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SALAO VS.

SALAO

This litigation regarding a forty-seven-hectare fishpond located at


Sitio Calunuran, Hermosa, Bataan involves the law of trusts and
prescription. The facts are as follows:

The spouses Manuel Salao and Valentina Ignacio of Barrio Dampalit,


Malabon, Rizal begot four children named Patricio, Alejandra, Juan
(Banli) and Ambrosia. Manuel Salao died in 1885. His eldest son, (1) One-half interest in a fishpond which she had inherited from her
Patricio, died in 1886 survived by his only child. Valentin Salao. parents, Feliciano Ignacio and Damiana Mendoza, and the other half
of which was owned by her co-owner, Josefa Sta. Ana . . . . . . . . . . .
There is no documentary evidence as to what, properties formed part . . . . . . . . . . . . . . . . . . . . . . . 21,700
of Manuel Salao's estate, if any. His widow died on May 28, 1914.
After her death, her estate was administered by her daughter (2) Fishpond inherited from her parents . . . . . . . . . . . . 7,418
Ambrosia.
(3) Fishpond inherited from her parents . . . . . . . . . . . . . 6,989
It was partitioned extrajudicially in a deed dated December 29, 1918
but notarized on May 22, 1919 (Exh. 21). The deed was signed by (4) Fishpond with a bodega for salt . . . . . . . . . . . . . . . . 50,469
her four legal heirs, namely, her three children, Alejandra, Juan and
Ambrosia, and her grandson, Valentin Salao, in representation of his (5) Fishpond with an area of one hectare, 12 ares and 5 centares
deceased father, Patricio. purchased from Bernabe and Honorata Ignacio by Valentina Ignacio
on November 9, 1895 with a bodega for salt . . . . . . . . . . . . . . . . . . . .
The lands left by Valentina Ignacio, all located at Barrio Dampalit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,205
were as follows:
(6) Fishpond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000
Nature of Land
(7) One-half interest in a fishpond with a total area of 10,424 square
meters, the other half was owned by A. Aguinaldo . . .A. . . . . . . . . . . .
. . . . . . . . 5,217 r
e
(8) Riceland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .a50,454
i
n
(9) Riceland purchased by Valentina Ignacio from Eduardo Salao on
January 27, 1890 with a house and two camarins thereon . . . . . . . . .
. . . . . . . . . 8,065 s
q
u

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(10) Riceland in the name of Ambrosia Salao, with an area of 11,678 The documentary evidence proves that in 1911 or prior to the death
square meters, of which 2,173 square meters were sold to Justa of Valentina Ignacio her two children, Juan Y. Salao, Sr. and
Yongco . . . . . . . . . .9,505 Ambrosia Salao, secured a Torrens title, OCT No. 185 of the
Registry of Deeds of Pampanga, in their names for a forty-seven-
TOTAL . . . . . . . . . . . . .. 179,022 square hectare fishpond located at Sitio Calunuran, Lubao, Pampanga (Exh.
14). It is also known as Lot No. 540 of the Hermosa cadastre
because that part of Lubao later became a part of Bataan.
m
e
The Calunuran fishpond is the bone of contention in this t case.
e
Plaintiffs' theory is that Juan Y. Salao, Sr. and his sister
r Ambrosia
had engaged in the fishpond business. Where they obtained s the
capital is not shown in any documentary evidence. Plaintiffs' version
To each of the legal heirs of Valentina Ignacio was adjudicated a is that Valentin Salao and Alejandra Salao were included in that joint
distributive share valued at P8,135.25. In satisfaction of his venture, that the funds used were the earnings of the properties
distributive share, Valentin Salao (who was then already forty-eight supposedly inherited from Manuel Salao, and that those earnings
years old) was given the biggest fishpond with an area of 50,469 were used in the acquisition of the Calunuran fishpond. There is no
square meters, a smaller fishpond with an area of 6,989 square documentary evidence to support that theory.
meters and the riceland with a net area of 9,905 square meters.
Those parcels of land had an aggregate appraised value of P13,501 On the other hand, the defendants contend that the Calunuran
which exceeded Valentin's distributive share. So in the deed of fishpond consisted of lands purchased by Juan Y. Salao, Sr. and
partition he was directed to pay to his co-heirs the sum of P5,365.75. Ambrosia Salao in 1905, 1906, 1907 and 1908 as, shown in their
That arrangement, which was obviously intended to avoid the Exhibits 8, 9, 10 and 13. But this point is disputed by the plaintiffs.
fragmentation of the lands, was beneficial to Valentin.
However, there can be no controversy as to the fact that after Juan
In that deed of partition (Exh. 21) it was noted that "desde la muerte Y. Salao, Sr. and Ambrosia Salao secured a Torrens title for the
de Valentina Ignacio y Mendoza, ha venido administrando sus Calunuran fishpond in 1911 they exercised dominical rights over it to
bienes la referida Ambrosia Salao" "cuya administracion lo ha sido a the exclusion of their nephew, Valentin Salao.
satisfaccion de todos los herederos y por designacion los mismos". It
was expressly stipulated that Ambrosia Salao was not obligated to Thus, on December 1, 1911 Ambrosia Salao sold under pacto de
render any accounting of her administration "en consideracion al retro for P800 the Calunuran fishpond to Vicente Villongco. The
resultado satisfactorio de sus gestiones, mejoradas los bienes y period of redemption was one year. In the deed of sale (Exh19)
pagodas por ella las contribusiones (pages 2 and 11, Exh. 21). Ambrosia confirmed that she and her brother Juan were the dueños
proindivisos of the said pesqueria. On December 7, 1911 Villongco,
By virtue of the partition the heirs became "dueños absolutos de sus the vendee a retro, conveyed the same fishpond to Ambrosia by way
respectivas propiedadas, y podran inmediatamente tomar posesion of lease for an anual canon of P128 (Exh. 19-a).
de sus bienes, en la forma como se han distribuido y llevado a cabo
las adjudicaciones" (page 20, Exh. 21). After the fishpond was redeemed from Villongco or on June 8, 1914
Ambrosia and Juan sold it under pacto de retroto Eligio Naval for the

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sum of P3,360. The period of redemption was also one year (Exh. That Pinanganacan or Lewa fishpond later became Cadastral Lot
20). The fishpond was later redeemed and Naval reconveyed it to the No. 544 of the Hermosa cadastre (Exh. 23). It adjoins the Calunuran
vendors a retro in a document dated October 5, 1916 (Exh. 20-a). fishpond (See sketch, Exh. 1).

The 1930 survey shown in the computation sheets of the Bureau of Juan Y. Salao, Sr. died on November 3, 1931 at the age of eighty
Lands reveals that the Calunuran fishpond has an area of 479,205 years (Exh. C). His nephew, Valentin Salao, died on February 9,
square meters and that it was claimed by Juan Salao and Ambrosia 1933 at the age of sixty years according to the death certificate (Exh.
Salao, while the Pinanganacan fishpond (subsequently acquired by A. However, if according to Exhibit 21, he was forty-eight years old in
Juan and Ambrosia) has an area of 975,952 square meters (Exh. 1918, he would be sixty-three years old in 1933).
22).
The intestate estate of Valentin Salao was partitioned extrajudicially
Likewise, there is no controversy as to the fact that on May 27, 1911 on December 28, 1934 between his two daughters, Benita Salao-
Ambrosia Salao bought for four thousand pesos from the heirs of Marcelo and Victorina Salao-Alcuriza (Exh. 32). His estate consisted
Engracio Santiago a parcel of swampland planted to bacawan and of the two fishponds which he had inherited in 1918 from his
nipa with an area of 96 hectares, 57 ares and 73 centares located at grandmother, Valentina Ignacio.
Sitio Lewa, Barrio Pinanganacan, Lubao, Pampanga (Exh. 17-d).
If it were true that he had a one-third interest in the Calunuran and
The record of Civil Case No. 136, General Land Registration Office Lewa fishponds with a total area of 145 hectares registered in 1911
Record No. 12144, Court of First Instance of Pampanga shows that and 1917 in the names of his aunt and uncle, Ambrosia Salao and
Ambrosia Salao and Juan Salao filed an application for the Juan Y. Salao, Sr., respectively, it is strange that no mention of such
registration of that land in their names on January 15, 1916. They interest was made in the extrajudicial partition of his estate in 1934.
alleged in their petition that "han adquirido dicho terreno por partes
iguales y por la compra a los herederos del finado, Don Engracio It is relevant to mention that on April 8, 1940 Ambrosia Salao
Santiago" (Exh. 17-a). donated to her grandniece, plaintiff Benita Salao, three lots located
at Barrio Dampalit with a total area of 5,832 square meters (Exit. L).
At the hearing on October 26, 1916 before Judge Percy M. Moir, As donee Benita Salao signed the deed of donation.
Ambrosia testified for the applicants. On that same day Judge Moir
rendered a decision, stating, inter alia, that the heirs of Engracio On that occasion she could have asked Ambrosia Salao to deliver to
Santiago had sold the land to Ambrosia Salao and Juan Salao. her and to the children of her sister, Victorina, the Calunuran
Judge Moir "ordena la adjudicacion y registro del terreno solicitado a fishpond if it were true that it was held in trust by Ambrosia as the
nombre de Juan Salao, mayor de edad y de estado casado y de su share of Benita's father in the alleged joint venture.
esposa Diega Santiago y Ambrosia Salao, de estado soltera y mayor
de edad, en participaciones iguales" (Exh. 17-e).
But she did not make any such demand. It was only after Ambrosia
Salao's death that she thought of filing an action for the
On November 28, 1916 Judge Moir ordered the issuance of a decree reconveyance of the Calunuran fishpond which was allegedly held in
for the said land. The decree was issued on February 21, 1917. On trust and which had become the sole property of Juan Salao y
March 12, 1917 Original Certificate of Title No. 472 of the Registry of Santiago (Juani).
Deeds of Pampanga was issued in the names of Juan Salao and
Ambrosia Salao.

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On September 30, 1944 or during the Japanese occupation and Juan S. Salao, Jr. in his answer pleaded as a defense the
about a year before Ambrosia Salao's death on September 14, 1945 indefeasibility of the Torrens title secured by his father and aunt. He
due to senility (she was allegedly eighty-five years old when she also invoked the Statute of Frauds, prescription and laches. As
died), she donated her one-half proindiviso share in the two counter-claims, he asked for moral damages amounting to P200,000,
fishponds in question to her nephew, Juan S. Salao, Jr. (Juani) At attorney's fees and litigation expenses of not less than P22,000 and
that time she was living with Juani's family. He was already the reimbursement of the premiums which he has been paying on his
owner of the the other half of the said fishponds, having inherited it bond for the lifting of the receivership Juan S. Salao, Jr. died in 1958
from his father, Juan Y. Salao, Sr. (Banli) The deed of denotion at the age of seventy-one. He was substituted by his widow,
included other pieces of real property owned by Ambrosia. She Mercedes Pascual and his six children and by the administrator of
reserved for herself the usufruct over the said properties during her his estate.
lifetime (Exh. 2 or M).
In the intestate proceedings for the settlement of his estate the two
The said deed of donation was registered only on April 5, 1950 (page fishponds in question were adjudicated to his seven legal heirs in
39, Defendants' Record on Appeal). equal shares with the condition that the properties would remain
under administration during the pendency of this case (page 181,
The lawyer of Benita Salao and the Children of Victorina Salao in a Defendants' Record on Appeal).
letter dated January 26, 1951 informed Juan S. Salao, Jr. that his
clients had a one-third share in the two fishponds and that when After trial the trial court in its decision consisting of one hundred ten
Juani took possession thereof in 1945, he refused to give Benita and printed pages dismissed the amended complaint and the counter-
Victorina's children their one-third share of the net fruits which claim. In sixty-seven printed pages it made a laborious recital of the
allegedly amounted to P200,000 (Exh. K). testimonies of plaintiffs' fourteen witnesses, Gregorio Marcelo,
Norberto Crisostomo, Leonardo Mangali Fidel de la Cruz, Dionisio
Juan S. Salao, Jr. in his answer dated February 6, 1951 categorically Manalili, Ambrosio Manalili, Policarpio Sapno, Elias Manies Basilio
stated that Valentin Salao did not have any interest in the two Atienza, Benita Salao, Emilio Cagui Damaso de la Peña, Arturo
fishponds and that the sole owners thereof his father Banli and his Alcuriza and Francisco Buensuceso, and the testimonies of
aunt Ambrosia, as shown in the Torrens titles issued in 1911 and defendants' six witnesses, Marcos Galicia, Juan Galicia, Tiburcio
1917, and that he Juani was the donee of Ambrosia's one-half share Lingad, Doctor Wenceslao Pascual, Ciriaco Ramirez and Pablo P.
(Exh. K-1). Salao. (Plaintiffs presented Regino Nicodemus as a fifteenth witness,
a rebuttal witness).
Benita Salao and her nephews and niece filed their original
complaint against Juan S. Salao, Jr. on January 9, 1952 in the Court The trial court found that there was no community of property among
of First Instance of Bataan (Exh. 36). They amended their complaint Juan Y. Salao, Sr., Ambrosia Salao and Valentin Salao when the
on January 28, 1955. They asked for the annulment of the donation Calunuran and Pinanganacan (Lewa) lands were acquired; that a co-
to Juan S. Salao, Jr. and for the reconveyance to them of the ownership over the real properties of Valentina Ignacio existed
Calunuran fishpond as Valentin Salao's supposed one-third share in among her heirr after her death in 1914; that the co-ownership was
the 145 hectares of fishpond registered in the names of Juan Y. administered by Ambrosia Salao and that it subsisted up to 1918
Salao, Sr. and Ambrosia Salao. when her estate was partitioned among her three children and her
grandson, Valentin Salao.

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The trial court surmised that the co-ownership which existed from facts do not contain "page references to the record" as required in
1914 to 1918 misled the plaintiffs and their witnesses and caused section 16[c] and [d] of Rule 46, formerly section 17, Rule 48 of the
them to believe erroneously that there was a co-ownership in 1905 or 1940 Rules of Court.
thereabouts. The trial court speculated that if valentin had a hand in
the conversion into fishponds of the Calunuran and Lewa lands, he Lawyers for appellants, when they prepare their briefs, would do well
must have done so on a salary or profit- sharing basis. It conjectured to read and re-read section 16 of Rule 46. If they comply strictly with
that Valentin's children and grandchildren were given by Ambrosia the formal requirements prescribed in section 16, they might make a
Salao a portion of the earnings of the fishponds as a reward for his competent and luminous presentation of their clients' case and
services or because of Ambrosia's affection for her grandnieces. lighten the burden of the Court.

The trial court rationalized that Valentin's omission during his lifetime What Justice Fisher said in 1918 is still true now: "The pressure of
to assail the Torrens titles of Juan and Ambrosia signified that "he work upon this Court is so great that we cannot, in justice to other
was not a co-owner" of the fishponds. It did not give credence to the litigants, undertake to make an examination of the voluminous
testimonies of plaintiffs' witnesses because their memories could not transcript of the testimony (1,553 pages in this case, twenty-one
be trusted and because no strong documentary evidence supported witnesses having testified), unless the attorneys who desire us to
the declarations. Moreover, the parties involved in the alleged trust make such examination have themselves taken the trouble to read
were already dead. the record and brief it in accordance with our rules" (Palara vs.
Baguisi 38 Phil. 177, 181). As noted in an old case, this Court
It also held that the donation was validly executed and that even if it decides hundreds of cases every year and in addition resolves in
were void Juan S. Salao, Jr., the donee, would nevertheless be the minute orders an exceptionally considerable number of petitions,
sole legal heir of the donor, Ambrosia Salao, and would inherit the motions and interlocutory matters (Alzua and Arnalot vs. Johnson, 21
properties donated to him. Phil. 308, 395; See In re Almacen, L-27654, February 18, 1970, 31
SCRA 562, 573).
Both parties appealed. The plaintiffs appealed because their action
for reconveyance was dismissed. The defendants appealed because Plaintiffs' first assignment of error raised a procedural issue. In
their counterclaim for damages was dismissed. paragraphs 1 to 14 of their first cause of action they made certain
averments to establish their theory that Valentin Salao had a one-
The appeals, which deal with factual and legal issues, were made to third interest in the two fishponds which were registrered in the
the Court of Appeals. However, as the amounts involved exceed two names of Juan Y. Salao, Sr. (Banli) and Ambrosia Salao.
hundred thousand pesos, the Court of Appeals elevated the case to
this Court in its resolution of Octoter 3, 1966 (CA-G.R. No. 30014-R). Juan S. Salao, Jr. (Juani) in his answer "specifically" denied each
and all the allegations" in paragraphs I to 10 and 12 of the first cause
Plaintiffs' appeal. — An appellant's brief should contain "a subject of action with the qualification that Original certificates of Title Nos.
index index of the matter in the brief with a digest of the argument 185 and 472 were issued "more than 37 years ago" in the names of
and page references" to the contents of the brief (Sec. 16 [a], Rule Juan (Banli) and Ambrosia under the circumstances set forth in Juan
46, 1964 Rules of Court; Sec. 17, Rule 48, 1940 Rules of Court). S. Salao, Jr.'s "positive defenses" and "not under the circumstances
stated in the in the amended complaint".
The plaintiffs in their appellants' brief consisting of 302 pages did not
comply with that requirement. Their statements of the case and the

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The plaintiffs contend that the answer of Juan S. Salao, Jr. was in nevertheless prevent or bar recovery by the plaintiff." Affirmative
effect tin admission of the allegations in their first cause of action that defenses include all matters set up "by of confession and
there was a co-ownership among Ambrosia, Juan, AIejandra and avoidance". (Sec. 5, Rule 6, Rules of Court).
Valentin, all surnamed Salao, regarding the Dampalit property as
early as 1904 or 1905; that the common funds were invested the The case of El Hogar Filipino vs. Santos Investments, 74 Phil. 79
acquisition of the two fishponds; that the 47-hectare Calunuran and similar cases are distinguishable from the instant case. In the El
fishpond was verbally adjudicated to Valentin Salao in the l919 Hogar case the defendant filed a laconic answer containing the
partition and that there was a verbal stipulation to to register "said statement that it denied "generally ans specifically each and every
lands in the name only of Juan Y. Salao". allegation contained in each and every paragraph of the complaint".
It did not set forth in its answer any matters by way of confession and
That contention is unfounded. Under section 6, Rule 9 of the 1940 of avoidance. It did not interpose any matters by way of confession and
Rules of Court the answer should "contain either a specific dinial a avoidance. It did not interpose any affirmative defenses.
statement of matters in accordance of the cause or causes of action
asserted in the complaint". Section 7 of the same rule requires the Under those circumstances, it was held that defendant's specific
defendant to "deal specificaly with each material allegation of fact the denial was really a general denial which was tantamount to an
truth of wihich he does not admit and, whenever practicable shall set admission of the allegations of the complaint and which justified
forth the substance of the matters which he will rely upon to support judgment on the pleadings. That is not the situation in this case.
his denial". "Material averments in the complaint, other than those as
to the amount damage, shall be deemed admitted when specifically The other nine assignments of error of the plaintiffs may be reduced
denied" (Sec. 8). "The defendant may set forth set forth by answer as to the decisive issue of whether the Calunuran fishpond was held in
many affirmative defenses as he may have. All grounds of defenses
trust for Valentin Salao by Juan Y. Salao, Sr. and Ambrosia Salao.
as would raise issues of fact not arising upon the preceding pleading
That issue is tied up with the question of whether plaintiffs' action for
must be specifically pleaded" (Sec. 9).
reconveyance had already prescribed.

What defendant Juan S. Salao, Jr. did in his answer was to set forth
The plaintiffs contend that their action is "to enforce a trust which
in his "positive defenses" the matters in avoidance of plaintiffs' first
defendant" Juan S. Salao, Jr. allegedly violated. The existence of a
cause of action which which supported his denials of paragraphs 4 to
trust was not definitely alleged in plaintiffs' complaint. They
10 and 12 of the first cause of action. Obviously, he did so because
mentioned trust for the first time on page 2 of their appelants' brief.
he found it impracticable to state pierceneal his own version as to the
acquisition of the two fishponds or to make a tedious and repetitious
recital of the ultimate facts contradicting allegations of the first cause To determine if the plaintiffs have a cause of action for the
of action. enforcement of a trust, it is necessary to maek some exegesis on the
nature of trusts (fideicomosis). Trusts in Anglo-American
jurisprudence were derived from thefideicommissa of the Roman law
We hold that in doing so he substantially complied with Rule 9 of the (Government of the Philippine Islands vs. Abadilla, 46 Phil. 642,
1940 Rules of Court. It may be noted that under the present Rules of 646).
Court a "negative defense is the specific denial of t the material fact
or facts alleged in the complaint essential to plaintiff's cause of
causes of action". On the other hand, "an affirmative defense is an "In its technical legal sense, a trust is defined as the right,
allegation of new matter which, while admitting the material enforceable solely in equity, to the beneficial enjoyment of property,
allegations of the complaint, expressly or impliedly, would the legal title to which is vested in another, but the word 'trust' is

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frequently employed to indicate duties, relations, and responsibilities trusts are found in articles 1448 to 1455 of the Civil Code. (See
which are not strictly technical trusts" (89 C.J.S. 712). Padilla vs. Court of Appeals, L-31569, September 28, 1973, 53
SCRA 168, 179; Martinez vs. Graño 42 Phil. 35).
A person who establishes a trust is called the trustor; one in whom
confidence is reposed as regards property for the benefit of another On the other hand, a constructive trust is -a trust "raised by
person is known as the trustee; and the person for whose benefit the construction of law, or arising by operation of law". In a more
trust has been created is referred to as the beneficiary" (Art. 1440, restricted sense and as contra-distinguished from a resulting trust, a
Civil Code). There is a fiduciary relation between the trustee and constructive trust is "a trust not created by any words, either
the cestui que trust as regards certain property, real, personal, expressly or impliedly evincing a direct intension to create a trust, but
money or choses in action (Pacheco vs. Arro, 85 Phil. 505). by the construction of equity in order to satisfy the demands of
justice." It does not arise "by agreement or intention, but by operation
"Trusts are either express or implied. Express trusts are created by of law." (89 C.J.S. 726-727).
the intention of the trustor or of the parties. Implied trusts come into
being by operation of law" (Art. 1441, Civil Code). "No express trusts Thus, "if property is acquired through mistake or fraud, the person
concerning an immovable or any interest therein may be proven by obtaining it is, by force of law, considered a trustee of an implied trust
parol evidence. An implied trust may be proven by oral evidence" for the benefit of the person from whom the property comes" (Art.
(Ibid, Arts. 1443 and 1457). 1456, Civil Code).

"No particular words are required for the creation of an express trust, Or "if a person obtains legal title to property by fraud or concealment,
it being sufficient that a trust is clearly intended" (Ibid, Art. 1444; courts of equity will impress upon the title a so-called constructive
Tuason de Perez vs. Caluag, 96 Phil. 981; Julio vs. Dalandan, L- trust in favor of the defrauded party". Such a constructive trust is not
19012, October 30, 1967, 21 SCRA 543, 546). "Express trusts are a trust in the technical sense. (Gayondato vs. Treasurer of the P. I.,
those which are created by the direct and positive acts of the parties, 49 Phil. 244).
by some writing or deed, or will, or by words either expressly or
impliedly evincing an intention to create a trust" (89 C.J.S. 72). Not a scintilla of documentary evidence was presented by the
plaintiffs to prove that there was an express trust over the Calunuran
"Implied trusts are those which, without being expressed, are fishpond in favor of Valentin Salao. Purely parol evidence was
deducible from the nature of the transaction as matters of intent, or offered by them to prove the alleged trust. Their claim that in the oral
which are superinduced on the transaction by operation of law as partition in 1919 of the two fishponds the Calunuran fishpond was
matter of equity, independently of the particular intention of the assigned to Valentin Salao is legally untenable.
parties" (89 C.J.S. 724). They are ordinarily subdivided into resulting
and constructive trusts (89 C.J.S. 722). It is legally indefensible because the terms of article 1443 of the Civil
Code (already in force when the action herein was instituted) are
"A resulting trust. is broadly defined as a trust which is raised or peremptory and unmistakable: parol evidence cannot be used to
created by the act or construction of law, but in its more restricted prove an express trust concerning realty.
sense it is a trust raised by implication of law and presumed to have
been contemplated by the parties, the intention as to which is to be Is plaintiffs' massive oral evidence sufficient to prove an implied trust,
found in the nature of their transaction, but not expressed in the deed resulting or constructive, regarding the two fishponds?
or instrument of conveyance (89 C.J.S. 725). Examples of resulting

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Plaintiffs' pleadings and evidence cannot be relied upon to prove an It is incredible that the forty-seven-hectare Calunuran fishpond would
implied trust. The trial court's firm conclusion that there was no be adjudicated to Valentin Salao mere by by word of mouth.
community of property during the lifetime of Valentina; Ignacio or Incredible because for the partition of the seventeen hectares of land
before 1914 is substantiated by defendants' documentary evidence. left by Valentina Ignacio an elaborate "Escritura de Particion"
The existence of the alleged co-ownership over the lands supposedly consisting of twenty-two pages had to be executed by the four Salao
inherited from Manuel Salao in 1885 is the basis of plaintiffs' heirs. Surely, for the partition of one hundred forty-five hectares of
contention that the Calunuran fishpond was held in trust for Valentin fishponds among three of the same Salao heirs an oral adjudication
Salao. would not have sufficed.

But that co-ownership was not proven by any competent evidence. It The improbability of the alleged oral partition becomes more evident
is quite improbable because the alleged estate of Manuel Salao was when it is borne in mind that the two fishponds were registered land
likewise not satisfactorily proven. The plaintiffs alleged in their and "the act of registration" is "the operative act" that conveys and
original complaint that there was a co-ownership over two hectares affects the land (Sec. 50, Act No. 496). That means that any
of land left by Manuel Salao. In their amended complaint, they transaction affecting the registered land should be evidenced by a
alleged that the co-ownership was over seven hectares of fishponds registerable deed. The fact that Valentin Salao and his successors-
located in Barrio Dampalit, Malabon, Rizal. In their brief they alleged in-interest, the plaintiffs, never bothered for a period of nearly forty
that the fishponds, ricelands and saltbeds owned in common in years to procure any documentary evidence to establish his
Barrio Dampalit had an area of twenty-eight hectares, of which supposed interest ox participation in the two fishponds is very
sixteen hectares pertained to Valentina Ignacio and eleven hectares suggestive of the absence of such interest.
represented Manuel Salao's estate.
The matter may be viewed from another angle. As already stated,
They theorized that the eleven hectares "were, and necessarily, the the deed of partition for Valentina Ignacio's estate wag notarized in
nucleus, nay the very root, of the property now in litigation (page 6, 1919 (Exh. 21). The plaintiffs assert that the two fishponds were
plaintiffs-appellants' brief). But the eleven hectares were not proven verbally partitioned also in 1919 and that the Calunuran fishpond
by any trustworthy evidence. Benita Salao's testimony that in 1918 or was assigned to Valentin Salao as his share.
1919 Juan, Ambrosia, Alejandra and Valentin partitioned twenty-
eight hectares of lands located in Barrio Dampalit is not credible. As Now in the partition of Valentina Ignacio's estate, Valentin was
noted by the defendants, Manuel Salao was not even mentioned in obligated to pay P3,355.25 to Ambrosia Salao. If, according to the
plaintiffs' complaints. plaintiffs, Ambrosia administered the two fishponds and was the
custodian of its earnings, then it could have been easily stipulated in
The 1919 partition of Valentina Ignacio's estate covered the deed partitioning Valentina Ignacio's estate that the amount due
about seventeen hectares of fishponds and ricelands (Exh. 21). If at from Valentin would just be deducted by Ambrosia from his share of
the time that partition was made there were eleven hectares of land the earnings of the two fishponds. There was no such stipulation. Not
in Barrio Dampalit belonging to Manuel Salao, who died in 1885, a shred of documentary evidence shows Valentin's participation in
those eleven hectares would have been partitioned in writing as in the two fishponds.
the case of the seventeen hectares belonging to Valentina Ignacio's
estate. The plaintiffs utterly failed to measure up to the yardstick that a trust
must be proven by clear, satisfactory and convincing evidence. It
cannot rest on vague and uncertain evidence or on loose, equivocal

8
or indefinite declarations (De Leon vs. Molo-Peckson, 116 Phil. 1267, the mirador de su casa, to avoid the possibility of losing his land"
1273). (Legarda and Prieto vs. Saleeby, 31 Phil. 590, 593).

Trust and trustee; establishment of trust by parol There was no resulting trust in this case because there never was
evidence; certainty of proof. — Where a trust is to be any intention on the part of Juan Y. Salao, Sr., Ambrosia Salao and
established by oral proof, the testimony supporting it Valentin Salao to create any trust. There was no constructive trust
must be sufficiently strong to prove the right of the because the registration of the two fishponds in the names of Juan
alleged beneficiary with as much certainty as if a and Ambrosia was not vitiated by fraud or mistake. This is not a case
document proving the trust were shown. A trust where to satisfy the demands of justice it is necessary to consider
cannot be established, contrary to the recitals of a the Calunuran fishpond " being held in trust by the heirs of Juan Y.
Torrens title, upon vague and inconclusive Salao, Sr. for the heirs of Valentin Salao.
proof.(Syllabus, Suarez vs. Tirambulo, 59 Phil. 303).
And even assuming that there was an implied trust, plaintiffs' action
Trusts; evidence needed to establish trust on parol is clearly barred by prescription or laches (Ramos vs. Ramos, L-
testimony. — In order to establish a trust in real 19872, December 3, 1974, 61 SCRA 284; Quiniano vs. Court of
property by parol evidence, the proof should be as Appeals, L-23024, May 31, 1971, 39 SCRA 221; Varsity Hills, Inc. vs.
fully convincing as if the act giving rise to the trust Navarro, 9, February 29, 1972, 43 SCRA 503; Alzona vs. Capunitan
obligation were proven by an authentic document. and Reyes, 114 Phil. 377).
Such a trust cannot be established upon testimony
consisting in large part of insecure surmises based Under Act No. 190, whose statute of limitation would apply if there
on ancient hearsay. (Syllabus, Santa Juana vs. Del were an implied trust in this case, the longest period of extinctive
Rosario 50 Phil. 110). prescription was only ten year (Sec. 40; Diaz vs. Gorricho and
Aguado, 103 Phil. 261, 266).
The foregoing rulings are good under article 1457 of the Civil Code
which, as already noted, allows an implied trust to be proven by oral The Calunuran fishpond was registered in 1911. The written
evidence. Trustworthy oral evidence is required to prove an implied extrajudicial demand for its reconveyance was made by the plaintiffs
trust because, oral evidence can be easily fabricated. in 1951. Their action was filed in 1952 or after the lapse of more than
forty years from the date of registration. The plaintiffs and their
On the other hand, a Torrens title is generally a conclusive of the predecessor-in-interest, Valentin Salao, slept on their rights if they
ownership of the land referred to therein (Sec. 47, Act 496). A strong had any rights at all. Vigilanti prospiciunt jura or the law protects him
presumption exists. that Torrens titles were regularly issued and that who is watchful of his rights (92 C.J.S. 1011, citing Esguerra vs.
they are valid. In order to maintain an action for reconveyance, proof Tecson, 21 Phil. 518, 521).
as to the fiduciary relation of the parties must be clear and
convincing (Yumul vs. Rivera and Dizon, 64 Phil. 13, 17-18). "Undue delay in the enforcement of a right is strongly persuasive of a
lack of merit in the claim, since it is human nature for a person to
The real purpose of the Torrens system is, to quiet title to land. assert his rights most strongly when they are threatened or invaded".
"Once a title is registered, the owner may rest secure, without the "Laches or unreasonable delay on the part of a plaintiff in seeking to
necessity of waiting in the portals of the court, or sitting in enforce a right is not only persuasive of a want of merit but may,

9
according to the circumstances, be destructive of the right itself." There is the further consideration that the parties were descendants
(Buenaventura vs. David, 37 Phil. 435, 440-441). of common ancestors, the spouses Manuel Salao and Valentina
Ignacio, and that plaintiffs' action was based on their honest
Having reached the conclusion that the plaintiffs are not entitled to supposition that the funds used in the acquisition of the lands in
the reconveyance of the Calunuran fishpond, it is no longer n to Pass litigation were earnings of the properties allegedly inherited from
upon the validity of the donation made by Ambrosia Salao to Juan S. Manuel Salao.
Salao, Jr. of her one-half share in the two fishponds The plaintiffs
have no right and personality to assil that donation. Considering those circumstances, it cannot be concluded with
certitude that plaintiffs' action was manifestly frivolous or was
Even if the donation were declared void, the plaintiffs would not have primarily intended to harass the defendants. An award for damages
any successional rights to Ambrosia's share. The sole legal heir of to the defendants does not appear to be just and proper.
Ambrosia was her nephew, Juan, Jr., her nearest relative within the
third degree. Valentin Salao, if living in 1945 when Ambrosia died, The worries and anxiety of a defendant in a litigation that was not
would have been also her legal heir, together with his first cousin, maliciously instituted are not the moral damages contemplated in the
Juan, Jr. (Juani). Benita Salao, the daughter of Valentin, could not law (Solis & Yarisantos vs. Salvador, L-17022, August 14, 1965, 14
represent him in the succession to the estate of Ambrosia since in SCRA 887; Ramos vs. Ramos, supra). The instant case is not
the collateral line, representation takes place only in favor of the among the cases mentioned in articles 2219 and 2220 of the Civil
children of brothers or sisters whether they be of the full or half blood Code wherein moral damages may be recovered. Nor can it be
is (Art 972, Civil Code). The nephew excludes a grandniece like regarded as analogous to any of the cases mentioned in those
Benita Salao or great-gandnephews like the plaintiffs Alcuriza (Pavia articles.
vs. Iturralde 5 Phil. 176).
The adverse result of an action does not per
The trial court did not err in dismissing plaintiffs' complaint. se make the act wrongful and subject the actor to
the payment of moral damages. The law could not
Defendants' appeal. — The defendants dispute the lower court's have meant to impose a penalty on the right to
finding that the plaintiffs filed their action in good faith. The litigate; such right is so precious that moral damages
defendants contend that they are entitled to damages because the may not be charged on those who may exercise it
plaintiffs acted maliciously or in bad faith in suing them. They ask for erroneously. (Barreto vs. Arevalo, 99 Phil. 771. 779).
P25,000 attorneys fees and litigation expenses and, in addition,
moral damages. The defendants invoke article 2208 (4) (11) of the Civil Code which
provides that attorney's fees may be recovered "in case of a clearly
We hold that defemdamts' appeal is not meritorious. The record unfounded civil action or proceeding against the plaintiff" (defendant
shows that the plaintiffs presented fifteen witnesses during the is a plaintiff in his counterclaim) or "in any other case where the court
protracted trial of this case which lasted from 1954 to 1959. They deems it just and equitable" that attorney's fees should he awarded.
fought tenaciously. They obviously incurred considerable expenses
in prosecuting their case. Although their causes of action turned out But once it is conceded that the plaintiffs acted in good faith in filing
to be unfounded, yet the pertinacity and vigor with which they their action there would be no basis for adjudging them liable to the
pressed their claim indicate their sincerity and good faith. defendants for attorney's fees and litigation expenses (See Rizal

10
Surety & Insurance Co., Inc. vs. Court of Appeals, L-23729, May 16,
1967, 20 SCRA 61). meters, and covered by Original Certificate of Title (OCT) No.
16676,[8] in the name of Valeriano Semilla (Valeriano), married to
It is not sound public policy to set a premium on the right to litigate.
Potenciana Acosta. Under unexplained circumstances, Valeriano
An adverse decision does not ipso facto justify the award of
attorney's fees to the winning party (Herrera vs. Luy Kim Guan, 110 gave Lot No. 356-A to his sister Marta Semilla, married to Eugenio
Phil. 1020, 1028; Heirs of Justiva vs. Gustilo, 61 O. G. 6959).
Torbela (spouses Torbela). Upon the deaths of the spouses Torbela,
TORBELA VS. ROSARIO Lot No. 356-A was adjudicated in equal shares among their children,
the Torbela siblings, by virtue of a Deed of Extrajudicial
Presently before the Court are two consolidated Petitions for Review
Partition[9] dated December 3, 1962.
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,
On December 12, 1964, the Torbela siblings executed a Deed of
1999 of the Court of Appeals in CA-G.R. CV No. 39770.
Absolute Quitclaim [10] over Lot No. 356-A in favor of Dr.
Rosario. According to the said Deed, the Torbela siblings for and in
The petitioners in G.R. No. 140528 are siblings Maria Torbela,[3] Pedro
consideration of the sum of NINE PESOS (P9.00) x x x transfer[red]
Torbela,[4] Eufrosina Torbela Rosario,[5] Leonila Torbela Tamin,
and convey[ed] x x x unto the said Andres T. Rosario, that undivided
Fernando Torbela,[6] Dolores Torbela Tablada, Leonora Torbela
portion of THREE HUNDRED SEVENTY-FOUR square meters of that
Agustin,[7] and Severina Torbela Ildefonso (Torbela siblings).
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
The petitioner in G.R. No. 140553 is Lena Duque-Rosario (Duque-
16, 1964, OCT No. 16676 in Valerianos name was partially cancelled
Rosario), who was married to, but now legally separated from, Dr.
as to Lot No. 356-A and TCT No. 52751[12] was issued in Dr. Rosarios
Andres T. Rosario (Dr. Rosario). Dr. Rosario is the son of Eufrosina
name covering the said property.
Torbela Rosario and the nephew of the other Torbela siblings.

