of fraudulently obtained and encashed Managers checks to 34, in the total
amount of Eleven Million Nine Hundred Thirty Seven Thousand One Hundred Fifty Pesos
(P11,937,150.00). The RTC granted this motion.

Since Balmaceda did not file an Answer, he was declared in default. On the other hand, Ramos filed an
Answer denying any knowledge of Balmacedas scheme. According to Ramos, he is a reputable
businessman engaged in the business of buying and selling fighting cocks, and Balmaceda was one of his
clients. Ramos admitted receiving money from Balmaceda as payment for the fighting cocks that he sold
to Balmaceda, but maintained that he had no knowledge of the source of Balmacedas money.

THE RTC DECISION

On September 22, 2000, the RTC issued a decision in favor of PCIB, with the following dispositive
portion:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the
defendants as follows:
1. Ordering defendant Antonio Balmaceda to pay the amount of P11,042,150.00 with interest thereon at
the legal rate from [the] date of his misappropriation of the said amount until full restitution shall have
been made[.]

2. Ordering defendant Rolando Ramos to pay the amount of P895,000.00 with interest at the legal rate
from the date of misappropriation of the said amount until full restitution shall have been made[.]

3. Ordering the defendants to pay plaintiff moral damages in the sum of P500,000.00 and attorneys fees
in the amount of ten (10%) percent of the total misappropriated amounts sought to be recovered.

4. Plus costs of suit.

SO ORDERED.[4]

From the evidence presented, the RTC found that Balmaceda, by taking undue advantage of his position
and authority as branch manager of the Sta. Cruz, Manila branch of PCIB, successfully obtained and
misappropriated the banks funds by falsifying several commercial documents. He accomplished this by
claiming that he had been instructed by one of the Banks corporate clients to purchase Managers checks
on its behalf, with the value of the checks to be debited from the clients corporate bank account. First,
he would instruct the Bank staff to prepare the application forms for the purchase of Managers checks,
payable to several persons. Then, he would forge the signature of the clients authorized representative
on these forms and sign the forms as PCIBs approving officer. Finally, he would have an authorized
officer of PCIB issue the Managers checks. Balmaceda would subsequently ask his subordinates to
release the Managers checks to him, claiming that the client had requested that he deliver the
checks.[5] After receiving the Managers checks, he encashed them by forging the signatures of the
payees on the checks.

In ruling that Ramos acted in collusion with Balmaceda, the RTC noted that although the Managers
checks payable to Ramos were crossed checks, Balmaceda was still able to encash the checks.[6] After
Balmaceda encashed three of these Managers checks, he deposited most of the money into Ramos
account.[7] The RTC concluded that from the P11,937,150.00 that Balmaceda misappropriated from
PCIB, P895,000.00 actually went to Ramos. Since the RTC disbelieved Ramos allegation that the sum of
money deposited into his Savings Account (PCIB, Pasig branch) were proceeds from the sale of fighting
cocks, it held Ramos liable to pay PCIB the amount of P895,000.00.
THE COURT OF APPEALS DECISION

On appeal, the CA dismissed the complaint against Ramos, holding that no sufficient evidence existed to
prove that Ramos colluded with Balmaceda in the latters fraudulent manipulations.[8]

According to the CA, the mere fact that Balmaceda made Ramos the payee in some of the Managers
checks does not suffice to prove that Ramos was complicit in Balmacedas fraudulent scheme. It
observed that other persons were also named as payees in the checks that Balmaceda acquired and
encashed, and PCIB only chose to go after Ramos. With PCIBs failure to prove Ramos actual participation
in Balmacedas fraud, no legal and factual basis exists to hold him liable.

The CA also found that PCIB acted illegally in freezing and debiting P251,910.96 from Ramos bank
account. The CA thus decreed:

WHEREFORE, the appeal is granted. The Decision of the trial court rendered on September 22, 2000[,]
insofar as appellant Ramos is concerned, is SET ASIDE, and the complaint below against him is
DISMISSED.

Appellee is hereby ordered to release the amount of P251,910.96 to appellant Ramos plus interest at
[the] legal rate computed from September 30, 1993 until appellee shall have fully complied therewith.

Appellee is likewise ordered to pay appellant Ramos the following:

a) P50,000.00 as moral damages

b) P50,000.00 as exemplary damages, and

c) P20,000.00 as attorneys fees.

No costs.

SO ORDERED.[9]
THE PETITION

In the present petition, PCIB avers that:

THE APPELLATE COURT ERRED IN HOLDING THAT THERE IS NO EVIDENCE TO HOLD THAT RESPONDENT
RAMOS ACTED IN COMPLICITY WITH RESPONDENT BALMACEDA

II

THE APPELLATE COURT ERRED IN ORDERING THE PETITIONER TO RELEASE THE AMOUNT OF
P251,910.96 TO RESPONDENT RAMOS AND TO PAY THE LATTER MORAL AND EXEMPLARY DAMAGES
AND ATTORNEYS FEES[10]

PCIB contends that the circumstantial evidence shows that Ramos had knowledge of, and acted in
complicity with Balmaceda in, the perpetuation of the fraud. Ramos explanation that he is a
businessman and that he received the Managers checks as payment for the fighting cocks he sold to
Balmaceda is unconvincing, given the large sum of money involved. While Ramos presented evidence
that he is a reputable businessman, this evidence does not explain why the Managers checks were made
payable to him in the first place.

PCIB maintains that it had the right to freeze and debit the amount of P251,910.96 from Ramos bank
account, even without his consent, since legal compensation had taken place between them by
operation of law. PCIB debited Ramos bank account, believing in good faith that Ramos was not entitled
to the proceeds of the Managers checks and was actually privy to the fraud perpetrated by Balmaceda.
PCIB cannot thus be held liable for moral and exemplary damages.

OUR RULING

We partly grant the petition.

At the outset, we observe that the petition raises mainly questions of fact whose resolution requires the
re-examination of the evidence on record. As a general rule, petitions for review on certiorari only
involve questions of law.[11] By way of exception, however, we can delve into evidence and the factual
circumstance of the case when the findings of fact in the tribunals below (in this case between those of
the CA and of the RTC) are conflicting. When the exception applies, we are given latitude to review the
evidence on record to decide the case with finality.[12]

Ramos participation in Balmacedas scheme not proven

From the testimonial and documentary evidence presented, we find it beyond question that Balmaceda,
by taking advantage of his position as branch manager of PCIBs Sta. Cruz, Manila branch, was able to
apply for and obtain Managers checks drawn against the bank account of one of PCIBs clients. The
unsettled question is whether Ramos, who received a portion of the money that Balmaceda took from
PCIB, should also be held liable for the return of this money to the Bank.

PCIB insists that it presented sufficient evidence to establish that Ramos colluded with Balmaceda in the
scheme to fraudulently secure Managers checks and to misappropriate their proceeds. Since Ramos
defense anchored on mere denial of any participation in Balmacedas wrongdoing is an intrinsically weak
defense, it was error for the CA to exonerate Ramos from any liability.

In civil cases, the party carrying the burden of proof must establish his case by a preponderance of
evidence, or evidence which, to the court, is more worthy of belief than the evidence offered in
opposition.[13] This Court, in Encinas v. National Bookstore, Inc.,[14] defined preponderance of
evidence in the following manner:

"Preponderance of evidence" is the weight, credit, and value of the aggregate evidence on either side
and is usually considered to be synonymous with the term "greater weight of the evidence" or "greater
weight of the credible evidence." Preponderance of evidence is a phrase which, in the last analysis,
means probability of the truth. It is evidence which is more convincing to the court as worthy of belief
than that which is offered in opposition thereto.

The party, whether the plaintiff or the defendant, who asserts the affirmative of an issue has the onus to
prove his assertion in order to obtain a favorable judgment, subject to the overriding rule that the
burden to prove his cause of action never leaves the plaintiff. For the defendant, an affirmative defense
is one that is not merely a denial of an essential ingredient in the plaintiff's cause of action, but one
which, if established, will constitute an "avoidance" of the claim.[15]

Thus, PCIB, as plaintiff, had to prove, by preponderance of evidence, its positive assertion that Ramos
conspired with Balmaceda in perpetrating the latters scheme to defraud the Bank. In PCIBs estimation, it
successfully accomplished this through the submission of the following evidence:

[1] Exhibits A, D, PPPP, QQQQ, and RRRR and their submarkings, the application forms for MCs, show
that [these MCs were applied for in favor of Ramos;]

[2] Exhibits K, N, SSSS, TTTT, and UUUU and their submarkings prove that the MCs were issued in favor
of x x x Ramos[; and]

[3] [T]estimonies of the witness for [PCIB].[16]

We cannot accept these submitted pieces of evidence as sufficient to satisfy the burden of proof that
PCIB carries as plaintiff.

On its face, all that PCIBs evidence proves is that Balmaceda used Ramos name as a payee when he filled
up the application forms for the Managers checks. But, as the CA correctly observed, the mere fact that
Balmaceda made Ramos the payee on some of the Managers checks is not enough basis to conclude
that Ramos was complicit in Balmacedas fraud; a number of other people were made payees on the
other Managers checks yet PCIB never alleged them to be liable, nor did the Bank adduce any other
evidence pointing to Ramos participation that would justify his separate treatment from the others.
Also, while Ramos is Balmacedas brother-in-law, their relationship is not sufficient, by itself, to render
Ramos liable, absent concrete proof of his actual participation in the fraudulent scheme.

Moreover, the evidence on record clearly shows that Balmaceda acted on his own when he applied for
the Managers checks against the bank account of one of PCIBs clients, as well as when he encashed the
fraudulently acquired Managers checks.

Mrs. Elizabeth Costes, the Area Manager of PCIB at the time of the relevant events, testified that
Balmaceda committed all the acts necessary to obtain the unauthorized Managers checks from filling up
the application form by forging the signature of the clients representative, to forging the signatures of
the payees in order to encash the checks. As Mrs. Costes stated in her testimony:

Q: I am going into [these] particular instances where you said that Mr. Balmaceda [has] been making
unauthorized withdrawals from particular account of a client or a client of yours at Sta. Cruz branch.
Would you tell us how he effected his unauthorized withdrawals?

A: He prevailed upon the domestic remittance clerk to prepare the application of a Managers check
which [has] been debited to a clients account. This particular Managers check will be payable to a
certain individual thru his account as the instruction of the client.

Q: What was your findings in so far as the particular alleged instruction of a client is concerned?

A: We found out that he forged the signature of the client.

Q: On that particular application?

A: Yes sir.

Q: Showing to you several applications for Managers Check previously attached as Annexes A, B, C, D
and E[] of the complaint. Could you please tell us where is that particular alleged signature of a client
applying for the Managers check which you claimed to have been forged by Mr. Balmaceda?

A: Here sir.

xxxx

Q: After the accomplishment of this application form as you stated Mrs. witness, do you know what
happened to the application form?

A: Before that application form is processed it goes to several stages. Here for example this was signed
supposed to be by the client and his signature representing that, he certified the signature based on
their records to be authentic.

Q: When you said he to whom are you referring to?

A: Mr. Balmaceda. And at the same time he approved the transaction.

xxxx

Q: Do you know if the corresponding checks applied for in the application forms were issued?

A: Yes sir.

Q: Could you please show us where these checks are now, the one applied for in Exhibit A which is in the
amount of P150,000.00, where is the corresponding check?

A: Rolando Ramos dated December 26, 1991 and one of the signatories with higher authority, this is Mr.
Balmacedas signature.

Q: In other words he is likewise approving signatory to the Managers check?

A: Yes sir. This is an authority that the check [has] been encashed.

Q: In other words this check issued to Rolando Ramos dated December 26, 1991 is a cross check but
nonetheless he allowed to encash by granting it.

Could you please show us?

ATTY. PACES: Witness pointing to an initial of the defendant Antonio Balmaceda, the notation cross
check.

A: And this is his signature.

xxxx

Q: How about the check corresponding to Exhibit E-2 which is an application for P125,000.00 for a
certain Rolando Ramos. Do you have the check?

A: Yes sir.
ATTY. PACES: Witness producing a check dated December 19, 1991 the amount of P125,000.00 payable
to certain Rolando Ramos.

Q: Can you tell us whether the same modus operandi was ad[o]pted by Mr. Balmaceda in so far as he is
concerned?

A: Yes sir he is also the right signer and he authorized the cancellation of the cross check.[17] (emphasis
ours)

xxxx

Q: These particular checks [Mrs.] witness in your findings, do you know if Mr. Balmaceda [has] again any
participation in these checks?

A: He is also the right signer and approved officer and he was authorized to debit on file.

xxxx

Q: And do you know if these particular checks marked as Exhibit G-2 to triple FFF were subsequently
encashed?

A: Yes sir.

Q: Were you able to find out who encashed?

A: Mr. Balmaceda himself and besides he approved the encashment because of the signature that he
allowed the encashment of the check.

xxxx

Q: Do you know if this particular person having in fact withdraw of received the proceeds of [these]
particular checks, the payee?

A: No sir.
Q: It was all Mr. Balmaceda dealing with you?

A: Yes sir.

Q: In other words it would be possible that Mr. Balmaceda himself gotten the proceeds of the checks by
forging the payees signature?

A: Yes sir.[18] (emphases ours)

Mrs. Nilda Laforteza, the Commercial Account Officer of PCIBs Sta. Cruz, Manila branch at the time the
events of this case occurred, confirmed Mrs. Costes testimony by stating that it was Balmaceda who
forged Ramos signature on the Managers checks where Ramos was the payee, so as to encash the
amounts indicated on the checks.[19] Mrs. Laforteza also testified that Ramos never went to the PCIB,
Sta. Cruz, Manila branch to encash the checks since Balmaceda was the one who deposited the checks
into Ramos bank account. As revealed during Mrs. Lafortezas cross-examination:

Q: Mrs. Laforteza, these checks that were applied for by Mr. Balmaceda, did you ever see my client go to
the bank to encash these checks?

A: No it is Balmaceda who is depositing in his behalf.

Q: Did my client ever call up the bank concerning this amount?

A: Yes he is not going to call PCIBank Sta. Cruz branch because his account is maintained at Pasig.

Q: So Mr. Balmaceda was the one who just remitted or transmitted the amount that you claimed [was
sent] to the account of my client?

A: Yes.[20] (emphases ours)

Even Mrs. Rodelia Nario, presented by PCIB as its rebuttal witness to prove that Ramos encashed a
Managers check for P480,000.00, could only testify that the money was deposited into Ramos PCIB bank
account. She could not attest that Ramos himself presented the Managers check for deposit in his bank
account.[21] These testimonies clearly dispute PCIBs theory that Ramos was instrumental in the
encashment of the Managers checks.
We also find no reason to doubt Ramos claim that Balmaceda deposited these large sums of money into
his bank account as payment for the fighting cocks that Balmaceda purchased from him. Ramos
presented two witnesses Vicente Cosculluela and Crispin Gadapan who testified that Ramos previously
engaged in the business of buying and selling fighting cocks, and that Balmaceda was one of Ramos
biggest clients.

Quoting from the RTC decision, PCIB stresses that Ramos own witness and business partner, Cosculluela,
testified that the biggest net profit he and Ramos earned from a single transaction with Balmaceda
amounted to no more than P100,000.00, for the sale of approximately 45 fighting cocks.[22] In PCIBs
view, this testimony directly contradicts Ramos assertion that he received approximately P400,000.00
from his biggest transaction with Balmaceda. To PCIB, the testimony also renders questionable Ramos
assertion that Balmaceda deposited large amounts of money into his bank account as payment for the
fighting cocks.

On this point, we find that PCIB misunderstood Cosculluelas testimony. A review of the testimony shows
that Cosculluela specifically referred to the net profit that they earned from the sale of the fighting
cocks;[23] PCIB apparently did not take into account the capital, transportation and other expenses that
are components of these transactions. Obviously, in sales transactions, the buyer has to pay not only for
the value of the thing sold, but also for the shipping costs and other incidental costs that accompany the
acquisition of the thing sold. Thus, while the biggest net profit that Ramos and Cosculluela earned in a
single transaction amounted to no more than P100,000.00,[24] the inclusion of the actual acquisition
costs of the fighting cocks, the transportation expenses (i.e., airplane tickets from Bacolod or
Zamboanga to Manila) and other attendant expenses could account for the P400,000.00 that Balmaceda
deposited into Ramos bank account.

Given that PCIB failed to establish Ramos participation in Balmacedas scheme, it was not even necessary
for Ramos to provide an explanation for the money he received from Balmaceda. Even if the evidence
adduced by the plaintiff appears stronger than that presented by the defendant, a judgment cannot be
entered in the plaintiffs favor if his evidence still does not suffice to sustain his cause of action;[25] to
reiterate, a preponderance of evidence as defined must be established to achieve this result.

PCIB itself at fault as employer

In considering this case, one point that cannot be disregarded is the significant role that PCIB played
which contributed to the perpetration of the fraud. We cannot ignore that Balmaceda managed to carry
out his fraudulent scheme primarily because other PCIB employees failed to carry out their assigned
tasks flaws imputable to PCIB itself as the employer.

Ms. Analiza Vega, an accounting clerk, teller and domestic remittance clerk working at the PCIB, Sta.
Cruz, Manila branch at the time of the incident, testified that Balmaceda broke the Banks protocol when
he ordered the Banks employees to fill up the application forms for the Managers checks, to be debited
from the bank account of one of the banks clients, without providing the necessary Authority to Debit
from the client.[26] PCIB also admitted that these Managers checks were subsequently released to
Balmaceda, and not to the clients representative, based solely on Balmacedas word that the client had
tasked him to deliver these checks.[27]

Despite Balmacedas gross violations of bank procedures mainly in the processing of the applications for
Managers checks and in the releasing of the Managers checks Balmacedas co-employees not only
turned a blind eye to his actions, but actually complied with his instructions. In this way, PCIBs own
employees were unwitting accomplices in Balmacedas fraud.

Another telling indicator of PCIBs negligence is the fact that it allowed Balmaceda to encash the
Managers checks that were plainly crossed checks. A crossed check is one where two parallel lines are
drawn across its face or across its corner.[28] Based on jurisprudence, the crossing of a check has the
following effects: (a) the check may not be encashed but only deposited in the bank; (b) the check may
be negotiated only once to the one who has an account with the bank; and (c) the act of crossing the
check serves as a warning to the holder that the check has been issued for a definite purpose and he
must inquire if he received the check pursuant to this purpose; otherwise, he is not a holder in due
course.[29] In other words, the crossing of a check is a warning that the check should be deposited only
in the account of the payee. When a check is crossed, it is the duty of the collecting bank to ascertain
that the check is only deposited to the payees account.[30] In complete disregard of this duty, PCIBs
systems allowed Balmaceda to encash 26 Managers checks which were all crossed checks, or checks
payable to the payees account only.

The General Banking Law of 2000[31] requires of banks the highest standards of integrity and
performance. The banking business is impressed with public interest. Of paramount importance is the
trust and confidence of the public in general in the banking industry. Consequently, the diligence
required of banks is more than that of a Roman pater familias or a good father of a family.[32] The
highest degree of diligence is expected.[33]

While we appreciate that Balmaceda took advantage of his authority and position as the branch
manager to commit these acts, this circumstance cannot be used to excuse the manner the Bank
through its employees handled its clients bank accounts and thereby ignored established bank
procedures at the branch managers mere order. This lapse is made all the more glaring by Balmacedas
repetition of his modus operandi 33 more times in a period of over one year by the Banks own
estimation. With this kind of record, blame must be imputed on the Bank itself and its systems, not
solely on the weakness or lapses of individual employees.

Principle of unjust enrichment not applicable

PCIB maintains that even if Ramos did not collude with Balmaceda, it still has the right to recover the
amounts unjustly received by Ramos pursuant to the principle of unjust enrichment. This principle is
embodied in Article 22 of the Civil Code which provides:

Article 22. Every person who through an act of performance by another, or any other means, acquires or
comes into possession of something at the expense of the latter without just or legal ground, shall
return the same to him.

To have a cause of action based on unjust enrichment, we explained in University of the Philippines v.
Philab Industries, Inc.[34] that:

Unjust enrichment claims do not lie simply because one party benefits from the efforts or obligations of
others, but instead it must be shown that a party was unjustly enriched in the sense that the term
unjustly could mean illegally or unlawfully.

Moreover, to substantiate a claim for unjust enrichment, the claimant must unequivocally prove that
another party knowingly received something of value to which he was not entitled and that the state of
affairs are such that it would be unjust for the person to keep the benefit. Unjust enrichment is a term
used to depict result or effect of failure to make remuneration of or for property or benefits received
under circumstances that give rise to legal or equitable obligation to account for them; to be entitled to
remuneration, one must confer benefit by mistake, fraud, coercion, or request. Unjust enrichment is not
itself a theory of reconvey. Rather, it is a prerequisite for the enforcement of the doctrine of
restitution.[35] (emphasis ours)
Ramos cannot be held liable to PCIB on account of unjust enrichment simply because he received
payments out of money secured by fraud from PCIB. To hold Ramos accountable, it is necessary to prove
that he received the money from Balmaceda, knowing that he (Ramos) was not entitled to it. PCIB must
also prove that Ramos, at the time that he received the money from Balmaceda, knew that the money
was acquired through fraud. Knowledge of the fraud is the link between Ramos and PCIB that would
obligate Ramos to return the money based on the principle of unjust enrichment.

However, as the evidence on record indicates, Ramos accepted the deposits that Balmaceda made
directly into his bank account, believing that these deposits were payments for the fighting cocks that
Balmaceda had purchased. Significantly, PCIB has not presented any evidence proving that Ramos
participated in, or that he even knew of, the fraudulent sources of Balmacedas funds.

PCIB illegally froze and debited Ramos assets

We also find that PCIB acted illegally in freezing and debiting Ramos bank account. In BPI Family Bank v.
Franco,[36] we cautioned against the unilateral freezing of bank accounts by banks, noting that:

More importantly, [BPI Family Bank] does not have a unilateral right to freeze the accounts of Franco
based on its mere suspicion that the funds therein were proceeds of the multi-million peso scam Franco
was allegedly involved in. To grant [BPI Family Bank], or any bank for that matter, the right to take
whatever action it pleases on deposits which it supposes are derived from shady transactions, would
open the floodgates of public distrust in the banking industry.[37]

We see no legal merit in PCIBs claim that legal compensation took place between it and Ramos, thereby
warranting the automatic deduction from Ramos bank account. For legal compensation to take place,
two persons, in their own right, must first be creditors and debtors of each other.[38] While PCIB, as the
depositary bank, is Ramos debtor in the amount of his deposits, Ramos is not PCIBs debtor under the
evidence the PCIB adduced. PCIB thus had no basis, in fact or in law, to automatically debit from Ramos
bank account.

On the award of damages

Although PCIBs act of freezing and debiting Ramos account is unlawful, we cannot hold PCIB liable for
moral and exemplary damages. Since a contractual relationship existed between Ramos and PCIB as the
depositor and the depositary bank, respectively, the award of moral damages depends on the
applicability of Article 2220 of the Civil Code, which provides:

Article 2220. Willful injury to property may be a legal ground for awarding moral damages if the court
should find that, under the circumstances, such damages are justly due. The same rule applies to
breaches of contract where the defendant acted fraudulently or in bad faith. [emphasis ours]

Bad faith does not simply connote bad judgment or negligence; it imports a dishonest purpose or some
moral obliquity and conscious commission of a wrong; it partakes of the nature of fraud.[39]

As the facts of this case bear out, PCIB did not act out of malice or bad faith when it froze Ramos bank
account and subsequently debited the amount of P251,910.96 therefrom. While PCIB may have acted
hastily and without regard to its primary duty to treat the accounts of its depositors with meticulous
care and utmost fidelity,[40] we find that its actions were propelled more by the need to protect itself,
and not out of malevolence or ill will. One may err, but error alone is not a ground for granting moral
damages.[41]

We also disallow the award of exemplary damages. Article 2234 of the Civil Code requires a party to first
prove that he is entitled to moral, temperate or compensatory damages before he can be awarded
exemplary damages. Since no reason exists to award moral damages, so too can there be no reason to
award exemplary damages.

We deem it just and equitable, however, to uphold the award of attorneys fees in Ramos favor. Taking
into consideration the time and efforts involved that went into this case, we increase the award of
attorneys fees from P20,000.00 to P75,000.00.

WHEREFORE, the petition is PARTIALLY GRANTED. We AFFIRM the decision of the Court of Appeals
dated April 29, 2003 in CA-G.R. CV No. 69955 with the MODIFICATION that the award of moral and
exemplary damages in favor of Rolando N. Ramos is DELETED, while the award of attorneys fees is
INCREASED to P75,000.00. Costs against the Philippine Commercial International Bank.

NANCY T. LORZANO, versus JUAN TABAYAG, JR.,

Nature of the Petition

This is a petition for review on certiorari under Rule 45 of the Rules of Court filed by Nancy T. Lorzano
(petitioner) assailing the Court of Appeals (CA) Decision[1] dated March 18, 2009 and Resolution[2]
dated September 16, 2009 in CA-G.R. CV No. 87762 entitled Juan Tabayag, Jr. v. Nancy T. Lorzano.

The Antecedent Facts

The instant case stemmed from an amended complaint[3] for annulment of document and
reconveyance filed by Juan Tabayag, Jr. (respondent) against the petitioner, docketed as Civil Case No.
Ir-3286, with the Regional Trial Court (RTC) of Iriga City.

The petitioner and the respondent are two of the children of the late Juan Tabayag (Tabayag) who died
on June 2, 1992. Tabayag owned a parcel of land situated in Sto. Domingo, Iriga City (subject property).
Right after the burial of their father, the petitioner allegedly requested from her siblings that she be
allowed to take possession of and receive the income generated by the subject property until after her
eldest son could graduate from college. The petitioners siblings acceded to the said request.

After the petitioners eldest son finished college, her siblings asked her to return to them the possession
of the subject property so that they could partition it among themselves. However, the petitioner
refused to relinquish her possession of the subject property claiming that she purchased the subject
property from their father as evidenced by a Deed of Absolute Sale of Real Property[4] executed by the
latter on May 25, 1992.

The respondent claimed that their father did not execute the said deed of sale. He pointed out that the
signature of their father appearing in the said deed of sale was a forgery as the same is markedly
different from the real signature of Tabayag.

Further, the respondent asserted that the said deed of sale was acknowledged before a person who was
not a duly commissioned Notary Public. The deed of sale was acknowledged by the petitioner before a
certain Julian P. Cabaes (Cabaes) on May 25, 1992 at Iriga City. However, as per the Certification[5]
issued by the Office of the Clerk of Court of the RTC on May 16, 2002, Cabaes has never been
commissioned as a Notary Public for and in the Province of Camarines Sur and in the Cities of Iriga and
Naga.

The respondent alleged that the petitioner purposely forged the signature of Tabayag in the said deed of
sale to deprive him and their other siblings of their share in the subject property. He then averred that
the subject property was already covered by Original Certificate of Title (OCT) No. 1786[6] issued by the
Register of Deeds of Iriga City on January 9, 2001 registered under the name of the petitioner. OCT No.
1786 was issued pursuant to Free Patent No. 051716 which was procured by the petitioner on June 24,
1996.

For her part, the petitioner maintained she is the owner of the subject parcel of land having purchased
the same from Tabayag as evidenced by the May 25, 1992 deed of sale. Further, the petitioner asserted
that the respondent failed to establish that the signature of Tabayag appearing on the said deed of sale
was a forgery considering that it was not submitted for examination by a handwriting expert.

The RTC Decision

On April 28, 2006, the RTC rendered an Amended Decision[7] the decretal portion of which reads:

WHEREFORE, Judgment is hereby rendered[:]

a. Declaring the supposed Deed of Sale null and void and of no legal effect;

b. Ordering the [petitioner] to reconvey to the heirs of the late Juan Tabayag, Sr. the land subject
matter of this case[;]

c. Declaring the property described in the complaint and in the spurious deed of sale to be owned in
common by the heirs of Juan Tabayag, Sr. as part of their inheritance from said Juan Tabayag, Sr[.];

d. Ordering [petitioner] to pay plaintiff the sum of One Hundred Thousand Pesos (P100,000.00)by
way of moral damages;

e. Ordering defendant to pay plaintiff the attorneys fees in the sum of Fifteen Thousand Pesos
(P15,000.00), based on quantum meruit;

f. Dismissing the counterclaim for lack of merit[;]

g. Costs against the defendant.

SO ORDERED.[8]

The RTC opined that a cursory comparison between the signature of Tabayag appearing on the said
deed of sale and his signatures appearing on other documents would clearly yield a conclusion that the
former was indeed a forgery. Moreover, the RTC asserted that the nullity of the said May 25, 1992 deed
of sale all the more becomes glaring considering that the same was purportedly acknowledged before a
person who is not a duly commissioned Notary Public.

The CA Decision

Thereafter, the petitioner appealed the decision with the CA. On March 18, 2009, the CA rendered the
assailed decision affirming in toto the RTC decision.[9] The CA held that the testimony of a handwriting
expert in this case is not indispensable as the similarity and dissimilarity between the questioned
signature of Tabayag as compared to other signatures of the latter in other documents could be
determined by a visual comparison.

Further, the CA upheld the award of moral damages and attorneys fees in favor of the respondent as the
petitioners conduct caused great concern and anxiety to the respondent and that the latter had to go to
court and retain the services of counsel to pursue his rights and protect his interests.

Undaunted, the petitioner instituted the instant petition for review on certiorari before this Court
asserting the following: (1) the questioned signature of Tabayag in the May 25, 1992 deed of sale could
not be declared spurious unless first examined and declared to be so by a handwriting expert; (2)
considering that the subject property was registered under the petitioners name pursuant to a free
patent, reconveyance of the same in favor of the respondent is improper since only the Government,
through the Office of the Solicitor General (OSG), could assail her title thereto in an action for reversion;
and (3) the respondent is not entitled to an award for moral damages and attorneys fees.

In his Comment,[10] the respondent claimed that the issues raised in the instant petition are factual in
nature and, hence, could not be passed upon by this Court in a petition for review on certiorari under
Rule 45. Likewise, the respondent asserted that the petitioners free patent, having been issued on the
basis of a falsified document, does not create a right over the subject property in her favor.
Issues

In sum, the threshold issues for resolution are the following: (a) whether the lower courts erred in
declaring the May 25, 1992 deed of sale a nullity; (b) whether an action for reconveyance is proper in
the instant case; and (c) whether the respondent is entitled to an award of moral damages and
attorneys fees.

The Courts Ruling

First and Third Issues: Nullity of the Deed of Sale and Award of Moral Damages and Attorneys Fees

This Court shall jointly discuss the first and third issues as the resolution of the same are interrelated.

Primarily, Section 1, Rule 45 of the Rules of Court categorically states that the petition filed shall raise
only questions of law, which must be distinctly set forth. A question of law arises when there is doubt as
to what the law is on a certain state of facts, while there is a question of fact when the doubt arises as to
the truth or falsity of the alleged facts. For a question to be one of law, the same must not involve an
examination of the probative value of the evidence presented by the litigants or any of them. The
resolution of the issue must rest solely on what the law provides on the given set of circumstances.
Once it is clear that the issue invites a review of the evidence presented, the question posed is one of
fact.[11]

That the signature of Tabayag in the May 25, 1992 deed of sale was a forgery is a conclusion derived by
the RTC and the CA on a question of fact. The same is conclusive upon this Court as it involves the truth
or falsehood of an alleged fact, which is a matter not for this Court to resolve.[12] Where a petitioner
casts doubt on the findings of the lower court as affirmed by the CA regarding the existence of forgery is
a question of fact.[13]

In any case, the CA aptly ruled that a handwriting expert is not indispensable to prove that the signature
of Tabayag in the questioned deed of sale was indeed a forgery. It is true that the opinion of handwriting
experts are not necessarily binding upon the court, the experts function being to place before the court
data upon which the court can form its own opinion. Handwriting experts are usually helpful in the
examination of forged documents because of the technical procedure involved in analyzing them. But
resort to these experts is not mandatory or indispensable to the examination or the comparison of
handwriting. A finding of forgery does not depend entirely on the testimonies of handwriting experts,
because the judge must conduct an independent examination of the questioned signature in order to
arrive at a reasonable conclusion as to its authenticity.[14]

For the same reason, we would ordinarily disregard the petitioners allegation as to the propriety of the
award of moral damages and attorneys fees in favor of the respondent as it is a question of fact. Thus,
questions on whether or not there was a preponderance of evidence to justify the award of damages or
whether or not there was a causal connection between the given set of facts and the damage suffered
by the private complainant or whether or not the act from which civil liability might arise exists are
questions of fact.[15]

Essentially, the petitioner is questioning the award of moral damages and attorneys fees in favor of the
respondent as the same is supposedly not fully supported by evidence. However, in the final analysis,
the question of whether the said award is fully supported by evidence is a factual question as it would
necessitate whether the evidence adduced in support of the same has any probative value. For a
question to be one of law, it must involve no examination of the probative value of the evidence
presented by the litigants or any of them.[16]

Nevertheless, a review of the amount of moral damages actually awarded by the lower courts in favor of
the respondent is necessary.

Here, the lower courts ordered the petitioner to pay the respondent moral damages in the amount of
P100,000.00. We find the said amount to be excessive.

Moral damages are not intended to enrich the complainant at the expense of the defendant. Rather,
these are awarded only to enable the injured party to obtain means, diversions or amusements that will
serve to alleviate the moral suffering that resulted by reason of the defendants culpable action. The
purpose of such damages is essentially indemnity or reparation, not punishment or correction. In other
words, the award thereof is aimed at a restoration within the limits of the possible, of the spiritual
status quo ante; therefore, it must always reasonably approximate the extent of injury and be
proportional to the wrong committed.[17]

Accordingly, the amount of moral damages must be reduced to P30,000.00, an amount reasonably
commensurate to the injury sustained by the respondent.
Second Issue: Propriety of the Reconveyance of the Subject Property to the Heirs of the late Juan
Tabayag

The petitioner asserted that the CA erred in not finding that her ownership over the subject property
was by virtue of a free patent issued by the government and, thus, even assuming that the subject deed
of sale is invalid, her title and ownership of the subject property cannot be divested or much less
ordered reconveyed to the heirs of Tabayag.

Simply put, the petitioner points out that the subject property, being acquired by her through a grant of
free patent from the government, originally belonged to the public domain. As such, the lower courts
could not order the reconveyance of the subject property to the heirs of Tabayag as the latter are not
the original owners thereof. If at all, the subject property could only be ordered reverted to the public
domain.

An issue cannot be raised for the first time on appeal as it is already barred by estoppel.

This Court notes that the foregoing argument is being raised by the petitioner for the first time in the
instant petition. It is well-settled that no question will be entertained on appeal unless it has been raised
in the proceedings below. Points of law, theories, issues and arguments not brought to the attention of
the lower court, administrative agency or quasi-judicial body, need not be considered by a reviewing
court, as they cannot be raised for the first time at that late stage. Basic considerations of fairness and
due process impel this rule. Any issue raised for the first time on appeal is barred by estoppel.[18]

Accordingly, the petitioners attack on the propriety of the action for reconveyance in this case ought to
be disregarded. However, in order to obviate any lingering doubt on the resolution of the issues
involved in the instant case, this Court would proceed to discuss the cogency of the petitioners
foregoing argument.

Title emanating from a free patent fraudulently secured does not become indefeasible.

The petitioner asserts that the amended complaint for annulment of document, reconveyance and
damages that was filed by the respondent with the RTC is a collateral attack on her title over the subject
property. She avers that, when the said amended compliant was filed, more than a year had already
lapsed since OCT No. 1786 over the subject property was issued under her name. Thus, the petitioner
maintains that her title over the subject property is already indefeasible and, hence, could not be
attacked collaterally.

We do not agree.

A Free Patent may be issued where the applicant is a natural-born citizen of the Philippines; is not the
owner of more than twelve (12) hectares of land; has continuously occupied and cultivated, either by
himself or through his predecessors-in-interest, a tract or tracts of agricultural public land subject to
disposition, for at least 30 years prior to the effectivity of Republic Act No. 6940; and has paid the real
taxes thereon while the same has not been occupied by any person.[19]

Once a patent is registered and the corresponding certificate of title is issued, the land covered thereby
ceases to be part of public domain and becomes private property, and the Torrens Title issued pursuant
to the patent becomes indefeasible upon the expiration of one year from the date of such issuance.[20]
However, a title emanating from a free patent which was secured through fraud does not become
indefeasible, precisely because the patent from whence the title sprung is itself void and of no effect
whatsoever.[21]

On this point, our ruling in Republic v. Heirs of Felipe Alejaga, Sr.[22] is instructive:

True, once a patent is registered and the corresponding certificate of title [is] issued, the land covered
by them ceases to be part of the public domain and becomes private property. Further, the Torrens Title
issued pursuant to the patent becomes indefeasible a year after the issuance of the latter. However, this
indefeasibility of a title does not attach to titles secured by fraud and misrepresentation. Well-settled is
the doctrine that the registration of a patent under the Torrens System does not by itself vest title; it
merely confirms the registrants already existing one. Verily, registration under the Torrens System is not
a mode of acquiring ownership.[23] (citations omitted)

A fraudulently acquired free patent may only be assailed by the government in an action for reversion.

Nonetheless, a free patent that was fraudulently acquired, and the certificate of title issued pursuant to
the same, may only be assailed by the government in an action for reversion pursuant to Section 101 of
the Public Land Act.[24] In Sherwill Development Corporation v. Sitio Sto. Nio Residents Association,
Inc.,[25] this Court pointed out that:

It is also to the public interest that one who succeeds in fraudulently acquiring title to a public land
should not be allowed to benefit therefrom, and the State should, therefore, have an even existing
authority, thru its duly-authorized officers, to inquire into the circumstances surrounding the issuance of
any such title, to the end that the Republic, thru the Solicitor General or any other officer who may be
authorized by law, may file the corresponding action for the reversion of the land involved to the public
domain, subject thereafter to disposal to other qualified persons in accordance with law. In other words,
the indefeasibility of a title over land previously public is not a bar to an investigation by the Director of
Lands as to how such title has been acquired, if the purpose of such investigation is to determine
whether or not fraud had been committed in securing such title in order that the appropriate action for
reversion may be filed by the Government.[26]

In Kayaban, et al. v. Republic, et al.,[27] this Court explained the reason for the rule that only the
government, through the OSG, upon the recommendation of the Director of Lands, may bring an action
assailing a certificate of title issued pursuant to a fraudulently acquired free patent:

Since it was the Director of Lands who processed and approved the applications of the appellants and
who ordered the issuance of the corresponding free patents in their favor in his capacity as
administrator of the disposable lands of the public domain, the action for annulment should have been
initiated by him, or at least with his prior authority and consent.[28]

An action for reconveyance is proper in this case.