Another Deed of Absolute Quitclaim [13] was subsequently executed on


The controversy began with a parcel of land, with an area of 374
December 28, 1964, this time by Dr. Rosario, acknowledging that he
square meters, located in Urdaneta City, Pangasinan (Lot No. 356-
only borrowed Lot No. 356-A from the Torbela siblings and was
A). It was originally part of a larger parcel of land, known as Lot No.
already returning the same to the latter for P1.00. The Deed stated:
356 of the Cadastral Survey of Urdaneta, measuring 749 square

11
That for and in consideration of the sum of
one peso (P1.00), Philippine Currency and the fact On May 16, 1967, Cornelio T. Tosino (Cornelio) executed an Affidavit
that I only borrowed the above described parcel of Adverse Claim,[16] on behalf of the Torbela siblings. Cornelio
of land from MARIA TORBELA, married to Eulogio
Tosino, EUFROSINA TORBELA, married to Pedro deposed in said Affidavit:
Rosario, PEDRO TORBELA, married to Petra
Pagador, LEONILA TORBELA, married to Fortunato 3. That ANDRES T. ROSARIO later
Tamen, FERNANDO TORBELA, married to quitclaimed his rights in favor of the former owners by
Victoriana Tablada, DOLORES TORBELA, widow, virtue of a Deed of Absolute Quitclaim which he
LEONORA TORBELA, married to Matias Agustin and executed before Notary Public Banaga, and entered
SEVERINA TORBELA, married to Jorge Ildefonso, x in his Notarial Registry as Dec. No. 43; Page No. 9;
x x by these presents do hereby cede, transfer and Book No. I; Series of 1964;
convey by way of this ABSOLUTE QUITCLAIM unto
the said Maria, Eufrosina, Pedro, Leonila, Fernando, 4. That it is the desire of the parties, my
Dolores, Leonora and Severina, all surnamed Torbela aforestated kins, to register ownership over the
the parcel of land described above.[14](Emphasis above-described property or to perfect their title over
ours.) the same but their Deed could not be registered
because the registered owner now, ANDRES T.
ROSARIO mortgaged the property with the
The aforequoted Deed was notarized, but was not immediately DEVELOPMENT BANK OF THE PHILIPPINES, on
September 21, 1965, and for which reason, the Title
annotated on TCT No. 52751. is still impounded and held by the said bank;

5. That pending payment of the obligation with the


Following the issuance of TCT No. 52751, Dr. Rosario obtained a loan DEVELOPMENT BANK OF THE PHILIPPINES or
redemption of the Title from said bank, I, CORNELIO
from the Development Bank of the Philippines (DBP) on February 21, T. TOSINO, in behalf of my mother MARIA
1965 in the sum of P70,200.00, secured by a mortgage constituted on TORBELA-TOSINO, and my Aunts EUFROSINA
TORBELA, LEONILA TORBELA-TAMEN,
Lot No. 356-A. The mortgage was annotated on TCT No. 52751 DOLORES TORBELA, LEONORA TORBELA-
on September 21, 1965 as Entry No. 243537.[15] Dr. Rosario used the AGUSTIN, SEVERINA TORBELA-ILDEFONSO, and
my Uncles PEDRO TORBELA and FERNANDO, also
proceeds of the loan for the construction of improvements on Lot No. surnamed TORBELA, I request the Register of Deeds
356-A. 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

12
DEVELOPMENT BANK OF THE PHILIPPINES be
informed accordingly.[17] 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,
The very next day, on May 17, 1967, the Torbela siblings had
covered by TCT No. 24832; and (3) Lot No. 5-F-8-C-2-B-2-A, with an
Cornelios Affidavit of Adverse Claim dated May 16, 1967 and Dr.
area of 1,001 square meters, located in Nancayasan, Urdaneta,
Rosarios Deed of Absolute Quitclaim dated December 28,
Pangasinan, covered by TCT No. 104189.[21] The amended loan
1964 annotated on TCT No. 52751 as Entry Nos.
agreement and mortgage on Lot No. 356-A was annotated on TCT
274471[18] and 274472,[19] respectively.
No. 52751 on March 6, 1981 as Entry No. 520099.[22]

The construction of a four-storey building on Lot No. 356-A was


Five days later, on March 11, 1981, another annotation, Entry
eventually completed. The building was initially used as a hospital, but
No. 520469,[23] was made on TCT No. 52751, canceling the adverse
was later converted to a commercial building. Part of the building was
claim on Lot No. 356-A under Entry Nos. 274471-274472, on the basis
leased to PT&T; and the rest to Mrs. Andrea Rosario-Haduca, Dr.
of the Cancellation and Discharge of Mortgage executed by Dr.
Rosarios sister, who operated the Rose Inn Hotel and Restaurant.
Rosario on March 5, 1981. Entry No. 520469 consisted of both
stamped and handwritten portions, and exactly reads:
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 Entry No. 520469. Cancellation of Adverse
Claim executed by Andres Rosario in favor
appearing under Entry No. 243537 was cancelled per the Cancellation
of same. The incumbrance/mortgage appearing
and Discharge of Mortgage executed by DBP in favor of Dr. Rosario under Entry No. 274471-72 is now cancelled as per
Cancellation and Discharge of Mortgage Ratified
and ratified before a notary public on July 11, 1980. before Notary Public Mauro G. Meris on March 5,
1981: Doc. No. 215; Page No. 44; Book No. 1; Series
Of 1981.
In the meantime, Dr. Rosario acquired another loan from the Lingayen, Pangasinan, 3-11, 19981
Philippine National Bank (PNB) sometime in 1979-1981. Records do
not reveal though the original amount of the loan from PNB, but the [Signed: Pedro dela Cruz]
loan agreement was amended on March 5, 1981 and the loan amount Register of Deeds [24]

was increased to P450,000.00. The loan was secured by mortgages

13
Entry No. 593494 Complaint Civil Case No. U-4359
On December 8, 1981, Dr. Rosario and his wife, Duque- (For: Recovery of Ownership and Possession and
Rosario (spouses Rosario), acquired a third loan in the amount Damages. (Sup. Paper).
Entry No. 593493 Notice of Lis Pendens The parcel
of P1,200,000.00 from Banco Filipino Savings and Mortgage Bank of land described in this title is subject to Lis Pendens
(Banco Filipino). To secure said loan, the spouses Rosario again executed by Liliosa B. Rosario, CLAO, Trial Attorney
dated February 13, 1986. Filed to TCT No. 52751
constituted mortgages on Lot No. 356-A, Lot No. 4489, and Lot No. 5- February 13, 1986-1986 February 13 3:30 p.m.
F-8-C-2-B-2-A. The mortgage on Lot No. 356-A was annotated on
(SGD.) PACIFICO M. BRAGANZA
TCT No. 52751 as Entry No. 533283[25] on December 18, 1981. Since Register of Deeds[27]
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
The spouses Rosario afterwards failed to pay their loan from Banco
deducted from the approved loan amount. Thus, the spouses Rosario
Filipino. As of April 2, 1987, the spouses Rosarios outstanding
could only avail of the maximum loan amount of P830,064.00 from
principal obligation and penalty charges amounted to P743,296.82
Banco Filipino.
and P151,524.00, respectively.[28]

Because Banco Filipino paid the balance of Dr. Rosarios loan


Banco Filipino extrajudicially foreclosed the mortgages on Lot
from PNB, the mortgage on Lot No. 356-A in favor of PNB was
No. 356-A, Lot No. 4489, and Lot No. 5-F-8-C-2-B-2-A. During the
cancelled per Entry No. 533478[26] on TCT No. 52751
public auction on April 2, 1987, Banco Filipino was the lone bidder for
dated December 23, 1981.
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,
On February 13, 1986, the Torbela siblings filed before the Regional
was annotated on TCT No. 52751 on April 14, 1987 as Entry No.
Trial Court (RTC) of Urdaneta, Pangasinan, a Complaint for recovery
610623.[30]
of ownership and possession of Lot No. 356-A, plus damages, against
the spouses Rosario, which was docketed as Civil Case No. U-
On December 9, 1987, the Torbela siblings filed before the
4359. On the same day, Entry Nos. 593493 and 593494 were made
RTC their Amended Complaint,[31] impleading Banco Filipino as
on TCT No. 52751 that read as follows:
additional defendant in Civil Case No. U-4359 and praying that the

14
spouses Rosario be ordered to redeem Lot No. 356-A from Banco
Filipino. Meanwhile, the Torbela siblings tried to redeem Lot No. 356-
A from Banco Filipino, but their efforts were unsuccessful. Upon the
The spouses Rosario instituted before the RTC on March 4, expiration of the one-year redemption period in April 1988, the
1988 a case for annulment of extrajudicial foreclosure and damages, Certificate of Final Sale[34] and Affidavit of Consolidation[35] covering all
with prayer for a writ of preliminary injunction and temporary three foreclosed properties were executed on May 24, 1988 and May
restraining order, against Banco Filipino, the Provincial Ex 25, 1988, respectively.
Officio Sheriff and his Deputy, and the Register of Deeds of
Pangasinan. The case was docketed as Civil Case No. U- On June 7, 1988, new certificates of title were issued in the
4667. Another notice of lis pendens was annotated on TCT No. 52751 name of Banco Filipino, particularly, TCT No. 165812 for Lot No. 5-F-
on March 10, 1988 as Entry No. 627059, viz: 8-C-2-B-2-A and TCT No. 165813 for Lot No. 356-A .[36]

Entry No. 627059 Lis Pendens Dr. Andres T. Rosario


and Lena Duque Rosario, Plaintiff versus Banco The Torbela siblings thereafter filed before the RTC on August
Filipino, et. al. Civil Case No. U-4667 or Annulment of 29, 1988 a Complaint[37] for annulment of the Certificate of Final Sale
ExtraJudicial Foreclosure of Real Estate Mortgage
The parcel of land described in this title is subject to dated May 24, 1988, judicial cancelation of TCT No. 165813, and
Notice of Lis Pendens subscribed and sworn to before damages, against Banco Filipino, the Ex Officio Provincial Sheriff, and
Notary Public Mauro G. Meris, as Doc. No. 21; Page
No. 5; Book 111; S-1988. March 7, 1988-1988 March the Register of Deeds of Pangasinan, which was docketed as Civil
10, 1:00 p.m. Case No. U-4733.

(SGD.) RUFINO M. MORENO, SR.


On June 19, 1991, Banco Filipino filed before the RTC of
Register of Deeds[32]
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
The Torbela siblings intervened in Civil Case No. U-4667. Eventually,
that a writ of possession be issued in its favor over Lot No. 5-F-8-C-2-
on October 17, 1990, the RTC issued an Order[33] dismissing without
B-2-A and Lot No. 356-A, plus the improvements thereon, and the
prejudice Civil Case No. U-4667 due to the spouses Rosarios failure
spouses Rosario and other persons presently in possession of said
to prosecute.
properties be directed to abide by said writ.

15
7. Banco Filipino is hereby
The RTC jointly heard Civil Case Nos. U-4359 and U-4733 ordered to give [the Torbela siblings] the right of first
refusal over Lot 356-A. The Register of Deeds is
and Pet. Case No. U-822. The Decision[38] on these three cases was hereby ordered to annotate the right of [the Torbela
promulgated on January 15, 1992, the dispositive portion of which siblings] at the back of TCT No. 165813 after payment
of the required fees;
reads:
8. Dr. Rosario and Lena Rosario
WHEREFORE, judgment is rendered: are hereby ordered to reimburse [the Torbela siblings]
the market value of Lot 356-A as of December, 1964
1. Declaring the real estate minus payments made by the former;
mortgage over Lot 356-A covered by TCT 52751
executed by Spouses Andres Rosario in favor of 9. Dismissing the complaint of [the
Banco Filipino, legal and valid; Torbela siblings] against Banco Filipino, Pedro Habon
and Rufino Moreno in Civil Case No. U-4733; and
2. Declaring the sheriffs sale against Banco Filipino in Civil Case No. U-4359.[39]
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; The RTC released an Amended Decision[40] dated January

3. Declaring Banco Filipino the 29, 1992, adding the following paragraph to the dispositive:
owner of Lot 356-A covered by TCT No. 52751 (now
TCT 165813); Banco Filipino is entitled to a Writ of
Possession over Lot-5-F-8-C-2-[B]-2-A of the
4. Banco Filipino is entitled to a subdivision plan (LRC) Psd-122471, covered by
Writ of Possession over Lot 356-A together with the Transfer Certificate of Title 104189 of the Registry of
improvements thereon (Rose Inn Building). The Deeds of Pangasinan[.][41]
Branch Clerk of Court is hereby ordered to issue a writ
of possession in favor of Banco Filipino;

5. [The Torbela siblings] are The Torbela siblings and Dr. Rosario appealed the foregoing
hereby ordered to render accounting to Banco Filipino
RTC judgment before the Court of Appeals. Their appeal was
the rental they received from tenants
of Rose Inn Building from May 14, 1988; docketed as CA-G.R. CV No. 39770.

6. [The Torbela siblings] are


hereby ordered to pay Banco Filipino the sum
of P20,000.00 as attorneys fees;

16
DECEMBER 28, 1964 AND THE
In its Decision[42] dated June 29, 1999, the Court of Appeals REGISTRATION OF THE NOTICE OF
decreed: ADVERSE CLAIM EXECUTED BY THE
[TORBELA SIBLINGS], SERVE AS THE
OPERATIVE ACT TO CONVEY OR AFFECT
WHEREFORE, foregoing considered, the THE LAND AND IMPROVEMENTS
appealed decision is hereby AFFIRMED with THEREOF IN SO FAR AS THIRD PERSONS
modification. Items No. 6 and 7 of the appealed ARE CONCERNED.
decision are DELETED. Item No. 8 is modified
requiring [Dr. Rosario] to pay [the Torbela siblings] Second Issue and Assignment of Error:
actual damages, in the amount of P1,200,000.00 with
6% per annum interest from finality of this decision THE HONORABLE COURT OF APPEALS
until fully paid. [Dr. Rosario] is further ORDERED to GRAVELY ERRED IN FINDING THAT THE
pay [the Torbela siblings] the amount of P300,000.00 SUBJECT PROPERTY COVERED BY
as moral damages; P200,000.00 as exemplary T.C.T. NO. 52751 IS CLEAN AND FREE,
damages and P100,000.00 as attorneys fees. DESPITE OF THE ANNOTATION OF
ENCUMBRANCES OF THE NOTICE OF
Costs against [Dr. Rosario].[43] ADVERSE CLAIM AND THE DEED OF
ABSOLUTE QUITCLAIM APPEARING AT
THE BACK THEREOF AS ENTRY NOS.
The Court of Appeals, in a Resolution[44] dated October 22, 274471 AND 274472, RESPECTIVELY.

1999, denied the separate Motions for Reconsideration of the Torbela Third Issue and Assignment of Error:
siblings and Dr. Rosario.
THE HONORABLE COURT OF APPEALS
GRAVELY ERRED IN FINDING THAT THE
NOTICE OF ADVERSE CLAIM OF THE
The Torbela siblings come before this Court via the Petition
[TORBELA SIBLINGS] UNDER ENTRY NO.
for Review in G.R. No. 140528, with the following assignment of 274471 WAS VALIDLY CANCELLED BY
THE REGISTER OF DEEDS, IN THE
errors: ABSENCE OF A PETITION DULY FILED IN
COURT FOR ITS CANCELLATION.
First Issue and Assignment of Error:
Fourth Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS
GRAVELY ERRED IN NOT FINDING THAT THE HONORABLE COURT OF APPEALS
THE REGISTRATION OF THE DEED OF GRAVELY ERRED IN FINDING THAT
ABSOLUTE QUITCLAIM EXECUTED BY RESPONDENT BANCO FILIPINO SAVINGS
[DR. ANDRES T. ROSARIO] IN FAVOR OF AND MORTGAGE BANK IS A MORTGAGEE
THE [TORBELA SIBLINGS] DATED IN GOOD FAITH.

17
siblings], and another DECISION issue ordering,
Fifth Issue and Assignment of Error: among other reliefs, the respondent Banco Filipino to
reconvey back Lot No. 356-A, covered by T.C.T. No.
THE HONORABLE COURT OF APPEALS 52751, in favor of the [Torbela siblings] who are the
GRAVELY ERRED IN NOT FINDING THAT actual owners of the same.
THE FILING OF A CIVIL CASE NO. U-4359
ON DECEMBER 9, 1987, IMPLEADING The [Torbela siblings] likewise pray for such
RESPONDENT BANCO FILIPINO AS other reliefs and further remedies as may be deemed
ADDITIONAL PARTY DEFENDANT, TOLL just and equitable under the premises.[46]
OR SUSPEND THE RUNNING OF THE ONE
YEAR PERIOD OF REDEMPTION.

Sixth Issue and Assignment of Error: Duque-Rosario, now legally separated from Dr. Rosario,
avers in her Petition for Review in G.R. No. 140553 that Lot No. 4489
THE HONORABLE COURT OF APPEALS
GRAVELY ERRED IN NOT FINDING THAT and Lot No. 5-F-8-C-2-B-2-A were registered in her name, and she
THE OWNERSHIP OVER THE SUBJECT was unlawfully deprived of ownership of said properties because of
PROPERTY WAS PREMATURELY
CONSOLIDATED IN FAVOR OF the following errors of the Court of Appeals:
RESPONDENT BANCO FILIPINO SAVINGS
AND MORTGAGE BANK.

Seventh Issue and Assignment of Error:


A
THE HON. COURT OF APPEALS PATENTLY
THE HONORABLE COURT OF APPEALS
ERRED IN NOT FINDING THAT THE PERIOD TO
GRAVELY ERRED IN FINDING THAT THE
REDEEM THE PROPERTY HAS NOT
SUBJECT PROPERTY IS AT LEAST
COMMENCED, HENCE, THE CERTIFICATE
WORTH P1,200,000.00.[45]
OF SALE, THE CONSOLIDATION OF OWNERSHIP
BY [BANCO FILIPINO], ARE NULL AND VOID.

The Torbela siblings ask of this Court: B

THE COURT OF APPEALS PATENTLY ERRED IN


WHEREFORE, in the light of the foregoing REFUSING TO RULE THAT THE FILING OF THE
considerations, the [Torbela siblings] most COMPLAINT BEFORE THE COURT A QUO BY THE
respectfully pray that the questioned DECISION [TORBELA SIBLINGS] HAD ALREADY BEEN
promulgated on June 29, 1999 (Annex A, Petition) PRESCRIBED.[47]
and the RESOLUTION dated October 22, 1999
(Annex B, Petition) be REVERSED and SET ASIDE,
and/or further MODIFIED in favor of the [Torbela

18
is based on misapprehension of facts; (5) when the
Duque-Rosario prays that the appealed decision of the Court findings of fact are conflicting; (6) when the Court of
of Appeals be reversed and set aside, and that Lot No. 4489 and Lot Appeals, in making its findings, went beyond the issues of
the case and the same is contrary to the admissions of both
No. 5-F-8-C-2-B-2-A be freed from all obligations and encumbrances parties; (7) when the findings of the Court of Appeals are
and returned to her. 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
Review of findings manifestly overlooked certain relevant facts not disputed
of fact by the RTC by the parties and which, if properly considered, would
and the Court of justify a different conclusion; and (10) when the findings of
Appeals fact of the Court of Appeals are premised on the absence
warranted. of evidence and are contradicted by the evidence on
record.[49]

A disquisition of the issues raised and/or errors assigned in


the Petitions at bar unavoidably requires a re-evaluation of the facts As the succeeding discussion will bear out, the first, fourth, and ninth
and evidence presented by the parties in the court a quo. exceptions are extant in these case.

Barangay
In Republic v. Heirs of Julia Ramos,[48] the Court summed up
conciliation was
the rules governing the power of review of the Court: not a pre-requisite
to the institution of
Civil Case No. U-
Ordinarily, this Court will not review, much less 4359.
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, Dr. Rosario contends that Civil Case No. U-4359, the Complaint of the
since this Court is not a trier of facts and does not routinely
Torbela siblings for recovery of ownership and possession of Lot No.
undertake the re-examination of the evidence presented
by the contending parties during the trial of the case. 356-A, plus damages, should have been dismissed by the RTC

The above rule, however, is subject to a number because of the failure of the Torbela siblings to comply with the prior
of exceptions, such as (1) when the inference made is requirement of submitting the dispute to barangay conciliation.
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

19
brought in the barangay where the real property
The Torbela siblings instituted Civil Case No. U-4359 on February 13, or any part thereof is situated.
1986, when Presidential Decree No. 1508, Establishing a System of The Lupon shall have no authority over
disputes:
Amicably Settling Disputes at the Barangay Level, was still in 1. involving parties who actually reside in
effect.[50] Pertinent provisions of said issuance read: barangays of different cities or
Section 2. Subject matters for amicable municipalities, except where such
settlement. The Lupon of each barangay shall have barangays adjoin each other; and
authority to bring together the parties actually 2. involving real property located in different
residing in the same city or municipality for municipalities.
amicable settlement of all disputes except: xxxx
1. Where one party is the government, or any
subdivision or instrumentality Section 6. Conciliation, pre-condition to filing
thereof; of complaint. No complaint, petition, action or
2. Where one party is a public officer or proceeding involving any matter within the authority
employee, and the dispute relates to of the Lupon as provided in Section 2 hereof shall be
the performance of his official filed or instituted in court or any other government
functions; office for adjudication unless there has been a
3. Offenses punishable by imprisonment confrontation of the parties before the Lupon
exceeding 30 days, or a fine Chairman or the Pangkat and no conciliation or
exceeding P200.00; settlement has been reached as certified by the
4. Offenses where there is no private Lupon Secretary or the Pangkat Secretary, attested
offended party; by the Lupon or Pangkat Chairman, or unless the
5. Such other classes of disputes which the settlement has been repudiated. x x x. (Emphases
Prime Minister may in the interest of supplied.)
justice determine upon
recommendation of the Minister of
Justice and the Minister of Local The Court gave the following elucidation on the jurisdiction of
Government.
Section 3. Venue. Disputes between or the Lupong Tagapayapa in Tavora v. Hon. Veloso[51]:
among persons actually residing in the same
barangay shall be brought for amicable settlement The foregoing provisions are quite
before the Lupon of said barangay. Those involving
clear. Section 2 specifies the conditions under which
actual residents of different barangays within the
the Lupon of a barangay shall have authority to bring
same city or municipality shall be brought in the
together the disputants for amicable settlement of
barangay where the respondent or any of the
their dispute: The parties must be actually residing
respondents actually resides, at the election of the in the same city or municipality. At the same time,
complainant. However, all disputes which involved
Section 3 while reiterating that the disputants must be
real property or any interest therein shall be
actually residing in the same barangay or in different
barangays within the same city or municipality

20
unequivocably declares that the Lupon shall have no Therefore, the quoted proviso should simply
authority over disputes involving parties who actually be deemed to restrict or vary the rule on venue
reside in barangays of different cities or prescribed in the principal clauses of the first
municipalities, except where such barangays adjoin paragraph of Section 3, thus: Although venue is
each other. generally determined by the residence of the
parties, disputes involving real property shall be
Thus, by express statutory inclusion and brought in the barangay where the real property
exclusion, the Lupon shall have no jurisdiction or any part thereof is situated, notwithstanding
over disputes where the parties are not actual that the parties reside elsewhere within the same
residents of the same city or municipality, except city/municipality.[52] (Emphases supplied.)
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 The original parties in Civil Case No. U-4359 (the Torbela siblings and
given dispute, Sec. 3 of PD 1508 adds: the spouses Rosario) do not reside in the same barangay, or in

"However, all disputes which different barangays within the same city or municipality, or in different
involve real property or any interest barangays of different cities or municipalities but are adjoining each
therein shall be brought in the
barangay where the real property or other. Some of them reside outside Pangasinan and even outside of
any part thereof is situated." the country altogether. The Torbela siblings reside separately in
Actually, however, this added sentence is just Barangay Macalong, Urdaneta, Pangasinan; Barangay Consolacion,
an ordinary proviso and should operate as such.
Urdaneta, Pangasinan; Pangil, Laguna; Chicago, United States of
The operation of a proviso, as a rule, should America; and Canada. The spouses Rosario are residents of Calle
be limited to its normal function, which is to restrict or
vary the operation of the principal clause, rather than Garcia, Poblacion, Urdaneta, Pangasinan. Resultantly, the Lupon had
expand its scope, in the absence of a clear indication no jurisdiction over the dispute and barangay conciliation was not a
to the contrary.
pre-condition for the filing of Civil Case No. U-4359.
The natural and appropriate
office of a proviso is . . . to except
something from the enacting clause; The Court now looks into the merits of Civil Case No. U-4359.
to limit, restrict, or qualify the statute
in whole or in part; or to exclude from
There was an
the scope of the statute that which
express trust
otherwise would be within its terms.
between the
(73 Am Jur 2d 467.)
Torbela siblings
and Dr. Rosario.

21
Among the notable evidence presented by the Torbela
There is no dispute that the Torbela sibling inherited the title
siblings is the testimony of Atty. Lorenza Alcantara (Atty. Alcantara),
to Lot No. 356-A from their parents, the Torbela spouses, who, in turn,
who had no apparent personal interest in the present case. Atty.
acquired the same from the first registered owner of Lot No. 356-A,
Alcantara, when she was still a boarder at the house of Eufrosina
Valeriano.
Torbela Rosario (Dr. Rosarios mother), was consulted by the Torbela
siblings as regards the extrajudicial partition of Lot No. 356-A. She
Indeed, the Torbela siblings executed a Deed of Absolute
Quitclaim on December 12, 1964 in which they transferred and also witnessed the execution of the two Deeds of Absolute Quitclaim
by the Torbela siblings and Dr. Rosario.
conveyed Lot No. 356-A to Dr. Rosario for the consideration
of P9.00. However, the Torbela siblings explained that they only
In contrast, Dr. Rosario presented TCT No. 52751, issued in
executed the Deed as an accommodation so that Dr. Rosario could
his name, to prove his purported title to Lot No. 356-A. In Lee Tek
have Lot No. 356-A registered in his name and use said property to
Sheng v. Court of Appeals,[53] the Court made a clear distinction
secure a loan from DBP, the proceeds of which would be used for
between title and the certificate of title:
building a hospital on Lot No. 356-A a claim supported by testimonial
and documentary evidence, and borne out by the sequence of events
The certificate referred to is that document issued by
immediately following the execution by the Torbela siblings of said the Register of Deeds known as the Transfer
Certificate of Title (TCT). By title, the law refers to
Deed. On December 16, 1964, TCT No. 52751, covering Lot No. 356- ownership which is represented by that document.
A, was already issued in Dr. Rosarios name. On December 28, 1964, Petitioner apparently confuses certificate with
title. Placing a parcel of land under the mantle of
Dr. Rosario executed his own Deed of Absolute Quitclaim, in which he the Torrens system does not mean that ownership
expressly acknowledged that he only borrowed Lot No. 356-A and was thereof can no longer be disputed. Ownership is
different from a certificate of title. The TCT is only the
transferring and conveying the same back to the Torbela siblings for best proof of ownership of a piece of land. Besides,
the consideration of P1.00. On February 21, 1965, Dr. Rosarios loan the certificate cannot always be considered as
conclusive evidence of ownership. Mere issuance of
in the amount of P70,200.00, secured by a mortgage on Lot No. 356- the certificate of title in the name of any person
does not foreclose the possibility that the real
A, was approved by DBP. Soon thereafter, construction of a hospital
property may be under co-ownership with
building started on Lot No. 356-A. persons not named in the certificate or that the
registrant may only be a trustee or that other

22
parties may have acquired interest subsequent to
the issuance of the certificate of title. To repeat, containing all the terms agreed upon and there can be, between the
registration is not the equivalent of title, but is only the parties and their successors in interest, no evidence of such terms
best evidence thereof. Title as a concept of
ownership should not be confused with the other than the contents of the written agreement.[56] Dr. Rosario may
certificate of title as evidence of such ownership not modify, explain, or add to the terms in the two written Deeds of
although both are interchangeably used. x x
x.[54] (Emphases supplied.) 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
Registration does not vest title; it is merely the evidence of
thereto; (3) the validity of the Deeds; or (4) the existence of other terms
such title. Land registration laws do not give the holder any better title
agreed to by the Torbela siblings and Dr. Rosario after the execution
than what he actually has.[55] Consequently, Dr. Rosario must still
of the Deeds.[57]
prove herein his acquisition of title to Lot No. 356-A, apart from his
Even if the Court considers Dr. Rosarios testimony on his
submission of TCT No. 52751 in his name.
alleged verbal agreement with the Torbela siblings, the Court finds the
same unsatisfactory. Dr. Rosario averred that the two Deeds were
Dr. Rosario testified that he obtained Lot No. 356-A after
executed only because he was planning to secure loan from the
paying the Torbela siblings P25,000.00, pursuant to a verbal
Development Bank of the Philippines and Philippine National Bank
agreement with the latter. The Court though observes that Dr.
and the bank needed absolute quitclaim[.][58] While Dr. Rosarios
Rosarios testimony on the execution and existence of the verbal
explanation makes sense for the first Deed of Absolute Quitclaim
agreement with the Torbela siblings lacks significant details (such as
dated December 12, 1964 executed by the Torbela siblings (which
the names of the parties present, dates, places, etc.) and is not
transferred Lot No. 356-A to Dr. Rosario for P9.00.00), the same could
corroborated by independent evidence.
not be said for the second Deed of Absolute Quitclaim dated
December 28, 1964 executed by Dr. Rosario. In fact, Dr. Rosarios
In addition, Dr. Rosario acknowledged the execution of the
Deed of Absolute Quitclaim (in which he admitted that he only
two Deeds of Absolute Quitclaim dated December 12,
borrowed Lot No. 356-A and was transferring the same to the Torbela
1964 and December 28, 1964, even affirming his own signature on the
siblings for P1.00.00) would actually work against the approval of Dr.
latter Deed. The Parol Evidence Rule provides that when the terms of
Rosarios loan by the banks. Since Dr. Rosarios Deed of Absolute
the agreement have been reduced into writing, it is considered as
Quitclaim dated December 28, 1964 is a declaration against his self-