However, the foregoing rule is not without an exception. A recognized exception is that situation where
plaintiff-claimant seeks direct reconveyance from defendant public land unlawfully and in breach of
trust titled by him, on the principle of enforcement of a constructive trust.[29]

A private individual may bring an action for reconveyance of a parcel of land even if the title thereof was
issued through a free patent since such action does not aim or purport to re-open the registration
proceeding and set aside the decree of registration, but only to show that the person who secured the
registration of the questioned property is not the real owner thereof.[30]
In Roco, et al. v. Gimeda,[31] we stated that if a patent had already been issued through fraud or
mistake and has been registered, the remedy of a party who has been injured by the fraudulent
registration is an action for reconveyance, thus:

It is to be noted that the petition does not seek for a reconsideration of the granting of the patent or of
the decree issued in the registration proceeding. The purpose is not to annul the title but to have it
conveyed to plaintiffs. Fraudulent statements were made in the application for the patent and no notice
thereof was given to plaintiffs, nor knowledge of the petition known to the actual possessors and
occupants of the property. The action is one based on fraud and under the law, it can be instituted
within four years from the discovery of the fraud. (Art. 1146, Civil Code, as based on Section 3,
paragraph 43 of Act No. 190.) It is to be noted that as the patent here has already been issued, the land
has the character of registered property in accordance with the provisions of Section 122 of Act No. 496,
as amended by Act No. 2332, and the remedy of the party who has been injured by the fraudulent
registration is an action for reconveyance. (Director of Lands vs. Registered of Deeds, 92 Phil., 826; 49
Off. Gaz. [3] 935; Section 55 of Act No. 496.)[32]

In the same vein, in Quiiano, et al. v. Court of Appeals, et al.,[33] we stressed that:

The controlling legal norm was set forth in succinct language by Justice Tuason in a 1953 decision,
Director of Lands v. Register of Deeds of Rizal. Thus: 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, as was done in the instant case, 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." Such a doctrine goes back to the 1919 landmark decision of Cabanos v. Register of
Deeds of Laguna. If it were otherwise the institution of registration would, to quote from Justice Torres,
serve "as a protecting mantle to cover and shelter bad faith ...." In the language of the then Justice, later
Chief Justice, Bengzon: "A different view would encourage fraud and permit one person unjustly to
enrich himself at the expense of another." It would indeed be a signal failing of any legal system if under
the circumstances disclosed, the aggrieved party is considered as having lost his right to a property to
which he is entitled. It is one thing to protect an innocent third party; it is entirely a different matter,
and one devoid of justification, if [deceit] would be rewarded by allowing the perpetrator to enjoy the
fruits of his nefarious deed. As clearly revealed by the undeviating line of decisions coming from this
Court, such an undesirable eventuality is precisely sought to be guarded against. So it has been before;
so it should continue to be.[34] (citations omitted)
Here, the respondent, in filing the amended complaint for annulment of documents, reconveyance and
damages, was not seeking a reconsideration of the granting of the patent or the decree issued in the
registration proceedings. What the respondent sought was the reconveyance of the subject property to
the heirs of the late Tabayag on account of the fraud committed by the petitioner. Thus, the lower
courts did not err in upholding the respondents right to ask for the reconveyance of the subject
property. To hold otherwise would be to make the Torrens system a shield for the commission of fraud.

That the subject property was not registered under the name of the heirs of Tabayag prior to the
issuance of OCT No. 1786 in the name of the petitioner would not effectively deny the remedy of
reconveyance to the former. An action for reconveyance is a legal and equitable remedy granted to the
rightful landowner, whose land was wrongfully or erroneously registered in the name of another, to
compel the registered owner to transfer or reconvey the land to him.[35]

It cannot be gainsaid that the heirs of Tabayag, by themselves and through their predecessors-in-
interest, had already acquired a vested right over the subject property. An open, continuous, adverse
and public possession of a land of the public domain from time immemorial by a private individual
personally and through his predecessors confers an effective title on said possessors whereby the land
ceases to be public, to become private property, at least by presumption.[36] Hence, the right of the
heirs of Tabayag to ask for the reconveyance of the subject property is irrefutable.

At this juncture, we deem it necessary to reiterate our disquisition in Naval v. Court of Appeals,[37] thus:

The fact that petitioner was able to secure a title in her name did not operate to vest ownership upon
her of the subject land. Registration of a piece of land under the Torrens System does not create or vest
title, because it is not a mode of acquiring ownership. A certificate of title is merely an evidence of
ownership or title over the particular property described therein. It cannot be used to protect a usurper
from the true owner; nor can it be used as a shield for the commission of fraud; neither does it permit
one to enrich himself at the expense of others. Its issuance in favor of a particular person does not
foreclose the possibility that the real property may be co-owned with persons not named in the
certificate, or that it may be held in trust for another person by the registered owner.[38] (citations
omitted)

WHEREFORE, in consideration of the foregoing disquisitions, the petition is DENIED. The Decision dated
March 18, 2009 and Resolution dated September 16, 2009 issued by the Court of Appeals in CA-G.R. CV
No. 87762 are hereby AFFIRMED with MODIFICATION. The petitioner is ordered to pay the respondent
moral damages in the amount of Thirty Thousand Pesos (P30,000.00).
REPUBLIC OF THE PHILIPPINES, - versus - DE GUZMAN,

This is a Petition for Review on Certiorari[1] filed by Republic of the Philippines, as represented by the
Chief of the Philippine National Police (PNP), of the September 27, 2006 Decision[2] of the Court of
Appeals in CA-G.R. CV No. 80623, which affirmed with modification the September 8, 2003 Decision[3]
of the Regional Trial Court (RTC), Branch 222, of Quezon City in Civil Case No. Q99-37717.

Respondent is the proprietress of Montaguz General Merchandise (MGM),[4] a contractor accredited by

the PNP for the supply of office and construction materials and equipment, and for the delivery of
various services such as printing and rental, repair of various equipment, and renovation of buildings,
facilities, vehicles, tires, and spare parts.[5]

On December 8, 1995, the PNP Engineering Services (PNPES), released a Requisition and Issue
Voucher[6] for the acquisition of various building materials amounting to Two Million Two Hundred
Eighty-Eight Thousand Five Hundred Sixty-Two Pesos and Sixty Centavos (P2,288,562.60) for the
construction of a four-storey condominium building with roof deck at Camp Crame, Quezon City.[7]

Respondent averred that on December 11, 1995, MGM and petitioner, represented by the PNP, through
its chief, executed a Contract of Agreement[8] (the Contract) wherein MGM, for the price of
P2,288,562.60, undertook to procure and deliver to the PNP the construction materials itemized in the
purchase order[9] attached to the Contract. Respondent claimed that after the PNP Chief approved the
Contract and purchase order,[10] MGM, on March 1, 1996, proceeded with the delivery of the
construction materials, as evidenced by Delivery Receipt Nos. 151-153,[11] Sales Invoice Nos. 038 and
041,[12] and the Report of Public Property Purchase[13] issued by the PNPs Receiving and Accounting
Officers to their Internal Auditor Chief. Respondent asseverated that following the PNPs inspection of
the delivered materials on March 4, 1996,[14] the PNP issued two Disbursement Vouchers; one in the
amount of P2,226,147.26 in favor of MGM,[15] and the other, [16] in the amount of P62,415.34,
representing the three percent (3%) withholding tax, in favor of the Bureau of Internal Revenue
(BIR).[17]

On November 5, 1997, the respondent, through counsel, sent a letter dated October 20, 1997[18] to the
PNP, demanding the payment of P2,288,562.60 for the construction materials MGM procured for the
PNP under their December 1995 Contract.

On November 17, 1997, the PNP, through its Officer-in-Charge, replied[19] to respondents counsel,
informing her of the payment made to MGM via Land Bank of the Philippines (LBP) Check No.
0000530631, [20] as evidenced by Receipt No. 001, [21] issued by the respondent to the PNP on April
23, 1996.[22]
On November 26, 1997, respondent, through counsel, responded by reiterating her demand[23] and
denying having ever received the LBP check, personally or through an authorized person. She also
claimed that Receipt No. 001, a copy of which was attached to the PNPs November 17, 1997 letter,
could not support the PNPs claim of payment as the aforesaid receipt belonged to Montaguz Builders,
her other company, which was also doing business with the PNP, and not to MGM, with which the
contract was made.

On May 5, 1999, respondent filed a Complaint for Sum of Money against the petitioner, represented by
the Chief of the PNP, before the RTC, Branch 222 of Quezon City.[24] This was docketed as Civil Case No.
Q99-37717.

The petitioner filed a Motion to Dismiss[25] on July 5, 1999, on the ground that the claim or demand set
forth in respondents complaint had already been paid or extinguished,[26] as evidenced by LBP Check
No. 0000530631 dated April 18, 1996, issued by the PNP to MGM, and Receipt No. 001, which the
respondent correspondingly issued to the PNP. The petitioner also argued that aside from the fact that
the respondent, in her October 20, 1997 letter, demanded the incorrect amount since it included the
withholding tax paid to the BIR, her delay in making such demand [did] not speak well of the worthiness
of the cause she espouse[d].[27]

Respondent opposed petitioners motion to dismiss in her July 12, 1999 Opposition[28]and September
10, 1999 Supplemental Opposition to Motion to Dismiss.[29] Respondent posited that Receipt No. 001,
which the petitioner claimed was issued by MGM upon respondents receipt of the LBP check, was, first,
under the business name Montaguz Builders, an entity separate from MGM. Next, petitioners allegation
that she received the LBP check on April 19, 1996 was belied by the fact that Receipt No. 001, which was
supposedly issued for the check, was dated four days later, or April 23, 1996. Moreover, respondent
averred, the PNPs own Checking Account Section Logbook or the Warrant Register, showed that it was
one Edgardo Cruz (Cruz) who signed for the check due to MGM, [30] contrary to her usual practice of
personally receiving and signing for checks payable to her companies.

After conducting hearings on the Motion to Dismiss, the RTC issued an Order[31] on May 4, 2001,
denying the petitioners motion for lack of merit. The petitioner thereafter filed its Answer,[32] wherein
it restated the same allegations in its Motion to Dismiss.

Trial on the merits followed the pre-trial conference, which was terminated on June 25, 2002 when the
parties failed to arrive at an amicable settlement.[33]
On September 3, 2002, shortly after respondent was sworn in as a witness, and after her counsel
formally offered her testimony in evidence, Atty. Norman Bueno, petitioners counsel at that time, made
the following stipulations in open court:

Atty. Bueno (To Court)

Your Honor, in order to expedite the trial, we will admit that this witness was contracted to deliver the
construction supplies or materials. We will admit that she complied, that she actually delivered the
materials. We will admit that Land Bank Corporation check was issued although we will not admit that
the check was not released to her, as [a] matter of fact, we have the copy of the check. We will admit
that Warrant Register indicated that the check was released although we will not admit that the check
was not received by the [respondent].

Court (To Atty. Albano)

So, the issues here are whether or not the [respondent] received the check for the payment of the
construction materials or supplies and who received the same. That is all.

Atty. Albano (To Court)

Yes, your Honor.

Court (To Atty. Albano)

I think we have an abbreviated testimony here. Proceed.[34] (Emphasis ours.)

The stipulations made by the petitioner through Atty. Bueno were in consonance with the admissions it
had previously made, also through Atty. Bueno, in its Answer,[35] and pre-trial brief[36]:

Answer:

IX
It ADMITS the allegation in paragraph 9 of the Complaint that [respondent] delivered to the PNP
Engineering Service the construction materials. It also ADMITS the existence of Receipt Nos. 151, 152
and 153 alleged in the same paragraph, copies of which are attached to the Complaint as Annexes G, G-
1 and G-2.[37] (Emphasis ours.)

Pre-trial Brief:

III

ADMISSIONS

3.1. Facts and/or documents admitted

For brevity, [petitioner] admit[s] only the allegations in [respondents] Complaint and the annexes
thereto that were admitted in the Answer.[38] (Emphases ours.)

With the issue then confined to whether respondent was paid or not, the RTC proceeded with the trial.

Respondent, in her testimony, narrated that on April 18, 1996, she went to the PNP Finance Center to
claim a check due to one of her companies, Montaguz Builders. As the PNP required the issuance of an
official receipt upon claiming its checks, respondent, in preparation for the PNP check she expected,
already signed Montaguz Builders Official Receipt No. 001, albeit the details were still blank. However,
upon arriving at the PNP Finance Center, respondent was told that the check was still with the LBP,
which could not yet release it. Respondent then left for the Engineering Services Office to see Captain
Rama, along with Receipt No. 001, which she had not yet issued.[39] Respondent claimed that after
some time, she left her belongings, including her receipt booklet, at a bench in Captain Ramas office
when she went around the Engineering Office to talk to some other people.[40] She reasoned that since
she was already familiar and comfortable with the people in the PNPES Office, she felt no need to ask
anyone to look after her belongings, as it was her normal practice[41] to leave her belongings in one of
the offices there. The next day, respondent alleged that when she returned for the check due to
Montaguz Builders that she was not able to claim the day before, she discovered for the first time that
Receipt No. 001, which was meant for that check, was missing. Since she would not be able to claim her
check without issuing a receipt, she just informed the releaser of the missing receipt and issued Receipt
No. 002 in its place.[42] After a few months, respondent inquired with the PNP Finance Center about the
payment due to MGM under the Contract of December 1995 and was surprised to find out that the
check payable to MGM had already been released. Upon making some inquiries, respondent learned
that the check, payable to MGM, in the amount of P2,226,147.26, was received by Cruz, who signed the
PNPs Warrant Register. Respondent admitted to knowing Cruz, as he was connected with Highland
Enterprises, a fellow PNP-accredited contractor. However, she denied ever having authorized Cruz or
Highland Enterprises to receive or claim any of the checks due to MGM or Montaguz Builders.[43] When
asked why she had not filed a case against Cruz or Herminio Reyes, the owner of Highland Enterprises,
considering the admitted fact that Cruz claimed the check due to her, respondent declared that there
was no reason for her to confront them as it was the PNPs fault that the check was released to the
wrong person. Thus, it was the PNPs problem to find out where the money had gone, while her course
of action was to go after the PNP, as the party involved in the Contract.[44]

On April 29, 2003, petitioner presented Ms. Jesusa Magtira, who was then the check releaser[45] of the
PNP, to prove that the respondent received the LBP check due to MGM, and that respondent herself
gave the check to Cruz.[46] Ms. Magtira testified that on April 23, 1996, she released the LBP check
payable to the order of MGM, in the amount of P2,226,147.26, to the respondent herein, whom she
identified in open court. She claimed that when she released the check to respondent, she also handed
her a voucher, and a logbook also known as the Warrant Register, for signing.[47] When asked why Cruz
was allowed to sign for the check, Ms. Magtira explained that this was allowed since the respondent
already gave her the official receipt for the check, and it was respondent herself who gave the logbook
to Cruz for signing.[48]

The petitioner next presented Edgardo Cruz for the purpose of proving that the payment respondent
was claiming rightfully belonged to Highland Enterprises. Cruz testified that Highland Enterprises had
been an accredited contractor of the PNP since 1975. In 1995, Cruz claimed that the PNPES was tasked
to construct by administration a condominium building. This meant that the PNPES had to do all the
work, from the canvassing of the materials to the construction of the building. The PNPES allegedly
lacked the funds to do this and so asked for Highland Enterprisess help.[49] In a meeting with its
accredited contractors, the PNPES asked if the other contractors would agree to the use of their
business name[50] for a two percent (2%) commission of the purchase order price to avoid the
impression that Highland Enterprises was monopolizing the supply of labor and materials to the
PNP.[51] Cruz alleged that on April 23, 1996, he and the respondent went to the PNP Finance Center to
claim the LBP check due to MGM. Cruz said that the respondent handed him the already signed Receipt
No. 001, which he filled up. He claimed that the respondent knew that the LBP check was really meant
for Highland Enterprises as she had already been paid her 2% commission for the use of her business
name in the concerned transaction.[52]

On September 8, 2003, the RTC rendered its Decision, the dispositive of which reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of [respondent] and against
[petitioner] ordering the latter to pay [respondent] the following sums:
(1) P2,226,147.26 representing the principal sum plus interest at 14% per annum from April 18, 1996
until the same shall have been fully paid;

(2) 20% of the sum to be collected as attorneys fees; and,

(3) Costs of suit.[53]

The RTC declared that while Cruzs testimony seemed to offer a plausible explanation on how and why
the LBP check ended up with him, the petitioner, already admitted in its Answer, and Pre-trial Brief, that
MGM, did in fact deliver the construction materials worth P2,288,562.60 to the PNP. The RTC also
pointed out the fact that the petitioner made the same admissions in open court to expedite the trial,
leaving only one issue to be resolved: whether the respondent had been paid or not. Since this was the
only issue, the RTC said that it had no choice but to go back to the documents and the documentary
evidence clearly indicates that the check subject of this case was never received by [respondent].[54] In
addition, the PNPs own Warrant Register showed that it was Edgardo Cruz who received the LBP check,
and Receipt No. 001 submitted by the petitioner to support its claim was not issued by MGM, but by
Montaguz Builders, a different entity. Finally, the RTC held that Cruzs testimony, which appeared to be
an afterthought to cover up the PNPs blunder, were irreconcilable with the petitioners earlier
declarations and admissions, hence, not credit-worthy.

The petitioner appealed this decision to the Court of Appeals, which affirmed with modification the RTCs
ruling on September 27, 2006:

WHEREFORE, the decision appealed from is AFFIRMED with the MODIFICATION that the 14% interest
per annum imposed on the principal amount is ordered reduced to 12%, computed from November 16,
1997 until fully paid. The order for the payment of attorneys fees and costs of the suit is DELETED.[55]

The Court of Appeals, in deciding against the petitioner, held that the petitioners admissions and
declarations, made in various stages of the proceedings are express admissions, which cannot be
overcome by allegations of respondents implied admissions. Moreover, petitioner cannot controvert its
own admissions and it is estopped from denying that it had a contract with MGM, which MGM duly
complied with. The Court of Appeals agreed with the RTC that the real issue for determination was
whether the petitioner was able to discharge its contractual obligation with the respondent. The Court
of Appeals held that while the PNPs own Warrant Register disclosed that the payment due to MGM was
received by Cruz, on behalf of Highland Enterprises, the PNPs contract was clearly with MGM, and not
with Highland Enterprises. Thus, in order to extinguish its obligation, the petitioner should have directed
its payment to MGM unless MGM authorized a third person to accept payment on its behalf.

The petitioner is now before this Court, praying for the reversal of the lower courts decisions on the
ground that the Court of Appeals committed a serious error in law by affirming the decision of the trial
court.[56]

THE COURTS RULING:

This case stemmed from a contract executed between the respondent and the petitioner. While the
petitioner, in proclaiming that the respondents claim had already been extinguished, initially insisted on
having fulfilled its contractual obligation, it now contends that the contract it executed with the
respondent is actually a fictitious contract to conceal the fact that only one contractor will be supplying
all the materials and labor for the PNP condominium project.

Both the RTC and the Court of Appeals upheld the validity of the contract between the petitioner and
the respondent on the strength of the documentary evidence presented and offered in Court and on
petitioners own stipulations and admissions during various stages of the proceedings.

It is worthy to note that while this petition was filed under Rule 45 of the Rules of Court, the assertions
and arguments advanced herein are those that will necessarily require this Court to re-evaluate the
evidence on record.

It is a well-settled rule that in a petition for review under Rule 45, only questions of law may be raised by
the parties and passed upon by this Court.[57]

This Court has, on many occasions, distinguished between a question of law and a question of fact. We
held that when there is doubt as to what the law is on a certain state of facts, then it is a question of
law; but when the doubt arises as to the truth or falsity of the alleged facts, then it is a question of
fact.[58] Simply put, when there is no dispute as to fact, the question of whether or not the conclusion
drawn therefrom is correct, is a question of law.[59] To elucidate further, this Court, in Hko Ah Pao v.
Ting[60] said:

One test to determine if there exists a question of fact or law in a given case is whether the Court can
resolve the issue that was raised without having to review or evaluate the evidence, in which case, it is a
question of law; otherwise, it will be a question of fact. Thus, the petition must not involve the
calibration of the probative value of the evidence presented. In addition, the facts of the case must be
undisputed, and the only issue that should be left for the Court to decide is whether or not the
conclusion drawn by the CA from a certain set of facts was appropriate.[61] (Emphases ours.)

In this case, the circumstances surrounding the controversial LBP check are central to the issue before
us, the resolution of which, will require a perusal of the entire records of the case including the
transcribed testimonies of the witnesses. Since this is an appeal via certiorari, questions of fact are not
reviewable. As a rule, the findings of fact of the Court of Appeals are final and conclusive[62] and this
Court will only review them under the following recognized exceptions: (1) when the inference made is
manifestly mistaken, absurd or impossible; (2) when there is a grave abuse of discretion; (3) when the
finding is grounded entirely on speculations, surmises or conjectures; (4) when the judgment of the
Court of Appeals is based on misapprehension of facts; (5) when the findings of fact are conflicting; (6)
when the Court of Appeals, in making its findings, went beyond the issues of the case and the same is
contrary to the admissions of both appellant and appellee; (7) when the findings of the Court of Appeals
are contrary to those of the trial court; (8) when the findings of fact are conclusions without citation of
specific evidence on which they are based; (9) when the Court of Appeals manifestly overlooked certain
relevant facts not disputed by the parties and which, if properly considered, would justify a different
conclusion; and (10) when the findings of fact of the Court of Appeals are premised on the absence of
evidence and are contradicted by the evidence on record.[63]

Although petitioners sole ground to support this petition was stated in such a manner as to impress
upon this Court that the Court of Appeals committed an error in law, what the petitioner actually wants
us to do is to review and re-examine the factual findings of both the RTC and the Court of Appeals.

Since the petitioner has not shown this Court that this case falls under any of the enumerated
exceptions to the rule, we are constrained to uphold the facts as established by both the RTC and the
Court of Appeals, and, consequently, the conclusions reached in the appealed decision.

Nonetheless, even if we were to exercise utmost liberality and veer away from the rule, the records will
show that the petitioner had failed to establish its case by a preponderance of evidence.[64] Section 1,
Rule 133 of the Revised Rules of Court provides the guidelines in determining preponderance of
evidence:

SECTION 1. Preponderance of evidence, how determined. In civil cases, the party having the burden of
proof must establish his case by a preponderance of evidence. In determining where the
preponderance or superior weight of evidence on the issues involved lies, the court may consider all the
facts and circumstances of the case, the witnesses manner of testifying, their intelligence, their means
and opportunity of knowing the facts to which they are testifying, the nature of the facts to which they
testify, the probability or improbability of their testimony, their interest or want of interest, and also
their personal credibility so far as the same may legitimately appear upon the trial. The court may also
consider the number of witnesses, though the preponderance is not necessarily with the greater
number.

Expounding on the concept of preponderance of evidence, this Court in Encinas v. National Bookstore,
Inc.,[65] held:

Preponderance of evidence is the weight, credit, and value of the aggregate evidence on either side and
is usually considered to be synonymous with the term greater weight of the evidence or greater weight
of the credible evidence. Preponderance of evidence is a phrase which, in the last analysis, means
probability of the truth. It is evidence which is more convincing to the court as worthy of belief than
that which is offered in opposition thereto.[66]

The petitioner avers that the Court of Appeals should not have relied heavily, if not solely[67] on the
admissions made by petitioners former counsel, thereby losing sight of the secret agreement between
the respondent and Highland Enterprises, which explains why all the documentary evidence were in
respondents name.[68]

The petitioner relies mainly on Cruzs testimony to support its allegations. Not only did it not present any
other witness to corroborate Cruz, but it also failed to present any documentation to confirm its story. It
is doubtful that the petitioner or the contractors would enter into any secret agreement involving
millions of pesos based purely on verbal affirmations. Meanwhile, the respondent not only presented all
the documentary evidence to prove her claims, even the petitioner repeatedly admitted that
respondent had fully complied with her contractual obligations.

The petitioner argued that the Court of Appeals should have appreciated the clear and adequate
testimony of Cruz, and should have given it utmost weight and credit especially since his testimony was
a judicial admission against interest a primary evidence which should have been accorded full
evidentiary value.[69]

The trial courts appreciation of the witnesses testimonies is entitled to the highest respect since it was
in a better position to assess their credibility.[70] The RTC held Cruzs testimony to be not credit
worthy[71] for being irreconcilable with petitioners earlier admissions. Contrary to petitioners
contentions, Cruzs testimony cannot be considered as a judicial admission against his interest as he is
neither a party to the case nor was his admission against his own interest, but actually against either the
petitioners or the respondents interest. Petitioners statements on the other hand, were deliberate,
clear, and unequivocal and were made in the course of judicial proceedings; thus, they qualify as judicial
admissions.[72] In Alfelor v. Halasan,[73] this Court held that:

A party who judicially admits a fact cannot later challenge that fact as judicial admissions are a waiver of
proof; production of evidence is dispensed with. A judicial admission also removes an admitted fact
from the field of controversy. Consequently, an admission made in the pleadings cannot be
controverted by the party making such admission and are conclusive as to such party, and all proofs to
the contrary or inconsistent therewith should be ignored, whether objection is interposed by the party
or not. The allegations, statements or admissions contained in a pleading are conclusive as against the
pleader. A party cannot subsequently take a position contrary of or inconsistent with what was
pleaded.[74]

The petitioner admitted to the existence and validity of the Contract of Agreement executed between
the PNP and MGM, as represented by the respondent, on December 11, 1995. It likewise admitted that
respondent delivered the construction materials subject of the Contract, not once, but several times
during the course of the proceedings. The only matter petitioner assailed was respondents allegation
that she had not yet been paid. If Cruzs testimony were true, the petitioner should have put respondent
in her place the moment she sent a letter to the PNP, demanding payment for the construction
materials she had allegedly delivered. Instead, the petitioner replied that it had already paid respondent
as evidenced by the LBP check and the receipt she supposedly issued. This line of defense continued on,
with the petitioner assailing only the respondents claim of nonpayment, and not the rest of respondents
claims, in its motion to dismiss, its answer, its pre-trial brief, and even in open court during the
respondents testimony. Section 4, Rule 129 of the Rules of Court states:

SECTION 4. Judicial Admissions.An admission, verbal or written, made by a party in the course of the
proceedings in the same case, does not require proof. The admission may be contradicted only by
showing that it was made through palpable mistake or that no such admission was made.

Petitioners admissions were proven to have been made in various stages of the proceedings, and since
the petitioner has not shown us that they were made through palpable mistake, they are conclusive as
to the petitioner. Hence, the only question to be resolved is whether the respondent was paid under the
December 1995 Contract of Agreement.
The RTC and the Court of Appeals correctly ruled that the petitioners obligation has not been
extinguished. The petitioners obligation consists of payment of a sum of money. In order for petitioners
payment to be effective in extinguishing its obligation, it must be made to the proper person. Article
1240 of the Civil Code states:

Art. 1240. Payment shall be made to the person in whose favor the obligation has been constituted, or
his successor in interest, or any person authorized to receive it.

In Cembrano v. City of Butuan,[75] this Court elucidated on how payment will effectively extinguish an
obligation, to wit:

Payment made by the debtor to the person of the creditor or to one authorized by him or by the law to
receive it extinguishes the obligation. When payment is made to the wrong party, however, the
obligation is not extinguished as to the creditor who is without fault or negligence even if the debtor
acted in utmost good faith and by mistake as to the person of the creditor or through error induced by
fraud of a third person.

In general, a payment in order to be effective to discharge an obligation, must be made to the proper
person. Thus, payment must be made to the obligee himself or to an agent having authority, express or
implied, to receive the particular payment. Payment made to one having apparent authority to receive
the money will, as a rule, be treated as though actual authority had been given for its receipt. Likewise,
if payment is made to one who by law is authorized to act for the creditor, it will work a discharge. The
receipt of money due on a judgment by an officer authorized by law to accept it will, therefore, satisfy
the debt.[76]

The respondent was able to establish that the LBP check was not received by her or by her authorized
personnel. The PNPs own records show that it was claimed and signed for by Cruz, who is openly known
as being connected to Highland Enterprises, another contractor. Hence, absent any showing that the
respondent agreed to the payment of the contract price to another person, or that she authorized Cruz
to claim the check on her behalf, the payment, to be effective must be made to her.[77]

The petitioner also challenged the RTCs findings, on the ground that it overlooked material fact and
circumstance of significant weight and substance.[78] Invoking the doctrine of adoptive admission, the
petitioner pointed out that the respondents inaction towards Cruz, whom she has known to have
claimed her check as early as 1996, should be taken against her. Finally, the petitioner contends that
Cruzs testimony should be taken against respondent as well, under Rule 130, Sec. 32 of the Revised
Rules on Evidence, since she has not presented any controverting evidence x x x notwithstanding that
she personally heard it.[79]

The respondent has explained her inaction towards Cruz and Highland Enterprises. Both the RTC and the
Court of Appeals have found her explanation sufficient and this Court finds no cogent reason to overturn
the assessment by the trial court and the Court of Appeals of the respondents testimony. It may be
recalled that the respondent argued that since it was the PNP who owed her money, her actions should
be directed towards the PNP and not Cruz or Highland Enterprises, against whom she has no adequate
proof.[80] Respondent has also adequately explained her delay in filing an action against the petitioner,
particularly that she did not want to prejudice her other pending transactions with the PNP.[81]

The petitioner claims that the RTC overlooked material fact and circumstance of significant weight and
substance,[82] but it ignores all the documentary evidence, and even its own admissions, which are
evidence of the greater weight and substance, that support the conclusions reached by both the RTC
and the Court of Appeals.

We agree with the Court of Appeals that the RTC erred in the interest rate and other monetary sums
awarded to respondent as baseless. However, we must further modify the interest rate imposed by the
Court of Appeals pursuant to the rule laid down in Eastern Shipping Lines, Inc. v. Court of Appeals[83]:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-
delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on
"Damages" of the Civil Code govern in determining the measure of recoverable damages.

II. With regard particularly to an award of interest in the concept of actual and compensatory damages,
the rate of interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default,
i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until
the demand can be established with reasonable certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the
time the demand is made, the interest shall begin to run only from the date the judgment of the court is
made (at which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount
finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of
legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum
from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit.[84]

Since the obligation herein is for the payment of a sum of money, the legal interest rate to be imposed,
under Article 2209 of the Civil Code is six percent (6%) per annum:

Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay,
the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the
interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per
annum.

Following the guidelines above, the legal interest of 6% per annum is to be imposed from November 16,
1997, the date of the last demand, and 12% in lieu of 6% from the date this decision becomes final until
fully paid.

Petitioners allegations of sham dealings involving our own government agencies are potentially
disturbing and alarming. If Cruzs testimony were true, this should be a lesson to the PNP not to dabble
in spurious transactions. Obviously, if it can afford to give a 2% commission to other contractors for the
mere use of their business names, then the petitioner is disbursing more money than it normally would
in a legitimate transaction. It is recommended that the proper agency investigate this matter and hold
the involved personnel accountable to avoid any similar occurrence in the future.
WHEREFORE, the Petition is hereby DENIED and the Decision of the Court of Appeals in C.A. G.R. CV No.
80623 dated September 27, 2006 is AFFIRMED with the MODIFICATION that the legal interest to be paid
is SIX PERCENT (6%) per annum on the amount of P2,226,147.26, computed from the date of the last
demand or on November 16, 1997. A TWELVE PERCENT (12%) per annum interest in lieu of SIX PERCENT
(6%) shall be imposed on such amount upon finality of this decision until the payment thereof.

HEIRS OF PACENCIA RACAZA, versus SPOUSES FLORENCIO ABAY-ABAY,

and ELEUTERIA ABAY-ABAY,[1]

This resolves the Petition for Review on Certiorari with Prayer to Admit Newly Discovered Evidence, filed
by the Heirs of Pacencia Racaza,[2] herein petitioners under Rule 45 of the Rules of Court to assail the
Decision[3] dated September 8, 2010 and Resolution[4] dated August 8, 2011 of the Court of Appeals
(CA) in CA-G.R. CEB-CV No. 01095.

The Facts

As a background, herein respondents Spouses Florencio and Eleuteria Abay-abay[5] filed in July 1985
with the Regional Trial Court (RTC) of Tagbilaran City, Bohol a complaint for quieting of title, recovery of
possession and damages against several defendants that included Alexander Miel (Alexander), the
husband of herein petitioner Angeles Racaza Miel (collectively, the Miels). Subject of the complaint,
which was docketed as Civil Case No. 3920, was the property covered by Tax Declaration No. 4501-663
and situated in Poblacion Ubay, Bohol, more particularly described as follows:

A residential lot bounded on the North by Emelia Garces (part); East by Emelia Garces; South by Rosario
Garces, Esperanza Rosello, Matea de Japson; West by Toribio Reyes St., with an area of 600 square
meters, more or less.[6]

Spouses Abay-abay alleged that they acquired the property from the estate of one Emilia Garces by
virtue of a Deed of Absolute Sale dated August 12, 1979, which was registered with the Register of
Deeds on October 10, 1984. In mid-1984, however, therein defendants began erecting residential
houses on the subject property without the knowledge and consent of Spouses Abay-abay. The refusal
of defendants therein to vacate the subject land despite herein respondents demand prompted the
latter to file the complaint with the RTC. Alexander failed to file his answer to the complaint, and was
then declared in default by the trial court.
On May 30, 1988, the RTC rendered its judgment in favor of Spouses Abay-abay, and then ordered the
defendants therein to vacate the disputed property. A writ of execution was later issued by the trial
court to effect the removal of the structures, including the house of the Miels, built on the property.
When the Miels failed to vacate the property despite their repeated promise to do so not later than
January 11, 1991, the RTC issued on January 14, 1991 an Order directing the sheriff to immediately
destroy and demolish the house of the Miels.

On January 23, 1991, the petitioners then filed before the RTC their own complaint, docketed as Civil
Case No. 4856, for quieting of title, recovery of possession and damages against Spouses Abay-abay. As
the surviving heirs of Pacencia Racaza (Pacencia), petitioners claimed to be the co-owners of the
property covered by Tax Declaration No. 45C1-313 under the name of Pacencia and more particularly
described as:

A parcel of land... bounded [on] the North by Seashore and Josefina Ruiz; on the South by Burgos St. and
M. Garces; on the East by Public Land and on the West by Marciano Garces now Public Market...
containing an area of ONE HUNDRED FIFTY square meters...[7]

Petitioners claimed to have had actual, peaceful, continuous and public possession of the land,
disturbed only in 1985 when Spouses Abay-abay instituted Civil Case No. 3920. They also questioned the
unjustified demolition of their ancestral house, arguing that only Alexander, who had no interest in the
property, was impleaded in the case.

In their answer to the complaint, Spouses Abay-abay invoked the valid judgment and writ of execution
already issued in Civil Case No. 3920. They also raised the issues of estoppel and laches in view of the
petitioners failure to intervene in Civil Case No. 3920.

The Ruling of the RTC

After due proceedings, the RTC rendered its Decision[8] dated April 4, 2005, which dismissed the
complaint for lack of preponderance of evidence, and affirmed Spouses Abay-abay's ownership and
possession over the subject property. The rulings of the trial court were based on the following findings:

1 Defendants [herein respondents] evidence to the effect that defendants and [their] predecessors-in-
interest have been in possession and ownership of the land under litigation since 1917 until the present
has more evidentiary weight than that of plaintiffs [herein petitioners] whose tax declaration over a
portion of the land claimed by defendants was issued in 1949;

2 The following undisputed facts negate plaintiffs claim over a portion of the land claimed by defendants
as follows:

a) Plaintiff Angeles Racaza Miel, who received the complaint and summons in Civil Case No. 3920
involving the land in question before RTC, Branch 2, never informed her husband Alexander Miel, who
was one of the defendants in that case, about such summons and complaint.

It is quite intriguing that, if indeed plaintiff Angeles Racaza Miel is one of the heirs of Paciencia Racaza[,]
the alleged owner of a portion of the land in question, why did she not inform her co-heirs and
intervene in that Civil Case No. 3920 when it was heard before RTC, Br. 2?

Such inaction of Angeles Racaza Miel infers the inanity of plaintiffs claim over a portion of the land in
question.

xxx

c) Angeles or her husband[,] Alexander Miel never appealed the decision rendered by RTC, Branch 2
awarding the land under litigation in favor of defendant-spouses Florencio and Eleuteria Abay-abay.

3 Another undisputed fact that would reveal that in connection with the decision rendered by RTC,
Branch 2 in favor of defendant[s]-spouses Florencio and Eleuteria, plaintiff Angeles Racaza Miel and her
original counsel in this case, Atty. Roberto Cajes promised before the said Court to vacate the subject
land. Such act of plaintiff Angeles Racaza Miel is indicative of her agreement to the decision rendered by
RTC, Branch 2 awarding the subject land to Florencio Abay-abay, Sr. and, thus, demolishes whatever
claim she and her co-plaintiffs in the case at bench may have over the land in question, which is the
subject matter of the above-entitled case.
Simply stated, the evidence as a whole adduced by the defendants is superior to that of the
plaintiffs[].[9]

The Ruling of the CA

On appeal, the CA affirmed the rulings of the RTC via the assailed Decision[10] dated September 8, 2010
and Resolution[11] dated August 8, 2011. Hence, this petition for review on certiorari.

The Present Petition

To support their petition, the petitioners argue that: (1) the disputed property is a foreshore land and
thus, owned by the State; (2) the respondents were buyers in bad faith when they purchased the
unregistered land; and (3) the order to demolish their property was inhuman and thus, unconstitutional.

As part of their petition, the petitioners also ask this Court to admit as newly discovered evidence a
Certification of the Community Environment and Natural Resources Office (CENRO) of Bohol, and a
cadastral map of Poblacion, Ubay, Bohol, purportedly to support their claim that the subject property is
a foreshore land which cannot be owned by herein respondents.

This Court's Ruling

We deny the petition.

First, the petition raises questions of fact which are beyond the coverage of a petition for review on
certiorari. The settled rule is that only questions of law may be raised in a petition under Rule 45 of the
Rules of Court. It is not this Courts function to analyze or weigh all over again evidence already
considered in the proceedings below, our jurisdiction being limited to reviewing only errors of law that
may have been committed by the lower court. The resolution of factual issues is the function of the
lower courts, whose findings on these matters are received with respect. A question of law which we
may pass upon must not involve an examination of the probative value of the evidence presented by the
litigants.[12] This is in accordance with Section 1, Rule 45 of the Rules of Court, as amended, which
reads:
Section 1. Filing of petition with Supreme Court. A party desiring to appeal by certiorari from a
judgment, final order or resolution of the Court of Appeals, the Sandiganbayan, the Court of Tax
Appeals, the Regional Trial Court or other courts, whenever authorized by law, may file with the
Supreme Court a verified petition for review on certiorari. The petition may include an application for a
writ of preliminary injunction or other provisional remedies and shall raise only questions of law, which
must be distinctly set forth. The petitioner may seek the same provisional remedies by verified motion
filed in the same action or proceeding at any time during its pendency. (Emphasis supplied)

Significantly, Section 5, Rule 45 provides that the failure of the petitioner to comply with the
requirements on the contents of the petition shall be sufficient ground for the dismissal thereof. While
jurisprudence provides settled exceptions to these rules, the instant petition does not fall under any of
these exceptions.

On the same ground that petitions under Rule 45 must not involve questions of fact, the petitioners
prayer for this Court to admit what they claimed to be newly discovered evidence is hereby denied. The
Supreme Court is not a trier of facts, and is not the proper forum for the ventilation and substantiation
of factual issues.[13] While the Rules of Court allows the introduction by parties of newly-discovered
evidence, as in motions for new trial under Rule 37, these are not to be presented for the first time
during an appeal. In addition, the term newly-discovered evidence has a specific definition under the
law. Under the Rules of Court, the requisites for newly discovered evidence are: (a) the evidence was
discovered after trial; (b) such evidence could not have been discovered and produced at the trial with
reasonable diligence; and (c) it is material, not merely cumulative, corroborative or impeaching, and is of
such weight that, if admitted, will probably change the judgment.[14]

The two documents which the petitioners seek to now present are not of this nature. Undeniably, the
CENRO Certification and cadastral map annexed to the petition could have been produced and
presented by the petitioners during the proceedings before the court a quo. Further to this, the
petitioners purpose for submitting the said documents is only to prove that the disputed property is a
foreshore land that should have been declared owned by the State. Thus, even granting that the
documents may be admitted at this stage, the certification and cadastral map fail to support the
petitioners claim of ownership over the disputed property. On the contrary, these documents only
negate their claim of ownership and better right to possess the land because foreshore land is not
subject to private ownership, but is part of the public domain. In Republic of the Philippines v. CA,[15]
we thus held:

When the sea moved towards the estate and tide invaded it, the invaded property became foreshore
land and passed to the realm of the public domain. In fact, the Court in Government vs. Cabangis
annulled the registration of land subject of cadastral proceedings when the parcel subsequently became
foreshore land. In another case, the Court voided the registration decree of a trial court and held that
said court had no jurisdiction to award foreshore land to any private person or entity. The subject land
in this case, being foreshore land, should therefore be returned to the public domain.[16] (Citations
omitted)

We note that not even herein petitioners, but the Republic of the Philippines, is the real party in interest
that is allowed to pursue such claims against lands of the public domain.[17]

All told, this Court finds no justification to depart from the factual findings of the trial and appellate
courts. The petitioners failed to present any cogent reason that would warrant a reversal of the decision
and resolution assailed in this petition.

WHEREFORE, premises considered, the instant petition is hereby DENIED. The Decision dated
September 8, 2010 and Resolution dated August 8, 2011 of the Court of Appeals in CA-G.R. CEB-CV No.
01095 are hereby AFFIRMED.

MORLA, versus CORAZON NISPEROS BELMONTE,

This petition for review on certiorari[1] seeks to annul and set aside the March 9, 2005 Decision[2] and
December 29, 2005 Resolution[3] of the Court of Appeals in CA-G.R. CV No. 53527, which affirmed with
modification the February 19, 1996 Judgment[4] of the Regional Trial Court (RTC) of Ilagan, Isabela,
Branch 17 in Civil Case No. 810.

Spouses Alfredo Nisperos and Esperanza Urbano (the Nisperos spouses) were the original homesteaders
of an 80,873-square meter tract of public land known and identified as Lot No. 4353 of Pls. 62, situated
in Caliguian, Burgos, Isabela,[5] by virtue of Original Certificate of Title (OCT) No. P-1542, issued on May
4, 1951.[6]

On June 8, 1988, the Nisperos spouses executed a Partial Deed of Absolute Sale,[7] wherein they sold a
portion of Lot No. 4353 with an area of 50,000 square meters (subject land) to the brothers Ramon and
Rodolfo Morla (the Morla brothers) for the sum of Two Hundred Fifty Thousand Pesos (250,000.00).
On August 2, 1988, the Morla brothers acknowledged and confirmed in writing (the 1988 contract) that
they had bought from the Nisperos spouses the subject land, and that they had agreed to give the
Nisperos spouses a period of ten (10) years within which to repurchase the subject land for the price of
Two Hundred Seventy-Five Thousand Pesos (275,000.00). The 1988 contract was written in Ilocano and
executed at the Office of the Barangay Captain in the Municipality of Burgos, Province of Isabela.[8]

On June 27, 1994, the Nisperos spouses filed a Complaint[9]for Repurchase and/or Recovery of
Ownership Plus Damages against the Morla brothers. They alleged that the deed of sale was registered
by the Morla brothers only when they had signified their intention to repurchase their property.[10]
Thus, Transfer Certificate of Title (TCT) No. 225544 for the subject land was issued in favor of the Morla
brothers, and TCT No. 225545,[11] for the remaining 30,870 square meters of Lot No. 4353, to the
Nisperos spouses.

In response,[12] the Morla brothers claimed that the Nisperos spouses had no cause of action, as the
repurchase of the subject land was improper for being outside the five-year period provided under
Section 119 of Commonwealth Act No. 141.[13]

At the pre-trial conference held on June 19, 1995, the parties settled that the only issue to be resolved
by the RTC was whether the 1988 contract executed by the parties, wherein it was stipulated that the
Nisperos spouses may repurchase the land sold to the Morla brothers within a period of ten (10) years,
was valid or not.[14]

On July 28, 1995, the RTC issued an Order[15] requiring the parties to submit their position papers or
memoranda in light of their agreement to submit the case for Summary Judgment on the issue of the
validity of the 1988 contract.

The Nisperos spouses then filed a Motion for Summary Judgment[16] on the ground that there was no
genuine issue of material facts in the case except for damages and attorneys fees, which may be heard
separately and independently.

On September 15, 1995, the Nisperos spouses deposited the amount of 275,000.00, with the clerk of
court of the RTC for the repurchase of the subject land.[17]

The RTC rendered its Judgment dated February 19, 1996, the dispositive portion of which reads:

WHEREFORE, for and in consideration of the foregoing, judgment is hereby rendered in favor of the
plaintiffs and against the defendants ordering the defendants to reconvey the portion of five (5)
hectares of plaintiffs land covered by their original title, Original Certificate of Title No. P-1542 unto the
plaintiffs and to receive and accept the 275,000.00 from the plaintiffs as repurchase; to pay attorneys
fees in the amount of 5,000.00 and to pay the costs of this suit.[18]

The RTC said that the only issue to be resolved was the validity of the 1988 contract, which the Morla
brothers neither attacked nor denied. The RTC held that it was clear from the 1988 contract, which the
Morla brothers executed, that they had bound themselves to its terms and conditions. The RTC further
proclaimed that what was prohibited was the shortening of the five-year redemption period under
Section 119 of Commonwealth Act No. 141, and not its prolongation.[19]

On March 14, 1996, the Morla brothers moved for the reconsideration[20] of the RTCs judgment on the
ground that it could not affect them since they were no longer the real parties-in-interest as they had
already sold the subject land to Rosie Ocampo, married to Delfin Gragasin, and Hilario Bernardino,
married to Manolita Morla, on May 2, 1994.[21]

The Nisperos spouses, in their Opposition to the Motion for Reconsideration,[22] attacked the validity of
the purported sale and alleged that such sale in favor of the Morla brothers close relatives was a last
ditch attempt to win the case. The Nisperos spouses pointed out that the Morla brothers never
mentioned such sale considering that it supposedly happened in May 1994, before the case was
instituted in June 1994.[23]

The RTC denied the Morla brothers motion for reconsideration in an Order[24] dated July 19, 1996. The
RTC noted how such purported sale was not mentioned by the Morla brothers in their confrontations
with the Nisperos spouses prior to the filing of the case, or in any of their pleadings filed before the RTC.
The RTC agreed with the Nisperos spouses contention that if the sale really did happen, then the Morla
brothers should have brought it up at the earliest opportune time. Finally, the RTC said that the belated
issue would not in any way affect the standing of the parties.

The Morla brothers timely[25] appealed this decision to the Court of Appeals and assigned the following
errors in support thereof:

The TRIAL COURT GRAVELY ERRED IN HOLDING THAT APPELLANTS AUGUST 2, 1988 private writing, Exh.
A WAS AN AGREEMENT BY PARTIES FOR APPELLEES TO REPURCHASE WITHIN TEN (10) YEARS
THEREFROM THE FIVE (5) HECTARES PORTION OF THEIR HOMESTEAD THEY SOLD TO THE FORMER AS
PER JUNE 28, 1988 PARTIAL DEED OF ABSOLUTE SALE, EXH. 1 NOTWITHSTANDING THE MANDATORY
FIVE (5) YEARS REPURCHASE PERIOD FROM THE DATE OF SALE PROVIDED BY SECTION 119 OF THE
PUBLIC LAND LAW (COMMONWEALTH ACT NO. 141).
II

THE TRIAL COURT GRAVELY ERRED IN RELYING ON THE PRECEDENT LAID IN THE CASES OF MENJE, ET
AL., VS. ANGELES, 101 PHIL. 563 AND MANUEL VS. PHILIPPINE NATIONAL BANK, 101 PHIL. 568, WHICH
TREAT OF REDEMPTION OF FORECLOSED HOMESTEAD AFTER FORECLOSURE SALES NOTWITHSTANDING
THE CLEAR ISSUE IN THE CASE AT BAR WHICH IS FOR REPURCHASE OF A PORTION OF A HOMESTEAD.
[26]

On March 9, 2005, the Court of Appeals affirmed the RTCs decision, with the deletion of the award of
attorneys fees for lack of basis in the decision, as the only modification. While the Court of Appeals
agreed with the Morla brothers assertion that the cases cited by the RTC were not applicable to their
case, it declared that the RTC did not err in allowing the Nisperos spouses to repurchase the subject
land. The Court of Appeals immediately noted that there clearly was no genuine issue as to any material
fact, except for the claim of attorneys fees. It upheld the validity of the 1988 contract and concurred
with the RTCs rationale that the arrangement to prolong the period for redemption of the subject land
was not prohibited by law as it was in line with the intent of Section 119 to give the homesteader or
patentee every chance to preserve for himself and his family the land that the State had gratuitously
given to him as a reward for his labor in cleaning and cultivating it. The Court of Appeals further held
that the 1988 contract, contrary to the Morla brothers contention, was not unenforceable as the
necessity to embody certain contracts in a public instrument was only for convenience and not for its
validity or enforceability.[27]

The Morla brothers sought to have this decision reconsidered on the strength of a newly discovered
Contract of Sale of farm land dated June 28, 1978 (1978 contract). The Morla brothers alleged that this
contract, which covered the subject land, was found only upon the prodding of their new lawyer; thus,
even the ten-year period to repurchase the subject land under Article 1606 of the Civil Code had already
expired.[28]

The Court of Appeals issued a Resolution[29] on December 29, 2005, denying the Morla brothers motion
for reconsideration in this wise:

[The Morla brothers] assert a new theory on the basis of a handwritten contract dated June 28, 1978 a
private document allegedly executed by [the Nisperos spouses]. Said document is being introduced for
the first time on appeal. And it is settled that issues not raised in the court a quo cannot be raised for
the first time on appeal in the case at bench, in a motion for reconsideration for being offensive to the
basic rules of fair play, justice and due process x x x.[30]
As Ramon Morla died on March 5, 2001, single and without any descendants or ascendants, Rodolfo
Morla (petitioner), by himself, elevated the instant case before this Court with the Nisperos spouses as
respondents. Alfredo Nisperos, however, also died on September 19, 2010.[31] Consequently, Alfredo
Nisperos legal heirs filed a motion[32] to be substituted as respondents, in lieu of their deceased father.
This motion was granted on October 3, 2011[33] thus, Corazon Nisperos Belmonte, Abraham U.
Nisperos, Perlita Nisperos Ocampo, Armando U. Nisperos, Alberto U. Nisperos, Hilario U. Nisperos,
Archimedes U. Nisperos, Buenafe Nisperos Perez, and Arthur U. Nisperos, now join their mother
Esperanza Urbano Nisperos as respondents in this case.

Issue

Petitioner, claiming that his petition is of transcendental importance as it poses a novel question of law,
is asking us to resolve the following question:

[M]ay parties to a deed of sale of a land covered by a homestead patent extend or prolong the 5-year
period of repurchase under Section 119 of Act 141, under a private writing subsequently executed by
them?[34]

The Courts Ruling

This Court would like to address the admissibility of the 1978 contract at the outset as petitioner posits
that by virtue of this contract, the respondents claim had already prescribed, even if the redemption
period under Section 119 of Commonwealth Act No. 141 were extended to ten years. Petitioner claims
that the June 8, 1988 Partial Deed of Sale was actually the formal culmination of an earlier transaction
between the Morla brothers and the Nisperos spouses, as shown by the 1978 contract. Hence, more
than ten years have already lapsed from the time such contract was executed to the time the right to
repurchase was sought to be exercised.[35]

Contrary to petitioners allegation in its Motion for Reconsideration before the Court of Appeals, the
1978 contract did not surface only after the appeal; it was actually attached to the Morla brothers
Answer[36] filed with the RTC on July 12, 1994. Referencing this 1978 contract, the Morla brothers
stated the following in their Answer:
8. Since June 28, 1978 and continuously up to the present, the defendants are in the open, continuous,
exclusive, and notorious actual physical possession, occupation, and cultivation of the (50,000 SQUARE
METERS) portion of Lot No. 4353, Pls-62, as evidenced by a private document, a xerox copy of which
document is hereto attached as Annex 2 to this answer.[37]

During the pre-trial, the Morla brothers and the Nisperos spouses also agreed on only the following
stipulation of facts, as stated in the RTCs June 19, 1995 Order:

1. That the land is a Homestead originally applied for by the plaintiffs and a Homestead Patent and
Original Certificate of Title were issued to the plaintiffs;

2. That on August 2, 1988, at Caliguian, Burgos, Isabela, in the presence of the Barangay Captain, an
Ilocano writing or contract was acknowledged and confirmed by the defendants and the defendants
admitted as to its authenticity;

3. That the Transfer Certificate of Title No. T-225545 is the remaining portion of Three (3) hectares or
30, 873 square meters, which was only issued by the Register of Deeds of Isabela on March 11, 1994,
and this remaining portion was derived from the Original Certificate of Title of Alfredo Nisperos, which is
OCT No. P-1542 issued in 1951;

4. That on June 8, 1988, a Partial Deed of Absolute Sale was prepared, as per Doc. No. 419; Page 84;
Book 17; Series of 1988, entered into the Notarial Book of Notary Public Severo Ladera;

5. That Transfer Certificate of Title No. T-225544 was registered in the name of the defendants,
Rodolfo Morla and Ramon Morla at the Office of the Registry of Deeds of Isabela on March 11, 1994.
[38]

The Morla brothers Position Paper/Memorandum[39] likewise reiterated that the sale of the subject
land happened on June 8, 1988, and referred to the 1978 contract only to prove their long possession of
the subject land, just as they did in their Answer.

If it were true that the subject lands ownership was ceded to the Morla brothers as early as 1978, then it
is inconceivable that they would forget to bring up this important fact and use it as their key defense
when they filed their Answer to the Complaint on July 12, 1994. Even then, the Morla brothers had
every opportunity to correct this lapse as they had always been aware and in possession of the 1978
contract. They could have stipulated it during the pre-trial conference, or at least stated it in their
Position Paper. The theory advanced by the Morla brothers from the very beginning is that they are
entitled to the possession of the subject land as the owner thereof because the property was sold to
them by virtue of the Partial Deed of Sale executed on June 8, 1988. They presented the 1978 contract
only to prove that they had been in continuous and open possession since 1978. The first time the Morla
brothers claimed ownership, and not mere possession, of the subject land by virtue of the 1978
contract, was in their motion for reconsideration, after they had lost their appeal before the Court of
Appeals. The Court of Appeals was correct in not considering this argument for not having been raised at
the earliest opportunity. It is a well-settled rule that a party who deliberately adopts a certain theory
upon which the case was decided by the lower court will not be permitted to change [it] on appeal.[40]
Petitioner is bound by the statements and stipulations he made while the case was being heard in the
lower courts.[41] In Manila Electric Company v. Benamira,[42] we said:

[I]t is a fundamental rule of procedure that higher courts are precluded from entertaining matters
neither alleged in the pleadings nor raised during the proceedings below, but ventilated for the first
time only in a motion for reconsideration or on appeal. The individual respondents are bound by their
submissions that AFSISI is their employer and they should not be permitted to change their theory. Such
a change of theory cannot be tolerated on appeal, not due to the strict application of procedural rules
but as a matter of fairness. A change of theory on appeal is objectionable because it is contrary to the
rules of fair play, justice and due process.[43]

Having settled the inadmissibility of the 1978 contract, we now go to the legality of the 1988 contract.

Since the subject land was acquired by the Nisperos spouses pursuant to a homestead patent, the
applicable law is Commonwealth Act No. 141, or the Public Land Act.[44] Section 119 thereof specifically
speaks about repurchases of a homestead or free patent land:

Sec. 119. Every conveyance of land acquired under the free patent or homestead provisions, when
proper, shall be subject to repurchase by the applicant, his widow, or legal heirs, within a period of five
years from the date of the conveyance.

The petitioner does not dispute the existence or validity of the 1988 contract. He simply argues that the
10-year repurchase period he and his brother Ramon Morla had agreed to grant the Nisperos spouses,
as evidenced by the 1988 contract, was contrary to law and jurisprudence, viz:
In no uncertain terms can the statutory period of five (5) years, which is fixed and non-extendible, be
prolonged or extended by agreement of the parties since it runs athwart with the express limitation of
the right to repurchase provided for in Section 119, Act 141. Spouses Nisperos cannot, therefore, use
the August 2, 1988 private writing to extend the already expired period granted under the law. To do so
is to violate the law. The law must control over the revised intention of the parties.[45] (Emphasis
supplied.)

Elucidating on the purpose of the homestead laws, this Court held in Republic of the Philippines v. Court
of Appeals[46]:

It is well-known that the homestead laws were designed to distribute disposable agricultural lots of the
State to land-destitute citizens for their home and cultivation. Pursuant to such benevolent intention the
State prohibits the sale or encumbrance of the homestead (Section 116) within five years after the grant
of the patent. After that five-year period the law impliedly permits alienation of the homestead; but in
line with the primordial purpose to favor the homesteader and his family the statute provides that such
alienation or conveyance (Section 117) shall be subject to the right of repurchase by the homesteader,
his widow or heirs within five years. This section 117 is undoubtedly a complement of section 116. It
aims to preserve and keep in the family of the homesteader that portion of public land which the State
had gratuitously given to him. It would, therefore, be in keeping with this fundamental idea to hold, as
we hold, that the right to repurchase exists not only when the original homesteader makes the
conveyance, but also when it is made by his widow or heirs. This construction is clearly deducible from
the terms of the statute.[47]

In Fontanilla, Sr. v. Court of Appeals,[48] we said:

The applicant for a homestead is to be given all the inducement that the law offers and is entitled to its
full protection. Its blessings, however, do not stop with him. This is particularly so in this case as the
appellee is the son of the deceased. There is no question then as to his status of being a legal heir. The
policy of the law is not difficult to understand. The incentive for a pioneer to venture into developing
virgin land becomes more attractive if he is assured that his effort will not go for naught should
perchance his life be cut short. This is merely a recognition of how closely bound parents and children
are in Filipino family. Logic, the sense of fitness and of right, as well as pragmatic considerations thus call
for continued adherence to the policy that not the individual applicant alone but those so closely related
to him as are entitled to legal succession may take full advantage of the benefits the law confers.[49]
We are in full accord with the clear findings and apt ruling of the lower courts. Nowhere in
Commonwealth Act No. 141 does it say that the right to repurchase under Section 119 thereof could not
be extended by mutual agreement of the parties involved. Neither would extending the period in
Section 119 be against public policy as the evident purpose of the Public Land Act, especially the
provisions thereof in relation to homesteads, is to conserve ownership of lands acquired as homesteads
in the homesteader or his heirs.[50] What cannot be bartered away is the homesteaders right to
repurchase the homestead within five years from its conveyance, as this is what public policy by law
seeks to preserve.[51] This, in our opinion, is the only logical meaning to be given to the law, which must
be liberally construed in order to carry out its purpose.[52]

Petitioner does not dispute that the 1988 contract was executed freely and willingly between him and
his late brother, and the Nisperos spouses. The freedom of contract is both a constitutional and
statutory right,[53] and the contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals, good customs,
public order, or public policy.[54] The 1988 contract neither shortens the period provided under Section
119 nor does away with it. Instead, it gives the Nisperos spouses more time to reacquire the land that
the State gratuitously gave them. The 1988 contract therefore is not contrary to law; instead it is merely
in keeping with the purpose of the homestead law. Since the 1988 contract is valid, it should be given
full force and effect. In Roxas v. De Zuzuarregui, Jr.,[55] we held:

It is basic that a contract is the law between the parties. Obligations arising from contracts have the
force of law between the contracting parties and should be complied with in good faith. Unless the
stipulations in a contract are contrary to law, morals, good customs, public order or public policy, the
same are binding as between the parties.[56]

Petitioner, who freely signed the 1988 contract, cannot now be allowed to renege on his obligation
under it, simply because he changed his mind. Article 1308 of the Civil Code provides:

The contract must bind both contracting parties; its validity or compliance cannot be left to the will of
one of them.

Petitioner is thus bound by the terms of the 1988 Contract, and must comply with it in good faith. Since
the right to repurchase was exercised by the Nisperos spouses before the expiration of the time given to
them by the Morla brothers, the lower courts correctly ruled in their favor.
WHEREFORE, the Petition is hereby DENIED and the March 9, 2005 Decision and December 29, 2005
Resolution of the Court of Appeals in CA-G.R. CV No. 53527, are AFFIRMED.

EMILIANA G. PEA versus TOLENTINO

By petition for review on certiorari, the petitioners appeal the adverse decision promulgated by the
Court of Appeals (CA) on March 31, 2000, [1] and the resolution issued on August 28, 2002 (denying
their motion for reconsideration).[2]

Antecedents

The petitioners are lessees of three distinct and separate parcels of land owned by the respondents,
located in the following addresses, to wit: Carmen Reyes, 1460 Velasquez, Tondo, Manila; for Amelia
Mar, 479 Perla, Tondo, Manila; and for Emiliana Pea, 1461 Sta. Maria, Tondo, Manila.

Based on the parties oral lease agreements, the petitioners agreed to pay monthly rents, pegged as of
October 9, 1995 at the following rates, namely: for Carmen Reyes, P570.00; for Amelia Mar, P840.00;
and for Emiliana Pea, P480.00.

On August 15, 1995, the respondents wrote a demand letter to each of the petitioners, informing that
they were terminating the respective month-to-month lease contracts effective September 15, 1995;
and demanding that the petitioners vacate and remove their houses from their respective premises,
with warning that should they not heed the demand, the respondents would charge them
P3,000.00/month each as reasonable compensation for the use and occupancy of the premises from
October 1, 1995 until they would actually vacate.

After the petitioners refused to vacate within the period allowed, the respondents filed on October 9,
1995 three distinct complaints for ejectment against the petitioners in the Metropolitan Trial Court
(MeTC) of Manila. The three cases were consolidated upon the respondents motion.
In their respective answers, the petitioners uniformly contended that the respondents could not
summarily eject them from their leased premises without circumventing Presidential Decree (P.D.) No.
20 and related laws.

During the preliminary conference, the parties agreed on the following issues:[3]

1. Whether or not each of the petitioners could be ejected on the ground that the verbal contract of
lease had expired; and

2. Whether or not the reasonable compensation demanded by the respondents was exorbitant or
unconscionable.

Ruling of the MeTC

On May 17, 1996, the MeTC ruled in favor of the respondents,[4] viz:

WHEREFORE, judgment is rendered in favor of the plaintiff spouses:

1. Ordering defendant Emiliana Pea in Civil Case No. 149598-CV to immediately vacate the lot located
at 1461 Sta. Maria, Tondo, Manila, and surrender the possession thereof to the plaintiff spouses; to pay
the latter the amount of P2,000.00 a month as reasonable compensation for the use and occupancy of
the premises from 1 October 1995 until the same is finally vacated; to pay the plaintiff spouses the
amount of P5,000.00 as attorneys fees; and to pay the costs of suit;

2. Ordering the defendant Amelia Mar in Civil Case No. 149599-CV to immediately vacate the lot
situated at 479 Perla St., Tondo, Manila, and surrender possession thereof to the plaintiff spouses; to
pay the latter the amount of P2,500.00 per month as reasonable compensation for the use and
occupancy of the premises from 1 October 1995 until the same is finally vacated; to pay the plaintiff
spouses the amount of P5,000.00 as attorneys fees; and to pay the costs of suit; and

3. Ordering the defendant Carmen Reyes in Civil Case No. 149601-CV to immediately vacate the lot
with address at 1460 Velasquez Street, Tondo, Manila, and surrender possession thereof to the plaintiff
spouses; to pay the latter the amount of P2,0500.00 a month as reasonable compensation for the use
and occupancy of the leased premises from 1 October 1995 until the same is finally vacated; to pay the
plaintiff-spouses the amount of P5,000.00 as attorneys fees; and to pay the costs of suit; and

SO ORDERED.

The MeTC explained in its decision:

Defendants themselves categorically state that the rentals on the respective lots leased to them were
paid every month. xxx Pertinent to the cases, thus, is the Supreme Court ruling in the case of Acab, et.
al. vs Court of Appeals (G.R. No. 112285, 21 February 1995) that lease agreements with no specified
period, but in which rentals are paid monthly, are considered to be on a month-to-month basis. They are
for a definite period and expire after the last day of any given thirty day period of lease, upon proper
demand and notice of lessor to vacate, and in which case, there is sufficient cause for ejectment under
Sec. 5(f) of Batas Pambansa 877, that is, the expiration of the period of the lease contract.

Ruling of the RTC

On appeal, the Regional Trial Court (RTC) modified the MeTCs decision,[5] viz:

WHEREFORE, premises considered, judgment is hereby rendered modifying the decision appealed from
as follows:

a. Defendants having stayed in the leased premises for not less than thirty (30) years, instead of being
on a month-to-month basis, the lease is fixed for a term of two (2) years reckoned from the date of this
decision.

b. Upon expiration of the term of the lease, defendants shall demolish their respective houses at their
own expense and vacate the leased premises;

c. The lease being covered by the Rent Control Law, defendants shall continue to pay the old monthly
rental to be gradually increased in accordance with said law;

d. Both parties shall pay their respective counsels the required attorney's fees; and

e. To pay the costs of the suit.

SO ORDERED.
The RTC affirmed the MeTCs holding that the leases expired at the end of every month, upon demand to
vacate by the respondents; but decreed based on the authority of the court under Article 1687 of the
Civil Code to fix a longer term that the leases were for two years reckoned from the date of its decision,
unless extended by the parties pursuant to the law and in keeping with equity and justice, considering
that the respondents had allowed the petitioners to construct their own houses of good materials on
the premises, and that the petitioners had been occupants for over 30 years.

Ruling of the CA

Both parties appealed by petition for review.[6]

The petitioners petition for review was docketed as C.A.-G.R. SP NO. 44172; that of the respondents was
docketed as C.A.-G.R. SP No. 44192. Nonetheless, the separate appeals were consolidated on November
20, 1997.[7]

On March 31, 2000, the CA promulgated its decision,[8] thus:

WHEREFORE, judgment is rendered SETTING ASIDE the decision of the RTC, Branch 26, Manila and
REINSTATING the decision of the MTC, Branch 3, Manila with the modification that the defendants shall
pay their respective agreed rentals which may be gradually increased in accordance with the Rent
Control Law for the use and occupancy of the premises from 1 October 1995 until the same is finally
vacated.

SO ORDERED.

The petitioners sought reconsideration, but the CA denied their motion for reconsideration on August
28, 2002, and granted the respondents motion for execution pending appeal and ordered the MeTC to
issue a writ of execution to enforce the judgment pending appeal.

Issues
Hence, this appeal to the Court, whereby the petitioners urge the following grounds,[9] to wit:

I. THE EJECTMENT OF HEREIN PETITIONERS FROM THE SAID LEASED PREMISES IS VIOLATIVE OF P.D.
NO. 20

II. HEREIN PETITIONER CANNOT BE EJECTED FROM THE SUBJECT LEASED PROPERTY WITHOUT CLEARLY
VIOLATING THE URBAN LAND REFORM CODE (P.D. 1517) AND R.A. 3516.

Ruling of the Court

The petition lacks merit.

1.

Were the contracts of lease

for an indefinite period?

The petitioners contend that their lease contracts were covered by P.D. No. 20,[10] which suspended
paragraph 1 of Article 1673,[11] Civil Code; that as a result, the expiration of the period of their leases
was no longer a valid ground to eject them; and that their leases should be deemed to be for an
indefinite period.

In refutation, the respondents argue that P.D. 20 suspended only Article 1673, not Article 1687,[12] Civil
Code; that under Article 1687, a lease on a month-to-month basis was a lease with a definite period; and
that the petitioners could be ejected from the leased premises upon the expiration of the definite
period, particularly as a demand to that effect was made.

The petitioners contention is erroneous.

First of all, the petitioners reliance on P.D. 20 is futile and misplaced because that law had no application
to their cause. They ignored that Batas Pambansa Blg. 25,[13] approved on April 10, 1979 and effective
immediately, had expressly repealed P.D. 20 pursuant to its Section 10.[14]

For the enlightenment of the petitioners in order to dispel their confusion, the following brief review of
the rental laws that came after P.D. 20 and B.P. Blg. 25 is helpful.

B.P. Blg. 25 remained in force for five years, after which P.D. 1912[15] and B.P. Blg. 867 were enacted to
extend the effectivity of B.P. Blg. 25 for eight months and six months, respectively. When the extension
of B.P. Blg. 25 ended on June 30, 1985, a new rental law, B.P. Blg. 877,[16] was enacted on July 1, 1985.
B.P. Blg. 877, although initially effective only until December 31, 1987, came to be extended up to
December 31, 1989 by Republic Act No. 6643.[17] Subsequently, Congress passed R.A. No. 7644[18] to
further extend the effectivity of B.P. Blg. 877 by three years. Finally, R.A. No. 8437[19] extended the rent
control period provided in B.P. Blg. 877 from January 1, 1998 up to December 31, 2001.

It is clear, therefore, that B.P. Blg. 877 was the controlling rental law when the complaints against the
petitioners were filed on October 9, 1995.

We note that on January 1, 2002, R.A. No. 9161[20] took effect. Its Section 7(e) provided that the
expiration of the period of the lease contract was still one of the grounds for judicial ejectment. Also, its
Section 10 provided for the suspension of paragraph 1 of Article 1673 of the Civil Code, which was
similar to Section 6 of B.P. Blg. 877, quoted hereunder:

Sec. 6 Application of the Civil Code and Rules of Court of the Philippines Except when the lease is for a
definite period, the provisions of paragraph (1) of Article 1673 of the Civil Code of the Philippines,
insofar as they refer to residential units covered by this Act shall be suspended during the effectivity of
this Act, but other provisions of the Civil Code and the Rules of Court on lease contracts, insofar as they
are not in conflict with the provisions of the Act shall apply.

In several rulings,[21] the Court held that Section 6 of B.P. Blg. 877 did not suspend the effects of Article
1687 of the Civil Code; and that the only effect of the suspension of paragraph 1, Article 1673 of the Civil
Code was that, independently of the grounds for ejectment enumerated in B.P. Blg. 877, the
owner/lessor could not eject the tenant by reason of the expiration of the period of lease as fixed or
determined under Article 1687 of the Civil Code. Consequently, the determination of the period of the
lease could still be made in accordance with Article 1687.

Under Section 5 (f) of B.P. Blg. 877,[22] the expiration of the period of the lease is among the grounds
for judicial ejectment of a lessee. In this case, because no definite period was agreed upon by the
parties, their contracts of lease being oral, the leases were deemed to be for a definite period,
considering that the rents agreed upon were being paid monthly, and terminated at the end of every
month, pursuant to Article 1687.[23] In addition, the fact that the petitioners were notified of the
expiration of the leases effective September 15, 1995 brought their right to stay in their premises to a
definite end as of that date.[24]

May petitioners validly raise their

alleged rights under P.D. 1517, R.A. 3516

and P.D. 2016 for the first time on appeal?

The petitioners contend that the decisions of the MeTC, RTC, and CA were contrary to law; that they
held the right of first refusal to purchase their leased premises pursuant to Sections 6 of P.D. 1517,[25]
because they had resided on the leased lots for almost 40 years, even before the respondents
purchased the properties from the former owners, and because they had erected their own apartments
on the leased lots; that under Section 5 of R.A. No. 3516,[26] a lessor was prohibited from selling the
leased premises to any person other than his lessee, without securing the latters written renunciation of
his right of first refusal to purchase the leased property; and that Section 2 of P.D. 2016[27] likewise
protected them.

The respondents counter that the petitioners could not validly raise the applicability of the cited laws for
the first time in this Court, without violating their right to due process.

In reply, the petitioners posit that the provisions of P.D. 1517 and R.A. No. 3516, although cited for the
first time only on appeal, were always presumed to be part of their affirmative or special defenses; that
the lower courts were bound to take judicial notice of and should render decisions consistent with said
provisions of law; that the Court was also clothed with ample authority to review matters even if not
assigned as errors on appeal if it found that their consideration was necessary to arrive at a just
determination of a case; and that Section 8 of Rule 51 of the Rules of Court authorizes the Court to
consider and resolve a plain error, although not specifically assigned, for, otherwise, substance may be
sacrificed for technicalities.

We cannot side with the petitioners.

Firstly, the petitioners appear to have known of their supposed right of first refusal even before the
respondents came to acquire the leased premises by purchase. They implied so in their petition for
review filed on May 30, 1997 in the CA:[28]
xxx It must also be borne in mind herein that the said petitioners had started occupying the said
property even before the same was purchased by the herein private respondents. In fact, the said sale
should even be considered as illegal if not null and void from the very beginning because the herein
petitioners were not even properly informed of the said sale considering that under the Urban Land
Reform Code they even have the right of first refusal over the said property. The public respondent
should also consider the said fact in resolving to give a longer period of lease to the herein petitioners
and certainly not for two (2) years only. Of course it would be a different matter if the public respondent
himself (RTC) had at least convinced if not goaded the herein private respondents to compensate the
petitioners for the value of the improvements introduced on the said leased premises in the interest of
equity, fairness and justice. We submit to this Honorable Court that the herein petitioners should be
allowed to enjoy their said improvements for a period of at least five (5) years before they can be
ejected from the said leased premises.

Yet, the petitioners did not invoke their supposed right of first refusal from the time when the
respondents filed their complaints for ejectment against them on October 9, 1995 until they brought the
present recourse to this Court. Neither did they offer any explanation for their failure to do so. It is
notable that the only defense they raised is that their eviction from the premises on the sole ground of
expiration of the lease contract violated R.A. No. 9161.

Moreover, the petitioners did not also assert their supposed right of first refusal despite the
respondents informing them (through their position paper filed in the MeTC on March 21, 1996)[29]
that they had terminated the petitioners leases because they were intending to sell the premises to a
third person. In fact, as the records bear out, the only reliefs the petitioners prayed for in the MTC, RTC,
and CA were the extension of their leases, and the reimbursement by the respondents of the values of
their improvements.[30] It is inferable from the petitioners silence, therefore, that they had neither the
interest nor the enthusiasm to assert the right of first refusal.

Secondly, the petitioners are precluded from invoking their supposed right of first refusal at this very
late stage after failing to assert it within a reasonable time from the respondents purchase of the
respective properties where their premises were respectively located. The presumption that they had
either abandoned or declined to assert their rights becomes fully warranted.[31]

Thirdly, it is clear that the petitioners are changing their theory of the case on appeal. That change is
impermissible on grounds of its elemental unfairness to the adverse parties, who would now be forced
to adapt to the change and to incur additional expense in doing so. Besides, such a change would
effectively deprive the lower courts of the opportunity to decide the merits of the case fairly. It is
certainly a basic rule in appellate procedure that the trial court should be allowed the meaningful
opportunity not only to consider and pass upon all the issues but also to avoid or correct any alleged
errors before those issues or errors become the basis for an appeal.[32] In that regard, the Court has
observed in Carantes v. Court of Appeals:[33]

The settled rule is that defenses not pleaded in the answer may not be raised for the first time on
appeal. A party cannot, on appeal, change fundamentally the nature of the issue in the case. 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.