23
interest, it must be taken as favoring the truthfulness of the contents Express trusts are created by direct and positive acts of the
of said Deed.[59] 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
It can also be said that Dr. Rosario is estopped from claiming of the Civil Code, [n]o particular words are required for the creation of
or asserting ownership over Lot No. 356-A based on his Deed of an express trust, it being sufficient that a trust is clearly intended.[62] It
Absolute Quitclaim dated December 28, 1964. Dr. Rosario's is possible to create a trust without using the word trust or
admission in the said Deed that he merely borrowed LotNo. 356-A is trustee. Conversely, the mere fact that these words are used does not
deemed conclusive upon him. Under Article 1431 of the Civil Code, necessarily indicate an intention to create a trust. The question in each
[t]hrough estoppel an admission or representation is rendered case is whether the trustor manifested an intention to create the kind
conclusive upon the person making it, and cannot be denied or of relationship which to lawyers is known as trust. It is immaterial
disproved as against the person relying thereon.[60] That admission whether or not he knows that the relationship which he intends to
cannot now be denied by Dr. Rosario as against the Torbela siblings, create is called a trust, and whether or not he knows the precise
the latter having relied upon his representation. characteristics of the relationship which is called a trust.[63]

Considering the foregoing, the Court agrees with the RTC and In Tamayo v. Callejo,[64] the Court recognized that a trust may
the Court of Appeals that Dr. Rosario only holds Lot No. 356-A in trust have a constructive or implied nature in the beginning, but the
for the Torbela siblings. registered owners subsequent express acknowledgement in a public
document of a previous sale of the property to another party, had the
Trust is the right to the beneficial enjoyment of property, the effect of imparting to the aforementioned trust the nature of an express
legal title to which is vested in another. It is a fiduciary relationship that trust. The same situation exists in this case. When Dr. Rosario was
obliges the trustee to deal with the property for the benefit of the able to register Lot No. 356-A in his name under TCT No. 52751
beneficiary. Trust relations between parties may either be express or on December 16, 1964, an implied trust was initially established
implied. An express trust is created by the intention of the trustor or of between him and the Torbela siblings under Article 1451 of the Civil
the parties, while an implied trust comes into being by operation of Code, which provides:
law.[61]

24
ART. 1451. When land passes by succession While there are some
to any person and he causes the legal title to be put decisions which hold that an action
in the name of another, a trust is established by upon a trust is imprescriptible,
implication of law for the benefit of the true owner. without distinguishing between
express and implied trusts, the better
rule, as laid down by this Court in
other decisions, is that prescription
Dr. Rosarios execution of the Deed of Absolute Quitclaim does supervene where the trust is
on December 28, 1964, containing his express admission that he only merely an implied one. The reason
has been expressed by Justice J.B.L.
borrowed Lot No. 356-A from the Torbela siblings, eventually Reyes in J.M. Tuason and Co., Inc.
transformed the nature of the trust to an express one.The express trust vs. Magdangal, 4 SCRA 84, 88, as
follows:
continued despite Dr. Rosario stating in his Deed of Absolute
Quitclaim that he was already returning Lot No. 356-A to the Torbela Under
Section 40 of the old
siblings as Lot No. 356-A remained registered in Dr. Rosarios name Code of Civil
Procedure, all
under TCT No. 52751 and Dr. Rosario kept possession of said
actions for recovery
property, together with the improvements thereon. of real property
prescribed in 10
years, excepting
only actions based
The right of the on continuing or
Torbela siblings to subsisting trusts that
recover Lot No. were considered by
356-A has not yet section 38 as
prescribed. imprescriptible. As
held in the case
The Court extensively discussed the prescriptive period for of Diaz v. Gorricho,
express trusts in the Heirs of Maximo Labanon v. Heirs of Constancio L-11229, March 29,
1958, however, the
Labanon,[65] to wit: continuing or
subsisting trusts
On the issue of prescription, we had the contemplated in
opportunity to rule in Bueno v. section 38 of the
Reyes that unrepudiated written express trusts Code of Civil
are imprescriptible: Procedure referred
only to express
unrepudiated trusts,

25
and did not include
constructive trusts who undertakes to hold the property for the former, or who is linked to
(that are imposed by the beneficiary by confidential or fiduciary relations. The trustee's
law) where no
fiduciary relation possession is, therefore, not adverse to the beneficiary, until and
exists and the unless the latter is made aware that the trust has been repudiated.[68]
trustee does not
recognize the trust
at all. Dr. Rosario argues that he is deemed to have repudiated the trust on
This principle was amplified in Escay v. Court December 16, 1964, when he registered Lot No. 356-A in his name
of Appeals this way: Express trusts prescribe 10
under TCT No. 52751, so when on February 13, 1986, the Torbela
years from the repudiation of the trust (Manuel Diaz,
et al. vs. Carmen Gorricho et al., 54 O.G. p. 8429, siblings instituted before the RTC Civil Case No. U-4359, for the
Sec. 40, Code of Civil Procedure).
recovery of ownership and possession of Lot No. 356-A from the
In the more recent case of Secuya v. De spouses Rosario, over 21 years had passed. Civil Case No. U-4359
Selma, we again ruled that the prescriptive period for
the enforcement of an express trust of ten (10) years was already barred by prescription, as well as laches.
starts upon the repudiation of the trust by the
trustee.[66]
The Court already rejected a similar argument in Ringor v.
Ringor[69] for the following reasons:
To apply the 10-year prescriptive period, which would bar a
beneficiarys action to recover in an express trust, the repudiation of A trustee who obtains a Torrens title over a
property held in trust for him by another cannot
the trust must be proven by clear and convincing evidence and made repudiate the trust by relying on the
known to the beneficiary.[67] The express trust disables the trustee registration. A Torrens Certificate of Title in Joses
name did not vest ownership of the land upon him.
from acquiring for his own benefit the property committed to his The Torrens system does not create or vest title. It
management or custody, at least while he does not openly repudiate only confirms and records title already existing and
vested. It does not protect a usurper from the true
the trust, and makes such repudiation known to the beneficiary owner. The Torrens system was not intended to
foment betrayal in the performance of a trust. It does
or cestui que trust. For this reason, the old Code of Civil Procedure
not permit one to enrich himself at the expense of
(Act 190) declared that the rules on adverse possession do not apply another. Where one does not have a rightful claim to
the property, the Torrens system of registration can
to continuing and subsisting (i.e., unrepudiated) trusts. In an express confirm or record nothing. Petitioners cannot rely on
trust, the delay of the beneficiary is directly attributable to the trustee the registration of the lands in Joses name nor in the

26
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 It is clear that under the foregoing jurisprudence, the
his co-heirs. The beneficiaries are entitled to enforce registration of Lot No. 356-A by Dr. Rosario in his name under TCT
the trust, notwithstanding the irrevocability of
the Torrens title. The intended trust must be No. 52751 on December 16, 1964 is not the repudiation that would
sustained.[70] (Emphasis supplied.) have caused the 10-year prescriptive period for the enforcement of an
express trust to run.
In the more recent case of Heirs of Tranquilino Labiste v. Heirs of Jose The Court of Appeals held that Dr. Rosario repudiated the
Labiste,[71] the Court refused to apply prescription and laches and express trust when he acquired another loan from PNB and
reiterated that: constituted a second mortgage on Lot No. 356-A sometime in 1979,
which, unlike the first mortgage to DBP in 1965, was without the
[P]rescription and laches will run only from the time knowledge and/or consent of the Torbela siblings.
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 Court only concurs in part with the Court of Appeals on
the recovery of the property held in trust it must be
shown that: (a) the trustee has performed this matter.
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 For repudiation of an express trust to be effective, the
trust, and (c) the evidence thereon is clear and
conclusive. Respondents cannot rely on the fact unequivocal act of repudiation had to be made known to the Torbela
that the Torrens title was issued in the name of siblings as the cestuis que trust and must be proven by clear and
Epifanio and the other heirs of Jose. It has been
held that a trustee who obtains a Torrens title conclusive evidence. A scrutiny of TCT No. 52751 reveals the
over property held in trust by him for another
following inscription:
cannot repudiate the trust by relying on the
registration. The rule requires a clear repudiation of
the trust duly communicated to the beneficiary. The Entry No. 520099
only act that can be construed as repudiation was
when respondents filed the petition for reconstitution Amendment of the mortgage in favor of PNB inscribed
in October 1993. And since petitioners filed their under Entry No. 490658 in the sense that the
complaint in January 1995, their cause of action has consideration thereof has been increased to
not yet prescribed, laches cannot be attributed to PHILIPPINE PESOS Four Hundred Fifty Thousand
them.[72] (Emphasis supplied.) Pesos only (P450,000.00) and to secure any and all
negotiations with PNB, whether contracted before,

27
during or after the date of this instrument,
acknowledged before Notary Public of Pangasinan when the Torbela siblings instituted before the RTC Civil Case No. U-
Alejo M. Dato as Doc. No. 198, Page No. 41, Book 4359 against the spouses Rosario, only about five years had
No. 11, Series of 1985.
passed. The Torbela siblings were able to institute Civil Case No. U-
Date of Instrument March 5, 1981 4359 well before the lapse of the 10-year prescriptive period for the
Date of Inscription March 6, 1981[73]
enforcement of their express trust with Dr. Rosario.

Although according to Entry No. 520099, the original loan and Civil Case No. U-4359 is likewise not barred by
mortgage agreement of Lot No. 356-A between Dr. Rosario and PNB laches. Laches means the failure or neglect, for an unreasonable and
was previously inscribed as Entry No. 490658, Entry No. 490658 does unexplained length of time, to do that which by exercising due
not actually appear on TCT No. 52751 and, thus, it cannot be used as diligence could or should have been done earlier. It is negligence or
the reckoning date for the start of the prescriptive period. omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned it
The Torbela siblings can only be charged with knowledge of or declined to assert it. As the Court explained in the preceding
the mortgage of Lot No. 356-A to PNB on March 6, 1981 when the paragraphs, the Torbela siblings instituted Civil Case No. U-4359 five
amended loan and mortgage agreement was registered on TCT No. years after Dr. Rosarios repudiation of the express trust, still within the
52751 as Entry No. 520099. Entry No. 520099 is constructive notice 10-year prescriptive period for enforcement of such trusts. This does
to the whole world[74] that Lot No. 356-A was mortgaged by Dr. not constitute an unreasonable delay in asserting one's right. A delay
Rosario to PNB as security for a loan, the amount of which was within the prescriptive period is sanctioned by law and is not
increased to P450,000.00. Hence, Dr. Rosario is deemed to have considered to be a delay that would bar relief. Laches apply only in the
effectively repudiated the express trust between him and the Torbela absence of a statutory prescriptive period.[75]
siblings on March 6, 1981, on which day, the prescriptive period for
the enforcement of the express trust by the Torbela siblings began to Banco Filipino is
not a mortgagee
run. and buyer in good
faith.

From March 6, 1981, when the amended loan and mortgage


agreement was registered on TCT No. 52751, to February 13, 1986,

28
Having determined that the Torbela siblings are the true and in the absence of any sign that might arouse suspicion, has no
owners and Dr. Rosario merely the trustee of Lot No. 356-A, the Court obligation to undertake further investigation. Hence, even if the
is next faced with the issue of whether or not the Torbela siblings may mortgagor is not the rightful owner of, or does not have a valid title to,
still recover Lot No. 356-A considering that Dr. Rosario had already the mortgaged property, the mortgagee in good faith is, nonetheless,
mortgaged Lot No. 356-A to Banco Filipino, and upon Dr. Rosarios entitled to protection.[76]
default on his loan obligations, Banco Filipino foreclosed the
mortgage, acquired Lot No. 356-A as the highest bidder at the On one hand, the Torbela siblings aver that Banco Filipino is
foreclosure sale, and consolidated title in its name under TCT No. not a mortgagee in good faith because as early as May 17, 1967, they
165813. The resolution of this issue depends on the answer to the had already annotated Cornelios Adverse Claim dated May 16,
question of whether or not Banco Filipino was a mortgagee in good 1967 and Dr. Rosarios Deed of Absolute Quitclaim dated December
faith. 28, 1964 on TCT No. 52751 as Entry Nos. 274471-274472,
respectively.
Under Article 2085 of the Civil Code, one of the essential
requisites of the contract of mortgage is that the mortgagor should be On the other hand, Banco Filipino asseverates that it is a
the absolute owner of the property to be mortgaged; otherwise, the mortgagee in good faith because per Section 70 of Presidential
mortgage is considered null and void. However, an exception to this Decree No. 1529, otherwise known as the Property Registration
rule is the doctrine of mortgagee in good faith. Under this doctrine, Decree, the notice of adverse claim, registered on May 17, 1967 by
even if the mortgagor is not the owner of the mortgaged property, the the Torbela siblings under Entry Nos. 274471-274472 on TCT No.
mortgage contract and any foreclosure sale arising therefrom are 52751, already lapsed after 30 days or on June 16, 1967. Additionally,
given effect by reason of public policy. This principle is based on the there was an express cancellation of Entry Nos. 274471-274472 by
rule that all persons dealing with property covered by a Torrens Entry No. 520469 dated March 11, 1981. So when Banco Filipino
Certificate of Title, as buyers or mortgagees, are not required to go approved Dr. Rosarios loan for P1,200,000.00 and constituted a
beyond what appears on the face of the title. This is the same rule that mortgage on Lot No. 356-A (together with two other properties) on
underlies the principle of innocent purchasers for value. The prevailing December 8, 1981, the only other encumbrance on TCT No. 52751
jurisprudence is that a mortgagee has a right to rely in good faith on was Entry No. 520099 dated March 6, 1981, i.e., the amended loan
the certificate of title of the mortgagor to the property given as security and mortgage agreement between Dr. Rosario and PNB (which was

29
Act for registering the same, make a statement in
eventually cancelled after it was paid off with part of the proceeds from writing setting forth fully his alleged right or interest,
Dr. Rosarios loan from Banco Filipino). Hence, Banco Filipino was not and how or under whom acquired, and a reference to
the volume and page of the certificate of title of the
aware that the Torbela siblings adverse claim on Lot No. 356-A still registered owner, and a description of the land in
subsisted. which the right or interest is claimed.

The statement shall be signed and sworn to, and shall


The Court finds that Banco Filipino is not a mortgagee in good state the adverse claimants residence, and designate
a place at which all notices may be served upon
faith. Entry Nos. 274471-274472 were not validly cancelled, and the him. This statement shall be entitled to registration as
an adverse claim, and the court, upon a petition of any
improper cancellation should have been apparent to Banco Filipino
party in interest, shall grant a speedy hearing upon
and aroused suspicion in said bank of some defect in Dr. Rosarios the question of the validity of such adverse claim and
shall enter such decree therein as justice and equity
title. 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
The purpose of annotating the adverse claim on the title of the registered was frivolous or vexatious, it may tax the
disputed land is to apprise third persons that there is a controversy adverse claimant double or treble costs in its
discretion.
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
Construing the aforequoted provision, the Court stressed
notice to third persons that any transaction regarding the disputed land
in Ty Sin Tei v. Lee Dy Piao[78] that [t]he validity or efficaciousness of
is subject to the outcome of the dispute.[77]
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
Adverse claims were previously governed by Section 110 of
the immediate hearing thereof and make the proper adjudication as
Act No. 496, otherwise known as the Land Registration Act, quoted in
justice and equity may warrant. And it is ONLY when such claim is
full below:
found unmeritorious that the registration thereof may be
ADVERSE CLAIM cancelled. The Court likewise pointed out in the same case that while

SEC. 110. Whoever claims any part or interest in a notice of lis pendens may be cancelled in a number of ways, the
registered land adverse to the registered owner, same is not true in a registered adverse claim, for it may be cancelled
arising subsequent to the date of the original
registration, may, if no other provision is made in this only in one instance, i.e., after the claim is adjudged invalid or

30
Before the lapse of thirty days aforesaid,
unmeritorious by the Court x x x; and if any of the registrations should any party in interest may file a petition in the Court
be considered unnecessary or superfluous, it would be the notice of lis of First Instance where the land is situated for the
cancellation of the adverse claim, and the court
pendens and not the annotation of the adverse claim which is more shall grant a speedy hearing upon the question of
permanent and cannot be cancelled without adequate hearing and the validity of such adverse claim, and shall
render judgment as may be just and equitable. If
proper disposition of the claim. 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
With the enactment of the Property Registration Decree that the adverse claim thus registered was frivolous,
it may fine the claimant in an amount not less than
on June 11, 1978, Section 70 thereof now applies to adverse claims:
one thousand pesos nor more than five thousand
pesos, in its discretion. Before the lapse of thirty days,
SEC. 70. Adverse claim. Whoever claims any the claimant may withdraw his adverse claim by filing
part or interest in registered land adverse to the with the Register of Deeds a sworn petition to that
registered owner, arising subsequent to the date of effect. (Emphases supplied.)
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,
In Sajonas v. Court of Appeals,[79]the Court squarely
or interest, and how or under whom acquired, a
reference to the number of the certificate of title of the interpreted Section 70 of the Property Registration Decree,
registered owner, the name of the registered owner,
and a description of the land in which the right or particularly, the new 30-day period not previously found in Section 110
interest is claimed. of the Land Registration Act, thus:

The statement shall be signed and sworn to,


and shall state the adverse claimants residence, and In construing the law aforesaid, care should
a place at which all notices may be served upon be taken that every part thereof be given effect and a
him. This statement shall be entitled to registration as construction that could render a provision inoperative
an adverse claim on the certificate of title. The should be avoided, and inconsistent provisions
adverse claim shall be effective for a period of should be reconciled whenever possible as parts of a
thirty days from the date of registration. After the harmonious whole. For taken in solitude, a word or
lapse of said period, the annotation of adverse phrase might easily convey a meaning quite different
claim may be cancelled upon filing of a verified from the one actually intended and evident when a
petition therefor by the party in interest: Provided, word or phrase is considered with those with which it
however, that after cancellation, no second adverse is associated. In ascertaining the period of effectivity
claim based on the same ground shall be registered of an inscription of adverse claim, we must read the
by the same claimant. law in its entirety. Sentence three, paragraph two of
Section 70 of P.D. 1529 provides:

31
cancellation of adverse claim by verified petition
The adverse claim shall be would serve to qualify the provision on the effectivity
effective for a period of thirty days period. The law, taken together, simply means that
from the date of registration. the cancellation of the adverse claim is still
necessary to render it ineffective, otherwise, the
At first blush, the provision in question would inscription will remain annotated and shall
seem to restrict the effectivity of the adverse claim to continue as a lien upon the property. For if the
thirty days. But the above provision cannot and adverse claim has already ceased to be effective
should not be treated separately, but should be read upon the lapse of said period, its cancellation is
in relation to the sentence following, which reads: no longer necessary and the process of
cancellation would be a useless ceremony.
After the lapse of said
period, the annotation of adverse It should be noted that the law employs the
claim may be cancelled upon filing of phrase "may be cancelled," which obviously
a verified petition therefor by the indicates, as inherent in its decision making power,
party in interest. that the court may or may not order the cancellation
of an adverse claim, notwithstanding such provision
If the rationale of the law was for the adverse limiting the effectivity of an adverse claim for thirty
claim to ipso facto lose force and effect after the lapse days from the date of registration. The court cannot
of thirty days, then it would not have been necessary be bound by such period as it would be inconsistent
to include the foregoing caveat to clarify and complete with the very authority vested in it. A fortiori, the
the rule. For then, no adverse claim need be limitation on the period of effectivity is immaterial in
cancelled. If it has been automatically terminated by determining the validity or invalidity of an adverse
mere lapse of time, the law would not have required claim which is the principal issue to be decided in the
the party in interest to do a useless act. court hearing. It will therefore depend upon the
evidence at a proper hearing for the court to
A statute's clauses and phrases must not be determine whether it will order the cancellation of the
taken separately, but in its relation to the statute's adverse claim or not.
totality. Each statute must, in fact, be construed as to
harmonize it with the pre-existing body of To interpret the effectivity period of the
laws. Unless clearly repugnant, provisions of statutes adverse claim as absolute and without qualification
must be reconciled. The printed pages of the limited to thirty days defeats the very purpose for
published Act, its history, origin, and its purposes may which the statute provides for the remedy of an
be examined by the courts in their construction. x x x. inscription of adverse claim, as the annotation of an
adverse claim is a measure designed to protect the
xxxx interest of a person over a piece of real property
where the registration of such interest or right is not
Construing the provision as a whole would otherwise provided for by the Land Registration Act or
reconcile the apparent inconsistency between the Act 496 (now P.D. 1529 or the Property Registration
portions of the law such that the provision on Decree), and serves as a warning to third parties

32
dealing with said property that someone is claiming
an interest or the same or a better right than the claim can only be cancelled after a party in interest files a petition for
registered owner thereof. cancellation before the RTC wherein the property is located, and the

The reason why the law provides for a RTC conducts a hearing and determines the said claim to be invalid
hearing where the validity of the adverse claim is or unmeritorious.
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 No petition for cancellation has been filed and no hearing has
can be established or revoked, all for the purpose
of determining at last the existence of any been conducted herein to determine the validity or merit of the adverse
encumbrance on the title arising from such
claim of the Torbela siblings. Entry No. 520469 cancelled the adverse
adverse claim. This is in line with the provision
immediately following: claim of the Torbela siblings, annotated as Entry Nos. 274471-774472,

Provided, however, that after upon the presentation by Dr. Rosario of a mere Cancellation and
cancellation, no second adverse Discharge of Mortgage.
claim shall be registered by the same
claimant.
Regardless of whether or not the Register of Deeds should
Should the adverse claimant fail to sustain his
interest in the property, the adverse claimant will be have inscribed Entry No. 520469 on TCT No. 52751, Banco Filipino
precluded from registering a second adverse claim
could not invoke said inscription in support of its claim of good
based on the same ground.
faith. There were several things amiss in Entry No. 520469 which
It was held that validity or efficaciousness of
the claim may only be determined by the Court upon should have already aroused suspicions in Banco Filipino, and
petition by an interested party, in which event, the compelled the bank to look beyond TCT No. 52751 and inquire into
Court shall order the immediate hearing thereof and
make the proper adjudication as justice and equity Dr. Rosarios title. First, Entry No. 520469 does not mention any court
may warrant. And it is only when such claim is found order as basis for the cancellation of the adverse claim. Second, the
unmeritorious that the registration of the adverse
claim may be cancelled, thereby protecting the adverse claim was not a mortgage which could be cancelled with Dr.
interest of the adverse claimant and giving notice and
Rosarios Cancellation and Discharge of Mortgage. And third, the
warning to third parties.[80] (Emphases supplied.)
adverse claim was against Dr. Rosario, yet it was cancelled based on
a document also executed by Dr. Rosario.
Whether under Section 110 of the Land Registration Act or
Section 70 of the Property Registration Decree, notice of adverse

33
It is a well-settled rule that a purchaser or mortgagee cannot property offered to it as security for a loan must be a standard and
close his eyes to facts which should put a reasonable man upon his indispensable part of its operations.
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 Banco Filipino cannot be deemed a mortgagee in good faith,
refusal to believe that such defect exists, or his willful closing of his much less a purchaser in good faith at the foreclosure sale of Lot No.
eyes to the possibility of the existence of a defect in the vendor's or 356-A. Hence, the right of the Torbela siblings over Lot No. 356-A is
mortgagor's title, will not make him an innocent purchaser or superior over that of Banco Filipino; and as the true owners of Lot No.
mortgagee for value, if it afterwards develops that the title was in fact 356-A, the Torbela siblings are entitled to a reconveyance of said
defective, and it appears that he had such notice of the defects as property even from Banco Filipino.
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 Nonetheless, the failure of Banco Filipino to comply with the
situation.[81] due diligence requirement was not the result of a dishonest purpose,
some moral obliquity, or breach of a known duty for some interest or
While the defective cancellation of Entry Nos. 274471-274472 ill will that partakes of fraud that would justify damages.[84]
by Entry No. 520469 might not be evident to a private individual, the
same should have been apparent to Banco Filipino. Banco Filipino is Given the reconveyance of Lot No. 356-A to the Torbela
not an ordinary mortgagee, but is a mortgagee-bank, whose business siblings, there is no more need to address issues concerning
is impressed with public interest. In fact, in one case, [82] the Court redemption, annulment of the foreclosure sale and certificate of sale
explicitly declared that the rule that persons dealing with registered (subject matter of Civil Case No. U-4733), or issuance of a writ of
lands can rely solely on the certificate of title does not apply to possession in favor of Banco Filipino (subject matter of Pet. Case No.
banks. In another case,[83] the Court adjudged that unlike private U-822) insofar as Lot No. 356-A is concerned. Such would only be
individuals, a bank is expected to exercise greater care and prudence superfluous. Banco Filipino, however, is not left without any recourse
in its dealings, including those involving registered lands. A banking should the foreclosure and sale of the two other mortgaged properties
institution is expected to exercise due diligence before entering into a be insufficient to cover Dr. Rosarios loan, for the bank may still bring
mortgage contract. The ascertainment of the status or condition of a a proper suit against Dr. Rosario to collect the unpaid balance.

34
The rules on
accession shall When it comes to the improvements on Lot No. 356-A, both
govern the the Torbela siblings (as landowners) and Dr. Rosario (as builder) are
improvements
on Lot No. 356-A deemed in bad faith. The Torbela siblings were aware of the
and the rents construction of a building by Dr. Rosario on Lot No. 356-A, while Dr.
thereof.
Rosario proceeded with the said construction despite his knowledge
that Lot No. 356-A belonged to the Torbela siblings. This is the case
The accessory follows the principal. The right of accession is contemplated under Article 453 of the Civil Code, which reads:
recognized under Article 440 of the Civil Code which states that [t]he
ownership of property gives the right by accession to everything which ART. 453. If there was bad faith, not only on
the part of the person who built, planted or sowed on
is produced thereby, or which is incorporated or attached thereto, the land of another, but also on the part of the owner
either naturally or artificially. of such land, the rights of one and the other shall
be the same as though both had acted in good
faith.
There is no question that Dr. Rosario is the builder of the
It is understood that there is bad faith on the
improvements on Lot No. 356-A. The Torbela siblings themselves part of the landowner whenever the act was done with
his knowledge and without opposition on his
alleged that they allowed Dr. Rosario to register Lot No. 356-A in his part. (Emphasis supplied.)
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
When both the landowner and the builder are in good faith, the
building constructed on Lot No. 356-A, initially used as a hospital, and
following rules govern:
then later for other commercial purposes. Dr. Rosario supervised the
construction of the building, which began in 1965; fully liquidated the ART. 448. The owner of the land on which
loan from DBP; and maintained and administered the building, as well anything has been built, sown or planted in good faith,
shall have the right to appropriate as his own the
as collected the rental income therefrom, until the Torbela siblings works, sowing or planting, after payment of the
instituted Civil Case No. U-4359 before the RTC on February 13, indemnity provided for in articles 546 and 548, or to
oblige the one who built or planted to pay the price of
1986. 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,

35
he shall pay reasonable rent, if the owner of the land
does not choose to appropriate the building or trees land the option to acquire the improvements after payment of the
after proper indemnity. The parties shall agree upon proper indemnity or to oblige the builder or planter to pay for the land
the terms of the lease and in case of disagreement,
the court shall fix the terms thereof. 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,
ART. 546. Necessary expenses shall be
refunded to every possessor; but only the possessor by the principle of accession, he is entitled to the ownership of the
in good faith may retain the thing until he has been accessory thing.[85]
reimbursed therefor.

Useful expenses shall be refunded only to the


The landowner has to make a choice between appropriating the
possessor in good faith with the same right of
retention, the person who has defeated him in the building by paying the proper indemnity or obliging the builder to pay
possession having the option of refunding the amount
of the expenses or of paying the increase in value the price of the land. But even as the option lies with the landowner,
which the thing may have acquired by reason thereof. the grant to him, nevertheless, is preclusive. He must choose one. He

ART. 548. Expenses for pure luxury or mere cannot, for instance, compel the owner of the building to remove the
pleasure shall not be refunded to the possessor in building from the land without first exercising either option. It is only if
good faith; but he may remove the ornaments with
which he has embellished the principal thing if it the owner chooses to sell his land, and the builder or planter fails to
suffers no injury thereby, and if his successor in the
purchase it where its value is not more than the value of the
possession does not prefer to refund the amount
expended. improvements, that the owner may remove the improvements from the
land. The owner is entitled to such remotion only when, after having

Whatever is built, planted, or sown on the land of another, and chosen to sell his land, the other party fails to pay for the same.[86]

the improvements or repairs made thereon, belong to the owner of the


land. Where, however, the planter, builder, or sower has acted in good This case then must be remanded to the RTC for the

faith, a conflict of rights arises between the owners and it becomes determination of matters necessary for the proper application of Article

necessary to protect the owner of the improvements without causing 448, in relation to Article 546, of the Civil Code. Such matters include

injustice to the owner of the land. In view of the impracticability of the option that the Torbela siblings will choose; the amount of

creating what Manresa calls a state of "forced co-ownership," the law indemnity that they will pay if they decide to appropriate the

has provided a just and equitable solution by giving the owner of 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

36
useful improvement, in the case of De Guzman vs. De
Lot No. 356-A to Dr. Rosario but the value of the land is considerably la Fuente, cited by the petitioner.
more than the improvements. The determination made by the Court of
The objective of Article 546 of the Civil Code
Appeals in its Decision dated June 29, 1999 that the current value of is to administer justice between the parties involved.
Lot No. 356-A is P1,200,000.00 is not supported by any evidence on In this regard, this Court had long ago stated in Rivera
vs. Roman Catholic Archbishop of Manila that the
record. 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
Should the Torbela siblings choose to appropriate the improvements of them in such a way as neither one nor the other
may enrich himself of that which does not belong to
on Lot No. 356-A, the following ruling of the Court in Pecson v. Court
him. Guided by this precept, it is therefore the current
of Appeals[87] is relevant in the determination of the amount of market value of the improvements which should be
made the basis of reimbursement. A contrary ruling
indemnity under Article 546 of the Civil Code: would unjustly enrich the private respondents who
would otherwise be allowed to acquire a highly valued
Article 546 does not specifically state how the income-yielding four-unit apartment building for a
value of the useful improvements should be measly amount. Consequently, the parties should
determined. The respondent court and the private therefore be allowed to adduce evidence on
respondents espouse the belief that the cost of the present market value of the apartment building
construction of the apartment building in 1965, and upon which the trial court should base its finding as to
not its current market value, is sufficient the amount of reimbursement to be paid by the
reimbursement for necessary and useful landowner.[88] (Emphases supplied.)
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, Still following the rules of accession, civil fruits, such as rents, belong
Jr., this Court pegged the value of the useful
improvements consisting of various fruits, bamboos, to the owner of the building.[89] Thus, Dr. Rosario has a right to the
a house and camarin made of strong material based
rents of the improvements on Lot No. 356-A and is under no obligation
on the market value of the said
improvements. In Sarmiento vs. Agana, despite the to render an accounting of the same to anyone. In fact, it is the Torbela
finding that the useful improvement, a residential
house, was built in 1967 at a cost of between eight siblings who are required to account for the rents they had collected
thousand pesos (P8,000.00) to ten thousand pesos from the lessees of the commercial building and turn over any balance
(P10,000.00), the landowner was ordered to
reimburse the builder in the amount of forty thousand to Dr. Rosario. Dr. Rosarios right to the rents of the improvements on
pesos (P40,000.00), the value of the house at the Lot No. 356-A shall continue until the Torbela siblings have chosen
time of the trial. In the same way, the landowner was
required to pay the "present value" of the house, a their option under Article 448 of the Civil Code. And in case the

37
Torbela siblings decide to appropriate the improvements, Dr. Rosario restraint and measured objectivity. The circumstances of the case call
shall have the right to retain said improvements, as well as the rents for a reduction of the award of exemplary damages to P100,000.00.
thereof, until the indemnity for the same has been paid.[90]
As regards attorney's fees, they may be awarded when the
Dr. Rosario is defendant's act or omission has compelled the plaintiff to litigate with
liable for damages
to the Torbela third persons or to incur expenses to protect his interest. Because of
siblings. Dr. Rosarios acts, the Torbela siblings were constrained to institute
several cases against Dr. Rosario and his spouse, Duque-Rosario, as

The Court of Appeals ordered Dr. Rosario to pay the Torbela well as Banco Filipino, which had lasted for more than 25

siblings P300,000.00 as moral damages; P200,000.00 as exemplary years. Consequently, the Torbela siblings are entitled to an award of

damages; and P100,000.00 as attorneys fees. attorney's fees and the amount of P100,000.00 may be considered

Indeed, Dr. Rosarios deceit and bad faith is evident when, being fully rational, fair, and reasonable.

aware that he only held Lot No. 356-A in trust for the Torbela siblings,
Banco Filipino is
he mortgaged said property to PNB and Banco Filipino absent the entitled to a writ of
possession for Lot
consent of the Torbela siblings, and caused the irregular cancellation
No. 5-F-8-C-2-B-2-
of the Torbela siblings adverse claim on TCT No. 52751. Irrefragably, A.
Dr. Rosarios betrayal had caused the Torbela siblings (which included
Dr. Rosarios own mother, Eufrosina Torbela Rosario) mental anguish, The Court emphasizes that Pet. Case No. U-822, instituted by
serious anxiety, and wounded feelings. Resultantly, the award of Banco Filipino for the issuance of a writ of possession before the RTC
moral damages is justified, but the amount thereof is reduced 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
to P200,000.00.
loan from Banco Filipino, is located in Dagupan City, Pangasinan, and
the petition for issuance of a writ of possession for the same should
In addition to the moral damages, exemplary damages may also be be separately filed with the RTC of Dagupan City). Since the Court has
imposed given that Dr. Rosarios wrongful acts were accompanied by already granted herein the reconveyance of Lot No. 356-A from Banco
bad faith. However, judicial discretion granted to the courts in the Filipino to the Torbela siblings, the writ of possession now pertains
only to Lot No. 5-F-8-C-2-B-2-A.
assessment of damages must always be exercised with balanced