Indeed, the settled rule in this jurisdiction, according to Mon v. Court of Appeals,[34] is that a party
cannot change his theory of the case or his cause of action on appeal. This rule affirms that courts of
justice have no jurisdiction or power to decide a question not in issue. Thus, a judgment that goes
beyond the issues and purports to adjudicate something on which the court did not hear the parties is
not only irregular but also extrajudicial and invalid.[35] The legal theory under which the controversy
was heard and decided in the trial court should be the same theory under which the review on appeal is
conducted. Otherwise, prejudice will result to the adverse party. We stress that points of law, theories,
issues, and arguments not adequately brought to the attention of the lower court will not be ordinarily
considered by a reviewing court, inasmuch as they cannot be raised for the first time on appeal.[36] This
would be offensive to the basic rules of fair play, justice, and due process.[37]

Lastly, the issue of whether the leased premises were covered by P. D. 1517 or not is truly a factual
question that is properly determined by the trial court, not by this Court due to its not being a trier of
facts.

CAs reinstatement of MeTCs decision

on the ejectment of petitioners is sustained,

subject to modification on rentals

Although the CA correctly reinstated the MeTCs decision as far as it ordered the petitioners ejectment
from the leased premises, we cannot uphold its modification by requiring the petitioners instead to pay
their respective agreed rentals which shall be gradually increased in accordance with the Rent Control
Law for the use and occupancy of the premises from 1 October 1995 until the same is finally vacated
without any elucidation of the reasons for ordering the payment of agreed rentals for the use and
occupancy of the premises in lieu of the MeTCs requiring the petitioners to pay reasonable
compensation.
It is true that the MeTC had not also given any justification for fixing reasonable compensation in the
respective amounts found in the dispositive portion of its decision, instead of rentals. However, we
discern that the MeTC had taken off from the demand letters of the respondents to each of the
petitioners, which included the warning to them that should they refuse to vacate as demanded they
would each be charged P3,000.00/month as reasonable compensation for the use and occupancy of the
premises from October 1, 1995 until they would actually vacate. We opt not to disturb the MeTCs
holding on reasonable compensation, in lieu of agreed rentals, considering that the petitioners did not
raise any issue against it, and considering further that the CA did not find any error committed by the
MeTC as to that. At any rate, it is worthy to note that the award of reasonable compensation, not
rentals, is more consistent with the conclusion of the MeTC that the leases of the petitioners had
expired. Indeed, to peg the respondents monetary recovery to the unadjusted rentals, instead of
reasonable compensation, is not fair.

Accordingly, we modify the CAs decision by reinstating the MeTCs decision without qualification.

WHEREFORE, we modify the decision promulgated on March 31, 2000 by the Court of Appeals by
reinstating the decision dated May 17, 1996 by the Metropolitan Trial Court in Manila without
qualification.

ESTATE OF MARGARITA D. CABACUNGAN, versus LAIGO

This Petition for Review under Rule 45 of the Rules of Court assails the October 13, 2006 Decision[1] of
the Court of Appeals in CA-G.R. CV No. 72371. The assailed decision affirmed the July 2, 2001
judgment[2] rendered by the Regional Trial Court of La Union, Branch 33 in Civil Case No. 1031-BG a
complaint for annulment of sale of real property, recovery of ownership and possession, cancellation of
tax declarations and damages filed by Margarita Cabacungan,[3] represented by her daughter, Luz Laigo-
Ali against Marilou Laigo and Pedro Roy Laigo, respondents herein, and against Estella Balagot,[4] and
the spouses Mario and Julia Campos.

The facts follow.

Margarita Cabacungan (Margarita) owned three parcels of unregistered land in Paringao and in Baccuit,
Bauang, La Union, each measuring 4,512 square meters, 1,986 square meters and 3,454 square meters.
The properties were individually covered by tax declaration all in her name.[5] Sometime in 1968,
Margaritas son, Roberto Laigo, Jr. (Roberto), applied for a non-immigrant visa to the United States, and
to support his application, he allegedly asked Margarita to transfer the tax declarations of the properties
in his name.[6] For said purpose, Margarita, unknown to her other children, executed an Affidavit of
Transfer of Real Property whereby the subject properties were transferred by donation to Roberto.[7]
Not long after, Robertos visa was issued and he was able to travel to the U.S. as a tourist and returned in
due time. In 1979, he adopted respondents Pedro Laigo (Pedro) and Marilou Laigo (Marilou),[8] and
then he married respondent Estella Balagot.

In July 1990, Roberto sold the 4,512 sq m property in Baccuit to the spouses Mario and Julia Campos for
P23,000.00.[9] Then in August 1992, he sold the 1,986 sq m and 3,454 sq m lots in Paringao,
respectively, to Marilou for P100,000.00 and to Pedro for P40,000.00.[10] Allegedly, these sales were
not known to Margarita and her other children.[11]

It was only in August 1995, at Robertos wake, that Margarita came to know of the sales as told by Pedro
himself.[12] In February 1996, Margarita, represented by her daughter, Luz, instituted the instant
complaint for the annulment of said sales and for the recovery of ownership and possession of the
subject properties as well as for the cancellation of Ricardos tax declarations. Margarita admitted having
accommodated Robertos request for the transfer of the properties to his name, but pointed out that the
arrangement was only for the specific purpose of supporting his U.S. visa application. She emphasized
that she never intended to divest herself of ownership over the subject lands and, hence, Roberto had
no right to sell them to respondents and the Spouses Campos. She likewise alleged that the sales, which
were fictitious and simulated considering the gross inadequacy of the stipulated price, were fraudulently
entered into by Roberto. She imputed bad faith to Pedro, Marilou and the Spouses Campos as buyers of
the lots, as they supposedly knew all along that Roberto was not the rightful owner of the
properties.[13] Hence, she principally prayed that the sales be annulled; that Robertos tax declarations
be cancelled; and that the subject properties be reconveyed to her.[14]

The Spouses Campos advanced that they were innocent purchasers for value and in good faith, and had
merely relied on Robertos representation that he had the right to sell the property; and that, hence,
they were not bound by whatever agreement entered by Margarita with her son. They posited that the
alleged gross inadequacy of the price would not invalidate the sale absent a vitiation of consent or proof
of any other agreement. Further, they noted that Margaritas claim was already barred by prescription
and laches owing to her long inaction in recovering the subject properties. Finally, they believed that
inasmuch as Roberto had already passed away, Margarita must have, instead, directed her claim against
his estate.[15]

In much the same way, Marilou and Pedro,[16] who likewise professed themselves to be buyers in good
faith and for value, believed that Margaritas cause of action had already been barred by laches, and that
even assuming the contrary, the cause of action was nevertheless barred by prescription as the same
had accrued way back in 1968 upon the execution of the affidavit of transfer by virtue of which an
implied trust had been created. In this regard, they emphasized that the law allowed only a period of ten
(10) years within which an action to recover ownership of real property or to enforce an implied trust
thereon may be brought, but Margarita merely let it pass.[17]
On February 3, 1999, prior to pre-trial, Margarita and the Spouses Campos amicably entered into a
settlement whereby they waived their respective claims against each other.[18] Margarita died two days
later and was forthwith substituted by her estate.[19] On February 8, 1999, the trial court rendered a
Partial Decision[20] approving the compromise agreement and dismissing the complaint against the
Spouses Campos. Forthwith, trial on the merits ensued with respect to Pedro and Marilou.

On July 2, 2001, the trial court rendered judgment dismissing the complaint as follows:

WHEREFORE, in view of the foregoing considerations, the complaint is DISMISSED.[21]

The trial court ruled that the 1968 Affidavit of Transfer operated as a simple transfer of the subject
properties from Margarita to Roberto. It found no express trust created between Roberto and Margarita
by virtue merely of the said document as there was no evidence of another document showing Robertos
undertaking to return the subject properties. Interestingly, it concluded that, instead, an implied or
constructive trust was created between the parties, as if affirming that there was indeed an agreement
albeit unwritten to have the properties returned to Margarita in due time. [22]

Moreover, the trial court surmised how Margarita could have failed to recover the subject properties
from Roberto at any time between 1968, following the execution of the Affidavit of Transfer, and
Robertos return from the United States shortly thereafter. Finding Margarita guilty of laches by such
inaction, the trial court barred recovery from respondents who were found to have acquired the
properties supposedly in good faith and for value.[23] It also pointed out that recovery could no longer
be pursued in this case because Margarita had likewise exhausted the ten-year prescriptive period for
reconveyance based on an implied trust which had commenced to run in 1968 upon the execution of
the Affidavit of Transfer.[24] Finally, it emphasized that mere inadequacy of the price as alleged would
not be a sufficient ground to annul the sales in favor of Pedro and Marilou absent any defect in
consent.[25]

Aggrieved, petitioner appealed to the Court of Appeals which, on October 13, 2006, affirmed the trial
courts disposition. The appellate court dismissed petitioners claim that Roberto was merely a trustee of
the subject properties as there was no evidence on record supportive of the allegation that Roberto
merely borrowed the properties from Margarita upon his promise to return the same on his arrival from
the United States. Further, it hypothesized that granting the existence of an implied trust, still
Margaritas action thereunder had already been circumscribed by laches. [26]
Curiously, while the appellate court had found no implied trust relation in the transaction between
Margarita and Roberto, nevertheless, it held that the ten-year prescriptive period under Article 1144 of
the Civil Code, in relation to an implied trust created under Article 1456, had already been exhausted by
Margarita because her cause of action had accrued way back in 1968; and that while laches and
prescription as defenses could have availed against Roberto, the same would be unavailing against
Pedro and Marilou because the latter were supposedly buyers in good faith and for value.[27] It
disposed of the appeal, thus:

WHEREFORE, the Appeal is hereby DENIED. The assailed Decision dated 2 July 2001 of the Regional Trial
Court of Bauang, La Union, Branch 33 is AFFIRMED.

SO ORDERED.[28]

Hence, the instant recourse imputing error to the Court of Appeals in holding: (a) that the complaint is
barred by laches and prescription; (b) that the rule on innocent purchaser for value applies in this case
of sale of unregistered land; and (c) that there is no evidence to support the finding that there is an
implied trust created between Margarita and her son Roberto.[29]

Petitioner posits that the Court of Appeals should not have haphazardly applied the doctrine of laches
and failed to see that the parties in this case are bound by familial ties. They assert that laches must not
be applied when an injustice would result from it. Petitioner believes that the existence of such
confidential relationship precludes a finding of unreasonable delay on Margaritas part in enforcing her
claim, especially in the face of Luzs testimony that she and Margarita had placed trust and confidence in
Roberto. Petitioner also refutes the Court of Appeals finding that there was a donation of the properties
to Roberto when the truth is that the subject properties were all that Margarita possessed and that she
could not have failed to provide for her other children nor for means by which to support herself. It
reiterates that the transfer to Roberto was only an accommodation so that he could submit proof to
support his U.S. visa application.

On the issue of prescription, petitioner advances that it runs from the time Roberto, as trustee, has
repudiated the trust by selling the properties to respondents in August 15, 1992; that hence, the filing of
the instant complaint in 1996 was well within the prescriptive period. Finally, petitioner states that
whether a buyer is in good or bad faith is a matter that attains relevance in sales of registered land, as
corollary to the rule that a purchaser of unregistered land uninformed of the sellers defective title
acquires no better right than such seller.

Respondents stand by the ruling of the Court of Appeals. In their Comment, they theorize that if indeed
Margarita and Roberto had agreed to have the subject properties returned following the execution of
the Affidavit of Transfer, then there should have been a written agreement evincing such intention of
the parties. They note that petitioners reliance on the Affidavit of Transfer as well as on the alleged
unwritten agreement for the return of the properties must fail, simply because they are not even parties
to it. Be that as it may, the said document had effectively transferred the properties to Roberto who, in
turn, had acquired the full capacity to sell them, especially since these properties could well be
considered as Robertos inheritance from Margarita who, on the contrary, did have other existing
properties in her name. Moreover, they believe that the liberal application of the rule on laches
between family members does not apply in the instant case because there is no fiduciary relationship
and privity between them and Margarita.

There is merit in the petition.

To begin with, the rule is that the latitude of judicial review under Rule 45 generally excludes factual and
evidentiary reevaluation, and the Court ordinarily abides by the uniform conclusions of the trial court
and the appellate court. Yet, in the case at bar, while the courts below have both arrived at the dismissal
of petitioners complaint, there still remains unsettled the ostensible incongruence in their respective
factual findings. It thus behooves us to be thorough both in reviewing the records and in appraising the
evidence, especially since an opposite conclusion is warranted and, as will be shown, justified.

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.[30] Trusts are
either express or implied.[31] Express or direct trusts are created by the direct and positive acts of the
parties, by some writing or deed, or will, or by oral declaration in words evincing an intention to create a
trust.[32] Implied trusts also called trusts by operation of law, indirect trusts and involuntary trusts arise
by legal implication based on the presumed intention of the parties or on equitable principles
independent of the particular intention of the parties.[33] They 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 inferred from the transaction by operation of law
basically by reason of equity.[34]

Implied trusts are further classified into constructive trusts and resulting trusts. Constructive trusts, on
the one hand, come about in the main by operation of law and not by agreement or intention. They
arise 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.[35] Also known as trusts ex
maleficio, trusts ex delicto and trusts de son tort, they are construed against one who by actual or
constructive fraud, duress, abuse of confidence, commission of a wrong or any form of unconscionable
conduct, artifice, concealment of questionable means, or who in any way against equity and good
conscience has obtained or holds the legal right to property which he ought not, in equity and good
conscience, hold and enjoy.[36] They are aptly characterized as fraud-rectifying trust,[37] imposed by
equity to satisfy the demands of justice[38] and to defeat or prevent the wrongful act of one of the
parties.[39] Constructive trusts are illustrated in Articles 1450, 1454, 1455 and 1456.[40]

On the other hand, resulting trusts arise from the nature or circumstances of the consideration involved
in a transaction whereby one person becomes invested with legal title but is obligated in equity to hold
his title for the benefit of another. This is based on the equitable doctrine that valuable consideration
and not legal title is determinative of equitable title or interest and is always presumed to have been
contemplated by the parties.[41] Such intent is presumed as it is not expressed in the instrument or
deed of conveyance and is to be found in the nature of their transaction.[42] Implied trusts of this
nature are hence describable as intention-enforcing trusts.[43] Specific examples of resulting trusts may
be found in the Civil Code, particularly Articles 1448, 1449, 1451, 1452 and 1453.[44]

Articles 1448 to 1456 of the Civil Code enumerate cases of implied trust, but the list according to Article
1447 is not exclusive of others which may be established by the general law on trusts so long as the
limitations laid down in Article 1442 are observed,[45] that is, that they be not in conflict with the New
Civil Code, the Code of Commerce, the Rules of Court and special laws.[46]

While resulting trusts generally arise on failure of an express trust or of the purpose thereof, or on a
conveyance to one person upon a consideration from another (sometimes referred to as a purchase-
money resulting trust), they may also be imposed in other circumstances such that the court, shaping
judgment in its most efficient form and preventing a failure of justice, must decree the existence of such
a trust.[47] A resulting trust, for instance, arises where, there being no fraud or violation of the trust, the
circumstances indicate intent of the parties that legal title in one be held for the benefit of another.[48]
It also arises in some instances where the underlying transaction is without consideration, such as that
contemplated in Article 1449[49] of the Civil Code. Where property, for example, is gratuitously
conveyed for a particular purpose and that purpose is either fulfilled or frustrated, the court may affirm
the resulting trust in favor of the grantor or transferor,[50] where the beneficial interest in property was
not intended to vest in the grantee.[51]

Intention although only presumed, implied or supposed by law from the nature of the transaction or
from the facts and circumstances accompanying the transaction, particularly the source of the
consideration is always an element of a resulting trust[52] and may be inferred from the acts or conduct
of the parties rather than from direct expression of conduct.[53] Certainly, intent as an indispensable
element, is a matter that necessarily lies in the evidence, that is, by evidence, even circumstantial, of
statements made by the parties at or before the time title passes.[54] Because an implied trust is
neither dependent upon an express agreement nor required to be evidenced by writing,[55] Article
1457[56] of our Civil Code authorizes the admission of parole evidence to prove their existence. Parole
evidence that is required to establish the existence of an implied trust necessarily has to be trustworthy
and it cannot rest on loose, equivocal or indefinite declarations.[57]
Thus, contrary to the Court of Appeals finding that there was no evidence on record showing that an
implied trust relation arose between Margarita and Roberto, we find that petitioner before the trial
court, had actually adduced evidence to prove the intention of Margarita to transfer to Roberto only the
legal title to the properties in question, with attendant expectation that Roberto would return the same
to her on accomplishment of that specific purpose for which the transaction was entered into. The
evidence of course is not documentary, but rather testimonial.

We recall that the complaint before the trial court alleged that the 1968 Affidavit of Transfer was
executed merely to accommodate Robertos request to have the properties in his name and thereby
produce proof of ownership of certain real properties in the Philippines to support his U.S. visa
application. The agreement, the complaint further stated, was for Margarita to transfer the tax
declarations of the subject properties to Roberto for the said purpose and without the intention to
divest her of the rights of ownership and dominion.[58] Margarita, however, died before trial on the
merits ensued;[59] yet the allegation was substantiated by the open-court statements of her daughter,
Luz, and of her niece, Hilaria Costales (Hilaria), a disinterested witness.

In her testimony, Luz, who affirmed under oath her own presence at the execution of the Affidavit of
Transfer, described the circumstances under which Margarita and Roberto entered into the agreement.
She narrated that Roberto had wanted to travel to the U.S and to show the embassy proof of his
financial capacity, he asked to borrow from Margarita the properties involved but upon the condition
that he would give them back to her upon his arrival from the United States. She admitted that Robertos
commitment to return the properties was not put in writing because they placed trust and confidence in
him, and that while she had spent most of her time in Mindanao since she married in 1956, she would
sometimes come to La Union to see her mother but she never really knew whether at one point or
another her mother had demanded the return of the properties from Roberto.[60] She further asserted
that even after Robertos arrival from the United States, it was Margarita who paid off the taxes on the
subject properties and that it was only when her health started to deteriorate that Roberto had taken
up those obligations.[61] Hilarias testimony ran along the same line. Like Luz, she was admittedly
present at the execution of the Affidavit of Transfer which took place at the house she shared with
Jacinto Costales, the notarizing officer who was her own brother. She told that Roberto at the time had
wanted to travel to the U.S. but did not have properties in the Philippines which he could use to back up
his visa application; as accommodation, Margarita lent him the tax declarations covering the properties
but with the understanding that upon his return he would give them back to Margarita. She professed
familiarity with the properties involved because one of them was actually sitting close to her own
property.[62]

While indeed at one point at the stand both of Luzs and Hilarias presence at the execution of the
affidavit had been put to test in subtle interjections by respondents counsel to the effect that their
names and signatures did not appear in the Affidavit of Transfer as witnesses, this, to our mind, is of no
moment inasmuch as they had not been called to testify on the fact of, or on the contents of, the
Affidavit of Transfer or its due execution. Rather, their testimony was offered to prove the
circumstances surrounding its execution the circumstances from which could be derived the unwritten
understanding between Roberto and Margarita that by their act, no absolute transfer of ownership
would be effected. Besides, it would be highly unlikely for Margarita to institute the instant complaint if
it were indeed her intention to vest in Roberto, by virtue of the Affidavit of Transfer, absolute ownership
over the covered properties.

It is deducible from the foregoing that the inscription of Robertos name in the Affidavit of Transfer as
Margaritas transferee is not for the purpose of transferring ownership to him but only to enable him to
hold the property in trust for Margarita. Indeed, in the face of the credible and straightforward
testimony of the two witnesses, Luz and Hilaria, the probative value of the ownership record forms in
the names of respondents, together with the testimony of their witness from the municipal assessors
office who authenticated said forms, are utterly minimal to show Robertos ownership. It suffices to say
that respondents did not bother to offer evidence that would directly refute the statements made by
Luz and Hilaria in open court on the circumstances underlying the 1968 Affidavit of Transfer.

As a trustee of a resulting trust, therefore, Roberto, like the trustee of an express passive trust, is merely
a depositary of legal title having no duties as to the management, control or disposition of the property
except to make a conveyance when called upon by the cestui que trust.[63] Hence, the sales he entered
into with respondents are a wrongful conversion of the trust property and a breach of the trust. The
question is: May respondents now be compelled to reconvey the subject properties to petitioner? We
rule in the affirmative.

Respondents posit that petitioners claim may never be enforced against them as they had purchased
the properties from Roberto for value and in good faith. They also claim that, at any rate, petitioners
cause of action has accrued way back in 1968 upon the execution of the Affidavit of Transfer and, hence,
with the 28 long years that since passed, petitioners claim had long become stale not only on account of
laches, but also under the rules on extinctive prescription governing a resulting trust. We do not agree.

First, fundamental is the rule in land registration law that the issue of whether the buyer of realty is in
good or bad faith is relevant only where the subject of the sale is registered land and the purchase was
made from the registered owner whose title to the land is clean, in which case the purchaser who relies
on the clean title of the registered owner is protected if he is a purchaser in good faith and for value.[64]
Since the properties in question are unregistered lands, respondents purchased the same at their own
peril. Their claim of having bought the properties in good faith, i.e., without notice that there is some
other person with a right to or interest therein, would not protect them should it turn out, as it in fact
did in this case, that their seller, Roberto, had no right to sell them.

Second, the invocation of the rules on limitation of actions relative to a resulting trust is not on point
because the resulting trust relation between Margarita and Roberto had been extinguished by the
latters death. A trust, it is said, terminates upon the death of the trustee, particularly where the trust is
personal to him.[65] Besides, prescription and laches, in respect of this resulting trust relation, hardly
can impair petitioners cause of action. On the one hand, in accordance with Article 1144[66] of the Civil
Code, an action for reconveyance to enforce an implied trust in ones favor prescribes in ten (10) years
from the time the right of action accrues, as it is based upon an obligation created by law.[67] It sets in
from the time the trustee performs unequivocal acts of repudiation amounting to an ouster of the cestui
que trust which are made known to the latter.[68] In this case, it was the 1992 sale of the properties to
respondents that comprised the act of repudiation which, however, was made known to Margarita only
in 1995 but nevertheless impelled her to institute the action in 1996 still well within the prescriptive
period. Hardly can be considered as act of repudiation Robertos open court declaration which he made
in the 1979 adoption proceedings involving respondents to the effect that he owned the subject
properties,[69] nor even the fact that he in 1977 had entered into a lease contract on one of the
disputed properties which contract had been subject of a 1996 decision of the Court of Appeals.[70]
These do not suffice to constitute unequivocal acts in repudiation of the trust.

On the other hand, laches, being rooted in equity, is not always to be applied strictly in a way that would
obliterate an otherwise valid claim especially between blood relatives. The existence of a confidential
relationship based upon consanguinity is an important circumstance for consideration; hence, the
doctrine is not to be applied mechanically as between near relatives.[71] Adaza v. Court of Appeals[72]
held that the relationship between the parties therein, who were siblings, was sufficient to explain and
excuse what would otherwise have been a long delay in enforcing the claim and the delay in such
situation should not be as strictly construed as where the parties are complete strangers vis-a-vis each
other; thus, reliance by one party upon his blood relationship with the other and the trust and
confidence normally connoted in our culture by that relationship should not be taken against him. Too,
Sotto v. Teves[73] ruled that the doctrine of laches is not strictly applied between near relatives, and the
fact that the parties are connected by ties of blood or marriage tends to excuse an otherwise
unreasonable delay.

Third, there is a fundamental principle in agency that where certain property entrusted to an agent and
impressed by law with a trust in favor of the principal is wrongfully diverted, such trust follows the
property in the hands of a third person and the principal is ordinarily entitled to pursue and recover it so
long as the property can be traced and identified, and no superior equities have intervened. This
principle is actually one of trusts, since the wrongful conversion gives rise to a constructive trust which
pursues the property, its product or proceeds, and permits the beneficiary to recover the property or
obtain damages for the wrongful conversion of the property. Aptly called the trust pursuit rule, it applies
when a constructive or resulting trust has once affixed itself to property in a certain state or form.[74]

Hence, a trust will follow the property through all changes in its state and form as long as such property,
its products or its proceeds, are capable of identification, even into the hands of a transferee other than
a bona fide purchaser for value, or restitution will be enforced at the election of the beneficiary through
recourse against the trustee or the transferee personally. This is grounded on the principle in property
law that ownership continues and can be asserted by the true owner against any withholding of the
object to which the ownership pertains, whether such object of the ownership is found in the hands of
an original owner or a transferee, or in a different form, as long as it can be identified.[75] Accordingly,
the person to whom is made a transfer of trust property constituting a wrongful conversion of the trust
property and a breach of the trust, when not protected as a bona fide purchaser for value, is himself
liable and accountable as a constructive trustee. The liability attaches at the moment of the transfer of
trust property and continues until there is full restoration to the beneficiary. Thus, the transferee is
charged with, and can be held to the performance of the trust, equally with the original trustee, and he
can be compelled to execute a reconveyance.[76]

This scenario is characteristic of a constructive trust imposed by Article 1456[77] of the Civil Code, which
impresses upon a person obtaining property through mistake or fraud the status of an implied trustee
for the benefit of the person from whom the property comes. Petitioner, in laying claim against
respondents who are concededly transferees who professed having validly derived their ownership from
Roberto, is in effect enforcing against respondents a constructive trust relation that arose by virtue of
the wrongful and fraudulent transfer to them of the subject properties by Roberto.

Aznar Brother Realty Co. v. Aying,[78] citing Buan Vda. de Esconde v. Court of Appeals,[79] explained
this form of implied trust as follows:

A deeper analysis of Article 1456 reveals that it is not a trust in the technical sense for in a typical trust,
confidence is reposed in one person who is named a trustee for the benefit of another who is called the
cestui que trust, respecting property which is held by the trustee for the benefit of the cestui que trust.
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.

xxxx

x x x [C]onstructive trusts are created by the construction of equity in order to satisfy the demands of
justice and prevent unjust enrichment. They arise contrary to intention 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.[80]

It is settled that an action for reconveyance based on a constructive implied trust prescribes in 10 years
likewise in accordance with Article 1144 of the Civil Code. Yet not like in the case of a resulting implied
trust and an express trust, prescription supervenes in a constructive implied trust even if the trustee
does not repudiate the relationship. In other words, repudiation of said trust is not a condition
precedent to the running of the prescriptive period.[81]

As to when the prescriptive period commences to run, Crisostomo v. Garcia[82] elucidated as follows:

When property is registered in another's name, an implied or constructive trust is created by law in
favor of the true owner. The action for reconveyance of the title to the rightful owner prescribes in 10
years from the issuance of the title. An action for reconveyance based on implied or constructive trust
prescribes in ten years from the alleged fraudulent registration or date of issuance of the certificate of
title over the property.

It is now well settled that the prescriptive period to recover property obtained by fraud or mistake,
giving rise to an implied trust under Art. 1456 of the Civil Code, is 10 years pursuant to Art. 1144. This
ten-year prescriptive period begins to run from the date the adverse party repudiates the implied trust,
which repudiation takes place when the adverse party registers the land.[83]

From the foregoing, it is clear that an action for reconveyance under a constructive implied trust in
accordance with Article 1456 does not prescribe unless and until the land is registered or the instrument
affecting the same is inscribed in accordance with law, inasmuch as it is what binds the land and
operates constructive notice to the world.[84] In the present case, however, the lands involved are
concededly unregistered lands; hence, there is no way by which Margarita, during her lifetime, could be
notified of the furtive and fraudulent sales made in 1992 by Roberto in favor of respondents, except by
actual notice from Pedro himself in August 1995. Hence, it is from that date that prescription began to
toll. The filing of the complaint in February 1996 is well within the prescriptive period. Finally, such delay
of only six (6) months in instituting the present action hardly suffices to justify a finding of inexcusable
delay or to create an inference that Margarita has allowed her claim to stale by laches.

WHEREFORE, the Petition is GRANTED. The October 13, 2006 Decision of the Court of Appeals in CA-G.R.
CV No. 72371, affirming the July 2, 2001 judgment of the Regional Trial Court of La Union, Branch 33 in
Civil Case No. 1031-BG, is REVERSED and SET ASIDE, and a new one is entered (a) directing the
cancellation of the tax declarations covering the subject properties in the name of Roberto D. Laigo and
his transferees; (b) nullifying the deeds of sale executed by Roberto D. Laigo in favor of respondents
Pedro Roy Laigo and Marilou Laigo; and (c) directing said respondents to execute reconveyance in favor
of petitioner.

PHILIPPINE NATIONAL BANK, versus AZNAR

Before the Court are two petitions for review on certiorari under Rule 45 of the Rules of Court both
seeking to annul and set aside the Decision[1] dated September 29, 2005 as well as the Resolution[2]
dated March 6, 2006 of the Court of Appeals in CA-G.R. CV No. 75744, entitled Merelo B. Aznar, Matias
B. Aznar III, Jose L. Aznar (deceased) represented by his heirs, Ramon A. Barcenilla (deceased)
represented by his heirs, Rosario T. Barcenilla, Jose B. Enad (deceased) represented by his heirs, and
Ricardo Gabuya (deceased) represented by his heirs v. Philippine National Bank, Jose Garrido and
Register of Deeds of Cebu City. The September 29, 2005 Decision of the Court of Appeals set aside the
Decision[3] dated November 18, 1998 of the Regional Trial Court (RTC) of Cebu City, Branch 17, in Civil
Case No. CEB-21511. Furthermore, it ordered the Philippine National Bank (PNB) to pay Merelo B. Aznar;
Matias B. Aznar III; Jose L. Aznar (deceased), represented by his heirs; Ramon A. Barcenilla (deceased),
represented by his heirs; Rosario T. Barcenilla; Jose B. Enad (deceased), represented by his heirs; and
Ricardo Gabuya (deceased), represented by his heirs (Aznar, et al.), the amount of their lien based on
the Minutes of the Special Meeting of the Board of Directors[4] (Minutes) of the defunct Rural Insurance
and Surety Company, Inc. (RISCO) duly annotated on the titles of three parcels of land, plus legal
interests from the time of PNBs acquisition of the subject properties until the finality of the judgment
but dismissing all other claims of Aznar, et al. On the other hand, the March 6, 2006 Resolution of the
Court of Appeals denied the Motion for Reconsideration subsequently filed by each party.

The facts of this case, as stated in the Decision dated September 29, 2005 of the Court of Appeals, are as
follows:

In 1958, RISCO ceased operation due to business reverses. In plaintiffs desire to rehabilitate RISCO, they
contributed a total amount of P212,720.00 which was used in the purchase of the three (3) parcels of
land described as follows:

A parcel of land (Lot No. 3597 of the Talisay-Minglanilla Estate, G.L.R.O. Record No. 3732) situated in the
Municipality of Talisay, Province of Cebu, Island of Cebu. xxx containing an area of SEVENTY[-]EIGHT
THOUSAND ONE HUNDRED EIGHTY[-]FIVE SQUARE METERS (78,185) more or less. x x x covered by
Transfer Certificate of Title No. 8921 in the name of Rural Insurance & Surety Co., Inc.;

A parcel of land (Lot 7380 of the Talisay Minglanilla Estate, G.L.R.O. Record No. 3732), situated in the
Municipality of Talisay, Province of Cebu, Island of Cebu. xxx containing an area of THREE HUNDRED
TWENTY[-]NINE THOUSAND FIVE HUNDRED FORTY[-]SEVEN SQUARE METERS (329,547), more or less.
xxx covered by Transfer Certificate of Title No. 8922 in the name of Rural Insurance & Surety Co., Inc.
and

A parcel of land (Lot 1323 of the subdivision plan Psd-No. 5988), situated in the District of Lahug, City of
Cebu, Island of Cebu. xxx containing an area of FIFTY[-]FIVE THOUSAND SIX HUNDRED FIFTY[-]THREE
(55,653) SQUARE METERS, more or less. covered by Transfer Certificate of Title No. 24576 in the name
of Rural Insurance & Surety Co., Inc.

After the purchase of the above lots, titles were issued in the name of RISCO. The amount contributed
by plaintiffs constituted as liens and encumbrances on the aforementioned properties as annotated in
the titles of said lots. Such annotation was made pursuant to the Minutes of the Special Meeting of the
Board of Directors of RISCO (hereinafter referred to as the Minutes) on March 14, 1961, pertinent
portion of which states:

xxxx

3. The President then explained that in a special meeting of the stockholders previously called for the
purpose of putting up certain amount of P212,720.00 for the rehabilitation of the Company, the
following stockholders contributed the amounts indicated opposite their names:

CONTRIBUTED SURPLUS

MERELO B. AZNAR

P50,000.00

MATIAS B. AZNAR

50,000.00

JOSE L. AZNAR

27,720.00

RAMON A. BARCENILLA

25,000.00

ROSARIO T. BARCENILLA

25,000.00

JOSE B. ENAD

17,500.00

RICARDO GABUYA

17,500.00
212,720.00

xxxx

And that the respective contributions above-mentioned shall constitute as their lien or interest on the
property described above, if and when said property are titled in the name of RURAL INSURANCE &
SURETY CO., INC., subject to registration as their adverse claim in pursuance of the Provisions of Land
Registration Act, (Act No. 496, as amended) until such time their respective contributions are refunded
to them completely.

xxxx

Thereafter, various subsequent annotations were made on the same titles, including the Notice of
Attachment and Writ of Execution both dated August 3, 1962 in favor of herein defendant PNB, to wit:

On TCT No. 8921 for Lot 3597:

Entry No. 7416-V-4-D.B. Notice of Attachment By the Provincial Sheriff of Cebu, Civil Case No. 47725,
Court of First Instance of Manila, entitled Philippine National Bank, Plaintiff, versus Iluminada Gonzales,
et al., Defendants, attaching all rights, interest and participation of the defendant Iluminada Gonzales
and Rural Insurance & Surety Co., Inc. of the two parcels of land covered by T.C.T. Nos. 8921,
Attachment No. 330 and 185.

Date of Instrument August 3, 1962.

Date of Inscription August 3, 1962, 3:00 P.M.

Entry No. 7417-V-4-D.B. Writ of Execution By the Court of First Instance of Manila, commanding the
Provincial Sheriff of Cebu, of the lands and buildings of the defendants, to make the sum of Seventy[-
]One Thousand Three Hundred Pesos (P71,300.00) plus interest etc., in connection with Civil Case No.
47725, File No. T-8021.

Date of Instrument July 21, 1962.

Date of Inscription August 3, 1962, 3:00 P.M.

Entry No. 7512-V-4-D.B. Notice of Attachment By the Provincial Sheriff of Cebu, Civil Case Nos. IV-74065,
73929, 74129, 72818, in the Municipal Court of the City of Manila, entitled Jose Garrido, Plaintiff, versus
Rural Insurance & Surety Co., Inc., et als., Defendants, attaching all rights, interests and participation of
the defendants, to the parcels of land covered by T.C.T. Nos. 8921 & 8922 Attachment No. 186, File No.
T-8921.

Date of the Instrument August 16, 1962.

Date of Inscription August 16, 1962, 2:50 P.M.

Entry No. 7513-V-4-D.B. Writ of Execution By the Municipal Court of the City of Manila, commanding the
Provincial Sheriff of Cebu, of the lands and buildings of the defendants, to make the sum of Three
Thousand Pesos (P3,000.00), with interest at 12% per annum from July 20, 1959, in connection with Civil
Case Nos. IV-74065, 73929, 74613 annotated above.

File No. T-8921

Date of the Instrument August 11, 1962.

Date of the Inscription August 16, 1962, 2:50 P.M.

On TCT No. 8922 for Lot 7380:

(Same as the annotations on TCT 8921)

On TCT No. 24576 for Lot 1328 (Corrected to Lot 1323-c per court order):

Entry No. 1660-V-7-D.B. Notice of Attachment by the Provincial Sheriff of Cebu, Civil Case No. 47725,
Court of First Instance of Manila, entitled Philippine National Bank, Plaintiff, versus, Iluminada Gonzales,
et al., Defendants, attaching all rights, interest, and participation of the defendants Iluminada Gonzales
and Rural Insurance & Surety Co., Inc. of the parcel of land herein described.

Attachment No. 330 & 185.

Date of Instrument August 3, 1962.

Date of Inscription August 3, 1962, 3:00 P.M.

Entry No. 1661-V-7-D.B. Writ of Execution by the Court of First Instance of Manila commanding the
Provincial Sheriff of Cebu, of the lands and buildings of the defendants to make the sum of Seventy[-
]One Thousand Three Hundred Pesos (P71,300.00), plus interest, etc., in connection with Civil Case No.
47725.

File No. T-8921.

Date of the Instrument July 21, 1962.

Date of the Inscription August 3, 1962 3:00 P.M.

Entry No. 1861-V-7-D.B. - Notice of Attachment By the Provincial Sheriff of Cebu, Civil Case Nos. IV-
74065, 73929, 74129, 72613 & 72871, in the Municipal Court of the City of Manila, entitled Jose Garrido,
Plaintiff, versus Rural Insurance & Surety Co., Inc., et als., Defendants, attaching all rights, interest and
participation of the defendants, to the parcel of land herein described.

Attachment No. 186.

File No. T-8921.

Date of the Instrument August 16, 1962.

Date of the Instription August 16, 1962 2:50 P.M.

Entry No. 1862-V-7-D.B. Writ of Execution by the Municipal Court of Manila, commanding the Provincial
Sheriff of Cebu, of the lands and buildings of the Defendants, to make the sum of Three Thousand Pesos
(P3,000.00), with interest at 12% per annum from July 20, 1959, in connection with Civil Case Nos. IV-
74065, 73929, 74129, 72613 & 72871 annotated above.

File No. T-8921.

Date of the Instrument August 11, 1962.

Date of the Inscription August 16, 1962 at 2:50 P.M.

As a result, a Certificate of Sale was issued in favor of Philippine National Bank, being the lone and
highest bidder of the three (3) parcels of land known as Lot Nos. 3597 and 7380, covered by T.C.T. Nos.
8921 and 8922, respectively, both situated at Talisay, Cebu, and Lot No. 1328-C covered by T.C.T. No.
24576 situated at Cebu City, for the amount of Thirty-One Thousand Four Hundred Thirty Pesos
(P31,430.00). Thereafter, a Final Deed of Sale dated May 27, 1991 in favor of the Philippine National
Bank was also issued and Transfer Certificate of Title No. 24576 for Lot 1328-C (corrected to 1323-C) was
cancelled and a new certificate of title, TCT 119848 was issued in the name of PNB on August 26, 1991.
This prompted plaintiffs-appellees to file the instant complaint seeking the quieting of their supposed
title to the subject properties, declaratory relief, cancellation of TCT and reconveyance with temporary
restraining order and preliminary injunction. Plaintiffs alleged that the subsequent annotations on the
titles are subject to the prior annotation of their liens and encumbrances. Plaintiffs further contended
that the subsequent writs and processes annotated on the titles are all null and void for want of valid
service upon RISCO and on them, as stockholders. They argued that the Final Deed of Sale and TCT No.
119848 are null and void as these were issued only after 28 years and that any right which PNB may
have over the properties had long become stale.