38
The Court has consistently ruled that the one-year redemption period
To recall, the Court of Appeals affirmed the issuance by the
should be counted not from the date of foreclosure sale, but from the
RTC of a writ of possession in favor of Banco Filipino. Dr. Rosario no
time the certificate of sale is registered with the Registry of
longer appealed from said judgment of the appellate court. Already
legally separated from Dr. Rosario, Duque-Rosario alone challenges Deeds.[91] No copy of TCT No. 104189 can be found in the records of
the writ of possession before this Court through her Petition in G.R. this case, but the fact of annotation of the Certificate of Sale thereon
No. 140553. was admitted by the parties, only differing on the date it was
made: April 14, 1987 according to Banco Filipino and April 15, 1987
Duque-Rosario alleges in her Petition that Lot No. 5-F-8-C-2-
as maintained by Duque-Rosario. Even if the Court concedes that the
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 Certificate of Sale was annotated on TCT No. 104189 on the later
much credence to Duque-Rosarios claim of sole ownership of Lot No. date, April 15, 1987, the one-year redemption period already expired
5-F-8-C-2-B-2-A. Also, the question of whether Lot No. 5-F-8-C-2-B- on April 14, 1988.[92] The Certificate of Final Sale and Affidavit of
2-A was the paraphernal property of Duque-Rosario or the conjugal
Consolidation were executed more than a month thereafter, on May
property of the spouses Rosario would not alter the outcome of
24, 1988 and May 25, 1988, respectively, and were clearly not
Duque-Rosarios Petition.
premature.
It is true that the rule on redemption is liberally construed in
The following facts are undisputed: Banco Filipino extrajudicially
favor of the original owner of the property. The policy of the law is to
foreclosed the mortgage constituted on Lot No. 5-F-8-C-2-B-2-A and
aid rather than to defeat him in the exercise of his right of
the two other properties after Dr. Rosario defaulted on the payment of
redemption.[93] However, the liberal interpretation of the rule on
his loan; Banco Filipino was the highest bidder for all three properties
redemption is inapplicable herein as neither Duque-Rosario nor Dr.
at the foreclosure sale on April 2, 1987; the Certificate of Sale dated
Rosario had made any attempt to redeem Lot No. 5-F-8-C-2-B-2-
April 2, 1987 was registered in April 1987; and based on the Certificate
A. Duque-Rosario could only rely on the efforts of the Torbela siblings
of Final Sale dated May 24, 1988 and Affidavit of Consolidation dated
at redemption, which were unsuccessful. While the Torbela siblings
May 25, 1988, the Register of Deeds cancelled TCT No. 104189 and
made several offers to redeem Lot No. 356-A, as well as the two other
issued TCT No. 165812 in the name of Banco Filipino for Lot No. 5-F-
properties mortgaged by Dr. Rosario, they did not make any valid
8-C-2-B-2-A on June 7, 1988.
tender of the redemption price to effect a valid redemption. The
general rule in redemption is that it is not sufficient that a person

39
offering to redeem manifests his desire to do so. The statement of Equally unpersuasive is Duque-Rosarios argument that the
intention must be accompanied by an actual and simultaneous tender writ of possession over Lot No. 5-F-8-C-2-B-2-A should not be issued
of payment. The redemption price should either be fully offered in legal given the defects in the conduct of the foreclosure sale (i.e., lack of
tender or else validly consigned in court. Only by such means can the personal notice to Duque-Rosario) and consolidation of title (i.e.,
auction winner be assured that the offer to redeem is being made in failure to provide Duque-Rosario with copies of the Certificate of Final
good faith.[94] In case of disagreement over the redemption price, the Sale).
redemptioner may preserve his right of redemption through judicial
action, which in every case, must be filed within the one-year period The right of the purchaser to the possession of the foreclosed
of redemption. The filing of the court action to enforce redemption, property becomes absolute upon the expiration of the redemption
being equivalent to a formal offer to redeem, would have the effect of period. The basis of this right to possession is the purchaser's
preserving his redemptive rights and freezing the expiration of the one- ownership of the property. After the consolidation of title in the buyer's
year period.[95] But no such action was instituted by the Torbela name for failure of the mortgagor to redeem, the writ of possession
siblings or either of the spouses Rosario. becomes a matter of right and its issuance to a purchaser in an
extrajudicial foreclosure is merely a ministerial function.[96]
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 The judge with whom an application for a writ of possession
invoking the pendency of Civil Case No. U-4359, the Torbela siblings is filed need not look into the validity of the mortgage or the manner of
action for recovery of ownership and possession and damages, which its foreclosure. Any question regarding the validity of the mortgage or
supposedly tolled the period for redemption of the foreclosed its foreclosure cannot be a legal ground for the refusal to issue a writ
properties. Without belaboring the issue of Civil Case No. U-4359 of possession. Regardless of whether or not there is a pending suit for
suspending the redemption period, the Court simply points out to the annulment of the mortgage or the foreclosure itself, the purchaser
Duque-Rosario that Civil Case No. U-4359 involved Lot No. 356-A is entitled to a writ of possession, without prejudice, of course, to the
only, and the legal consequences of the institution, pendency, and eventual outcome of the pending annulment case. The issuance of a
resolution of Civil Case No. U-4359 apply to Lot No. 356-A alone. 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]

40
WHEREFORE, in view of the foregoing, the Petition of the Torbela the reasonable rent of Lot No. 356-A to be paid by Dr. Rosario to the
siblings in G.R. No. 140528 is GRANTED, while the Petition of Lena Torbela siblings;
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 (4) The Torbela siblings are DIRECTED to submit an
No. 39770, which affirmed with modification the Amended Decision accounting of the rents of the improvements on Lot No. 356-A which
dated January 29, 1992 of the RTC in Civil Case Nos. U-4359 and U- they had received and to turn over any balance thereof to Dr. Rosario;
4733 and Pet. Case No. U-822, is AFFIRMED WITH
MODIFICATIONS, to now read as follows: (5) Dr. Rosario is ORDERED to pay the Torbela
siblings P200,000.00 as moral damages, P100,000.00 as exemplary
(1) Banco Filipino is ORDERED to reconvey Lot No. 356-A to the damages, and P100,000.00 as attorneys fees; and
Torbela siblings; (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
(2) The Register of Deeds of Pangasinan is ORDERED to of Court is ORDERED to issue a writ of possession for the said
cancel TCT No. 165813 in the name of Banco Filipino and to issue a property in favor of Banco Filipino.
new certificate of title in the name of the Torbela siblings for Lot No.
356-A; TONGOY VS. CA

The case is basically an action for reconveyance


(3) The case is REMANDED to the RTC for further respecting two (2) parcels of land in Bacolod City.
The first is Lot No. 1397 of the Cadastral Survey of
proceedings to determine the facts essential to the proper application
Bacolod, otherwise known as Hacienda Pulo,
of Articles 448 and 546 of the Civil Code, particularly: (a) the present containing an area of 727,650 square meters and
originally registered under Original Certificate of Title
fair market value of Lot No. 356-A; (b) the present fair market value of No. 2947 in the names of Francisco Tongoy, Jose
the improvements thereon; (c) the option of the Torbela siblings to Tongoy, Ana Tongoy, Teresa Tongoy and Jovita
Tongoy in pro-indiviso equal shares. Said co-owners
appropriate the improvements on Lot No. 356-A or require Dr. Rosario were all children of the late Juan Aniceto Tongoy.
to purchase Lot No. 356-A; and (d) in the event that the Torbela The second is Lot No. 1395 of the Cadastral Survey
of Bacolod, briefly referred to as Cuaycong property,
siblings choose to require Dr. Rosario to purchase Lot No. 356-A but containing an area of 163,754 square meters, and
the value thereof is considerably more than the improvements, then

41
formerly covered by Original Certificate of Title No. per annum. The mortgagors however were unable to
2674 in the name of Basilisa Cuaycong. keep up with the yearly amortizations, as a result of
which the PNB instituted judicial foreclosure
Of the original registered co-owners of Hacienda proceedings over Hacienda Pulo on June 18, 1931.
Pulo, three died without issue, namely: Jose Tongoy, To avoid foreclosure, one of the co-owners and
who died a widower on March 11, 1961; Ama mortgagors, Jose Tongoy, proposed to the PNB an
Tongoy, who also died single on February 6, 1957, amortization plan that would enable them to liquidate
and Teresa Tongoy who also died single on their account. But, on December 23, 1932, the PNB
November 3, 1949. The other two registered co- Branch Manager in Bacolod advised Jose Tongoy by
owners, namely, Francisco Tongoy and Jovita letter that the latter's proposal was rejected and that
Tongoy, were survived by children. Francisco the foreclosure suit had to continue. As a matter of
Tongoy, who died on September 15, 1926, had six fact, the suit was pursued to finality up to the
children; Patricio D. Tongoy and Luis D. Tongoy by Supreme Court which affirmed on July 31, 1935 the
the first marriage; Amado P. Tongoy, Ricardo P. decision of the CFI giving the PNB the right to
Tongoy; Cresenciano P. Tongoy and Norberto P. foreclose the mortgage on Hacienda Pulo. In the
Tongoy by his second wife Antonina Pabello whom meantime, Patricio D. Tongoy and Luis Tongoy
he subsequently married sometime after the birth of executed on April 29, 1933 a Declaration of
their children. For her part, Jovita Tongoy (Jovita Inheritance wherein they declared themselves as the
Tongoy de Sonora), who died on May 14, 1915, had only heirs of the late Francisco Tongoy and thereby
four children: Mercedes T. Sonora, Juan T. Sonora, entitled to the latter's share in Hacienda Pulo. On
Jesus T. Sonora and Trinidad T. Sonora. March 13, 1934, Ana Tongoy, Teresa Tongoy,
Mercedes Sonora, Trinidad Sonora, Juan Sonora
and Patricio Tongoy executed an "Escritura de
By the time this case was commenced, the late
Venta" (Exh. 2 or Exh. W), which by its terms
Francisco Tongoy's aforesaid two children by his first
marriage, Patricio D. Tongoy and Luis D. Tongoy, transferred for consideration their rights and
have themselves died. It is claimed that Patricio D. interests over Hacienda Pulo in favor of Luis D.
Tongoy. Thereafter, on October 23, 1935 and
Tongoy left three acknowledged natural children
November 5, 1935, respectively, Jesus Sonora and
named Fernando, Estrella and Salvacion, all
Jose Tongoy followed suit by each executing a
surnamed Tongoy. On the other hand, there is no
similar "Escritura de Venta" (Exhs. 3 or DD and 5 or
question that Luis D. Tongoy left behind a son,
Francisco A. Tongoy, and a surviving spouse, Ma. AA) pertaining to their corresponding rights and
Rosario Araneta Vda. de Tongoy. interests over Hacienda Pulo in favor also of Luis D.
Tongoy. In the case of Jose Tongoy, the execution
of the "Escritura de Venta" (Exh. 5 or AA) was
The following antecedents are also undisputed, preceded by the execution on October 14, 1935 of
though by no means equally submitted as the an Assignment of Rights (Exh. 4 or Z) in favor of
complete facts, nor seen in Identical lights: On April Luis D. Tongoy by the Pacific Commercial Company
17, 1918, Hacienda Pulo was mortgaged by its as judgment lien-holder (subordinate to the PNB
registered co-owners to the Philippine National Bank mortgage) of Jose Tongoy's share in Hacienda Pulo.
(PNB), Bacolod Branch, as security for a loan of On the basis of the foregoing documents, Hacienda
P11,000.00 payable in ten (10) years at 8% interest

42
Pulo was placed on November 8, 1935 in the name and as judicial administrator of the estate of the late
of Luis D. Tongoy, married to Maria Rosario Luis D. Tongoy, and Maria Rosario Araneta Vda. de
Araneta, under Transfer Certificate of "Title No. Tongoy. Also impleaded as defendants, because of
20154 (Exh. 20). In the following year, the title of the their unwillingness to join as plaintiffs were Amado
adjacent Cuaycong property also came under the P. Tongoy, Norberto P. Tongoy ** and Fernando P.
name of Luis D. Tongoy, married to Maria Rosario Tongoy. Alleging in sum that plaintiffs and/or their
Araneta, per Transfer Certificate of Title No. 21522, predecessors transferred their interests on the two
by virtue of an "Escritura de Venta" (Exh. 6) lots in question to Luis D. Tongoy by means of
executed in his favor by the owner Basilisa simulated sales, pursuant to a trust arrangement
Cuaycong on June 22, 1936 purportedly for whereby the latter would return such interests after
P4,000.00. On June 26, 1936, Luis D. Tongoy the mortgage obligations thereon had been settled,
executed a real estate mortgage over the Cuaycong the complaint prayed that 'judgment be rendered in
property in favor of the PNB, Bacolod Branch, as favor of the plaintiffs and against the defendants-
security for loan of P4,500.00. Three days thereafter,
on June 29, 1936, he also executed a real estate (a) Declaring that the HACIENDA
mortgage over Hacienda Pulo in favor of the same PULO, Lot 1397-B-3 now covered
bank to secure an indebtedness of P21,000.00, by T.C.T. No. 29152, Bacolod City,
payable for a period of fifteen (15) years at 8% per and the former Cuaycong property,
annum. After two decades, on April 17, 1956, Luis D. Lot 1395 now covered by T.C.T. No.
Tongoy paid off all his obligations with the PNB, T-824 (RT-4049) (21522), Bacolod
amounting to a balance of P34,410.00, including the City, as trust estate belonging to the
mortgage obligations on the Cuaycong property and plaintiffs and the defendants in the
Hacienda Pulo. However, it was only on April 22, proportion set forth in Par. 26 of this
1958 that a release of real estate mortgage was complaint;
executed by the bank in favor of Luis D. Tongoy. On
February 5, 1966, Luis D. Tongoy died at the (b) Ordering the Register of Deeds
Lourdes Hospital in Manila, leaving as heirs his wife
of Bacolod City to cancel T.C.T. No.
Maria Rosario Araneta and his son Francisco A.
29152 and T.C.T. No. T-824 (RT-
Tongoy. Just before his death, however, Luis D.
4049) (21522), Bacolod City, and to
Tongoy received a letter from Jesus T. Sonora,
issue new ones in the names of the
dated January 26, 1966, demanding the return of the plaintiffs and defendants in the
shares in the properties to the co-owners. proportions set forth in Par. 26
thereof, based on the original area
Not long after the death of Luis D. Tongoy, the case of HACIENDA PULO;
now before Us was instituted in the court below on
complaint filed on June 2, 1966 by Mercedes T. (c) Ordering the defendants
Sonora, Juan T. Sonora ** , Jesus T. Sonora, Francisco A. Tongoy and Ma.
Trinidad T. Sonora, Ricardo P. Tongoy and
Rosario Araneta Vda. de Tongoy to
Cresenciano P. Tongoy. Named principally as
render an accounting to the plaintiffs
defendants were Francisco A. Tongoy, for himself
of the income of the above two

43
properties from the year 1958 to the allegedly bringing an unfounded and malicious
present and to deliver to each complaint.
plaintiff his corresponding share with
legal interest thereon from 1958 and For their part, defendants Norberto Tongoy and
until the same shall have been fully Amado Tongoy filed an answer under oath,
paid; admitting every allegation of the complaint. On the
other hand, defendant Fernando Tongoy originally
(d) Ordering the defendants joined Francisco A. Tongoy in the latter's answer,
Francisco Tongoy and Ma. Rosario but after the case was submitted and was pending
Araneta Vda. de Tongoy to pay to decision, the former filed a verified answer also
the plaintiffs as and for attorney's admitting every allegation of the complaint.
fees an amount equivalent to
twenty-four per cent (24%) of the Meanwhile, before the case went to trial, a motion to
rightful shares of the plaintiffs over intervene as defendants was filed by and was
the original HACIENDA PULO and granted to Salvacion Tongoy and Estrella Tongoy,
the Cuaycong property, including alleging they were sisters of the full blood of
the income thereof from 1958 to the Fernando Tongoy. Said intervenors filed an answer
present; and similarly admitting every allegation of the complaint.

(e) Ordering the defendants After trial on the merits, the lower court rendered its
Francisco A. Tongoy and Ma. decision on October 15, 1968 finding the existence
Rosario Vda. de Tongoy to pay the of an implied trust in favor of plaintiffs, but at the
costs of this suit. same time holding their action for reconveyance
barred by prescription, except in the case of Amado
Plaintiffs also pray for such other and further P. Tongoy, Ricardo P. Tongoy, Cresenciano P.
remedies just and equitable in the premises. Tongoy, and Norberto P. Tongoy, who were
adjudged entitled to reconveyance of their
Defendants Francisco A. Tongoy and Ma. Rosario corresponding shares in the property left by their
Vda. de Tongoy filed separate answers, denying in father Francisco Tongoy having been excluded
effect plaintiffs' causes of action, and maintaining, therefrom in the partition had during their minority,
among others, that the sale to Luis D. Tongoy of the and not having otherwise signed any deed of
two lots in question was genuine and for a valuable transfer over such shares. The dispositive portion of
consideration, and that no trust agreement of the decision reads:
whatever nature existed between him and the
plaintiffs. As affirmative defenses, defendants also IN VIEW OF ALL THE FOREGOING considerations,
raised laches, prescription, estoppel, and the statute judgment is hereby rendered dismissing the
of frauds against plaintiffs. Answering defendants complaint, with respect to Mercedes, Juan, Jesus
counter claimed for damages against plaintiffs for and Trinidad, all surnamed Sonora. The defendants
Francisco Tongoy and Rosario Araneta Vda. de

44
Tongoy are hereby ordered to reconvey the that the defendants-appellants were not ordered to render an
proportionate shares of Ricardo P., Cresenciano P., accounting of the fruits and income of the properties in trust; and that
Amado P., and Norberto P., all surnamed Tongoy in defendants were not ordered to pay the attorney's fees of plaintiffs-
Hda. Pulo and the Cuaycong property. Without appellants. For their part, defendants-appellants Francisco A.
damages and costs. Tongoy and Ma. Rosario Araneta Vda. de Tongoy not only refuted
the errors assigned by plaintiffs-appellants, but also assailed the
SO ORDERED. findings that there was preponderance of evidence in support of the
existence of an implied trust; that Ricardo P. Tongoy, Amado P.
Upon motion of plaintiffs, the foregoing dispositive Tongoy and Norberto P. Tongoy are the legitimate half-brothers of
the late Luis D. Tongoy; that their shares in Hacienda Pulo and
portion of the decision was subsequently clarified by
Cuaycong property should be reconveyed to them by defendants-
the trial court through its order of January 9, 1969 in
appellants; and that an execution was ordered pending appeal.
the following tenor:

Considering the motion for On December 3, 1975, respondent court rendered the questioned
decision, the dispositive portion of which is as follows:
clarification of decision dated
November 7, 1968 and the
opposition thereto, and with the view WHEREFORE, judgment is hereby rendered
to avoid further controversy with modifying the judgment and Orders appealed from
respect to the share of each heir, by ordering Maria Rosario Araneta Vda. de Tongoy
the dispositive portion of the and Francisco A. Tongoy. —
decision is hereby clarified in the
sense that, the proportionate legal 1) To reconvey to Mercedes T. Sonora, Juan T.
share of Amado P. Tongoy, Ricardo Sonora (as substituted and represented by his
P. Tongoy, Cresenciano P. Tongoy heirs), Jesus T. Sonora and Trinidad T. Sonora each
and the heirs of Norberto P. Tongoy, a 7/60th portion of both Hacienda Pulo and the
in Hda. Pulo and Cuaycong property Cuaycong property, based on their original shares;
consist of 4/5 of the whole trust
estate, leaving 1/5 of the same to 2) To reconvey to Ricardo P. Tongoy, Cresenciano
the heirs of Luis D. Tongoy. P. Tongoy, Amado P. Tongoy and Norberto P.
Tongoy as substituted and represented by his heirs
SO ORDERED. (pp. 157-166, Vol. I, rec.). each a 14/135th portion of both Hacienda Pulo and
the Cuaycong property, also based on their original
Both parties appealed the decision of the lower court to respondent shares; provided that the 12 hectares already
appellate court. Plaintiffs-appellants Mercedes T. Sonora, Jesus T. reconveyed to them by virtue of the Order for
Sonora, Trinidad T. Sonora and the heirs of Juan T. Sonora execution pending appeal of the judgment shall be
questioned the lower court's decision dismissing their complaint on duly deducted;
ground of prescription, and assailed it insofar as it held that the
agreement created among the Tongoy-Sonora family in 1931 was an 3) To render an accounting to the parties named in
implied, and not an express, trust; that their action had prescribed; pars. 1 and 2 above with respect to the income of

45
Hacienda Pulo and the Cuaycong property from May VI. The Court of Appeals erred in ordering petitioners to pay
5, 1958 up to the time the reconveyances as herein attorney's fees of P 20,000.00.
directed are made; and to deliver or pay to each of
said parties their proportionate shares of the income, VII. The Court of Appeals erred in declaring that execution pending
if any, with legal interest thereon from the date of appeal in favor of respondents Tongoys was justified.
filing of the complaint in this case, January 26, 1966,
until the same is paid;
I

4) To pay unto the parties mentioned in par. 1 above


It appears to US that the first and second errors assigned by
attorney's fees in the sum of P 20,000.00; and
petitioners are questions of fact which are beyond OUR power to
review.
5) To pay the costs.
Thus, as found by the respondent Court of Appeals:
SO ORDERED (pp. 207-208, Vol. 1, rec.).
xxx xxx xxx
Petitioners Francisco A. Tongoy and Ma. Rosario Araneta Vda. de
Tongoy (defendants-appellants) have come before Us on petition for We shall consider first the appeal interposed by
review on certiorari with the following assignments of errors (pp. 23-
plaintiffs-appellants. The basic issues underlying the
24, Brief for Petitioners):
disputed errors raised suggest themselves as
follows: 1) whether or not the conveyance respecting
I. The Court of Appeals erred in finding that there was a trust the questioned lots made in favor of Luis D. Tongoy
constituted on Hacienda Pulo. in 1934 and 1935 were conceived pursuant to a trust
agreement among the parties; 2) if so, whether the
II. The Court of Appeals erred in finding that the purchase price for trust created was an express or implied trust; and 3)
the Cuaycong property was paid by Jose Tongoy and that said if the trust was not an express trust, whether the
property was also covered by a trust in favor of respondents. action to enforce it has prescribed.

III. Conceding, for the sake of argument, that respondents have The first two issues indicated above will be
adequately proven an implied trust in their favor, the Court of considered together as a matter of logical necessity,
Appeals erred in not finding that the rights of respondents have being so closely interlocked. To begin with, the trial
prescribed, or are barred by laches. court found and ruled that the transfers made in
favor of Luis D. Tongoy were clothed with an implied
IV. The Court of Appeals erred in finding that the respondents trust, arriving at this conclusion as follows:
Tongoy are the legitimated children of Francisco Tongoy.
The Court finds that there is
V. Granting arguendo that respondents Tongoy are the legitimated preponderance of evidence in
children of Francisco Tongoy, the Court of Appeals erred in not support of the existence of
finding that their action against petitioners has prescribed. constructive, implied or tacit trust.

46
The hacienda could have been of Luis D. Tongoy dated November
leased to third persons and the 5, 1935 (Exhibit 'BB-1') is very
rentals would have been sufficient to significant, the tenor of which is
liquidate the outstanding obligation quoted hereunder:
in favor of the Philippine National
Bank. But the co-owners agreed to Dear Brother Jose:
give the administration of the
property to Atty. Luis D. Tongoy, so Herewith is the deed which the bank
that the latter can continue giving sent for us to sign. The bank made
support to the Tongoy-Sonora family
me pay the Pacific the sum of
and at the same time, pay the
P100.00 so as not to sell anymore
amortization in favor of the
the land in public auction. This deed
Philippine National Bank, in the
is for the purpose of dispensing with
same manner that Jose Tongoy did. the transfer of title to the land in the
And of course, if the administration name of the bank, this way we will
is successful, Luis D. Tongoy would
avoid many expenses.
benefit with the profits of the
hacienda. Simulated deeds of
conveyance in favor of Luis D. Yours,
Tongoy were executed to facilitate
and expedite the transaction with Luis D. Tongoy
the Philippine National Bank. Luis D.
Tongoy supported the Tongoy- Jose Tongoy signed the deed because he incurred
Sonora family, defrayed the the obligation with the Pacific and paid it. In
expenses of Dr. Jesus Sonora and releasing the second mortgage, Luis Tongoy paid
Atty. Ricardo P. Tongoy, in their only P100.00 and the deed was in favor of Luis
studies. Luis Tongoy even gave Tongoy. This was done in order "to avoid many
Sonoras their shares in the expenses " of both Jose and Luis as obviously
"beneficacion" although the referred to in the word "WE".
"beneficacion" were included in the
deeds of sale. The amount of Those two transactions with nominal considerations
consideration of the one-fifth (15) are irrefutable and palpable evidence of the
share of Jose Tongoy is one existence of constructive or implied trust.
hundred (P 100,00) pesos only.
Likewise the consideration of the
Another significant factor in support of the existence
sale of the interests of the Pacific
of constructive trust is the fact that in 1933-34, when
Commercial Company is only
proposals for amicable settlement with the Philippine
P100.00 despite the fact that Jose
National Bank were being formulated and
Tongoy paid in full his indebtedness
considered, Luis D. Tongoy was yet a neophite (sic)
in favor of said company. The letter
in the practice of law, and he was still a bachelor. It

47
was proven that it was Jose Tongoy, the of making five copies and furnished copy to each co-
administrator of Hda. Pulo, who provided for his owner, or at least one copy would have been kept by
expenses when he studied law, when he married him? Why is it that when Atty. Arboleda invited Mrs.
Maria Araneta, the latter's property were leased and Maria Rosario Araneta Vda. de Tongoy and her son
the rentals were not sufficient to cover all the to see him in his house, Atty. Arboleda did not reveal
considerations stated in the deeds of sale executed or mention the fact of the existence of a written trust
by the co-owners of Hda. Pulo, no matter how agreement signed by the late Luis D. Tongoy? The
inadequate were the amounts so stated. These revelation of the existence of a written trust
circumstances fortified the assertion of Judge agreement would have been a vital and controlling
Arboleda that Luis D. Tongoy at that time was in no factor in the amicable settlement of the case, which
condition to pay the purchase price of the property Atty. Arboleda would have played an effective role
sold, as an unbiased mediator. Why did not Atty. Arboleda
state the precise context of the written agreement;
But the Court considers the evidence of execution of its form and the language it was written, knowing as
express trust agreement insufficient. Express trust he should, the rigid requirements of proving the
agreement was never mentioned in the plaintiffs' contents of a lost document. It is strange that when
pleadings nor its existence asserted during the pre- Mrs. Maria Rosario Araneta Vda. de Tongoy and her
trial hearings. It was only during the trial on the son were in the house of Atty. Arboleda, in
merits when Atty. Eduardo P. Arboleda went on to compliance with his invitation for the supposed
testify that he prepared the deed of trust agreement. friendly settlement of the case, Atty. Arboleda did not
even submit proposals for equitable arbitration of the
case. On the other hand, according to Mrs. Tongoy,
Indeed the most formidable weapon the plaintiff
Mrs. Arboleda intimated her desire to have Atty.
could have used in destroying the "impregnable
Arboleda be taken in. The Court refuses to believe
walls of the defense castle consisting of public
documents" is testimony of Atty. Eduardo P. that Judge Arboleda was aware of the alleged
Arboleda. He is most qualified and in a knowable intimations of Mrs. Arboleda, otherwise he would not
have tolerated or permitted her to indulge in such an
position to testify as to the truth of the existence of
embarrassing and uncalled for intrusion. The
the trust agreement, because he was not only the
plaintiffs evidently took such ungainly insinuations
partner of the late Luis D. Tongoy in their practice of
with levity so much so that they did not think it
law especially during the time he prepared and/or
notarized the deeds of sale but he was also his necessary to bring Mrs. Arboleda to Court to refute
colleague in the City Council. But however forceful this fact.
would be the impact of his testimony, it did not go
beyond the establishment of constructive or implied The parties, on either side of this appeal take issue
trust agreement. In the first place, if it is true that with the conclusion that there was an implied trust,
written trust agreement was prepared by him and one side maintaining that no trust existed at all, the
signed by Luis D. Tongoy for the security of the other that the trust was an express trust.
vendor, why is it that only two copies of the
agreement were prepared, one copy furnished Jose To begin with, We do not think the trial court erred in
Tongoy and the other kept by Luis Tongoy, instead its ultimate conclusion that the transfers of the two

48
lots in question made in favor of the late Luis D. incompetent as proof thereof anent the timely
Tongoy by his co-owners in 1933 and 1934 created objections of defendants-appellees to the
an implied trust in favor of the latter. While, on one introduction of such testimonial evidence on the
hand, the evidence presented by plaintiffs-appellants basis of the survivorship rule. The witnesses being
to prove an express trust agreement accompanying themselves parties to the instant case, suing the
the aforesaid transfers of the lots are incompetent, if representatives of the deceased Luis D. Tongoy
not inadequate, the record bears sufficiently clear upon a demand against the latter's estate, said
and convincing evidence that the transfers were only witnesses are barred by the objections of
simulated to enable Luis D. Tongoy to save defendants-appellees from testifying on matters of
Hacienda Pulo from foreclosure for the benefit of the fact occurring before the death of the deceased
co-owners, including himself. Referring in more (Sec. 20[a], Rule 130), more particularly where such
detail to the evidence on the supposed express trust, occurrences consist of verbal agreements or
it is true that plaintiffs- appellants Jesus T. Sonora, statements made by or in the presence of the
Ricardo P. Tongoy, Mercedes T. Sonora and deceased.
Trinidad T. Sonora have testified with some
vividness on the holding of a family conference in Neither has the existence of the alleged contra-
December 1931 among the co-owners of Hacienda documento-- by which Luis D. Tongoy supposedly
Pulo to decide on steps to be taken vis-a-vis the acknowledged the transfers to be simulated and
impending foreclosure of the hacienda by the PNB bound himself to return the shares of his co-owners
upon the unpaid mortgage obligation thereon. after the mortgage on the Hacienda had been
Accordingly, the co-owners had agreed to entrust discharged-been satisfactorily established to merit
the administration and management of Hacienda consideration as proof of the supposed express
Pulo to Luis D. Tongoy who had newly emerged as trust. We can hardly add to the sound observations
the lawyer in the family. Thereafter, on the of the trial court in rejecting the evidence to the
representation of Luis D. Tongoy that the bank effect as insufficient, except to note further that at
wanted to deal with only one person it being least plaintiffs-appellants Mercedes T. Sonora and
inconvenient at time to transact with many persons, Trinidad T. Sonora have testified having been
specially when some had to be out of town the co- apprised of the document and its contents when Luis
owners agreed to make simulated transfers of their D. Tongoy supposedly delivered one copy to Jose
participation in Hacienda Pulo to him. As the Tongoy. And yet as the trial court noted, no express
evidence stands, even if the same were competent, trust agreement was ever mentioned in plaintiffs-
it does not appear that there was an express appellants' pleadings or at the pre-trial.
agreement among the co-owners for Luis D. Tongoy
to hold Hacienda Pulo in trust, although from all the
Nevertheless, there is on record enough convincing
circumstances just indicated such a trust may be
evidence not barred by the survivorship rule, that the
implied under the law (Art. 1453, Civil Code; also
transfers made by the co-owners in favor of Luis D.
see Cuaycong vs. Cuaycong, L-21616, December Tongoy were simulated and that an implied or
11, 1967, 21 SCRA 1192, 1197-1198). But, resulting trust thereby came into existence, binding
whatever may be the nature of the trust suggested in
the latter to make reconveyance of the co-owners'
the testimonies adverted to, the same are
shares after the mortgage indebtedness on

49
Hacienda Pulo has been discharged. Thus it arrangement made with the PNB by Luis D. Tongoy
appears beyond doubt that Hacienda Pulo has been to redeem the shares or participation of his co-
the source of livelihood to the co-owners and their owners. That this was readily assented to in the
dependents, when the subject transfers were made. anxiety to save and preserve Hacienda Pulo for all
It is most unlikely that all of the several other co- its co-owners appears very likely anent undisputed
owners should have come at the same time to one evidence that the said co-owners had been used to
mind about disposing of their participation in the entrusting the management thereof to one among
hacienda, when the same counted so much in their them, dating back to the time of Francisco Tongoy
subsistence and self-esteem. Only extreme who once acted as administrator, followed by Jose
necessity would have forced the co-owners to act in Tongoy, before Luis D. Tongoy himself took over the
unison towards earnestly parting with their shares, hacienda.
taking into account the meager considerations
mentioned in the deeds of transfer which at their Strongly supported the theory that the transfers were
most generous gave to each co-owner only only simulated to enable Luis D. Tongoy (to) have
P2,000.00 for a 1/5 part of the hacienda. As it effective control and management of the hacienda
appears to Us, the impending foreclosure on the for the benefit of all the co-owners is preponderant
mortgage for P11,000.00 could not have created evidence to the effect that he was in no financial
such necessity. Independent of testimony to the condition at the time to purchase the hacienda.
effect, it is not hard to surmise that the hacienda Witness Eduardo Arboleda who was a law partner of
could have been leased to others on terms that Luis D. Tongoy when the transfers were made, and
would have satisfied the mortgage obligation. who is not a party in this case, emphatically testified
Moreover, as it turned out, the PNB was amenable, that Luis D. Tongoy could not have produced the
and did actually accede, to a restructuring of the money required for the purchase from his law
mortgage loan in favor of Luis D. Tongoy, thereby practice then. On the other hand, the suggestion that
saving the hacienda from foreclosure. As a matter of his wife Ma. Rosario Araneta had enough income
fact, the co-owners must have been posted on the from her landed properties to sufficiently augment
attitude of the bank regarding the overdue mortgage Luis D. Tongoy's income from his practice is belied
loan, and its willingness to renew or restructure the by evidence that such properties were leased, and
same upon certain conditions. Under such the rentals collected in advance, for eleven (11) crop
circumstances, it is more reasonable to conclude years beginning 1931 (Exh. EEE), when they were
that there was no compelling reason for the other co- not yet married.
owners to sell out their birthrights to Luis D. Tongoy,
and that the purported transfers were, as claimed by
The financial incapacity of Luis D. Tongoy
them in reality simulated pursuant to the suggestion
intertwines, and together gains strength, with proof
that the bank wanted to deal with only one person. In
that the co-owners as transferors in the several
fact, as recited in the Escritura de Venta (Exh. AA)
deeds of sale did not receive the considerations
executed between Luis. D. Tongoy and Jose stated therein. In addition to the testimony of the
Tongoy, it appears that the series of transfers made notary public, Eduardo P. Arboleda, that no
in favor of the former by the co-owners of Hacienda
consideration as recited in the deeds of transfer
Pulo followed and was made pursuant to a prior
were ever paid in his presence, all the transferors

50
who testified including Jesus T. Sonora, Mercedes apparently from the sustenance from Hacienda Pulo
T. Sonora and Trinidad T. Sonora-all denied having for a long time following the alleged transfers in favor
received the respective considerations allegedly of Luis D. Tongoy. In fact, it does not appear
given them. While said transferors are parties in this possible that Jesus T. Sonora and Ricardo P.
case, it has been held that the survivorship rule has Tongoy could have finished medicine and law,
no application where the testimony offered is to the respectively, without support from Luis D. Tongoy as
effect that a thing did not occur (Natz vs. Agbulos, administrator of the common property.
CA-G.R. No. 4098-R, January 13, 1951; Mendoza v.
C. Vda. de Goitia, 54 Phil. 557, cited by Mora, All the foregoing, considered together, constitute
Comments on the Rules of Court, 1970 ed., Vol. 5, clear and convincing evidence that the transfers
p. 174). made in favor of Luis D. Tongoy by his co- owners
were only simulated, under circumstances giving rise
Also of some significance is the fact that the deeds to an implied or resulting trust whereby Luis D.
of transfer executed by Ana Tongoy, Teresa Tongoy, Tongoy is bound to hold title in trust for the benefit of
Mercedes Sonora, Trinidad Sonora, Juan Sonora, his co-owners (cf. de Buencamino, et al. vs. De
and Patricio Tongoy (Exh. W) as well as that by Matias, et al., L-19397, April 30, 1966, 16 SCRA
Jesus Sonora (Exh. DD) did not even bother to 849)" [pp. 170-181, Vol. I, rec.].
clarify whether Luis D. Tongoy as transferee of his
co-owners' share was assuming the indebtedness The Court of Appeals found enough convincing evidence not barred
owing to the PNB upon the mortgage on Hacienda by the aforecited survivorship rule to the effect that the transfers
Pulo. In an honest-to-goodness sale, it would have made by the co- owners in favor of Luis D. Tongoy were simulated.
been most unlikely that the transferors would have
paid no attention to this detail, least of all where, as
All these findings of fact, as a general rule, are conclusive upon US
in this case, the transfers were apparently prompted
and beyond OUR power to review. It has been well-settled that the
by the inability of the co-owners to discharge the jurisdiction of the Supreme Court in cases brought to IT from the
mortgage obligation and were being pressed for
Court of Appeals is limited to reviewing and revising errors of law
payment.
imputed to it, its findings of fact being conclusive as a matter of
general principle (Chan vs. C.A., 33 SCRA 737, 744; Alquiza vs.
Furthermore, the tenor of the letter from Luis D. Alquiza, 22 SCRA 494, 497).
Tongoy to Jose Tongoy, dated November 5, 1935
(Exhibit Bb-1), as heretofore quoted with portions of
The proofs submitted by petitioners do not place the factual findings
the decision on appeal, is very revealing of the fact
of the Court of Appeals under any of the recognized exceptions to
that the steps taken to place Hacienda Pulo in the
the aforesaid general rule.
name of Luis D. Tongoy were made for the benefit
not only of himself but for the other co-owners as
well. Thus, the letter ends with the clause-"this way I
we will avoid many expenses.
The initial crucial issue therefore is-whether or not the rights of herein
Finally, it is not without significance that the co- respondents over subject properties, which were the subjects of
owners and their dependents continued to survive simulated or fictitious transactions, have already prescribed.

51
The negative answer to the aforesaid query is found in Articles 1409 The following are the most fundamental characteristics of void or
and 1410 of the New Civil Code. Said provisions state thus: inexistent contracts:

Art. 1409. The following contracts are inexistent and 1) As a general rule, they produce no legal effects whatsoever in
void from the beginning: accordance with the principle "quod nullum est nullum producit
effectum."
xxx xxx xxx
2) They are not susceptible of ratification.
2) Those which are absolutely
simulated or fictitious; 3) The right to set up the defense of inexistence or absolute nullity
cannot be waived or renounced.
xxx xxx xxx
4) The action or defense for the declaration of their inexistence or
These contracts cannot be ratified. Neither can the absolute nullity is imprescriptible.
right to set up the defense of illegality be waived
(emphasis supplied). 5) The inexistence or absolute nullity of a contract cannot be invoked
by a person whose interests are not directly affected (p. 444,
Art. 1410. The action or defense for the declaration Comments and Jurisprudence on Obligations and Contracts, Jurado,
of the inexistence of a contract does not prescribe. 1969 Ed.; emphasis supplied).

The characteristic of simulation is the fact that the apparent contract The nullity of these contracts is definite and cannot be cured by
is not really desired nor intended to produce legal effects nor in any ratification. The nullity is permanent, even if the cause thereof has
way alter the juridical situation of the parties. Thus, where a person, ceased to exist, or even when the parties have complied with the
in order to place his property beyond the reach of his creditors, contract spontaneously (p. 595, Tolentino, supra).
simulates a transfer of it to another, he does not really intend to
divest himself of his title and control of the property; hence, the deed In Eugenio vs. Perdido, et al., No. L-7083, May 19, 1955, 97 Phil. 41,
of transfer is but a sham. This characteristic of simulation was this Court thus reiterated:
defined by this Court in the case of Rodriguez vs. Rodriguez, No. L-
23002, July 31, 1967, 20 SCRA 908. Under the existing classification, such contract would
be "inexisting" and the "action or defense for
A void or inexistent contract is one which has no force and effect declaration' of such inexistence "does not prescribe'
from the very beginning, as if it had never been entered into, and (Art. 14 10 New Civil Code). While it is true that this
which cannot be validated either by time or by ratification (p. 592, is a new provision of the New Civil Code, it is
Civil Code of the Philippines, Vol. IV, Tolentino, 1973 Ed.). nevertheless a principle recognized since Tipton vs.
Velasco, 6 Phil. 67 that "mere lapse of time cannot
Avoid contract produces no effect whatsoever either against or in give efficacy to contracts that are null and void.
favor of anyone; hence, it does not create, modify or extinguish the
juridical relation to which it refers (p. 594, Tolentino, supra).

52
Consistently, this Court held that 11 where the sale of a homestead There is no implied trust that was generated by the simulated
is nun and void, the action to recover the same does not prescribe transfers; because being fictitious or simulated, the transfers were
because mere lapse of time cannot give efficacy to the contracts that null and void ab initio-from the very beginning and thus vested no
are null and void and inexistent" (Angeles, et al. vs. Court of rights whatsoever in favor of Luis Tongoy or his heirs. That which is
Appeals, et al., No. L-11024, January 31, 1958, 102 Phil. 1006). inexistent cannot give life to anything at all.

In the much later case of Guiang vs. Kintanar (Nos. L-49634-36, July II
25, 1981, 106 SCRA 49), this Court enunciated thus:
But even assuming arguendo that such an implied trust exists
It is of no consequence, pursuant to the same between Luis Tongoy as trustee and the private respondents
article, that petitioners, the Guiang spouses, as cestui que trust, still the rights of private respondents to claim
executed on August 21, 1975, apparently in reconveyance is not barred by prescription or laches.
ratification of the impugned agreement, the deeds of
sale covering the two lots already referred to and Petitioners maintain that, even conceding that respondents have
that petitioners actually received in part or in whole adequately proven an implied trust in their favor, their rights have
the money consideration stipulated therein, for already prescribed, since actions to enforce an implied trust created
according to the same Article 1409, contracts under the old Civil Code prescribes in ten years.
contemplated therein, as the one We are dealing
with, "cannot be ratified nor the defense of its Under Act No. 190, whose statute of limitation would
illegality be waived." Neither it it material, much less
apply if there were an implied trust as in this case,
decisive, that petitioners had not earlier judicially
the longest period of extinctive prescription was only
moved to have the same annulled or set aside.
ten years (Salao vs. Salao, 70 SCRA 84; Diaz vs.
Under Article 1410 of the Civil Code, (t)he action or
Gorricho and Aguado, 103 Phil. 261, 226).
defense for declaration of the inexistence of a
contract does not prescribe.
On the other hand, private respondents contend that prescription
cannot operate against the cestui que trust in favor of the trustee,
Evidently, therefore, the deeds of transfer executed in favor of Luis
and that actions against a trustee to recover trust property held by
Tongoy were from the very beginning absolutely simulated or him are imprescriptible (Manalang vs. Canlas, 50 OG 1980). They
fictitious, since the same were made merely for the purpose of also cite other pre-war cases to bolster this contention, among which
restructuring the mortgage over the subject properties and thus
are: Camacho vs. Municipality of Baliwag, 28 Phil. 46; Uy vs. Cho
preventing the foreclosure by the PNB.
Jan Ling, 19 Phil. 202 [pls. see pp. 258-259, Brief for Respondents,
p. 398, rec.]. They further allege that possession of a trustee is, in
Considering the law and jurisprudence on simulated or fictitious law, possession of the cestui quetrust and, therefore, it cannot be a
contracts as aforestated, the within action for reconveyance instituted good ground for title by prescription (Laguna vs. Levantino, 71 Phil.
by herein respondents which is anchored on the said simulated 566; Cortez vs. Oliva, 33 Phil. 480, cited on p. 261, Brief for
deeds of transfer cannot and should not be barred by prescription. Respondents, supra).
No amount of time could accord validity or efficacy to such fictitious
transactions, the defect of which is permanent.

53
The rule now obtaining in this jurisdiction is aptly discussed in the court and respondent appellate court are correct in applying the ten-
case of Bueno vs. Reyes (27 SCRA 1179, 1183), where the Court year prescriptive period.
through then Mr. Justice Makalintal, held:
The question, however, is, from what time should such period be
While there are some decisions which hold that an counted?
action upon a trust is imprescriptible, without
distinguishing between express and implied trusts, The facts of the case at bar reveal that the title to Hacienda Pulo was
the better rule, as laid down by this Court in other registered in the name of Luis D. Tongoy with the issuance of TCT
decisions, is that prescription does supervene where No. 20154 on November 8, 1935; that the title to the adjacent
the trust is merely an implied one. The reason has Cuaycong property was transferred to Luis D. Tongoy with the
been expressed by Mr. Justice J.B.L. Reyes in J.M. issuance of TCT No. 21522 on June 22, 1936. The properties were
Tuazon and Co., Inc. vs. Magdangal, 4 SCRA 84, mortgaged in the year 1936 by said Luis D. Tongoy for P4,500.00
88, as follows: and P 21,000.00, respectively, for a period of fifteen years; that
the mortgage obligations to the PNB were fully paid on April 17,
Under Section 40 of the Old Code of Civil 1956; that the release of mortgage was recorded in the Registry of
Procedure, all actions for recovery of real property Deeds on May 5, 1958; and that the case for reconveyance was
prescribe in ten years, excepting only actions based filed in the trial court on June 2, 1966.
on continuing or subsisting trusts that were
considered by section 38 as imprescriptible. As held Considering that the implied trust resulted from the simulated sales
in the case of Diaz vs. Gorricho, L-11229, March 29, which were made for the purpose of enabling the transferee, Luis D.
1958, however, the continuing or subsisting trusts Tongoy, to save the properties from foreclosure for the benefit of the
contemplated in Sec. 38 of the Code of Civil co-owners, it would not do to apply the theory of constructive notice
Procedure referred only to express unrepudiated resulting from the registration in the trustee's name. Hence, the ten-
trusts, and did not include constructive trusts (that year prescriptive period should not be counted from the date of
are imposed by law) where no fiduciary relation registration in the name of the trustee, as contemplated in the earlier
exists and the trustee does not recognize the trust at case of Juan vs. Zuñiga (4 SCRA 1221). Rather, it should be
all. counted from the date of recording of the release of mortgage in the
Registry of Deeds, on which date May 5, 1958 — the cestui que trust
This doctrine has been reiterated in the latter case of Escay vs. C.A. were charged with the knowledge of the settlement of the mortgage
(61 SCRA 370, 387), where WE held that implied or constructive obligation, the attainment of the purpose for which the trust was
trusts prescribe in ten years. "The prescriptibility of an action for constituted.
reconveyance based on implied or constructive trust, is now a settled
question in this jurisdiction. It prescribes in ten years" (Boñaga vs. Indeed, as respondent Court of Appeals had correctly held:
Soler, et al., 2 SCRA 755; J.M. Tuazon and Co., Inc. vs. Magdangal,
4 SCRA 88, special attention to footnotes). ... as already indicated, the ten-year prescriptive
period for bringing the action to enforce the trust or
Following such proposition that an action for reconveyance such as for reconveyance of plaintiffs-appellants" shares
the instant case is subject to prescription in ten years, both the trial should be toned from the registration of the release
of the mortgage obligation, since only by that time

54
could plaintiffs-appellants be charged with As for the claim for attorney's fees, the same appears to be well
constructive knowledge of the liquidation of the taken in the light of the findings WE have made considering that
mortgage obligations, when it became incumbent prevailing plaintiffs- appellants were forced to litigate to enforce their
upon them to expect and demand the return of their rights, and that equity under all the circumstances so dictate, said
shares, there being no proof that plaintiffs-appellants plaintiffs-appellants should recover attorney's fees in a reasonable
otherwise learned of the payment of the obligation amount. We deem P20,000.00 adequate for the purpose (p. 36 of
earlier. More precisely then the prescriptive period Decision, p. 151, rec.).
should be reckoned from May 5, 1958 when the
release of the mortgage was recorded in the IV
Registry of Deeds, which is to say that the present
complaint was still filed within the period on June 4,
The remaining assignement of error dwells on the question of
1966 (p. 35 of questioned Decision, on p. 191, rec.).
whether or not respondents Amado, Ricardo, Cresenciano and
Norberto, all surnamed Tongoy, may be considered legitimated by
Consequently, petitioner Francisco A. Tongoy as successor-in- virtue of the marriage of their parents, Francisco Tongoy and
interest and/or administrator of the estate of the late Luis D. Tongoy, Antonina Pabello, subsequent to their births and shortly before
is under obligation to return the shares of his co-heirs and co-owners Francisco died on September 15, 1926. Petitioners maintain that
in the subject properties and, until it is done, to render an accounting since the said respondents were never acknowledged by their father,
of the fruits thereof from the time that the obligation to make a return they could not have been legitimated by the subsequent marriage of
arose, which in this case should be May 5, 1958, the date of their parents, much less could they inherit from the estate of their
registration of the document of release of mortgage. father, the predecessor-in-interest of Luis D. Tongoy, who is
admittedly the half brother of the said respondents.
Hence, WE find no evidence of abuse of discretion on the part of
respondent Court of Appeals when it ordered such accounting from Both the trial court and the respondent appellate court have found
May 5, 1958, as well as the imposition of legal interest on the fruits overwhelming evidence to sustain the following conclusions: that
and income corresponding to the shares that should have been Amado P. Tongoy, Ricardo P. Tongoy, Cresenciano P. Tongoy and
returned to the private respondents, from the date of actual demand Norberto P. Tongoy were born illegitimate to Antonina Pabello on
which has been determined to have been made on January 26, 1966 August 19, 1910 (Exh. A), August 12,1914 (Exh. B), December 1,
by the demand letter (Exh. TT) of respondent Jesus T. Sonora to 1915 (Exhs. C and C- 1) and August 4, 1922 (Exh. D), respectively;
deceased Luis D. Tongoy. that Francisco Tongoy was their father; that said Francisco Tongoy
had before them two legitimate children by his first wife, namely, Luis
III D. Tongoy and Patricio D. Tongoy; that Francisco Tongoy and
Antonina Pabello were married sometime before his death on
With respect to the award of attorney's fees in the sum of September 15, 1926 (Exh. H); that shortly thereafter, Luis D. Tongoy
P20,000.00, the same appears to have been properly made, and Patricio D. Tongoy executed an Extra-Judicial Declaration of
considering that private respondents were unnecessarily compelled Heirs, leaving out their half-brothers Amado, Ricardo, Cresenciano,
to litigate (Flordelis vs. Mar, 114 SCRA 41; Sarsosa Vda. de and Norberto, who were then still minors; that respondents Amado,
Barsobin vs. Cuenco, 113 SCRA 547; Phil. Air Lines vs. C.A., 106 Ricardo, Cresenciano and Norberto were known and accepted by the
SCRA 393). As pointed out in the questioned decision of the Court of whole clan as children of Francisco; that they had lived in Hacienda
Appeals: Pulo with their parents, but when they went to school, they stayed in
the old family home at Washington Street, Bacolod, together with

55
their grandmother, Agatona Tongoy, as well as with the Sonoras and second wife Antonina Pabello just over a month
with Luis and Patricio Tongoy; that everybody in Bacolod knew them before his death was to give legitimate status to their
to be part of the Tongoy-Sonora clan; and that Luis D. Tongoy as children. It is not in keeping with the more liberal
administrator of Hacienda Pulo, also spent for the education of attitude taken by the New Civil Code towards
Ricardo Tongoy until he became a lawyer; and that even petitioners illegitimate children and the more compassionate
admit the fact that they were half-brothers of the late Luis D. Tongoy. trend of the New Society to insist on a very literal
application of the law in requiring the formalities of
The bone of contention, however, hinges on the absence of an compulsory acknowledgment, when the only result is
acknowledgment through any of the modes recognized by the Old to unjustly deprive children who are otherwise
Civil Code (please see Articles 131 and 135 of the Old Civil Code), entitled to hereditary rights. From the very nature of
such that legitimation could not have taken place in view of the things, it is hardly to be expected of appellees,
provisions of Art. 121 of the same Code which states that "children having been reared as legitimate children by their
shall be considered legitimated by a subsequent marriage only when parents and treated as such by everybody, to bring
they have been acknowledged by the parents before or after the an action to compel their parents to acknowledge
celebration thereof." them. In the hitherto cited case of Ramos vs.
Ramos, supra, the Supreme Court showed the way
out of patent injustice and inequity that might result
Of course, the overwhelming evidence found by respondent Court of
in some cases simply because of the implacable
Appeals conclusively shows that respondents Amado, Ricardo,
insistence on the technical amenities for
Cresenciano and Norberto have been in continuous possession of
the status of natural, or even legitimated, children. Still, it recognizes acknowledgment. Thus, it held —
the fact that such continuous possession of status is not, per se, a
sufficient acknowledgment but only a ground to compel recognition Unacknowledged natural children have no rights
(Alabat vs. Alabat, 21 SCRA 1479; Pua vs. Chan, 21 SCRA 753; whatsoever (Buenaventura vs. Urbano, 5 Phil. 1;
Larena vs. Rubio, 43 Phil. 1017). Siguiong vs. Siguiong, 8 Phil. 5, 11; Infante vs.
Figueras, 4 Phil. 738; Crisolo vs. Macadaeg, 94 Phil.
862). The fact that the plaintiffs, as natural children
Be that as it may, WE cannot but agree with the liberal view taken by
of Martin Ramos, received shares in his estate
respondent Court of Appeals when it said:
implied that they were acknowledged. Obviously,
defendants Agustin Ramos and Granada Ramos
... It does seem equally manifest, however, that and the late Jose Ramos and members of his family
defendants-appellants stand on a purely technical had treated them as his children. Presumably, that
point in the light of the overwhelming evidence that fact was well-known in the community. Under the
appellees were natural children of Francisco Tongoy circumstances, Agustin Ramos and Granada Ramos
and Antonina Pabello, and were treated as and the heirs of Jose Ramos, are estopped from
legitimate children not only by their parents but also attacking plaintiffs' status as acknowledged natural
by the entire clan. Indeed, it does not make much children (See Arts. 283 [4] and 2666 [3], New Civil
sense that appellees should be deprived of their Code). [Ramos vs. Ramos, supra].
hereditary rights as undoubted natural children of
their father, when the only plausible reason that the
With the same logic, estoppel should also operate in
latter could have had in mind when he married his
this case in favor of appellees, considering, as

56
already explained in detail, that they have always having occurred on September 15, 1926, the provisions of the
been treated as acknowledged and legitimated Spanish Civil Code is applicable to this case, following the doctrine
children of the second marriage of Francisco laid down in Villaluz vs. Neme (7 SCRA 27) where this Court,
Tongoy, not only by their presumed parents who through Mr. Justice Paredes, held:
raised them as their children, but also by the entire
Tongoy-Sonora clan, including Luis D. Tongoy Considering that Maria Rocabo died (on February
himself who had furnished sustenance to the clan in 17, 1937) during the regime of the Spanish Civil
his capacity as administrator of Hacienda Pulo and Code, the distribution of her properties should be
had in fact supported the law studies of appellee governed by said Code, wherein it is provided that
Ricardo P. Tongoy in Manila, the same way he did between co-heirs, the act to demand the partition of
with Jesus T. Sonora in his medical studies. As the inheritance does not prescribe (Art. 1965 [Old
already pointed out, even defendants-appellants Civil Code]; Baysa, et al. vs. Baysa, 53 Off. Gaz.
have not questioned the fact that appellees are half- 7272). Verily, the 3 living sisters were possessing
brothers of Luis D. Tongoy. As a matter of fact, that the property as administratices of the other co-heirs,
are really children of Francisco Tongoy and Antonina plaintiffs-appellants herein, who have the right to
Pabello, and only the technicality that their vindicate their inheritance regardless of the lapse of
acknowledgment as natural children has not been time (Sevilla vs. De los Angeles, L- 7745, 51 Off.
formalized in any of the modes prescribed by law Gaz. 5590, and cases cited therein).
appears to stand in the way of granting them their
hereditary rights. But estoppel, as already indicated, Even following the more recent doctrine enunciated in Gerona vs. de
precludes defendants-appellants from attacking Guzman (11 SCRA 153) that "an action for reconveyance of real
appellees' status as acknowledged natural or
property based upon a constructive or implied trust, resulting from
legitimated children of Francisco Tongoy. In addition
fraud, may be barred by the statute of limitations" (Candelaria vs.
to estoppel, this is decidedly one instance when
Romero, L-12149, Sept. 30, 1960; Alzona vs. Capunita, L-10220,
technicality should give way to conscience, equity Feb. 28, 1962)", and that "the action therefor may be filed within four
and justice (cf. Vda. de Sta. Ana vs. Rivera, L- years from the discovery of the fraud x x x", said period may not be
22070, October 29, 1966,18 SCRA 588) [pp. 196-
applied to this case in view of its peculiar circumstances. The
198, Vol. 1, rec.].
registration of the properties in the name of Luis D. Tongoy on
November 8, 1935 cannot be considered as constructive notice to
It is time that WE, too, take a liberal view in favor of natural children the whole world of the fraud.
who, because they enjoy the blessings and privileges of an
acknowledged natural child and even of a legitimated child, found it
It will be noted that the foreclosure on the original mortgage over
rather awkward, if not unnecessary, to institute an action for
Hacienda Pulo was instituted by PNB as early as June 18, 1931,
recognition against their natural parents, who, without their asking,
from which time the members of the Tongoy-Sonora clan had been
have been showering them with the same love, care and material
in constant conference to save the property. At that time all the
support as are accorded to legitimate children. The right to respondents-Tongoys were still minors (except Amado, who was
participate in their father's inheritance should necessarily follow. already 23 years old then), so that there could be truth to the
allegation that their exclusion in the Declaration of Inheritance
The contention that the rights of the said respondents — Tongoys executed by Patricio and Luis Tongoy on April 29, 1933 was made to
have prescribed, is without merit. The death of Francisco Tongoy facilitate matters-as part of the general plan arrived at after the family

57
conferences to transfer the administration of the property to the June 29, 1936 — Luis D. Tongoy executed a real
latter. The events that followed were obviously in pursuance of such estate mortgage over Hacienda Pulo to secure a
plan, thus: loan of P21,000.00 payable for fifteen years.

March 13, 1934 — An Escritura de Venta (Exh. 2 or When the mortgages were constituted, respondents Cresenciano
W) was executed in favor of Luis D. Tongoy by Ana Tongoy and Norberto Tongoy were still minors, while respondent
Tongoy, Teresa Tongoy, Mercedes Sonora, Trinidad Amado Tongoy became of age on August 19, 1931, and Ricardo
Sonora, Juan Sonora and Patricio Tongoy, Tongoy attained majority age on August 12, 1935. Still, considering
transferring their rights and interests over Hacienda that such transfer of the properties in the name of Luis D. Tongoy
Pulo to the former. was made in pursuance of the master plan to save them from
foreclosure, the said respondents were precluded from doing
October 23, 1935 — An Escritura de Venta (Exh. 3 anything to assert their rights. It was only upon failure of the herein
or DD) was executed by Jesus Sonora, likewise petitioner, as administrator and/or successor-in-interest of Luis D.
transferring his rights and interests over Hacienda Tongoy, to return the properties that the prescriptive period should
Pulo to Luis D. Tongoy; begin to run.

November 5, 1935 — An Escritura de Venta (Exh. 5 As above demonstrated, the prescriptive period is ten year-from the
or AA) was also executed by Jose Tongoy in favor of date of recording on May 5, 1958 of the release of mortgage in the
Luis D. Tongoy for the same purpose; (Note: This Registry of Deeds.
was preceded by the execution on October 14, 1935
of an Assignment of Rights [4 or Z) in favor of Luis WHEREFORE, THE JUDGMENT APPEALED FROM IS HEREBY
D. Tongoy by the Pacific Commercial Company as AFFIRMED IN TOTO.
judgment lien-holder [subordinate of the PNB
mortgage] of Jose Tongoy on Hacienda Pulo SO ORDERED.

November 5, 1935 — Hacienda Pulo was placed in


the name of Luis D. Tongoy married to Ma. Rosario
Araneta with the issuance of TCT 20154 (Exh. 20);

June 22, 1936 — An Escritura de Venta was Vda. De Esconde vs. CA


executed by Basilisa Cuaycong over the Cuaycong
property in favor of Luis D. Tongoy, thereby resulting
in the issuance of TCT No. 21522 in the name of This petition for review on certiorari seeks the reversal of
Luis D. Tongoy married to Ma. Rosario Araneta; the January 22, 1992 decision[1] in CA G.R. CV No. 26795 of the Court
of Appeals affirming the Decision of the Regional Trial Court of
Bataan, Branch 2.[2] The lower court declared that petitioners action
June 26, 1936 — Luis D. Tongoy executed a real
for reconveyance of real property based on an implied trust has been
estate mortgage over the Cuaycong property in favor barred by prescription and laches.
of the PNB to secure a loan of P4,500.00; and

58
Petitioners Constancia, Benjamin and Elenita, and private (b) Ricardo Buan - Undivided one-third (1/3) share;
respondent Pedro, are the children of the late Eulogio Esconde and
petitioner Catalina Buan. Eulogio Esconde was one of the (c) Melody Oconer - Undivided one-sixth (1/6) share;
children[3] and heirs of Andres Esconde. Andres is the brother of
Estanislao Esconde, the original owner of the disputed lot who died
(d) Leopoldo Oconer - Undivided one-sixth (1/6) share;
without issue on April 1942. Survived by his only brother, Andres,
Estanislao left an estate consisting of four (4) parcels of land in Samal,
Bataan, namely: (a) Lot No. 1865 with 22,712 square meters; (b) Lot 3. TO CONSTANCIA, PEDRO, BENJAMIN and ELENITA, all
No. 1902 with 54,735 square meters; (c) Lot No. 1208 with 20,285 Surnamed ESCONDE, are adjudicated, in undivided equal shares
square meters; and (d) Lot No. 1700 with 547 square meters. each, the following:

Eulogio died in April, 1944 survived by petitioners and private (a) Lot No. 1208 Samal Cadastre, subject to the encumbrance of the
respondent. At that time, Lazara and Ciriaca, Eulogios sisters, had right of ownership of Arturo Dominguez on the FIVE LUANG;
already died without having partitioned the estate of the late Estanislao
Esconde.
4. TO PEDRO ESCONDE is adjudicated exclusively Lot No. 1700 of
On December 5, 1946, the heirs of Lazara, Ciriaca and Eulogio the Cadastral Survey of Samal; (Italics supplied.)
executed a deed of extrajudicial partition,[4] with the heirs of Lazara
identified therein as the Party of the First Part, that of Ciriaca, the Party The deed bears the thumbmark of Catalina Buan and the
of the Second Part and that of Eulogio, the Party of the Third signature of Constancia Esconde, as well as the approval and
Part. Since the children of Eulogio, with the exception of Constancia, signature of Judge Basilio Bautista.[5]
were then all minors, they were represented by their mother and
judicial guardian, petitioner Catalina Buan vda. de Esconde who Pursuant to the same deed, transfer certificates of title were
renounced and waived her usufructuary rights over the parcels of land issued to the new owners of the properties.[6] Transfer Certificate of
in favor of her children in the same deed. Salient provisions of the Title No. 394 for Lot No. 1700 was issued on February 11, 1947 in the
deed state as follows: name of private respondent but Catalina kept it in her possession until
she delivered it to him in 1949 when private respondent got married.
1. TO ARTURO DOMINGUEZ, minor, Party of the First Part is Meanwhile, Benjamin constructed the family home on Lot No.
adjudicated: 1698-B[7] which is adjacent to Lot No. 1700. A portion of the house
occupied an area of twenty (20) square meters, more or less, of Lot
(a) Lot No. 1865 of Samal Cadastre; No. 1700. Benjamin also built a concrete fence and a common gate
enclosing the two (2) lots, as well as an artesian well within Lot No.
(b) Portion of Lot No. 1208, Samal Cadastre, which portion has an 1700.
area of FIVE (5) Luang; Sometime in December, 1982, Benjamin discovered that Lot No.
1700 was registered in the name of his brother, private
2. TO JOVITA BUAN, RICARDO BUAN, and MELODY and respondent. Believing that the lot was co-owned by all the children of
LEOPOLDO OCONER, are adjudicated Lot No. 1902 Samal Eulogio Esconde, Benjamin demanded his share of the lot from private
Cadastre, and to de (sic) divided as follows: respondent.[8] However, private respondent asserted exclusive
ownership thereof pursuant to the deed of extrajudicial partition and,
(a) Jovita Buan - Undivided one-third (1/3) share;

59
in 1985 constructed a buho fence to segregate Lot No. 1700 from Lot were to be applied, still, the action would have prescribed on February
No. 1698-B. 11, 1977.
Hence, on June 29, 1987, petitioners herein filed a complaint Hence, petitioners elevated the case to the Court of Appeals
before the Regional Trial Court of Bataan against private respondent which affirmed the lower courts decision. The appellate court held that
for the annulment of TCT No. 394. They further prayed that private the deed of extrajudicial partition established an implied trust arising
respondent be directed to enter into a partition agreement with them, from the mistake of the judicial guardian in favoring one heir by giving
and for damages (Civil Case No. 5552). him a bigger share in the hereditary property. It stressed that an action
for reconveyance based on implied or constructive trust prescribes in
In its decision of July 31, 1989, the lower court dismissed the ten (10) years counted from the registration of the property in the sole
complaint and the counterclaims. It found that the deed of extrajudicial name of the co-heir.[10]
partition was an unenforceable contract as far as Lot No. 1700 was
concerned because petitioner Catalina Buan vda. de Esconde, as Petitioners are now before this Court charging the Court of
mother and judicial guardian of her children, exceeded her authority Appeals with having erred in: (a) denying their appeal by reason of
as such in donating the lot to private respondent or waiving the rights prescription and laches, and (b) not reversing the decision of the lower
thereto of Benjamin and Elenita in favor of private court insofar as awarding them damages is concerned.
respondent. Because of the unenforceability of the deed, a trust
relationship was created with private respondent as trustee and Trust is the legal relationship between one person having an
Benjamin and Elenita as beneficiaries. The court said: equitable ownership in 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
Although the parties to the partition did not either contemplate or powers by the latter.[11] Trusts are either express or implied. An
express it in said document, the resulting trust arose or was created express trust is created by the direct and positive acts of the parties,
by operation of Article 1456 of the new Civil Code, which reads: If by some writing or deed or will or by words evidencing an intention to
property is acquired through mistake or fraud, the person obtaining it create a trust.[12] No particular words are required for the creation of
is, by force of law, considered a trustee of an implied trust for the an express trust, it being sufficient that a trust is clearly intended.[13]
benefit of the person from whom the property comes. The persons
from whom the two-thirds portion of Lot 1700 came are On the other hand, implied trusts are those which, without being
plaintiffs Benjamin and Elenita Esconde and the trustee was expressed, are deducible from the nature of the transaction as matters
defendant Pedro Esconde, who acquired such portion of intent or which are superinduced on the transaction by operation of
through mistake by virtue of the subject partition. The mistake was law as matters of equity, independently of the particular intention of
the allotment or assignment of such portion to Pedro Esconde the parties.[14] In turn, implied trusts are either resulting or constructive
although it had rightfully belonged to said two plaintiffs more than two trusts. These two are differentiated from each other as follows:
(2) years before.[9]
Resulting trusts are based on the equitable doctrine that valuable
However, the lower court ruled that the action had been barred consideration and not legal title determines the equitable title or
by both prescription and laches. Lot No. 1700 having been registered interest and are presumed always to have been contemplated by the
in the name of private respondent on February 11, 1947, the action to parties. They arise from the nature or circumstances of the
annul such title prescribed within ten (10) years on February 11, 1957 consideration involved in a transaction whereby one person thereby
or more than thirty (30) years before the action was filed on June 29, becomes invested with legal title but is obligated in equity to hold his
1987. Thus, even if Art. 1963 of the old Civil Code providing for a 30- legal title for the benefit of another. On the other hand, constructive
year prescriptive period for real actions over immovable properties

60
trusts are created by the construction of equity in order to satisfy the privileged bestowal, the fact is that, said lot was registered in private
demands of justice and prevent unjust enrichment. They arise respondents name. After TCT No. 394 was handed to him by his
contrary to intention against one who, by fraud, duress or abuse of mother, private respondent exercised exclusive rights of ownership
confidence, obtains or holds the legal right to property which he therein to the extent of even mortgaging the lot when he needed
ought not, in equity and good conscience, to hold.[15] money.
If, as petitioners insist, a mistake was committed in allotting Lot
While the deed of extrajudicial partition and the registration of Lot No. 1700 to private respondent, then a trust relationship was created
No. 1700 occurred in 1947 when the Code of Civil Procedure or Act between them and private respondent. However, private respondent
No. 190 was yet in force, we hold that the trial court correctly applied never considered himself a trustee. If he allowed his brother Benjamin
Article 1456. In Diaz, et al. v. Gorricho and Aguado,[16]the Court to construct or make improvements thereon, it appears to have been
categorically held that while it is not a retroactive provision of the new out of tolerance to a brother. Consequently, if indeed,
Civil Code, Article 1456 merely expresses a rule already recognized by mistake,[18] private respondent was given the entirety of Lot No.
by our courts prior to the Codes promulgation. This article provides: 1700, the trust relationship between him and petitioners was
a constructive, not resulting, implied trust. Petitioners, therefore,
Art. 1456. If property is acquired through mistake or fraud, the person correctly questioned private respondents exercise of absolute
obtaining it is, by force of law, considered a trustee of an implied trust ownership over the property. Unfortunately, however, petitioners
for the benefit of the person from whom the property comes. assailed it long after their right to do so had prescribed.