Defendant PNB on the other hand countered that plaintiffs have no right of action for quieting of title
since the order of the court directing the issuance of titles to PNB had already become final and
executory and their validity cannot be attacked except in a direct proceeding for their annulment.
Defendant further asserted that plaintiffs, as mere stockholders of RISCO do not have any legal or
equitable right over the properties of the corporation. PNB posited that even if plaintiffs monetary lien
had not expired, their only recourse was to require the reimbursement or refund of their
contribution.[5]

Aznar, et al., filed a Manifestation and Motion for Judgment on the Pleadings[6] on October 5, 1998.
Thus, the trial court rendered the November 18, 1998 Decision, which ruled against PNB on the basis
that there was an express trust created over the subject properties whereby RISCO was the trustee and
the stockholders, Aznar, et al., were the beneficiaries or the cestui que trust. The dispositive portion of
the said ruling reads:

WHEREFORE, judgment is hereby rendered as follows:

a) Declaring the Minutes of the Special Meeting of the Board of Directors of RISCO approved on
March 14, 1961 (Annex E, Complaint) annotated on the titles to subject properties on May 15, 1962 as
an express trust whereby RISCO was a mere trustee and the above-mentioned stockholders as
beneficiaries being the true and lawful owners of Lots 3597, 7380 and 1323;

b) Declaring all the subsequent annotations of court writs and processes, to wit: Entry No. 7416-V-4-
D.B., 7417-V-4-D.B., 7512-V-4-D.B., and 7513-V-4-D.B. in TCT No. 8921 for Lot 3597 and TCT No. 8922 for
Lot 7380; Entry No. 1660-V-7-D.B., Entry No. 1661-V-7-D.B., Entry No. 1861-V-7-D.B., Entry No. 1862-V-
7-D.B., Entry No. 4329-V-7-D.B., Entry No. 3761-V-7-D.B. and Entry No. 26522 v. 34, D.B. on TCT No.
24576 for Lot 1323-C, and all other subsequent annotations thereon in favor of third persons, as null
and void;
c) Directing the Register of Deeds of the Province of Cebu and/or the Register of Deeds of Cebu City,
as the case may be, to cancel all these annotations mentioned in paragraph b) above the titles;

d) Directing the Register of Deeds of the Province of Cebu to cancel and/or annul TCTs Nos. 8921 and
8922 in the name of RISCO, and to issue another titles in the names of the plaintiffs; and

e) Directing Philippine National Bank to reconvey TCT No. 119848 in favor of the plaintiffs.[7]

PNB appealed the adverse ruling to the Court of Appeals which, in its September 29, 2005 Decision, set
aside the judgment of the trial court. Although the Court of Appeals agreed with the trial court that a
judgment on the pleadings was proper, the appellate court opined that the monetary contributions
made by Aznar, et al., to RISCO can only be characterized as a loan secured by a lien on the subject lots,
rather than an express trust. Thus, it directed PNB to pay Aznar, et al., the amount of their contributions
plus legal interest from the time of acquisition of the property until finality of judgment. The dispositive
portion of the decision reads:

WHEREFORE, premises considered, the assailed Judgment is hereby SET ASIDE.

A new judgment is rendered ordering Philippine National Bank to pay plaintiffs-appellees the amount of
their lien based on the Minutes of the Special Meeting of the Board of Directors duly annotated on the
titles, plus legal interests from the time of appellants acquisition of the subject properties until the
finality of this judgment.

All other claims of the plaintiffs-appellees are hereby DISMISSED.[8]

Both parties moved for reconsideration but these were denied by the Court of Appeals. Hence, each
party filed with this Court their respective petitions for review on certiorari under Rule 45 of the Rules of
Court, which were consolidated in a Resolution[9] dated October 2, 2006.

In PNBs petition, docketed as G.R. No. 171805, the following assignment of errors were raised:
I

THE COURT OF APPEALS ERRED IN AFFIRMING THE FINDINGS OF THE TRIAL COURT THAT A JUDGMENT
ON THE PLEADINGS WAS WARRANTED DESPITE THE EXISTENCE OF GENUINE ISSUES OF FACTS ALLEGED
IN PETITIONER PNBS ANSWER.

II

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE RIGHT OF RESPONDENTS TO
REFUND OR REPAYMENT OF THEIR CONTRIBUTIONS HAD NOT PRESCRIBED AND/OR THAT THE MINUTES
OF THE SPECIAL MEETING OF THE BOARD OF DIRECTORS OF RISCO CONSTITUTED AS AN EFFECTIVE
ADVERSE CLAIM.

III

THE COURT OF APPEALS ERRED IN NOT CONSIDERING THE DISMISSAL OF THE COMPLAINT ON GROUNDS
OF RES JUDICATA AND LACK OF CAUSE OF ACTION ALLEGED BY PETITIONER IN ITS ANSWER.[10]

On the other hand, Aznar, et al.s petition, docketed as G.R. No. 172021, raised the following issue:

THE COURT OF APPEALS ERRED IN CONCLUDING THAT THE CONTRIBUTIONS MADE BY THE
STOCKHOLDERS OF RISCO WERE MERELY A LOAN SECURED BY THEIR LIEN OVER THE PROPERTIES,
SUBJECT TO REIMBURSEMENT OR REFUND, RATHER THAN AN EXPRESS TRUST.[11]

Anent the first issue raised in G.R. No. 171805, PNB argues that a judgment on the pleadings was not
proper because its Answer,[12] which it filed during the trial court proceedings of this case, tendered
genuine issues of fact since it did not only deny material allegations in Aznar, et al.s Complaint[13] but
also set up special and affirmative defenses. Furthermore, PNB maintains that, by virtue of the trial
courts judgment on the pleadings, it was denied its right to present evidence and, therefore, it was
denied due process.
The contention is meritorious.

The legal basis for rendering a judgment on the pleadings can be found in Section 1, Rule 34 of the Rules
of Court which states that [w]here an answer fails to tender an issue, or otherwise admits the material
allegations of the adverse partys pleading, the court may, on motion of that party, direct judgment on
such pleading. x x x.

Judgment on the pleadings is, therefore, based exclusively upon the allegations appearing in the
pleadings of the parties and the annexes, if any, without consideration of any evidence aliunde.[14]
However, when it appears that not all the material allegations of the complaint were admitted in the
answer for some of them were either denied or disputed, and the defendant has set up certain special
defenses which, if proven, would have the effect of nullifying plaintiffs main cause of action, judgment
on the pleadings cannot be rendered.[15]

In the case at bar, the Court of Appeals justified the trial courts resort to a judgment on the pleadings in
the following manner:

Perusal of the complaint, particularly, Paragraph 7 thereof reveals:

7. That in their desire to rehabilitate RISCO, the above-named stockholders contributed a total amount
of PhP212,720.00 which was used in the purchase of the above-described parcels of land, which amount
constituted liens and encumbrances on subject properties in favor of the above-named stockholders as
annotated in the titles adverted to above, pursuant to the Minutes of the Special Meeting of the Board
of Directors of RISCO approved on March 14, 1961, a copy of which is hereto attached as Annex E.

On the other hand, defendant in its Answer, admitted the aforequoted allegation with the qualification
that the amount put up by the stockholders was used as part payment for the properties. Defendant
further averred that plaintiffs liens and encumbrances annotated on the titles issued to RISCO
constituted as loan from the stockholders to pay part of the purchase price of the properties and was a
personal obligation of RISCO and was thus not a claim adverse to the ownership rights of the
corporation. With these averments, We do not find error on the part of the trial court in rendering a
judgment on the pleadings. For one, the qualification made by defendant in its answer is not sufficient
to controvert the allegations raised in the complaint. As to defendants contention that the money
contributed by plaintiffs was in fact a loan from the stockholders, reference can be made to the Minutes
of the Special Meeting of the Board of Directors, from which plaintiffs-appellees anchored their
complaint, in order to ascertain the true nature of their claim over the properties. Thus, the issues raised
by the parties can be resolved on the basis of their respective pleadings and the annexes attached
thereto and do not require further presentation of evidence aliunde.[16]
However, a careful reading of Aznar, et al.s Complaint and of PNBs Answer would reveal that both
parties raised several claims and defenses, respectively, other than what was cited by the Court of
Appeals, which requires the presentation of evidence for resolution, to wit:

Complaint (Aznar, et al.)

Answer (PNB)

11. That these subsequent annotations on the titles of the properties in question are subject to the prior
annotation of liens and encumbrances of the above-named stockholders per Entry No. 458-V-7-D.B.
inscribed on TCT No. 24576 on May 15, 1962 and per Entry No. 6966-V-4-D.B. on TCT No. 8921 and TCT
No. 8922 on May 15, 1962;

10) Par. 11 is denied as the loan from the stockholders to pay part of the purchase price of the
properties was a personal obligation of RISCO and was thus not a claim adverse to the ownership rights
of the corporation;

12. That these writs and processes annotated on the titles are all null and void for total want of valid
service upon RISCO and the above-named stockholders considering that as early as sometime in 1958,
RISCO ceased operations as earlier stated, and as early as May 15, 1962, the liens and encumbrances of
the above-named stockholders were annotated in the titles of subject properties;

11) Par. 12 is denied as in fact notice to RISCO had been sent to its last known address at Plaza Goite,
Manila;

13. That more particularly, the Final Deed of Sale (Annex G) and TCT No. 119848 are null and void as
these were issued only after 28 years and 5 months (in the case of the Final Deed of Sale) and 28 years,
6 months and 29 days (in the case of TCT 119848) from the invalid auction sale on December 27, 1962,
hence, any right, if any, which PNB had over subject properties had long become stale;

12) Par. 13 is denied for no law requires the final deed of sale to be executed immediately after the end
of the redemption period. Moreover, another court of competent jurisdiction has already ruled that PNB
was entitled to a final deed of sale;

14. That plaintiffs continue to have possession of subject properties and of their corresponding titles,
but they never received any process concerning the petition filed by PNB to have TCT 24576 over Lot
1323-C surrendered and/or cancelled;

13) Par. 14 is denied as plaintiffs are not in actual possession of the land and if they were, their
possession was as trustee for the creditors of RISCO like PNB;

15. That there is a cloud created on the aforementioned titles of RISCO by reason of the annotate writs,
processes and proceedings caused by Jose Garrido and PNB which were apparently valid or effective,
but which are in truth and in fact invalid and ineffective, and prejudicial to said titles and to the rights of
the plaintiffs, which should be removed and the titles quieted.[17]
14) Par. 15 is denied as the court orders directing the issuance of titles to PNB in lieu of TCT 24576 and
TCT 8922 are valid judgments which cannot be set aside in a collateral proceeding like the instant
case.[18]

Furthermore, apart from refuting the aforecited material allegations made by Aznar, et al., PNB also
indicated in its Answer the special and affirmative defenses of (a) prescription; (b) res judicata; (c) Aznar,
et al., having no right of action for quieting of title; (d) Aznar, et al.s lien being ineffective and not
binding to PNB; and (e) Aznar, et al.s having no personality to file the suit.[19]

From the foregoing, it is indubitably clear that it was error for the trial court to render a judgment on the
pleadings and, in effect, resulted in a denial of due process on the part of PNB because it was denied its
right to present evidence. A remand of this case would ordinarily be the appropriate course of action.
However, in the interest of justice and in order to expedite the resolution of this case which was filed
with the trial court way back in 1998, the Court finds it proper to already resolve the present
controversy in light of the existence of legal grounds that would dispose of the case at bar without
necessity of presentation of further evidence on the other disputed factual claims and defenses of the
parties.

A thorough and comprehensive scrutiny of the records would reveal that this case should be dismissed
because Aznar, et al., have no title to quiet over the subject properties and their true cause of action is
already barred by prescription.

At the outset, the Court agrees with the Court of Appeals that the agreement contained in the Minutes
of the Special Meeting of the RISCO Board of Directors held on March 14, 1961 was a loan by the therein
named stockholders to RISCO. We quote with approval the following discussion from the Court of
Appeals Decision dated September 29, 2005:

Careful perusal of the Minutes relied upon by plaintiffs-appellees in their claim, showed that their
contributions shall constitute as lien or interest on the property if and when said properties are titled in
the name of RISCO, subject to registration of their adverse claim under the Land Registration Act, until
such time their respective contributions are refunded to them completely.

It is a cardinal rule in the interpretation of contracts that if the terms of a contract are clear and leave no
doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control.
When the language of the contract is explicit leaving no doubt as to the intention of the drafters
thereof, the courts may not read into it any other intention that would contradict its plain import.
The term lien as used in the Minutes is defined as a discharge on property usually for the payment of
some debt or obligation. A lien is a qualified right or a proprietary interest which may be exercised over
the property of another. It is a right which the law gives to have a debt satisfied out of a particular thing.
It signifies a legal claim or charge on property; whether real or personal, as a collateral or security for
the payment of some debt or obligation. Hence, from the use of the word lien in the Minutes, We find
that the money contributed by plaintiffs-appellees was in the nature of a loan, secured by their liens and
interests duly annotated on the titles. The annotation of their lien serves only as collateral and does not
in any way vest ownership of property to plaintiffs.[20] (Emphases supplied.)

We are not persuaded by the contention of Aznar, et al., that the language of the subject Minutes
created an express trust.

Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in another. It
is a fiduciary relationship that obliges the trustee to deal with the property for the benefit of the
beneficiary. Trust relations between parties may either be express or implied. An express trust is created
by the intention of the trustor or of the parties. An implied trust comes into being by operation of
law.[21]

Express trusts, sometimes referred to as direct trusts, are intentionally created by the direct and positive
acts of the settlor or the trustor - by some writing, deed, or will or oral declaration. It is created not
necessarily by some written words, but by the direct and positive acts of the parties.[22] This is in
consonance with Article 1444 of the Civil Code, which states that [n]o particular words are required for
the creation of an express trust, it being sufficient that a trust is clearly intended.

In other words, 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.[23]

No such reasonable certitude in the creation of an express trust obtains in the case at bar. In fact, a
careful scrutiny of the plain and ordinary meaning of the terms used in the Minutes does not offer any
indication that the parties thereto intended that Aznar, et al., become beneficiaries under an express
trust and that RISCO serve as trustor.

Indeed, we find that Aznar, et al., have no right to ask for the quieting of title of the properties at issue
because they have no legal and/or equitable rights over the properties that are derived from the
previous registered owner which is RISCO, the pertinent provision of the law is Section 2 of the
Corporation Code (Batas Pambansa Blg. 68), which states that [a] corporation is an artificial being
created by operation of law, having the right of succession and the powers, attributes and properties
expressly authorized by law or incident to its existence.

As a consequence thereof, a corporation has a personality separate and distinct from those of its
stockholders and other corporations to which it may be connected.[24] Thus, we had previously ruled in
Magsaysay-Labrador v. Court of Appeals[25] that the interest of the stockholders over the properties of
the corporation is merely inchoate and therefore does not entitle them to intervene in litigation
involving corporate property, to wit:

Here, the interest, if it exists at all, of petitioners-movants is indirect, contingent, remote, conjectural,
consequential and collateral. At the very least, their interest is purely inchoate, or in sheer expectancy of
a right in the management of the corporation and to share in the profits thereof and in the properties
and assets thereof on dissolution, after payment of the corporate debts and obligations.

While a share of stock represents a proportionate or aliquot interest in the property of the corporation,
it does not vest the owner thereof with any legal right or title to any of the property, his interest in the
corporate property being equitable or beneficial in nature. Shareholders are in no legal sense the
owners of corporate property, which is owned by the corporation as a distinct legal person.[26]

In the case at bar, there is no allegation, much less any proof, that the corporate existence of RISCO has
ceased and the corporate property has been liquidated and distributed to the stockholders. The records
only indicate that, as per Securities and Exchange Commission (SEC) Certification[27] dated June 18,
1997, the SEC merely suspended RISCOs Certificate of Registration beginning on September 5, 1988 due
to its non-submission of SEC required reports and its failure to operate for a continuous period of at
least five years.

Verily, Aznar, et al., who are stockholders of RISCO, cannot claim ownership over the properties at issue
in this case on the strength of the Minutes which, at most, is merely evidence of a loan agreement
between them and the company. There is no indication or even a suggestion that the ownership of said
properties were transferred to them which would require no less that the said properties be registered
under their names. For this reason, the complaint should be dismissed since Aznar, et al., have no cause
to seek a quieting of title over the subject properties.

At most, what Aznar, et al., had was merely a right to be repaid the amount loaned to RISCO.
Unfortunately, the right to seek repayment or reimbursement of their contributions used to purchase
the subject properties is already barred by prescription.
Section 1, Rule 9 of the Rules of Court provides that when it appears from the pleadings or the evidence
on record that the action is already barred by the statute of limitations, the court shall dismiss the claim,
to wit:

Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived.
However, when it appears from the pleadings or the evidence on record that the court has no
jurisdiction over the subject matter, that there is another action pending between the same parties for
the same cause, or that the action is barred by a prior judgment or by statute of limitations, the court
shall dismiss the claim. (Emphasis supplied.)

In Feliciano v. Canoza,[28] we held:

We have ruled that trial courts have authority and discretion to dismiss an action on the ground of
prescription when the parties pleadings or other facts on record show it to be indeed time-barred x x x;
and it may do so on the basis of a motion to dismiss, or an answer which sets up such ground as an
affirmative defense; or even if the ground is alleged after judgment on the merits, as in a motion for
reconsideration; or even if the defense has not been asserted at all, as where no statement thereof is
found in the pleadings, or where a defendant has been declared in default. What is essential only, to
repeat, is that the facts demonstrating the lapse of the prescriptive period, be otherwise sufficiently and
satisfactorily apparent on the record; either in the averments of the plaintiffs complaint, or otherwise
established by the evidence.[29] (Emphasis supplied.)

The pertinent Civil Code provision on prescription which is applicable to the issue at hand is Article
1144(1), to wit:

The following actions must be brought within ten years from the time the right of action accrues:

1. Upon a written contract;

2. Upon an obligation created by law;

3. Upon a judgment. (Emphasis supplied.)

Moreover, in Nielson & Co., Inc. v. Lepanto Consolidated Mining Co.,[30] we held that the term written
contract includes the minutes of the meeting of the board of directors of a corporation, which minutes
were adopted by the parties although not signed by them, to wit:

Coming now to the question of prescription raised by defendant Lepanto, it is contended by the latter
that the period to be considered for the prescription of the claim regarding participation in the profits is
only four years, because the modification of the sharing embodied in the management contract is
merely verbal, no written document to that effect having been presented. This contention is untenable.
The modification appears in the minutes of the special meeting of the Board of Directors of Lepanto
held on August 21, 1940, it having been made upon the authority of its President, and in said minutes
the terms of modification had been specified. This is sufficient to have the agreement considered, for
the purpose of applying the statute of limitations, as a written contract even if the minutes were not
signed by the parties (3 A.L.R., 2d, p. 831). It has been held that a writing containing the terms of a
contract if adopted by two persons may constitute a contract in writing even if the same is not signed by
either of the parties (3 A.L.R., 2d, pp. 812-813). Another authority says that an unsigned agreement the
terms of which are embodied in a document unconditionally accepted by both parties is a written
contract (Corbin on Contracts, Vol. I, p. 85).[31]

Applied to the case at bar, the Minutes which was approved on March 14, 1961 is considered as a
written contract between Aznar, et al., and RISCO for the reimbursement of the contributions of the
former. As such, the former had a period of ten (10) years from 1961 within which to enforce the said
written contract. However, it does not appear that Aznar, et al., filed any action for reimbursement or
refund of their contributions against RISCO or even against PNB. Instead the suit that Aznar, et al.,
brought before the trial court only on January 28, 1998 was one to quiet title over the properties
purchased by RISCO with their contributions. It is unmistakable that their right of action to claim for
refund or payment of their contributions had long prescribed. Thus, it was reversible error for the Court
of Appeals to order PNB to pay Aznar, et al., the amount of their liens based on the Minutes with legal
interests from the time of PNBs acquisition of the subject properties.

In view of the foregoing, it is unnecessary for the Court to pass upon the other issues raised by the
parties.

WHEREFORE, the petition of Aznar, et al., in G.R. No. 172021 is DENIED for lack of merit. The petition of
PNB in G.R. No. 171805 is GRANTED. The Complaint, docketed as Civil Case No. CEB-21511, filed by
Aznar, et al., is hereby DISMISSED. No costs.
MARIA TORBELA versus ROSARIO

Presently before the Court are two consolidated Petitions for Review on Certiorari under Rule 45 of the
Rules of Court, both assailing the Decision[1] dated June 29, 1999 and Resolution[2] dated October 22,
1999 of the Court of Appeals in CA-G.R. CV No. 39770.

The petitioners in G.R. No. 140528 are siblings Maria Torbela,[3] Pedro Torbela,[4] Eufrosina Torbela
Rosario,[5] Leonila Torbela Tamin, Fernando Torbela,[6] Dolores Torbela Tablada, Leonora Torbela
Agustin,[7] and Severina Torbela Ildefonso (Torbela siblings).

The petitioner in G.R. No. 140553 is Lena Duque-Rosario (Duque-Rosario), who was married to, but now
legally separated from, Dr. Andres T. Rosario (Dr. Rosario). Dr. Rosario is the son of Eufrosina Torbela
Rosario and the nephew of the other Torbela siblings.

The controversy began with a parcel of land, with an area of 374 square meters, located in Urdaneta
City, Pangasinan (Lot No. 356-A). It was originally part of a larger parcel of land, known as Lot No. 356 of
the Cadastral Survey of Urdaneta, measuring 749 square meters, and covered by Original Certificate of
Title (OCT) No. 16676,[8] in the name of Valeriano Semilla (Valeriano), married to Potenciana Acosta.
Under unexplained circumstances, Valeriano gave Lot No. 356-A to his sister Marta Semilla, married to
Eugenio Torbela (spouses Torbela). Upon the deaths of the spouses Torbela, Lot No. 356-A was
adjudicated in equal shares among their children, the Torbela siblings, by virtue of a Deed of
Extrajudicial Partition[9] dated December 3, 1962.

On December 12, 1964, the Torbela siblings executed a Deed of Absolute Quitclaim[10] over Lot No.
356-A in favor of Dr. Rosario. According to the said Deed, the Torbela siblings for and in consideration of
the sum of NINE PESOS (P9.00) x x x transfer[red] and convey[ed] x x x unto the said Andres T. Rosario,
that undivided portion of THREE HUNDRED SEVENTY-FOUR square meters of that parcel of land
embraced in Original Certificate of Title No. 16676 of the land records of Pangasinan x x x.[11] Four days
later, on December 16, 1964, OCT No. 16676 in Valerianos name was partially cancelled as to Lot No.
356-A and TCT No. 52751[12] was issued in Dr. Rosarios name covering the said property.

Another Deed of Absolute Quitclaim[13] was subsequently executed on December 28, 1964, this time by
Dr. Rosario, acknowledging that he only borrowed Lot No. 356-A from the Torbela siblings and was
already returning the same to the latter for P1.00. The Deed stated:

That for and in consideration of the sum of one peso (P1.00), Philippine Currency and the fact that I only
borrowed the above described parcel of land from MARIA TORBELA, married to Eulogio Tosino,
EUFROSINA TORBELA, married to Pedro Rosario, PEDRO TORBELA, married to Petra Pagador, LEONILA
TORBELA, married to Fortunato Tamen, FERNANDO TORBELA, married to Victoriana Tablada, DOLORES
TORBELA, widow, LEONORA TORBELA, married to Matias Agustin and SEVERINA TORBELA, married to
Jorge Ildefonso, x x x by these presents do hereby cede, transfer and convey by way of this ABSOLUTE
QUITCLAIM unto the said Maria, Eufrosina, Pedro, Leonila, Fernando, Dolores, Leonora and Severina, all
surnamed Torbela the parcel of land described above.[14] (Emphasis ours.)

The aforequoted Deed was notarized, but was not immediately annotated on TCT No. 52751.

Following the issuance of TCT No. 52751, Dr. Rosario obtained a loan from the Development Bank of the
Philippines (DBP) on February 21, 1965 in the sum of P70,200.00, secured by a mortgage constituted on
Lot No. 356-A. The mortgage was annotated on TCT No. 52751 on September 21, 1965 as Entry No.
243537.[15] Dr. Rosario used the proceeds of the loan for the construction of improvements on Lot No.
356-A.

On May 16, 1967, Cornelio T. Tosino (Cornelio) executed an Affidavit of Adverse Claim,[16] on behalf of
the Torbela siblings. Cornelio deposed in said Affidavit:

3. That ANDRES T. ROSARIO later quitclaimed his rights in favor of the former owners by virtue of a Deed
of Absolute Quitclaim which he executed before Notary Public Banaga, and entered in his Notarial
Registry as Dec. No. 43; Page No. 9; Book No. I; Series of 1964;

4. That it is the desire of the parties, my aforestated kins, to register ownership over the above-
described property or to perfect their title over the same but their Deed could not be registered because
the registered owner now, ANDRES T. ROSARIO mortgaged the property with the DEVELOPMENT BANK
OF THE PHILIPPINES, on September 21, 1965, and for which reason, the Title is still impounded and held
by the said bank;

5. That pending payment of the obligation with the DEVELOPMENT BANK OF THE PHILIPPINES or
redemption of the Title from said bank, I, CORNELIO T. TOSINO, in behalf of my mother MARIA
TORBELA-TOSINO, and my Aunts EUFROSINA TORBELA, LEONILA TORBELA-TAMEN, DOLORES TORBELA,
LEONORA TORBELA-AGUSTIN, SEVERINA TORBELA-ILDEFONSO, and my Uncles PEDRO TORBELA and
FERNANDO, also surnamed TORBELA, I request the Register of Deeds of Pangasinan to annotate their
adverse claim at the back of Transfer Certificate of Title No. 52751, based on the annexed document,
Deed of Absolute Quitclaim by ANDRES T. ROSARIO, dated December 28, 1964, marked as Annex A and
made a part of this Affidavit, and it is also requested that the DEVELOPMENT BANK OF THE PHILIPPINES
be informed accordingly.[17]
The very next day, on May 17, 1967, the Torbela siblings had Cornelios Affidavit of Adverse Claim dated
May 16, 1967 and Dr. Rosarios Deed of Absolute Quitclaim dated December 28, 1964 annotated on TCT
No. 52751 as Entry Nos. 274471[18] and 274472,[19] respectively.

The construction of a four-storey building on Lot No. 356-A was eventually completed. The building was
initially used as a hospital, but was later converted to a commercial building. Part of the building was
leased to PT&T; and the rest to Mrs. Andrea Rosario-Haduca, Dr. Rosarios sister, who operated the Rose
Inn Hotel and Restaurant.

Dr. Rosario was able to fully pay his loan from DBP. Under Entry No. 520197 on TCT No. 52751[20] dated
March 6, 1981, the mortgage appearing under Entry No. 243537 was cancelled per the Cancellation and
Discharge of Mortgage executed by DBP in favor of Dr. Rosario and ratified before a notary public on
July 11, 1980.

In the meantime, Dr. Rosario acquired another loan from the Philippine National Bank (PNB) sometime
in 1979-1981. Records do not reveal though the original amount of the loan from PNB, but the loan
agreement was amended on March 5, 1981 and the loan amount was increased to P450,000.00. The
loan was secured by mortgages constituted on the following properties: (1) Lot No. 356-A, covered by
TCT No. 52751 in Dr. Rosarios name; (2) Lot No. 4489, with an area of 1,862 square meters, located in
Dagupan City, Pangasinan, covered by TCT No. 24832; and (3) Lot No. 5-F-8-C-2-B-2-A, with an area of
1,001 square meters, located in Nancayasan, Urdaneta, Pangasinan, covered by TCT No. 104189.[21]
The amended loan agreement and mortgage on Lot No. 356-A was annotated on TCT No. 52751 on
March 6, 1981 as Entry No. 520099.[22]

Five days later, on March 11, 1981, another annotation, Entry No. 520469,[23] was made on TCT No.
52751, canceling the adverse claim on Lot No. 356-A under Entry Nos. 274471-274472, on the basis of
the Cancellation and Discharge of Mortgage executed by Dr. Rosario on March 5, 1981. Entry No.
520469 consisted of both stamped and handwritten portions, and exactly reads:

Entry No. 520469. Cancellation of Adverse Claim executed by Andres Rosario in favor of same. The
incumbrance/mortgage appearing under Entry No. 274471-72 is now cancelled as per Cancellation and
Discharge of Mortgage Ratified before Notary Public Mauro G. Meris on March 5, 1981: Doc. No. 215;
Page No. 44; Book No. 1; Series Of 1981.

Lingayen, Pangasinan, 3-11, 19981

[Signed: Pedro dela Cruz]

Register of Deeds [24]

On December 8, 1981, Dr. Rosario and his wife, Duque-Rosario (spouses Rosario), acquired a third loan
in the amount of P1,200,000.00 from Banco Filipino Savings and Mortgage Bank (Banco Filipino). To
secure said loan, the spouses Rosario again constituted mortgages on Lot No. 356-A, Lot No. 4489, and
Lot No. 5-F-8-C-2-B-2-A. The mortgage on Lot No. 356-A was annotated on TCT No. 52751 as Entry No.
533283[25] on December 18, 1981. Since the construction of a two-storey commercial building on Lot
No. 5-F-8-C-2-B-2-A was still incomplete, the loan value thereof as collateral was deducted from the
approved loan amount. Thus, the spouses Rosario could only avail of the maximum loan amount of
P830,064.00 from Banco Filipino.

Because Banco Filipino paid the balance of Dr. Rosarios loan from PNB, the mortgage on Lot No. 356-A
in favor of PNB was cancelled per Entry No. 533478[26] on TCT No. 52751 dated December 23, 1981.

On February 13, 1986, the Torbela siblings filed before the Regional Trial Court (RTC) of Urdaneta,
Pangasinan, a Complaint for recovery of ownership and possession of Lot No. 356-A, plus damages,
against the spouses Rosario, which was docketed as Civil Case No. U-4359. On the same day, Entry Nos.
593493 and 593494 were made on TCT No. 52751 that read as follows:

Entry No. 593494 Complaint Civil Case No. U-4359 (For: Recovery of Ownership and Possession and
Damages. (Sup. Paper).

Entry No. 593493 Notice of Lis Pendens The parcel of land described in this title is subject to Lis Pendens
executed by Liliosa B. Rosario, CLAO, Trial Attorney dated February 13, 1986. Filed to TCT No. 52751

February 13, 1986-1986 February 13 3:30 p.m.

(SGD.) PACIFICO M. BRAGANZA

Register of Deeds[27]
The spouses Rosario afterwards failed to pay their loan from Banco Filipino. As of April 2, 1987, the
spouses Rosarios outstanding principal obligation and penalty charges amounted to P743,296.82 and
P151,524.00, respectively.[28]

Banco Filipino extrajudicially foreclosed the mortgages on Lot No. 356-A, Lot No. 4489, and Lot No. 5-F-
8-C-2-B-2-A. During the public auction on April 2, 1987, Banco Filipino was the lone bidder for the three
foreclosed properties for the price of P1,372,387.04. The Certificate of Sale[29] dated April 2, 1987, in
favor of Banco Filipino, was annotated on TCT No. 52751 on April 14, 1987 as Entry No. 610623.[30]

On December 9, 1987, the Torbela siblings filed before the RTC their Amended Complaint,[31]
impleading Banco Filipino as additional defendant in Civil Case No. U-4359 and praying that the spouses
Rosario be ordered to redeem Lot No. 356-A from Banco Filipino.

The spouses Rosario instituted before the RTC on March 4, 1988 a case for annulment of extrajudicial
foreclosure and damages, with prayer for a writ of preliminary injunction and temporary restraining
order, against Banco Filipino, the Provincial Ex Officio Sheriff and his Deputy, and the Register of Deeds
of Pangasinan. The case was docketed as Civil Case No. U-4667. Another notice of lis pendens was
annotated on TCT No. 52751 on March 10, 1988 as Entry No. 627059, viz:

Entry No. 627059 Lis Pendens Dr. Andres T. Rosario and Lena Duque Rosario, Plaintiff versus Banco
Filipino, et. al. Civil Case No. U-4667 or Annulment of ExtraJudicial Foreclosure of Real Estate Mortgage
The parcel of land described in this title is subject to Notice of Lis Pendens subscribed and sworn to
before Notary Public Mauro G. Meris, as Doc. No. 21; Page No. 5; Book 111; S-1988. March 7, 1988-1988
March 10, 1:00 p.m.

(SGD.) RUFINO M. MORENO, SR.

Register of Deeds[32]

The Torbela siblings intervened in Civil Case No. U-4667. Eventually, on October 17, 1990, the RTC issued
an Order[33] dismissing without prejudice Civil Case No. U-4667 due to the spouses Rosarios failure to
prosecute.
Meanwhile, the Torbela siblings tried to redeem Lot No. 356-A from Banco Filipino, but their efforts
were unsuccessful. Upon the expiration of the one-year redemption period in April 1988, the Certificate
of Final Sale[34] and Affidavit of Consolidation[35] covering all three foreclosed properties were
executed on May 24, 1988 and May 25, 1988, respectively.

On June 7, 1988, new certificates of title were issued in the name of Banco Filipino, particularly, TCT No.
165812 for Lot No. 5-F-8-C-2-B-2-A and TCT No. 165813 for Lot No. 356-A .[36]

The Torbela siblings thereafter filed before the RTC on August 29, 1988 a Complaint[37] for annulment
of the Certificate of Final Sale dated May 24, 1988, judicial cancelation of TCT No. 165813, and damages,
against Banco Filipino, the Ex Officio Provincial Sheriff, and the Register of Deeds of Pangasinan, which
was docketed as Civil Case No. U-4733.

On June 19, 1991, Banco Filipino filed before the RTC of Urdaneta City a Petition for the issuance of a
writ of possession. In said Petition, docketed as Pet. Case No. U-822, Banco Filipino prayed that a writ of
possession be issued in its favor over Lot No. 5-F-8-C-2-B-2-A and Lot No. 356-A, plus the improvements
thereon, and the spouses Rosario and other persons presently in possession of said properties be
directed to abide by said writ.

The RTC jointly heard Civil Case Nos. U-4359 and U-4733 and Pet. Case No. U-822. The Decision[38] on
these three cases was promulgated on January 15, 1992, the dispositive portion of which reads:

WHEREFORE, judgment is rendered:

1. Declaring the real estate mortgage over Lot 356-A covered by TCT 52751 executed by
Spouses Andres Rosario in favor of Banco Filipino, legal and valid;

2. Declaring the sheriffs sale dated April 2, 1987 over Lot 356-A covered by TCT 52751 and
subsequent final Deed of Sale dated May 14, 1988 over Lot 356-A covered by TCT No. 52751 legal and
valid;

3. Declaring Banco Filipino the owner of Lot 356-A covered by TCT No. 52751 (now TCT
165813);
4. Banco Filipino is entitled to a Writ of Possession over Lot 356-A together with the
improvements thereon (Rose Inn Building). The Branch Clerk of Court is hereby ordered to issue a writ of
possession in favor of Banco Filipino;

5. [The Torbela siblings] are hereby ordered to render accounting to Banco Filipino the rental
they received from tenants of Rose Inn Building from May 14, 1988;

6. [The Torbela siblings] are hereby ordered to pay Banco Filipino the sum of P20,000.00 as
attorneys fees;

7. Banco Filipino is hereby ordered to give [the Torbela siblings] the right of first refusal over
Lot 356-A. The Register of Deeds is hereby ordered to annotate the right of [the Torbela siblings] at the
back of TCT No. 165813 after payment of the required fees;

8. Dr. Rosario and Lena Rosario are hereby ordered to reimburse [the Torbela siblings] the
market value of Lot 356-A as of December, 1964 minus payments made by the former;

9. Dismissing the complaint of [the Torbela siblings] against Banco Filipino, Pedro Habon and
Rufino Moreno in Civil Case No. U-4733; and against Banco Filipino in Civil Case No. U-4359.[39]

The RTC released an Amended Decision[40] dated January 29, 1992, adding the following paragraph to
the dispositive:

Banco Filipino is entitled to a Writ of Possession over Lot-5-F-8-C-2-[B]-2-A of the subdivision plan (LRC)
Psd-122471, covered by Transfer Certificate of Title 104189 of the Registry of Deeds of Pangasinan[.][41]

The Torbela siblings and Dr. Rosario appealed the foregoing RTC judgment before the Court of Appeals.
Their appeal was docketed as CA-G.R. CV No. 39770.

In its Decision[42] dated June 29, 1999, the Court of Appeals decreed:
WHEREFORE, foregoing considered, the appealed decision is hereby AFFIRMED with modification. Items
No. 6 and 7 of the appealed decision are DELETED. Item No. 8 is modified requiring [Dr. Rosario] to pay
[the Torbela siblings] actual damages, in the amount of P1,200,000.00 with 6% per annum interest from
finality of this decision until fully paid. [Dr. Rosario] is further ORDERED to pay [the Torbela siblings] the
amount of P300,000.00 as moral damages; P200,000.00 as exemplary damages and P100,000.00 as
attorneys fees.

Costs against [Dr. Rosario].[43]

The Court of Appeals, in a Resolution[44] dated October 22, 1999, denied the separate Motions for
Reconsideration of the Torbela siblings and Dr. Rosario.

The Torbela siblings come before this Court via the Petition for Review in G.R. No. 140528, with the
following assignment of errors:

First Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT THE REGISTRATION OF
THE DEED OF ABSOLUTE QUITCLAIM EXECUTED BY [DR. ANDRES T. ROSARIO] IN FAVOR OF THE
[TORBELA SIBLINGS] DATED DECEMBER 28, 1964 AND THE REGISTRATION OF THE NOTICE OF ADVERSE
CLAIM EXECUTED BY THE [TORBELA SIBLINGS], SERVE AS THE OPERATIVE ACT TO CONVEY OR AFFECT
THE LAND AND IMPROVEMENTS THEREOF IN SO FAR AS THIRD PERSONS ARE CONCERNED.