Construing this provision of the Civil Code, in Philippine National The rule that a trustee cannot acquire by prescription ownership
Bank v. Court of Appeals, the Court stated: over property entrusted to him until and unless he repudiates the trust,
applies to express trusts[19] and resulting implied trusts.[20] However,
in constructive implied trusts, prescription may supervene[21] even if
A deeper analysis of Article 1456 reveals that it is not a trust in the the trustee does not repudiate the relationship. Necessarily,
technical sense for in a typical trust, confidence is reposed in one repudiation of the said trust is not a condition precedent to the running
person who is named a trustee for the benefit of another who is of the prescriptive period.
called the cestui que trust, respecting property which is held by the
trustee for the benefit of the cestui que trust. A constructive trust, Since the action for the annulment of private respondents title to
unlike an express trust, does not emanate from, or generate a Lot No. 1700 accrued during the effectivity of Act No. 190, Section 40
fiduciary relation. While in an express trust, a beneficiary and a of Chapter III thereof applies. It provides:
trustee are linked by confidential or fiduciary relations, in a
constructive trust, there is neither a promise nor any fiduciary relation Sec. 40. Period of prescription as to real estate. - An action for
to speak of and the so-called trustee neither accepts any trust nor recovery of title to, or possession of, real property, or an interest
intends holding the property for the beneficiary.[17] therein, can only be brought within ten years after the cause of such
action accrues.
In the case at bench, petitioner Catalina Buan vda. de Esconde,
as mother and legal guardian of her children, appears to have favored Thus, in Heirs of Jose Olviga v. Court of Appeals,[22] the Court ruled
her elder son, private respondent, in allowing that he be given Lot No. that the ten-year prescriptive period for an action for reconveyance of
1700 in its entirety in the extrajudicial partition of the Esconde estate real property based on implied or constructive trust which is
to the prejudice of her other children. Although it does not appear on counted from the date of registration of the property, applies when the
record whether Catalina intentionally granted private respondent that plaintiff is not in possession of the contested property. In this case,

61
private respondent, not petitioners who instituted the action, is in IGLESIA FILIPINA INDEPENDIENTE vs.
actual possession of Lot No. 1700. Having filed their action only HEIRS of BERNARDINO TAEZA
on June 29, 1987, petitioners action has been barred by prescription.
Not only that. Laches has also circumscribed the action for, This deals with the Petition for Review on Certiorari under Rule 45 of
whether the implied trust is constructive or resulting, this doctrine the Rules of Court praying that the Decision1of the Court of Appeals
applies.[23] As regards constructive implied trusts, the Court held (CA), promulgated on June 30, 2006, and the Resolution2 dated
in Diaz, et al. v. Gorricho and Aguado[24] that: August 23, 2007, denying petitioner's motion for reconsideration
thereof, be reversed and set aside.
x x x in constructive trusts (that are imposed by law), there is neither
promise nor fiduciary relation; the so-called trustee does not The CA's narration of facts is accurate, to wit:
recognize any trust and has no intent to hold for the beneficiary;
therefore, the latter is not justified in delaying action to recover his The plaintiff-appellee Iglesia Filipina Independiente (IFI, for brevity),
property. It is his fault if he delays; hence, he may be estopped by his a duly registered religious corporation, was the owner of a parcel of
own laches. land described as Lot 3653, containing an area of 31,038 square
meters, situated at Ruyu (now Leonarda), Tuguegarao, Cagayan,
It is tragic that a land dispute has once again driven a wedge and covered by Original Certificate of Title No. P-8698. The said lot
between brothers. However, credit must be given to petitioner is subdivided as follows: Lot Nos. 3653-A, 3653-B, 3653-C, and
Benjamin Esconde[25] for resorting to all means possible in arriving at 3653-D.
a settlement between him and his brother in accordance with Article
222 of the Civil Code.[26] Verbally and in two letters,[27] he demanded Between 1973 and 1974, the plaintiff-appellee, through its then
that private respondent give him and his sisters their share in Lot No. Supreme Bishop Rev. Macario Ga, sold Lot 3653-D, with an area of
1700. He even reported the matter to the barangay authorities for 15,000 square meters, to one Bienvenido de Guzman.
which three conferences were held.[28] Unfortunately, his efforts
proved fruitless. Even the action he brought before the court was filed On February 5, 1976, Lot Nos. 3653-A and 3653-B, with a total area
too late. of 10,000 square meters, were likewise sold by Rev. Macario Ga, in
his capacity as the Supreme Bishop of the plaintiff-appellee, to the
On the other hand, private respondent should not be unjustly defendant Bernardino Taeza, for the amount of ₱100,000.00,
enriched by the improvements introduced by his brother on Lot No. through installment, with mortgage to secure the payment of the
1700 which he himself had tolerated. He is obliged by law to indemnify balance. Subsequently, the defendant allegedly completed the
his brother, petitioner Benjamin Esconde, for whatever expenses the payments.
latter had incurred.
WHEREFORE, the instant petition for review on certiorari is In 1977, a complaint for the annulment of the February 5, 1976 Deed
hereby DENIED and the questioned decision AFFIRMED subject to of Sale with Mortgage was filed by the Parish Council of Tuguegarao,
the modification that private respondent shall indemnify petitioner Cagayan, represented by Froilan Calagui and Dante Santos, the
Benjamin Esconde the expenses the latter had incurred for the President and the Secretary, respectively, of the Laymen's
improvements on Lot No. 1700. No costs. Committee, with the then Court of First Instance of Tuguegarao,
Cagayan, against their Supreme Bishop Macario Ga and the
SO ORDERED. defendant Bernardino Taeza.

62
The said complaint was, however, subsequently dismissed on the On November 6, 2001, the court a quo rendered judgment in favor of
ground that the plaintiffs therein lacked the personality to file the the plaintiff-appellee.1âwphi1 It held that the deed of sale executed
case. by and between Rev. Ga and the defendant-appellant is null and
void.3
After the expiration of Rev. Macario Ga's term of office as Supreme
Bishop of the IFI on May 8, 1981, Bishop Abdias dela Cruz was The dispositive portion of the Decision of Regional Trial Court of
elected as the Supreme Bishop. Thereafter, an action for the Tuguegarao City (RTC) reads as follows:
declaration of nullity of the elections was filed by Rev. Ga, with the
Securities and Exchange Commission (SEC). WHEREFORE, judgment is hereby rendered:

In 1987, while the case with the SEC is (sic) still pending, the 1) declaring plaintiff to be entitled to the claim in the
plaintiff-appellee IFI, represented by Supreme Bishop Rev. Soliman Complaint;
F. Ganno, filed a complaint for annulment of the sale of the subject
parcels of land against Rev. Ga and the defendant Bernardino
2) declaring the Deed of Sale with Mortgage dated February
Taeza, which was docketed as Civil Case No. 3747. The case was
5, 1976 null and void;
filed with the Regional Trial Court of Tuguegarao, Cagayan, Branch
III, which in its order dated December 10, 1987, dismissed the said
case without prejudice, for the reason that the issue as to whom of 3) declaring Transfer Certificates of Title Numbers T-77995
the Supreme Bishops could sue for the church had not yet been and T-77994 to be null and void ab initio;
resolved by the SEC.
4) declaring the possession of defendant on that portion of
On February 11, 1988, the Securities and Exchange Commission land under question and ownership thereof as unlawful;
issued an order resolving the leadership issue of the IFI against Rev.
Macario Ga. 5) ordering the defendant and his heirs and successors-in-
interest to vacate the premises in question and surrender the
Meanwhile, the defendant Bernardino Taeza registered the subject same to plaintiff; [and]
parcels of land. Consequently, Transfer Certificate of Title Nos. T-
77995 and T-77994 were issued in his name. 6) condemning defendant and his heirs pay (sic) plaintiff the
amount of ₱100,000.00 as actual/consequential damages
The defendant then occupied a portion of the land. The plaintiff- and ₱20,000.00 as lawful attorney's fees and costs of the
appellee allegedly demanded the defendant to vacate the said land amount (sic).4
which he failed to do.
Petitioner appealed the foregoing Decision to the CA. On June 30,
In January 1990, a complaint for annulment of sale was again filed 2006, the CA rendered its Decision reversing and setting aside the
by the plaintiff-appellee IFI, this time through Supreme Bishop Most RTC Decision, thereby dismissing the complaint.5 The CA ruled that
Rev. Tito Pasco, against the defendant-appellant, with the Regional petitioner, being a corporation sole, validly transferred ownership
Trial Court of Tuguegarao City, Branch 3. over the land in question through its Supreme Bishop, who was at
the time the administrator of all properties and the official
representative of the church. It further held that "[t]he authority of the

63
then Supreme Bishop Rev. Ga to enter into a contract and represent In the alternative, petitioner contends that if the contract is not
the plaintiff-appellee cannot be assailed, as there are no provisions declared null and void, it should nevertheless be found
in its constitution and canons giving the said authority to any other unenforceable, as the approval and conformity of the other entities in
person or entity."6 their church was not obtained, as required by their Canons.

Petitioner then elevated the matter to this Court via a petition for Section 113 of the Corporation Code of the Philippines provides that:
review on certiorari, wherein the following issues are presented for
resolution: Sec. 113. Acquisition and alienation of property. - Any corporation
sole may purchase and hold real estate and personal property for its
A.) WHETHER OR NOT THE COURT OF APPEALS church, charitable, benevolent or educational purposes, and may
ERRED IN NOT FINDING THE FEBRUARY 5, 1976 DEED receive bequests or gifts for such purposes. Such corporation may
OF SALE WITH MORTGAGE AS NULL AND VOID; mortgage or sell real property held by it upon obtaining an order for
that purpose from the Court of First Instance of the province where
B.) ASSUMING FOR THE SAKE OF ARGUMENT THAT IT the property is situated; x x x Provided, That in cases where the
IS NOT VOID, WHETHER OR NOT THE COURT OF rules, regulations and discipline of the religious denomination, sect or
APPEALS ERRED IN NOT FINDING THE FEBRUARY 5, church, religious society or order concerned represented by such
1976 DEED OF SALE WITH MORTGAGE AS corporation sole regulate the method of acquiring, holding, selling
UNENFORCEABLE, [and] and mortgaging real estate and personal property, such rules,
regulations and discipline shall control, and the intervention of the
courts shall not be necessary.8
C.) WHETHER OR NOT THE COURT OF APPEALS
ERRED IN NOT FINDING RESPONDENT TAEZA HEREIN
AS BUYER IN BAD FAITH.7 Pursuant to the foregoing, petitioner provided in Article IV (a) of its
Constitution and Canons of the Philippine Independent Church,9 that
The first two issues boil down to the question of whether then "[a]ll real properties of the Church located or situated in such parish
can be disposed of only with the approval and conformity of the
Supreme Bishop Rev. Ga is authorized to enter into a contract of
laymen's
sale in behalf of petitioner.

Petitioner maintains that there was no consent to the contract of sale committee, the parish priest, the Diocesan Bishop, with sanction of
the Supreme Council, and finally with the approval of the Supreme
as Supreme Bishop Rev. Ga had no authority to give such consent. It
Bishop, as administrator of all the temporalities of the Church."
emphasized that Article IV (a) of their Canons provides that "All real
properties of the Church located or situated in such parish can be
disposed of only with the approval and conformity of the laymen's Evidently, under petitioner's Canons, any sale of real property
committee, the parish priest, the Diocesan Bishop, with sanction of requires not just the consent of the Supreme Bishop but also the
the Supreme Council, and finally with the approval of the Supreme concurrence of the laymen's committee, the parish priest, and the
Bishop, as administrator of all the temporalities of the Church." It is Diocesan Bishop, as sanctioned by the Supreme Council. However,
alleged that the sale of the property in question was done without the petitioner's Canons do not specify in what form the conformity of the
required approval and conformity of the entities mentioned in the other church entities should be made known. Thus, as petitioner's
Canons; hence, petitioner argues that the sale was null and void. witness stated, in practice, such consent or approval may be
assumed as a matter of fact, unless some opposition is expressed.10

64
Here, the trial court found that the laymen's committee indeed made to the prejudice of her other children;16 and where a person, holding
its objection to the sale known to the Supreme Bishop. 11 The CA, on a special power of attorney, sells a property of his principal that is not
the other hand, glossed over the fact of such opposition from the included in said special power of attorney. 17
laymen's committee, opining that the consent of the Supreme Bishop
to the sale was sufficient, especially since the parish priest and the In the present case, however, respondents' predecessor-in-interest,
Diocesan Bishop voiced no objection to the sale.12 Bernardino Taeza, had already obtained a transfer certificate of title
in his name over the property in question. Since the person
The Court finds it erroneous for the CA to ignore the fact that the supposedly transferring ownership was not authorized to do so, the
laymen's committee objected to the sale of the lot in question. The property had evidently been acquired by mistake. In Vda. de
Canons require that ALL the church entities listed in Article IV (a) Esconde v. Court of Appeals,18 the Court affirmed the trial court's
thereof should give its approval to the transaction. Thus, when the ruling that the applicable provision of law in such cases is Article
Supreme Bishop executed the contract of sale of petitioner's lot 1456 of the Civil Code which states that "[i]f property is acquired
despite the opposition made by the laymen's committee, he acted through mistake or fraud, the person obtaining it is, by force of law,
beyond his powers. considered a trustee of an implied trust for the benefit of the person
from whom the property comes." Thus, in Aznar Brothers Realty
This case clearly falls under the category of unenforceable contracts Company v. Aying,19 citing Vda. de Esconde,20 the Court clarified the
mentioned in Article 1403, paragraph (1) of the Civil Code, which concept of trust involved in said provision, to wit:
provides, thus:
Construing this provision of the Civil Code, in Philippine National
Art. 1403. The following contracts are unenforceable, unless they are Bank v. Court of Appeals, the Court stated:
ratified:
A deeper analysis of Article 1456 reveals that it is not a trust in the
(1) Those entered into in the name of another person by one who technical sense for in a typical trust, confidence is reposed in one
has been given no authority or legal representation, or who has person who is named a trustee for the benefit of another who is
acted beyond his powers; 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
In Mercado v. Allied Banking Corporation,13 the Court explained that:
fiduciary relation. While in an express trust, a beneficiary and a
trustee are linked by confidential or fiduciary relations, in a
x x x Unenforceable contracts are those which cannot be enforced by constructive trust, there is neither a promise nor any fiduciary relation
a proper action in court, unless they are ratified, because either they to speak of and the so-called trustee neither accepts any trust nor
are entered into without or in excess of authority or they do not intends holding the property for the beneficiary.
comply with the statute of frauds or both of the contracting parties do
not possess the required legal capacity. x x x.14
The concept of constructive trusts was further elucidated in the same
case, as follows:
Closely analogous cases of unenforceable contracts are those where
a person signs a deed of extrajudicial partition in behalf of co-heirs
. . . implied trusts are those which, without being expressed, are
without the latter's authority;15 where a mother as judicial guardian of
her minor children, executes a deed of extrajudicial partition wherein deducible from the nature of the transaction as matters of intent or
she favors one child by giving him more than his share of the estate which are superinduced on the transaction by operation of law as

65
matters of equity, independently of the particular intention of the Article 1144. The following actions must be brought within ten years
parties. In turn, implied trusts are either resulting or constructive from the time the right of action accrues:
trusts. These two are differentiated from each other as follows:
(1) Upon a written contract;
Resulting trusts are based on the equitable doctrine that valuable
consideration and not legal title determines the equitable title or (2) Upon an obligation created by law;
interest and are presumed always to have been contemplated by the
parties. They arise from the nature of circumstances of the (3) Upon a judgment.
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, constructive xxx xxx xxx
trusts are created by the construction of equity in order to satisfy the
demands of justice and prevent unjust enrichment. They arise An action for reconveyance based on an implied or constructive trust
contrary to intention against one who, by fraud, duress or abuse of must perforce prescribe in ten years and not otherwise. A long line of
confidence, obtains or holds the legal right to property which he decisions of this Court, and of very recent vintage at that, illustrates
ought not, in equity and good conscience, to hold. (Italics supplied) this rule. Undoubtedly, it is now well-settled that an action for
reconveyance based on an implied or constructive trust prescribes in
A constructive trust having been constituted by law between ten years from the issuance of the Torrens title over the property.
respondents as trustees and petitioner as beneficiary of the subject
property, may respondents acquire ownership over the said It has also been ruled that the ten-year prescriptive period begins to
property? The Court held in the same case of Aznar,21 that unlike in run from the date of registration of the deed or the date of the
express trusts and resulting implied trusts where a trustee cannot issuance of the certificate of title over the property, x x x.23
acquire by prescription any property entrusted to him unless he
repudiates the trust, in constructive implied trusts, the trustee may Here, the present action was filed on January 19, 1990,24 while the
acquire the property through prescription even if he does not transfer certificates of title over the subject lots were issued to
repudiate the relationship. It is then incumbent upon the beneficiary respondents' predecessor-in-interest, Bernardino Taeza, only on
to bring an action for reconveyance before prescription bars the February 7, 1990.25
same.
Clearly, therefore, petitioner's complaint was filed well within the
In Aznar,22 the Court explained the basis for the prescriptive period, prescriptive period stated above, and it is only just that the subject
to wit: property be returned to its rightful owner.

x x x under the present Civil Code, we find that just as an implied or WHEREFORE, the petition is GRANTED. The Decision of the Court
constructive trust is an offspring of the law (Art. 1456, Civil Code), so of Appeals, dated June 30, 2006, and its Resolution dated August
is the corresponding obligation to reconvey the property and the title 23, 2007, are REVERSED and SET ASIDE. A new judgment is
thereto in favor of the true owner. In this context, and vis-á-vis hereby entered:
prescription, Article 1144 of the Civil Code is applicable.

66
(1) DECLARING petitioner Iglesia Filipina Independiente as On 2 February 1988, Priscila Morales, one of the daughters of
the RIGHTFUL OWNER of the lots covered by Transfer late Rosendo Avelino and Juana Ricaforte, filed a motion to intervene
Certificates of Title Nos. T-77994 and T-77995; in Case No. 265. No opposition thereto having been filed, the motion
was granted on 4 March 1988.[2]
(2) ORDERING respondents to execute a deed reconveying On 30 November 1988 Rodolfo Morales passed away. In its order
the aforementioned lots to petitioner; of 9 February 1989[3] the trial court allowed his substitution by his
heirs, Roda, Rosalia, Cesar and Priscila, all
(3) ORDERING respondents and successors-in-interest to surnamed Morales. Thereafter, pre-trial and trial on the merits were
vacate the subject premises and surrender the same to had and the case was submitted for decision on 16 November 1990.
petitioner; and
On 26 August 1991 the Trial Court rendered its decision[4] in favor
(4) Respondents to PAY costs of suit. of plaintiffs, private respondents herein, the dispositive portion of
which reads as follows:
SO ORDERED.
WHEREFORE, judgment is hereby rendered in favor of the Plaintiffs
and against Defendants-Intervenor:

1. Declaring the Plaintiffs the absolute and rightful owners of the


premises in question;

2. Ordering the Defendants-Intervenor to:

Morales vs. CA a. vacate from the premises in question;

In this petition for review on certiorari under Rule 45 of the Rules b. remove the beauty shop thereat;
of Court, petitioners urge this Court to reverse the 20 April 1994
decision of the Court of Appeals (Seventeenth Division) in CA-G.R.
CV No. 34936,[1] which affirmed in toto the 26 August 1991 decision of c. jointly and severally, pay the Plaintiffs, a monthly rental
the Regional Trial Court of Calbayog City in Civil Case No. 265. of P1,500.00 of the premises starting from March
1987, and the amounts of P75,000.00 for moral
Civil Case No. 265 was an action for recovery of possession of damages, P5,000.00 for litigation expenses,
land and damages with a prayer for a writ of preliminary mandatory and P10,000.00 for Attorneys fees; and
injunction filed by private respondents herein, spouses Ranulfo Ortiz,
Jr. and Erlinda Ortiz, against Rodolfo Morales. The complaint prayed d. to pay the costs.
that private respondents be declared the lawful owners of a parcel of
land and the two-storey residential building standing thereon, and that The injunction issued in this case is hereby made permanent.
Morales be ordered to remove whatever improvements he constructed
thereon, vacate the premises, and pay actual and moral damages,
litigation expenses, attorney's fees and costs of the suit. SO ORDERED.[5]

67
The following is trial courts summary of the evidence for the Inasmuch as the Plaintiffs are the purchasers of the other real
plaintiffs: properties of Celso Avelino, one of which is at Acedillo (now Sen.
J.D. Avelino) street, after they were offered by Celso Avelino to buy
The evidence adduced by the Plaintiffs discloses that the Plaintiffs the premises in question, they examined the premises in question
are the absolute and exclusive owners of the premises in question and talked with the defendant about that fact, the latter encouraged
having purchased the same from Celso Avelino, evidenced by a them to purchase the premises in question rather than the property
Deed of Absolute Sale (Exh. C), a public instrument. They later going to somebody else they do not know and that he will vacate the
caused the transfer of its tax declaration in the name of the female premises as soon as his uncle will notify him to do so. Thus, they
plaintiff (Exh. I) and paid the realty taxes thereon (Exh. K & series). paid the purchase price and Exh. C was executed in their favor.

Celso Avelino (Plaintiffs predecessor in interest) purchased the land However, despite due notice from his uncle to vacate the premises in
in question consisting of two adjoining parcels while he was still a question (Exh. N), the defendant refused to vacate or demolish the
bachelor and the City Fiscal of Calbayog City from Alejandra beauty shop unless he is reimbursed P35,000.00 for it although it
Mendiola and Celita Bartolome, through a Escritura de Venta (Exh. was valued at less than P5,000.00. So, the Plaintiffs demanded,
B). After the purchase, he caused the transfer of the tax declarations orally and in writing (Exhs. L & M) to vacate the premises. The
of the two parcels in his name (Exhs. D & E to G & H) as well as defendant refused.
consolidated into one the two tax declarations in his name (Exh. F).
With the knowledge of the Intervenor and the defendant, (Cross- As the plaintiffs were about to undertake urgent repairs on the
examination of Morales, t.s.n. pp. 13-14) Celso Avelino caused the dilapidated residential building, the defendant had already occupied
survey of the premises in question, in his name, by the Bureau of the same, taking in paying boarders and claiming already ownership
Lands (Exh. J). He also built his residential house therein with of the premises in question, thus they filed this case.
Marcial Aragon (now dead) as his master carpenter who was even
scolded by him for constructing the ceiling too low. Plaintiffs, being the neighbors of Celso Avelino, of their own
knowledge are certain that the premises in question is indeed owned
When the two-storey residential house was finished, he took his by their predecessor-in-interest because the male plaintiff used to
parents, Rosendo Avelino and Juana Ricaforte, and his sister, Aurea, play in the premises when he was still in his teens while the female
who took care of the couple, to live there until their deaths. He also plaintiff resided with the late Judge Avelino. Besides, their inquiries
declared this residential house in his tax declaration to the premises and documentary evidence shown to them by Celso Avelino confirm
in question (Exh. F) and paid the corresponding realty taxes, keeping this fact. Likewise, the defendant and Intervenor did not reside in the
intact the receipts which he comes to get or Aurea would go to Cebu premises in question because they reside respectively in Brgy.
to give it to him (t.s.n. Morales, pp. 4-6). Tarobucan and Brgy. Trinidad (Sabang), both of Calbayog City with
their own residential houses there.
After being the City Fiscal of Calbayog, Celso Avelino became an
Immigration Officer and later as Judge of the Court of First Instance Due to the damages they sustained as a result of the filing of this
in Cebu with his sister, Aurea, taking care of the premises in case, the plaintiffs are claiming P50,000.00 for mental anguish;
question. While he was already in Cebu, the defendant, without the monthly rental of the premises in question of P1,500.00 starting from
knowledge and consent of the former, constructed a small beauty March 1987; litigation expenses of P5,000.00 and P10,000.00 for
shop in the premises in question. Attorney's fees.[6]

68
The trial courts summary of the evidence for the defendants and receipts to Celso or the latter will come to get them. Rodolfo also
intervenor is as follows: gave some of the receipts to Celso.

Defendants-Intervenors testimonial evidence tend to show that the The sale of the subject premises to the Plaintiffs is fraudulent
premises is question (land and two-storey building) is originally because it included her (Intervenors) share and the beauty shop of
owned by the spouses, Rosendo Avelino and Juana Ricaforte, who, her son, the defendant.
through their son, Celso Avelino, through an Escritura de Venta (Exh.
2) bought it from the Mendiolas on July 8, 1948. After the purchase As a result of this case she is worried and suffered moral damages,
the couple occupied it as owners until they died. Juana died on May lost her health, lacks sleep and appetite and should be compensated
31, 1965 while Rosendo died on June 4, 1980. Upon their demise, for P80,000.00 and the expenses for litigation in the amount
their children: Trinidad A. Cruz, Concepcion A. Peralta, Priscila A. of P30,000.00 until the case is finished.
Morales and Aurea Avelino (who died single) succeeded as owners
thereof, except Celso Avelino who did not reside in the premises The Intervenor would not claim ownership of the premises if her son,
because he was out of Calbayog for more than 30 years until his the defendant is not being made to vacate therefrom by the
death in Cebu City.
Plaintiffs.[7]

The premises in question was acquired by Celso Avelino who was


The trial court reached the aforementioned disposition on the
entrusted by Rosendo with the money to buy it. Rosendo let Celso basis of its findings of facts and conclusions, which we quote:
buy it being the only son. The property is in the name of Celso
Avelino and Rosendo told his children about it (TSN, Morales, p. 21).
In 1950 Rosendo secured gratuitous license (Exh. 1) and During the ocular inspection of the premises in question on April 4,
constructed the two-storey house, having retired as Operator of the 1988, conducted by the Court upon motion of the parties, the Court
Bureau of Telecommunications, buying lumber from the father of found that the two-storey residential building urgently needed major
Simplicia Darotel and paying the wages of Antonio Nartea as a general repairs and although the bedrooms seemed occupied by
laborer. lodgers, neither the defendant nor the Intervenor informed the Court
where or in which of the rooms they occupied.
In 1979, defendant Rodolfo Morales constructed beside the two-
storey house and beauty shop for his wife with the consent of Celso Observing the questioned premises from the outside, it is easily
and the latters sisters. deducible that it has not been inhabited by a true or genuine owner
for a long time because the two-story building itself has been left to
deteriorate or ruin steadily, the paint peeling off, the window shutters
Priscila Morales was aware that the premises in question was
to be replaced, the lumber of the eaves about to fall and the hollow-
surveyed in the name of Celso but she did not make any attempt, not
block fence to be straightened out, a portion along Umbria street
even her father, to change the muniment of title to Rosendo Avelino. (West) cut in the middle with the other half to the south is tilting while
Despite the fact that Intervenor has two sons who are lawyers, no the premises inside the fence farther from the beauty shop to be
extra-judicial settlement was filed over the premises in question since
cleaned.
the death of Rosendo Avelino up to the present.
From the evidence adduced by the parties, the following facts are
Celso Avelino kept the receipts for the realty tax payments of the undisputed:
premises. Sometimes Aurea would go to Cebu to deliver these

69
1. The identity of the premises in question which is a 8. Ever since the Plaintiffs acquired the disputed premises,
parcel of land together with the two residential its tax declaration is now in the name of the female
building standing thereon, located at corner Umbria Plaintiff with the current realty taxes thereon paid by
St. (on the West) and Rosales Blvd. (on the North), her.
Brgy. Central, Calbayog City, with an area of 318 sq.
meters, presently covered by Tax Declaration No. A very careful study and meticulous appraisal of the evidence
47606 in the name of the female Plaintiff and also adduced by both parties and the applicable laws and jurisprudence
bounded on the East by lot 03-002 (1946) and on show a preponderance of evidence conclusively in favor of the
the South by lot 03-006 (1950); Plaintiffs, due to the following facts and circumstances, all borne of
the record.
2. The Deeds of Conveyance of the questioned premises -
- the Escritura de Venta (Exh. B) from the Mendiolas One. While Plaintiff's claim of ownership over the premises in
to Celso Avelino and the Deed of Sale (Exh. C) from question is duly supported by documentary evidences, such as the
Celso Avelino to the Plaintiffs- are both public Deed of Conveyance (Exhs. B and C), Tax declarations and
instruments; payments of the realty taxes on the disputed property, both as to the
land and the two-storey building (Exhs. D, E, F, G, H, and I and K
3. The couple, Rosendo and Juana Avelino as well as their and series) and the survey plan of the land (Exh. J), Defendants-
daughter, Aurea, resided and even died in the Intervenors claim of ownership is based merely on testimonial
disputed premises; evidence which is self-serving and cannot prevail over documentary
evidence because it is a settled rule in this jurisdiction that
4. The defendant, Rodolfo Morales, constructed the beauty testimonial evidence cannot prevail over documentary evidence.
parlor in the said premises and later occupied the
two-storey residential house; Two. While Plaintiffs evidence of ownership of the disputed premises
is clear, positive, categorical and credible, Intervenors testimony that
5. Not one of the children or grandchildren of Rosendo the disputed premises was acquired by his brother (p. 16); that the
Avelino ever contested the ownership of Celso document of conveyance of the land and the building (p. 14) is in the
Avelino of the disputed premises; name of her brother; that it was surveyed in her brothers name with
her knowledge (pp. 13-14); that during the lifetime of her father the
6. There has no extra-judicial partition effected on the muniments of title of the premises was never transferred in her
fathers name (pp. 10-11 & 20); that not one of the heirs of Rosendo
subject property since the death of Rosendo Avelino
Avelino ever contested Celso Avelinos ownership thereof, despite
although two of the Intervenor's children are full-
their knowledge (p.21); that no extra-judicial partition or settlement
pledged lawyers;
was instituted by all the female children of Rosendo Avelino,
especially by the Intervenor herself even though two of her children
7. Since the premises in question had been acquired by are full-pledge lawyers (p.15); and the fact that the Intervenor is not
Celso Avelino, it has been declared in his name for even interested to see the document of the disputed premises (19),
taxation purposes and the receipts of the realty very clearly show that her claim is neither positive nor categorical but
taxes thereon were kept by him, some were either is rather unconvincing.
delivered to him by Aurea or by defendant; and

70
Three. The foregoing testimony of the Intervenor also show that she from the evidence is Celso Avelino's absolute ownership of the
is already in laches. disputed property, both as to the land and the residential house (Exh.
F) which was sold to the Plaintiffs (Exh. C) while Intervenors self-
Four. The present condition of the premises, especially the two- serving and unconvincing testimony of co-ownership is not supported
storey building which has been left to deteriorate or ruin steadily by any piece of credible documentary evidence.
clearly betrays or belies Intervenor's pretense of ownership of the
disputed premises. On the contrary, the last part of Art. 1448 of Our New Civil Code
bolsters Plaintiffs ownership over the disputed premises. It expressly
Five. If the premises in question is really owned in common by the provides: x x x . However, if the person to whom the title is conveyed
children of Rosendo and Juana Avelino, why is it that the surviving is a child, legitimate or illegitimate, of the one paying the price of the
sisters of the Intervenor did not join her in this case and intervene to sale, no trust is implied by law, it being disputably presumed that
protect their respective interests? there is a gift in favor of the child.(underscoring supplied)