Second Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE SUBJECT PROPERTY
COVERED BY T.C.T. NO. 52751 IS CLEAN AND FREE, DESPITE OF THE ANNOTATION OF ENCUMBRANCES
OF THE NOTICE OF ADVERSE CLAIM AND THE DEED OF ABSOLUTE QUITCLAIM APPEARING AT THE BACK
THEREOF AS ENTRY NOS. 274471 AND 274472, RESPECTIVELY.

Third Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE NOTICE OF ADVERSE
CLAIM OF THE [TORBELA SIBLINGS] UNDER ENTRY NO. 274471 WAS VALIDLY CANCELLED BY THE
REGISTER OF DEEDS, IN THE ABSENCE OF A PETITION DULY FILED IN COURT FOR ITS CANCELLATION.

Fourth Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RESPONDENT BANCO FILIPINO
SAVINGS AND MORTGAGE BANK IS A MORTGAGEE IN GOOD FAITH.

Fifth Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT THE FILING OF A CIVIL
CASE NO. U-4359 ON DECEMBER 9, 1987, IMPLEADING RESPONDENT BANCO FILIPINO AS ADDITIONAL
PARTY DEFENDANT, TOLL OR SUSPEND THE RUNNING OF THE ONE YEAR PERIOD OF REDEMPTION.

Sixth Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT THE OWNERSHIP OVER
THE SUBJECT PROPERTY WAS PREMATURELY CONSOLIDATED IN FAVOR OF RESPONDENT BANCO
FILIPINO SAVINGS AND MORTGAGE BANK.

Seventh Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE SUBJECT PROPERTY IS AT
LEAST WORTH P1,200,000.00.[45]

The Torbela siblings ask of this Court:

WHEREFORE, in the light of the foregoing considerations, the [Torbela siblings] most respectfully pray
that the questioned DECISION promulgated on June 29, 1999 (Annex A, Petition) and the RESOLUTION
dated October 22, 1999 (Annex B, Petition) be REVERSED and SET ASIDE, and/or further MODIFIED in
favor of the [Torbela siblings], and another DECISION issue ordering, among other reliefs, the
respondent Banco Filipino to reconvey back Lot No. 356-A, covered by T.C.T. No. 52751, in favor of the
[Torbela siblings] who are the actual owners of the same.

The [Torbela siblings] likewise pray for such other reliefs and further remedies as may be deemed just
and equitable under the premises.[46]

Duque-Rosario, now legally separated from Dr. Rosario, avers in her Petition for Review in G.R. No.
140553 that Lot No. 4489 and Lot No. 5-F-8-C-2-B-2-A were registered in her name, and she was
unlawfully deprived of ownership of said properties because of the following errors of the Court of
Appeals:

THE HON. COURT OF APPEALS PATENTLY ERRED IN NOT FINDING THAT THE PERIOD TO REDEEM THE
PROPERTY HAS NOT COMMENCED, HENCE, THE CERTIFICATE OF SALE, THE CONSOLIDATION OF
OWNERSHIP BY [BANCO FILIPINO], ARE NULL AND VOID.

THE COURT OF APPEALS PATENTLY ERRED IN REFUSING TO RULE THAT THE FILING OF THE COMPLAINT
BEFORE THE COURT A QUO BY THE [TORBELA SIBLINGS] HAD ALREADY BEEN PRESCRIBED.[47]

Duque-Rosario prays that the appealed decision of the Court of Appeals be reversed and set aside, and
that Lot No. 4489 and Lot No. 5-F-8-C-2-B-2-A be freed from all obligations and encumbrances and
returned to her.

Review of findings of fact by the RTC and the Court of Appeals warranted.

A disquisition of the issues raised and/or errors assigned in the Petitions at bar unavoidably requires a
re-evaluation of the facts and evidence presented by the parties in the court a quo.
In Republic v. Heirs of Julia Ramos,[48] the Court summed up the rules governing the power of review of
the Court:

Ordinarily, this Court will not review, much less reverse, the factual findings of the Court of Appeals,
especially where such findings coincide with those of the trial court. The findings of facts of the Court of
Appeals are, as a general rule, conclusive and binding upon this Court, since this Court is not a trier of
facts and does not routinely undertake the re-examination of the evidence presented by the contending
parties during the trial of the case.

The above rule, however, is subject to a number of exceptions, such as (1) when the inference made is
manifestly mistaken, absurd or impossible; (2) when there is grave abuse of discretion; (3) when the
finding is grounded entirely on speculations, surmises, or conjectures; (4) when the judgment of the
Court of Appeals is based on misapprehension of facts; (5) when the findings of fact are conflicting; (6)
when the Court of Appeals, in making its findings, went beyond the issues of the case and the same is
contrary to the admissions of both parties; (7) when the findings of the Court of Appeals are contrary to
those of the trial court; (8) when the findings of fact are conclusions without citation of specific evidence
on which they are based; (9) when the Court of Appeals manifestly overlooked certain relevant facts not
disputed by the parties and which, if properly considered, would justify a different conclusion; and (10)
when the findings of fact of the Court of Appeals are premised on the absence of evidence and are
contradicted by the evidence on record.[49]

As the succeeding discussion will bear out, the first, fourth, and ninth exceptions are extant in these
case.

Barangay conciliation was not a pre-requisite to the institution of Civil Case No. U-4359.

Dr. Rosario contends that Civil Case No. U-4359, the Complaint of the Torbela siblings for recovery of
ownership and possession of Lot No. 356-A, plus damages, should have been dismissed by the RTC
because of the failure of the Torbela siblings to comply with the prior requirement of submitting the
dispute to barangay conciliation.

The Torbela siblings instituted Civil Case No. U-4359 on February 13, 1986, when Presidential Decree No.
1508, Establishing a System of Amicably Settling Disputes at the Barangay Level, was still in effect.[50]
Pertinent provisions of said issuance read:
Section 2. Subject matters for amicable settlement. The Lupon of each barangay shall have authority to
bring together the parties actually residing in the same city or municipality for amicable settlement of all
disputes except:

1. Where one party is the government, or any subdivision or instrumentality thereof;

2. Where one party is a public officer or employee, and the dispute relates to the performance of his
official functions;

3. Offenses punishable by imprisonment exceeding 30 days, or a fine exceeding P200.00;

4. Offenses where there is no private offended party;

5. Such other classes of disputes which the Prime Minister may in the interest of justice determine upon
recommendation of the Minister of Justice and the Minister of Local Government.

Section 3. Venue. Disputes between or among persons actually residing in the same barangay shall be
brought for amicable settlement before the Lupon of said barangay. Those involving actual residents of
different barangays within the same city or municipality shall be brought in the barangay where the
respondent or any of the respondents actually resides, at the election of the complainant. However, all
disputes which involved real property or any interest therein shall be brought in the barangay where the
real property or any part thereof is situated.

The Lupon shall have no authority over disputes:

1. involving parties who actually reside in barangays of different cities or municipalities, except where
such barangays adjoin each other; and

2. involving real property located in different municipalities.

xxxx

Section 6. Conciliation, pre-condition to filing of complaint. No complaint, petition, action or proceeding

involving any matter within the authority of the Lupon as provided in Section 2 hereof shall be filed or
instituted in court or any other government office for adjudication unless there has been a
confrontation of the parties before the Lupon Chairman or the Pangkat and no conciliation or
settlement has been reached as certified by the Lupon Secretary or the Pangkat Secretary, attested by
the Lupon or Pangkat Chairman, or unless the settlement has been repudiated. x x x. (Emphases
supplied.)

The Court gave the following elucidation on the jurisdiction of the Lupong Tagapayapa in Tavora v. Hon.
Veloso[51]:
The foregoing provisions are quite clear. Section 2 specifies the conditions under which the Lupon of a
barangay shall have authority to bring together the disputants for amicable settlement of their dispute:
The parties must be actually residing in the same city or municipality. At the same time, Section 3 while
reiterating that the disputants must be actually residing in the same barangay or in different barangays
within the same city or municipality unequivocably declares that the Lupon shall have no authority over
disputes involving parties who actually reside in barangays of different cities or municipalities, except
where such barangays adjoin each other.

Thus, by express statutory inclusion and exclusion, the Lupon shall have no jurisdiction over disputes
where the parties are not actual residents of the same city or municipality, except where the barangays
in which they actually reside adjoin each other.

It is true that immediately after specifying the barangay whose Lupon shall take cognizance of a given
dispute, Sec. 3 of PD 1508 adds:

"However, all disputes which involve real property or any interest therein shall be brought in the
barangay where the real property or any part thereof is situated."

Actually, however, this added sentence is just an ordinary proviso and should operate as such.

The operation of a proviso, as a rule, should be limited to its normal function, which is to restrict or vary
the operation of the principal clause, rather than expand its scope, in the absence of a clear indication to
the contrary.

The natural and appropriate office of a proviso is . . . to except something from the enacting clause; to
limit, restrict, or qualify the statute in whole or in part; or to exclude from the scope of the statute that
which otherwise would be within its terms. (73 Am Jur 2d 467.)

Therefore, the quoted proviso should simply be deemed to restrict or vary the rule on venue prescribed
in the principal clauses of the first paragraph of Section 3, thus: Although venue is generally determined
by the residence of the parties, disputes involving real property shall be brought in the barangay where
the real property or any part thereof is situated, notwithstanding that the parties reside elsewhere
within the same city/municipality.[52] (Emphases supplied.)
The original parties in Civil Case No. U-4359 (the Torbela siblings and the spouses Rosario) do not reside
in the same barangay, or in different barangays within the same city or municipality, or in different
barangays of different cities or municipalities but are adjoining each other. Some of them reside outside
Pangasinan and even outside of the country altogether. The Torbela siblings reside separately in
Barangay Macalong, Urdaneta, Pangasinan; Barangay Consolacion, Urdaneta, Pangasinan; Pangil,
Laguna; Chicago, United States of America; and Canada. The spouses Rosario are residents of Calle
Garcia, Poblacion, Urdaneta, Pangasinan. Resultantly, the Lupon had no jurisdiction over the dispute and
barangay conciliation was not a pre-condition for the filing of Civil Case No. U-4359.

The Court now looks into the merits of Civil Case No. U-4359.

There was an express trust between the Torbela siblings and Dr. Rosario.

There is no dispute that the Torbela sibling inherited the title to Lot No. 356-A from their parents, the
Torbela spouses, who, in turn, acquired the same from the first registered owner of Lot No. 356-A,
Valeriano.

Indeed, the Torbela siblings executed a Deed of Absolute Quitclaim on December 12, 1964 in which they
transferred and conveyed Lot No. 356-A to Dr. Rosario for the consideration of P9.00. However, the
Torbela siblings explained that they only executed the Deed as an accommodation so that Dr. Rosario
could have Lot No. 356-A registered in his name and use said property to secure a loan from DBP, the
proceeds of which would be used for building a hospital on Lot No. 356-A a claim supported by
testimonial and documentary evidence, and borne out by the sequence of events immediately following
the execution by the Torbela siblings of said Deed. On December 16, 1964, TCT No. 52751, covering Lot
No. 356-A, was already issued in Dr. Rosarios name. On December 28, 1964, Dr. Rosario executed his
own Deed of Absolute Quitclaim, in which he expressly acknowledged that he only borrowed Lot No.
356-A and was transferring and conveying the same back to the Torbela siblings for the consideration of
P1.00. On February 21, 1965, Dr. Rosarios loan in the amount of P70,200.00, secured by a mortgage on
Lot No. 356-A, was approved by DBP. Soon thereafter, construction of a hospital building started on Lot
No. 356-A.

Among the notable evidence presented by the Torbela siblings is the testimony of Atty. Lorenza
Alcantara (Atty. Alcantara), who had no apparent personal interest in the present case. Atty. Alcantara,
when she was still a boarder at the house of Eufrosina Torbela Rosario (Dr. Rosarios mother), was
consulted by the Torbela siblings as regards the extrajudicial partition of Lot No. 356-A. She also
witnessed the execution of the two Deeds of Absolute Quitclaim by the Torbela siblings and Dr. Rosario.
In contrast, Dr. Rosario presented TCT No. 52751, issued in his name, to prove his purported title to Lot
No. 356-A. In Lee Tek Sheng v. Court of Appeals,[53] the Court made a clear distinction between title
and the certificate of title:

The certificate referred to is that document issued by the Register of Deeds known as the Transfer
Certificate of Title (TCT). By title, the law refers to ownership which is represented by that document.
Petitioner apparently confuses certificate with title. Placing a parcel of land under the mantle of the
Torrens system does not mean that ownership thereof can no longer be disputed. Ownership is different
from a certificate of title. The TCT is only the best proof of ownership of a piece of land. Besides, the
certificate cannot always be considered as conclusive evidence of ownership. Mere issuance of the
certificate of title in the name of any person does not foreclose the possibility that the real property may
be under co-ownership with persons not named in the certificate or that the registrant may only be a
trustee or that other parties may have acquired interest subsequent to the issuance of the certificate of
title. To repeat, registration is not the equivalent of title, but is only the best evidence thereof. Title as a
concept of ownership should not be confused with the certificate of title as evidence of such ownership
although both are interchangeably used. x x x.[54] (Emphases supplied.)

Registration does not vest title; it is merely the evidence of such title. Land registration laws do not give
the holder any better title than what he actually has.[55] Consequently, Dr. Rosario must still prove
herein his acquisition of title to Lot No. 356-A, apart from his submission of TCT No. 52751 in his name.

Dr. Rosario testified that he obtained Lot No. 356-A after paying the Torbela siblings P25,000.00,
pursuant to a verbal agreement with the latter. The Court though observes that Dr. Rosarios testimony
on the execution and existence of the verbal agreement with the Torbela siblings lacks significant details
(such as the names of the parties present, dates, places, etc.) and is not corroborated by independent
evidence.

In addition, Dr. Rosario acknowledged the execution of the two Deeds of Absolute Quitclaim dated
December 12, 1964 and December 28, 1964, even affirming his own signature on the latter Deed. The
Parol Evidence Rule provides that when the terms of the agreement have been reduced into writing, it is
considered as containing all the terms agreed upon and there can be, between the parties and their
successors in interest, no evidence of such terms other than the contents of the written agreement.[56]
Dr. Rosario may not modify, explain, or add to the terms in the two written Deeds of Absolute Quitclaim
since he did not put in issue in his pleadings (1) an intrinsic ambiguity, mistake, or imperfection in the
Deeds; (2) failure of the Deeds to express the true intent and the agreement of the parties thereto; (3)
the validity of the Deeds; or (4) the existence of other terms agreed to by the Torbela siblings and Dr.
Rosario after the execution of the Deeds.[57]
Even if the Court considers Dr. Rosarios testimony on his alleged verbal agreement with the Torbela
siblings, the Court finds the same unsatisfactory. Dr. Rosario averred that the two Deeds were executed
only because he was planning to secure loan from the Development Bank of the Philippines and
Philippine National Bank and the bank needed absolute quitclaim[.][58] While Dr. Rosarios explanation
makes sense for the first Deed of Absolute Quitclaim dated December 12, 1964 executed by the Torbela
siblings (which transferred Lot No. 356-A to Dr. Rosario for P9.00.00), the same could not be said for the
second Deed of Absolute Quitclaim dated December 28, 1964 executed by Dr. Rosario. In fact, Dr.
Rosarios Deed of Absolute Quitclaim (in which he admitted that he only borrowed Lot No. 356-A and
was transferring the same to the Torbela siblings for P1.00.00) would actually work against the approval
of Dr. Rosarios loan by the banks. Since Dr. Rosarios Deed of Absolute Quitclaim dated December 28,
1964 is a declaration against his self-interest, it must be taken as favoring the truthfulness of the
contents of said Deed.[59]

It can also be said that Dr. Rosario is estopped from claiming or asserting ownership over Lot No. 356-A
based on his Deed of Absolute Quitclaim dated December 28, 1964. Dr. Rosario's admission in the said
Deed that he merely borrowed Lot No. 356-A is deemed conclusive upon him. Under Article 1431 of the
Civil Code, [t]hrough estoppel an admission or representation is rendered conclusive upon the person
making it, and cannot be denied or disproved as against the person relying thereon.[60] That admission
cannot now be denied by Dr. Rosario as against the Torbela siblings, the latter having relied upon his
representation.

Considering the foregoing, the Court agrees with the RTC and the Court of Appeals that Dr. Rosario only
holds Lot No. 356-A in trust for the Torbela siblings.

Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in another. It
is a fiduciary relationship that obliges the trustee to deal with the property for the benefit of the
beneficiary. Trust relations between parties may either be express or implied. An express trust is created
by the intention of the trustor or of the parties, while an implied trust comes into being by operation of
law.[61]

Express trusts are created by direct and positive acts of the parties, by some writing or deed, or will, or
by words either expressly or impliedly evincing an intention to create a trust. Under Article 1444 of the
Civil Code, [n]o particular words are required for the creation of an express trust, it being sufficient that
a trust is clearly intended.[62] It is possible to create a trust without using the word trust or trustee.
Conversely, the mere fact that these words are used does not necessarily indicate an intention to create
a trust. The question in each case is whether the trustor manifested an intention to create the kind of
relationship which to lawyers is known as trust. It is immaterial whether or not he knows that the
relationship which he intends to create is called a trust, and whether or not he knows the precise
characteristics of the relationship which is called a trust.[63]
In Tamayo v. Callejo,[64] the Court recognized that a trust may have a constructive or implied nature in
the beginning, but the registered owners subsequent express acknowledgement in a public document of
a previous sale of the property to another party, had the effect of imparting to the aforementioned trust
the nature of an express trust. The same situation exists in this case. When Dr. Rosario was able to
register Lot No. 356-A in his name under TCT No. 52751 on December 16, 1964, an implied trust was
initially established between him and the Torbela siblings under Article 1451 of the Civil Code, which
provides:

ART. 1451. When land passes by succession to any person and he causes the legal title to be put in the
name of another, a trust is established by implication of law for the benefit of the true owner.

Dr. Rosarios execution of the Deed of Absolute Quitclaim on December 28, 1964, containing his express
admission that he only borrowed Lot No. 356-A from the Torbela siblings, eventually transformed the
nature of the trust to an express one. The express trust continued despite Dr. Rosario stating in his Deed
of Absolute Quitclaim that he was already returning Lot No. 356-A to the Torbela siblings as Lot No. 356-
A remained registered in Dr. Rosarios name under TCT No. 52751 and Dr. Rosario kept possession of said
property, together with the improvements thereon.

The right of the Torbela siblings to recover Lot No. 356-A has not yet prescribed.

The Court extensively discussed the prescriptive period for express trusts in the Heirs of Maximo
Labanon v. Heirs of Constancio Labanon,[65] to wit:

On the issue of prescription, we had the opportunity to rule in Bueno v. Reyes that unrepudiated written
express trusts are imprescriptible:

While there are some decisions which hold that an action upon a trust is imprescriptible, without
distinguishing between express and implied trusts, the better rule, as laid down by this Court in other
decisions, is that prescription does supervene where the trust is merely an implied one. The reason has
been expressed by Justice J.B.L. Reyes in J.M. Tuason and Co., Inc. vs. Magdangal, 4 SCRA 84, 88, as
follows:
Under Section 40 of the old Code of Civil Procedure, all actions for recovery of real property prescribed
in 10 years, excepting only actions based on continuing or subsisting trusts that were considered by
section 38 as imprescriptible. As held in the case of Diaz v. Gorricho, L-11229, March 29, 1958, however,
the continuing or subsisting trusts contemplated in section 38 of the Code of Civil Procedure referred
only to express unrepudiated trusts, and did not include constructive trusts (that are imposed by law)
where no fiduciary relation exists and the trustee does not recognize the trust at all.

This principle was amplified in Escay v. Court of Appeals this way: Express trusts prescribe 10 years from
the repudiation of the trust (Manuel Diaz, et al. vs. Carmen Gorricho et al., 54 O.G. p. 8429, Sec. 40,
Code of Civil Procedure).

In the more recent case of Secuya v. De Selma, we again ruled that the prescriptive period for the
enforcement of an express trust of ten (10) years starts upon the repudiation of the trust by the
trustee.[66]

To apply the 10-year prescriptive period, which would bar a beneficiarys action to recover in an express
trust, the repudiation of the trust must be proven by clear and convincing evidence and made known to
the beneficiary.[67] The express trust disables the trustee from acquiring for his own benefit the
property committed to his management or custody, at least while he does not openly repudiate the
trust, and makes such repudiation known to the beneficiary or cestui que trust. For this reason, the old
Code of Civil Procedure (Act 190) declared that the rules on adverse possession do not apply to
continuing and subsisting (i.e., unrepudiated) trusts. In an express trust, the delay of the beneficiary is
directly attributable to the trustee who undertakes to hold the property for the former, or who is linked
to the beneficiary by confidential or fiduciary relations. The trustee's possession is, therefore, not
adverse to the beneficiary, until and unless the latter is made aware that the trust has been
repudiated.[68]

Dr. Rosario argues that he is deemed to have repudiated the trust on December 16, 1964, when he
registered Lot No. 356-A in his name under TCT No. 52751, so when on February 13, 1986, the Torbela
siblings instituted before the RTC Civil Case No. U-4359, for the recovery of ownership and possession of
Lot No. 356-A from the spouses Rosario, over 21 years had passed. Civil Case No. U-4359 was already
barred by prescription, as well as laches.

The Court already rejected a similar argument in Ringor v. Ringor[69] for the following reasons:
A trustee who obtains a Torrens title over a property held in trust for him by another cannot repudiate
the trust by relying on the registration. A Torrens Certificate of Title in Joses name did not vest
ownership of the land upon him. The Torrens system does not create or vest title. It only confirms and
records title already existing and vested. It does not protect a usurper from the true owner. The Torrens
system was not intended to foment betrayal in the performance of a trust. It does not permit one to
enrich himself at the expense of another. Where one does not have a rightful claim to the property, the
Torrens system of registration can confirm or record nothing. Petitioners cannot rely on the registration
of the lands in Joses name nor in the name of the Heirs of Jose M. Ringor, Inc., for the wrong result they
seek. For Jose could not repudiate a trust by relying on a Torrens title he held in trust for his co-heirs.
The beneficiaries are entitled to enforce the trust, notwithstanding the irrevocability of the Torrens title.
The intended trust must be sustained.[70] (Emphasis supplied.)

In the more recent case of Heirs of Tranquilino Labiste v. Heirs of Jose Labiste,[71] the Court refused to
apply prescription and laches and reiterated that:

[P]rescription and laches will run only from the time the express trust is repudiated. The Court has held
that for acquisitive prescription to bar the action of the beneficiary against the trustee in an express
trust for the recovery of the property held in trust it must be shown that: (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. Respondents cannot rely on the fact that the Torrens title was issued in the name of Epifanio
and the other heirs of Jose. It has been held that a trustee who obtains a Torrens title over property held
in trust by him for another cannot repudiate the trust by relying on the registration. The rule requires a
clear repudiation of the trust duly communicated to the beneficiary. The only act that can be construed
as repudiation was when respondents filed the petition for reconstitution in October 1993. And since
petitioners filed their complaint in January 1995, their cause of action has not yet prescribed, laches
cannot be attributed to them.[72] (Emphasis supplied.)

It is clear that under the foregoing jurisprudence, the registration of Lot No. 356-A by Dr. Rosario in his
name under TCT No. 52751 on December 16, 1964 is not the repudiation that would have caused the
10-year prescriptive period for the enforcement of an express trust to run.

The Court of Appeals held that Dr. Rosario repudiated the express trust when he acquired another loan
from PNB and constituted a second mortgage on Lot No. 356-A sometime in 1979, which, unlike the first
mortgage to DBP in 1965, was without the knowledge and/or consent of the Torbela siblings.

The Court only concurs in part with the Court of Appeals on this matter.
For repudiation of an express trust to be effective, the unequivocal act of repudiation had to be made
known to the Torbela siblings as the cestuis que trust and must be proven by clear and conclusive
evidence. A scrutiny of TCT No. 52751 reveals the following inscription:

Entry No. 520099

Amendment of the mortgage in favor of PNB inscribed under Entry No. 490658 in the sense that the
consideration thereof has been increased to PHILIPPINE PESOS Four Hundred Fifty Thousand Pesos only
(P450,000.00) and to secure any and all negotiations with PNB, whether contracted before, during or
after the date of this instrument, acknowledged before Notary Public of Pangasinan Alejo M. Dato as
Doc. No. 198, Page No. 41, Book No. 11, Series of 1985.

Date of Instrument March 5, 1981

Date of Inscription March 6, 1981[73]

Although according to Entry No. 520099, the original loan and mortgage agreement of Lot No. 356-A
between Dr. Rosario and PNB was previously inscribed as Entry No. 490658, Entry No. 490658 does not
actually appear on TCT No. 52751 and, thus, it cannot be used as the reckoning date for the start of the
prescriptive period.

The Torbela siblings can only be charged with knowledge of the mortgage of Lot No. 356-A to PNB on
March 6, 1981 when the amended loan and mortgage agreement was registered on TCT No. 52751 as
Entry No. 520099. Entry No. 520099 is constructive notice to the whole world[74] that Lot No. 356-A
was mortgaged by Dr. Rosario to PNB as security for a loan, the amount of which was increased to
P450,000.00. Hence, Dr. Rosario is deemed to have effectively repudiated the express trust between
him and the Torbela siblings on March 6, 1981, on which day, the prescriptive period for the
enforcement of the express trust by the Torbela siblings began to run.

From March 6, 1981, when the amended loan and mortgage agreement was registered on TCT No.
52751, to February 13, 1986, when the Torbela siblings instituted before the RTC Civil Case No. U-4359
against the spouses Rosario, only about five years had passed. The Torbela siblings were able to institute
Civil Case No. U-4359 well before the lapse of the 10-year prescriptive period for the enforcement of
their express trust with Dr. Rosario.
Civil Case No. U-4359 is likewise not barred by laches. Laches means the failure or neglect, for an
unreasonable and unexplained length of time, to do that which by exercising due diligence could or
should have been done earlier. It is negligence or omission to assert a right within a reasonable time,
warranting a presumption that the party entitled to assert it either has abandoned it or declined to
assert it. As the Court explained in the preceding paragraphs, the Torbela siblings instituted Civil Case
No. U-4359 five years after Dr. Rosarios repudiation of the express trust, still within the 10-year
prescriptive period for enforcement of such trusts. This does not constitute an unreasonable delay in
asserting one's right. A delay within the prescriptive period is sanctioned by law and is not considered to
be a delay that would bar relief. Laches apply only in the absence of a statutory prescriptive period.[75]

Banco Filipino is not a mortgagee and buyer in good faith.

Having determined that the Torbela siblings are the true owners and Dr. Rosario merely the trustee of
Lot No. 356-A, the Court is next faced with the issue of whether or not the Torbela siblings may still
recover Lot No. 356-A considering that Dr. Rosario had already mortgaged Lot No. 356-A to Banco
Filipino, and upon Dr. Rosarios default on his loan obligations, Banco Filipino foreclosed the mortgage,
acquired Lot No. 356-A as the highest bidder at the foreclosure sale, and consolidated title in its name
under TCT No. 165813. The resolution of this issue depends on the answer to the question of whether or
not Banco Filipino was a mortgagee in good faith.

Under Article 2085 of the Civil Code, one of the essential requisites of the contract of mortgage is that
the mortgagor should be the absolute owner of the property to be mortgaged; otherwise, the mortgage
is considered null and void. However, an exception to this rule is the doctrine of mortgagee in good
faith. Under this doctrine, even if the mortgagor is not the owner of the mortgaged property, the
mortgage contract and any foreclosure sale arising therefrom are given effect by reason of public policy.
This principle is based on the rule that all persons dealing with property covered by a Torrens Certificate
of Title, as buyers or mortgagees, are not required to go beyond what appears on the face of the title.
This is the same rule that underlies the principle of innocent purchasers for value. The prevailing
jurisprudence is that a mortgagee has a right to rely in good faith on the certificate of title of the
mortgagor to the property given as security and in the absence of any sign that might arouse suspicion,
has no obligation to undertake further investigation. Hence, even if the mortgagor is not the rightful
owner of, or does not have a valid title to, the mortgaged property, the mortgagee in good faith is,
nonetheless, entitled to protection.[76]

On one hand, the Torbela siblings aver that Banco Filipino is not a mortgagee in good faith because as
early as May 17, 1967, they had already annotated Cornelios Adverse Claim dated May 16, 1967 and Dr.
Rosarios Deed of Absolute Quitclaim dated December 28, 1964 on TCT No. 52751 as Entry Nos. 274471-
274472, respectively.
On the other hand, Banco Filipino asseverates that it is a mortgagee in good faith because per Section 70
of Presidential Decree No. 1529, otherwise known as the Property Registration Decree, the notice of
adverse claim, registered on May 17, 1967 by the Torbela siblings under Entry Nos. 274471-274472 on
TCT No. 52751, already lapsed after 30 days or on June 16, 1967. Additionally, there was an express
cancellation of Entry Nos. 274471-274472 by Entry No. 520469 dated March 11, 1981. So when Banco
Filipino approved Dr. Rosarios loan for P1,200,000.00 and constituted a mortgage on Lot No. 356-A
(together with two other properties) on December 8, 1981, the only other encumbrance on TCT No.
52751 was Entry No. 520099 dated March 6, 1981, i.e., the amended loan and mortgage agreement
between Dr. Rosario and PNB (which was eventually cancelled after it was paid off with part of the
proceeds from Dr. Rosarios loan from Banco Filipino). Hence, Banco Filipino was not aware that the
Torbela siblings adverse claim on Lot No. 356-A still subsisted.

The Court finds that Banco Filipino is not a mortgagee in good faith. Entry Nos. 274471-274472 were not
validly cancelled, and the improper cancellation should have been apparent to Banco Filipino and
aroused suspicion in said bank of some defect in Dr. Rosarios title.

The purpose of annotating the adverse claim on the title of the disputed land is to apprise third persons
that there is a controversy over the ownership of the land and to preserve and protect the right of the
adverse claimant during the pendency of the controversy. It is a notice to third persons that any
transaction regarding the disputed land is subject to the outcome of the dispute.[77]

Adverse claims were previously governed by Section 110 of Act No. 496, otherwise known as the Land
Registration Act, quoted in full below:

ADVERSE CLAIM

SEC. 110. Whoever claims any part or interest in registered land adverse to the registered owner, arising
subsequent to the date of the original registration, may, if no other provision is made in this Act for
registering the same, make a statement in writing setting forth fully his alleged right or interest, and
how or under whom acquired, and a reference to the volume and page of the certificate of title of the
registered owner, and a description of the land in which the right or interest is claimed.

The statement shall be signed and sworn to, and shall state the adverse claimants residence, and
designate a place at which all notices may be served upon him. This statement shall be entitled to
registration as an adverse claim, and the court, upon a petition of any party in interest, shall grant a
speedy hearing upon the question of the validity of such adverse claim and shall enter such decree
therein as justice and equity may require. If the claim is adjudged to be invalid, the registration shall be
cancelled. If in any case the court after notice and hearing shall find that a claim thus registered was
frivolous or vexatious, it may tax the adverse claimant double or treble costs in its discretion.

Construing the aforequoted provision, the Court stressed in Ty Sin Tei v. Lee Dy Piao[78] that [t]he
validity or efficaciousness of the [adverse] claim x x x may only be determined by the Court upon
petition by an interested party, in which event, the Court shall order the immediate hearing thereof and
make the proper adjudication as justice and equity may warrant. And it is ONLY when such claim is
found unmeritorious that the registration thereof may be cancelled. The Court likewise pointed out in
the same case that while a notice of lis pendens may be cancelled in a number of ways, the same is not
true in a registered adverse claim, for it may be cancelled only in one instance, i.e., after the claim is
adjudged invalid or unmeritorious by the Court x x x; and if any of the registrations should be considered
unnecessary or superfluous, it would be the notice of lis pendens and not the annotation of the adverse
claim which is more permanent and cannot be cancelled without adequate hearing and proper
disposition of the claim.

With the enactment of the Property Registration Decree on June 11, 1978, Section 70 thereof now
applies to adverse claims:

SEC. 70. Adverse claim. Whoever claims any part or interest in registered land adverse to the registered
owner, arising subsequent to the date of the original registrations, may, if no other provision is made in
this Decree for registering the same, make a statement in writing setting forth fully his alleged right, or
interest, and how or under whom acquired, a reference to the number of the certificate of title of the
registered owner, the name of the registered owner, and a description of the land in which the right or
interest is claimed.

The statement shall be signed and sworn to, and shall state the adverse claimants residence, and a place
at which all notices may be served upon him. This statement shall be entitled to registration as an
adverse claim on the certificate of title. The adverse claim shall be effective for a period of thirty days
from the date of registration. After the lapse of said period, the annotation of adverse claim may be
cancelled upon filing of a verified petition therefor by the party in interest: Provided, however, that after
cancellation, no second adverse claim based on the same ground shall be registered by the same
claimant.

Before the lapse of thirty days aforesaid, any party in interest may file a petition in the Court of First
Instance where the land is situated for the cancellation of the adverse claim, and the court shall grant a
speedy hearing upon the question of the validity of such adverse claim, and shall render judgment as
may be just and equitable. If the adverse claim is adjudged to be invalid, the registration thereof shall be
ordered cancelled. If, in any case, the court, after notice and hearing, shall find that the adverse claim
thus registered was frivolous, it may fine the claimant in an amount not less than one thousand pesos
nor more than five thousand pesos, in its discretion. Before the lapse of thirty days, the claimant may
withdraw his adverse claim by filing with the Register of Deeds a sworn petition to that effect.
(Emphases supplied.)

In Sajonas v. Court of Appeals,[79]the Court squarely interpreted Section 70 of the Property Registration
Decree, particularly, the new 30-day period not previously found in Section 110 of the Land Registration
Act, thus:

In construing the law aforesaid, care should be taken that every part thereof be given effect and a
construction that could render a provision inoperative should be avoided, and inconsistent provisions
should be reconciled whenever possible as parts of a harmonious whole. For taken in solitude, a word or
phrase might easily convey a meaning quite different from the one actually intended and evident when
a word or phrase is considered with those with which it is associated. In ascertaining the period of
effectivity of an inscription of adverse claim, we must read the law in its entirety. Sentence three,
paragraph two of Section 70 of P.D. 1529 provides:

The adverse claim shall be effective for a period of thirty days from the date of registration.

At first blush, the provision in question would seem to restrict the effectivity of the adverse claim to
thirty days. But the above provision cannot and should not be treated separately, but should be read in
relation to the sentence following, which reads:

After the lapse of said period, the annotation of adverse claim may be cancelled upon filing of a verified
petition therefor by the party in interest.

If the rationale of the law was for the adverse claim to ipso facto lose force and effect after the lapse of
thirty days, then it would not have been necessary to include the foregoing caveat to clarify and
complete the rule. For then, no adverse claim need be cancelled. If it has been automatically terminated
by mere lapse of time, the law would not have required the party in interest to do a useless act.

A statute's clauses and phrases must not be taken separately, but in its relation to the statute's totality.
Each statute must, in fact, be construed as to harmonize it with the pre-existing body of laws. Unless
clearly repugnant, provisions of statutes must be reconciled. The printed pages of the published Act, its
history, origin, and its purposes may be examined by the courts in their construction. x x x.

xxxx

Construing the provision as a whole would reconcile the apparent inconsistency between the portions of
the law such that the provision on cancellation of adverse claim by verified petition would serve to
qualify the provision on the effectivity period. The law, taken together, simply means that the
cancellation of the adverse claim is still necessary to render it ineffective, otherwise, the inscription will
remain annotated and shall continue as a lien upon the property. For if the adverse claim has already
ceased to be effective upon the lapse of said period, its cancellation is no longer necessary and the
process of cancellation would be a useless ceremony.

It should be noted that the law employs the phrase "may be cancelled," which obviously indicates, as
inherent in its decision making power, that the court may or may not order the cancellation of an
adverse claim, notwithstanding such provision limiting the effectivity of an adverse claim for thirty days
from the date of registration. The court cannot be bound by such period as it would be inconsistent with
the very authority vested in it. A fortiori, the limitation on the period of effectivity is immaterial in
determining the validity or invalidity of an adverse claim which is the principal issue to be decided in the
court hearing. It will therefore depend upon the evidence at a proper hearing for the court to determine
whether it will order the cancellation of the adverse claim or not.

To interpret the effectivity period of the adverse claim as absolute and without qualification limited to
thirty days defeats the very purpose for which the statute provides for the remedy of an inscription of
adverse claim, as the annotation of an adverse claim is a measure designed to protect the interest of a
person over a piece of real property where the registration of such interest or right is not otherwise
provided for by the Land Registration Act or Act 496 (now P.D. 1529 or the Property Registration
Decree), and serves as a warning to third parties dealing with said property that someone is claiming an
interest or the same or a better right than the registered owner thereof.

The reason why the law provides for a hearing where the validity of the adverse claim is to be threshed
out is to afford the adverse claimant an opportunity to be heard, providing a venue where the propriety
of his claimed interest can be established or revoked, all for the purpose of determining at last the
existence of any encumbrance on the title arising from such adverse claim. This is in line with the
provision immediately following:

Provided, however, that after cancellation, no second adverse claim shall be registered by the same
claimant.
Should the adverse claimant fail to sustain his interest in the property, the adverse claimant will be
precluded from registering a second adverse claim based on the same ground.

It was held that validity or efficaciousness of the claim may only be determined by the Court upon
petition by an interested party, in which event, the Court shall order the immediate hearing thereof and
make the proper adjudication as justice and equity may warrant. And it is only when such claim is found
unmeritorious that the registration of the adverse claim may be cancelled, thereby protecting the
interest of the adverse claimant and giving notice and warning to third parties.[80] (Emphases supplied.)

Whether under Section 110 of the Land Registration Act or Section 70 of the Property Registration
Decree, notice of adverse claim can only be cancelled after a party in interest files a petition for
cancellation before the RTC wherein the property is located, and the RTC conducts a hearing and
determines the said claim to be invalid or unmeritorious.

No petition for cancellation has been filed and no hearing has been conducted herein to determine the
validity or merit of the adverse claim of the Torbela siblings. Entry No. 520469 cancelled the adverse
claim of the Torbela siblings, annotated as Entry Nos. 274471-774472, upon the presentation by Dr.
Rosario of a mere Cancellation and Discharge of Mortgage.