Six. On the witness chair, Intervenors demeanor and manner of Finally, from the testimony of the Intervenor (p.22) the truth is out in
testifying show that she was evasive and shifty and not direct in her that the Intervenor is putting up her pretense of ownership over the
answers to simple questions that she was admonished by the Court disputed premises only when the defendant was being advised to
not be evasive and be direct or categorical in her answers; and which vacate and only to shield him from vacating therefrom. Thus, on
rendered her testimony unworthy of full faith and credit. question of the Court, she declared:

Seven. That Plaintiffs predecessor-in-interest is the true and absolute Q When your father died, as a co-owner were you not
owner of the disputed premises having purchased it from the interested to look at the document so that you can
Mendiolas while he was the City Fiscal of Calbayog and still a lawfully claim, act as owner of that land?
bachelor and later became an Immigration Officer and later became A We just claim only when my son, Rodolfo was driven by
a CFI (now RTC) Judge when the two-storey building was the Plaintiff.
constructed by Marcial Aragon, thus he declared both the land and
the residential building in his name, had it surveyed in his name and Q In other words what you are saying is that if your son was
continuously paid the realty taxes thereon, is more in conformity with not dispossessed of the property in question, you would
common knowledge, experience and belief because it would be not claim ownership?
unnatural for a man to continuously pay realty taxes for a property
that does not belong to him. Thus, our Supreme Court, ruled: Tax A No, sir.
receipts are not true evidence of ownership, but no person in his right
mind would continue paying taxes for land which he thinks does not In her Memorandum, Intervenor raises the issue whether or not the
belong to him. (Ramos vs. Court of Appeals, 112 SCRA 543). plaintiffs are entitled to the damages being claimed which were duly
supported or proven by direct evidence.
Eight. Intervenors claim of implied trust is untenable because even
from the different cases mentioned in her Memorandum, it is very On this particular issue, the Plaintiffs evidence has established that
apparent that in order for implied trust to exist there must be before the Plaintiffs paid the purchase price of the premises in
evidence of an equitable obligation of the trustee to convey, which question, they talked with the defendant about the intended sale and
circumstance or requisite is absent in this case. What is instead clear the latter even encouraged them to purchase it and that he will

71
vacate the premises as soon as the payment is made therefore 3. xxx in ruling that the Intervenor is barred by laches from
(TSN, Ortiz, Jr., p. 20, April 4, 1988). Hence, they paid the purchase asserting her status as a beneficiary of the aforesaid
price and Exh. C was duly executed by the owner in their favor. The implied trust.
defendant, however, despite his encouragement and notice from his
uncle to vacate the subject premises (Exh. N) reneged on his words 4. xxx in ruling that Celso Avelino validly sold the house and
and refused to vacate or demolish his beauty shop inside the lot in question to appellees without the consent of the
premises in question unless he is paid P35,000.00 for it although it is other heirs of Rosendo Avelino and Juana Ricaforte
valued at less than P5,000.00. Avelino.
5. xxx in declaring appellees the absolute and rightful
With that unreasonable demand of the defendant, the plaintiffs owners of the house and lot in question by virtue of the
demanded, orally and in writing (Exhs. L and M) to vacate the sale of those properties to them by Celso Avelino.
premises. The defendant refused.
6. xxx in not ruling that appellants are rightful co-owners and
possessors of the house and lot in question in their
Later, as the plaintiffs were about to undertake urgent repairs on the
capacities as heirs of Rosendo Avelino and Juana
dilapidated residential building and make it as their residence, they
Ricaforte Avelino, the true owners of those properties.
found out that the defendant rather than vacate the premises, had
already occupied the said residential building and admitted lodgers 7. xxx in ordering defendants to remove the beauty shop on
to it (id., p. 24) and claimed ownership thereof, to the damage, the disputed land instead of declaring Rodolfo Morales a
prejudice and injury and mental anguish of the plaintiffs. So, the builder in good faith and providing for the protection of
plaintiffs, as the true and lawful owners of the premises in question, his rights as such.
filed the instant case incurring expenses in the process as they hired
the services of a lawyer to protect their interests from the willful and 8. xxx in ordering appellants to vacate the disputed
wrongful acts or omissions of the defendant.[8] premises and to pay appellees a monthly rental, moral
damages, litigation expenses, and attorney's fees.
Dissatisfied with the trial courts decision, defendants heirs of 9. xxx in not awarding appellants the damages and costs
Rodolfo Morales and intervenor Priscila Morales, petitioners herein, prayed for in answer with counterclaim and answer in
appealed to the Court of Appeals, which docketed the appeal as CA- intervention, considering that the action to dispossess
G.R. CV No. 34936, and in their Appellants Brief they assigned the them of the house and land in question is clearly without
following errors: legal foundation.[9]
1. The RTC erred in ruling that Celso Avelino, appellees In its decision of 20 April 1994[10] the Court of Appeals affirmed
predecessor-in- interest, was the true and lawful owner the decision of the trial court.
of the house and lot in question.
Their motion to reconsider the decision having been denied in the
2. xxx in not ruling that Celso Avelino purchased the house resolution[11] of 14 September 1994 for lack of merit, petitioners filed
and lot in question as a mere trustee, under an implied the instant petition wherein they claim that:
trust, for the benefit of the trustor, his father, Rosendo
Avelino, and the latters heirs. 1. Respondent CA erred in adopting the trial courts
reasoning that it would be unnatural for a man to
continuously pay realty taxes for a property that does not
belong to him on the basis of a misreading and

72
misapplication of Ramos v. Court of Appeals, 112 SCRA be compelled to vacate the disputed property or to pay a
543 (1982).Respondent CA also erred in concluding that monthly rental unless he was first indemnified for the cost
the payment of realty taxes is conclusive evidence of of what he had built. In so doing, respondent CA: (i)
ownership, which conclusion ignores this Honorable refused to apply the clear language of Articles 448 and
Court's rulings in Ferrer-Lopez v. Court of Appeals, 150 453 of the Civil Code; and (ii) ignored this Honorable
SCRA 393 (1987), De Guzman v. Court of Appeals, 148 Court's rulings in Municipality of Oas v Roa, 7 Phil. 20
SCRA 75 (1987), and heirs of Celso Amarante v. Court (1906) Merchant v. City of Manila, 11 Phil. 116 (1908),
of Appeals, 185 SCRA 585 (1990). Martinez v. Baganus, 28 Phil. 500 (1914), Grana v. Court
of Appeals, 109 Phil. 260 (1960), and Miranda v.
2. xxx in relying on Conception Peralta's alleged Fadullon, 97 Phil. 810 (1955).
Confirmation (Exhibit O) in ruling that Celso Avelino (and
later the respondents) had exclusive and absolute 7. xxx in affirming the Trial Court's award of damages in
ownership of the disputed property. Exhibit O was not favor of the respondents. In so doing, respondent CA: (i)
identified by the purported affiant at the trial, and was misapplied Articles 2199, 2208, 2219, and 2220 of the
therefore plainly hearsay. Respondent CA erred in Civil Code; and (ii) ignored this Honorable Courts ruling
admitting Exhibit O in evidence over the objection of the in San Miguel Brewery, Inc. v. Magno, 21 SCRA 292
petitioner's counsel. (1967).
3. xxx in inferring and surmising that Celso Avelinos alleged 8. xxx in refusing to rule that the respondents are liable to
exclusive ownership of the disputed property was petitioners for moral damages, and attorney's fees and
affirmed by the inaction of his four sisters. costs of litigation. In so doing, respondent CA ignored
unrebutted evidence on record and Articles 2208, 2217,
4. xxx in ruling that the petitioners' testimonial evidence and 2219 of the Civil Code.
could not prevail over the respondent's evidence for the
purpose of establishing the existence of an implied On 13 September 1995, after the filing of private respondents
trust. This ruling ignores this Honorable Court's decision comment on the petition and petitioners reply thereto, we resolved to
in De Los Santos v. Reyes, 205 SCRA 437 (1992). deny the petition for failure of petitioners to sufficiently show that the
respondent Court of Appeals committed reversible error.
5. xxx in ignoring unrebutted evidence on record that Celso
Avelino held title to the disputed property merely as a Undaunted, petitioners on 17 October 1995 filed a motion for
trustee for his father, mother, and siblings. In so doing, reconsideration of our resolution of 13 September 1995 based on the
respondent CA: (i) ignored decided cases where this following grounds:
Honorable Court found the existence of trusts on the
bases of similar evidence, including the cases of Valdez 1. The Honorable Court erred in not ruling that at the very
v. Olorga, 51 SCRA 71 (1973), De Buencamino, et al. v. least, Rodolfo Morales should have been considered a
De Matias, 16 SCRA 849 (1966), Gayos v. Gayos, 67 builder in good faith who could not be compelled to
SCRA 146 (1975), and Custodio v. Casiano, 9 SCRA 841 vacate the disputed property or to pay monthly rental
(1963); and (ii) refused to apply the clear language of unless he was first indemnified for the cost of what he
Article 1448 of the Civil Code. had built.

6. xxx in not ruling that Rodolfo Morales should have at least


been regarded as a builder in good faith who could not

73
2. xxx in not ruling that the Court of Appeals and the Trial 1. It is a relationship;
Court gravely misapplied the law in ruling that there was
no implied trust over the premises. 2. it is a relationship of fiduciary character;

3. xxx in not ruling that the Court of Appeals and the Trial 3. it is a relationship with respect to property, not one
Court gravely misapplied the law in awarding damages involving merely personal duties;
to the respondents. 4. it involves the existence of equitable duties imposed upon
We required respondents to comment on the motion for the holder of the title to the property to deal with it for the
reconsideration; however it was not until 1 July 1996 and after we benefit of another; and
required their counsel to show cause why he should not be 5. it arises as a result of a manifestation of intention to create
disciplinarily dealt with for failure to file comment when said counsel the relationship.[13]
filed the comment by mail. Upon prior leave of court, petitioners filed
a reply to the comment. Trusts are either express or implied. Express trusts are created
by the intention of the trustor or of the parties, while implied trusts
On 19 August 1996 we granted petitioners motion for come into being by operation of law,[14] either through implication of an
reconsideration and required the parties to submit their respective intention to create a trust as a matter of law or through the imposition
memoranda. Petitioners and private respondents submitted their of the trust irrespective of, and even contrary to, any such
memoranda on 4 and 28 October 1996, respectively. intention.[15] In turn, implied trusts are either resulting or constructive
The grant of the motion for reconsideration necessarily limits the trusts. Resulting trusts are based on the equitable doctrine that
issues to the three grounds postulated in the motion for valuable consideration and not legal title determines the equitable title
reconsideration, which we restate as follows: or interest and are presumed always to have been contemplated by
the parties. They arise from the nature or circumstances of the
1. Did Celso Avelino purchase the land in question from the consideration involved in a transaction whereby one person thereby
Mendiolas on 8 July 1948 as a mere trustee for his becomes invested with legal title but is obligated in equity to hold his
parents and siblings or, simply put, is the property the legal title for the benefit of another. On the other hand, constructive
former acquired a trust property? trusts are created by the construction of equity in order to satisfy the
demands of justice and prevent unjust enrichment. They arise contrary
2. Was Rodolfo Morales a builder in good faith? to intention against one who, by fraud, duress or abuse of confidence,
3. Was there basis for the award of damages, attorneys fees obtains or holds the legal right to property which he ought not, in equity
and litigation expenses to the private respondents? and good conscience, to hold.[16]

We shall discuss these issues in seriatim. A resulting trust is exemplified by Article 1448 of the Civil Code,
which reads:
I
A trust is the legal relationship between one person having an Art. 1448. There is an implied trust when property is sold, and the
equitable ownership in property and another person owning the legal legal estate is granted to one party but the price is paid by another
title to such property, the equitable ownership of the former entitling for the purpose of having the beneficial interest of the property. The
him to the performance of certain duties and the exercise of certain former is the trustee, while the latter is the beneficiary. However, if
powers by the latter.[12] The characteristics of a trust are: 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

74
by law, it being disputably presumed that there is a gift in favor of the fact remains, however, that title to the property was conveyed to
child. Celso. Accordingly, the situation is governed by or falls within the
exception under the third sentence of Article 1448, which for
The trust created under the first sentence of Article 1448 is sometimes convenience we quote:
referred to as a purchase money resulting trust.[17] The trust is created
in order to effectuate what the law presumes to have been the ... However, if the person to whom the title is conveyed is a
intention of the parties in the circumstances that the person to whom child, legitimate or illegitimate, of the one paying the price of the
the land was conveyed holds it as trustee for the person who supplied sale, no trust is implied by law, it being disputably presumed
the purchase money.[18] that there is a gift in favor of the child. (Underscoring supplied).
To give rise to a purchase money resulting trust, it is essential
that there be: On this basis alone, the case for petitioners must fall. The
preponderance of evidence, as found by the trial court and affirmed by
1. an actual payment of money, property or services, or an the Court of Appeals, established positive acts of Celso Avelino
equivalent, constituting valuable consideration; indicating, without doubt, that he considered the property he
purchased from the Mendiolas as his exclusive property. He had its
2. and such consideration must be furnished by the alleged tax declaration transferred in his name, caused the property surveyed
beneficiary of a resulting trust.[19] for him by the Bureau of Lands, and faithfully paid the realty
There are recognized exceptions to the establishment of an taxes. Finally, he sold the property to private respondents.
implied resulting trust. The first is stated in the last part of Article The theory of implied trust with Celso Avelino as the trustor and
1448 itself. Thus, where A pays the purchase money and title is his parents Rosendo Avelino and Juan Ricaforte as trustees is not
conveyed by absolute deed to As child or to a person to whom A even alleged, expressly or impliedly, in the verified Answer of Rodolfo
stands in loco parentis and who makes no express promise, a trust Morales[24] nor in the Answer in Intervention of Priscila A.
does not result, the presumption being that a gift was Morales.[25] In the former, Rodolfo alleged that:
intended. Another exception is, of course, that in which an actual
contrary intention is proved. Also where the purchase is made in A. [T]he lot and the two-storey building in question... which
violation of an existing statute and in evasion of its express provision, are actually possessed by Rodolfo Morales, defendant
no trust can result in favor of the party who is guilty of the fraud.[20] herein, and by his parents -- Priscila A. Morales and
Cesar Morales -- and consequently, the ones now in
As a rule, the burden of proving the existence of a trust is on the litigation in the above-entitled case, were originally and
party asserting its existence, and such proof must be clear and exclusively owned and possessed by his grandparents-
satisfactorily show the existence of the trust and its elements. [21] While Rosendo Avelino and Juana Ricaforte;
implied trusts may be proved by oral evidence,[22] the evidence must
be trustworthy and received by the courts with extreme caution, and B. [S]aid lot, together with an old house then thereon, were
should not be made to rest on loose, equivocal or indefinite (sic) acquired by said couple -- Rosendo Avelino and
declarations. Trustworthy evidence is required because oral evidence Juana Ricaforte -- on July 8, 1948, which they right away
can easily be fabricated.[23] possessed exclusively in the concept of owner;[26]
In the instant case, petitioners theory is that Rosendo Avelino Priscila, on her part, merely reiterated the foregoing allegations in
owned the money for the purchase of the property and he requested subparagraphs A and B of paragraph 2 of her Answer in
Celso, his son, to buy the property allegedly in trust for the former. The Intervention.[27]

75
Rodolfo and Priscila likewise even failed to suggest in their Yet, petitioners now want us to reverse the rulings of the courts
respective Special and Affirmative Defenses that Celso Avelino held below that Celso Avelino was the absolute and exclusive owner of the
the property in trust despite Rodolfos claim that: property in question, on strength of, primarily, their implied trust theory.
The problem with petitioners is that they entirely forgot that the trial
4. [T]he alleged sale by Celso Avelino alone of the court and the Court of Appeals did not base their rulings on this
properties in question in favor of plaintiff Erlinda alone. As shown earlier, the trial court pointed out numerous other
Ortiz and the alleged TD-47606 in the name of flaws in petitioners theory, such as laches. Then, too, the rule is settled
Erlinda Ortiz, were clandestine, fraudulent, null and that the burden of proving the existence of a trust is on the party
void because, first, said documents cover the entire asserting its existence and that such proof must be clear and
properties in question of the late Rosendo Avelino satisfactory.[32] As to that, petitioners relied principally on testimonial
and Juana Ricaforte; second, only Celso Avelino evidence. It is, of course, doctrinally entrenched that the evaluation of
sold the entire properties, without the knowledge and the testimony of witnesses by the trial court is received on appeal with
consent of said Priscila A. Morales, Trinidad A. Cruz the highest respect, because it is the trial court that has the direct
and Concepcion E. Peralta - children and heirs of opportunity to observe them on the stand and detect if they are telling
said Rosendo Avelino and Juana Ricaforte; and, the truth or lying through their teeth. The assessment is accepted as
third, said documents were also made without the correct by the appellate court and binds it, absent a clear showing that
knowledge and consent of defendant Rodolfo it was reached arbitrarily.[33] In this case, petitioners failed to assail,
Morales who has prior and legal possession over the much less overcome, the following observation of the trial court:
properties in question and who is a builder in good
faith of the shop building thereon.[28] Six. On the witness chair, Intervenors demeanor and manner of
testifying show that she was evasive and shifty and not direct in her
Not surprisingly, Priscila merely restated these allegations in answers to simple questions that she was admonished by the Court
paragraph 2 of her Special and Affirmative Defenses. If truly they were not to be evasive and direct and categorical in her answers; and
convinced that Celso Avelino acquired the property in trust for his which rendered her testimony unworthy of full faith and credit.[34]
parents, it would have been far easier for them to explicitly state such
fact.[29] Likewise fatal to petitioners cause is that Concepcion Peraltas
sworn Confirmation dated 14 May 1987 cannot be considered hearsay
The separate Answers of Rodolfo and Priscila do not likewise evidence due to Concepcions failure to testify. On the contrary, it is an
allege that Celso Avelino committed any breach of the trust by having exception to the hearsay rule under Section 38 of Rule 130 of the
the property declared in his name and paying the realty taxes thereon Rules of Court, it having been offered as evidence of an act or
and by having the lot surveyed by the Bureau of Lands which gave it declaration against interest. As declarant Concepcion was a daughter
a lot number: Lot 1949.[30] Even more telling is that in the Pre-Trial of Rosendo Avelino and Juana Ricaforte, and a sister of Celso Avelino
Order[31] of the trial court, petitioners did not claim the existence of an and intervenor Priscila Morales, Concepcion was thus a co-heir of her
implied trust; the parties merely agreed that the main issues were: siblings, and would have had a share, equal to that of each of her co-
heirs, in the estate of Rosendo and Juana. However, Concepcion
a. Who is the owner of the premises in question? explicitly declared therein thus:

b. Who is entitled to the possession thereof? That my aforenamed brother [Celso Avelino], during the time when
he was City Fiscal of Calbayog City and still a bachelor, out of his
own money, bought the parcels of land located at corner Umbria

76
Street and Rosales Blvd., Brgy. Central, Calbayog City, from Culets shares in the property conveyed to them after the death of Rosendo
Mendiola de Bartolome and Alejandra Fua Mendiola by virtue of a Avelino in 1980. Neither is there any evidence that during his lifetime
Deed of Sale entered as Doc. No. 37; Page No. 20; Book No. XI; Rosendo demanded from Celso that the latter convey the land to the
Series of 1948 in the Notarial Book of Atty. Celedonio Alcazar, former, which Rosendo could have done after Juanas death on 31
Notary Public of Calbayog, Samar; Likewise, out of his own money, May 1965. This omission was mute and eloquent proof of Rosendos
he constructed a residential building on the lot which building is recognition that Celso was the real buyer of the property in 1948 and
made of strong materials. the absolute and exclusive owner thereof.
II
If indeed the property was merely held in trust by Celso for his parents,
Concepcion would have been entitled to a proportionate part thereof Was Rodolfo Morales a builder in good faith? Petitioners urge us
as co-heir. However, by her Confirmation, Concepcion made a solemn to so rule and apply Article 448 of the Civil Code, which provides:
declaration against interest. Petitioners, realizing that the
Confirmation was admissible, attempted to cushion its impact by The owner of the land on which anything has been built, sown or
offering in evidence as Exhibit 4[35] Concepcions affidavit, dated 16 planted in good faith, shall have the right to appropriate as his own
June 1987, wherein Concepcion stated: 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
3. The property in question (particularly the house), however forms planted to pay the price of the land, and the one who sowed, the
part of the state of our deceased parents, and, therefore, full and proper rent. However, the builder or planter cannot be obliged to buy
complete conveyance of the right, title and interest in and to such the land if its value is considerably more than that of the building or
property can only be effected with the agreement of the other heirs, trees. In such case, he shall pay reasonable rent, if the owner of the
namely, my sisters Trinidad A. Cruz and Priscila A. Morales, and land does not choose to appropriate the building or trees after proper
myself. indemnity. The parties shall agree upon the terms of the lease and in
case of disagreement, the court shall fix the terms thereof.
Note that Concepcion seemed to be certain that only the house formed
part of the estate of her deceased parents. In light of the equivocal Clearly, Article 448 applies only when the builder, planter or
nature of Concepcions later affidavit, the trial court and the Court of sower believes he has the right to so build, plant or sow because he
Appeals did not then err in giving more weight to Concepcions earlier thinks he owns the land or believes himself to have a claim of title.[37] In
Confirmation. the instant case Rodolfo Morales knew from the very beginning that
he was not the owner of the land. He alleged in his answer that the
At bottom, the crux of the matter is whether petitioners land was acquired by his grandparents Rosendo Avelino and Juana
discharged their burden to prove the existence of an implied trust. We Ricaforte and he constructed the shop building in 1979 upon due
rule in the negative. Priscilas justification for her and her sisters failure permission and financial assistance from his mother, Priscila A.
to assert co-ownership of the property based on the theory of implied Morales and from his aunts Trinidad A. Cruz and Concepcion A.
trust is, to say the least, flimsy. In light of their assertion that Celso Peralta ..., with the knowledge and consent of his uncle Celso
Avelino did not have actual possession of the property because he Avelino.[38]
was away from Calbayog continuously for more than 30 years until he
died on October 31, 1987,[36] and the established fact that the tax Petitioners, however, contend that:
declarations of the property were in Celsos name and the latter paid
the realty taxes thereon, there existed no valid and cogent reason why Even assuming the argument that Rodolfo Morales was a builder in
Priscila and her sisters did not do anything to have their respective bad faith because he was aware of Celso Avelinos supposed

77
exclusive ownership of the land, still, however, injured party to obtain means, diversion, or amusements that will serve
the unrebutted evidence shows that Celso Avelino consented to to alleviate the moral sufferings he underwent, by reason of the
Rodolfo Morales construction of the beauty shop on the land. TSN, defendant's culpable action and must, perforce, be proportionate to
April 4, 1988, p. 40; TSN, April 4, 1988, p. 40; TSN, October 19, the suffering inplicted.[43] In the same vein, moral damages must be
1990, p. 21. Under Article 453 of the Civil Code, such consent is understood to be in concept of grants, not punitive or corrective in
considered bad faith on the part of the landowner. In such a case, nature, calculated to compensate the claimant for the injury
the rights of the landowner and the builder shall be considered as suffered.[44]
though both acted in good faith.[39]
In the instant case, the private respondents have not convincingly
shown that they suffered "mental anguish" for certain acts of herein
This so-called unrebutted testimony was rejected by the courts petitioner which fell under any of the cases enumerated in Articles
below, and with good reason. First, it was clearly self-serving and 2219 and 2220 of the Civil Code. However, the trial court invoked
inconsistent with petitioners vigorous insistence that Celso Avelino Articles 19, 20, 21, 2217, 2219, 2220 to support the award for moral
was away from Calbayog City continuously for more than 30 years damages. Article 2220 is definitely inapplicable since this is not a case
until he died on October 31, 1987.[40] The circumstances of when and of willful injury to property or breach of contract.
where allegedly the consent was given are unclear. Second, only
Celso Avelino could have rebutted it; but the testimony was given after The attendant circumstances in this case also reject the
Avelinos death, thus forever sealing his lips.Reason and fairness application of Articles 19, 20 and 21 of the Chapter on Human
demand that the attribution of an act to a dead man must be viewed Relations of the Civil Code.
with utmost caution. Finally, having insisted with all vigor that the land
was acquired by Rosendo Avelino and Juanita Ricaforte, it would be Accordingly, for lack of factual and legal basis, the award of moral
most unlikely that Rodolfo would have taken the trouble of securing damages must be set aside.
Celsos consent, who had been continuously away from Calbayog City For the same reason the award of attorney's fees and litigation
for more than 30 years, for the construction of the shop building. expenses must suffer the same fate. The award of attorney's fees is
III the exception rather than the rule and counsel's fees are not to be
awarded every time a party wins a suit. The power of the court to
We cannot however give our affirmance to the awards of moral award attorney's fees under Article 2208 of the Civil Code demands
damages, attorneys fees and litigation expenses. factual, legal and equitable justification; its basis cannot be left to
speculation and conjecture.[45] The general rule is that attorney's fees
Pursuant to Article 2217 of the Civil Code, moral damages, which cannot be recovered as part of damages because of the policy that no
include physical suffering, mental anguish, fright, serious anxiety, premium should be placed on the right to litigate.[46]
besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury may be recovered in the cases WHEREFORE, premises considered, except as to the award of
enumerated in Article 2219 and 2220 of the same Code.[41] For moral moral damages, attorneys fees and litigation expenses which are
damages to be recovered, it must be shown that they are the hereby DELETED, the judgment of the respondent Court of Appeals
proximate result of the defendant's wrongful act or omission in the is AFFIRMED.
cases provided for in Articles 2219 and 2220, i.e., it must be shown
that an injury was suffered by the claimant and that such injury sprang Costs against petitioners.
from any of the cases stated in Articles 2219 and 2220. [42] Moral SO ORDERED.
damages are emphatically not intended to enrich a plaintiff at the
expense of the defendant. They are awarded only to enable the

78
Firstly, petitioner alleged in her Complaint that she was the
owner of a parcel of land situated in Ugac Norte, Tuguegarao,
Cagayan, with an area of 1,457 sq.m. and covered by Transfer
Certificate of Title (TCT) No. T-43373[4] of the Register of Deeds for
the Province of Cagayan, registered in petitioners name. A residential
Assailed in this Petition for Review on Certiorari under Rule house and a warehouse were constructed on the said parcel of land
45 of the Rules of Court is the Decision[1] dated 15 December 2006 of which petitioner also claimed to own (the land and the improvements
the Court of Appeals in CA-G.R. CV No. 69731. Said Decision thereon shall be hereinafter referred to as the Ugac
reversed and set aside the Decision[2] dated 19 January 2000 of the properties). Petitioner averred that in the middle part of 1986, she
Regional Trial Court (RTC) of Tuguegarao City, Branch 2, in Civil discovered that TCT No. T-43373 was cancelled on 13 May
Case No. 3672, which declared petitioner Lina Pealber the owner of 1983 and TCT No. T-58043[5] was issued in its stead in the name of
the Bonifacio property subject of this case and ordered respondent respondent spouses Ramos. Upon verification, petitioner learned that
spouses Quirino Ramos and Leticia Pealber to reconvey the same to the basis for the cancellation of her title was a Deed of Donation of
petitioner. a Registered Land, Residential House and Camarin,[6] which
petitioner purportedly executed in favor of respondent spouses Ramos
The factual and procedural antecedents of the case are set on 27 April 1983. Petitioner insisted that her signature on the said
forth hereunder. Deed of Donation was a forgery as she did not donate any property to
respondent spouses Ramos. When petitioner confronted the
Petitioner is the mother of respondent Leticia and the mother- respondent spouses Ramos about the false donation, the latter
in-law of respondent Quirino, husband of Leticia. Respondent Bartex, pleaded that they would just pay for the Ugac properties in the amount
Inc., on the other hand, is a domestic corporation which bought from of P1 Million. Petitioner agreed to the proposition of the respondent
respondent spouses Ramos one of the two properties involved in this spouses Ramos.
case.
On 18 February 1987, petitioner filed before the RTC a Subsequently, around 10 January 1987,[7] petitioner found out
Complaint for Declaration of Nullity of Deeds and Titles, that the respondent spouses Ramos were selling the Ugac properties
Reconveyance, Damages, [with] Application for a Writ of Preliminary to respondent Bartex, Inc. Petitioner then sent her son, Johnson
Prohibitory Injunction against the respondents.[3] It was docketed as Paredes (Johnson),[8] to caution respondent Bartex, Inc. that
Civil Case No. 3672. respondent spouses Ramos were not the lawful owners of the said
properties. Johnson was allegedly able to convey petitioners caveat to
First Cause of Action a representative of respondent Bartex, Inc. Petitioner also warned
respondent spouses Ramos not to sell the Ugac properties anymore,

79
otherwise, she would file the necessary action against them. The Secondly, petitioner claimed that for many years prior to 1984,
respondent spouses Ramos then assured her that they would do no she operated a hardware store in a building she owned
such thing. As a precaution, petitioner executed an Affidavit of along Bonifacio St., Tuguegarao, Cagayan. However, the commercial
Adverse Claim over the Ugac Properties on 19 January 1987 and lot (Bonifacio property) upon which the building stood is owned by
caused the same to be annotated on TCT No. T-58043 on the same and registered in the name of Maria Mendoza (Mendoza), from whom
day. Despite petitioners warnings, respondent spouses Ramos still petitioner rented the same.
executed in favor of respondent Bartex, Inc. a Deed of Absolute
Sale[9] over the Ugac properties on 12 January 1987 for a total price On 22 March 1982, petitioner allowed respondent spouses
of P150,000.00. As a result, TCT No. T-58043 in the name of Ramos to manage the hardware store. Thereafter, in
respondent spouses Ramos was cancelled and TCT No. T- 1984, Mendoza put the Bonifacio property up for sale. As petitioner
68825[10] in the name of respondent Bartex, Inc. was issued on 20 did not have available cash to buy the property, she allegedly entered
January 1987. into a verbal agreement with respondent spouses Ramos with the
following terms:
Petitioner contended that the Deed of Absolute Sale executed
by respondent spouses Ramos in favor of respondent Bartex, Inc. did [1.] The lot would be bought [by herein respondent
spouses Ramos] for and in behalf of [herein
not convey any valid title, not only because respondent Bartex, Inc. petitioner];
was a buyer in bad faith, but also because respondent spouses
Ramos did not own the Ugac properties. Thus, petitioner prayed for [2.] The consideration of P80,000.00 for said lot
would be paid by [respondent spouses
the declaration of nullity of (1) the Deed of Donation of a Registered
Ramos] from the accumulated earnings of the
Land, Residential House and Camarin purportedly executed by store;
petitioner in favor respondent spouses Ramos; (2) TCT No. T-58043,
[3.] Since [respondent spouses Ramos] have the
issued in the name of respondent spouses Ramos; (3) the Deed of
better credit standing, they would be made to
Absolute Sale executed by the respondent spouses Ramos in favor of appear in the Deed of Sale as the vendees so
respondent Bartex, Inc.; and (4) TCT No. T-68825, issued in the name that the title to be issued in their names could
of respondent Bartex, Inc. Should petitioners prayer not be granted, be used by [them] to secure a loan with which
to build a bigger building and expand the
petitioner sought in the alternative that respondent spouses Ramos be business of [petitioner].
ordered to pay the assessed value of the Ugac properties, which was
about P1.5 Million. Petitioner further prayed that TCT No. T-43373, in
her name, be declared valid and active. In accordance with the above agreement, respondent spouses Ramos
allegedly entered into a contract of sale[11] with Mendoza over the
Second Cause of Action Bonifacio property,[12] and on 24 October 1984, TCT No. T-

80
62769[13] covering said property was issued in the names of mortgaged property or pay her mortgage debt to DBP. In return,
respondent spouses Ramos. petitioner promised to cede, convey and transfer full ownership of the
Ugac properties to them. Respondent spouses Ramos paid the
On 20 September 1984, respondent spouses Ramos returned mortgage debt and, in compliance with her promise, petitioner
the management of the hardware store to petitioner. On the bases of voluntarily transferred the Ugac properties to the former by way of a
receipts and disbursements, petitioner asserted that the Bonifacio Deed of Donation dated 27 April 1983. After accepting the donation
property was fully paid out of the funds of the store and if respondent and having the Deed of Donation registered, TCT No. T- 58043 was
spouses Ramos had given any amount for the purchase price of the issued to respondent spouses Ramos and they then took actual and
said property, they had already sufficiently reimbursed themselves physical possession of the Ugac properties. Respondent spouses
from the funds of the store. Consequently, petitioner demanded from Ramos asserted that petitioner had always been aware of their
respondent spouses Ramos the reconveyance of the title to the intention to sell the Ugac properties as they posted placards thereon
Bonifacio property to her but the latter unjustifiably refused. stating that the said properties were for sale. Respondent spouses
Ramos further averred that petitioner also knew that they finally sold
Petitioner insisted that respondent spouses Ramos were, in the Ugac properties to respondent Bartex, Inc. for P150,000.00. Thus,
reality, mere trustees of the Bonifacio property, thus, they were under respondent spouses Ramos maintained that petitioner was not entitled
a moral and legal obligation to reconvey title over the said property to to any reimbursement for the Ugac properties.
her. Petitioner, therefore, prayed that she be declared the owner of the
Bonifacio property; TCT No. T-62769, in the name of respondent With regard to petitioners second cause of action involving the
spouses, be declared null and void; and the Register of Deeds for Bonifacio property, respondent spouses Ramos contended that they
the Province of Cagayan be directed to issue another title in her were given not only the management, but also the full ownership of
name. the hardware store by the petitioner, on the condition that the stocks
and merchandise of the store will be inventoried, and out of the
On 2 March 1987, respondent spouses Ramos accordingly proceeds of the sales thereof, respondent spouses Ramos shall pay
filed before the RTC their Answer[14] to petitioners Complaint. As petitioners outstanding obligations and liabilities. After settling and
regards the first cause of action, respondent spouses Ramos alleged paying the obligations and liabilities of petitioner, respondent spouses
that petitioner, together with her son, Johnson, and the latters wife, Ramos bought the Bonifacio property from Mendoza out of their own
Maria Teresa Paredes, mortgaged the Ugac properties to the funds.
Development Bank of the Philippines (DBP) on 19 August 1990 for the
amount of P150,000.00. When the mortgage was about to be Lastly, even if petitioner and respondent spouses Ramos
foreclosed because of the failure of petitioner to pay the mortgage belonged to the same family, the spouses Ramos faulted petitioner for
debt, petitioner asked respondent spouses Ramos to redeem the failing to exert efforts to arrive at an amicable settlement of their

81
dispute. Hence, respondent spouses Ramos sought, by way of a On the first cause of action, the Court
finds the testimony of [herein petitioner] Lina
counterclaim against petitioner, moral and exemplary damages and Penalber (sic) denying her execution of the deed
attorneys fees, for allegedly filing a false, flimsy and frivolous of donation over the Ugac property in favor of
complaint. [herein respondent spouses] Quirino Ramos and
Leticia Penalber-Ramos (sic) insufficient to
support the said cause of action. A notarial
On 27 April 1987, respondent Bartex, Inc. filed before the RTC document is, by law, entitled to full faith and credit
its own Answer to petitioners Complaint, alleging, inter alia, that when upon its face (Arrieta v. Llosa, 282 SCRA 248) and a
high degree of proof is needed to overthrow the
a representative of the corporation inquired about the Ugac properties
presumption of truth in the recitals contained in a
for sale, respondent spouses Ramos presented their owners duplicate public document executed with all legal formalities
copy of TCT No. T-58043, together with the tax declarations covering (People vs. Fabro, 277 SCRA 19). Hence, in order to
the parcel of land and the buildings thereon. Respondent Bartex, Inc. contradict the facts contained in a notarial document
and the presumption of regularity in its favor, these
even verified the title and tax declarations covering the Ugac (sic) must be evidence that is clear, convincing and
properties with the Register of Deeds and the Office of the Municipal more than merely preponderant (Calahat vs.
Assessor as to any cloud, encumbrance or lien on the properties, but Intermediate Appellate Court, 241 SCRA 356). In the
case at bench, [petitioner] claims that she did not
none were found. Respondent spouses Ramos were then actually execute the deed of donation over the Ugac property
occupying the Ugac properties and they only vacated the same after in favor of [respondent spouses Ramos]. Such
the consummation of the sale to respondent Bartex, Inc. Respondent denial, by itself, is not sufficient to overcome the
presumption of regularity of the notarial deed of
Bartex, Inc. claimed that the sale of the Ugac properties by respondent
donation and its entitlement to full faith and
spouses Ramos to the corporation was already consummated on 12 credit. While it is true that, generally, the party who
January 1987, and the documents conveying the said properties were asserts the affirmative side of a proposition has the
by then being processed for registration, when petitioner caused the burden of proof, which in this instance is (sic) the
[respondent spouses Ramos] who are asserting the
annotation of an adverse claim at the back of TCT No. T-58043 on 19 validity of the deed of donation, [respondent spouses
January 1987. As respondent Bartex, Inc. was never aware of any Ramos] can merely rely on the above-stated
imperfection in the title of respondent spouses Ramos over the Ugac presumption given to notarial documents and need
not present any evidence to support their claim of
properties, it claimed that it was an innocent purchaser in good faith. validity and due execution of the notarized deed of
donation. On the other hand, [petitioner], in
Trial of the case thereafter ensued. addition to her allegation that she did not execute
any such deed of donation in favor of [respondent
spouses Ramos] should have had her allegedly
On 19 January 2000, the RTC promulgated its decision, ruling falsified signature on the deed of donation
on petitioners first cause of action in this wise: examined by qualified handwriting experts to
prove that, indeed, she did not execute the

82
same. Her failure to do so results in the failure of her how much and when [respondent spouses Ramos]
cause.[15] (Emphasis ours.) paid said alleged obligations of [petitioner] or even
who were the said suppliers thus paid. That
[petitioner] and [respondent spouses Ramos]
With respect to petitioners second cause of action, the RTC agreed that the amount due [petitioner] from the
proceeds of the sales of her stocks in the
adjudged that: hardware store would be applied to the purchase
price of the Bonifacio property is supported by
On the second cause of action, the Court the fact that [petitioner] did not ever ask for an
finds the evidence preponderantly in favor of the accounting of said proceeds, despite the fact that
[herein petitioner]. The evidence on record shows as early as September, 1984 (sic) she already
that when [petitioner] allowed [herein respondent knew that her stocks left by her in March, 1982
spouses Ramos] full management of the hardware (sic) was already sold by [respondent spouses
store located on the Bonifacio property in March, Ramos] and that there was a difference
1982 (sic) an inventory of the stocks in trade in the of P116,000.00 plus which was due to
said store was made showing stocks her.[16] (Emphasis ours.)
worth P226,951.05* and when she got back the store
from [respondent spouses Ramos] on September
1984, another inventory was made [on] the stocks in Thus, the RTC decreed:
trade in the said store showing, stocks
worth P110,005.88* or a difference
of P116,946.17.* The only reason for an inventory WHEREFORE, in view of all the foregoing,
having been made when the hardware store was judgment is hereby rendered:
turned over to [respondent spouses Ramos] was,
to the mind of the Court, for the latter to account 1. Finding the evidence on record
for the sales of such stocks. And to arrive at the net insufficient to prove the [herein petitioners] first cause
amount due to [petitioner], all that is needed to be of action, and, hence, dismissing the same;
done is to deduct the value of the stocks present at
the store when management was returned to 2. On the second cause of action,
[petitioner] in September 1984 from the value of the in favor of the [petitioner] and against the [herein
stocks found in the hardware store when said respondent spouses Ramos];
management was given to [respondent spouses
Ramos] in 1982. [Petitioner] claims that the purchase 2.1 Declaring the [petitioner] the
price for the Bonifacio property was to be taken from owner of Lot 2-B of subdivision plan PST-2-01-
the proceeds of sales from the hardware store which, 019316 (sic) with an area of 195 square meters
as the evidence on record stands[,] shows a balance situated along Bonifacio Street, Tuguegarao,
in her favor of more than P116,000.00. [Respondent Cagayan; and
spouses Ramos] contend that said amount was
expended to pay off [petitioners] obligations to her 2.2 Ordering the [respondent
suppliers. The record, however, is totally silent on spouses Ramos] to reconvey to the [petitioner]
the said property (Bonifacio property).

83
Finding merit in the appeal, the appellate court observed that
With costs de oficio.[17] (Emphasis ours.)
the second cause of action involved not only the petitioner and her
daughter, but also her son-in-law, who was not covered by the term
On 22 February 2000, respondent spouses Ramos filed with family relations under Article 150[21] of the Family Code. Therefore,
the RTC a Motion for Reconsideration[18] of the afore-mentioned Article 151[22] of the Family Code, requiring the exertion of earnest
decision, assailing the ruling of the RTC on petitioners second cause efforts toward a compromise, did not apply as the impediment arising
of action on the ground that the alleged express trust created between from the said provision was limited only to suits between members of
them and petitioner involving the Bonifacio property could not be the same family or those encompassed in the term family relations
proven by parol evidence. In an Order[19] dated 17 July 2000, the RTC under Article 150.
denied respondent spouses Ramos Motion for Reconsideration for
lack of merit, ratiocinating that respondent spouses Ramos failed to The Court of Appeals also declared that petitioner failed to
interpose timely objections when petitioner testified on their alleged prove her claim with the required quantum of evidence. According to
verbal agreement regarding the purchase of the Bonifacio property. As the Court of Appeals:
such, respondent spouses Ramos were deemed to have waived such
It appears that before management of the
objections, which cannot be raised anymore in their Motion for store was transferred to [herein respondent spouses
Reconsideration. The RTC then reiterated its finding that petitioners Ramos], a beginning inventory of the stocks of the
evidence clearly established her second cause of action. Additionally, hardware store was made by [herein petitioners] other
children showing stocks amounting to
the RTC held that the requirement that the parties exert earnest efforts Php226,951.05. After management of the hardware
towards an amicable settlement of the dispute had likewise been store was returned to [petitioner], a second inventory
waived by the respondents as they filed no motion regarding the same was made with stocks amounting to Php110,004.88
showing a difference of Php116,946.15. Contrary,
before the trial.
however, to the finding of the trial court, We find
that said inventory showing such difference is not
On 24 July 2000, respondent spouses Ramos elevated their conclusive proof to show that the said amount
was used to pay the purchase price of the subject
case to the Court of Appeals, insofar as the ruling of the RTC on
lot. In fact, as testified by Johnson Paredes, son of
petitioners second cause of action was concerned.[20] The appeal was [petitioner] who made the computation on the alleged
docketed as CA-G.R. CV No. 69731. inventories, it is not known if the goods, representing
the amount of Php116,946.17, were actually sold or
not. It may have been taken without actually being
On 15 December 2006, the Court of Appeals rendered the sold.
assailed Decision in favor of respondent spouses Ramos.
It is a basic rule of evidence that bare
allegations, unsubstantiated by evidence, are not

84
equivalent to proof. As between [petitioners] bare in Civil Case No. 3672 is
allegation of a verbal trust agreement, and the deed hereby REVERSED and SET ASIDE and a new one
of absolute sale between Maria Mendoza and entered DISMISSING the second cause of action of
[respondent spouses Ramos], the latter should [herein petitioners] complaint.[24]
prevail.

Although oral testimony is allowed to prove On 12 January 2007, petitioner sought reconsideration[25] of
that a trust exists, contrary to the contention of
[respondent spouses Ramos], and the court may rely the foregoing Decision, but it was denied by the appellate court in a
on parol evidence to arrive at a conclusion that an Resolution[26] dated 31 May 2007.
express trust exists, what is crucial is the intention to
create a trust. While oftentimes the intention is
To have the ruling of the Court of Appeals overturned,
manifested by the trustor in express or explicit
language, such intention may be manifested by petitioner brought her case before us through the instant Petition,
inference from what the trustor has said or done, from raising the following issues: (1) whether the existence of a trust
the nature of the transaction, or from the
agreement between her and respondent spouses Ramos was clearly
circumstances surrounding the creation of the
purported trust. established, and (2) whether such trust agreement was valid and
enforceable.
However, an inference of the intention to
create a trust, made from language, conduct or
circumstances, must be made with reasonable At the outset, it is apparent that petitioner is raising questions
certainty. It cannot rest on vague, uncertain or of fact in the instant Petition. Be it noted that in a petition for review
indefinite declarations. An inference of intention to under Rule 45 of the Rules of Court, only questions of law must be
create a trust, predicated only on circumstances,
can be made only where they admit of no other entertained. A question of law arises when there is doubt as to what
interpretation. Here, [petitioner] failed to the law is on a certain state of facts, while there is a question of fact
establish with reasonable certainty her claim that when the doubt arises as to the truth or falsity of the alleged
the purchase of the subject lot was pursuant to a
facts.[27] When the doubt or difference arises as to the truth or
verbal trust agreement with [respondent spouses
Ramos].[23] (Emphasis ours.) falsehood of alleged facts or when the query necessarily solicits
calibration of the whole evidence considering mostly the credibility of
witnesses, existence and relevancy of specific surrounding
Thus, the Court of Appeals disposed of the case as follows: circumstances, their relation to each other and to the whole and
probabilities of the situation, questions or errors of fact are
WHEREFORE, in view of the foregoing, the
instant appeal is hereby GRANTED and the Decision raised.[28] The rule that only questions of law may be raised in a
dated 19 January 2000 of the Regional Trial Court petition for review under Rule 45, however, admits of certain
(RTC) of Tuguegarao City, Branch 2, with respect to exceptions,[29] among which is when the findings of the trial court are
the second cause of action or the Bonifacio Property

85
grounded entirely on speculation, surmise and conjecture. As will be spouses Ramos could not account for the P116,946.15 difference in
discussed further, we find the afore-mentioned exception to be the beginning inventory and the second inventory of the stocks of the
applicable in the present Petition, thus, warranting a departure from hardware store, and they failed to present proof to support their
the general rule. allegation that the amount was used to pay the other obligations of
petitioner. As respondent spouses Ramos never denied the existence
In its technical legal sense, a trust is defined as the right, of the P116,946.15 difference, petitioner contends that they have the
enforceable solely in equity, to the beneficial enjoyment of property, burden of proving where this amount had gone, if indeed they did not
the legal title to which is vested in another, but the word trust is use the same to buy the Bonifacio property. Petitioner asserts that
frequently employed to indicate duties, relations, and responsibilities given the respondent spouses Ramos failure to discharge such
which are not strictly technical trusts.[30] A person who establishes a burden, the only conclusion would be that they did use the amount to
trust is called the trustor; one in whom confidence is reposed is known purchase the Bonifacio property.
as the trustee; and the person for whose benefit the trust has been
created is referred to as the beneficiary.[31] There is a fiduciary relation Petitioner further alleges that based on the verbal agreement
between the trustee and the beneficiary (cestui que trust) as regards between her and respondent spouses Ramos, a trust agreement was
certain property, real, personal, money or choses in action.[32] created and that the same is valid and enforceable. Petitioner claims
that she is the trustor for it was she who entrusted the Bonifacio
Trusts are either express or implied. Express trusts are property to respondent spouses Ramos as the trustees, with the
created by the intention of the trustor or of the parties. Implied trusts condition that the same be used to secure a loan, the proceeds of
come into being by operation of law.[33] Express trusts are those which which would be used to build a bigger building to expand petitioners
are created by the direct and positive acts of the parties, by some business. Petitioner maintains that a trust agreement was clearly
writing or deed, or will, or by words either expressly or impliedly intended by the parties when petitioner left the management of the
evincing an intention to create a trust.[34] No particular words are hardware store to respondent spouses Ramos, with the agreement
required for the creation of an express trust, it being sufficient that a that the proceeds from the sales from said store be used to buy the lot
trust is clearly intended.[35]
However, in accordance with Article 1443 upon which the store stands. The respondent spouses Ramos
of the Civil Code, when an express trust concerns an immovable assumption of the management of the hardware store and their
property or any interest therein, the same may not be proved by eventual purchase of the Bonifacio property indubitably shows that
parol or oral evidence.[36] respondent spouses Ramos honored their obligation under the verbal
agreement. Such being the case, it behooved for the respondent
In the instant case, petitioner maintains that she was able to spouses Ramos to hold the Bonifacio property for petitioners benefit.
prove the existence of a trust agreement between her and respondent
spouses Ramos. She calls attention to the fact that respondent Petitioners arguments fail to persuade.

86
It bears stressing that petitioner has the burden of proving her On this score, we subscribe to the ruling of the RTC in its
cause of action in the instant case and she may not rely on the Order dated 17 July 2000 that said spouses were deemed to have
weakness of the defense of respondent spouses Ramos. Burden of waived their objection to the parol evidence as they failed to timely
proof is the duty of any party to present evidence to establish his claim object when petitioner testified on the said verbal agreement. The
or defense by the amount of evidence required by law, which is requirement in Article 1443 that the express trust concerning an
preponderance of evidence in civil cases. Preponderance of immovable or an interest therein be in writing is merely for purposes
evidence[37] is the weight, credit, and value of the aggregate evidence of proof, not for the validity of the trust agreement. Therefore, the said
on either side and is usually considered to be synonymous with the article is in the nature of a statute of frauds. The term statute of frauds
term "greater weight of the evidence" or "greater weight of the credible is descriptive of statutes which require certain classes of contracts to
evidence. It is evidence which is more convincing to the court as be in writing. The statute does not deprive the parties of the right to
worthy of belief than that which is offered in opposition contract with respect to the matters therein involved, but merely
thereto.[38]Therefore, the party, whether plaintiff or defendant, who regulates the formalities of the contract necessary to render it
asserts the affirmative of the issue has the burden of proof to obtain a enforceable.[41] The effect of non-compliance is simply that no action
favorable judgment. For the plaintiff, the burden of proof never can be proved unless the requirement is complied with. Oral evidence
parts.[39] For the defendant, an affirmative defense is one which is not of the contract will be excluded upon timely objection. But if the parties
a denial of an essential ingredient in the plaintiffs cause of action, but to the action, during the trial, make no objection to the admissibility of
one which, if established, will be a good defense i.e., an avoidance of the oral evidence to support the contract covered by the statute, and
the claim.[40] thereby permit such contract to be proved orally, it will be just as
binding upon the parties as if it had been reduced to writing.[42]
From the allegations of the petitioners Complaint in Civil Case
No. 3672, the alleged verbal trust agreement between petitioner and Per petitioners testimony,[43] the Bonifacio property was
respondent spouses Ramos is in the nature of an express trust as offered for sale by its owner Mendoza. Petitioner told respondent
petitioner explicitly agreed therein to allow the respondent spouses spouses Ramos that she was going to buy the lot, but the title to the
Ramos to acquire title to the Bonifacio property in their names, but to same will be in the latters names. The money from the hardware store
hold the same property for petitioners benefit. Given that the alleged managed by respondent spouses Ramos shall be used to buy the
trust concerns an immovable property, however, respondent spouses Bonifacio property, which shall then be mortgaged by the respondent
Ramos counter that the same is unenforceable since the agreement spouses Ramos so that they could obtain a loan for building a bigger
was made verbally and no parol evidence may be admitted to prove store. The purchase price of P80,000.00 was paid for the Bonifacio
the existence of an express trust concerning an immovable property property. On 20 September 1984, the respondent spouses Ramos
or any interest therein. returned the management of the store to petitioner. Thereafter,

87
petitioner allowed her son Johnson to inventory the stocks of the proving the alleged verbal trust agreement between petitioner and
store. Johnson found out that the purchase price of P80,000.00 for the respondent spouses.
Bonifacio property was already fully paid. When petitioner told the
respondent spouses Ramos to transfer the title to the Bonifacio Petitioners allegations as to the existence of an express trust
property in her name, the respondent spouses Ramos refused, thus, agreement with respondent spouses Ramos, supported only by her
prompting petitioner to file a complaint against them. own and her son Johnsons testimonies, do not hold water. As correctly
ruled by the Court of Appeals, a resulting difference of P116,946.15 in
Similarly, Johnson testified[44] that on 22 March 1982, the beginning inventory of the stocks of the hardware store (before
petitioner turned over the management of the hardware store to management was transferred to respondent spouses Ramos) and the
respondent spouses Ramos. During that time, an inventory[45] of the second inventory thereof (after management was returned to
stocks of the store was made and the total value of the said stocks petitioner), by itself, is not conclusive proof that the said amount was
were determined to be P226,951.05. When respondent spouses used to pay the purchase price of the Bonifacio property, such as
Ramos returned the management of the store to petitioner on 20 would make it the property of petitioner held merely in trust by
September 1984, another inventory[46] of the stocks was made, with respondent spouses Ramos. Such a conclusion adopted by the RTC
the total value of the stocks falling to P110,004.88. The difference is purely speculative and non sequitur. The resulting difference in the
of P116,946.16 was attributed to the purchase of the Bonifacio two inventories might have been caused by other factors and the same
property by the respondent spouses Ramos using the profits from the is capable of other interpretations (e. g., that the amount thereof may
sales of the store. have been written off as business losses due to a bad economic
condition, or that the stocks of the store might have been damaged or
A careful perusal of the records of the case reveals that otherwise their purchase prices have increased dramatically, etc.), the
respondent spouses Ramos did indeed fail to interpose their exclusion of which rested upon the shoulders of petitioner alone who
objections regarding the admissibility of the afore-mentioned has the burden of proof in the instant case. This petitioner miserably
testimonies when the same were offered to prove the alleged verbal failed to do. The fact that respondent spouses Ramos never denied
trust agreement between them and petitioner. Consequently, these the P116,946.15 difference, or that they failed to present proof that
testimonies were rendered admissible in evidence. Nevertheless, they indeed used the said amount to pay the other obligations and
while admissibility of evidence is an affair of logic and law, liabilities of petitioner is not sufficient to discharge petitioners burden
determined as it is by its relevance and competence, the weight to prove the existence of the alleged express trust agreement.
to be given to such evidence, once admitted, still depends on
judicial evaluation.[47] Thus, despite the admissibility of the said WHEREFORE, premises considered, the instant Petition for
testimonies, the Court holds that the same carried little weight in Review on Certiorari under Rule 45 of the Rules of Court is
hereby DENIED. The assailed Decision of the Court of Appeals in CA-

88
G.R. CV No. 69731 dated 15 December 2006 is Upon receipt of this cabled message on February 24, 1975, PNB's
International Department noticed an error and sent a service
hereby AFFIRMED. Costs against petitioner. message to SEPAC Bank. The latter replied with instructions that the
amount of US$14,000 should only be for US$1,400.

SO ORDERED. On the basis of the cable message dated February 24, 1975
Cashier's Check No. 269522 in the amount of US$1,400 (P9,772.95)
representing reimbursement from Star Kist, was issued by the Star
PNB vs. CA Kist for the account of Mata on February 25, 1975 through the Insular
Bank of Asia and America (IBAA).
Rarely is this Court confronted with a case calling for the delineation
in broad strokes of the distinctions between such closely allied However, fourteen days after or on March 11, 1975, PNB effected
concepts as the quasi-contract called "solutio indebiti" under the another payment through Cashier's Check No. 270271 in the amount
venerable Spanish Civil Code and the species of implied trust of US$14,000 (P97,878.60) purporting to be another transmittal of
denominated "constructive trusts," commonly regarded as of Anglo- reimbursement from Star Kist, private respondent's foreign principal.
American origin. Such a case is the one presented to us now which
has highlighted more of the affinity and less of the dissimilarity Six years later, or more specifically, on May 13, 1981, PNB
between the two concepts as to lead the legal scholar into the error requested Mata for refund of US$14,000 (P97,878.60) after it
of interchanging the two. Presented below are the factual discovered its error in effecting the second payment.
circumstances that brought into juxtaposition the twin institutions of
the Civil Law quasi-contract and the Anglo-American trust. On February 4, 1982, PNB filed a civil case for collection and refund
of US$14,000 against Mata arguing that based on a constructive
Private Respondent B.P. Mata & Co. Inc. (Mata), is a private trust under Article 1456 of the Civil Code, it has a right to recover the
corporation engaged in providing goods and services to shipping said amount it erroneously credited to respondent Mata.1
companies. Since 1966, it has acted as a manning or crewing agent
for several foreign firms, one of which is Star Kist Foods, Inc., USA After trial, the Regional Trial Court of Manila rendered judgment
(Star Kist). As part of their agreement, Mata makes advances for the dismissing the complaint ruling that the instant case falls squarely
crew's medical expenses, National Seaman's Board fees, Seaman's under Article 2154 on solutio indebiti and not under Article 1456 on
Welfare fund, and standby fees and for the crew's basic personal constructive trust. The lower court ruled out constructive trust,
needs. Subsequently, Mata sends monthly billings to its foreign applying strictly the technical definition of a trust as "a right of
principal Star Kist, which in turn reimburses Mata by sending a property, real or personal, held by one party for the benefit of
telegraphic transfer through banks for credit to the latter's account. another; that there is a fiduciary relation between a trustee and
a cestui que trust as regards certain property, real, personal, money
Against this background, on February 21, 1975, Security Pacific or choses in action."2
National Bank (SEPAC) of Los Angeles which had an agency
arrangement with Philippine National Bank (PNB), transmitted a In affirming the lower court, the appellate court added in its opinion
cable message to the International Department of PNB to pay the that under Article 2154 on solutio indebiti, the person who makes the
amount of US$14,000 to Mata by crediting the latter's account with payment is the one who commits the mistake vis-a-vis the recipient
the Insular Bank of Asia and America (IBAA), per order of Star Kist. who is unaware of such a mistake.3 Consequently, recipient is duty

89
bound to return the amount paid by mistake. But the appellate court within the prescriptive period of ten (10) years as provided by Article
concluded that petitioner's demand for the return of US$14,000 1144, paragraph 2 of the Civil Code.5
cannot prosper because its cause of action had already prescribed
under Article 1145, paragraph 2 of the Civil Code which states: If it is to be construed as a case of payment by mistake or solutio
indebiti, then the prescriptive period for quasi-contracts of six years
The following actions must be commenced within six applies, as provided by Article 1145. As pointed out by the appellate
years: court, petitioner's cause of action thereunder shall have prescribed,
having been brought almost seven years after the cause of action
xxx xxx xxx accrued. However, even assuming that the instant case constitutes a
constructive trust and prescription has not set in, the present action
has already been barred by laches.
(2) Upon a quasi-contract.

This is because petitioner's complaint was filed only on To recall, trusts are either express or implied. While express trusts
are created by the intention of the trustor or of the parties, implied
February 4, 1982, almost seven years after March 11, 1975
trusts come into being by operation of law.6 Implied trusts are those
when petitioner mistakenly made payment to private
which, without being expressed, are deducible from the nature of the
respondent.
transaction as matters of intent or which are superinduced on the
transaction by operation of law as matters of equity, independently of
Hence, the instant petition for certiorari proceeding seeking to annul the particular intention of the parties.7
the decision of the appellate court on the basis that Mata's obligation
to return US$14,000 is governed, in the alternative, by either Article
In turn, implied trusts are subdivided into resulting and constructive
1456 on constructive trust or Article 2154 of the Civil Code on quasi-
trusts.8 A resulting trust is a trust raised by implication of law and
contract.4
presumed always to have been contemplated by the parties, the
intention of which is found in the nature of the transaction, but not
Article 1456 of the Civil Code provides: expressed in the deed or instrument of conveyance.9 Examples of
resulting trusts are found in Articles 1448 to 1455 of the Civil
If property is acquired through mistake or fraud, the Code.10 On the other hand, a constructive trust is one not created by
person obtaining it is, by force of law, considered a words either expressly or impliedly, but by construction of equity in
trustee of an implied trust for the benefit of the order to satisfy the demands of justice. An example of a constructive
person from whom the property comes. trust is Article 1456 quoted above.11

On the other hand, Article 2154 states: A deeper analysis of Article 1456 reveals that it is not a trust in the
technical sense 12 for in a typical trust, confidence is reposed in one
If something is received when there is no right to person who is named a trustee for the benefit of another who is
demand it, and it was unduly delivered through called the cestui que trust, respecting property which is held by the
mistake, the obligation to return it arises. trustee for the benefit of the cestui que trust.13 A constructive trust,
unlike an express trust, does not emanate from, or generate a
Petitioner naturally opts for an interpretation under constructive trust fiduciary relation. While in an express trust, a beneficiary and a
as its action filed on February 4, 1982 can still prosper, as it is well trustee are linked by confidential or fiduciary relations, in a

90
constructive trust, there is neither a promise nor any fiduciary relation case money) has been received when there was no right to demand
to speak of and the so-called trustee neither accepts any trust nor it and (2) the same was unduly delivered through mistake. There is a
intends holding the property for the beneficiary. 14 presumption that there was a mistake in the payment "if something
which had never been due or had already been paid was delivered;
In the case at bar, Mata, in receiving the US$14,000 in its account but he from whom the return is claimed may prove that the delivery
through IBAA, had no intent of holding the same for a supposed was made out of liberality or for any other just cause."18
beneficiary or cestui que trust, namely PNB. But under Article 1456,
the law construes a trust, namely a constructive trust, for the benefit In the case at bar, a payment in the corrected amount of US$1,400
of the person from whom the property comes, in this case PNB, for through Cashier's Check No. 269522 had already been made by
reasons of justice and equity. PNB for the account of Mata on February 25, 1975. Strangely,
however, fourteen days later, PNB effected another payment through
At this juncture, a historical note on the codal provisions on trust and Cashier's Check No. 270271 in the amount of US$14,000, this time
quasi-contracts is in order. purporting to be another transmittal of reimbursement from Star Kist,
private respondent's foreign principal.
Originally, under the Spanish Civil Code, there were only two kinds of
quasi contracts: negotiorum gestio and solutio indebiti. But the Code While the principle of undue enrichment or solutio indebiti, is not
Commission, mindful of the position of the eminent Spanish jurist, new, having been incorporated in the subject on quasi-contracts in
Manresa, that "the number of quasi contracts may be indefinite," Title XVI of Book IV of the Spanish Civil Code entitled "Obligations
added Section 3 entitled "Other Quasi-Contracts."15 incurred without contract,"19the chapter on Trusts is fairly recent,
having been introduced by the Code Commission in 1949. Although
the concept of trusts is nowhere to be found in the Spanish Civil
Moreover, even as Article 2142 of the Civil Code defines a quasi-
Code, the framers of our present Civil Code incorporated implied
contract, the succeeding article provides that: "The provisions for
trusts, which includes constructive trusts, on top of quasi-contracts,
quasi-contracts in this Chapter do not exclude other quasi-contracts
which may come within the purview of the preceding article."16 both of which embody the principle of equity above strict legalism.20

In analyzing the law on trusts, it would be instructive to refer to


Indubitably, the Civil Code does not confine itself exclusively to the
Anglo-American jurisprudence on the subject. Under American Law,
quasi-contracts enumerated from Articles 2144 to 2175 but is open to
the possibility that, absent a pre-existing relationship, there being a court of equity does not consider a constructive trustee for all
neither crime nor quasi-delict, a quasi-contractual relation may be purposes as though he were in reality a trustee; although it will force
him to return the property, it will not impose upon him the numerous
forced upon the parties to avoid a case of unjust enrichment.17 There
fiduciary obligations ordinarily demanded from a trustee of an
being no express consent, in the sense of a meeting of minds
express trust.21 It must be borne in mind that in an express trust, the
between the parties, there is no contract to speak of. However, in
trustee has active duties of management while in a constructive trust,
view of the peculiar circumstances or factual environment, consent is
presumed to the end that a recipient of benefits or favors resulting the duty is merely to surrender the property.
from lawful, voluntary and unilateral acts of another may not be
unjustly enriched at the expense of another. Still applying American case law, quasi-contractual obligations give
rise to a personal liability ordinarily enforceable by an action at law,
while constructive trusts are enforceable by a proceeding in equity to
Undoubtedly, the instant case fulfills the indispensable requisites
of solutio indebiti as defined in Article 2154 that something (in this

91
compel the defendant to surrender specific property. To be sure, the possible that a grantor, like PNB in the case at hand, may commit the
distinction is more procedural than substantive.22 mistake.

Further reflection on these concepts reveals that a constructive Proceeding now to the issue of whether or not petitioner may still
"trust" is as much a misnomer as a "quasi-contract," so far removed claim the US$14,000 it erroneously paid private respondent under a
are they from trusts and contracts proper, respectively. In the case of constructive trust, we rule in the negative. Although we are aware
a constructive trust, as in the case of quasi-contract, a relationship is that only seven (7) years lapsed after petitioner erroneously credited
"forced" by operation of law upon the parties, not because of any private respondent with the said amount and that under Article 1144,
intention on their part but in order to prevent unjust enrichment, thus petitioner is well within the prescriptive period for the enforcement of
giving rise to certain obligations not within the contemplation of the a constructive or implied trust, we rule that petitioner's claim cannot
parties.23 prosper since it is already barred by laches. It is a well-settled rule
now that an action to enforce an implied trust, whether resulting or
Although we are not quite in accord with the opinion that "the trusts constructive, may be barred not only by prescription but also by
known to American and English equity jurisprudence are derived laches.28
from the fidei commissa of the Roman Law,"24 it is safe to state that
their roots are firmly grounded on such Civil Law principles are While prescription is concerned with the fact of delay, laches deals
expressed in the Latin maxim, "Nemo cum alterius detrimento with the effect of unreasonable delay.29 It is amazing that it took
locupletari potest," 25 particularly the concept of constructive trust. petitioner almost seven years before it discovered that it had
erroneously paid private respondent. Petitioner would attribute its
Returning to the instant case, while petitioner may indeed opt to avail mistake to the heavy volume of international transactions handled by
of an action to enforce a constructive trust or the quasi-contract the Cable and Remittance Division of the International Department of
of solutio indebiti, it has been deprived of a choice, for prescription PNB. Such specious reasoning is not persuasive. It is unbelievable
has effectively blocked quasi-contract as an alternative, leaving only for a bank, and a government bank at that, which regularly publishes
constructive trust as the feasible option. its balanced financial statements annually or more frequently, by the
quarter, to notice its error only seven years later. As a universal bank
with worldwide operations, PNB cannot afford to commit such costly
Petitioner argues that the lower and appellate courts cannot indulge
mistakes. Moreover, as between parties where negligence is
in semantics by holding that in Article 1456 the recipient commits the
imputable to one and not to the other, the former must perforce bear
mistake while in Article 2154, the recipient commits no mistake. 26 On
the other hand, private respondent, invoking the appellate court's the consequences of its neglect. Hence, petitioner should bear the
reasoning, would impress upon us that under Article 1456, there can cost of its own negligence.
be no mutual mistake. Consequently, private respondent contends
that the case at bar is one of solutio indebiti and not a constructive WHEREFORE, the decision of the Court of Appeals dismissing
trust. petitioner's claim against private respondent is AFFIRMED.

We agree with petitioner's stand that under Article 1456, the law Costs against petitioner.
does not make any distinction since mutual mistake is a possibility on
either side — on the side of either the grantor or the grantee.27 Thus, SO ORDERED.
it was error to conclude that in a constructive trust, only the person
obtaining the property commits a mistake. This is because it is also

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