Regardless of whether or not the Register of Deeds should have inscribed Entry No. 520469 on TCT No.
52751, Banco Filipino could not invoke said inscription in support of its claim of good faith. There were
several things amiss in Entry No. 520469 which should have already aroused suspicions in Banco Filipino,
and compelled the bank to look beyond TCT No. 52751 and inquire into Dr. Rosarios title. First, Entry No.
520469 does not mention any court order as basis for the cancellation of the adverse claim. Second, the
adverse claim was not a mortgage which could be cancelled with Dr. Rosarios Cancellation and
Discharge of Mortgage. And third, the adverse claim was against Dr. Rosario, yet it was cancelled based
on a document also executed by Dr. Rosario.

It is a well-settled rule that a purchaser or mortgagee cannot close his eyes to facts which should put a
reasonable man upon his guard, and then claim that he acted in good faith under the belief that there
was no defect in the title of the vendor or mortgagor. His mere refusal to believe that such defect exists,
or his willful closing of his eyes to the possibility of the existence of a defect in the vendor's or
mortgagor's title, will not make him an innocent purchaser or mortgagee for value, if it afterwards
develops that the title was in fact defective, and it appears that he had such notice of the defects as
would have led to its discovery had he acted with the measure of precaution which may be required of a
prudent man in a like situation.[81]
While the defective cancellation of Entry Nos. 274471-274472 by Entry No. 520469 might not be evident
to a private individual, the same should have been apparent to Banco Filipino. Banco Filipino is not an
ordinary mortgagee, but is a mortgagee-bank, whose business is impressed with public interest. In fact,
in one case, [82] the Court explicitly declared that the rule that persons dealing with registered lands
can rely solely on the certificate of title does not apply to banks. In another case,[83] the Court adjudged
that unlike private individuals, a bank is expected to exercise greater care and prudence in its dealings,
including those involving registered lands. A banking institution is expected to exercise due diligence
before entering into a mortgage contract. The ascertainment of the status or condition of a property
offered to it as security for a loan must be a standard and indispensable part of its operations.

Banco Filipino cannot be deemed a mortgagee in good faith, much less a purchaser in good faith at the
foreclosure sale of Lot No. 356-A. Hence, the right of the Torbela siblings over Lot No. 356-A is superior
over that of Banco Filipino; and as the true owners of Lot No. 356-A, the Torbela siblings are entitled to a
reconveyance of said property even from Banco Filipino.

Nonetheless, the failure of Banco Filipino to comply with the due diligence requirement was not the
result of a dishonest purpose, some moral obliquity, or breach of a known duty for some interest or ill
will that partakes of fraud that would justify damages.[84]

Given the reconveyance of Lot No. 356-A to the Torbela siblings, there is no more need to address issues
concerning redemption, annulment of the foreclosure sale and certificate of sale (subject matter of Civil
Case No. U-4733), or issuance of a writ of possession in favor of Banco Filipino (subject matter of Pet.
Case No. U-822) insofar as Lot No. 356-A is concerned. Such would only be superfluous. Banco Filipino,
however, is not left without any recourse should the foreclosure and sale of the two other mortgaged
properties be insufficient to cover Dr. Rosarios loan, for the bank may still bring a proper suit against Dr.
Rosario to collect the unpaid balance.

The rules on accession shall govern the improvements on Lot No. 356-A and the rents thereof.

The accessory follows the principal. The right of accession is recognized under Article 440 of the Civil
Code which states that [t]he ownership of property gives the right by accession to everything which is
produced thereby, or which is incorporated or attached thereto, either naturally or artificially.

There is no question that Dr. Rosario is the builder of the improvements on Lot No. 356-A. The Torbela
siblings themselves alleged that they allowed Dr. Rosario to register Lot No. 356-A in his name so he
could obtain a loan from DBP, using said parcel of land as security; and with the proceeds of the loan,
Dr. Rosario had a building constructed on Lot No. 356-A, initially used as a hospital, and then later for
other commercial purposes. Dr. Rosario supervised the construction of the building, which began in
1965; fully liquidated the loan from DBP; and maintained and administered the building, as well as
collected the rental income therefrom, until the Torbela siblings instituted Civil Case No. U-4359 before
the RTC on February 13, 1986.

When it comes to the improvements on Lot No. 356-A, both the Torbela siblings (as landowners) and Dr.
Rosario (as builder) are deemed in bad faith. The Torbela siblings were aware of the construction of a
building by Dr. Rosario on Lot No. 356-A, while Dr. Rosario proceeded with the said construction despite
his knowledge that Lot No. 356-A belonged to the Torbela siblings. This is the case contemplated under
Article 453 of the Civil Code, which reads:

ART. 453. If there was bad faith, not only on the part of the person who built, planted or sowed on the
land of another, but also on the part of the owner of such land, the rights of one and the other shall be
the same as though both had acted in good faith.

It is understood that there is bad faith on the part of the landowner whenever the act was done with his
knowledge and without opposition on his part. (Emphasis supplied.)

When both the landowner and the builder are in good faith, the following rules govern:

ART. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall
have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity
provided for in articles 546 and 548, or to oblige the one who built or planted to pay the price of the
land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy
the land if its value is considerably more than that of the building or trees. In such case, he shall pay
reasonable rent, if the owner of the land does not choose to appropriate the building or trees after
proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the
court shall fix the terms thereof.

ART. 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith
may retain the thing until he has been reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good faith with the same right of retention,
the person who has defeated him in the possession having the option of refunding the amount of the
expenses or of paying the increase in value which the thing may have acquired by reason thereof.

ART. 548. Expenses for pure luxury or mere pleasure shall not be refunded to the possessor in good
faith; but he may remove the ornaments with which he has embellished the principal thing if it suffers
no injury thereby, and if his successor in the possession does not prefer to refund the amount
expended.

Whatever is built, planted, or sown on the land of another, and the improvements or repairs made
thereon, belong to the owner of the land. Where, however, the planter, builder, or sower has acted in
good faith, a conflict of rights arises between the owners and it becomes necessary to protect the owner
of the improvements without causing injustice to the owner of the land. In view of the impracticability
of creating what Manresa calls a state of "forced co-ownership," the law has provided a just and
equitable solution by giving the owner of the land the option to acquire the improvements after
payment of the proper indemnity or to oblige the builder or planter to pay for the land and the sower to
pay the proper rent. It is the owner of the land who is allowed to exercise the option because his right is
older and because, by the principle of accession, he is entitled to the ownership of the accessory
thing.[85]

The landowner has to make a choice between appropriating the building by paying the proper indemnity
or obliging the builder to pay the price of the land. But even as the option lies with the landowner, the
grant to him, nevertheless, is preclusive. He must choose one. He cannot, for instance, compel the
owner of the building to remove the building from the land without first exercising either option. It is
only if the owner chooses to sell his land, and the builder or planter fails to purchase it where its value is
not more than the value of the improvements, that the owner may remove the improvements from the
land. The owner is entitled to such remotion only when, after having chosen to sell his land, the other
party fails to pay for the same.[86]

This case then must be remanded to the RTC for the determination of matters necessary for the proper
application of Article 448, in relation to Article 546, of the Civil Code. Such matters include the option
that the Torbela siblings will choose; the amount of indemnity that they will pay if they decide to
appropriate the improvements on Lot No. 356-A; the value of Lot No. 356-A if they prefer to sell it to Dr.
Rosario; or the reasonable rent if they opt to sell Lot No. 356-A to Dr. Rosario but the value of the land is
considerably more than the improvements. The determination made by the Court of Appeals in its
Decision dated June 29, 1999 that the current value of Lot No. 356-A is P1,200,000.00 is not supported
by any evidence on record.
Should the Torbela siblings choose to appropriate the improvements on Lot No. 356-A, the following
ruling of the Court in Pecson v. Court of Appeals[87] is relevant in the determination of the amount of
indemnity under Article 546 of the Civil Code:

Article 546 does not specifically state how the value of the useful improvements should be determined.
The respondent court and the private respondents espouse the belief that the cost of construction of
the apartment building in 1965, and not its current market value, is sufficient reimbursement for
necessary and useful improvements made by the petitioner. This position is, however, not in
consonance with previous rulings of this Court in similar cases. In Javier vs. Concepcion, Jr., this Court
pegged the value of the useful improvements consisting of various fruits, bamboos, a house and camarin
made of strong material based on the market value of the said improvements. In Sarmiento vs. Agana,
despite the finding that the useful improvement, a residential house, was built in 1967 at a cost of
between eight thousand pesos (P8,000.00) to ten thousand pesos (P10,000.00), the landowner was
ordered to reimburse the builder in the amount of forty thousand pesos (P40,000.00), the value of the
house at the time of the trial. In the same way, the landowner was required to pay the "present value"
of the house, a useful improvement, in the case of De Guzman vs. De la Fuente, cited by the petitioner.

The objective of Article 546 of the Civil Code is to administer justice between the parties involved. In this
regard, this Court had long ago stated in Rivera vs. Roman Catholic Archbishop of Manila that the said
provision was formulated in trying to adjust the rights of the owner and possessor in good faith of a
piece of land, to administer complete justice to both of them in such a way as neither one nor the other
may enrich himself of that which does not belong to him. Guided by this precept, it is therefore the
current market value of the improvements which should be made the basis of reimbursement. A
contrary ruling would unjustly enrich the private respondents who would otherwise be allowed to
acquire a highly valued income-yielding four-unit apartment building for a measly amount.
Consequently, the parties should therefore be allowed to adduce evidence on the present market value
of the apartment building upon which the trial court should base its finding as to the amount of
reimbursement to be paid by the landowner.[88] (Emphases supplied.)

Still following the rules of accession, civil fruits, such as rents, belong to the owner of the building.[89]
Thus, Dr. Rosario has a right to the rents of the improvements on Lot No. 356-A and is under no
obligation to render an accounting of the same to anyone. In fact, it is the Torbela siblings who are
required to account for the rents they had collected from the lessees of the commercial building and
turn over any balance to Dr. Rosario. Dr. Rosarios right to the rents of the improvements on Lot No. 356-
A shall continue until the Torbela siblings have chosen their option under Article 448 of the Civil Code.
And in case the Torbela siblings decide to appropriate the improvements, Dr. Rosario shall have the right
to retain said improvements, as well as the rents thereof, until the indemnity for the same has been
paid.[90]
Dr. Rosario is liable for damages to the Torbela siblings.

The Court of Appeals ordered Dr. Rosario to pay the Torbela siblings P300,000.00 as moral damages;
P200,000.00 as exemplary damages; and P100,000.00 as attorneys fees.

Indeed, Dr. Rosarios deceit and bad faith is evident when, being fully aware that he only held Lot No.
356-A in trust for the Torbela siblings, he mortgaged said property to PNB and Banco Filipino absent the
consent of the Torbela siblings, and caused the irregular cancellation of the Torbela siblings adverse
claim on TCT No. 52751. Irrefragably, Dr. Rosarios betrayal had caused the Torbela siblings (which
included Dr. Rosarios own mother, Eufrosina Torbela Rosario) mental anguish, serious anxiety, and
wounded feelings. Resultantly, the award of moral damages is justified, but the amount thereof is
reduced to P200,000.00.

In addition to the moral damages, exemplary damages may also be imposed given that Dr. Rosarios
wrongful acts were accompanied by bad faith. However, judicial discretion granted to the courts in the
assessment of damages must always be exercised with balanced restraint and measured objectivity. The
circumstances of the case call for a reduction of the award of exemplary damages to P100,000.00.

As regards attorney's fees, they may be awarded when the defendant's act or omission has compelled
the plaintiff to litigate with third persons or to incur expenses to protect his interest. Because of Dr.
Rosarios acts, the Torbela siblings were constrained to institute several cases against Dr. Rosario and his
spouse, Duque-Rosario, as well as Banco Filipino, which had lasted for more than 25 years.
Consequently, the Torbela siblings are entitled to an award of attorney's fees and the amount of
P100,000.00 may be considered rational, fair, and reasonable.

Banco Filipino is entitled to a writ of possession for Lot No. 5-F-8-C-2-B-2-A.

The Court emphasizes that Pet. Case No. U-822, instituted by Banco Filipino for the issuance of a writ of
possession before the RTC of Urdaneta, included only Lot No. 5-F-8-C-2-B-2-A and Lot No. 356-A (Lot No.
4489, the third property mortgaged to secure Dr. Rosarios loan from Banco Filipino, is located in
Dagupan City, Pangasinan, and the petition for issuance of a writ of possession for the same should be
separately filed with the RTC of Dagupan City). Since the Court has already granted herein the
reconveyance of Lot No. 356-A from Banco Filipino to the Torbela siblings, the writ of possession now
pertains only to Lot No. 5-F-8-C-2-B-2-A.
To recall, the Court of Appeals affirmed the issuance by the RTC of a writ of possession in favor of Banco
Filipino. Dr. Rosario no longer appealed from said judgment of the appellate court. Already legally
separated from Dr. Rosario, Duque-Rosario alone challenges the writ of possession before this Court
through her Petition in G.R. No. 140553.

Duque-Rosario alleges in her Petition that Lot No. 5-F-8-C-2-B-2-A had been registered in her name
under TCT No. 104189. Yet, without a copy of TCT No. 104189 on record, the Court cannot give much
credence to Duque-Rosarios claim of sole ownership of Lot No. 5-F-8-C-2-B-2-A. Also, the question of
whether Lot No. 5-F-8-C-2-B-2-A was the paraphernal property of Duque-Rosario or the conjugal
property of the spouses Rosario would not alter the outcome of Duque-Rosarios Petition.

The following facts are undisputed: Banco Filipino extrajudicially foreclosed the mortgage constituted on
Lot No. 5-F-8-C-2-B-2-A and the two other properties after Dr. Rosario defaulted on the payment of his
loan; Banco Filipino was the highest bidder for all three properties at the foreclosure sale on April 2,
1987; the Certificate of Sale dated April 2, 1987 was registered in April 1987; and based on the
Certificate of Final Sale dated May 24, 1988 and Affidavit of Consolidation dated May 25, 1988, the
Register of Deeds cancelled TCT No. 104189 and issued TCT No. 165812 in the name of Banco Filipino for
Lot No. 5-F-8-C-2-B-2-A on June 7, 1988.

The Court has consistently ruled that the one-year redemption period should be counted not from the
date of foreclosure sale, but from the time the certificate of sale is registered with the Registry of
Deeds.[91] No copy of TCT No. 104189 can be found in the records of this case, but the fact of
annotation of the Certificate of Sale thereon was admitted by the parties, only differing on the date it
was made: April 14, 1987 according to Banco Filipino and April 15, 1987 as maintained by Duque-
Rosario. Even if the Court concedes that the Certificate of Sale was annotated on TCT No. 104189 on the
later date, April 15, 1987, the one-year redemption period already expired on April 14, 1988.[92] The
Certificate of Final Sale and Affidavit of Consolidation were executed more than a month thereafter, on
May 24, 1988 and May 25, 1988, respectively, and were clearly not premature.

It is true that the rule on redemption is liberally construed in favor of the original owner of the property.
The policy of the law is to aid rather than to defeat him in the exercise of his right of redemption.[93]
However, the liberal interpretation of the rule on redemption is inapplicable herein as neither Duque-
Rosario nor Dr. Rosario had made any attempt to redeem Lot No. 5-F-8-C-2-B-2-A. Duque-Rosario could
only rely on the efforts of the Torbela siblings at redemption, which were unsuccessful. While the
Torbela siblings made several offers to redeem Lot No. 356-A, as well as the two other properties
mortgaged by Dr. Rosario, they did not make any valid tender of the redemption price to effect a valid
redemption. The general rule in redemption is that it is not sufficient that a person offering to redeem
manifests his desire to do so. The statement of intention must be accompanied by an actual and
simultaneous tender of payment. The redemption price should either be fully offered in legal tender or
else validly consigned in court. Only by such means can the auction winner be assured that the offer to
redeem is being made in good faith.[94] In case of disagreement over the redemption price, the
redemptioner may preserve his right of redemption through judicial action, which in every case, must be
filed within the one-year period of redemption. The filing of the court action to enforce redemption,
being equivalent to a formal offer to redeem, would have the effect of preserving his redemptive rights
and freezing the expiration of the one-year period.[95] But no such action was instituted by the Torbela
siblings or either of the spouses Rosario.

Duque-Rosario also cannot bar the issuance of the writ of possession over Lot No. 5-F-8-C-2-B-2-A in
favor of Banco Filipino by invoking the pendency of Civil Case No. U-4359, the Torbela siblings action for
recovery of ownership and possession and damages, which supposedly tolled the period for redemption
of the foreclosed properties. Without belaboring the issue of Civil Case No. U-4359 suspending the
redemption period, the Court simply points out to Duque-Rosario that Civil Case No. U-4359 involved
Lot No. 356-A only, and the legal consequences of the institution, pendency, and resolution of Civil Case
No. U-4359 apply to Lot No. 356-A alone.

Equally unpersuasive is Duque-Rosarios argument that the writ of possession over Lot No. 5-F-8-C-2-B-2-
A should not be issued given the defects in the conduct of the foreclosure sale (i.e., lack of personal
notice to Duque-Rosario) and consolidation of title (i.e., failure to provide Duque-Rosario with copies of
the Certificate of Final Sale).

The right of the purchaser to the possession of the foreclosed property becomes absolute upon the
expiration of the redemption period. The basis of this right to possession is the purchaser's ownership of
the property. After the consolidation of title in the buyer's name for failure of the mortgagor to redeem,
the writ of possession becomes a matter of right and its issuance to a purchaser in an extrajudicial
foreclosure is merely a ministerial function.[96]

The judge with whom an application for a writ of possession is filed need not look into the validity of the
mortgage or the manner of its foreclosure. Any question regarding the validity of the mortgage or its
foreclosure cannot be a legal ground for the refusal to issue a writ of possession. Regardless of whether
or not there is a pending suit for the annulment of the mortgage or the foreclosure itself, the purchaser
is entitled to a writ of possession, without prejudice, of course, to the eventual outcome of the pending
annulment case. The issuance of a writ of possession in favor of the purchaser in a foreclosure sale is a
ministerial act and does not entail the exercise of discretion.[97]

WHEREFORE, in view of the foregoing, the Petition of the Torbela siblings in G.R. No. 140528 is
GRANTED, while the Petition of Lena Duque-Rosario in G.R. No. 140553 is DENIED for lack of merit. The
Decision dated June 29, 1999 of the Court of Appeals in CA-G.R. CV No. 39770, which affirmed with
modification the Amended Decision dated January 29, 1992 of the RTC in Civil Case Nos. U-4359 and U-
4733 and Pet. Case No. U-822, is AFFIRMED WITH MODIFICATIONS, to now read as follows:
(1) Banco Filipino is ORDERED to reconvey Lot No. 356-A to the Torbela siblings;

(2) The Register of Deeds of Pangasinan is ORDERED to cancel TCT No. 165813 in the name of Banco
Filipino and to issue a new certificate of title in the name of the Torbela siblings for Lot No. 356-A;

(3) The case is REMANDED to the RTC for further proceedings to determine the facts essential to the
proper application of Articles 448 and 546 of the Civil Code, particularly: (a) the present fair market
value of Lot No. 356-A; (b) the present fair market value of the improvements thereon; (c) the option of
the Torbela siblings to appropriate the improvements on Lot No. 356-A or require Dr. Rosario to
purchase Lot No. 356-A; and (d) in the event that the Torbela siblings choose to require Dr. Rosario to
purchase Lot No. 356-A but the value thereof is considerably more than the improvements, then the
reasonable rent of Lot No. 356-A to be paid by Dr. Rosario to the Torbela siblings;

(4) The Torbela siblings are DIRECTED to submit an accounting of the rents of the improvements on Lot
No. 356-A which they had received and to turn over any balance thereof to Dr. Rosario;

(5) Dr. Rosario is ORDERED to pay the Torbela siblings P200,000.00 as moral damages, P100,000.00 as
exemplary damages, and P100,000.00 as attorneys fees; and

(6) Banco Filipino is entitled to a writ of possession over Lot-5-F-8-C-2-B-2-A, covered by TCT No.
165812. The RTC Branch Clerk of Court is ORDERED to issue a writ of possession for the said property in
favor of Banco Filipino.

METROPOLITAN BANK & TRUST COMPANY, INC. versus

THE BOARD OF TRUSTEES OF RIVERSIDE MILLS CORPORATION PROVIDENT AND RETIREMENT FUND

This petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended,
prays for the reversal of the Decision[1] dated November 7, 2006 and Resolution[2] dated March 5, 2007
of the Court of Appeals (CA) in CA-G.R. CV No. 76642. The CA had affirmed the Decision[3] dated June
27, 2002 of the Regional Trial Court (RTC), Branch 137, Makati City in Civil Case No. 97-997 which
declared invalid the reversion or application of the Riverside Mills Corporation Provident and Retirement
Fund (RMCPRF) to the outstanding obligation of Riverside Mills Corporation (RMC) with Philippine
Banking Corporation (Philbank).

The facts are as follows:

On November 1, 1973, RMC established a Provident and Retirement Plan[4] (Plan) for its regular
employees. Under the Plan, RMC and its employees shall each contribute 2% of the employees current
basic monthly salary, with RMCs contribution to increase by 1% every five (5) years up to a maximum of
5%. The contributions shall form part of the provident fund (the Fund) which shall be held, invested and
distributed by the Commercial Bank and Trust Company. Paragraph 13 of the Plan likewise provided that
the Plan may be amended or terminated by the Company at any time on account of business conditions,
but no such action shall operate to permit any part of the assets of the Fund to be used for, or diverted
to purposes other than for the exclusive benefit of the members of the Plan and their beneficiaries. In
no event shall any part of the assets of the Fund revert to [RMC] before all liabilities of the Plan have
been satisfied.[5]

On October 15, 1979, the Board of Trustees of RMCPRF (the Board) entered into an Investment
Management Agreement[6] (Agreement) with Philbank (now, petitioner Metropolitan Bank and Trust
Company). Pursuant to the Agreement, petitioner shall act as an agent of the Board and shall hold,
manage, invest and reinvest the Fund in Trust Account No. 1797 in its behalf. The Agreement shall be in
force for one (1) year and shall be deemed automatically renewed unless sooner terminated either by
petitioner bank or by the Board.

In 1984, RMC ceased business operations. Nonetheless, petitioner continued to render investment
services to respondent Board. In a letter[7] dated September 27, 1995, petitioner informed respondent
Board that Philbanks Board of Directors had decided to apply the remaining trust assets held by it in the
name of RMCPRF against part of the outstanding obligations of RMC.

Subsequently, respondent RMC Unpaid Employees Association, Inc. (Association), representing the
terminated employees of RMC, learned of Trust Account No. 1797. Through counsel, they demanded
payment of their share in a letter[8] dated February 4, 1997. When such demand went unheeded, the
Association, along with the individual members of RMCPRF, filed a complaint for accounting against the
Board and its officers, namely, Ernesto Tanchi, Jr., Carlitos Y. Lim, Amelita G. Simon, Evelina S. Ocampo
and Cesar Saligumba, as well as petitioner bank. The case was docketed as Civil Case No. 97-997 in the
RTC of Makati City, Branch 137.

On June 2, 1998, during the trial, the Board passed a Resolution[9] in court declaring that the Fund
belongs exclusively to the employees of RMC. It authorized petitioner to release the proceeds of Trust
Account No. 1797 through the Board, as the court may direct. Consequently, plaintiffs amended their
complaint to include the Board as co-plaintiffs.

On June 27, 2002, the RTC rendered a decision in favor of respondents. The trial court declared invalid
the reversion and application of the proceeds of the Fund to the outstanding obligation of RMC to
petitioner bank. The fallo of the decision reads:

WHEREFORE, judgment is hereby rendered:

1. Declaring INVALID the reversion or application of the Riverside Mills Corporation Provident and
Retirement Fund as payment for the outstanding obligation of Riverside Mills Corporation with
defendant Philippine Banking Corporation.

2. Defendant Philippine Banking Corporation (now [Global Bank]) is hereby ordered to:
a. Reverse the application of the Riverside Mills Corporation Provident and Retirement Fund as payment
for the outstanding obligation of Riverside Mills Corporation with defendant Philippine Banking
Corporation;

b. Render a complete accounting of the Riverside Mills Corporation Provident and Retirement Fund; the
Fund will then be subject to disposition by plaintiff Board of Trustees in accordance with law and the
Provident Retirement Plan;

c. Pay attorneys fees equivalent to 10% of the total amounts due to plaintiffs Riverside Mills Unpaid
Employees Association and the individual beneficiaries of the Riverside Mills Corporation Provident and
Retirement Fund; and costs of suit.

3. The Riverside Mills Corporation Provident and Retirement Fund is ordered to determine the
beneficiaries of the FUND entitled to benefits, the amount of benefits per beneficiary, and pay such
benefits to the individual beneficiaries.

SO ORDERED.[10]

On appeal, the CA affirmed the trial court. It held that the Fund is distinct from RMCs account in
petitioner bank and may not be used except for the benefit of the members of RMCPRF. Citing
Paragraph 13 of the Plan, the appellate court stressed that the assets of the Fund shall not revert to the
Company until after the liabilities of the Plan had been satisfied. Further, the Agreement was specific
that upon the termination of the Agreement, petitioner shall deliver the Fund to the Board or its
successor, and not to RMC as trustor. The CA likewise sustained the award of attorneys fees to
respondents.[11]

Hence, this petition.

Before us, petitioner makes the following assignment of errors:

I.

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE REVERSION AND APPLICATION BY
PHILBANK OF THE FUND IN PAYMENT OF THE LOAN OBLIGATIONS OF RIVERSIDE MILLS CORPORATION
WERE INVALID.[12]

II.

THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN DECLARING THAT BY HAVING
ENTERED INTO AN AGREEMENT WITH THE BOARD, (PHILBANK) IS NOW ESTOPPED TO QUESTION THE
LATTERS AUTHORITY AS WELL AS THE TERMS AND CONDITIONS THEREOF.[13]

III.
THE HONORABLE COURT COMMITTED REVERSIBLE ERROR IN AWARDING ATTORNEYS FEES TO
PLAINTIFFS-APPELLEES ON THE BASIS THAT [PHILBANK] WAS REMISS IN ITS DUTY TO TREAT RMCPRFS
ACCOUNT WITH THE HIGHEST DEGREE OF CARE CONSIDERING THE FIDUCIARY NATURE OF THEIR
RELATIONSHIP, PERFORCE, THE PLAINTIFFS-APPELLEES WERE COMPELLED TO LITIGATE TO PROTECT
THEIR RIGHT.[14]

The fundamental issue for our determination is whether the proceeds of the RMCPRF may be applied to
satisfy RMCs debt to Philbank.

Petitioner contends that RMCs closure in 1984 rendered the RMCPRF Board of Trustees functus officio
and devoid of authority to act on behalf of RMCPRF. It thus belittles the RMCPRF Board Resolution dated
June 2, 1998, authorizing the release of the Fund to several of its supposed beneficiaries. Without
known claimants of the Fund for eleven (11) years since RMC closed shop, it was justifiable for
petitioner to consider the Fund to have technically reverted to, and formed part of RMCs assets. Hence,
it could be applied to satisfy RMCs debts to Philbank. Petitioner also disputes the award of attorneys
fees in light of the efforts taken by Philbank to ascertain claims before effecting the reversion.

Respondents for their part, belie the claim that petitioner exerted earnest efforts to ascertain claims.
Respondents cite petitioners omission to publish a notice in newspapers of general circulation to locate
claims against the Fund. To them, petitioners act of addressing the letter dated September 27, 1995 to
the Board is a recognition of its authority to act for the beneficiaries. For these reasons, respondents
believe that the reversion of the Fund to RMC is not only unwarranted but unconscionable. For being
compelled to litigate to protect their rights, respondents also defend the award of attorneys fees to be
proper.

The petition has no merit.

A trust is a fiduciary relationship with respect to property which involves the existence of equitable
duties imposed upon the holder of the title to the property to deal with it for the benefit of another. A
trust is either express or implied. Express trusts are those which the direct and positive acts of the
parties create, by some writing or deed, or will, or by words evincing an intention to create a trust.[15]

Here, the RMC Provident and Retirement Plan created an express trust to provide retirement benefits to
the regular employees of RMC. RMC retained legal title to the Fund but held the same in trust for the
employees-beneficiaries. Thus, the allocation under the Plan is directly credited to each members
account:

6. Allocation:

a. Monthly Contributions:

1. Employee to be credited to his account.

2. Employer to be credited to the respective members account as stated under the contribution
provision.

b. Investment Earnings semestral valuation of the fund shall be made and any earnings or losses shall be
credited or debited, as the case may be, to each members account in proportion to his account balances
based on the last proceeding (sic) [preceding] accounting period.

c. Forfeitures shall be retained in the fund.[16] (Emphasis supplied.)

The trust was likewise a revocable trust as RMC reserved the power to terminate the Plan after all the
liabilities of the Fund to the employees under the trust had been paid. Paragraph 13 of the Plan
provided that [i]n no event shall any part of the assets of the Fund revert to the Company before all
liabilities of the Plan have been satisfied.

Relying on this clause, petitioner, as the Fund trustee, considered the Fund to have technically reverted
to RMC, allegedly after no further claims were made thereon since November 1984. Thereafter, it
applied the proceeds of the Fund to RMCs debt with the bank pursuant to Paragraph 9 of Promissory
Note No. 1618-80[17] which RMC executed on May 12, 1981. The pertinent provision of the promissory
note reads:

IN THE EVENT THAT THIS NOTE IS NOT PAID AT MATURITY OR WHEN THE SAME BECOMES DUE UNDER
ANY OF THE PROVISIONS HEREOF, I/WE HEREBY AUTHORIZE THE BANK AT ITS OPTION AND WITHOUT
NOTICE, TO APPLY TO THE PAYMENT OF THIS NOTE, ANY AND ALL MONEYS, SECURITIES AND THINGS OF
VALUE WHICH MAY BE IN ITS HAND OR ON DEPOSIT OR OTHERWISE BELONGING TO ME/US AND, FOR
THIS PURPOSE, I/WE HEREBY, JOINTLY AND SEVERALLY, IRREVOCABLY CONSTITUTE AND APPOINT THE
SAID BANK TO BE MY/OUR TRUE ATTORNEY-IN-FACT WITH FULL POWER AND AUTHORITY FOR ME/US
AND IN MY/OUR NAME AND BEHALF, AND WITHOUT PRIOR NOTICE, TO NEGOTIATE, SELL AND
TRANSFER ANY MONEYS, SECURITIES AND THINGS OF VALUE WHICH IT MAY HOLD, BY PUBLIC OR
PRIVATE SALE, AND APPLY THE PROCEEDS THEREOF TO THE PAYMENT OF THIS NOTE. (Emphasis
supplied.)

Petitioner contends that it was justified in supposing that reversion had occurred because its efforts to
locate claims against the Fund from the National Labor Relations Commission (NLRC), the lower courts,
the CA and the Supreme Court proved futile.

We are not convinced.

Employees trusts or benefit plans are intended to provide economic assistance to employees upon the
occurrence of certain contingencies, particularly, old age retirement, death, sickness, or disability. They
give security against certain hazards to which members of the Plan may be exposed. They are
independent and additional sources of protection for the working group and established for their
exclusive benefit and for no other purpose.[18] Here, while the Plan provides for a reversion of the Fund
to RMC, this cannot be done until all the liabilities of the Plan have been paid. And when RMC ceased
operations in 1984, the Fund became liable for the payment not only of the benefits of qualified retirees
at the time of RMCs closure but also of those who were separated from work as a consequence of the
closure. Paragraph 7 of the Retirement Plan states:

Separation from Service:

A member who is separated from the service of the Company before satisfying the conditions for
retirement due to resignation or any reason other than dismissal for cause shall be paid the balance of
his account as of the last day of the month prior to separation. The amount representing the Companys
contribution and income thereon standing to the credit of the separating member shall be paid to him
as follows:

Completed Years % of Companys Contribution

of Membership and Earnings Thereon Payable

0 5 NIL

6 10 20%

11 15 40%

16 20 60%

21 25 80%

25 over 100%

A member who is separated for cause shall not be entitled to withdraw the total amount representing
his contribution and that of the Company including the earned interest thereon, and the employers
contribution shall be retained in the fund.[19] (Emphasis supplied.)

The provision makes reference to a member-employee who is dismissed for cause. Under the Labor
Code, as amended, an employee may be dismissed for just or authorized causes. A dismissal for just
cause under Article 282[20] of the Labor Code, as amended, implies that the employee is guilty of some
misfeasance towards his employer, i.e. the employee has committed serious misconduct in relation to
his work, is guilty of fraud, has perpetrated an offense against the employer or any immediate member
of his family, or has grossly and habitually neglected his duties. Essentially, it is an act of the employee
that sets off the dismissal process in motion.

On the other hand, a dismissal for an authorized cause under Article 283[21] and 284[22] of the Labor
Code, as amended, does not entail any wrongdoing on the part of the employee. Rather, the
termination of employment is occasioned by the employers exercise of management prerogative or by
the illness of the employee matters beyond the workers control.

The distinction between just and authorized causes for dismissal lies in the fact that payment of
separation pay is required in dismissals for an authorized cause but not so in dismissals for just cause.
The rationale behind this rule was explained in the case of Phil. Long Distance Telephone Co. v. NLRC[23]
and reiterated in San Miguel Corporation v. Lao,[24] thus:

We hold that henceforth separation pay shall be allowed as a measure of social justice only in those
instances where the employee is validly dismissed for causes other than serious misconduct or those
reflecting on his moral character. Where the reason for the valid dismissal is, for example, habitual
intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow
worker, the employer may not be required to give the dismissed employee separation pay, or financial
assistance, or whatever other name it is called, on the ground of social justice.

xxxxxxxxx

The policy of social justice is not intended to countenance wrongdoing simply because it is committed
by the underprivileged. At best[,] it may mitigate the penalty but it certainly will not condone the
offense.

In San Miguel Corporation v. Lao, we reversed the CA ruling which granted retirement benefits to an
employee who was found by the Labor Arbiter and the NLRC to have been properly dismissed for willful
breach of trust and confidence.

Applied to this case, the penal nature of the provision in Paragraph 7 of the Plan, whereby a member
separated for cause shall not be entitled to withdraw the contributions made by him and his employer,
indicates that the separation for cause being referred to therein is any of the just causes under Article
282 of the Labor Code, as amended.

To be sure, the cessation of business by RMC is an authorized cause for the termination of its
employees. Hence, not only those qualified for retirement should receive their total benefits under the
Fund, but those laid off should also be entitled to collect the balance of their account as of the last day
of the month prior to RMCs closure. In addition, the Plan provides that the separating member shall be
paid a maximum of 40% of the amount representing the Companys contribution and its income standing
to his credit. Until these liabilities shall have been settled, there can be no reversion of the Fund to RMC.

Under Paragraph 6[25] of the Agreement, petitioners function shall be limited to the liquidation and
return of the Fund to the Board upon the termination of the Agreement. Paragraph 14 of said
Agreement further states that it shall be the duty of the Investment Manager to assign, transfer, and pay
over to its successor or successors all cash, securities, and other properties held by it constituting the
fund less any amounts constituting the charges and expenses which are authorized [under the
Agreement] to be payable from the Fund.[26] Clearly, petitioner had no power to effect reversion of the
Fund to RMC.

The reversion petitioner effected also could hardly be said to have been done in good faith and with due
regard to the rights of the employee-beneficiaries. The restriction imposed under Paragraph 13 of the
Plan stating that in no event shall any part of the assets of the Fund revert to the Company before all
liabilities of the Plan have been satisfied, demands more than a passive stance as that adopted by
petitioner in locating claims against the Fund. Besides, the beneficiaries of the Fund are readily
identifiable the regular or permanent employees of RMC who were qualified retirees and those who
were terminated as a result of its closure. Petitioner needed only to secure a list of the employees
concerned from the Board of Trustees which was its principal under the Agreement and the trustee of
the Plan or from RMC which was the trustor of the Fund under the Retirement Plan. Yet, petitioner
notified respondent Board of Trustees only after Philbanks Board of Directors had decided to apply the
remaining trust assets of RMCPRF to the liabilities of the company.

Petitioner nonetheless assails the authority of the Board of Trustees to issue the Resolution of June 2,
1998 recognizing the exclusive ownership of the Fund by the employees of RMC and authorizing its
release to the beneficiaries as may be ordered by the trial court. Petitioner contends that the cessation
of RMCs operations ended not only the Board members employment in RMC, but also their tenure as
members of the RMCPRF Board of Trustees.

Again, we are not convinced. Paragraph 13 of the Plan states that [a]lthough it is expected that the Plan
will continue indefinitely, it may be amended or terminated by the Company at any time on account of
business conditions. There is no dispute as to the management prerogative on this matter, considering
that the Fund consists primarily of contributions from the salaries of members-employees and the
Company. However, it must be stressed that the RMC Provident and Retirement Plan was primarily
established for the benefit of regular and permanent employees of RMC. As such, the Board may not
unilaterally terminate the Plan without due regard to any accrued benefits and rightful claims of
members-employees. Besides, the Board is bound by Paragraph 13 prohibiting the reversion of the Fund
to RMC before all the liabilities of the Plan have been satisfied.

As to the contention that the functions of the Board of Trustees ceased upon with RMCs closure, the
same is likewise untenable.

Under Section 122[27] of the Corporation Code, a dissolved corporation shall nevertheless continue as a
body corporate for three (3) years for the purpose of prosecuting and defending suits by or against it
and enabling it to settle and close its affairs, to dispose and convey its property and to distribute its
assets, but not for the purpose of continuing the business for which it was established. Within those
three (3) years, the corporation may appoint a trustee or receiver who shall carry out the said purposes
beyond the three (3)-year winding-up period. Thus, a trustee of a dissolved corporation may commence
a suit which can proceed to final judgment even beyond the three (3)-year period of liquidation.[28]

In the same manner, during and beyond the three (3)-year winding-up period of RMC, the Board of
Trustees of RMCPRF may do no more than settle and close the affairs of the Fund. The Board retains its
authority to act on behalf of its members, albeit, in a limited capacity. It may commence suits on behalf
of its members but not continue managing the Fund for purposes of maximizing profits. Here, the
Boards act of issuing the Resolution authorizing petitioner to release the Fund to its beneficiaries is still
part of the liquidation process, that is, satisfaction of the liabilities of the Plan, and does not amount to
doing business. Hence, it was properly within the Boards power to promulgate.

Anent the award of attorneys fees to respondents, we find the same to be in order. Article 2208(2) of
the Civil Code allows the award of attorneys fees in cases where the defendants act or omission has
compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest.
Attorneys fees may be awarded by a court to one (1) who was compelled to litigate with third persons
or to incur expenses to protect his or her interest by reason of an unjustified act or omission of the party
from whom it is sought.[29]

Here, petitioner applied the Fund in satisfaction of the obligation of RMC without authority and without
bothering to inquire regarding unpaid claims from the Board of Trustees of RMCPRF. It wrote the
members of the Board only after it had decided to revert the Fund to RMC. Upon being met with
objections, petitioner insisted on the reversion of the Fund to RMC, despite the clause in the Plan that
prohibits such reversion before all liabilities shall have been satisfied, thereby leaving respondents with
no choice but to seek judicial relief.

WHEREFORE, the petition for review on certiorari is hereby DENIED. The Decision dated November 7,
2006 and the Resolution dated March 5, 2007 of the Court of Appeals in CA-G.R. CV No. 76642 are
AFFIRMED.

JOSE JUAN TONG, ET AL., vs. GO TIAT KUN, ET AL

This appeal by petition for review seeks to annul and set aside the Decision1 dated October 28, 2010
and the Resolution2 dated March 3, 2011 of the Court of Appeals (CA) in CA-G.R. CV No. 03078, which
reversed the Decision3 dated May 21, 2009 of the Regional Trial Court of Iloilo City, Branch 37, in Civil
Case No. 05-28626.

The Facts

The instant petition stemmed from an action for Nullification of Titles and Deeds of Extra-Judicial
Settlement and Sale and Damages instituted by the petitioners against the respondents over a parcel of
land known as Lot 998-A of the Cadastral Survey of Iloilo, having an area of 2,525 square meters and
now covered by Transfer Certificate of Title (TCT) No. 134082.

The petitioners are nine of the ten children of Spouses Juan Tong (Juan Tong) and Sy Un (Spouses Juan
Tong), namely: Jose Juan Tong, Lucio Juan Tong, Simeon Juan Tong, Felisa Juan Tong Cheng, Luisa Juan
Tong Tan, Julia Juan Tong Dihiansan, Ana Juan Tong Dy, Elena Juan Tong Yng Choan, and Vicente Juan
Tong, who being already deceased, is survived by his widow, Rosita So and their children, Chanto Juan
Tong and Alfonso So-Chanto Juan Tong.
Completing the ten children of Spouses Juan Tong is the deceased Luis Juan Tong, Sr. (Luis, Sr.) whose
surviving heirs are: his spouse Go Tiat Kun, and their children, Leon, Mary, Lilia, Tomas, Luis, Jr., and
Jaime, who being already dead, is survived by his wife, Roma Cokee Juan Tong (respondents).

Sometime in 1957, Juan Tong had a meeting with all his children to inform them of his intention to
purchase Lot 998 to be used for the familys lumber business called "Juan Tong Lumber". However, since
he was a Chinese citizen and was disqualified from acquiring the said lot, the title to the property will be
registered in the name of his eldest son, Luis, Sr., who at that time was already of age and was the only
Filipino citizen among his children. On May 11, 1957, Juan Tong bought Lot 998 from the heirs of Jose
Ascencio. Accordingly, on May 16, 1957, TCT No. 10346 was issued by the Register of Deeds in the name
of Luis, Sr.

On December 8, 1978, the single proprietorship of Juan Tong Lumber was incorporated into a
corporation known as the Juan Tong Lumber, Inc.4 However, Sy Un and Juan Tong both died intestate
on October 31, 1984, and November 13, 1990, respectively.

Meanwhile, on May 30, 1981, Luis, Sr. died and the respondents, being his surviving heirs, claimed
ownership over Lot 998 by succession, alleging that no trust agreement exists and it was Luis, Sr. who
bought Lot 998. On July 2, 1982, the respondents executed a Deed of Extra-Judicial Settlement of Estate
of Luis, Sr., adjudicating unto themselves Lot 998 and claiming that the said lot is the conjugal property
of Luis, Sr., and his wife, which the Juvenile and Domestic Relations Court of Iloilo City approved on June
28, 1982. On July 19, 1982, the said deed was registered causing the cancellation of TCT No. 10346 and
the issuance of TCT No. T-60231 in the name of the respondents.

Subsequently, the respondents agreed to subdivide Lot 998, thus, on October 12, 1992, two new titles
were issued: (1) TCT No. 97068 over Lot 998-A in the name of Go Tiat Kun and her children; and (2) TCT
No. T-96216 over Lot 998-B in the name of Luis, Jr.

After Lot 998 was subdivided, Luis, Jr. sold Lot 998-B to Fine Rock Development Corporation (FRDC),
which in turn sold the same to Visayas Goodwill Credit Corporation (VGCC). It was only after the
petitioners received a letter from VGCC, on August 31, 1995, that they discovered about the breach of
the trust agreement committed by the respondents.

To protect their rights, the petitioners filed an action for Annulment of Sales, Titles, Reconveyance and
Damages of Lot 998-B docketed as Civil Case No. 22730 against Luis, Jr., FRDC and VGCC. On March 6,
1997, the trial court ruled5 in favor of the petitioners which were later affirmed by the CA6 and this
Court7 on appeal. Consequently, Lot 998-B was reconveyed to the petitioners and TCT No. T-14839 was
issued under their names including the late Luis, Sr.

Then, on February 24, 2001, Go Tiat Kun executed a Deed of Sale of Undivided Interest over Lot 998-A in
favor of her children, Leon, Mary, Lilia, Tomas, and the late Jaime, resulting in the issuance of TCT No. T-
134082 over Lot 998-A.

Hence, on August 2, 2005, the petitioners filed the instant case for Nullification of Titles, and Deeds of
Extra-judicial Settlement and Sale and Damages claiming as owners of Lot 998-A.8

After trial, the court a quo rendered its judgment in favor of the petitioners, ruling that there was an
implied resulting trust between Juan Tong, Luis, Sr., the petitioners and the respondents, over Lot 998.
The trial court found that Luis Sr. was a mere trustee, and not the owner of Lot 998, and the beneficial
interest over said property remained in Juan Tong and subsequently in the Juan Tong Lumber, Inc. The
trust is further established by the fact that Luis Sr., during his lifetime: (1) did not build a house or any
structure thereon or make use of the property in any manner; (2) resided with his family together with
his parents, brothers and sisters in Juan Tong building in front of the said lot; (3) have acquired a
residential property at Ledesco Village, La Paz, Iloilo City and other places, where his heirs now reside;
and (4) did not exercised any other act of ownership over the said lot.

The trial court further claimed that any right that the respondents may have over Lot 998-A would have
been merely derived from that of their predecessor-in-interest, Luis Sr. Since the respondents were not
the owners of Lot 998-A, they could not appropriate the property unto themselves, much less convey
the same unto third persons. Thus, any document executed by them adjudicating unto themselves or
conveying in favor of each other Lot 998-A, as well as the titles issued in their favor as a consequence of
those documents, are invalid. Since the petitioners were deprived of Lot 998-A through the surreptitious
and fraudulent acts of the respondents, the petitioners are entitled to the reconveyance of the
properties, and the validity of TCT No. T-134082 which covers Lot 998-A as well as the previous titles and
documents of conveyance covering the said lot were null and void. Thus:

WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered in favor of the
plaintiffs and against the defendants:

1. Declaring null and void the following:

a. Deed of Extrajudicial Settlement of Estate of Deceased Person executed by the Defendants on July 2,
1982 executed by defendants Go Tiat Kun, Leon Juan Tong, Mary Juan Tong, Lilia Juan Tong, and Tomas
Juan Tong, and the late Jaime Juan Tong;

b. Transfer Certificate of Title No. T-60231 in the name of defendants Go Tiat Kun, Leon Juan Tong, Mary
Juan Tong, Lilia Juan Tong, and Tomas Juan Tong and the late Jaime Juan Tong;

c. Transfer Certificate of Title No. T-97068 in the name of defendants Go Tiat Kun, Leon Juan Tong, Mary
Juan Tong, Lilia Juan Tong, and Tomas Juan Tong and the late Jaime Juan Tong;

d. Deed of Sale of Undivided Interest over Real Property executed by defendant Go Tiat Kun on February
24, 2001 in favor of defendants Leon Juan Tong, Mary Juan Tong, Lilia Juan Tong, and Tomas Juan Tong
and the late Jaime Juan Tong; [and]

e. Transfer Certificate of Title No. T-134082, and all titles issued subsequent thereto, covering Lot 998-A,
in the names of defendants Leon Juan Tong, Mary Juan Tong, Lilia Juan Tong, and Tomas Juan Tong and
the late Jaime Juan Tong[.]

2. Ordering defendants to jointly and severally pay Jose Juan Tong Moral Damages of Php200,000.00,
and the plaintiffs Litigation Expenses of Php100,000.00 and Attorneys Fees of Php200,000.00.

3. Ordering the Register of Deeds of the City of Iloilo to issue a new transfer certificate of title covering
Lot 998-A in the name of the plaintiffs and Luis Juan Tong, in equal shares.

4. The Counterclaim is hereby ordered dismissed for lack of merit.

SO ORDERED.9

On appeal, the CA rendered the herein assailed decision, which reversed and set aside the trial courts
decision, and dismissed the complaint for lack of merit.

The appellate court, more particularly ruled that an express trust was created because there was a
direct and positive act from Juan Tong to create a trust. And when an express trust concerns an
immovable property or any interest therein, it may not be proved by parol or oral evidence, but must be
proven by some writing or deed.10 The CA also ruled that even granting that an implied resulting trust
was created; the petitioners are still barred by prescription because the said resulting trust was
terminated upon the death of Luis, Sr. and was then converted into a constructive trust.11 Since in an
action for reconveyance based on a constructive trust prescribes in ten years from the issuance of the
Torrens title over the property, counting from the death of Luis, Sr. in 1981, the action has already
prescribed.

The CA went on to rule that there is a presumption of donation in this case pursuant to Article 1448 of
the Civil Code that if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the
one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a
gift in favor of the child. Thus, even though the respondents did not present evidence to prove a
donation, the petitioners likewise did not also try to dispute it. The CA also held that the petitioners
were already barred by estoppel and laches.

Aggrieved by the foregoing disquisition, the petitioners moved for reconsideration but it was denied by
the appellate court,12 hence, they filed this petition for review.

The Issue

Briefly stated, the issues to be resolved in this petition are: (1) Was there an implied resulting trust
constituted over Lot 998 when Juan Tong purchased the property and registered it in the name of Luis,
Sr.? (2) May parol evidence be used as proof of the establishment of the trust? (3) Were the petitioners
action barred by prescription, estoppel and laches?

The Courts Ruling

The petition is impressed with merit.

As a general rule, in petitions for review under Rule 45 of the Rules of Court, the jurisdiction of this
Court in cases brought before it from the CA is limited to the review and revision of errors of law
allegedly committed by the appellate court. The question of the existence of an implied trust is factual,
hence, ordinarily outside the purview of Rule 45. Nevertheless, the Courts review is justified by the
need to make a definitive finding on this factual issue in light of the conflicting rulings rendered by the
courts below.13
At the outset, it is worthy to note that the issues posited in this case are not novel because in Civil Case
No. 22730 involving Lot 998-B which forms part of Lot 998, the trial court already found that said lot was
held in trust by Luis Sr. in favor of his siblings by virtue of an implied resulting trust. The trial courts
decision was then affirmed by the CA in CA-G.R. CV No. 56602, and this Court in G.R. No. 156068. Thus,
Lot 998-A, the subject of this instant case, and Lot 998-B, are similarly situated as they comprise the
subdivided Lot 998, the property which in its entirety was held in trust by Luis Sr. in favor of his siblings.

A review of the records shows an intention to create a trust between the parties. Although Lot 998 was
titled in the name of Luis, Sr., the circumstances surrounding the acquisition of the subject property
eloquently speak of the intent that the equitable or beneficial ownership of the property should belong
to the Juan Tong family.

First, Juan Tong had the financial means to purchase the property for P55,000.00. On the other hand,
respondents failed to present a single witness to corroborate their claim that Luis, Sr. bought the
property with his own money since at that time, Luis Sr., was merely working for his father where he
received a monthly salary of P200.00 with free board and lodging.

Second, the possession of Lot 998 had always been with the petitioners. The property was physically
possessed by Juan Tong and was used as stockyard for their lumber business before it was acquired, and
even after it was acquired. In fact, the lot remains to be the stockyard of the family lumber business
until this very day.

Third, from the time it was registered in the name of Luis, Sr. in 1957, Lot 998 remained undivided and
untouched by the respondents. It was only after the death of Luis, Sr. that the respondents claimed
ownership over Lot 998 and subdivided it into two lots, Lot 998-A and Lot 998-B.

Fourth, respondent Leon admitted that up to the time of his fathers death, (1) Lot 998 is in the
possession of the petitioners, (2) they resided in the tenement in the front part of Juan Tongs
compound, (3) Luis Sr. never sent any letter or communication to the petitioners claiming ownership of
Lot 998, and (4) he and his mother have a residence at Ledesco Village, La Paz, Iloilo City while his
brother and sisters also have their own residences.

Fifth, the real property taxes on Lot 998 were paid not by Luis Sr. but by his father Juan Tong and the
Juan Tong Lumber, Inc., from 1966 up to early 2008 as evidenced by the following: a) the letter of
assessment sent by the City Treasurer of Iloilo, naming Juan Tong as the owner of Lot 998; and b) the
receipts of real property taxes paid by Juan Tong Lumber, and later by Juan Tong Lumber, Inc., from
1997 to 2008. While some of the tax receipts were in the name of Luis Sr., the fact that the petitioners
were in possession of the originals thereof established that the petitioners, the Juan Tong Lumber, Inc.,
or the late Juan Tong paid for the taxes. The respondents did not try to explain the petitioners
possession of the realty property tax receipts in the name of Luis Sr.

The appellate courts conclusion that an express trust was created because there was a direct and
positive act by Juan Tong to create a trust must inevitably yield to the clear and positive evidence on
record which showed that what was truly created was an implied resulting trust. As what has been fully
established, in view of the mutual trust and confidence existing between said parties who are family
members, the only reason why Lot 998 was registered in the name of Luis, Sr. was to facilitate the
purchase of the said property to be used in the familys lumber business since Luis, Sr. is the only Filipino
Citizen in the Juan Tong family at that time. As the registered owner of Lot 998, it is only natural that tax
declarations and the corresponding tax payment receipts be in the name of Luis, Sr. so as to effect
payment thereof.

The principle of a resulting trust is based on the equitable doctrine that valuable consideration and not
legal title determines the equitable title or interest and are presumed always to have been
contemplated by the parties. They arise from the nature or circumstances of the consideration involved
in a transaction whereby one person thereby becomes invested with legal title but is obligated in equity
to hold his legal title for the benefit of another. On the other hand, a constructive trust, unlike an
express trust, does not emanate from, or generate a fiduciary relation. Constructive trusts are created
by the construction of equity in order to satisfy the demands of justice and prevent unjust enrichment.
They arise contrary to intention 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.14

Guided by the foregoing definitions, the Court is in conformity with the finding of the trial court that an
implied resulting trust was created as provided under the first sentence of Article 144815 which is
sometimes referred to as a purchase money resulting trust, the elements of which are: (a) an actual
payment of money, property or services, or an equivalent, constituting valuable consideration; and (b)
such consideration must be furnished by the alleged beneficiary of a resulting trust.16 Here, the
petitioners have shown that the two elements are present in the instant case. Luis, Sr. was merely a
trustee of Juan Tong and the petitioners in relation to the subject property, and it was Juan Tong who
provided the money for the purchase of Lot 998 but the corresponding transfer certificate of title was
placed in the name of Luis, Sr.

The principle that a trustee who puts a certificate of registration in his name cannot repudiate the trust
by relying on the registration is one of the well-known limitations upon a title. A trust, which derives its
strength from the confidence one reposes on another especially between families, does not lose that
character simply because of what appears in a legal document.17
Contrary to the claim of the respondents, it is not error for the trial court to rely on parol evidence, i.e.,
the oral testimonies of witnesses Simeon Juan Tong and Jose Juan Tong, to arrive at the conclusion that
an implied resulting trust exists. What is crucial is the intention to create a trust.

"Intentionalthough only presumed, implied or supposed by law from the nature of the transaction or
from the facts and circumstances accompanying the transaction, particularly the source of the
considerationis always an element of a resulting trust and may be inferred from the acts or conduct of
the parties rather than from direct expression of conduct. Certainly, intent as an indispensable element
is a matter that necessarily lies in the evidence, that is, by evidence, even circumstantial, of statements
made by the parties at or before the time title passes. Because an implied trust is neither dependent
upon an express agreement nor required to be evidenced by writing, Article 1457 of our Civil Code
authorizes the admission of parol evidence to prove their existence. Parol evidence that is required to
establish the existence of an implied trust necessarily has to be trustworthy and it cannot rest on loose,
equivocal or indefinite declarations."18

Lastly, the respondents assertion that the petitioners action is barred by prescription, laches and
estoppel is erroneous.

As a rule, implied resulting trusts do not prescribe except when the trustee repudiates the trust.1wphi1
Further, the action to reconvey does not prescribe so long as the property stands in the name of the
trustee.19 To allow prescription would be tantamount to allowing a trustee to acquire title against his
principal and true owner. It should be noted that the title of Lot 998 was still registered in the name of
Luis Sr. even when he predeceased Juan Tong. Considering that the implied trust has been repudiated
through such death, Lot 998 cannot be included in his estate except only insofar as his undivided share
thereof is concerned. It is well-settled that title to property does not vest ownership but it is a mere
proof that such property has been registered. And, the fact that the petitioners are in possession of all
the tax receipts and tax declarations of Lot 998 all the more amplify their claim of ownership over Lot
998-A. Although these tax declarations or realty tax payments of property are not conclusive evidence of
ownership, nevertheless, they are good indicia of possession in the concept of owner, for no one in his
right mind would be paying taxes for a property that is not in his actual or at least constructive
possession. Such realty tax payments constitute proof that the holder has a claim of title over the
property.20 Therefore, the action for reconveyance of Lot 998-A, which forms part of Lot 998, is
imprescriptible and the petitioners are not estopped from claiming ownership thereof.

Moreso, when the petitioners received a letter from VGCC, and discovered about the breach of the trust
agreement committed by the heirs of Luis, Sr., they immediately instituted an action to protect their
rights, as well as upon learning that respondent Go Tiat Kun executed a Deed of Sale of Undivided
Interest over Lot 998-A in favor of her children. Clearly, no delay may be attributed to them. The
doctrine of laches is not strictly applied between near relatives, and the fact that the parties are
connected by ties of blood or marriage tends to excuse an otherwise unreasonable delay.
On the question of whether or not Juan Tong intended a donation to Luis, Sr., this is merely a disputable
presumption which in this case was clearly disputed by the petitioners and supported by the pieces of
evidence on record.

Thus, contrary to the CA' s finding that there was no evidence on record showing that an implied
resulting trust relation arose between Juan Tong and Luis, Sr., the Court finds that the petitioners before
the trial court, had actually adduced sufficient evidence to prove the intention of Juan Tong to transfer
to Luis, Sr. only the legal title of Lot 998, with attendant expectation that Luis, Sr. would hold the
property in trust for the family. The evidence of course is not documentary, but rather testimonial.
Furthermore, the respondents never proffered any proof that could tend to establish that they were the
ones who have been paying taxes from the time of its purchase up to the present, that they have been
in possession of the subject property or that they had it surveyed and subdivided openly with notice to
all concerned.

WHEREFORE, in consideration of the foregoing premises, the instant petition is hereby GRANTED. The
Decision dated October 28, 2010 and Resolution dated March 3, 2011 of the Court of Appeals in CA-G.R.
CV No. 03078 are REVERSED and SET ASIDE. The Decision dated May 21, 2009 of the Regional Trial Court
of Iloilo City, Branch 37 in Civil Case No. 05-28626 is REINSTATED.

PEOPLE OF THE PHILIPPINES, vs. DUNGO,

This is an automatic review of the Decision * of the Regional Trial Court of the Third Judicial Region,
Branch 54, Macabebe, Pampanga, convicting the accused of the crime of murder.

The pertinent facts of the case are:

On March 24, 1987, the prosecuting attorney of the Province of Pampanga filed an information charging
Rosalino Dungo, the defendant-appellant herein, with the felony of murder, committed as follows:

That on or about the 16th day of March, 1987 in the Municipality of Apalit, Province of Pampanga,
Philippines, and within the jurisdiction of this Honorable Court, the above-named accused ROSALINO
DUNGO, armed with a knife, with deliberate intent to kill, by means of treachery and with evident
premeditation, did then and there willfully, unlawfully and feloniously attack, assault and stab Mrs.
Belen Macalino Sigua with a knife hitting her in the chest, stomach, throat and other parts of the body
thereby inflicting upon her fatal wounds which directly caused the death of said Belen Macalino Sigua.

All contrary to law, and with the qualifying circumstance of alevosia, evident premeditation and the
generic aggravating circumstance of disrespect towards her sex, the crime was committed inside the
field office of the Department of Agrarian Reform where public authorities are engaged in the discharge
of their duties, taking advantage of superior strength and cruelty. (Record, p. 2)

On arraignment, accused-appellant Rosalino Dungo pleaded not guilty to the crime charged. Trial on the
merits thereafter ensued.

The prosecution, through several witnesses, has established that on March 16, 1987 between the hours
of 2:00 and 3:00 o'clock in the afternoon, a male person, identified as the accused, went to the place
where Mrs. Sigua was holding office at the Department of Agrarian Reform, Apalit, Pampanga. After a
brief talk, the accused drew a knife from the envelope he was carrying and stabbed Mrs. Sigua several
times. Accomplishing the morbid act, he went down the staircase and out of the DAR's office with blood
stained clothes, carrying along a bloodied bladed weapon. (TSN, pp. 4-19, 33-46, April 13, 1987; TSN, pp.
5-21, 28-38, April 20, 1987).

The autopsy report (Exh. "A") submitted by Dra. Melinda dela Cruz Cabugawan reveals that the victim
sustained fourteen (14) wounds, five (5) of which were fatal.

Rodolfo Sigua, the husband of the deceased, testified that, sometime in the latter part of February,
1987, the accused Rosalino Dungo inquired from him concerning the actuations of his wife (the victim)
in requiring so many documents from the accused. Rodolfo Sigua explained to the accused the
procedure in the Department of Agrarian Reform but the latter just said "never mind, I could do it my
own way." Rodolfo Sigua further testified that his wife's annual salary is P17,000.00, and he spent the
amount of P75,000.00 for the funeral and related expenses due to the untimely death of his wife. (TSN,
pp. 4-21, April 22, 1987).

The accused, in defense of himself, tried to show that he was insane at the time of the commission of
the offense.

The defense first presented the testimony of Andrea Dungo, the wife of the accused. According to her,
her husband had been engaged in farming up to 1982 when he went to Lebanon for six (6) months.
Later, in December 1983, her husband again left for Saudi Arabia and worked as welder. Her husband
did not finish his two-year contract because he got sick. Upon his arrival, he underwent medical
treatment. He was confined for one week at the Macabali Clinic. Thereafter he had his monthly check-
up. Because of his sickness, he was not able to resume his farming. The couple, instead, operated a small
store which her husband used to tend. Two weeks prior to March 16, 1987, she noticed her husband to
be in deep thought always; maltreating their children when he was not used to it before; demanding
another payment from his customers even if the latter had paid; chasing any child when their children
quarrelled with other children. There were also times when her husband would inform her that his feet
and head were on fire when in truth they were not. On the fateful day of March 16, 1987, at around
noon time, her husband complained to her of stomach ache; however, they did not bother to buy
medicine as he was immediately relieved of the pain therein. Thereafter, he went back to the store.
When Andrea followed him to the store, he was no longer there. She got worried as he was not in his
proper mind. She looked for him. She returned home only when she was informed that her husband had
arrived. While on her way home, she heard from people the words "mesaksak" and "menaksak"
(translated as "stabbing" and "has stabbed"). She saw her husband in her parents-in-law's house with
people milling around, including the barangay officials. She instinctively asked her husband why he did
such act, but he replied, "that is the only cure for my ailment. I have a cancer in my heart." Her husband
further said that if he would not be able to kill the victim in a number of days, he would die, and that he
chose to live longer even in jail. The testimony on the statements of her husband was corroborated by
their neighbor Thelma Santos who heard their conversation. (See TSN, pp. 12-16, July 10, 1987). Turning
to the barangay official, her husband exclaimed, "here is my wallet, you surrender me." However, the
barangay official did not bother to get the wallet from him. That same day the accused went to Manila.
(TSN, pp. 6-39, June 10, 1981)

Dra. Sylvia Santiago and Dr. Nicanor Echavez of the National Center for Mental Health testified that the
accused was confined in the mental hospital, as per order of the trial court dated August 17, 1987, on
August 25, 1987. Based on the reports of their staff, they concluded that Rosalino Dungo was psychotic
or insane long before, during and after the commission of the alleged crime and that his insanity was
classified under organic mental disorder secondary to cerebro-vascular accident or stroke. (TSN, pp. 4-
33, June 17, 1988; TSN, pp. 5-27, August 2, 1988).

Rosalino Dungo testified that he once worked in Saudi Arabia as welder. However, he was not able to
finish his two-year contract when he got sick. He had undergone medical treatment at Macabali Clinic.
However, he claimed that he was not aware of the stabbing incident nor of the death of Mrs. Belen
Sigua. He only came to know that he was accused of the death of Mrs. Sigua when he was already in jail.
(TSN, pp. 5-14, July 15, 1988)

Rebuttal witnesses were presented by the prosecution. Dr. Vicente Balatbat testified that the accused
was his patient. He treated the accused for ailments secondary to a stroke. While Dr. Ricardo Lim
testified that the accused suffered from oclusive disease of the brain resulting in the left side weakness.
Both attending physicians concluded that Rosalino Dungo was somehow rehabilitated after a series of
medical treatment in their clinic. Dr. Leonardo Bascara further testified that the accused is functioning at
a low level of intelligence. (TSN, pp. 620, September 1, 1988; TSN, pp. 4-29, November 7, 1988).
On January 20, 1989, the trial court rendered judgment the dispositive portion of which reads:

WHEREFORE, finding the accused guilty beyond reasonable doubt as principal for the crime of murder,
the Court hereby renders judgment sentencing the accused as follows:

1. To suffer the penalty of reclusion perpetua and the accessories of the law;

2. To indemnify the family of the victim in the amount of P75,000.00 as actual damage, P20,000.00
as exemplary damages and P30,000.00 as moral damages.

SO ORDERED. (p. 30, Rollo)

The trial court was convinced that the accused was sane during the perpetration of the criminal act. The
act of concealing a fatal weapon indicates a conscious adoption of a pattern to kill the victim. He was
apprehended and arrested in Metro Manila which indicates that he embarked on a flight in order to
evade arrest. This to the mind of the trial court is another indication that the accused was sane when he
committed the crime.

It is an exercise in futility to inquire into the killing itself as this is already admitted by the defendant-
appellant. The only pivotal issue before us is whether or not the accused was insane during the
commission of the crime changed.

One who suffers from insanity at the time of the commission of the offense charged cannot in a legal
sense entertain a criminal intent and cannot be held criminally responsible for his acts. His unlawful act
is the product of a mental disease or a mental defect. In order that insanity may relieve a person from
criminal responsibility, it is necessary that there be a complete deprivation of intelligence in committing
the act, that is, that the accused be deprived of cognition; that he acts without the least discernment;
that there be complete absence or deprivation of the freedom of the will. (People v. Puno, 105 SCRA
151)

It is difficult to distinguish sanity from insanity. There is no definite defined border between sanity and
insanity. Under foreign jurisdiction, there are three major criteria in determining the existence of
insanity, namely: delusion test, irresistible impulse test, and the right and wrong test. Insane delusion is
manifested by a false belief for which there is no reasonable basis and which would be incredible under
the given circumstances to the same person if he is of compos mentis. Under the delusion test, an
insane person believes in a state of things, the existence of which no rational person would believe. A
person acts under an irresistible impulse when, by reason of duress or mental disease, he has lost the
power to choose between right and wrong, to avoid the act in question, his free agency being at the
time destroyed. Under the right and wrong test, a person is insane when he suffers from such perverted
condition of the mental and moral faculties as to render him incapable of distinguishing between right
and wrong. (See 44 C.J.S. 2)

So far, under our jurisdiction, there has been no case that lays down a definite test or criterion for
insanity. However, We can apply as test or criterion the definition of insanity under Section 1039 of the
Revised Administrative Code, which states that insanity is "a manifestation in language or conduct, of
disease or defect of the brain, or a more or less permanently diseased or disordered condition of the
mentality, functional or organic, and characterized by perversion, inhibition, or by disordered function of
the sensory or of the intellective faculties, or by impaired or disordered volition." Insanity as defined
above is evinced by a deranged and perverted condition of the mental faculties which is manifested in
language or conduct. An insane person has no full and clear understanding of the nature and
consequence of his act.

Thus, insanity may be shown by surrounding circumstances fairly throwing light on the subject, such as
evidence of the alleged deranged person's general conduct and appearance, his acts and conduct
inconsistent with his previous character and habits, his irrational acts and beliefs, and his improvident
bargains.

Evidence of insanity must have reference to the mental condition of the person whose sanity is in issue,
at the very time of doing the act which is the subject of inquiry. However, it is permissible to receive
evidence of his mental condition for a reasonable period both before and after the time of the act in
question. Direct testimony is not required nor the specific acts of derangement essential to establish
insanity as a defense. The vagaries of the mind can only be known by outward acts: thereby we read the
thoughts, motives and emotions of a person; and through which we determine whether his acts
conform to the practice of people of sound mind. (People v. Bonoan, 64 Phil. 87)

In the case at bar, defense's expert witnesses, who are doctors of the National Center for Mental Health,
concluded that the accused was suffering from psychosis or insanity classified under organic mental
disorder secondary to cerebro-vascular accident or stroke before, during and after the commission of
the crime charged. (Exhibit L, p. 4). Accordingly, the mental illness of the accused was characterized by
perceptual disturbances manifested through impairment of judgment and impulse control, impairment
of memory and disorientation, and hearing of strange voices. The accused allegedly suffered from
psychosis which was organic. The defect of the brain, therefore, is permanent.
Dr. Echavez, defense's expert witness, admitted that the insanity of the accused was permanent and did
not have a period for normal thinking. To quote

Q Is there such a lucid intervals?

A In this case, considering the nature of the organic mental disorder, the lucid intervals
unfortunately are not present, sir.

(TSN, p. 36, August 2, 1988)

However, Dr. Echavez disclosed that the manifestation or the symptoms of psychosis may be treated
with medication. (TSN, p. 26, August 2, 1988). Thus, although the defect of the brain is permanent, the
manifestation of insanity is curable.

Dr. Echavez further testified that the accused was suffering from psychosis since January of 1987, thus:

Q In your assessment of the patient, did you determine the length of time the patient has been
mentally ill?

A From his history, the patient started (sic) or had a stroke abroad. If I may be allowed to scan my
record, the record reveals that the patient had a stroke in Riyadh about seven (7) months before his
contract expired and he was brought home. Sometime in January of 1987, the first manifestation is
noted on the behavioral changes. He was noted to be in deep thought, pre-occupied self, complaining of
severe headache, deferment of sleep and loss of appetite; and that was about January of 1987, Sir. (TSN,
pp. 21-22, August 2, 1988)

The defense reposed their arguments on the findings of the doctors of the National Center for Mental
Health, specifically on Dr. Echavez's assessment that the accused has been insane since January of 1987
or three (3) months before the commission of the crime charged. The doctors arrived at this conclusion
based on the testimonies of the accused's wife and relatives, and after a series of medical and
psychological examinations on the accused when he was confined therein. However, We are still in
quandary as to whether the accused was really insane or not during the commission of the offense.
The prosecution aptly rebutted the defense proposition, that the accused, though he may be insane, has
no lucid intervals. It is an undisputed fact that a month or few weeks prior to the commission of the
crime charged the accused confronted the husband of the victim concerning the actuations of the latter.
He complained against the various requirements being asked by the DAR office, particularly against the
victim. We quote hereunder the testimony of Atty. Rodolfo C. Sigua:

Q In the latter part of February 1987 do you remember having met the accused Rosalino Dungo?

A Yes, sir.

Q Where?

A At our residence, sir, at San Vicente, Apalit, Pampanga.

Q Could you tell us what transpired in the latter part of February 1987, when you met the accused
at your residence?

A Accused went to our residence. When I asked him what he wanted, accused told me that he
wanted to know from my wife why she was asking so many documents: why she was requiring him to be
interviewed and file the necessary documents at the Office of the DAR. Furthermore, he wanted to
know why my wife did not want to transfer the Certificate of Land Transfer of the landholding of his
deceased father in his name.

xxx xxx xxx

Q When the accused informed you in the latter part of February 1987 that your wife the late Belen
Macalino Sigua was making hard for him the transfer of the right of his father, what did you tell him?

A I asked the accused, "Have you talked or met my wife? Why are you asking this question of me?"

Q What was his answer?

A Accused told me that he never talked nor met my wife but sent somebody to her office to make
a request for the transfer of the landholding in the name of his deceased father in his name.

Q When you informed him about the procedure of the DAR, what was the comment of the
accused?

A The accused then said, "I now ascertained that she is making things difficult for the transfer of
the landholding in the name of my father and my name."

(TSN, pp. 5-7, April 22, 1987)

If We are to believe the contention of the defense, the accused was supposed to be mentally ill during
this confrontation. However, it is not usual for an insane person to confront a specified person who may
have wronged him. Be it noted that the accused was supposed to be suffering from impairment of the
memory, We infer from this confrontation that the accused was aware of his acts. This event proves that
the accused was not insane or if insane, his insanity admitted of lucid intervals.

The testimony of defense witness Dr. Nicanor Echavez is to the effect that the appellant could have
been aware of the nature of his act at the time he committed it. To quote:

Q Could you consider a person who is undergoing trial, not necessarily the accused, when asked by
the Court the whereabouts of his lawyer he answered that his lawyer is not yet in Court and that he is
waiting for his counsel to appear and because his counsel did not appear, he asked for the
postponement of the hearing of the case and to reset the same to another date. With those facts, do
you consider him insane?

A I cannot always say that he is sane or insane, sir.

Q In other words, he may be sane and he may be insane?

A Yes, sir.

COURT
Q How about if you applied this to the accused, what will be your conclusion?

A Having examined a particular patient, in this particular case, I made a laboratory examination, in
short all the assessment necessary to test the behavior of the patient, like for example praying for
postponement and fleeing from the scene of the crime is one situation to consider if the patient is really
insane or not. If I may elaborate to explain the situation of the accused, the nature of the illness, the
violent behavior, then he appears normal he can reason out and at the next moment he burst out into
violence regardless motivated or unmotivated. This is one of the difficulties we have encountered in this
case. When we deliberated because when we prepared this case we have really deliberation with all the
members of the medical staff so those are the things we considered. Like for example he shouted out
"Napatay ko si Mrs. Sigua!" at that particular moment he was aware of what he did, he knows the
criminal case.

COURT

Q With that statement of yours that he was aware when he shouted that he killed the victim in
this case, Mrs. Sigua, do we get it that he shouted those words because he was aware when he did the
act?

A The fact that he shouted, Your Honor, awareness is there. (TSN, pp. 37-41, August 2, 1983;
emphasis supplied)

Insanity in law exists when there is a complete deprivation of intelligence. The statement of one of the
expert witnesses presented by the defense, Dr. Echavez, that the accused knew the nature of what he
had done makes it highly doubtful that accused was insane when he committed the act charged. As
stated by the trial court:

The Court is convinced that the accused at the time that he perpetrated the act was sane. The evidence
shows that the accused, at the time he perpetrated the act was carrying an envelope where the fatal
weapon was hidden. This is an evidence that the accused consciously adopted a pattern to kill the
victim. The suddenness of the attack classified the killing as treacherous and therefore murder. After the
accused ran away from the scene of the incident after he stabbed the victim several times, he was
apprehended and arrested in Metro Manila, an indication that he took flight in order to evade arrest.
This to the mind of the Court is another indicia that he was conscious and knew the consequences of his
acts in stabbing the victim (Rollo, p. 63)
There is no ground to alter the trial court's findings and appreciation of the evidence presented. (People
v. Claudio, 160 SCRA 646). The trial court had the privilege of examining the deportment and demeanor
of the witnesses and therefore, it can discern if such witnesses were telling the truth or not.

Generally, in criminal cases, every doubt is resolved in favor of the accused. However, in the defense of
insanity, doubt as to the fact of insanity should be resolved in fervor of sanity. The burden of proving the
affirmative allegation of insanity rests on the defense. Thus:

In considering the plea of insanity as a defense in a prosecution for crime, the starting premise is that
the law presumes all persons to be of sound mind. (Art. 800, Civil Code: U.S. v. Martinez, 34 Phil. 305)
Otherwise stated, the law presumes all acts to be voluntary, and that it is improper to presume that acts
were done unconsciously (People v. Cruz, 109 Phil. 288). . . . Whoever, therefore, invokes insanity as a
defense has the burden of proving its existence. (U.S. v. Zamora, 52 Phil. 218) (People v. Aldemita, 145
SCRA 451)

The quantum of evidence required to overthrow the presumption of sanity is proof beyond reasonable
doubt. Insanity is a defense in a confession and avoidance and as such must be proved beyond
reasonable doubt. Insanity must be clearly and satisfactorily proved in order to acquit an accused on the
ground of insanity. Appellant has not successfully discharged the burden of overcoming the
presumption that he committed the crime as charged freely, knowingly, and intelligently.

Lastly, the State should guard against sane murderer escaping punishment through a general plea of
insanity. (People v. Bonoan, supra) PREMISES CONSIDERED, the questioned decision is hereby